Weekly update from the National Housing Conference
News from Washington | By Luke Villalobos
HUD opens door for Special Purpose Credit Programs

On Tuesday, the U.S. Department of Housing and Urban Development’s Office of Fair Housing and Equal Opportunity published a memorandum addressing Special Purpose Credit Programs (SPCP) to address disparities in access to homeownership. The memorandum answers a long-standing question regarding SPCPs legality when viewed through the lens of the Fair Housing Act, which prevents unlawful discrimination against federally protected classes of people.. Despite efforts from fair housing organizations, many groups have been hesitant to enact SPCPs due to vagueness  in the statute   The Equal Credit Opportunity Act (ECOA) adds to the  hesitancy by  prohibiting  reverse redlining ( minority communities cannot be targeted for lending in order to reduce predatory lending practices.) The memorandum includes a legal opinion that definitively states that “non-profit organization’s Special Purpose Credit Program established to serve an economically disadvantaged class of persons or a for-profit institution’s Special Purpose Credit Program designed and implemented in compliance with ECOA and Regulation B generally do not violate the Act.” 
“Despite SPCPs’ being specifically authorized under [the Equal Credit Opportunity Act], for too long banks have expressed reticence to establish these programs, some citing concerns that the Fair Housing Act somehow bars what ECOA explicitly permits. Today, HUD is making it clear that certain SPCPs that are lawful under ECOA generally are not barred by the Fair Housing Act,” stated HUD Secretary Marcia Fudge.  
Treasury issues ANPR on all-cash real estate transactions

On Monday, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an advance notice of proposed rulemaking (ANPR) regarding the increase in all-cash real estate purchases and the possibility of illicit financial activity. The ANPR, which  seeks public comment on the Department’s plans to apply more scrutiny to all-cash real estate transactions, seeks to identify any money laundering or illicit activity within the real estate market. The FinCEN press release notes that when a mortgage bank is removed from the purchasing process, there is little to no oversight of the transaction, stating “it can be nearly impossible to trace the beneficial owners behind shell companies that are often used to purchase the real estate.”
Cash buyers have been a topic of concern for many housing organizations over the past year who have argued that increases in cash buyers are pricing out first-time homebuyers and further constricting an already tight supply of homes. According to the ANPR, the Department intends to increase transparency in all-cash real estate purchases through additional reporting requirements similar to those of financial institutions, including suspicious activity reports. Currently, only a dozen metropolitan areas have reporting requirements for identification of all-cash residential transactions through shell companies exceeding $300,000. FinCen is also considering including commercial real estate purchases in these new requirements. 
"Increasing transparency in the real estate sector will curb the ability of corrupt officials and criminals to launder the proceeds of their ill-gotten gains through the U.S. real estate market," stated Acting Director of Treasury's Financial Crimes Enforcement Network, Himamauli Das. 
CFPB finalizes LIBOR rule

On Tuesday, the Consumer Financial Protection Bureau (CFPB) issued a final rule facilitating the discontinuation of the London Interbank Offered Rate (LIBOR) interest rate index for consumer financial products. The LIBOR rate, which acted as a benchmark that helped to determine interest rates on adjustable-rate loans and mortgages, contributed to the 2008 financial crisis after easy manipulation from banks utilizing the rate. The final rule establishes that no new financial contracts may reference LIBOR after 2021, and in 2023 LIBOR can no longer be used for any existing financial contracts. Currently, an estimated $1.4 trillion of loans are tied to LIBOR. Lenders will have to replace LIBOR with a comparable index in their contracts by June 2023, a major change for the mortgage industry. Some lenders have already begun the process of transition away from LIBOR. CFPB provided FAQ’s alongside the announcement. 
In his statement regarding the change, CFPB Director Rohit Chopra stated, “In issuing today’s rule, the CFPB is playing its part to move the financial system away from this opaque and too easily manipulated index.” The rule goes into effect on April 1, 2022. 
MBA seeks Program and Policy Specialist

Mortgage Bankers Association is currently seeking a Program and Policy Specialist for Affordable Housing in Washington, DC. The position will help manage key affordable homeownership efforts, work on program and policy initiatives at the national and local level, and manage communications. Applications can be submitted via the online portal here
FHA Defect Taxonomy extended

On Wednesday, the Federal Housing Administration (FHA) announced an extension on the open comment period for the draft update of the Single Family Housing Policy Handbook 4000.1
(Handbook 4000.1), Appendix 8.0 – FHA Defect Taxonomy for Servicing Loan Reviews. Feedback can now be submitted through January 28, 2022, rather than the original due date of December 27, 2021. NHC was among the organizations that requested an extension from FHA, citing the need for further analysis of the ambiguous draft. 
The defect taxonomy, which provides ‘rules of the road’ for mortgage servicers to provide remedies for any loan-level defects pertaining to servicing, has been criticized by housing organizations as unclear and lacking necessary detail to serve its purpose. Further, the new draft does not sufficiently attract major lenders back into the FHA lending market. One HUD spokesperson responded, “It is important to note that the draft Servicing Defect Taxonomy that FHA posted on its Drafting Table on October 28 is exactly that – a draft.” Feedback can be submitted at FHA’s Drafting Table website here.
HUD announces $52 million for Indian Community Block Grants

On Tuesday, HUD announced the award of nearly $52 million of funding to the Indian Community Block Grant-American Rescue Plan (ICDBG-ARP) program intended to deliver equitable COVID-19 relief to Tribal communities. This award is part of the larger allocated $280 million for the ICDBG program from the American Rescue Plan, and follows a previous award announced in November. According to the announcement, the funding will help communities prevent, prepare for, and respond to the impacts of the pandemic. A full list of the 49 award recipients and their amounts received is available here
Housing leaders urge flexibility in Fiscal Recovery Fund

On Friday, NHC and eighteen other housing stakeholders sent a letter to Treasury Secretary Yellen strongly urging the Treasury Department to modify existing guidance on the Coronavirus State and Local Fiscal Recovery Fund to provide more flexibility in the use of these funds in developments financed with Low Income Housing Tax Credits. They note that the unprecedented surge in construction material costs since the start of the COVID-19 pandemic has made LIHTC production challenging, as have supply chain disruptions and labor shortages. The group argues that by leveraging Fiscal Recovery Funds with the private equity invested in LIHTC developments, states and local governments would be able to maximize the impact of the Fiscal Recovery Fund for affordable housing.
Chart of the week
Chart of the week: Forecasting Rent, OER Inflation
Federal Reserve Bank of Dallas finds a high correlation between current house price growth and potential inflation of rent. The chart below forecasts the 12-month PCE inflation rates for rent and OER (owner’s equivalent rent) through December 2023.
What we're reading
podcast by CQ Roll Call featured an interview with HUD Secretary Marcia Fudge and discussed the opportunities for housing in the United States with funding from the pending Build Back Better package. Fudge discussed meeting supply and demand challenges, equitable housing, increasing vouchers, and housing rehabilitation as big goals for the Department if the package passes the Senate. She reminded listeners of what the investment could do for the average person. “It literally is life-changing, when you consider the fact that we have never made this kind of an investment in housing in the history of this country,” she stated. 
New York Times article examined whether or not the chance to convert hotels to housing is slipping away as COVID is slowly being addressed by vaccine uptake. Despite support of the idea, zero hotels were actually converted within New York City. A mixture of regulatory and zoning issues are to blame for the lack of conversions, as well as cost of development. The opportunity remains alive as hotels have not recovered and could ultimately save the city on otherwise costly development. NHC hosted a series of webinars earlier in the year on hotels-to-housing as a favored policy solution. 
An article by NPR examines the Biden administration’s recent decision to raise duties on lumber imports from Canada. The historic increases in lumber prices made headlines earlier in the year and became a topic of concern for many housing groups, but despite advocacy for lower tariffs from the National Association of Home Builders and others, softwood lumber duties were increased this week from 8.99% to 17.9%. Lumber costs directly impact the cost to build affordable housing, leaving housing advocates unhappy with the decision. 
The Washington Post reports that prices climbed 6.8% in November compared with last year, the largest rise in nearly four decades. Inflation has been spurred by the COVID-19 pandemic, which has upended supply chains and reshaped the labor market while government stimulus has increased consumer demand. As inflation spreads through the economy, it has become a major concern for political leaders ahead of the 2022 midterm elections. Democrats have argued that their Build Back Better proposal, which has been passed by the House and is currently under negotiation in the Senate, has key provisions to lower costs – including major housing proposals which could help increase housing supply and ease inflationary pressures.
The week ahead
Monday, December 13

Tuesday, December 14

Wednesday, December 15
NCRC: CRA and race, 1 – 2 p.m. ET
NAHRO: Ethics for specialists, 1:30 – 4 p.m. ET
Next City: Trivia night, 5 – 6 p.m. ET

Thursday, December 16

Friday, December 17
The National Housing Conference is a diverse continuum of affordable housing stakeholders that convene and collaborate through dialogue, advocacy, research, and education, to develop equitable solutions that serve our common interest.
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