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Weekly update from the National Housing Conference
News from Washington
President-elect introduces comprehensive COVID-19 relief plan

On Thursday, Present-elect Biden unveiled his “American Rescue Plan,” outlining a legislative package and policy roadmap to provide further COVID-19 relief to struggling households and small businesses. The proposal includes another $1,400 in direct stimulus payments, as well as $350 billion in state and local aid, $25 billion in additional rental assistance and $5 billion in emergency assistance for individuals experiencing or at risk of homelessness. “These funds will ensure that the hardest-hit renters and small landlords, including those in disadvantaged communities that have suffered disproportionately in terms of pollution and other environmental harms, aren’t put in the position where they can’t cover their own housing expenses,” the plan explains.

NHC issued a statement commending the president-elect for moving quickly to put forth a comprehensive plan. “As industry leaders have expressed, the first $25 billion was a significant down payment towards the rental crisis, but research has proven an additional $25 billion is certainly needed,” said NHC’s David Dworkin. “President-elect Biden’s plan, coupled with the U.S. Department of Treasury’s efforts to expeditiously provide funds to states and localities, represents monumental steps in the right direction.”
Stricter GSE condo rules draw attention

Both Fannie Mae and Freddie Mac recently made changes to their condo lending requirements to restrict lending for condos in high-rent vacation destinations. The move is designed to exclude so-called “condotels” – condo buildings in vacation destinations that offer hotel-like amenities and a comparatively high number of short-term rental units – from GSE lending. The stricter requirements went into effect in December for Fannie Mae loans and go into effect on Feb. 2 for Freddie Mac loans. Fannie Mae also released a series of FAQs clarifying which properties are affected by the new rules.

Some industry stakeholders oppose the policy changes. “The updated rules… are starting to generate pushback from realtors and bankers who say entire buildings could be ineligible for financing even if only some units are rented out on a short-term basis,” according to a recent Wall Street Journal article.

“We’re concerned that access to credit could be limited for whole projects or condo buildings, which could affect not just second-home buyers but some primary home-buyers across the country,” Ken Fears, senior policy advisor at the National Association of REALTORS®, told The Wall Street Journal. Fannie Mae responded, saying, “Fannie Mae’s charter is for residential lending. We provided clarity to lenders regarding what are acceptable residential condominium projects and what meets Fannie Mae residential lending standards and practices.”
Experts caution many homeowners may be in forbearance for the long haul

According to the Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey, roughly 5.5% of mortgages were in forbearance as of Jan. 3, representing an estimated 2.7 million homeowners. The number of homeowners in forbearance has held steady, and even declined somewhat in recent months. These declines can be observed across all loan types, including loans securitized by Fannie Mae, Freddie Mac and Ginnie Mae, as well as private label securities. However, MBA Senior Vice President and Chief Economist Mike Fratantoni warns, "The data show that those homeowners who remain in forbearance are more likely to be in distress, with fewer continuing to make any payments and fewer exiting forbearance each month. Those borrowers who do exit are also more likely to require a modification to their ongoing repayment plans."

“There are signs that a meaningful number of home-loan borrowers will not be able to resume payments any time soon,” Reuters reports in a recent article. Reuters notes that over half of homeowners in forbearance have requested an extension in the past three months and suggests that banks have had a difficult time assessing which consumers will be able to resume mortgage payments at the expiration of their forbearance plan and which will require a modification.
HUD OIG finds 3,800 loans from 2019 lacked necessary flood insurance coverage

The Department of Housing and Urban Development (HUD) Office of Inspector General (OIG) published the findings of an audit of flood insurance coverage for 2019 Federal Housing Administration (FHA) mortgages. OIG compared FHA loan data to National Flood Insurance Program (NFIP) data, and found that at least 3,870 loans, totaling more than $900 million, closed in 2019 were made for properties in special flood hazard areas, but lacked NFIP coverage. Many of the loans identified had private flood insurance instead of the required NFIP coverage, while other loans lacked flood insurance entirely. In all cases, however, the absence of appropriate coverage made the loans ineligible for FHA insurance.

New research warns that the number of affordable housing units at risk of coastal flooding and sea level rise will likely triple in the next 30 years, underscoring the importance of adequate flood insurance coverage. To resolve this issue going forward, OIG recommends HUD implement system checks to avoid endorsement of ineligible loans and update its data collection to ensure the appropriate flood insurance coverage is in place at the point of origination, including flood zone, flood insurance type, flood insurance amount and property value.

OIG’s findings come at the same time as the Association of State Floodplain Managers and National Resources Defense Council’s recent petition to the Federal Emergency Management Agency to make significant changes to NFIP to modernize its flood risk maps and update restrictions on construction and land use in floodplains.
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Serving the Delaware Valley area, The Financial Wellness Institute is a New Jersey-based nonprofit focused on equipping and strengthening individuals, emboldening them to make confident financial decisions that also empower and build the surrounding community. 
Senate Banking Committee chair outlines housing-focused agenda

In a press conference earlier this week, incoming Chair of the Senate Committee on Banking, Housing, and Urban Affairs Sherrod Brown (D-Ohio) shared his legislative agenda for the new Congress, which will focus more heavily on housing-related issues than in previous years. "Housing was a word left out of this committee’s title for far too many years and it won’t be left out anymore,” said Sen. Brown. “Housing determines so much in peoples’ lives. It determines closeness to a grocery store…It determines the school district your children live in.”

Sen. Brown discussed several specific housing priorities that the committee will pursue under his leadership, including preserving COVID-19 eviction protections, expanding refinance availability for low- and moderate-income homeowners, and examining the role credit reporting plays in hindering access to mortgage credit. Sen. Brown also said he plans to approach the oversight of the entire financial system through a “climate lens and through a racial justice lens.”
FHFA extends underwriting flexibilities

This week, the Federal Housing Finance Agency (FHFA) extended several temporary policies enacted in 2020. The policy changes, implemented to support borrowers and lenders during the pandemic, include relaxed appraisal requirements, alternative methods of document and income verification and expanded use of power of attorney. These flexibilities were scheduled to expire at the end of the month but have now been extended through Feb. 28.

FHFA’s announcement follows HUD’s decision to extend its own temporary policies in late December. “To assist lenders and servicers in continuing to supply FHA-insured affordable mortgage financing despite the considerations for social distancing,” HUD extended the deadline for endorsing mortgages in forbearance through March 31, as well as temporary verification of employment and appraisal requirements through Feb. 28.
HUD unveils new tool to connect at-risk individuals to community support

On Thursday, HUD unveiled its Find Shelter tool. The new online resource allows individuals and families experiencing financial hardship to locate essential resources within their community. The tool enables search by location and keyword for emergency shelter, food pantries, health clinics and clothing. Visitors to the site will also find helpful links to other emergency care resources, including homeless support, housing counseling and rental assistance.

“The Find Shelter website is another tool with which we can relieve homelessness and provide people with the resources they need,” said HUD Secretary Ben Carson. “Particularly as we continue to recover from the coronavirus pandemic, it’s important to make sure individuals and families know where to go to get help.”
FHFA and Treasury amend GSE PSPAs

FHFA and the Treasury Department announced new amendments to Fannie Mae and Freddie Mac’s Preferred Stock Purchase Agreements (PSPAs) that will allow the GSEs to retain their earnings until the requirements of the 2020 capital rule are met. The announcement follows similar updates in 2017 and 2019 that allowed the GSEs to retain additional capital (up to $25 billion for Fannie Mae and up to $20 billion for Freddie Mac). “In order to better protect against unexpected future losses, [Treasury Secretary Steven] Mnuchin and [FHFA Director Mark] Calabria determined that the GSEs should be permitted to continue to accumulate more first-loss capital to stand in front of and protect taxpayers,” the announcement explains.

Mnuchin said, “Although we would have preferred to have been able to achieve further reforms to the housing finance system through legislative action over the past several years, we are pleased to announce today’s agreement.”

In addition to extending capital retention, the PSPA amendments stipulate that the GSEs cannot exit conservatorship with less than 3% capital. The amendments lay out a blueprint for eventual common stock issuance and implement new restrictions, including limits on the GSEs’ retained mortgage portfolios and higher-risk single-family mortgage acquisitions, small lender protections and multifamily lending caps.

“Today's agreement that allows Fannie Mae and Freddie Mac to continue retaining earnings is a step in the right direction, but more hard work remains," said Calabria.
Chart of the week
Chart of the week: COVID-19 surge dampens consumer confidence in housing

Fannie Mae’s Home Purchase Sentiment Index saw declines in November and December as COVID-19 outbreaks surged across the country. "Both the 'Good Time to Sell' and 'Good Time to Buy' components fell significantly, with respondents overwhelmingly noting the unfavourability of economic conditions,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “In particular, the sell-side component fell for the first time since April and by 18 points, reversing most of the increases of the past three months and implying to us that, at least temporarily, potential home sellers might wait to list their homes.”
What we're reading
The National Council of State Housing Agencies Executive Director Stockton Williams argued that Treasury should determine eligibility for the new federal Emergency Rental Assistance program by letting renters themselves determine whether they are in need. "Requiring renters to provide additional documentation [...] will thwart Congress' clear intent in getting rental relief to eligible households as quickly as possible," said Williams, adding that attestation was important for the speedy distribution of both federal and state pandemic aid last year.

In a recent op-ed for The Hill, National Fair Housing Alliance President and CEO Lisa Rice discussed the intersection of fair housing and COVID-19. “Where you live matters deeply, and fair housing opportunities have a significant and lasting impact on every aspect of a person’s life and their health outcomes,” said Rice. “Communities of color have more hazardous and toxic waste facilities; more polluted land, air and water; fewer banking options, health care and fitness facilities; less green space and access to fresh food and water.” Rice called on the Biden administration to make fair housing impact analysis a key element of their policy agenda.

A new report from the Economic Roundtable – a Los Angeles-based nonprofit – forecasts the impact of the COVID-19 pandemic on the homeless population using data from the 2008 Great Recession. Based on its analysis, the Economic Roundtable estimates that over the next four years chronic homelessness will increase 49% nationwide, 68% in California and 86% in Los Angeles.

A new retrospective examines lessons learned from the $180 million Health Futures Fund – a collaboration between The Kresge Foundation, Local Initiatives Support Corporation and Morgan Stanley. From 2012 and 2019, the fund combined the Low-Income Housing Tax Credit and New Markets Tax Credit to provide loans to community developers and award grants supporting project development. Some of the challenges encountered by the fund include “power dynamics” amongst co-located partners, data system capabilities and informal collaboration arrangements. Thoughtful site selection, effective coordination amongst partners, and providing trustworthy community services led to the most successful outcomes.
The week ahead
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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