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NCSHA Washington Report | May 31, 2024

Published on May 31, 2024

Web Washington Report Graphics - May 31, 2024
The range of responses, from breathless to blistering, to Freddie Mac’s request for permission from its regulator to start purchasing and guaranteeing closed-end home equity loans for borrowers who have a Freddie-backed mortgage is a reminder that, even after almost 16 years of federal conservatorship, few subjects stoke the passions of the mortgage finance punditocracy quite like the housing GSEs.

Meredith Whitney, the “Oracle of Wall Street,” credited with predicting the global financial crisis that led to GSE conservatorship, says Freddie’s securitization of second mortgages “could begin to unleash almost $1 [trillion] into consumers’ wallets” as soon as this summer, rising to $2 trillion by fall, “without adding a dime to government debt.”

Christopher Whalen, an investment banker and prolific commentator, is decidedly less enthused. He calls the idea “part of a shameless election year push by the Biden Administration to appear to be supporting home affordability” and argues it wouldn’t resonate at all with consumers anyway (who don’t know whether Freddie guarantees their mortgage) or banks either (who couldn’t make much by offering the new product).

Opinion is somewhat divided among trade groups representing various players in the housing finance system as well, with most lining up against. The American Bankers Association, Housing Policy Council, Securities Industry and Financial Markets Association, and U.S. Mortgage Insurers are among those opposed. They say Freddie’s proposal takes it beyond its charter mandate and would crowd out well-functioning providers, increase inflation, elevate credit risks, and worsen inequality.

On the other side, groups including the Community Home Lenders of America, which represents community-based independent mortgage banks, and American Credit Union Mortgage Association see benefit in Freddie expanding access to second mortgages.

The biggest trade association tent is the Mortgage Bankers Association, and its balanced comments should carry extra weight, in our view. MBA refutes the mission-creep charge, noting the GSEs “have previously engaged in the purchase of closed-end second mortgages,” and believes a new Freddie product “could expand and improve the options available for borrowers to access the equity in their homes while preserving an underlying low-rate first mortgage and providing a cost-effective alternative to cash-out refinances at today’s higher rates.”

At the same time, MBA has “major concerns that this new product could harm the existing market,” citing the same problems as outright opponents, unless Freddie and the Federal Housing Finance Agency clarify a number of details about how it will work.
Our comments on Freddie’s proposal strike similar notes: There’s probably potential for significant consumer benefits but only with some significant adjustment, including better alignment with mortgage offerings from mission-focused providers of lower-income home mortgages, including state HFAs.

If Freddie-securitized seconds also expressly emphasized home improvements as a preferred use of funds — a massive need the private market is demonstrably not meeting — borrower benefits could be even greater than current estimates, and the product could line up neatly with the company’s statutory duty-to-serve goals.

Freddie has put forward something here that deserves more than knee-jerk embrace or rejection. It’s worth exploring further what might make sense.
Stockton-Williams-Washington-ReportStockton Williams | Executive Director

In This Issue

NCSHA Welcomes New Members
NCSHA welcomed these organizations as Affiliate members in May: Center for Public Enterprise; Esusu; HSPAM, LLC; ION Water; Memorial Community Development Corporation; Optimal Blue; and Sisal. If you work with a partner interested in becoming a member, please contact membership@ncsha.org.

HFAs, NCSHA Testify at HUD PBCA Stakeholder Listening Session
On Wednesday, NCSHA and a number of state HFAs provided in-person feedback during the U.S. Department of Housing and Urban Development’s stakeholder listening session on its proposal asking Congress to include, in Fiscal Year 2025 appropriations legislation, language authorizing HUD to enter into cooperative agreements, under a notice of funding opportunity, to select partners to help it administer project-based rental assistance. This was the first — and only in-person — listening session of three HUD is holding to satisfy direction from Congress that it solicit input and feedback from interested stakeholders on its approach to renewing expiring performance-based contract administration contracts. NCSHA’s and HFAs’ statements generally supported HUD’s approach, emphasizing the importance of state-by-state competition; restricting eligibility to HFAs and other public housing agencies; including selection criteria that emphasizes public purpose, statewide contract administration experience, affordable housing expertise, and the ability to use housing resources and programs to address preservation and other needs; and the problems with a traditional procurement process.

HUD will hold two additional listening sessions virtually: on June 5, 10:00 am – 12:00 pm ET, and June 6, 2:00 pm – 4:00 pm ET. To listen or speak during either session, register here.

NCSHA Submits Comments on Treasury and IRS 2024‒25 Priority Guidance Plan
Today, NCSHA sent a letter to the U.S. Department of the Treasury and Internal Revenue Service (IRS) asking them to include guidance on issues related to the Housing Credit and Housing Bonds in their 2024‒25 Priority Guidance Plan. The plan is an annual document that identifies the guidance projects Treasury and IRS will work on during the 12-month period beginning July 1 and ending June 30.

NCSHA’s letter urges IRS to ensure the Housing Credit and HUD programs are aligned in regards to HUD’s implementation of the Housing Opportunities Through Modernization Act and National Standards for the Physical Inspection of Real Estate; mitigate the early termination of restrictions on Housing Credit properties by requiring states to enact qualified contract waiver requirements or incentives; provide clarification related to nonprofit right of first refusal; issue guidance on application of the Violence Against Women Act to the Housing Credit; finalize pending guidance related to compliance monitoring, the Average Income Test, and Audit Technique Guide for Completing Form 8823; and take other actions to improve the ongoing administration of the Housing Credit program.

NCSHA’s letter also presses IRS to reconsider misguided proposed changes to the Mortgage Revenue Bond (MRB) purchase price safe harbor calculation, make updates to guidance for verifying first-time home buyer status, allow for more flexible use of private activity bond carryforward authority, adjust record retention requirements for bonds, amend existing regulations to change how mortgage fees are considered when calculating an MRB mortgage’s effective interest rate, and amend the Yield and Valuation of Purpose Investment regulations to address covered investments.

The ACTION Campaign, which NCSHA co-chairs with Enterprise Community Partners, also submitted comments on the Priority Guidance Plan related to the Housing Credit.

House Republican Tax Teams Begin to Prepare for 2025 Tax Legislation with Comment Request, Briefings
The House Ways and Means Committee’s Republican “tax teams” announced they are accepting comments from the public in advance of anticipated legislative action to address provisions of the 2017 Tax Cuts and Jobs Act (TCJA) expiring at the end of next year. As NCSHA previously reported, Chairman Jason Smith (R-MO) recently established 10 tax teams composed of Republican Ways and Means Committee members. Each team will focus on an area likely to be addressed in upcoming tax legislation. The Community Development tax team — Representatives Mike Kelly (R-PA), Claudia Tenney (R-NY), Darin LaHood (R-IL), Blake Moore (R-UT), and Mike Carey (R-OH) — will cover affordable housing. Comment letters emailed to RepublicanTaxTeams@mail.house.gov will be accepted through October 15. NCSHA will submit comments focused on its tax priorities related to the Housing Credit, tax-exempt private activity bonds, and the Neighborhood Homes Investment Act.

In addition to the request for comments, the tax teams will be holding a number of staff- and member-level briefings and site visits to help inform their work. NCSHA took part in a briefing for personal staff of the Community Development tax team members this week to discuss the Housing Credit and Housing Bond programs and NCSHA’s legislative priorities related to the Affordable Housing Credit Improvement Act and Affordable Housing Bond Enhancement Act.

House Appropriations Committee Allocates FY 2025 Discretionary Spending to Subcommittees
On May 23, the House Appropriations Committee approved funding distributions known as 302(b) allocations for FY 2025 to individual appropriations subcommittees, including those with jurisdiction over funding for the Departments of Agriculture and Housing and Urban Development. Of particular note, the 302(b) allocation for the Transportation, Housing and Urban Development (THUD) Subcommittee would represent an approximate 10 percent cut from the FY 2024 enacted level, although it is unclear how these cuts might be distributed between HUD and other federal agencies under the THUD Subcommittee’s jurisdiction. The 302(b) allocations advanced by a party-line vote, with committee Democrats arguing Republicans were ignoring the fiscal agreement previously reached in exchange for suspending the debt ceiling in Summer 2023.

In addition to the 302(b) allocations, the committee announced a tentative FY 2025 markup schedule, with the subcommittee and full committee markups for THUD scheduled for June 27 and July 10, respectively.

CFPB Seeks Public Input on Mortgage Closing Costs
The Consumer Financial Protection Bureau (CFPB) yesterday announced it has issued a request for information (RFI) on mortgage closing costs and the financial impact they have on consumers. CFPB’s announcement expresses concern mortgage closing costs have increased substantially in recent years, citing an analysis it recently conducted that found mortgage costs for the median borrower increased 36 percent from 2021 to 2023. Such fees, CFPB argues, increase costs for both consumers and lenders. The RFI includes a series of questions seeking more information on how such fees are set, what is driving the recent price increases for some fees, who benefits from the fees, and whether there are fees respondents feel are unnecessary. The deadline to comment is August 2. NCSHA would appreciate HFA input as we prepare a response. Please email any feedback by July 19 to Rosemarie Sabatino.

HUD Awards Funding for Green and Resilient Retrofit Program
On May 21, HUD announced an additional $67 million in new funding from its Green and Resilient Retrofit Program (GRRP) for energy-efficient and climate-resilient renovations at 12 HUD-supported multifamily properties around the country. This most recent announcement brings the total amount of GRRP funding awarded to date to more than $610 million, supporting similar efforts at 122 properties representing more than 14,000 rental homes.

Climate United Holds Webinar on Greenhouse Gas Reduction Fund Plans
On Thursday, Climate United — a consortium consisting of Calvert Investment, Community Preservation Corporation, and Self-Help — held a webinar for state, local, and tribal governments and agencies to highlight its preliminary plans to use the $7 billion award received through the National Clean Investment Fund (NCIF) component of the Greenhouse Gas Reduction Fund. While many of the specific program parameters remain fluid until the award agreement with EPA is finalized, Climate United described initiatives targeted to affordable single- and multifamily housing, explained some of the criteria that developments and activities will need to meet to be eligible for NCIF funding, and expressed its intent for HFAs to play an important role in deploying funding. You can learn more about Climate United here.

GAO Report Summarizes Single-Family Housing Institutional Investor Activity
The Government Accountability Office (GAO) last week released a report examining the impact of institutional investors on the market for single-family homes. The report synthesizes the findings of 74 previously conducted studies. GAO attributes the initial growth of large institutional investors in single-family rental housing to bulk purchases facilitated by local auctions of foreclosed properties after the 2007–2009 recession. While no investor owned more than 1,000 single-family homes before 2011, by 2022, 32 institutional investors collectively owned 450,000 single-family homes, with the five largest investors owning nearly 300,000 homes. Studies GAO reviewed found that institutional investors may have contributed to increasing home prices and rents, but it is unclear what impact such investors had on the availability of homeownership opportunities overall, because many other factors also might have had an impact. GAO notes some studies show institutional investors are more likely to file for eviction than other landlords, and some studies suggest single-family rental housing may increase neighborhood diversity and increase housing options for low- and moderate-income families.

House Housing Subcommittee Discusses HUD Oversight of PHAs
The House Housing and Insurance Subcommittee last week held a hearing to examine the performance of public housing authorities (PHAs) and HUD’s oversight of them. In his opening statement, Subcommittee Chair Warren Davidson (R-OH) cited several instances of PHA mismanagement and/or corruption, which he said led to unsafe housing for residents. Davidson criticized HUD for inadequately supervising these PHAs and for not taking corrective actions with them sooner. Ranking Member Emanuel Cleaver (D-MO) and other subcommittee Democrats said that, while badly performing PHAs need to be reformed, most PHAs do a good job providing a valuable service and need additional federal funding to properly fulfill their missions. Witnesses included Bill Stover and Matt Doherty, former heads, respectively, of the Washington, DC, and Atlantic City, NJ, PHAs, who related their experiences trying to turn around their agencies. Also testifying was Georgi Banna of the National Association of Housing and Redevelopment Officials. Banna defended PHAs, pointing out HUD has categorized most as “higher performing” and their need of significant funding to preserve their housing stock.

NCSHA in the News
The Hill, 5.28.24, Freddie Mac proposes buying home equity loans

Looking Ahead

Legislative and Regulatory Activities

NCSHA, State HFA, and Industry Events

  • June 4 – 5 | Fannie Mae Affordable Lending Summit | Washington, DC
    Stockton Williams will participate in this event; other NCSHA staff will attend.
  • June 10 – 13 | NCSHA’s Housing Credit Connect & Marketplace | Atlanta
  • July 22 – 24 | 2024 Texas Housing Conference | Austin, TX
    Jennifer Schwartz will participate in this event.

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