Weekly update from the National Housing Conference
In this issue
August 9, 2020 I Issue 89-28

  • Consensus starting to form around federal rental assistance
  • Forbearances continue to decline, but trend may not last
  • Fitch downgrades outlook as GSEs prepare for new liquidity requirements
  • Senate bill would help households overcome down payment burden
  • Industry continues vocal opposition to HUD’s AFFH decision
  • Proposed legislation would create emergency CDFI fund
  • HUD will resume physical REAC inspections in October
  • Chart of the Week: Unemployed workers quickly depleting limited savings 
Find the information you need at NHC's COVID-19 Housing Resource Center
Now is the time to engage
By David M. Dworkin, NHC president and CEO

Dear Friend,

As negotiations on a new relief package continue, momentum on preventing evictions and funding comprehensive rental assistance is growing. Over the weekend, the president signed an Executive Order that may be used to “halt evictions,” according to National Economic Council Director Larry Kudlow on ABC’s “This Week.” The Executive Order rightly notes that “those who are dislocated from their homes may be unable to shelter in place and may have more difficulty maintaining a routine of social distancing. They will have to find alternative living arrangements, which may include a homeless shelter or a crowded family home and may also require traveling to other States. In addition, evictions tend to disproportionately affect minorities, particularly African Americans and Latinos.” On FOX News Sunday, Kudlow said that the “Health Secretary has the authority, working with the CDC, to declare it an emergency. And, therefore, there will be no evictions.” It’s an important step in the right direction, but it is not a sustainable solution.

Ultimately, only comprehensive federal rental assistance can resolve an eviction crisis. That is because an unfunded moratorium hurts landlords now at the expense of tenants later. If you can’t pay one month’s rent, how on earth can you pay six or 12 months of rent later? 

Many of you have been working hard on this, as have we. I particularly want to call out the contributions of our industry partners at the Mortgage Bankers Association, National Association of Home Builders, National Association of REALTORS®, and National Multifamily Housing Council, as well as low-income advocates like the National Alliance to End Homelessness, National Low Income Housing Coalition, and Stewards of Affordable Housing for the Future, among many others. NHC has engaged directly with senior officials at the White House, the Treasury Department and the Department of Housing and Urban Development, as well as the staffs of the Senate Banking Committee and the offices of several key Republican senators. All members of the Senate Banking Committee are critically important, especially Republicans. Other influential “swing votes” include Sens. Mitt Romney (R-Utah), Rob Portman (R-Ohio) and Todd Young (R-Ind.). 

Our message to all sides is simple. Rental assistance is critically needed by both small businesses AND tenants, making it an ideal issue for both progressives and conservatives, Republicans and Democrats. Bipartisan accord on rental assistance is an essential part of stabilizing the economy and avoiding a much bigger crisis. 

Every effort helps, so if you know Republican senators or have relationships with their staffs, now is the time to engage if you haven’t already done so and reinforce your message to those you have already engaged. Those who have been supportive need encouragement; those who are unconvinced need to hear why this is important in their state. Enhanced unemployment insurance is a big deal, but without rental assistance, it’s not enough, and millions of people, including the most vulnerable, will be left out. 
News from Washington
Consensus starting to form around federal rental assistance

Although Congress has yet to pass legislation to address the now-expired federal eviction moratorium or provide federal assistance for households struggling to pay their rent, there appears to be growing bipartisan support for some form of legislative rent relief. Senate Banking, Housing and Urban Affairs Committee Chair Mike Crapo (R-Idaho) confirmed Congress is considering rental assistance and told reporters this week that “rental assistance needs to be much more focused on those who are impacted by COVID rather than across the board.” Democratic presidential nominee Joe Biden called on the president and Congress to come together to avoid “a potential housing crisis.” In a statement to Politico, Biden said, “To prevent a catastrophic rise in evictions and homelessness, President Trump must work with Congress to act swiftly and enact a broad emergency housing support program for renters.”
 
“It defies logic that Republicans wouldn’t be fighting just as hard as Democrats for rental assistance,” said NHC President and CEO David Dworkin in a recent Politico article. “This is a terrible bargaining chip, because frankly both sides need rental assistance, but one side may not realize how much they need it." NHC joins a growing list of advocacy groups who support the $100 billion rental assistance proposed by the House-passed HEROES Act.
Forbearances continue to decline, but trend may not last 

The number of mortgages in forbearance has fallen for seven consecutive weeks, but an uptick in Ginnie Mae loans in forbearance may be the first sign that another wave of foreclosures is on the horizon. The Mortgage Bankers Association’s (MBA) Forbearance and Call Volume Survey reported a drop in the share of servicers’ portfolios in forbearance from 7.74% down to 7.67% for the last week of July compared to the prior week, representing roughly 3.8 million homeowners in forbearance. While loans backed by Fannie Mae and Freddie Mac continue to see declines in forbearance, the volume of Ginnie Mae loans – those backed by the Federal Housing Administration, the Department of Veterans Affairs and the U.S. Department of Agriculture – actually increased. About one in 10 Ginnie Mae loans are currently in forbearance, a troubling reflection of COVID-19’s impact on more vulnerable housing populations, including first-time, veteran, rural and low- to moderate-income homeowners.
 
MBA Chief Economist Mike Fratantoni warned, "The job market has cooled somewhat over the past few weeks, with layoffs increasing and other indications that the economic rebound may be losing some steam because of the rising COVID-19 cases throughout the country. It is therefore not surprising to see this situation first impact the Ginnie Mae segment of the market."
 
In an effort to stave off the negative effects of forbearance on mortgage lenders and homeowners, the Federal Housing Finance Agency (FHFA) recently extended its policy allowing Fannie Mae and Freddie Mac to purchase qualified loans in forbearance through Aug. 31.
Fitch downgrades outlook as GSEs prepare for new liquidity requirements
 
Fitch revised Fannie Mae and Freddie Mac’s rating outlooks on Monday from “stable” to “negative.” The move comes after the rating agency revised the U.S. outlook to negative as well. Fitch noted that the government-sponsored enterprises (GSEs) “experienced volatility at the onset of the coronavirus pandemic but have since stabilized.” Fitch cautioned that “sustained deterioration” in liquidity and access to capital for a prolonged period, “absent intervention by the U.S. federal government,” could result in further negative rating actions. Citing the upcoming presidential election and disruption caused by COVID-19, Fitch said the likelihood of GSE reform in the near-term has diminished. 
 
Both Fannie Mae and Freddie Mac reported quarter-over-quarter income gains. Fannie Mae reported $2.5 billion in net income during the second quarter, up from $461 million in the first quarter, while Freddie Mac reported about $1.8 billion in net income, up from $173 million. Despite quarterly gains, the GSEs have expressed concern about their finances heading into the fall. On Sep. 1, FHFA’s new liquidity requirements for the GSEs go into effect. In its recent filing, Freddie Mac said the new requirements “could result in higher funding costs in the future and may negatively affect our net interest income.”
 
Advocates have expressed concern with changes in requirements and new rulemakings for the GSEs at a time when they play a critical role in maintaining stability in the housing market and supporting distressed homeowners. Democratic Reps. Denny Heck (D-Wash.), Financial Services Committee Chairwoman Maxine Waters (D-Calif.), and Housing, Community Development and Insurance Subcommittee Chair Lacy Clay (D-Mo.) recently sent a letter to FHFA asking Director Mark Calabria to pause the GSE capital rule. At the onset of the pandemic, NHC urged regulators to temporarily suspend regulatory actions unrelated to the nation’s response to COVID-19. 
Senate bill would help households overcome down payment burden

Sens. Cory Gardner (R-Colo.) and Doug Jones (D-Ala.) introduced new legislation this week that would help American households overcome one of the largest obstacles to homeownership: saving up for a down payment. The American Dream Down Payment Act, which is cosponsored by Senate Banking, Housing and Urban Affairs Ranking Member Sen. Sherrod Brown (D-Ohio), would create a tax-advantaged savings program that allows prospective homebuyers to save up to 20% of eligible housing costs, tax free. “Inspired by the popular 529 education savings accounts, this bipartisan bill will make it easier for people to save for a down payment, which will aid both our unique housing challenges in Colorado and our economic recovery from the COVID-19 pandemic,” said Sen. Gardner in a statement.

In a statement of support, Donnell Williams, president of the National Association of Real Estate Brokers, called the legislation “a beacon of hope to vastly increase the opportunity for Black Americans to purchase a first-time home and begin a wealth building journey.” Williams continued, “Homeownership continues to be the best avenue to build legacy wealth and to begin closing the wide wealth gap between Black Americans and non-Hispanic White Americans.”
Industry continues vocal opposition to HUD’s AFFH decision

When HUD Secretary Ben Carson announced the termination of the Affirmatively Furthering Fair Housing (AFFH) rule last month, NHC President and CEO David Dworkin issued a statement condemning the action, calling it “an invitation to do nothing to address the impact local policies and practices can have on increasing racial inequality.” Since then, more housing organizations, including NHC members Local Initiatives Support Corporation and Enterprise Community Partners, have spoken out against the termination of the rule that provides mechanisms for enforcing the Fair Housing Act in local communities that fail to address racial segregation.  
 
HousingWire recently interviewed Julián  Castro, who served as HUD Secretary in 2015 when the rule was adopted. “The intent was to hold communities across the country more accountable for ensuring fair housing opportunities for everyone,” said Castro. “Unfortunately, even in the 21st century, so many years removed from the Fair Housing Act, people still face discrimination in the housing market.” In the absence of the rule, Castro said millions of households could be “blocked from living in higher-opportunity areas with access to better jobs, schools [and] healthcare.” On Monday, the Council of Large Public Housing Authorities also sent a letter to Secretary Carson, asking HUD to withdraw its decision.
Proposed legislation would create emergency CDFI fund

A group of 11 senators introduced proposed legislation this week that would amend the Community Banking and Financial Institutions Act to establish a $2 billion Community Development Financial Institution (CDFI) National Crisis Fund. The fund would ensure that CDFIs have ample resources to support struggling households in the event of an economic crisis or natural disaster.
 
“This pandemic has shown us that when a crisis or a disaster strikes, families and communities need support. By creating a crisis fund for CDFIs with automatic triggers, we can quickly provide aid to the people and small businesses that need it most,” said Sen. Brian Schatz (D-Hawaii) in a statement. Schatz’s legislation is co-sponsored by Sens. Tammy Baldwin (D-Wis.), Chris Van Hollen (D-Md.), Kirsten Gillibrand (D-N.Y.), Ron Wyden (D-Ore.), Elizabeth Warren (D-Mass.), Dianne Feinstein (D-Calif.), Richard Blumenthal (D-Conn.), Bernie Sanders (I-Vt.), Martin Heinrich (D-N.M.) and Jeff Merkley (D-Ore.).
 
Credit Union National Association President and CEO Jim Nussle issued a statement in support of the legislation, saying “Sen. Schatz’s legislation to create [a] CDFI National Crisis Fund will ensure that CDFI credit unions can get much needed resources to our most vulnerable communities, reducing the pain experienced as the result of any number of disasters.”
HUD will resume physical REAC inspections in October

On Friday, HUD announced it will resume Real Estate Assessment Center (REAC) inspections for HUD multifamily and public housing properties. Physical inspections were suspended in March because of COVID-19 related health concerns and will resume around Oct. 5. In order to ensure the safety of residents and staff, HUD will prioritize high-risk properties – those that have historically received low REAC scores – in areas with relatively low COVID-19 risk. More information about the risk assessment methodology and timeline for returning to normal operations is available on HUD’s website.
 
“REAC inspections provide a critical service in HUD assisted properties to ensure residents are living in safe and decent housing. I believe we have found a solution to continue this important function while keeping staff, residents, and inspectors healthy,” said HUD Assistant Secretary for Public and Indian Housing Hunter Kurtz.
Chart of the Week
Unemployed workers quickly depleting limited savings 

The recent expiration of federal unemployment benefits puts more unemployed workers at risk, as households dip into dwindling savings. Analysis from Morning Consult reveals the majority of recently unemployed individuals can cover four or fewer months of expenses with their current savings. Morning Consult estimates that 5.4 million unemployed individuals will run out of money to cover basic expenses by the end of August, followed by another 9.2 million individuals by the end of September. 
What we're reading
A recent article from Curbed suggests that major cities could see a resurgence of tenant activism, similar to that seen during the Great Depression. As eviction moratoriums expire and more households face past-due rent without federal rental assistance, many renters are turning to local organizations and neighbors for support and eviction defense. The article explains that eviction defense in many cases “merely requires neighbors to come together and support one another in a time of need.”
 
Despite the impact of the global pandemic on the larger economy, the housing market remains hot, even seeing a spike in bidding wars, according to the National Association of Home Builders’ Housing Trends Report for the second quarter of 2020. Nearly one-third of homebuyers were outbid on properties during the second quarter, up from 18% last year. Roughly 40% of active buyers cited the lack of affordable housing as the primary reason they had not yet completed a home purchase.
 
The New York Times highlighted the need for more small-dollar mortgage lenders in low-cost areas of the country in a recent article. In some areas, such as Louisville, Kentucky and Detroit, Michigan, homes are affordable, but households may still have difficulty obtaining a mortgage. “The prices are so low that most banks and lenders will not bother writing mortgages for them,” the article explains. The New York Times points to programs, like the MicroMortgage Marketplace, that are bridging the gap, helping connect prospective homebuyers with small-dollar mortgage financing.  
The week ahead
Monday, August 10
 
Tuesday, August 11
 
Wednesday, August 12
 
Thursday, August 13
 
Friday, August 14
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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