January 25, 2011
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More than 175 HFA staff members, industry experts, and NCSHA affiliate members came together with senior officials from HUD, Treasury, USDA, IRS, and SEC at NCSHA’s HFA Institute MRB/Federal Mortgage Insurance meeting to discuss current housing and bond market conditions, the status and outlook of relevant federal programs and regulations, and how to address challenges and opportunities in the coming year.

At Thursday’s opening plenary, Jay Brinkmann, Chief Economist and Senior Vice President of Research and Economics at the Mortgage Bankers Association, outlined some of the major economic and demographic factors driving the housing markets this year; Vicki Bott, HUD’s Deputy Assistant Secretary for Single-Family Housing, described the status of and HUD’s plans for the FHA mortgage insurance program; and NCSHA’s Garth Rieman outlined some of the challenges and opportunities HFAs and industry partners will face in Washington this year, including likely efforts to reduce federal spending, modify the tax code, and enact housing finance reform.

Later, officials from the IRS and Treasury shared their perspectives regarding regulatory and legislative initiatives affecting MRBs in the coming year.  John Cross, Associate Tax Legislative Counsel with the U.S. Department of the Treasury, and Vicky Tsilas, Assistant Branch Chief for the IRS Office of Associate Chief Counsel, addressed the expiration of temporary rules that allowed State and local governmental issuers to purchase and hold their own tax-exempt bonds without resulting in an extinguishment of the purchased bonds for federal tax purposes, and problems associated with the expiration of private activity bond (PAB) cap for bonds structured as draw-down loans.  Cross and Tsilas affirmed that IRS and Treasury were aware of the problems these issues raise for HFAs and were drafting guidance to address the concerns.

Kathleen Gibbons, Director of the Single Family MBS Division at Ginnie Mae, reported on Ginnie Mae’s activities over the past year, including managing over $25 billion in loan servicing, increasing net worth requirements for single-family and HMBS issuers, and increasing staff and support systems and monitoring efforts.  Gibbons concluded by telling the audience that Ginnie Mae is looking forward to better understanding HFAs’ business environment.

Karin Hill, Director of HUD’s Office of Single-Family Program Development, expanded upon Vicki Bott’s comments and further described the state of FHA.  She emphasized that FHA is not expecting to play a large role in the mortgage market for the long-term, and that the agency is only acting as a counter-cyclical safe-guard.  Hill told the audience that FHA’s priority is managing the long-term viability of the MMI Fund, which FHA has begun to strengthen with higher net worth requirements for FHA-approved lenders and increases in mortgage insurance premiums.

Also on Thursday, HFAs heard from Theo Polan, Fiscal Affairs Specialist at Treasury, who provided an update on the Administration’s New Issue Bond Program (NIBP) and Temporary Credit and Liquidity Program (TCLP).  Polan told attendees that Treasury does not have the statutory authority to allow new obligations under NIBP; however, it does have the flexibility to make other modifications, although obtaining approval for them may be difficult.

Attendees also spoke with Treasury and HUD officials who discussed the Hardest Hit Fund (HHF) program and the Emergency Homeowner Loan Program (EHLP).  Mark McArdle, Program Director for the Hardest Hit Fund at Treasury, told the audience that 2011 is the year when the “rubber hits the road” regarding HHF.  As of the conference, seven states were running their new programs, while eight more HFAs were in the final stages of preparation.  On a common question he has received about whether borrowers must report their HHF assistance as income, McArdle said that Treasury was working with the IRS and they hope to have a resolution soon.

Bill Apgar, Senior Advisor for Mortgage Finance at HUD, said HUD is in the process of approving similar state programs for EHLP, but he did not have a definite date for a final announcement.  He reminded HFAs that, by statute, all EHLP money must be committed by September 30, 2011.  He also emphasized that borrowers must be three months delinquent to be eligible for the program.  Regarding working with the IRS on income reporting, Apgar said that HUD will base its approach on how the HHF is handled.

The conference featured a session on regulatory initiatives related to implementation of the Dodd‐Frank Wall Street Reform and Consumer Protection Act (Dodd‐Frank Act).  The SEC’s Mary Simpkins, Senior Special Counsel in the Office of Municipal Securities within the Division of Trading and Markets, assured attendees that the Commission was open to changes to proposed regulations and encouraged them to submit their comments and concerns to the SEC on any and all relevant issues, including the SEC’s recent proposed rule defining appointed HFA board members as municipal advisors, subjecting them to registration requirements.

Presentation slides and additional materials from the conference are available here.