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Weekly update from the National Housing Conference
News from Washington
White House infrastructure counteroffer leaves housing provisions unchanged

The White House released a smaller infrastructure proposal on Friday with a price tag of $1.7 trillion, down from the $2.25 trillion price tag of its original proposal. The new proposal was released as a counteroffer to the Republican proposal to spend just under $600 billion on infrastructure over the next five years, though the new White House proposal still leaves the two sides over $1 trillion apart. Sitting between the two proposals is a plan released last week by the Bipartisan Policy Council (BPC), which proposes $1 trillion in infrastructure spending.

The treatment of housing remains a major difference between the two proposed packages. The White House's new proposal retains all of the housing-related provisions contained in the original, including direct investments totaling $213 billion and the expansion or creation of several housing tax credit programs whose standalone bills have bipartisan support.

Meanwhile, the Republican proposal includes no provisions directly related to housing, which Republicans maintain does not meet the traditional definition of "infrastructure." "People certainly need housing, but housing is not infrastructure," said Sen. Pat Toomey (R-Pa.) at a Thursday meeting of the Senate Banking Committee. "Housing is housing."

BPC's proposal seeks to split the difference between the two camps, including several tax credit programs but cutting proposed spending on housing to $50 billion.
GSEs release proposed Duty to Serve plans

On Tuesday, the Federal Housing Finance Agency (FHFA) published Fannie Mae’s and Freddie Mac’s proposed plans to better serve low- and moderate-income families for 2022 through 2024. Fannie Mae and Freddie Mac submitted the proposals to FHFA in accordance with the Duty to Serve (DTS) rule, which requires the GSEs to create three-year plans to improve services to low- and moderate-income households through investments in three underserved markets: manufactured housing, affordable housing preservation and rural housing. The publication of the proposals coincided with the start of a public comment period, in which FHFA will seek input on whether the plans effectively expand market access for underserved groups and adequately address challenges created by COVID-19.

The GSEs’ plans are similar, proposing to increase the purchase of loans financing development in the three underserved markets the Duty to Serve rule identifies. Unique elements of the proposals include Fannie Mae’s proposal to develop new products focused on vacant properties and Freddie Mac’s proposal to research the impact of “upzoning” on local housing prices.

FHFA has scheduled three listening sessions later this year to receive feedback on the proposals, one focused on the GSE’s plans for rural housing on July 12, one on their plans for preserving existing affordable housing on July 13, and one on manufactured housing on July 14. Comments on the plans are due July 16.
NHC leads coalition to ask for White House action on lumber prices

NHC led a coalition of 20 organizations in a letter sent Friday asking the White House to take steps to address skyrocketing lumber prices and other housing materials supply issues. The letter notes that while the nearly 400% increase in lumber prices represents the bulk of the problem facing home builders and the rest of the housing supply chain, "prices for steel, gypsum products and concrete all continue to climb at a record pace" as well. Especially affected by the price increases are multifamily affordable housing developers, who work on smaller margins than is typical in the industry. Their inability to pay for increasingly expensive materials could constrain the supply of affordable housing at a time when it is already near record lows.

The letter asks that the White House "convene a Building Supply Summit to address the rising price of materials and create a Building Supply task force at the U.S. Department of Commerce to investigate the root causes and develop practical solutions." Signers include NHC members National Association of Home Builders and Local Initiatives Support Corporation, the AFL-CIO Investment Trust, and several major developers, among other affordable housing stakeholders.
Banks announce racial equity initiatives

Several major banks, including NHC Members Bank of America, Wells Fargo and JPMorgan Chase & Co., revealed initiatives to increase access to credit for people of color and other underserved groups this week. Bank of America announced on Tuesday it is building on its partnership with the nonprofit, Neighborhood Assistance Corporation of America (NACA) to expand its mortgage program for low- and moderate-income homebuyers. The program would allow buyers to secure loans with no down payment, below-market interest rates and with closing costs covered.

Bank of America and NACA's program will provide an additional $15 billion in mortgages by the year 2027, which the organizations say will help close the racial homeownership and wealth gaps. In a statement announcing the program, NACA noted that the program is intended to help atone for historic discrimination that created such racial disparities in the first place. “It was the no-down payment VA mortgage that built the white suburbs after World War II and it is the NACA program that is needed now for those historically locked out of affordable homeownership,” the organization stated.
On Monday, Wells Fargo announced its new Banking Inclusion Initiative, which aims to provide unbanked individuals with affordable and accessible bank accounts, with a particular focus on people of color. According to their announcement, 7 million Americans remain unbanked, more than half of whom are Black, Hispanic, and Native and Alaskan Americans. The initiative will bring together national and community stakeholders to roll out the program and ultimately allow for better wealth building and service to communities in need.

The Wall Street Journal reported that JPMorgan Chase, Wells Fargo and U.S. Bancorp plan to create a pilot program to issue credit cards to people who lack a credit score. Information such as checking and savings accounts will be factored into their approval for the card, and the program will be government-backed. According to Fair Isaac Corp, about 53 million adults in the U.S. do not have a credit score, a disproportionate number of which are composed of people of color. While banks have been experimenting with approving borrowers with no credit for years, the efforts have been mostly small scale and company specific. This partnership will be an organized data-sharing effort to reach populations who have historically been locked out from borrowing.
Federal agencies extend AI rule comment period

Five federal agencies announced on Monday that they will extend the comment period for a request for information (RFI) on artificial intelligence (AI) and machine learning (ML) use through July 1, 2021. The agencies include the Board of Governors of the Federal Reserve System (Board), Bureau of Consumer Financial Protection, Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration, and Office of the Comptroller of the Currency (OCC). The agencies explained that commenters expressed concern that the initial deadline of June 1, 2021, did not allow for sufficient time to analyze the topic due to its complexity and technical nature.

The initial request for information was made to gauge the opinions on financial institutions’ use of AI and ML in customer service for business and operations, as well as related issues such as appropriate governance, controls, and risk management. The extension also notes that the initial RFI “solicited respondents’ views on the use of AI in financial services to assist in determining whether any clarifications from the agencies would be helpful for financial institutions’ use of AI in a safe and sound manner and in compliance with applicable laws and regulations, including those related to consumer protection.”
OCC will reconsider last year's CRA rule

On Tuesday, the OCC announced that it would reconsider the June 2020 final rule written for the Community Reinvestment Act (CRA). The OCC justified the reconsideration by stating that the decision would “provide the OCC with the opportunity to consider additional stakeholder input, to evaluate issues and questions that have been raised, to reassess the necessary data, and to take additional regulatory action, as appropriate.”

CRA reform has long been a topic within the housing industry, but the June final rule was largely condemned by housing groups, who argued it would disincentivize banks from investing in low-and moderate-income communities. NHC published a letter to House Speaker Nancy Pelosi (D-CA) after the June 2020 decision expressing disapproval of the attempt to push through the rule during the pandemic. The changes were so divisive that neither of the other two CRA regulators, the Federal Reserve, and FDIC, signed onto them.

The OCC has stated that while the reconsideration is ongoing, implementation of the June 2020 changes would only need to continue for provisions that had a compliance deadline of October 2020.
FHFA report highlights risks of CRT program

On Monday, FHFA released a report on the GSE credit risk transfer (CRT) program, through which Fannie Mae and Freddie Mac offload some of their credit risk into the private market. The report notes that while the CRT program has had success in transferring risk from the public sector to private investors – facilitating the transfer of $126 billion in mortgage credit risk since its inception in 2013, at a cost of $15 billion in GSE interest payments – key aspects of the program remain untested for their resilience in the face of market changes. According to the report, the structure of the CRT program leaves the GSEs vulnerable to overexposure to risk in the event of a wave of mortgage prepayments followed by a wave of delinquencies.

Some experts warn that exactly that sort of event is in the cards, as some mortgage borrowers take advantage of low interest rates and high home prices by prepaying their mortgages and others begin to default because of the pandemic recession. NHC President and CEO David Dworkin has pointed to efforts like the Homeowners Assistance Fund as being crucial for preventing such a mass foreclosure event.
HUD announces $5 billion for emergency housing vouchers

On Monday, HUD announced an allocation of $5 billion in emergency housing vouchers (EHVs) to house individuals experiencing or at risk of homelessness. According to the agency, the move will help house more than 130,000 families, in conjunction with other federal funding. The funding is the second and final allocation of EHV funding called for by the American Rescue Plan. It will be distributed to housing authorities in all 50 states, as well as the District of Columbia, Puerto Rico, and the Virgin Islands.

The increase in EHV funding comes as the pandemic recession and rising housing prices have contributed to a significant increase in homelessness. “While most of us spent more time in our homes than we ever have, more than half a million Americans had to spend the last year either in crowded shelters or sleeping outside,” said HUD Secretary Marcia Fudge in her announcement of the funds. “With HUD’s swift allocation of this $5 billion in American Rescue Plan funding, we are providing communities the resources to give homes to the people who have had to endure the COVID-19 pandemic without one.”
Chart of the week
Chart of the week: Home prices rose fastest in communities of color during the pandemic

A new report from the Joint Center for Housing Studies shows that home prices rose fastest in communities of color during the COVID-19 pandemic. The report uses data from Zillow to show that home value increases in predominantly non-White Zip codes outpaced those in White areas, especially in majority-Black Zip codes.
What we're reading
An article in the Los Angeles Times asks whether suburbs will buy into a Biden administration effort to roll back local exclusionary zoning laws, which some have worried lacks the teeth necessary to ensure compliance. “If the federal government is going to invest taxpayer dollars into transportation, it’s not unreasonable that money is prioritized for communities doing everything they can to address the causes of long commutes — exclusionary zoning,” NHC’s David Dworkin told the Los Angeles Times.

NBC News tells the story of a woman in Indianapolis who concealed her race from home appraisers and saw her home value more than double going from $110,000 to $259,000. The homeowner, who is Black, went as far as removing family photos from her house and having a White friend pose as her brother during the third appraisal after feeling suspicious that her race was influencing her final home value.

A new paper from the Urban Institute makes the case that “Homeownership is Affordable Housing.” “Contrary to popular belief, owning one’s own home is frequently more affordable than renting,” writes author Mike Loftin, noting that even when controlling for income and considering maintenance and utility costs, owning a home is on average cheaper than renting.
The week ahead
Monday, May 24
ULI: Value and cap rates, noon – 2 p.m. ET
Tuesday, May 25
Wednesday, May 26
NAHRO: Ethics for management, 1:30 – 4 p.m. ET
HUD: Moving On office hours, 2 – 3:30 p.m. ET
Thursday, May 27
Enterprise: Financial inclusion forum, 10 a.m. – 2 p.m. ET
The National Housing Conference has been defending the American Home since 1931. We believe everyone in America should have equal opportunity to live in a quality, affordable home in a thriving community. NHC convenes and collaborates with our diverse membership and the broader housing and community development sectors to advance our policy, research and communications initiatives to effect positive change at the federal, state and local levels. Politically diverse and nonpartisan, NHC is a 501(c)3 nonprofit organization.
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