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Weekly update from the National Housing Conference
News from Washington | By Luke Villalobos
FHFA suspends several PSPA amendments

On Tuesday, the Treasury Department and Federal Housing Finance Agency (FHFA) announced their agreement to suspend some of the January 2021 amendments to the Preferred Stock Purchase Agreements (PSPAs), the contracts that govern the terms of Treasury support of Fannie Mae and Freddie Mac (the Enterprises). The amendments ultimately limited the Enterprises ability to purchase what were considered “high risk” mortgages, including second homes, some multifamily properties, and other defined high risk characteristics by capping the amount of these types of loans the Enterprises could purchase. The suspension of these amendments will allow FHFA to examine whether or not they were consistent with internal standards, according to FHFA Acting Director Sandra Thompson. 

The suspension has been met favorably by the housing and mortgage industry. NHC President and CEO David Dworkin specifically called for the changes in his 5 new policies for new FHFA leadership, stating that the cap amendment was “unnecessary, unwarranted, and extremely damaging to those who most need access to Enterprise mortgages.” Dworkin issued a statement after Tuesday’s announcement praising the decision and noting its potential to help close the racial homeownership gap.

Mortgage Bankers Association President and CEO Bob Broeksmit applauded the change as well, stating, “The suspensions will eliminate several market and pricing disruptions caused by these caps that were harming lenders and borrowers alike and pave the way to restore appropriate regulatory authority to the FHFA.” 
FHFA proposes changes to GSE Capital Rule

FHFA announced Wednesday that it would seek comments on proposed changes to the Enterprise Regulatory Capital Framework (the Capital Rule) governing Fannie Mae and Freddie Mac’s treatment of credit risk. FHFA’s proposal makes several targeted changes to last year’s Capital Rule focused on allowing the Enterprises to increase their use of the Credit Risk Transfer (CRT) program, which is meant to reduce risk to taxpayers by transferring credit risk to private investors. The proposed changes are meant to address concerns that the 2020 Capital Rule was overly complex and discouraged offloading risk through the CRT program.

The proposal would lower the risk-weighted floor on CRT exposure retained by the Enterprises from 10% to 5%, lowering the amount of capital the Enterprises must hold after a CRT transaction and making it cheaper for them to use the program. It would also remove the requirement that the Enterprises apply an overall effectiveness adjustment to CRT exposure they retain, a portion of the 2020 rule that was criticized as being overly burdensome without actually reducing risk.

FHFA also proposed linking each Enterprise’s required leverage cushion to the amount of capital they are required to hold, rather than to their total assets as under the current Capital Rule. FHFA says that this move will disincentivize risk-taking by the Enterprises as they attempt to meet leverage requirements that may be mismatched with their actual assets, which in turn will increase their use of CRT.

Comments on FHFA’s proposed rulemaking are due November 15.
House Financial Services considers ERA bills

Last week, Chairwoman Maxine Waters (D-CA) of the U.S. House Committee on Financial Services introduced legislation to alter the Emergency Rental Assistance (ERA) program, titled the Expediting Assistance to Renters and Landlords Act of 2021. The bill aims to better distribute emergency rental assistance and protect renters during the distribution process by expanding eligibility criteria, codifying self-attestation of applicants, allowing landlords to apply on behalf of tenants without consent, and establishing a four month eviction moratorium, among other provisions. Ranking member Patrick McHenry (R-NC) unsuccessfully sought to force consideration of his Renter Protection Act of 2021, first introduced in July, in order to simplify the ERA programs by consolidating them under one set of rules. 

A group of housing organizations sent a coalition letter to Chairwoman Waters and Ranking member Patrick McHenry (R-NC) in support of some provisions to expedite the ERA program funding, but opposing the four month moratorium included in Waters’ bill. The organizations expressed concern that a moratorium with no guarantee for landlords to receive funding would harm housing providers. Other organizations support the provision, including the National Low Income Housing Coalition, which argued for the necessity of moratoria during testimony to the Committee during the September 10th hearing on Protecting Renters During the Pandemic: Reviewing Reforms to Expedite Emergency Rental Assistance.
HUD announces awards and funding opportunities

HUD announced six funding awards and opportunities this week ranging from $10 million to $5 billion in value.

On Tuesday, the agency awarded $10 million in grants to 55 public housing agencies for emergency safety and security improvements. The grants were awarded through HUD’s Capital Fund Emergency Safety and Security Program and can be used to install or repair public housing security features such as security systems, locks, and cameras.

On Tuesday, HUD announced that it would make $51 million available to housing counseling agencies to assist them in expanding their services and providing counseling related to COVID-19. When awarding the grants, HUD will focus in particular on proposals that support disaster relief and recovery, help seniors age in place, and promote racial equity. HUD has set aside $3 million of the allocation specifically for historically Black colleges and universities and other minority-serving institutions and housing counseling agencies that partner with them.

HUD made two funding announcements on Wednesday, both intended to help communities reduce and prevent homelessness. The agency announced that it would make $5 billion in HOME funding secured by the American Rescue Plan available to communities aiming to provide affordable housing for individuals experiencing or at risk of homelessness. It also announced grants totaling $142 million aimed at mitigating youth homelessness in 33 communities through the Youth Homelessness Demonstration Program.

On Thursday, HUD announced the availability of more than $180 million in COVID-19 supplemental funding for multifamily properties participating in assisted housing programs. Owners participating in HUD Section 202, Section 811, and Section 8 programs are eligible to apply. These owners can receive reimbursements for operating costs ensuring the health, safety, and wellbeing of residents on their property. Funds can be used to cover COVID-related expenses incurred between April 1, 2021 and October 31, 2021, including capital investments in response to the pandemic such as ventilation and air filtration improvements and broadband infrastructure. The application period ends on November 19, 2021. 
Newsom victory clears path for zoning reform in California

California Gov. Gavin Newsom’s (D) victory over a recall effort this week seems poised to clear the path for zoning reform in the state, the nation’s largest and longtime epicenter of the housing crisis. Newsom had put off signing two bills that would roll back restrictions on housing production until after the election but signed them the day after his win.

The two bills have a storied history in California’s legislature. One of them, which makes it easier for localities to rezone land near transit and jobs for higher-density housing, has been introduced perennially by State Sen. Scott Wiener (D) for several years and only passed earlier this summer, after a year of unprecedented housing cost growth. The other allows property owners to build terraced housing with up to four units on properties formerly zoned exclusively for single-family homes. Together, they effectively eliminate single-family zoning in the state.

Though some housing advocates worry that the housing enabled by the bills would be out of reach to low- and moderate-income Californians, most acknowledged that a Newsom defeat would have hampered efforts to respond to the state’s housing woes. Newsom’s most prominent Republican opponents, talk radio host Larry Elder and former San Diego Mayor Kevin Faulconer, both opposed building multifamily housing in low-density neighborhoods and advocated addressing the state’s homelessness crisis by clearing encampments.
House Financial Services and Ways and Means committees complete reconciliation markups

As budget reconciliation continues, two markups were completed this week by the House Ways and Means Committee and the House Financial Services Committee. 
The Financial Services Committee released their draft legislation on Sunday, and on Tuesday the Committee voted to approve the bill and move forward in the process. The approved bill includes historic investments in housing programs totaling $327 billion, including $90 billion for rental assistance, $80 billion for Public Housing, and more. 

The House Ways and Means Committee released their draft legislation last Friday, which includes several key provisions for the Low-Income Housing Tax Credit. The bill answers calls by the housing industry for expanded basis boosts for extremely low-income developments, temporarily lowering the 50% bond-financing threshold to 25%, and expanding the basis boost for Difficult Development Areas. On Wednesday, the bill was passed by Ways and Means and will now head to the House Budget Committee. 
Chart of the week
Chart of the week: Forthcoming Paycheck to Paycheck data highlights housing affordability challenges for infrastructure workers

The 2021 update of NHC’s Paycheck to Paycheck database shows that infrastructure workers such as highway maintenance workers are unable to afford housing across vast swaths of the country. The data highlights the need for investments in housing affordability in a “human infrastructure” package that includes down payment assistance, so that infrastructure workers are able to live in the regions where they are needed. Affordability challenges facing other occupations will be highlighted in a forthcoming report from NHC.
What we're reading
The Niskanen Center published a report characterizing housing cost increases as a symptom of “cost disease”, which occurs when policymakers respond to increasing costs by subsidizing them rather than increasing supply or fostering innovation. According to the report, housing, like other cost-diseased sectors such as healthcare and higher education, would benefit more from reducing regulations rather than increasing subsidies, the windfalls of which tend to go to established interests, rather than consumers themselves.

National Association of REALTORS® Vice President of Policy Advocacy Bryan Greene’s new article in Smithsonian Magazine explores the legacy of Black World War II soldiers’ return to the United States after the war’s conclusion, which was often marred by the realization that the freedom they had enjoyed in Europe was absent in the United States. Green charts the galvanizing effect of the racial oppression and terrorism these veterans endured, particularly when they attempted to move into White neighborhoods, setting the stage for the Civil Rights Movement of subsequent decades.

The Hill published an opinion piece by Donna Gambrell, president and CEO of Appalachian Community Capital, discussing the potential of the Community Revitalization Fund to support civic infrastructure projects in underserved communities. The role of Community Development Financial Institutions is noted as vital to financing projects in areas that suffer historic disinvestment, and establishes the transformational impact that such funding can have on communities.
The week ahead
Monday, September 20
Tuesday, September 21
Wednesday, September 22
Thursday, September 23
Friday, September 24
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