Weekly update from the National Housing Conference
October 17, 2018
President's Message I By David M. Dworkin

The most recent Freddie Mac mortgage survey had some sobering news for the mortgage market. The 30-year fixed-rate mortgage jumped 19 basis points to 4.90 percent, leaving rates at the highest level since April 2011. There are two serious risks with rising mortgage rates. Most immediately, higher rates increase the cost of borrowing money, both for home buyers as well as home builders. The second is that some lenders are more likely to market cash-out refinances that weaken the equity levels of existing home loans, increasing risk of default in a recession.

At a time when there is a tremendous shortage of affordable housing stock for both home buyers and renters, rising rates have a direct impact on housing affordability. An increase of an additional 100 basis points or 1 percent would raise the cost of a $200,000 mortgage by approximately $125 per month. Increased rates impact apartment rents in two ways. Construction loans are more expensive, and fewer home buyers mean more renters, resulting in more demand for existing units – and higher rents as a result.
But one of the most troubling impacts of rising rates occurs when lenders seek to replace the shrinking supply of mortgages for the purchase of a home and refinance loans with cash-out refinances. During the run up to the mortgage crisis and subsequent Great Recession, a historic amount of home equity was extracted from single family homes through cash-out refinancing. This had a direct impact on the scale and pace of mortgage defaults, making the crisis much worse than it might have been. Not so in Texas, where cash-out refinancing was strictly limited by law. A study conducted by the Federal Reserve Bank of Dallas found that “at the peak of the housing crisis, the share of subprime mortgages underwater in Texas was 40 percentage points below the rest of the nation, with serious delinquencies among subprime borrowers about ten percentage points lower.”

Restrictions on cash-out refinancing need not be a barrier to accessing the equity in one’s home for retirement, education or even health care emergencies. Similar equity restrictions are already a common feature of retirement accounts. Cash-out refinancing to cover home improvements should also be exempt from any additional restrictions, since the money is reinvested in the value of the home. Even cash-out refinancing for just cash can be allowed as long as the total equity isn’t reduced past a responsible level. Where those levels should be set is a reasonable area for discussion and debate. One thing is certain however, we need to avoid making the mistakes of the past if we are to avoid them in the future.

David M. Dworkin
President and CEO
P.S.  This month we are launching our Membership Drive, and we encourage all of our current members to rejoin as well as consider increasing their contribution level. For those of you who receive these notes but are not members, circulation will be restricted to current members beginning in January of 2019. I hope that you will consider joining NHC now . If you join or renew by Dec. 1, you can lock in the 2018 rates. Retiree memberships are only $100 and sole practitioners may join now for only $400 per year. Other levels are also listed on our website.
News from Washington I By Tristan Bréaux and
Kaitlyn Snyder
NHC submits comments on AFFH

NHC submitted comments on HUD’s advanced notice of proposed rulemaking on Affirmatively Furthering Fair Housing: Streamlining and Enhancements. NHC called on HUD to reinstate the Assessment Tool and continue requiring communities to submit Assessments of Fair Housing over its outdated and inefficient predecessor, Analysis of Impediments. 
Treasury’s Phillips calls for privatization of Fannie Mae and Freddie Mac

Sec. Steven Mnuchin’s top housing advisor, Craig Phillips, called for the privatization of Fannie Mae and Freddie Mac in a speech before the Mortgage Bankers Association’s Annual Conference and Expo in Washington, D.C., according to HousingWire . “The administration advocates ending the conservatorship of Fannie Mae and Freddie Mac and returning them to private ownership,” Phillips said Monday. “Their charters should be removed from statute and their operations should be overseen by the primary regulator that has the authority to approve additional guarantors to introduce competition into the secondary mortgage market.” NHC’s President and CEO David Dworkin called for a similar approach in a HousingWire op-ed in July .
California passes state AFFH requirements

A recently passed California state law reinstates the AFFH process recently suspended by HUD and expands the coverage of AFFH to additional jurisdictions. The effort was led by Public Advocates, the Western Center on Law & Poverty and National Housing Law Project. The bill passed the California Assembly 56-23-1 and the Senate 31-7-2. California has more housing units than any other state, over 10 percent of the nation’s total.
HUD awards housing counseling grants

This week, HUD awarded $47 million in housing counseling grants to help approximately 1 million households find housing, make more informed housing choices, or keep their current homes. These grants will directly support the housing counseling services provided by 31 national and regional organizations, six multi-state organizations, 19 state housing finance agencies and 207 local housing counseling agencies. In addition, HUD is awarding $3.5 million to four national organizations to train and certify additional housing counselors.
HUD announces disaster assistance for Florida storm victims

HUD announced it is providing a 90-day moratorium on foreclosures of Federal Housing Administration-insured home mortgages in the presidentially-declared disaster counties of Bay, Franklin, Gulf, Taylor and Wakulla. HUD is also making mortgage insurance available through its Section 203(h) and 203(k) programs. 
FHFA, Fannie & Freddie introduce Mortgage Translations

The Federal Housing Finance Agency (FHFA), Freddie Mac and Fannie Mae announced the launch of Mortgage Translations – a centralized clearinghouse of online resources to assist lenders, servicers, housing counselors and other real estate professionals in serving limited English proficient borrowers. The first phase of the launch consists of Spanish-language documents and resources in four other commonly spoken languages – Chinese, Vietnamese, Korean and Tagalog – will be added in the coming years.
Senate Banking committee hearing on Fannie, Freddie and FHFA

The Senate committee on Banking, Housing and Urban Affairs has scheduled a hearing on Oct. 18 at 10 a.m. EDT on oversight of Fannie Mae’s and Freddie Mac’s pilot programs. Fannie Mae CEO Timothy Mayopoulos, Freddie Mac CEO Donald Layton and Sandra Thompson, deputy director of the Federal Housing Finance Agency's division of housing mission and goals, are scheduled to testify. The hearing will take place in the Dirksen Senate office building, room 538, and via webcast.
The National Housing Conference has been defending the American Home since 1931. 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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