NCSHA Washington Report | April 1, 2022

Today an estimated 2.4 million homeowners will start paying more for their flood insurance. For 330,000 of them, the increases will be significant, and since many live in the same coastal areas, some community-wide impacts could be “staggering,” says the New York Times.

The higher costs reflect a new FEMA methodology that is intended to more accurately and transparently price the flood risk of individual homes and alleviate unfair cross-subsidization of higher-risk (sometimes wealthier) homeowners by lower-risk (often lower-income) owners who all depend on the National Flood Insurance Program (NFIP).

Congress’ failure to revise the program, despite bipartisan agreement on most key issues, constrains FEMA from offsetting egregious premium hikes. “As Congress considers a long-term reauthorization of the NFIP, a central question may be who should bear the costs of floodplain occupancy in the future and how to address the concerns of constituents facing increases in flood insurance premiums,” the Congressional Research Service wrote in December.

In fact, U.S. housing policy is inundated with flood risk.

An audit by the HUD Inspector General published last week found the combination of FHA-backed loans “that had private flood insurance instead of the required NFIP coverage, NFIP coverage that did not meet the minimum required amount, or no coverage during calendar year 2020” exposed the FHA insurance fund to “greater risk from at least $4.5 billion in loans that did not maintain adequate NFIP coverage.”

HUD now requires lenders to provide the department proof they are complying with federal flood insurance requirements. The White House is also finalizing a federal rule that would for the first time allow FHA borrowers to buy private flood insurance “that may be more affordable than NFIP policies.”

HUD is also under pressure to respond to reporting last fall by NPR on the agency’s sales of foreclosed homes located in flood-risk areas. “Homes HUD sells are disproportionately located in flood-prone places, compared with Zillow records of all homes sold in the United States…and [t]he agency does not fully disclose the potential costs and dangers of living in harm’s way,” NPR asserted.

HUD’s response that it’s unable to control where homes FHA insures that end up in foreclosure are located seems more comprehensible than its reported view that its role as insurer prevents it from disclosing known flood risks associated with homes it ends up owning and reselling.

In terms of conventional mortgages, Fannie Mae says “flooding currently poses the most pertinent disaster risk to its portfolio, and the risk is growing.” The company in January recommended FEMA create a “national flood reporting standard” to “equip potential buyers with the information needed to make an informed decision regarding the flood risk associated with their new home.”

There’s evidence Fannie and Freddie inadvertently may incent lenders to “originate and distribute their climate risk and encourage households to locate in flood risk areas.” At the same time, it appears lenders increase securitization activity after floods and other disasters, transferring risk — both mispriced and undisclosed — back to the GSEs.

And us.

Stockton Williams | Executive Director 

State HFA Emergency Housing Assistance

In This Issue

• HFA Executive Directors Appointed in Oregon and Wisconsin
• NCSHA Welcomes New Members
• White House FY 2023 Budget Proposes Major Increases in Housing Funding, New Programs to Increase Housing Supply
• Treasury Publishes ERA 2 Reallocation Guidance and ERA Spending Data Through February
• Treasury Publishes Draft Guidance on HAF Compliance and Reporting Responsibilities
• FHA Proposes a 40-Year Loan Modification Term Limit
• IRS Publishes New MRB and MCC Purchase Price Limits and Safe Harbors
• Senate Banking Committee Hearing Explores Senior Housing Needs
• NCSHA in the News
• Looking Ahead

HFA Executive Directors Appointed in Oregon and Wisconsin
Governor Kate Brown has appointed Andrea Bell as the director of Oregon Housing and Community Services (OHCS), effective today; Bell has been serving as acting director since February. She joined OHCS in April 2019 as the assistant director of homeless services and became director of housing stabilization in 2020. Previously, Bell served as the housing director for a Medicaid health plan administrator in Arizona.

Elmer Moore Jr. has been appointed by Governor Tony Evers to serve as CEO and executive director of the Wisconsin Housing and Economic Development Authority, effective April 11. Moore currently serves as the executive director of Scale Up Milwaukee and is an adjunct instructor of entrepreneurship at Marquette University and the University of Wisconsin-Milwaukee.

NCSHA Welcomes New Members
These organizations joined NCSHA as affiliate members in March: Avail; Blanco Tackabery; KCG Companies, Inc.; Loop Capital; Mercy Housing Inc.; Ovation Development Corp; Partners Southeast; Positive Wellness Alliance; and Reno & Cavanaugh, PLLC. If you work with a partner interested in joining NCSHA, please contact Phaedra Stoger.

White House FY 2023 Budget Proposes Major Increases in Housing Funding, New Programs to Increase Housing Supply
On Monday, the Biden Administration submitted to Congress the President’s Budget for Fiscal Year 2023, outlining the administration’s fiscal priorities for the coming year. The budget requests $71.9 billion for the U.S. Department of Housing and Urban Development (HUD), a 9.4 percent increase above the FY 2022 enacted level, including $1.95 billion for the HOME Investment Partnerships program, $15 billion to fully fund renewals and amendments in the Project-Based Rental Assistance program, and $1.2 billion for the Housing for Persons with Disabilities and Housing for the Elderly programs. The budget also requests $1.8 billion for the U.S. Department of Agriculture’s (USDA) multifamily housing programs, an increase of $257 million (17 percent) from FY 2022.

The budget proposes $50 billion in mandatory funding to increase the supply of affordable housing, including $35 billion for a new Housing Supply Fund to be administered by HUD. The Housing Supply Fund would provide funding to state and local housing finance agencies and their partners for grants, revolving loans, and other streamlined financing tools to increase housing supply, as well as grants to advance state and local jurisdictions’ efforts to remove barriers to affordable housing. The $50 billion also is inclusive of a $10 billion investment in the Housing Credit, which would go toward basis boosts for certain bond-financed Housing Credit developments, and $5 billion for the U.S. Department of Treasury’s Community Development Financial Institutions Fund. See NCSHA’s full budget analysis and updated budget chart for more details.

Treasury Publishes ERA 2 Reallocation Guidance and ERA Spending Data Through February
This week, Treasury issued guidance detailing how it will reallocate excess funding from the Emergency Rental Assistance program authorized under the American Rescue Plan Act (ERA 2). As with ERA 1, assessments for ERA 2 reallocation will take place over multiple rounds. However, unlike ERA 1, grantees only received a portion of their ERA 2 funds up front and have to meet a threshold set by the statute to request and receive additional tranches of funding from their full ERA 2 grant amounts. All reallocations will come from funding remaining at Treasury, which grantees have not yet requested, and Treasury will not be recapturing any funds already paid to grantees. For more information on the specific mechanism Treasury is employing for ERA 2 reallocation, see NCSHA’s blog.

Treasury also released this week spending data for both ERA 1 and ERA 2 through the end of February, showing grantees had spent or obligated approximately $30 billion of the $46 billion total Congress provided for both programs. Grantees have made more than 4.7 million payments to households. Treasury expects the vast majority of ERA funds to have been deployed, or at least paid to grantees, by mid-2022.

Treasury Publishes Draft Guidance on HAF Compliance and Reporting Responsibilities
The Treasury Department late Wednesday published draft guidance outlining the various compliance and reporting obligations for agencies administering the Homeowner Assistance Fund (HAF). The first section of the guidance summarizes Treasury’s expectations regarding policies and actions HAF agencies will take to conduct proper program oversight so HAF dollars are spent effectively and clarity on how agencies can use program-generated income. The second section lays out the information Treasury will expect HAF agencies to submit in their quarterly and/or annual reports and also sets a timeline by which these reports will be submitted. The first quarterly report is due May 16, with subsequent quarterly reports due 45 days after the end of each quarter. The first annual report is due August 15, with subsequent annual reports due 45 days after the end of each year (which for HAF will run July through June).

Treasury is seeking public input on the draft guidance through April 14. NCSHA intends to submit comments and clarifying questions to Treasury on behalf of HFAs and other HAF state and territorial programs. If you have input or questions you would like NCSHA to consider for our comments, please email Greg Zagorski by April 6.

FHA Proposes a 40-Year Loan Modification Term Limit
Today, HUD published a proposed rule to amend its current regulation to increase the maximum mortgage loan modification term limit from 360 months to 480 months. The proposed rule, if finalized, would allow mortgagees to provide a 40-year loan modification option to borrowers who may not otherwise qualify for payment reduction or other loss mitigation options. It also would align the Federal Housing Administration (FHA) with modifications available to borrowers with mortgages backed by Fannie Mae and Freddie Mac. Comments are due to HUD by May 31. If you have feedback for NCSHA to consider in our comments, please email Rosemarie Sabatino by May 2.

IRS Publishes New MRB and MCC Purchase Price Limits and Safe Harbors
The Internal Revenue Service on Wednesday published Revenue Procedure 2022-21, which revises the nationwide average purchase price limits and the average area purchase price safe harbors for the Mortgage Revenue Bond (MRB) and Mortgage Credit Certificate (MCC) programs. The revenue procedure establishes the new MRB and MCC purchase price limits by taking the FHA single-family loan limits set in November 2021 and dividing them by 1.083. It also sets the national average purchase price at $368,500 for computing the housing cost/income ratio, an increase of nearly $37,000 from 2021. The new nationwide and average purchase price limits and the average area purchase price safe harbors take effect for all loans and MCCs originated as of March 30. An exception is allowed for those loans and certificates an HFA commits to finance before May 29 and that are financed by bond sales occurring before April 29.

Senate Banking Committee Hearing Explores Senior Housing Needs
On March 31, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing to discuss Affordability and Accessibility: Addressing the Housing Needs of America’s Seniors. Committee Democrats explored a range of solutions to address the growing need for affordable, accessible, and service-enriched housing for seniors including strengthening the Section 202 and Section 811 programs, investments in public housing, loss mitigation of reverse mortgage borrowers, zoning reforms that would allow for more accessory dwelling units, and manufactured housing. Committee Ranking Member Pat Toomey (R-PA) suggested a plethora of federal housing policies has made housing more expensive.

Testifying before the committee, Audra Hamernik, president and CEO of Nevada HAND, stressed the role of the Housing Credit in increasing the supply of affordable housing for seniors. Another witness, Thomas Wade, director of financial services and housing policy at the American Action Forum, urged Congress to end the conservatorship of the GSEs and evaluate zoning and land-use restrictions that limit housing development as possible solutions.

NCSHA in the News
The Washington Post, 3.25.22, Affordable housing, long overlooked, getting federal boost
Southeast Missourian | Northwest Arkansas Democrat Gazette, 3.28.22, Billions in relief put toward housing

Looking Ahead…

Legislative and Regulatory Activities

• April 6 | Comments Due to NCSHA | Treasury Department Proposed Guidance on Homeowner Assistance Fund Participant Compliance and Reporting Responsibilities
• April 14 | Comments Due | Treasury Department Proposed Guidance on Homeowner Assistance Fund Participant Compliance and Reporting Responsibilities
• May 2 | Comments Due to NCSHA | HUD Proposed Rule on Increased 40-Year Term for Loan Modifications
• May 6 | Comments Due to NCSHA | Labor Department Proposed Rulemaking to Update Davis-Bacon Act Regulations
• May 17 | Comments Due | Labor Department Proposed Rulemaking to Update Davis-Bacon Act Regulations
• May 31 | Comments Due | HUD Proposed Rule on Increased 40-Year Term for Loan Modifications

NCSHA, State HFA, and Industry Events

• April 28 – 29 | Novogradac Affordable Housing Conference | San Francisco and Online
  Jennifer Schwartz will speak at this event.
• May 2 – 4 | Mountain Plains HFA Summit | Billings, MT
  Garth Rieman will speak at this event.
• May 11 – 12 | Outside the Box: 2022 PHFA Housing Forum | Harrisburg, PA
  Jennifer Schwartz will speak at this event.
• June 8 – 9 | CAHEC Partners Conference | Greensboro, NC
  Stockton Williams will speak at this event.
• June 21 – 24 | NCSHA’s Housing Credit Connect | Chicago

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