Weekly update from the National Housing Conference
News from Washington | By Luke Villalobos
FHFA eliminates some LLPAs, updates credit tools

On Monday, FHFA announced it is changing guarantee fee pricing for Fannie Mae and Freddie Mac (the Enterprises) by eliminating some upfront fees, called Loan-Level Price Adjustments (LLPA), for certain borrowers and affordable mortgage products. This group includes first-time homebuyers at or below 100 percent of area median income (AMI) in most of the United States and below 120 percent of AMI in high-cost areas; Fannie Mae’s HomeReady and Freddie Mac’s Home Possible loans; HFA’s Advantage and Preferred loans; and single-family loans supporting the Duty to Serve program. FHFA announced a new fee on cash-out refinance loans, with a Feb. 1, 2023, target date for implementation, which will help cross-subsidize the changes. FHFA is working with the Enterprises on an implementation date for the LLPA cuts.
LLPAs are based on factors like credit score, loan-to-value ratio, and debt-to-income ratio, which are already factored into mortgage underwriting. These factors can also be highly correlated with first-time and first-generation homeownership. LLPA fees can be as much as 3.5 percent up front or spread into the interest rate over the life of the loan, significantly increasing the monthly payment for those who can least afford it. NHC has advocated against LLPAs since 2016, most recently at a convening with FHFA Director Sandra L. Thompson at the Urban Institute on Sep. 28. Repeal of LLPAs is also a high priority for the Black Homeownership Collaborative.
This week’s decision is a major step towards elimination of LLPAs, which were adopted early in the mortgage crisis when mortgage insurance companies were failing. Since then, FHFA has adopted strict capital standards for mortgage insurers, making LLPAs redundant. “Today’s announcement will result in savings for approximately one in five borrowers of the Enterprises’ recent mortgage acquisitions,” Thompson said. Bob Broeksmit, president and CEO of the Mortgage Bankers Association, called the guarantee fee pricing adjustments “well-timed.”
FHFA also announced the validation and approval of both the FICO 10T credit score model and the VantageScore 4.0 credit score model for use by the Enterprises. This change in how the Enterprises evaluate creditworthiness will bring healthy competition to the credit-scoring process while updating FICO’s credit score algorithm to better serve a broader range of qualified borrowers. “The announced updates on credit-scoring models should help broaden the scope of eligible borrowers and expand access to homeownership for underserved communities,” Broeksmit said. “MBA supports competition in the credit scoring space, and we will work with FHFA to ensure costs and the implementation process are monitored to mitigate unintended consequences to lenders and borrowers.”
Treasury announces latest NMTC awards

On Friday, the Treasury Department announced more than $5 billion in New Markets Tax Credit (NMTC) awards. Treasurer of the United States Chief Lynn Malerba announced 107 organizations across the country would receive the NMTC allocation awards, distributed through the NMTC Program’s 2021 calendar year. You can see the list of award recipients here.

The NMTC Program grants individual and corporate taxpayers a non-refundable tax credit against federal income taxes for making equity investments in financial intermediaries known as Community Development Entities (CDE). CDEs that receive the tax credit allocation authority under the program are domestic corporations or partnerships that provide loans, investments, or financial counseling in low-income urban and rural communities.

“This program has created or retained hundreds of thousands of jobs and spurred economic growth in many low-income communities across our country. It is important that Congress sustain these investments over time by making the New Markets Tax Credit Program permanent,” Malerba said.

Treasury selected the 107 CDEs receiving awards from a pool of 199 applicants that requested an aggregate total of $14.7 billion in tax credit allocation authority. The award recipients are located in 35 states and the District of Columbia. Over 20 percent of the investments will be made in rural communities. Treasury estimates recipients will make nearly $1 billion in NMTC investments in non-metropolitan counties.

The NMTC Program has awarded more than $71 billion since its inception in 2000. Treasury says NMTC Program awards have generated $8 of private investment for every $1 invested by the federal government.
FDIC survey shows 96 percent of households banked of 2021

The FDIC released results from its 2021 National Survey of Unbanked and Underbanked Households on Tuesday. The survey found that 96 percent of U.S. households were banked last year. Meanwhile, 4.5 percent of people, representing 5.9 million households, were unbanked in 2021. That’s the lowest national unbanked rate since the FDIC began the survey in 2009.
The biannual survey asks households about their use of banking and financial products and services. The new results show that about 1.2 million more households were banked in 2021 than when the last survey took place in 2019. Forty-five percent of newly banked said receiving government benefits during the COVID-19 pandemic contributed to opening a bank account.
“During the pandemic, consumers opened bank accounts to access relief funds and other benefits quickly and securely,” FDIC Acting Chairman Martin J. Gruenberg said. “Safe and affordable bank accounts provide a way to bring more Americans into the banking system and will continue to play an important role in advancing economic inclusion for all Americans. Today’s results highlight the importance of ensuring consumers who are receiving benefits or starting a new job, two key bankable moments, can easily find and open a bank account that meets their needs.”
Freddie Mac issues Sept. volume summary

Freddie Mac released its Monthly Volume Summary for September this past Tuesday. The summary provides information on Freddie Mac’s mortgage-related portfolios, securities issuance, risk management, delinquencies, debt activities, and other investments. The company’s total mortgage portfolio increased at an annualized rate of 4 percent in September. Freddie Mac’s single-family refinance-loan and guarantee volume represented 19 percent of total single-family mortgage portfolio purchases and issuances
HUD deploys first round of RUSH funding

Last week, HUD announced it allocated the first round of funding through its new Rapid Unsheltered Survivor Housing Response (RUSH) program. The program addresses homelessness by filling in federal assistance gaps in communities hit by disasters. HUD’s first round of funding consists of $6.8 million earmarked for the State of Florida and seven of the state’s localities impacted by Hurricane Ian.
Ginnie Mae changes re-performing loan policies

On Monday, at the Mortgage Bankers Association’s Annual Conference, Ginnie Mae President Alanna McCargo announced a decrease in the pre-pooling seasoning requirement on re-performing loans from six months to three months. In addition, Ginnie Mae will allow issuers the option to pool re-performing loans into TBA-eligible Ginnie Mae II Multi-Issuer Pools.

The company will enact the changes no later than the first quarter of 2023 and issue a formal policy notice beforehand.
HUD awards money to combat youth homelessness

Last Monday, HUD announced it awarded $83.7 million through its Youth Homelessness Demonstration Program (YHDP). The agency said the money is for building systems to end youth homelessness in 17 local communities, including 6 rural communities. YHDP supports many housing programs, including rapid rehousing, permanent supportive housing, transitional housing, and host homes.
“Placing young people experiencing homelessness into permanent housing can change the trajectory of their lives,” HUD Secretary Marcia L. Fudge said. “With this funding, HUD is targeting federal resources to meet local needs and support community-driven efforts to end youth homelessness and improve outcomes through stable housing and services.”
Perrey chairs NCSHA board

The National Council of State Housing Agencies announced its 2023 Board of Directors on Thursday, with Ralph M. Perrey serving as chair. Perrey is the executive director of the Tennessee Housing Development Agency and serves as secretary on NHC’s Board of Governors.

“I am honored by and grateful for the opportunity my colleagues have given me to serve as NCSHA Chairman,” Perrey said. “Executive Director Stockton Williams and NCSHA’s professional staff have done great work in putting state housing finance agencies ’at the center’ of key housing policy discussions. I look forward to being of help in that effort.”

“I’ve worked with Ralph for over 25 years and he is one of the best in the affordable housing arena. NCSHA is lucky to benefit from his leadership and experience,” said NHC’s President and CEO David Dworkin.
Chart of the week
Income needed to buy median-price existing home has doubled

The income needed to buy a median-priced existing home in the U.S. has doubled since 2019, highlighting the severity of the country's home affordability crisis. Compiled data from several sources shows the cost of a median-priced new home rose to $454,900 in the third quarter of 2022, up from $327,100 at the end of 2019. The median-priced existing home cost $393,000 in the second quarter of 2022, up from $274,600 at the end of 2019. As a result, the annual income required to buy a new median-priced home has nearly tripled, going from $61,200 to $173,000.
What we're reading
The Federal Reserve Bank of Cleveland released a paper reviewing what determines the success of housing mobility programs. The paper studies how design features influence the success of Housing Mobility Programs in reducing racial segregation.
Bryan Greene, Vice President of Policy Advocacy at the National Association of REALTORS® and The Washington Post financial columnist Michelle Singletary talked on the Our Body Politic podcast. Both spoke about the racial homeownership gap and how inflation and rising interest rates are affecting homeownership
The Joint Center for Housing Studies released a paper analyzing how technology or digitalization can advance, or hamper, housing challenges. The paper lays out the digitalization broadly, then describes more specifically key aspects of housing that technology is transforming and whether those changes will help to further public goals.
The week ahead
Monday, October 31

Tuesday, November 1
2022 OPTECH Conference & Expo (NMHC), all day in Las Vegas, NV
FHFA Fall Econ Summit (FHFA), 9:00 AM - 12:45 PM in Washington, DC

Wednesday, November 2
2022 OPTECH Conference & Expo (NMHC), all day in Las Vegas, NV
NAAHL/CCL Annual Policy & Practice Conference (NAAHL), 8:00 AM - 6:00 PM ET in Washington, DC
Virtual Coffee With Bridges (WHF), 12:00 - 1:00 PM ET

Thursday, November 3
2022 OPTECH Conference & Expo (NMHC), all day in Las Vegas, NV

Friday, November 4
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.
Defending Our American Home since 1931
Copyright © 2022. All Rights Reserved.