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Weekly update from the National Housing Conference
News from Washington
President-elect Biden unveils key transition team members

This week, President-elect Joe Biden and Vice President-elect Kamala Harris announced the members of the Agency Review Teams that will manage the transition to the new administration across the federal government’s different agencies. NHC applauded the president-elect for his selection of key leaders in community development and housing, including Don Graves, Treasury Department team lead, and Erika Poethig, Department of Housing and Urban Development (HUD) team lead. NHC members are represented on Agency Review Teams for HUD, the Treasury Department, federal regulatory agencies and the Small Business Administration.

“On behalf of the National Housing Conference, I would like to congratulate President-elect Biden for moving quickly to appoint Don Graves and Erika Poethig to lead the Agency Review Teams responsible for coordinating the transition efforts for some of the federal government’s most important functions,” said NHC’s David Dworkin in a press release this week.

“Don Graves is a trusted advisor to President-elect Biden with decades of experience in the Treasury Department as well as community lending. Erika Poethig has led some of the most innovative research in housing and community development at the Urban Institute, while having extensive experience at HUD. These choices are an excellent indication of the kind of leadership we can look forward to,” he continued. NHC is committed to working with President-elect Biden’s team to ensure a smooth transition and impactful first 100 days.

Several other housing organizations have congratulated the president-elect in the past week, including the Mortgage Bankers Association, National Fair Housing Alliance and National Low Income Housing Coalition.
FHFA extends policy allowing purchase of loans in forbearance

The Federal Housing Finance Agency (FHFA) announced that it will once again extend its temporary policy allowing the GSEs to purchase loans in forbearance. The provision, which was originally introduced in April at the onset of the pandemic, was set to expire on Nov. 30. FHFA’s latest announcement will extend this important policy through Dec. 31. While the GSEs are not able to purchase loans in forbearance under usual circumstances, the policy addresses the unique scenario in which a borrower has closed on their mortgage but entered into a COVID-19-related forbearance prior to the sale of the loan to Fannie Mae or Freddie Mac. FHFA’s temporary policies during the pandemic, such as the purchase of loans in forbearance, relaxed requirements for appraisals, alternative methods of document and income verification and expanded use of power of attorney, have benefited lenders and borrowers alike.

“These prudential measures also ensure fulfillment of the Enterprises' charter requirements to only purchase loans that meet the purchase standards imposed by private, institutional mortgage investors,” FHFA said in its announcement. “FHFA will continue to monitor the coronavirus' impact on renters, borrowers, and the mortgage market and update policies as needed.”
Senate Appropriations Committee releases FY21 THUD bill

On Tuesday, the Senate Appropriations Committee published the Transportation, Housing and Urban Development (THUD) bill as part of the release of all 12 FY 2021 funding measures. “By and large, these bills are the product of bipartisan cooperation among members of the committee. As negotiations with the House begin in earnest, I look forward to working with Chairwoman Lowey, Vice Chairman Leahy, and Ranking Member Granger to resolve our differences in a bipartisan manner,” Committee Chairman Richard Shelby (R-Ala.) said in a statement.

The bill allocates $48.7 billion to HUD. Several housing programs received funding increases compared to FY 2020. The bill allocates $25.5 billion for tenant-based rental assistance, $13.4 billion for project-based rental assistance, $7.4 billion for public housing, $3.4 billion for Community Development Block Grants, $1.3 billion to the HOME Investment Partnerships Program, $853 million to Housing for the Elderly, $237 million to Housing for the Disabled and $360 million to lead-based paint hazard grants.
HUD proposes changes to flood insurance requirement

HUD published a new proposed rule that would expand the insurance options available to satisfy the Federal Housing Administration’s (FHA) flood insurance requirements. Currently, FHA borrowers in Special Flood Hazard Areas designated by the Federal Emergency Management Agency must get their flood insurance through the National Flood Insurance Program (NFIP), which received a last-minute extension in the latest stopgap spending bill. HUD’s proposal, however, would allow these borrowers to select a private insurance option.

If implemented, HUD would provide a compliance aid for private insurers, which “would allow lenders to rely on the compliance aid to determine if a private flood insurance policy meets FHA’s requirements.” According to HUD’s estimates, about 5% of borrowers would be able to obtain a private flood insurance policy.

“Our proposal would expand the options for obtaining flood insurance, rather than continuing to lock in borrowers to one federal option without any ability to comparison shop,” said Assistant Secretary for Housing and Federal Housing Commissioner Dana Wade. “We are also proposing important safeguards that will help protect borrowers, so their homes will have flood insurance coverage at a level at or above the level available through the National Flood Insurance Program.”

NFIP, created in 1968, has more than 5 million flood insurance policies, representing more than $1.3 trillion in insurance coverage. NFIP was last reauthorized in 2012, which lasted through 2017. Since then, the program has operated on short-term extensions. The Congressional Research Service (CRS) recently outlined recommendations to reform the program. “Reforming the premium structure to reflect full risk-based rates could place the NFIP on a more financially sustainable path, risk-based price signals could give policyholders a clearer understanding of their true flood risk, and a reformed rate structure could encourage more private insurers to enter the market,” CRS wrote.
Financial Stability Report raises concern about spike in delinquent mortgages

The Federal Reserve released its biannual Financial Stability Report on Monday. The report raised concern around several areas of the economy, including mortgage lending and the housing market. “The resurgence of fragility and funding stress in the same nonbank financial sectors in the COVID-19 crisis and the global financial crisis highlights the importance of a renewed commitment to financial reform,” Federal Reserve Governor Lael Brainard said in a statement.

The Financial Stability Report highlighted the general health of the housing market in 2020, citing strong home sales and rising home prices. “Downside risk” remains, the Federal Reserve said, “given the large number of mortgage loans in forbearance programs and the uncertainty around their ultimate repayment.” The report applauded “widespread loss mitigation measures,” which have helped to soften the negative financial effects of COVID-19. “The severe decline in economic activity and tightening of lending standards originating from the COVID-19 shock” notwithstanding, the Federal Reserve highlighted the healthy position of most households, with a “very low” share of homeowners with negative equity.
Housing groups urge Congress to address 'impending housing crisis'

This week a group of 13 housing organizations, including the Mortgage Bankers Association, National Association of REALTORS®, National Multifamily Housing Council and National Association of Home Builders, sent a letter to bipartisan leaders in the Senate and House of Representatives urging them to take immediate action to support renters and housing providers to avoid an “impending housing crisis.”

As Congress prepares to revisit a stimulus package in the lame-duck session, the organizations request that Senate Majority Leader Mitch McConnell (R-Ky.), Senate Minority Leader Chuck Schumer (D-N.Y.), Speaker of the House Nancy Pelosi (D-Calif.) and House Minority Leader Kevin McCarthy (R-Calif.) provide assistance to renters and property owners, extend the Paycheck Protection Program to multifamily businesses and provide full-year funding for HUD and the Department of Agriculture’s rental assistance programs. The letter implores Congress “to extend additional COVID-19 relief measures and fund a strong federal assistance program that protects the long-term stability of our nation’s housing markets.”
FHFA validates Classic FICO, will continue to assess other credit score models

As part of FHFA’s ongoing initiative to validate and approve different credit score models, the agency announced the validation of the Classic FICO. In 2019, FHFA issued a final rule outlining the approval process, beginning with the solicitation of applications from credit score providers, the review of applicants, a credit score assessment and an enterprise assessment.

The Classic FICO validation comes just in time for the Nov. 20 deadline for the GSEs to use a validated and approved credit score model under the Economic Growth, Regulatory Relief and Consumer Protection Act. “The validation and approval of Classic FICO by the Enterprises allows them to continue supporting the mortgage market while assessing more modern credit score models,” FHFA said. The agency called the validation an “incremental step” and said it will take another year to validate the other credit score models currently under review. Both Fannie Mae and Freddie Mac issued announcements this week.
Regulators give financial institutions more leeway on LIBOR replacement

The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation (FDIC) issued a statement signaling their intention to refrain from endorsing a single replacement for LIBOR. The once widely accepted benchmark rate, used to calculate adjustable rate mortgages (ARMs), is scheduled to expire at the end of 2021. Despite the Alternative Reference Rates Committee’s recommendation of the Secured Overnight Financing Rate (SOFR), the three federal regulators indicated that new financial contracts with a benchmark rate should “either utilize a reference rate other than LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation.” Use of SOFR will be voluntary.

Earlier this summer, the Consumer Financial Protection Bureau (CFPB) took several steps to support the mortgage industry’s transition away from LIBOR and towards alterative benchmarks like SOFR. The CFPB published FAQs, updated its consumer handbook on ARMs, released a fact sheet and issued a Notice and Opportunity to Comment. Ginnie Mae also announced it will cease acceptance of certain mortgages with interest rates tied to LIBOR beginning in January 2021.
Chart of the week
Chart of the week: Mom-and-pop landlords may be forced to sell properties to cover income losses

Mom-and-pop landlords – those that own less than 10 properties – could become increasingly vulnerable as we get further away from the expiration of emergency unemployment benefits and continue to wait on federal rental assistance. With landlords citing renters’ inability to pay as the primary reason for loss of rental income, many may be forced to sell their properties to cover the losses, the Urban Institute said in a recent blog post.
What we're reading
In honor of Veterans Day, Kathryn Monet, CEO of the National Coalition for Homeless Veterans, published a call-to-action in The Hill. With more than 37,000 veterans homeless on any given night, “Congress must do more to ensure there are veteran-centric services available for veterans facing housing instability,” Monet said. She specifically called on the Senate to pass the DELIVER Act.

As the nation paused to recognize the sacrifices of our servicemembers, The National Alliance to End Homelessness offered five key facts about barriers to ending veteran homelessness. The timely report points to the drop in veteran homelessness associated with increased government investment. It also notes that veterans are at an increased risk of homelessness, with that risk particularly concentrated among veterans of color. The National Alliance to End Homelessness also warned that COVID-19 could present a major setback in recent progress made in the fight to end veteran homelessness.

Better data collection is needed to assess the effectiveness of tax expenditures, according to a new report on Opportunity Zones. The Government Accountability Office’s report, which compares Opportunity Zones to other tax expenditures designed to direct investment to low-income and distressed areas, such as the New Markets Tax Credit (NMTC) and the Low-Income Housing Tax Credit (LIHTC), recommends Congress grant the Treasury Department more authority to collect data and report on the performance of Opportunity Zones.
The week ahead
Monday, November 16

Tuesday, November 17
ULI: Education and jobs, noon – 1 p.m. ET
SIFMA: Big data, 1 – 2:30 p.m. ET
HUD: CDBG best practices, 2 – 3 p.m. ET

Wednesday, November 18

Thursday, November 19

Friday, November 20

Saturday, November 21
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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