Weekly update from the National Housing Conference
News from Washington | By Luke Villalobos
Agencies release joint CRA modernization NPR

On Thursday, the Federal Reserve, FDIC, and OCC jointly released a Notice of Proposed Rulemaking (NPR) to modernize the Community Reinvestment Act (CRA). This highly anticipated NPR aims to strengthen and update CRA regulations to better realize the law's original intent of stamping out redlining. The 679-page document will be carefully analyzed by housing and banking stakeholders over the next few months. 
fact sheet that outlines key elements of the proposed rule, including expanding access to credit, banking in low- and moderate-income communities, adapting to innovation in the banking industry, and providing greater exam transparency was released with a 30 page staff memo that summarizes the 679-page NPR in greater detail. NHC President and CEO David Dworkin issued a statement stating that the proposed rule “moves CRA into the 21st century with a durable approach that will withstand the scrutiny of future swings in political leadership for at least a decade.” 
The FDIC Board of Governors discussed the proposed rule at a meeting held on Thursday morning. Topics included changes to assessment area designation to account for online lending, altering thresholds of small and intermediate banks to better align CRA requirements with bank capacity, and updates and benchmarks for lending, product, and community development tests. The Board also discussed the proposal to take race and ethnicity into account by requiring large banks to disclose race and ethnicity data for mortgage borrowers, along with additional requirements for reporting on lending in most large metro areas.
“As we saw during the pandemic, financial inclusion is more important than ever… The pandemic demonstrated clearly the importance of access to financial services for low and moderate income households,” said newly confirmed Federal Reserve Vice Chair Lael Brainard, explaining the motivations behind the NPR. Acting Comptroller of the Currency Michael J. Hsu called the proposal “an important milestone in our efforts to expand financial access and inclusion for low-and moderate-income (LMI) communities.”
Reactions to the NPR were positive across various stakeholders. National Community Reinvestment Coalition CEO Jesse Van Tol called the NPR “a welcome and overdue opportunity to address the unacceptable and persistent wealth and opportunity divides that plague the world’s richest nation.” Industry groups also struck an optimistic tone, with American Bankers Association President and CEO Bob Nichols applauding “that the agencies are trying to develop a regulatory framework that better reflects today's modern-day banking system and provides greater clarity, consistency and transparency to banks seeking to meet the needs of their customers and communities.”
Comments on the NPR are due August 5.
Fed raises interest rates by 50 basis points

The Federal Reserve Board of Governors announced Wednesday that it would raise interest rates half a percentage point, effective May 5. The increase is the largest in 22 years and will bring the federal funds rate to between 0.75% and 1%, with markets predicting that rates will reach 2.75%-3% by the end of the year.
The 50-basis point hike was widely anticipated by observers who pointed to rising inflation rates and decreasing unemployment as reasons the Fed was likely to move toward a tougher monetary policy. Some had even predicted that the Fed would raise rates by 75 basis points, but Powell indicated that an increase of that level had not been on the table and would likely not be for the foreseeable future. “Seventy-five basis points is not something the committee is actively considering,” he told reporters on Wednesday. Instead, he said that further increases of 0.5% "should be on the table at the next couple of meetings."
The Fed also announced moves to reduce its balance sheet, which it had expanded during the COVID-19 pandemic as a stimulus measure. It will allow $30 billion in Treasury bonds and $17.5 billion in mortgage-backed securities to roll off its books starting in June, before doubling those numbers in September.
Treasury calls on grantees to use SLFRF for affordable housing

Deputy Secretary of the Treasury Wally Adeyemo encouraged state and local governments to utilize more of their State and Local Fiscal Recovery Funds (SLFRF) for affordable housing development during a site visit in Los Angeles County. The press release from Treasury cited the 3.8 million housing unit shortage as a driver for states to use more of the American Rescue Plan allocated funding for housing development across all states. 
“The pandemic dramatically underscored the severity and consequences of the shortage of affordable housing across the country – particularly for low-income renters and communities of color,” Adeyemo said. "Treasury is urging state, local, and Tribal governments to follow the lead of states like California in dedicating more of their American Rescue Plan funds to build additional affordable housing and lower costs for families." 
Notably, SLFRF has been difficult to use in conjunction with LIHTC, the country's most successful affordable housing program. Affordable housing stakeholders sent a letter to Congress in March asking for a fix in the program to make it more accessible for LIHTC developers, after which Reps. Alma Adams (D-NC) and David Rouzer (R-NC) introduced a bill to that effect.
Bennet and Warnock urge increased funding for eviction protection

Senators Michael Bennet (D-CO) and Raphael Warnock (D-GA) are currently circulating a “Dear Colleague” letter encouraging greater investment in the Department of Housing and Urban Development’s (HUD) Eviction Protection Grant Program. The letter asks for funding of at least $100 million for the program, citing what they call “a severe eviction crisis” and the rapidly rising cost of housing. The program funds legal assistance for families facing eviction in order to prevent unlawful evictions. 

“American households have long faced a severe eviction crisis,” the letter notes. “Prior to the COVID-19 pandemic, 3.7 million eviction filings took place every year—a rate of seven every minute— with families of color disproportionately at risk of being removed from their homes. This risk of eviction is due in part to the acute shortage of affordable housing, which forced 1 in 4 renters, or nearly 11 million households, to spend more than half of their income on rent in 2018.” The deadline for Senators to sign on is May 10.
FHA announces 30-day owner-occupant sales period for CWCOT homes

HUD announced Thursday that it would require mortgagees selling foreclosed FHA properties to institute a 30-day exclusive sale period for owner-occupants. The exclusive sale period covers properties sold through FHA’s Claims Without Conveyance of Title (CWCOT) program, in which insurance benefits are paid to mortgagees after the sale of a foreclosed FHA property to a third party. CWCOT sales typically go to investors, but last year President Biden announced his intent to use the program to increase housing available to owner-occupants.

“This policy change is critical as the nation continues to address the challenges of a real estate market in which home prices are high and the availability of affordable housing supply is low, making it difficult for individuals and families to achieve the dream of homeownership,” said Principal Deputy Assistant Secretary for Housing and the Federal Housing Administration Lopa P. Kolluri.
FHFA mandates increased lender reporting on consumer demographics

Fannie Mae and Freddie Mac will now require lenders to use the Supplemental Consumer Information Form (SCIF) to report on consumer demographics, FHFA announced Tuesday. The form will be a mandatory step in applying for loans sold to the Enterprises. The requirement will allow for information collection about language preference and homebuyer education and counseling services to better serve the borrowers' needs. 

Lenders will be required to collect the data on SCIF and report back to the Enterprise. The new provision will need to be adopted for loans with application dates on or after March 1, 2023. "Collecting language preference and housing counseling information provides mortgage applicants with an additional method to inform lenders of their needs, enabling the industry to more fully respond to the nation's growing diversity," said FHFA Acting Director Sandra Thompson. "These steps will contribute to an equitable housing finance system that welcomes all qualified borrowers."
CBA names Johnson as new president and CEO

The Consumer Bankers Association (CBA) announced Tuesday that Lindsey Johnson would succeed Richard Hunt as the organization’s president and CEO. Johnson, an NHC board member, has served as president of the U.S. Mortgage Insurers since 2015 and will depart that post in June. Hunt, who has led CBA for 13 years and announced his intention to depart last year, called her “the right leader to take the reins of this truly incredible organization.”

“From leading an industry association that works to expand access to homeownership to serving in senior leadership roles on Capitol Hill and within the financial services industry, Lindsey brings to CBA nearly two decades of advocacy and strategic leadership experience,” said CBA Board Chair Michelle Lee. “With a depth of financial services knowledge and a proven record of bipartisan advocacy, Lindsey is just the leader we were looking for to promote the work of our member banks, advance commonsense policy solutions and champion our industry and the customers we serve.”
Freddie Mac appoints Palmer as head of multifamily portfolio

Freddie Mac announced Tuesday that company veteran Kevin Palmer would take over the company’s multifamily business. Palmer has served the company since 2001, and most recently worked as its vice president for single-family portfolio management.
“Over the course of his more than two decades at Freddie Mac, Kevin Palmer has demonstrated broad knowledge of the mortgage industry, a deep understanding of our company and an unyielding commitment to our mission,” said Michael DeVito, CEO of Freddie Mac. “These qualities make him the right leader to take our multifamily business forward.”
Chart of the week
Pandemic fueled home price growth in previously cheap suburbs

An analysis by the Economist finds that American homebuyers flocked to suburban neighborhoods in previously cheap locations during the pandemic, something analysts say is likely due to the massive increase in remote work. “Since covid emerged, price gains have been large where housing was previously cheap, and smaller elsewhere,” the analysis says. “This supports recent research showing that remote workers tend to move to reduce their cost of shelter.”
What we're reading
report from the Urban Institute argues that Fannie Mae and Freddie Mac should work to increase pricing for loans that do not fall within their mission, such as loans for investment properties, to increase their cross-subsidy for mission-based loans. The authors estimate that the Enterprises could increase the current cross-subsidy of $4.74 billion by $1 billion, which could then support homeownership for families with high debt burdens or low wealth.
Shelterforce explains how HUD's stringent requirements for nonprofits to receive HOME funds force grantees to leave millions of dollars unspent. The rules make it difficult for states and localities to certify nonprofits as community housing development organizations (CHDOs), which are supposed to receive 15% of a grantee's HOME funds. However, HUD's requirements are so strict that grantees are often unable to find nonprofits that meet them, limiting their ability to spend HOME funds.
Shelterforce also reported on prospects for housing programs contained in the Biden administration’s Build Back Better proposal. In the article, NHC president and CEO David Dworkin notes that housing supply legislation like the Affordable Housing Credit Improvement Act and Neighborhood Homes Investment Act give “both Democrats as well as Republicans an opportunity to say, ‘We’re doing something about inflation.’ They don’t have any control over interest rates or gas prices or food prices, but they definitely have control over creating more affordable housing. Shelter is a big driver of inflation numbers.”
Former Freddie Mac CEO Don Layton explores the policymaking implications of record-high mortgage originations during the COVID-19 pandemic in Housing Perspectives. Noting that mortgage lenders did not fully pass through low interest rates to mortgage borrowers during the pandemic, Layton floats the possibility of a program to limit lenders’ profits during future booms. “While the industry would naturally be vociferous against any attempt to limit their margins, a program to do so—but restricted to times of great economic stress or with respect to targeted programs designed to expand homeownership—might make sense,” he says.
The week ahead
Monday, May 9
Tuesday, May 10
NLIHC: Legislative working group, 12:30 – 1:30 p.m. ET
Wednesday, May 11
MBA: MAA quarterly webinar, 2 – 3 p.m. ET
Thursday, May 12
Friday, May 13
The National Housing Conference is a diverse continuum of affordable housing stakeholders that convene and collaborate through dialogue, advocacy, research, and education, to develop equitable solutions that serve our common interest.
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