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Weekly update from the National Housing Conference
News from Washington
Historic down payment assistance legislation proposed

The House Financial Services Committee released on Friday a discussion draft of legislation that would create a historic down payment assistance program to address the homeownership gap for people of color. The bill will be among those discussed at a hearing of the committee, on the morning of Wednesday, March 10.

The legislation was drafted with assistance from the steering committee of the Black Homeownership Collaborative, a group organized by NHC last year to address systemic barriers to Black homeownership. The collaborative is led by representatives from the National Association of Real Estate Brokers, Mortgage Bankers Association, NAACP, National Urban League, National Association of REALTORS®, National Fair Housing Alliance, NHC and Urban Institute. The new legal mechanism to improve targeting to underserved first-time homebuyers and people of color was developed by lawyers from the Center for Responsible Lending and the National Fair Housing Alliance, among others.

The discussion draft would make $20,000 in down payment assistance available to first-generation homebuyers whose income does not exceed 120% of area median income (AMI). An additional $5,000 would be available to “socially and economically disadvantaged people,“ on the rebuttable presumption that people of color are disproportionately socially and economically disadvantaged. The program would also include homeownership counseling requirements and funding.

The discussion draft defines “socially disadvantaged” as being a member of a group that has “been subjected to racial or ethnic prejudice because of their identity as members of such group without regard to their individual qualities; individuals identifying as Black, Hispanic, Native American, or Asian American, or any combination thereof.” Economic disadvantage is defined as those with an income below 100 percent of AMI. Funding for the program has not been identified, but there is growing consensus that a continuation of the 10-basis point fee on mortgages from Fannie Mae, Freddie Mac and FHA that was enacted as part of the Temporary Payroll Tax Cut Continuation Act of 2011 would provide sustainable resources for the program.
Soaring lumber prices further constrain housing supply

Soaring lumber prices are causing disruptions to housing construction across the country, further constraining the supply of available housing at a time when inventory is already lower than it has been in decades. Lumber is now more than twice as expensive as it was in the middle of last year, bucking the usual industry trend of a slowdown in the winter months and putting further upward pressure on already rising home prices.

The surge in lumber prices is the result of a perfect storm of factors related to the COVID-19 pandemic. Suppliers were forced to cut back on production when the pandemic began in order to comply with social distancing regulations, which have been especially strict in Canada, which typically provides more than 80% of softwood lumber used in the United States. Some suppliers cut supply even further in anticipation of a drop in demand due to the financial effects of the pandemic.

On the demand side, however, the desire for more space as consumers spent more time at home and record-low mortgage rates meant that 2020 saw home prices rise almost 10%. The combination of a supply chain bottleneck and skyrocketing demand have led to today’s lumber prices, which are pushing homebuilders to cut back on production, including those focused on affordable housing.

In response to the price increases, the National Association of Home Builders (NAHB) has encouraged the Biden-Harris administration to take steps to increase supply flow. “NAHB is urging President Biden and Congress to help mitigate this growing threat to housing and the economy by urging domestic lumber producers to ramp up production to ease growing shortages and to make it a priority to end tariffs on Canadian lumber shipments into the U.S. that are exacerbating unprecedented price volatility in the lumber market,” said NAHB Chairman Chuck Fowke in a recent statement. He added that the Commerce Department should further investigate why domestic lumber producer output is so low.
FHFA announces record GSE affordable housing allocation

Federal Housing Finance Agency (FHFA) Director Mark Calabria announced his authorization of the disbursement of over $1 billion in Fannie Mae and Freddie Mac affordable housing allocations on Monday. The allocations will be split between the Department of Housing and Urban Development’s (HUD) Housing Trust Fund, which will receive $711 million; and the Department of Treasury’s Capital Magnet Fund, which will receive $383 million. The funds, which amount to more than double last year’s total, represent the largest affordable housing allocation ever disbursed by the GSEs.

“The record increase in house prices last year exacerbated the affordable housing shortage,” Calabria said in a statement announcing the funds. “To help increase the supply of affordable housing in our communities, FHFA remains steadfast in support of the Housing Trust Fund and Capital Magnet Fund.”

NHC President and CEO David M. Dworkin applauded the allocation. "These trust funds continue to grow in both size and impact," he said. "Capital Magnet Fund grants have been transformational in communities across the country, and the Housing Trust Fund is needed now more than ever. This unique source of funding will continue to grow and contribute to housing and community development."

GSE affordable housing allocations are determined by the enterprises’ earnings in the prior year, which for both Fannie Mae and Freddie Mac were up more than 15%. Funding for the Housing Trust Fund goes toward state grants for the production and preservation of affordable housing, while funding for the Capital Magnet Fund goes toward competitively awarded grants for community development projects that benefit low-income people and communities.
Senate Banking Committee holds hearing for CFPB director nominee Rohit Chopra

The Senate Banking Committee held a hearing on Tuesday to consider President Biden’s nomination of Rohit Chopra to be the director of the Consumer Financial Protection Bureau (CFPB). Chopra, whose nomination hearing was held jointly with Gary Gensler, Biden’s pick to lead the Securities and Exchange Commission, focused in his testimony on how CFPB can help consumers at risk due to the COVID-19 pandemic. In particular, Chopra flagged protections for struggling renters and homeowners as an area he would prioritize as CFPB director.

“Many families are going to struggle,” Chopra said during his testimony. “They have lost income they may not be able to resume, and we should make sure that they can stay in their homes when they have the ability to do so and not be deceived about what their options are.” He added, “My intuition is we have to be ready for potentially looming problems when it comes to forbearances that might flip to foreclosures.” CFPB recently released a report warning that over 10 million households are at risk of eviction or foreclosure after federal moratoria expire absent further assistance.

Chopra also indicated that he has an “open mind” regarding changes to CFPB’s Qualified Mortgage (QM) rules, saying that he would look into the issue further if confirmed. “When it comes to QM, it is important that we balance the consumer protections that Congress has put into place with access, including for rural and other areas,” he said. His comments came one day before CFPB confirmed a delay in the mandatory compliance date for the final QM rule, citing the need to keep all options on the table for potential homebuyers.

Chopra began his career in government at CFPB as the agency’s student loan ombudsman and has served as a commissioner on the Federal Trade Commission since 2018. He is expected to be confirmed within the next several weeks.
CFPB formally proposes delay of mandatory QM rule compliance

CFPB proposed Wednesday to delay the mandatory compliance date of the General Qualified Mortgage (QM) final rule over a year, from July 1 of this year to Oct. 1, 2021. The agency’s Notice of Proposed Rulemaking (NPRM) cited ongoing financial hardship as a result of the COVID-19 pandemic as the reason for the change, saying the delay “will assist consumers by avoiding unnecessarily constraining the mortgage market during a period of heightened volatility and stress.”

The NPRM comes a week after CFPB announced they expected to push the General QM final rule back as part of an effort to reconsider rules finalized under the previous administration that have not yet taken effect if they are “not in line with our consumer protection mission and mandate.” “In proposing to extend the date by which lenders must comply with the CFPB’s new General QM definition, we are working to provide needed options for both homeowners and lenders during a time of uncertainty and hardship,” said Acting CFPB Director Dave Uejio in a statement announcing the NPRM.

A delay of mandatory compliance with the rule would extend the “GSE patch,” which allows lenders to continue providing QM status to loans eligible for sale to the GSEs even if they would not have QM status under the final rule. The GSE patch effectively expands access to mortgage credit by allowing lenders to make QM loans based on GSE eligibility criteria even if a borrower’s debt-to-income ratio exceeds the 43% limit CFPB implemented in 2013.
Chart of the week
Chart of the week: Little evidence of moral hazard in forbearance data

A policy brief from the JPMorgan Chase Institute finds little evidence of material moral hazard as a result of federal COVID-19 forbearance, reporting that homeowners in forbearance experienced far larger drops in income than other homeowners. “If there had been widespread moral hazard, we would expect income changes for those in forbearance to have been much more similar to those not in forbearance,” the brief’s authors note.
What we're reading
The Wall Street Journal reports delays in the distribution of $25 billion in federal rental assistance funds by state and local agencies, which are coming as Congress deliberates on a stimulus bill that includes a further $20 billion for the same program. “Right now it’s just sitting there in most states,” says NHC President and CEO David Dworkin, who is quoted in the piece. “The reality is that these things do take time and you want to do them well and not make mistakes because you went too fast.”

New research from Urban Institute analyzes amendments to Fannie Mae and Freddie Mac’s preferred stock purchase agreements (PSPAs) that restrict the volume of higher-risk loans the GSEs can purchase. Researchers found that the amended PSPAs will decrease credit access by instituting hard volume limits on loans with certain risky characteristics without accounting for whether those risks are offset by strengths in other areas. The changes “will further limit access to mortgage credit and disproportionately affect Black and Hispanic borrowers, as well as [hamper] the goals of the Biden administration to advance racial equity,” they wrote.

An article from Bloomberg CityLab asks why remote workers spend more on housing than workers who stay in the office, citing a study that finds that a major source of increased cost for remote workers comes in the form of extra rooms for use as offices. “The extra housing costs aren’t much of a hardship for the highest earners,” the article notes. Instead, the increased cost burden of remote work disproportionately falls on “remote workers on the lower end of the earning scale who are already spending a bigger share of their income on housing.”
The week ahead
Monday, March 8

Tuesday, March 9
NMHC: Rent payment tracker; March data release, 11:30 a.m. – 12:15 p.m. ET

Wednesday, March 10

Thursday, March 11

Friday, March 12
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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