Weekly update from the National Housing Conference
News from Washington | By Luke Villalobos
Report finds disparities grew along with homeownership rate in 2020

A new report from the National Association of REALTORS® (NAR) finds that while 2020 saw an increase in homeownership rates across racial groups, it also saw a widening gap between White and Black homeownership rates. The report illustrates how national homeownership rate rose to a ten-year high of 65.5% in 2020, fueled in part by low mortgage rates that proliferated during the COVID-19 pandemic, making buying a home cheaper than it had been in years. That increase was reflected in homeownership rates for all racial groups NAR collects data on, including a 3% increase in the Hispanic homeownership rate, pushing it past 50% to the highest level on record. Even though both the Black and White homeownership rates increased in 2020, Black homeownership rates grew slower than White rates, adding to the existing disparity of the racial gap between the groups. Black Americans were the only racial group whose homeownership rate was lower in 2020 than 2010.
In addition, the report finds pervasive racial disparities in several indicators related to homeownership, including mortgage denial rates, ability to transition from renting to homeownership, and ability to use proceeds from a previous home sale for a new down payment. NAR Vice President of Demographics and Behavioral Insights Jessica Lautz stated that current trends in housing markets were likely to exacerbate those disparities. "Housing affordability and low inventory has made it even more challenging for all buyers to enter into homeownership, but even more so for Black Americans,” she said. “It is important to understand the unique challenges that minority home buyers face.”
The report drew the attention of HUD Secretary Marcia Fudge, who said that it "confirms that Black Americans are being locked out of homeownership opportunities at an even higher rate than a decade ago." Fudge highlighted HUD's efforts to increase the Black homeownership rate, including ramping up fair housing enforcement, lowering barriers to homeownership for borrowers with student loan debt and confirming the legality of special-purpose credit programs. Fudge's statement comes three days after HUD signed onto an interagency statement on special purpose credit programs confirming their legality under the Fair Housing Act. All of the actions Fudge highlighted are priorities of the Black Homeownership Collaborative, which has argued for a reorientation of federal regulations and industry practice to increase the Black homeownership rate.
FHFA encourages CRT in new Enterprise Capital Regulatory Framework

FHFA released its final rule amending the Enterprise Regulatory Capital Framework (ECRF) on Friday, changing requirements for the leverage buffers Fannie Mae and Freddie Mac must maintain and rules around credit risk transfer (CRT). The rule amends the original ECRF, implemented in December 2020, which aimed to ensure that the Enterprises could weather economic downturns while continuing to play their central role in the housing market.
The updated ECRF replaces the 2020 rule’s fixed leverage buffer with a dynamic leverage buffer tied to each Enterprise’s stability capital buffer, which FHFA said would better allow the Enterprises to offload risk using CRT. The new rule also increases the Enterprises’ incentives to use CRT, which FHFA called an “effective, resilient, and cost effective mechanism for [the] distribution of unexpected credit risk, especially while the Enterprises are in conservatorships and have inadequate capital positions relative to their overall books of business.” The Enterprises use CRT to offload risk by selling mortgage-backed securities that are only partially guaranteed to investors, thereby moving risk away from taxpayers to investors.
Acting FHFA Director Sandra Thompson noted that the final rule would help reduce taxpayer risk and allow FHFA to better weather economic downturns. "The amendments finalized today reflect the feedback FHFA received last year and advance FHFA's mission of ensuring the Enterprises are able to support the housing market throughout the economic cycle," she stated. "The final rule provides the Enterprises with the necessary incentives to transfer credit risk to private investors, which will help protect taxpayers from the risks posed by the Enterprises and will support the Enterprises as they strive to provide equitable and sustainable access to mortgage credit."
80% of ERA funds went to low-income households, Treasury finds

On Thursday, the Treasury Department released new data on the Emergency Rental Assistance (ERA) program, indicating that over 80% of assistance was delivered to households earning less than half of area median income. Treasury also found that the share of ERA funding going to Black, Hispanic and female-headed families was in line with those groups' share of eviction filings early in the pandemic. That suggests that ERA distribution has not been affected by the same inequities that have characterized many other pandemic assistance programs, which often favored more privileged applicants. In addition, Treasury reported ERA reallocation has favored grantees serving higher shares of extremely low-income households. 

"When we began implementing the Emergency Rental Assistance program, one of the goals was to use the resources to prevent an eviction crisis from hitting our country's most vulnerable families. A year later, Treasury is pleased to report that the vast majority of rental assistance has gone to keeping the lowest-income families in their homes during the pandemic," said Deputy Treasury Secretary Wally Adeyemo. "This wasn't by accident, and we continue to use every lever to ensure these funds are distributed equitably and encourage state and local grantees to increase ease of access." 
FHFA proposes revised single-family servicer requirements

FHFA proposed new financial requirements for third parties to service single-family loans owned by the Enterprises on Thursday, updating a 2020 proposal that was shelved due to the COVID-19 pandemic. The proposal aims to modernize capital and liquidity floors for third parties conducting business with the Enterprises’ single-family books, in place since 2015.
Thursday’s proposal incorporates industry feedback on its 2020 proposal, as well as lessons from the COVID-19 pandemic. Specifically, it aims to mitigate the impact of higher servicing costs and delinquency rates as well as decreased liquidity in the to-be-announced market, both of which were observed at the outset of the pandemic. It also institutes more stringent requirements for large non-depository institutions that perform a significant portion of Enterprise servicing and creates separate liquidity requirements based on servicers' remittance types. In addition, the plan creates specific requirements for servicing Ginnie Mae loans that differ from those for loans held by Fannie Mae and Freddie Mac, a change FHFA called a "key improvement" over the current requirements.
CFPB publishes strategies to combat algorithmic bias

On Wednesday, CFPB published strategies to ensure automated models are developed with enhanced accuracy and fairness. CFPB noted several potential routes for establishing quality control standards for automated valuation models, including protecting data against manipulation, avoiding conflicts of interest and random sample testing.
The announcement noted the potential for an interagency rule, promulgated with OCC, FDIC, NCUA and FHFA, aimed at further ensuring that algorithmic systems comply with anti-discrimination laws. That rule would be crafted after convening a small business review panel to determine its viability for smaller organizations.
CFPB’s announcement comes a week after the National Fair Housing Alliance (NFHA) released a framework for evaluating algorithmic bias that NFHA President and CEO Lisa Rice said could become the “gold standard” in the industry. Rice has long advocated for more investment in combatting the issue, telling Curbed in 2019 that “we don’t have a big enough movement around this issue.” Wednesday’s move by CFPB signals that the agency is ready to take a tougher stand on the problem.
White House issues new executive order on supply chains

On Thursday, President Biden issued an executive order outlining new steps for addressing supply chain issues throughout the United States. The order comes one year after Biden established a Supply Chain Disruptions Task Force to strengthen pandemic recovery and address breakdowns in four industry chains: semiconductors and advanced packaging, high-capacity batteries, critical minerals and materials, and pharmaceuticals. Biden also released reports on the supply chain crisis from seven agencies that were commissioned in last year’s order, along with a summary of key findings from them. The new order boosts financing for semiconductor production and renewable energy, expands access to capital for small manufacturers and provides funding to improve U.S. ports and infrastructure.
Housing industry stakeholders have repeatedly expressed concerns over supply chain issues, particularly for lumber as well as other construction materials, which have experienced a rise in costs over the course of the pandemic. However, the current order does not mention those materials specifically. 
HUD announces disaster assistance and closes on RAD disaster recovery deal

HUD announced disaster relief for survivors of presidentially-declared disasters in IowaKansas and Nebraska last week. The relief includes foreclosure relief for FHA-insured properties, mortgage and home repair insurance, and administrative relief for government agencies affected by the disasters.

HUD also announced last week that it had closed a rental assistance demonstration (RAD) transaction to move several dozen Wilson, North Carolina, public housing units out of a flood zone. HUD initiated the RAD project after North Carolina identified moving public housing out of 100-year flood zones as a part of its plan to recover from Hurricane Matthew in 2016 and committed Community Development Block Grants for Disaster Recovery to the effort in Wilson. The new units will be constructed in an environmentally-friendly building near downtown, and their former site will be converted to a greenfield. 
FHA opens access to HAF informational webinar

FHA published a free, pre-recorded webinar on how the Homeowner Assistance Fund (HAF) interacts with FHA-insured mortgages on Wednesday. The webinar answers questions about how HAF can be used in conjunction with loss mitigation measures for FHA-insured single-family forward mortgages and HECMs.
Those interested can register to view the webinar on-demand on HUD’s website. It is also available on FHA’s website under servicing and loss mitigation training.
Chart of the week
Chart of the week: Investors purchased record share of homes in 2020

Washington Post analysis of 40 major metropolitan areas reveals the extent of investors’ purchases of homes, which reached a record of 15% in the fourth quarter of 2020. The analysis finds that Southern cities and Black neighborhoods saw disproportionate amounts of investor purchases, with Atlanta and Charlotte as the most affected areas.
What we're reading
Vox’s Jerusalem Demsas explores the implications of the slowdown in Americans’ mobility since the 1980s, which she says is driven in large part by increasingly stringent zoning policies that prevent attractive areas from growing their population. Demsas argues that the slowdown in mobility doesn't just hamper economic growth; it also erodes American values such as egalitarianism and openness to strangers. "If you’re stuck in a place where you don’t want to be, it has broader implications for your ability to pick your social networks. You are stuck with the family and friends that you happen to be near,” she writes.
Novogradac’s blog post offers data on housing production as a solution for rising inflation rates, reiterating the fact that housing is the single largest component of the consumer price index. The post calculates the impact of expanding the New Markets Tax Credit and the Low-Income Housing Tax Credit, including the potential to reduce the racial homeownership gap and improve distressed communities.
National Bureau of Economic Research working paper finds that low-income residents of inexpensive metropolitan areas enjoy a level of consumption 74% higher than low-income residents of expensive ones. The paper exposes large differences in low-income Americans' standard of living based on regional prices for food, healthcare, housing and other expenses that the authors say are not present for higher-income groups, who have a more uniform level of consumption across metropolitan areas.
The week ahead
Monday, February 28
NLIHC: National Call on HoUsed, 2:30 – 4 p.m. ET
Tuesday, March 1
Wednesday, March 2
Thursday, March 3
Friday, March 4
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