NCSHA Washington Report | December 2, 2022
Unsung efforts by policymakers and mortgage industry players, including state HFAs, to keep a lid on home foreclosures and mortgage delinquencies during Covid’s worst periods were highly successful, averting untold economic harm that seemed inevitable. Now, focus is shifting to adapting what worked for an economy that soon may inflict new stress on lower-income homeowners.
The main Covid-era intervention in the mortgage market was mass forbearance directed by federal policy and extended by loan servicers, which cut almost in half the percentage of past-due borrowers, from 6.7 percent in the second quarter of 2020 to 3.5 percent at the end of 2021. Today, analysts observe a “new normal for mortgage markets characterized by forbearances settling in at below half a million, around 2 million delinquent mortgages, and around 30,000 foreclosure starts per month.”
The Federal Housing Administration played a key role too, helping more than one million homeowners enter forbearance or access one of its targeted Covid recovery options. Today, former FHA Commissioner Brian Montgomery points out FHA delinquency numbers “are not outsized by FHA standards and have come way down from pandemic highs.” And FHA’s annual report published last month shows “a very healthy FHA program, with continued strengthening of the FHA Mutual Mortgage Insurance Fund, lower delinquency levels, and fewer borrowers in pandemic-related forbearance” according to the Mortgage Bankers Association.
The question is whether the recession widely expected next year will destabilize this “post-Covid” equilibrium. Former FHFA Director Mark Calabria has suggested evidence of a recession could show up first among FHA-insured homeowners. “This is the part of the mortgage market to watch,” he said, “FHA is the canary in the coal mine for the mortgage market.”
FHA Commissioner Julia Gordon and her team are laser-focused on the issue and hearing from stakeholders what else the agency may be able to do.
NCSHA and the Housing Policy Council have recommended how the Homeowner Assistance Fund most HFAs administer could work more effectively in combination with FHA’s “loss mitigation waterfall,” by FHA allowing verbal attestation of hardship, increasing its partial claim cap, and allowing fund recipients to access FHA relief options as long as fund assistance is available.
The RADAR Group suggests turning the dials on FHA’s current loss mitigation programs to deepen their impact in a higher rate environment: raising the partial claim limit from 25 to 30 percent and reducing the rate on the FHA 40-year term program. The firm estimates those moves, together with suspending FHA’s mortgage insurance premium, could reduce monthly payments by 9 – 18 percent for delinquent borrowers.
Going further, researchers at the Urban Institute have proposed that FHA, along with the VA and Fannie and Freddie, “normalize forbearance” implemented in response to the pandemic by establishing it as a standing option in the loss mitigation waterfall “for circumstances that are common and where third-party documentation can be easily obtained to avoid fraud and to maintain efficiency.”
HFAs will stay engaged in these critical conversations going into next year.
Stockton Williams | Executive Director
State HFA Emergency Housing Assistance
In This Issue
- Housing Credit Champions, ACTION Campaign Press Congress to Enact Housing Credit Priorities
- HOME Coalition Pushes for Robust FY23 HOME Funding
- Congress Works on FY23 Appropriations Legislation
- FHA, FHFA Raise Maximum Loan Limits for Respective Programs
- FHA to Allow Private Flood Insurance Coverage
- House Financial Services Committee Hearing Examines Inflation, Housing Affordability
- CDFI Fund Announces Availability of $5 Billion in New Markets Tax Credits
- NCSHA in the News
- Looking Ahead
Housing Credit Champions, ACTION Campaign Press Congress to Enact Housing Credit Priorities
Momentum continues to build for an expansion of the Housing Credit during the remaining weeks of 2022. On November 21, more than 2,500 groups signed a letter organized by the ACTION Campaign urging Congress to provide a 50 percent cap increase for the program — at a bare minimum reinstate the 12.5 percent cut in authority the program suffered in 2022 — and lower the 50 percent test to 25 percent. Next, on November 28, a bipartisan coalition of members of the House of Representatives led by Affordable Housing Credit Improvement Act (AHCIA) sponsors Suzan DelBene (D-WA) and Brad Wenstrup (R-OH) sent a letter to House leadership expressing their support for the 12.5 percent cut to be restored and the bond financing threshold to be lowered to 25 percent in an end-of-year bill. More information can be found in our blog posts about the ACTION and congressional sign-on letters.
These letters, and more House and Senate AHCIA cosponsors, help position the Housing Credit for consideration in a tax bill before the end of this Congress. There are no guarantees Congress will come to an agreement on tax legislation, and if so, what that agreement will look like, so NCSHA encourages housing advocates to continue outreach to AHCIA cosponsors on both sides of the aisle to urge them to talk to their leadership to encourage enactment of these priorities.
Recent cosponsors of the AHCIA include Senators Marsha Blackburn (R-TN) and Jacky Rosen (D-NV) and the following House members: Diana Harshbarger (R-TN), Dina Titus (D-NV), Hank Johnson (D-GA), Michael Turner (R-OH), and Robert Wittman (R-VA). If these members are in your delegation, please thank them for their support. You can find the full list of AHCIA cosponsors here.
HOME Coalition Pushes for Robust FY23 HOME Funding
Earlier this week, NCSHA, on behalf of the HOME Coalition, sent members of the House and Senate Appropriations Committees a letter requesting robust funding for the HOME Investment Partnerships program. The letter, which notes the urgency of the affordable housing supply shortage and historical impact of the HOME program to boost production, rehabilitation, and preservation of affordable homes for purchase or rent, urges Congress to fund the HOME program at no less than $1.9 billion, as requested by the administration in its FY23 budget request. Congress has until December 16, when the current continuing resolution expires, to pass government funding legislation for the remainder of fiscal year 2023.
Congress Works on FY23 Appropriations Legislation
Congress has just two weeks to complete work on legislation to fund the federal government before the current continuing resolution (CR) expires on December 16. Negotiations are underway among leadership and appropriators in both parties and chambers and the White House to determine whether an agreement can be reached on an omnibus spending bill that would likely include increases in certain non-defense domestic spending priorities, as well as additional defense spending and aid for Ukraine. If not, a further CR of indeterminate duration would be required to avoid a government shutdown before the holidays.
House and Senate Democrats support passing an omnibus by December 16. The House has passed several spending bills, including the Department of Housing and Urban Development and the Department of Agriculture rural housing funding bills, and the House Appropriations Committee has passed spending bills for all government agencies and programs. Senate Democrats have released proposed language for the 12 spending bills funding all government agencies and programs. Senate Minority Leader Mitch McConnell (R-KY) has said he supports passing an omnibus spending bill this year, citing his support for increased spending for defense and Ukraine, but faces pressure from some conservatives in both the House and Senate to instead enact a short-term CR which would give Republicans additional leverage once they take control of the House in the 118th Congress. The fallback option could be a full-year CR which would provide certainty for domestic spending levels but would carry potential implications for national security and Ukraine.
FHA, FHFA Raise Maximum Loan Limits for Respective Programs
On Thursday, the Federal Housing Administration (FHA) published Mortgagee Letters 2022-20 and 2022-21, announcing new maximum mortgage limits for FHA’s forward mortgage and home equity conversion mortgage programs, respectively. The limits will increase from $420,680 and $970,800 in calendar year 2022 to $472,030 and $1,089,300 in calendar year 2023, respectively, for a one-unit property. (Alaska, Hawaii, Guam, and the U.S. Virgin Islands are subject to a higher forward mortgage “ceiling;” see the mortgagee letter for details.) These new loan limits are effective for case numbers assigned on or after January 1, 2023, through December 31, 2023. The list of areas at the “ceiling” and areas with limits between the “floor” and “ceiling” — along with lists that can be sorted by state, county, or metropolitan statistical area or by calendar year — is on HUD’s Maximum Mortgage Limits web page. More information is available in HUD’s press release.
On Tuesday, the Federal Housing Finance Agency (FHFA) announced the 2023 conforming loan limits for single-family mortgages eligible for purchase by Fannie Mae and Freddie Mac. The 2023 limit for one-unit homes in most counties will be $726,200, an increase of $79,000 from $647,200 in 2022. High-cost areas, where 115 percent of the local median home value exceeds the baseline conforming loan limit, will have higher limits. The highest-cost area loan limit will be $1,089,300, 150 percent of the $726,200 conforming loan limit. The $1,089,300 limit also applies to all mortgages for homes in Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Per federal statute, FHFA is required to adjust the conforming loan limit for Fannie Mae and Freddie Mac annually to reflect changes in home prices as measured by FHFA. FHFA’s House Price Index showed that nationwide house prices increased 12.2 percent between the third quarters of 2021 and 2022. The new loan limits take effect January 1. FHFA also released FAQs on the new loan limits and a comprehensive list of the limits for each U.S. county.
FHA to Allow Private Flood Insurance Coverage
HUD announced on November 21 it will allow homeowners with FHA mortgage insurance to obtain flood insurance policies from private insurance providers. Previously, only flood insurance obtained through the National Flood Insurance Program was permissible for FHA-insured mortgages. FHA requires that insured mortgages for properties in Federal Emergency Management Agency-designated Special Flood Hazard Areas have flood insurance. HUD released the changes, which are effective December 21, through a Federal Register notice and a companion mortgagee letter that provides implementation guidance for FHA-approved lenders.
House Financial Services Committee Hearing Examines Inflation, Housing Affordability
The House Financial Services Committee held a December 1 hearing entitled Boom and Bust: The Need for Bold Investments in Fair and Affordable Housing to Combat Inflation. Much of the discussion among witnesses and committee members centered on the impact of the Federal Reserve’s efforts to combat inflation on the cost of housing, including housing production. Of note, in his written and oral testimony, witness Mark Zandi, chief economist for Moody’s Analytics, emphasized the importance of supply-side policy tools including the Low Income Housing Tax Credit and HOME Investment Partnerships program to promote long-term stability and affordability in the housing market, and he spoke favorably of proposals in Congress to substantially increase funding for these and other programs.
CDFI Fund Announces Availability of $5 Billion in New Markets Tax Credits
The Treasury Department’s Community Development Financial Institutions Fund last month announced it is accepting applications for the 2022 round of New Markets Tax Credits (NMTC). Treasury has made up to $5 billion in tax credits available for this year, the same as last year. The NMTC program is designed to be a catalyst for private-sector investment in distressed communities by providing tax credits to organizations or individuals making Qualified Equity Investments in designated Community Development Entities. Here is more information on how to apply and related deadlines.
NCSHA in the News
Route Fifty, 12.1.22, The Fight to Expand the Low-Income Housing Tax Credit
Affordable Housing Finance, 12.1.22, Supporters Push for Neighborhood Homes Investment Act
Novogradac, 12.1.22, Low-Income Housing Tax Credits News Briefs – December 2022
Affordable Housing Finance, 11.28.22, Developers Continue to Face Increasing Costs
The Mortgage Reports, 11.25.22, First-time home buyer grants for 2022: 8 Grant programs
Oregon Business Report, 11.23.22, Con. Bonamici calls for Low-Income Housing Tax Credit Financing Fix
BizNow, 11.21.22, 2,500 Groups Urge Congress To Pass Affordable Housing Legislation As Economy Keeps People Renting
Legislative and Regulatory Activities
- December 5 | Comments Due | FHA RFI on Small Mortgage Loans
- December 5 | Comments Due | EPA Greenhouse Gas Reduction Fund RFI
- December 9 | Comments Due to NCSHA | Indexing Methodology for Title I Manufactured Home Loan Limits
- December 19 | Comments Due | Indexing Methodology for Title I Manufactured Home Loan Limits
- January 11 | Application Deadline | FY22 Choice Neighborhoods Planning and Implementation Grants
NCSHA, State HFA, and Industry Events
- December 5 | Hotel Room Block Closes and Early Registration Discounts End | NCSHA’s HFA Institute 2023 | Washington, DC
- January 8 – 13 | NCSHA’s HFA Institute 2023 | Washington, DC
Back to NCSHA Washington Report
Only members receive NCSHA Blog and Washington Report.
