Washington Report | May 18, 2018

Representatives of HFAs active with Fannie Mae and Freddie Mac were in Washington this week discussing key business issues and new opportunities with these longtime and increasingly important partners.  More than 40 HFAs are delivering financing through Fannie Mae HFA Preferred Products, which have generated $25 billion in lending to fund more than 184,000 home mortgages. HFA business with Freddie Mac is at a smaller scale but growing.

The foundation of HFA-GSE relationships is a shared commitment to safe and sound affordable housing lending that fills gaps in the market. This week’s discussions illuminated emerging areas of collaboration in expanding access to credit, generating new housing supply, and achieving efficiencies where feasible through more standardized approaches. HFAs’ abilities to do more for and with the GSEs depends on partnership parameters that work for both parties — and a policy and regulatory environment that supports their collaboration.

It has been almost a decade since the U.S Treasury Department announced that Fannie and Freddie would be placed under the “temporary” conservatorship of the Federal Housing Finance Agency, and it looks like another Congress will conclude without passing legislation to revamp the housing finance system. Yet two of the most insightful industry observers suggest that mortgage market regulatory changes could come as soon as next year, regardless of whether Congress acts. In a new paper, Mark Zandi and Jim Parrott assert, “With a new director of the FHFA next year, we are likely to see a meaningful shift in the role of Fannie Mae and Freddie Mac.”

Zandi and Parrott refer to the fact that the term of FHFA Director Mel Watt, who was nominated by President Obama and confirmed by the Senate in 2013, ends December 31, 2018. The Administration’s appointment of Watt’s successor will be one of its most consequential housing policy decisions, as the FHFA director has the authority to substantially shape the role Fannie and Freddie play in affordable housing.

Treasury Secretary Mnuchin, testifying in February before the House Financial Services Committee, confirmed in answers to questions from Committee Chairman Jeb Hensarling (R-TX) that the FHFA director can, for example, choose not to enforce the GSEs’ statutory affordable housing goals, suspend all GSE contributions to the Housing Trust Fund, and discontinue the Home Affordable Refinance Program.

Alternatively, the FHFA director can authorize what NCSHA is advocating: new HFA-GSE solutions to emerging market needs, supported by the FHFA’s own stated understanding in the agency’s 2014 Strategic Plan that “HFAs have historically provided access to credit and lower down payment lending for lower- and moderate-income families and have proven, strong performance records.”

In both the legislative and regulatory environments, the HFA value proposition in the housing finance system as a preferred, advantaged partner of the GSEs — based on a common mission and demonstrable lending performance — must be constantly protected, forcefully articulated, and strategically advanced.

Stockton Williams | Executive Director

In This Issue

• Study Documents Superior Lending Performance of State HFAs
• NCSHA Participates in Fannie Mae and FHFA Work Sessions
• House Appropriations Subcommittee Approves HUD FY 2019 Funding Bill
• Representatives Duffy and Cleaver Introduce Voucher Mobility Demonstration Bill
• House Committee Discusses Opportunity Zones
• Administration Nominates Michael Bright to Be Ginnie Mae President
• Congressional Briefing Focuses on Housing as Infrastructure
• CohnReznick Finds Housing Credit Property Performance High and Improving
• Terner Center Study Finds Economic Mobility, Educational Success for Housing Credit Tenants
• Looking Ahead

Study Documents Superior Lending Performance of State HFAs

Single-family loans originated through state HFA programs perform substantially better than similar loans to low- and moderate-income (LMI) borrowers, according to a major study released yesterday.

The study examines data on more than 1 million Fannie Mae-guaranteed loans to first-time LMI homebuyers from 2005 to 2014, around 10 percent of which were originated through HFA programs. Overall, HFA loans were 20 percent less likely to experience a long-term default, and 30 percent less likely to be foreclosed.

The paper attributes this strong performance, in large part, to HFAs’ high-touch mortgage servicing practices and homeownership counseling. It credits HFAs with serving lower income borrowers than the conventional market and suggests that HFA programs offer Fannie Mae a way to meet its affordable housing goals without compromising the quality of its portfolio. The authors have published a commentary summarizing their findings on Fannie Mae’s website.

NCSHA Participates in Fannie Mae and FHFA Work Sessions

Fannie Mae this week held its 8th annual “HFA Training Summit” for HFAs who partner with Fannie Mae to support affordable homeownership.  NCSHA’s Stockton Williams delivered remarks stressing the importance and impacts of the HFA-Fannie Mae relationship.  Stockton, along with NCSHA’s Garth Rieman and Greg Zagorski, joined staff from 26 HFAs, local agencies, and HFA industry partners for a series of sessions focusing on the most pressing topics facing HFA homeownership programs, including the shortage of affordable single-family inventory, digitized mortgage lending, and HFA-lender relationships.

Stockton, Garth, and Greg also participated in a session convened by the Federal Housing Finance Agency to explore ways that HFAs, mortgage loan originators, and the GSEs can optimize lending processes and procedures.