In light of COVID-19, we are temporarily making our Member Brief available to non-members. If you wish to join, click here.
Weekly update from the National Housing Conference
News from Washington
NHC joins housing and civil rights organizations to comment on QM changes

This week, NHC joined housing and civil rights groups to comment on two Notices of Proposed Rulemaking (NPRM) issued by the Consumer Financial Protection Bureau (CFPB) on changes to the Qualified Mortgage (QM) rule, including provisions to address the impending expiration of the GSE Patch, which is scheduled to expire in January 2021.
For the first NPRM to amend the general QM definition, NHC and 11 housing and civil rights groups wrote to CFPB Director Kathleen L. Kraninger to consider these recommendations to ensure that the post-GSE Patch definition preserves broad access to sustainable credit and levels the playing field for private capital:
  1. Strongly reiterate its commitment and obligation to ensure fair lending compliance and clearly state that a QM and/or Safe Harbor designation does not confer compliance or override non-compliance with the Fair Housing Act and/or Equal Credit Opportunity Act, or other consumer protection laws pertaining to mortgage lending;
  2. Increase the Safe Harbor threshold to 200 bps above Average Prime Offer Rate (APOR);
  3. Increase the QM cap to 300 bps over APOR; and
  4. Modify the treatment of short-reset ARMs to permit the use of the standard APR with an alternative pricing cap, to serve as a control on payment shock and a means to protect the ongoing affordability of these mortgage products.

For the second NPRM to amend Regulation Z to extend the GSE Patch, the group expressed that when finalizing the rule CFPB should ensure borrower protections for four key issues: fair lending, pricing caps, short-reset adjustable rate mortgages (ARMs), and “consider and verify.” They proposed the following recommendations:
  1. Protect against pricing discrimination by ensuring that lenders engaged in price discrimination cannot take advantage of the safe harbor;
  2. Adopt a price-based approach to QM rather than a DTI- or hybrid DTI/price-based approach;
  3. Raise the safe harbor threshold to 2% over APOR;
  4. Raise the overall QM cap for rebuttable presumption loans to 3% over APOR;
  5. Ensure that borrowers are protected from excessive payment shock in short-reset ARMs consistent with the QM statute;
  6. Clarify the requirement that lenders consider and verify debts and income and consider debt-to-income (DTI) or residual income by ensuring meaningful ability to repay (ATR) analysis under the safe harbor;
  7. Refrain from adopting a seasoning approach to turn non-QM or rebuttable presumption loans into safe harbor loans. If CFPB adopts the seasoning approach, ensure that none of the safeguards CFPB included in the proposed rule are weakened; and
  8. Engage in further data analysis for small loans, disaggregating chattel and real estate-secured loans.
State level interpretation of CDC moratorium could result in confusion and gaps

Following the recent Centers for Disease Control and Prevention (CDC) agency order halting evictions for certain renters through the end of the year, states across the country have begun to interpret and implement the order’s requirements. With enforcement and adjudication delegated to the states, state supreme courts, including Michigan, Ohio and Virginia, have published their own guidance for lower courts.

Legal aid organizations in Iowa, Michigan, North Carolina, Oklahoma and elsewhere are also preparing to help renters navigate the terms of eligibility and complete the mandatory declaration required by the order. This state level approach to interpretation and implementation could result in an uneven application of the moratorium’s coverage and add confusion to the already complex eviction moratorium and tenant protection landscape.

Advocates on both sides of the issue have expressed concern with the order. The New Civil Liberties Alliance filed a complaint in the U.S. District Court for the Northern District of Georgia to stop the CDC from enforcing the order, arguing it leaves landlords suffering their own financial hardship no recourse for unpaid rent. “An administrative agency has no authority to overrule duly enacted state laws across the country that protect landlords from delinquent tenants when a contract is in place,” NCLA said in a statement.

An article from the Washington Post this week says the order does not resolve the underlying challenges facing renters either; “The order does nothing to address the root cause of this eviction crisis — a half century of federal retrenchment from providing low-income housing and the rejection of traditional multifamily public housing as a viable and effectual anti-poverty program. Very low-income Americans have been left at the mercy of landlords and private rental companies and covid-19 has exposed the consequences.”

While the CARES Act and CDC order help mitigate widespread evictions in the near term, NHC’s President and CEO David Dworkin warns, “It is a stopgap measure. It will not be totally effective. People will definitely fall through the cracks.” Dworkin told Slate that “the bigger problem is that it simply kicks the can down the road and doesn’t solve the core problem, which is that millions of Americans can’t pay their rent, and haven’t been paying their rent, and when this moratorium ends, there will still be mass evictions.”
Application of disparate impact standard limited in new final rule

HUD recently published the final rule updating the agency’s implementation of the Fair Housing Act’s disparate impact standard. The final rule, which follows the proposed rule issued in July 2019, amends the 2013 disparate impact rule to “better reflect” the Supreme Court’s ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, according to HUD. The amendments include changes to the burden-shifting test, new examples of discriminatory housing and a uniform standard to determine when policies or practices constitute a violation of the Fair Housing Act.
Several housing organizations came out to strongly oppose the final rule, which comes on the heels of HUD’s decision in July to terminate the Affirmatively Furthering Fair Housing rule – another important regulatory mechanism for enforcing the Fair Housing Act. National Low Income Housing Coalition President and CEO Diane Yentel said in a statement, “HUD has now created a new and much higher bar for proving discriminatory outcomes, effectively eliminating disparate impact as a means of combatting discrimination.” The National Fair Housing Alliance (NFHA) and National Community Reinvestment Coalition (NCRC) joined the opposition. “This is a free pass to business policies that have discriminatory effects,” said NCRC CEO Jesse Van Tol.
NFHA President and CEO Lisa Rice said, “This is the worst possible time for HUD to gut civil rights protections. We are grappling with a triple pandemic — the COVID-19 health crisis, the ensuing economic crisis, and the crisis of racism that has plagued us since the beginnings of this nation.” 

Senate Banking Committee Ranking Member Sen. Sherrod Brown (D-Ohio) said the new rule undermines civil rights protections. Sen. Brown released a statement saying, “The Administration’s Disparate Impact rule will make it harder for victims of discrimination – whether because of their race, disability, the fact that they have children, or other protected characteristics – to seek justice and equal opportunities to thrive.”   
As the industry and regulators contend with how to enforce fair housing, a recent article from the Harvard Business Review highlights the opportunities and challenges associated with using artificial intelligence to fight discrimination. Preventing disparate impact is a “complex undertaking,” the article explains. “What makes avoiding disparate impact so difficult in practice is that it is often extremely challenging to truly remove all proxies for protected classes. In a society shaped by profound systemic inequities such as that of the United States, disparities can be so deeply embedded that it oftentimes requires painstaking work to fully separate what variables (if any) operate independently from protected attributes.”

Findings such as these point to the need for deeper discussions about how to deploy modern technology to advance fair housing.
ESG and CDBG recipients encouraged to support eviction prevention
The Department of Housing and Urban Development (HUD) recently reminded recipients of Emergency Solutions Grants (ESG) and Community Development Block Grants (CDBG), including states, cities, communities and nonprofits, that rental assistance is an allowable use of the $7 billion in HUD funding available under the CARES Act. Citing the executive order from Aug. 8, HUD encouraged grantees to use the funds they’ve received “to provide rental assistance or other aid to individuals experiencing financial hardship because of the pandemic.”

HUD also directed states, localities and nonprofits to its Eviction Prevention and Stability Toolkit, which provides templates for tenant brochures, landlord flyers and resident needs assessments, as well as sample repayment agreements. 
HUD provides greater flexibility for use of ESG funds

This week, HUD issued a notice providing new flexibilities for states and localities receiving ESG funds under the CARES Act. The notice describes the requirements for ESG recipients of the $3.96 billion in CARES Act funding. In a statement, HUD Secretary Ben Carson said the administration has “been working hard since the onset of this pandemic to ensure that localities are properly equipped with the funding and resources necessary to keep the American people safe. These flexibilities allow local governments to tailor CARES Act funds to the unique needs of their community.”
The notice makes new activities eligible for ESG funds, including the creation of temporary emergency shelters and landlord incentives. HUD will now offer states and localities more discretion in how to deploy funds outside of what is described in the ESG regulations to provide COVID-19 support, including contributing funds to hotel costs for individuals receiving ESG funds or Continuum of Care programs. The notice also extends the expenditure deadline for fund recipients. 
Increased urgency around NFIP deadline during historic hurricane season

This year’s hurricane season continues to break records with the earliest 14th and 15th named storms on record. Hurricane Laura, which battered the Louisiana coast at the end of August, is estimated to have caused up to $12 billion in damages. HUD responded to Hurricane Laura with additional disaster assistance, including immediate foreclosure relief and insurance for mortgages and home rehabilitation. HUD also released guidance for servicers managing the aftermath of natural disasters during a global pandemic, saying the Federal Housing Administration (FHA) “recognizes the difficulty facing many borrowers across the country in light of recent hurricanes, wildfires, and other extreme weather events in the midst of a pandemic.”

Housing vendors and technology providers are also developing innovative solutions to help homeowners better understand and prepare for the risks associated with increasingly severe climate events. Most recently, unveiled a new tool to educate homebuyers on a property’s flood risk based on data from nonprofit research group First Street Foundation.
New storms continue to develop as the National Flood Insurance Program (NFIP) nears the expiration of its authority to provide flood insurance at the end of the month. Housing organizations, including the National Association of REALTORS®, have urged Congress to re-extend the program. House Majority Leader Steny Hoyer (D-Md.) sent a letter to colleagues in the House of Representatives, saying “Congress must complete our work on appropriations and other expiring items, such as flood insurance” before the Sep. 30 shutdown deadline.
Chart of the Week
Chart of the week: Record high number of young adults living with parents

The Pew Research Center reports that the share of young adults, ages 18 to 29, living with a parent has exceeded previous peak levels experienced during the Great Depression. As of July, 52% of young adults shared a residence with a parent. Pew observed this trend across all demographics, regardless of race, gender or geographic location. According to Pew, this trend could have a negative impact on the U.S. economy, prompting fewer younger adults to form households and dampening demand for housing and household goods. 
What we're reading
The average home in the U.S. is getting bigger, while the average apartment size is shrinking, according to new research from STORAGECafé – an online platform for self-storage unit listings. Over the past decade, the average U.S. apartment has lost a bedroom, while single family homes have grown steadily larger with newer single family homes now 18% larger than the overall market.
Online real estate platform Redfin reports that most homeowners are missing out on the cost savings created by the current record low mortgage interest rate environment. Although lower rates have afforded homebuyers earning $2,500 a month an additional $33,000 in purchasing power, those gains have been “effectively cancelled out” by the more than 8% year-over-year increase in home prices this summer. 
Deploying its Eviction Tracking System, Eviction Lab has kept abreast of eviction trends during the pandemic. New analysis compares the amount owed by tenants in landlord eviction filings in Cincinnati, Ohio, Houston, Texas and Phoenix, Arizona. Eviction Lab finds that across all three cities, the majority of evictions initiated during COVID-19 “have been for relatively small sums of money.” Nearly 12% of evictions filed cited $500 or less in money owed and about 28% cited $1,000 or less in money owed. 
The week ahead
Monday, September 14

Tuesday, September 15
Wednesday, September 16
Thursday, September 17
Friday, September 18
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.
Defending our American Home since 1931
Copyright © 2020. All Rights Reserved.