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Weekly update from the National Housing Conference
News from Washington
FHFA issues final capital rule

After publishing the proposed rule in June, the Federal Housing Finance Agency (FHFA) published its final rule establishing a new regulatory capital framework for the GSEs going forward. The final rule is largely similar to the proposed rule, with the exception of the following changes: an increased amount of capital relief for credit risk transfers; reduced credit risk capital requirements for single-family mortgage exposures for borrowers financially impacted by COVID-19; and an increased exposure level risk-weight floor for single-family and multifamily mortgages.

“The final rule is another milestone necessary for responsibly ending the conservatorships,” said FHFA Director Mark Calabria in a statement. “Fannie Mae and Freddie Mac have a mission to serve the American housing market during good times and bad. After considering all the comments on the proposed rule, and the Financial Stability Oversight Council's review of the secondary mortgage market, FHFA is confident that the final rule puts Fannie Mae and Freddie Mac on a path toward a sound capital footing.”

NHC joined 14 housing and civil rights groups urging FHFA to revise its approach in the proposed rule. The group recommended several changes, including refraining from adopting bank capital rules, counting a portion of guarantee fee revenue as capital for risk-based capital requirements, eliminating the punitive stability capital buffer and the countercyclical capital buffer, and lowering the leverage ratio to the alternative proposal from the 2018 proposed rule of 1.5% for trust assets and 4% for retained portfolio.

“The levels of capital and the leverage ratio recommended by FHFA would disrupt housing markets and significantly raise the cost of homeownership. In the middle of an unprecedented pandemic and the worst recession since the Great Depression, now is not the time to restrict credit or alter the fundamental infrastructure of the housing economy,” said NHC’s David Dworkin.
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FHA's Annual Report to Congress reveals record high share of first-time homebuyers

The Federal Housing Administration (FHA) released its Fiscal Year 2020 Annual Report to Congress, which details the status of FHA’s Mutual Mortgage Insurance Fund (MMIF), as well as the breakdown of the borrowers served by FHA programs throughout the year. “In addition to assisting homeowners struggling financially, during this past fiscal year FHA continued to play a leading role in supporting homeownership for first-time, minority, and low- and moderate-income homebuyers,” said HUD Secretary Carson.

The report illustrates FHA’s impact on first-time and minority homeownership, the National Council of State Housing Agencies said: “FHA endorsed more than 1.3 million home mortgage loans through its forward mortgage program, including 817,847 mortgage loans to homebuyers, 83.1 percent of whom were first-time buyers.” Minority households accounted for roughly 32% of forward mortgage purchases in FY 2020 – 17.3% of which were Hispanic, 12.7% were Black, 2.2% were Asian and 0.4% were American Indian.

Despite strong purchase volume, FHA’s market share decreased from 11.6% in the prior year to 9.6% in 2020. FHA also highlighted a 1.26% gain in the overall capital ratio, putting the agency “well above” its congressionally mandated 2% capital ratio. “I think if you take all the actions that we’ve put in place, and put them all together, it’s really had a positive impact on the capitalization of the fund, which is a great thing for taxpayers that stand behind the FHA,” FHA Commissioner and Assistant Secretary Dana Wade told HousingWire in an interview this week

Mortgage Bankers Association President and CEO Bob Broeksmit issued a statement following the release of the report, saying, “We look forward to working with HUD and FHA on further efforts to improve the program for borrowers and lenders alike while protecting taxpayers, especially with the ongoing challenges and uncertainty presented by the pandemic. As that picture becomes clearer, including how the 800,000 FHA borrowers currently in forbearance will exit, FHA should begin to re-examine premium levels.”
HUD to provide $86 million in COVID-19 funding through Mainstream Vouchers

The Department of Housing and Urban Development (HUD) announced more than $86 million in new COVID-19-related funding that will be available through Mainstream Vouchers to public housing agencies (PHAs). HUD published the awards, which will be distributed to roughly 160 PHAs across more than 30 states.

“Recently, we have learned a great deal about coronavirus and the impact it has on all of our nation’s people,” said HUD Secretary Ben Carson. “Now, we must apply this knowledge to protect and save lives, especially when it comes to populations that face adversity in the form of mental, physical, and emotional challenges. Understanding the needs of these populations, Mainstream Vouchers provide targeted assistance to non-elderly populations with disabilities in the department’s ongoing effort to provide resources to combat COVID-19.”

Several senators welcomed the additional funding. Sen. Susan Collins (R-Maine) announced that five different PHAs in her home state will receive $1.48 million in new funding from HUD. West Virginia Sens. Shelley Moore Capito (R-W.Va.) and Joe Manchin (D-W.Va.) also released statements of support. “Over 10,000 children and youth are experiencing homelessness across the state, and we know that number is likely much higher,” said Sen. Manchin. “This funding will help those families find affordable, reliable housing in Clarksburg, Charleston and Parkersburg so they have a safe place to sleep and a roof over their head.”
State HFAs share COVID-19 lessons learned and priorities for the first 100 days

On Friday, NHC hosted a Restoring Neighborhoods Webinar examining the role of housing finance agencies in addressing affordable housing challenges, particularly during COVID-19. NHC’s David Dworkin spoke to NHC members Tia Boatman Patterson, executive director of the California Housing Finance Agency (CalHFA), and Jeff Sykes, CFO of the Michigan State Housing Development Authority (MSHDA). Both CalHFA and MSHDA were recognized as recipients of the National Council of State Housing Agencies 2020 Awards for Program Excellence.

Patterson discussed the programs CalHFA has deployed during the pandemic, including housing counseling, made possible by the National Mortgage Settlement Fund, as well as a mortgage assistance program, currently under development, for small landlords with one to four rental properties. She also highlighted the organization’s Mixed-Income Housing and Bond Recycling programs. Sykes discussed how MSHDA has deployed relief funds, short-term payment deferrals and flexible gap financing to support multifamily housing providers in Michigan. He also explained the evolution of the organization’s Below Market Rate Bond Program.

Both panelists expressed concern with the impact of the impending expiration of unemployment benefits and other COVID-19 relief at the end of the year on renters and property owners. As the Biden transition team prepares its agenda for the first 100 days, Sykes encouraged the administration and the new Congress to focus on additional resources for struggling renters and homeowners. Patterson said that making sure HUD was fully staffed should be a top priority.

FDIC preparing to launch Mission-Driven Bank Fund

On Wednesday, the Federal Deposit Insurance Corporation (FDIC) published a Request for Proposal for a financial advisor to guide the development of its newly announced Mission-Driven Bank Fund. The new fund will drive private capital to FDIC-insured Minority Depository Institutions (MDIs) and Community Development Financial Institutions (CDFIs).

The more than 250 FDIC-insured MDIs and CDFIs play a central role in serving minority, low-income, and rural communities. According to FDIC, MDIs’ mortgage and small business loan portfolios include a larger share of low- to moderate-income borrowers, while more than half of the lending and services CDFIs extend are provided to low-income communities. Once established, the Mission-Driven Bank Fund will help MDIs and CDFIs raise capital, expand their services, attract new talent, acquire new technology and build out capacity.
Chart of the week
Chart of the week: Businesses and households becoming more adaptable in the face of COVID-19 resurgence

Fannie Mae’s November Economic and Housing Outlook examines the impact of the latest wave of COVID-19 outbreaks on the economy, including the effects in hard-hit states like Arizona. “Regional measures of economic activity do not appear to be responding as negatively to the resurgence,” relative to the dramatic initial spikes in unemployment experienced in May. Fannie Mae attributed this increased resiliency to stronger “adaptability” amongst businesses and households as well as “distancing fatigue.”
What we're reading
The Local Initiatives Support Corporation (LISC) recently announced a new partnership with Dick’s Sporting Goods. The sporting goods retailer will invest $12.5 million into LISC’s Black Economic Development Fund. LISC said it hopes to raise over $100 million by the end of the year to contribute to the fund, which is designed to support minority-owned businesses and close the racial wealth gap.

A new report from Brookings examines the effects of COVID-19 on the country’s already divided workforce. “The shock has exposed and widened rifts in our two-tiered labor market – between workers with stable jobs and the newly unemployed, between those who can work from home and those who can’t, and between high-income workers and those struggling to make ends meet.” Brookings urged policymakers to “facilitate safe reemployment as soon as possible,” while simultaneously providing more targeted support to low-wage workers.

Zest AI announced a new partnership with Freddie Mac this week. The GSE will deploy Zest’s machine learning tools to support its credit risk modeling. “Freddie Mac is always evaluating technology solutions that meet our high standards and support our continued commitment to expanding homeownership opportunities responsibly, especially among first-time homebuyers, communities of color, and those living in underserved markets,” said Michael Bradley, senior vice president of modeling, econometrics, data science and analytics, Freddie Mac.

This week, Harvard’s Joint Center for Housing Studies published its annual State of the Nation’s Housing report. The report finds that the global pandemic has exacerbated housing challenges, “particularly the lack of affordable rental housing, unequal access to good-quality homes, and the vulnerability of much of the housing stock to natural disasters.” In spite of all the turmoil and disruption to renters and homeowners alike, the report suggests that housing could play a key role in driving the country’s post-COVID economic recovery.
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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