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NCSHA Washington Report | April 28, 2023

Published on April 28, 2023

Web Washington Report Graphics - April 28, 2023

The Federal Housing Finance Agency this week began belatedly to respond to the rising tide of criticism over the agency’s plan to increase the upfront fees on mortgages backed by Fannie Mae and Freddie Mac.

FHFA has been revising fees for various categories of GSE-supported borrowers since early last year, most significantly from HFAs’ perspective in October, when the agency cut them for credit-worthy lower-income buyers served by Fannie and Freddie’s flagship HFA programs and similar products — a move NCSHA had pressed FHFA to make for several years. Lender and Realtor organizations applauded the action as well.

The most recent round of fee adjustments, announced in January of this year, apply to a much broader range of borrowers, and as a result, many with higher credit scores will pay more — potentially several thousand more over the course of their mortgages — than before. (Nevertheless, “most borrowers who put down between 5% and 25% and have credit scores greater than 680 will … see a fee increase but will still pay less overall than lower credit borrowers,” according to an analysis by National Mortgage News.)

The new fee structure is currently scheduled to kick in August 1 and will apply to loans acquired by the GSEs starting in January 2024. Lenders are understandably upset. “The timing of these changes is especially troubling given current stressed housing market conditions already making affordability a challenge, and the fast-approaching peak home buying season,” wrote the Mortgage Bankers Association in February.

Some have connected last year’s fee cut for lower-income borrowers with the pending price increase for more creditworthy ones. David Stevens, former MBA CEO and a previous FHA Commissioner, said, “This was a blatant and significant cut of fees for their highest-risk borrowers and a clear increase in much better credit quality buyers — which just clarified to the world that this move was a pretty significant cross-subsidy pricing change.”

Stevens’ Obama Administration colleague, Jim Parrot of the Urban Institute, has pushed back on that notion, saying, “The criticism is misplaced, conflating two separate, largely unrelated moves on pricing…While FHFA is also raising fees modestly on the GSEs’ core business, this increase is paying almost entirely for higher capital requirements, not the cross-subsidy.”

FHFA Director Sandra Thompson this week attempted to clarify the issue further. “The targeted eliminations of upfront fees for borrowers with lower incomes — not lower credit scores — primarily are supported by the higher fees on products such as second homes and cash-out refinances,” not the forthcoming fees on mortgages for primary residences, Thompson said.

A letter to Thompson Wednesday from the National Association of Realtors objects to the fact that “the fee reduction on entry-level borrowers accompanied an increase in [fees] on borrowers who make down payments of 5 percent to 25 percent and with credit scores greater than 680,” with no mention of cross subsidy.

The Realtors further suggest Fannie and Freddie are sufficiently profitable to be able to reduce unnecessary fees on credit-worthy lower-income borrowers without raising them on those in the middle — a comment that awaits an FHFA response.

Stockton Williams | Executive Director

Stockton-Williams-Washington-Report

Stockton Williams | Executive Director

State HFA Emergency Housing Assistance

In This Issue

Todman Recognizes Georgia, Kentucky for Rural Homelessness Work in Interview
The Department of Housing and Urban Development (HUD) has awarded Georgia another $2.2 million to house people in remote areas of the state. In 2023, Georgia has received nearly $5 million from the federal government to address rural homelessness. In an article published today in The Atlanta Journal – Constitution, HUD Deputy Secretary Adrianne Todman said, “Our job is not done. It is the good work of [states] like Georgia, Kentucky and across the country, that as their work progresses makes the case for additional funds.”

HFAs Participate in HUD Listening Session on PBCA Legislative Proposal
On April 25, representatives from nine state HFAs and NCSHA participated in a listening session HUD convened on its legislative proposal to authorize it to contract with public housing agencies (PHAs), including state HFAs, to administer Section 8 project-based rental assistance (PBRA). State HFA participants described the added value state HFAs bring to their contract administration work, including a strong public-purpose mission aligned with HUD’s, a focus and priority on affordable housing preservation and tenant well-being, a variety of federal and agency resources they can leverage and bring to bear on the HUD-assisted portfolio, broad and deep relationships with key affordable housing stakeholders throughout their states, local presence to respond to and address problems and property or tenant needs, and a proven track record of performance under the Performance-Based Contract Administration (PBCA) and other HUD programs.

In July 2022, HUD issued a new solicitation to procure PBCA contracts which would have had negative impacts on the PBCA program by replacing state-level administration of PBCA contracts with large, regional entities and effectively prohibiting HFAs from bidding, thus ending decades of successful partnership with HUD. In light of extensive stakeholder engagement, however, including by many HFAs, the House and Senate Appropriations committees responded by including bill text in the FY23 appropriations legislation explicitly prohibiting HUD from proceeding with a procurement action identical or substantially similar to the one issued in July 2022. HUD also was directed by Congress to propose legislation if necessary and conduct effective stakeholder outreach prior to initiating further procurement activity related to the PBCA contracts, which was part of the impetus for HUD’s legislative proposal and listening session.

NCSHA Releases Update to HFA1 Affordable Homeownership Lender Toolkit; Participation Rises to 16 HFAs
With the addition of three states, raising the total number of participating HFAs to 16, NCSHA released an update to its HFA1 Affordable Homeownership Lender Toolkit yesterday. The new participants are the Louisiana Housing Corporation, Minnesota Housing, and Virginia Housing. Other noteworthy enhancements in this update include the addition of Tennessee Housing’s FHA, VA, and USDA-RD Guaranteed programs; elimination of the “TBA” designation from the tools in the kit; and elimination of an overlay by the Washington State Housing Finance Commission and MassHousing. Lastly, the updated toolkit reflects the launch of the New Mexico Mortgage Finance Authority’s HomeForward Program, which is HFA1-aligned. 

NCSHA Submits Comments on Affirmatively Furthering Fair Housing Proposed Rule
On April 21, NCSHA submitted comments on HUD’s 2023 overhaul of its Affirmatively Furthering Fair Housing (AFFH) regulations. The proposed rule, issued in January, would build upon the 2015 AFFH rule adopted under the Obama Administration. The Trump Administration suspended implementation of the 2015 rule and later promulgated a final rule — the Preserving Community and Neighborhood Choice (PCNC) rule — repealing and replacing the 2015 AFFH rule. The Biden Administration in 2021 repealed the PCNC rule and restored certain aspects of the 2015 AFFH rule, announcing it would reexamine the 2015 rule and develop a new rule in its place.

NCSHA’s comments applaud HUD for repealing the 2020 PCNC rule, which we believe would not have resulted in meaningful planning and strategies to meet the statutory obligation to affirmatively further fair housing, and for seeking to streamline and improve the 2015 AFFH rule rather than reinstating it without critical examination and revisions to reduce its substantial burden on HUD program participants. In general, NCSHA believes HUD has taken substantial steps towards improving the process for fair housing planning. However, NCSHA also believes HUD can and should do more to further streamline aspects of the rule, clarify program participants’ responsibility, and reduce duplication of efforts and better coordinate planning when different HUD program participants serve the same geographic areas. See NCSHA’s blog for more information.

NCSHA Submits Comments on HUD’s Proposed NSPIRE Scoring Methodology
Yesterday, NCSHA submitted comments on HUD’s proposed scoring methodology for the new National Standards for the Physical Inspection of Real Estate (NSPIRE) for many HUD-assisted properties. NCSHA’s comment letter expresses agreement “with the underlying premise of the NSPIRE model, which is that health and safety considerations should take priority over superficial and cosmetic issues in assessing the physical condition of affordable multifamily housing” but cautions that the timeline for full implementation of the new NSPIRE physical inspection regime is far too aggressive. The letter further urges HUD to coordinate with the Internal Revenue Service “so that properties financed with both the Housing Credit and HUD funding can follow a single [physical inspection] protocol.”

Senate Banking Committee Holds Hearing to Examine Bipartisan Housing Bills
Senate Banking Committee members from both parties expressed interest in advancing bipartisan legislation to address the affordable housing shortage during a hearing Wednesday. In his opening statement, Committee Chair Sherrod Brown (D-OH) said he hopes the committee can find common ground on “common sense” legislative solutions to increase access to affordable housing and cited several housing bills Banking Committee members have introduced. Brown also expressed support for several housing tax credit bills, including the Affordable Housing Credit Improvement Act (AHCIA) and Neighborhood Homes Investment Act (NHIA). Ranking Member Tim Scott (R-SC) called on members from both parties to put aside their partisan differences to craft policies that help more Americans become homeowners. He touted his ROAD to Housing Act, summarized below, which he said would enact needed reforms to federal housing programs. During questioning, several committee members expressed support for AHCIA and NHIA. Senator Catherine Cortez Masto (D-NV) also addressed the importance of reauthorizing the HOME program. One of the witnesses, Vanessa Brown Calder of the Cato Institute, criticized the Housing Credit in her written and oral statements, arguing it disproportionately benefits developers instead of low-income households. Prior to the hearing, the ACTION Campaign, which NCSHA co-chairs, sent the committee this letter to address proactively Brown Calder’s previous program criticisms.

Scott Releases Comprehensive Housing Bill
Senate Banking Committee Ranking Member Tim Scott (R-SC) Tuesday released a discussion draft of the Renewing Opportunity in the American Dream to Housing Act (ROAD to Housing Act). This legislation would enact a series of reforms to federal housing programs intended to make them more effective and accountable. Notable provisions include eliminating the cap on the number of public housing units that may be converted under the Rental Assistance Demonstration program; fully authorizing the Moving to Work program; requiring HUD to prioritize grants for recipients located in or around Opportunity Zones; changing the definition of manufactured housing to allow more housing units to qualify; and directing the Consumer Financial Protection Bureau to amend its regulations to better incentivize small-dollar mortgage lending. The bill also would establish recertification requirements for housing counselors working for agencies that receive HUD funding, require that counselors lose their certification if the home buyers they assist default at a higher rate than the area average, and impose anti-lobbying restrictions on entities receiving funding from HUD’s Housing Counseling program. Scott also released this section-by-section summary of the bill.

IRS Publishes New MRB, MCC Purchase Price Limits and Safe Harbors; Seeks Input on Possible Alternative Data Sources on Home Prices
The IRS last week published Revenue Procedure 2023-22, which revises the nationwide average purchase price limits and 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 limitations based on the Federal Housing Administration single-family loan limits set in December 2022 and sets the national average purchase price at $503,300. MRB and MCC administrators use this figure to calculate the housing cost/income ratio, which provides for an upward adjustment to the percentage limitation in high housing cost areas. This is a nearly $135,000 increase from the average purchase price for 2022. In addition, IRS requests comment on whether there are other sources of average purchase price data, including data that differentiates between new and existing residences, that could provide a different method for calculating average area purchase price safe harbors. The deadline to comment is June 19. NCSHA is considering whether to submit comments on behalf of all HFAs. If you have input for NCSHA to consider, please email Greg Zagorski by June 5.

HUD Announces Action Plan to Remove Unnecessary Barriers to Housing for People with Criminal Records
On April 24, HUD announced upcoming efforts to ensure otherwise qualified people are not denied the opportunity to access housing solely due to a criminal record. This effort follows a comprehensive HUD review of its regulations, policies, and guidance, which identified regulatory and sub-regulatory requirements that could be improved in support of this goal, such as not automatically denying an applicant housing assistance simply based on the presence of a criminal conviction except where otherwise prohibited by federal law and disregarding criminal history that is unlikely to bear on fitness for tenancy in HUD-supported housing such as convictions not involving violence or harm to persons or property.

HUD expects to issue a Notice of Proposed Rulemaking in the coming weeks to change regulations governing public housing agencies and HUD-subsidized housing providers to prevent unnecessary denials of housing assistance to people with criminal records, as well as technical assistance to help PHAs and other owners to determine what convictions HUD considers relevant to health and safety and how to conduct an individualized assessment when reviewing criminal records.

HUD Seeks Public Comment on Regulatory Proposals Prohibiting Discrimination on the Basis of Disability in HUD-Assisted Programs
On Tuesday, HUD published an Advance Notice of Proposed Rulemaking (ANPR) to consider revisions to the regulation implementing Section 504 of the Rehabilitation Act of 1973 (Section 504), which prohibits discrimination on the basis of disability in programs and activities receiving HUD federal financial assistance. The Section 504 ANPR seeks comment on how to account for advances in accessible design, the use of websites and other technology, and auxiliary aids and services including assistive technologies, as well as whether HUD should adopt an updated federal accessibility standard to comply with Section 504. Comments on the ANPR are due July 24.

NCSHA in the News
Biznow.com, 4.23.23, ARPA Could Already Be Running Out Of Time To Bring ‘Transformative’ Change To The Affordable Housing Crisis
U.S. News, 4.21.23, On the Financial Edge: How to Avoid Becoming Homeless

Looking Ahead…

Legislative and Regulatory Activities

NCSHA, State HFA, and Industry Events

  • May 3 | Stewards of Affordable Housing for the Future/National Affordable Housing Trust Annual Retreat | Washington, DC
    Jennifer Schwartz will speak at this event.
  • May 3 – 6 | National Association of Local Housing Finance Agencies Annual Conference | Tampa, FL
    Robert Henson will speak at this event.
  • May 4 – 5 | National Association of Home Builders Mortgage Roundtable | Washington, DC
    Stockton Williams will participate in this event.
  • May 9 | Ballard Spahr National Housing Summit | Washington, DC
    Jennifer Schwartz will speak at this event.
  • May 10, 11:59 p.m. ET | Entry Deadline | NCSHA’s 2023 Awards for Program Excellence
  • May 15 | Last Day for Discounted Early Registration, Hotel Group Rate: NCSHA’s Housing Credit Connect & Marketplace | Seattle, WA
  • May 31 – June 1 I Fannie Mae Affordable Lending Summit | Washington, DC
    Stockton Williams will speak at this event.
  • June 7 | HCCP Board of Governors Average Income Test Webinar | Virtual
    Jennifer Schwartz will speak at this event.
  • June 13 – 16 | NCSHA’s Housing Credit Connect & Marketplace | Seattle, WA

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