NCSHA Washington Report | February 24, 2023

What’s old is new again, sometimes, in housing finance. Allowing renters to improve their credit scores based on their timely rent payments is a timely example.

As Michael Stegman and Kelly Thompson Cochran wrote last year: “Rental payment history — an intuitive indicator of how well someone can pay a mortgage — used to be a significant factor in underwriting first-time home buyers. But this practice waned when automated underwriting systems were adopted in the 1990s.”

Today though, there’s a highly competitive business climate and gradually evolving policy environment to give renters more opportunities to build credit.

On the business front, “several current trends have combined to give the strategy momentum, including an urgent need to grow purchase volume, increased use of consumer-authorized digital banking information, evolution in underwriting and credit scoring and the proliferation of credit-building and rent services fintechs,” according to National Mortgage News.

There are more than a dozen said fintechs, some of which market directly to renters and others that target landlords. One of the earliest and largest is Esusu, founded in 2018 by Samir Goel and Wemimo Abbey, which last year became one of only a few Black-owned startups to reach a valuation of $1 billion, Bloomberg reported.

Last December, the Ohio Housing Finance Agency announced a pilot program with Esusu. Executive Director Shawn Smith crystalized the value proposition for his agency: “A strong credit score opens doors for Ohio families, such as lower interest rates and more credit options. And over the long term, a strong credit score can help renters realize their dream of homeownership as well as improve their economic mobility in the future.”

You can hear from Shawn and Samir about their partnership during NCSHA’s virtual symposium on racial equity in the housing system next week.

Policy is still playing catch-up with innovation. Another Urban Institute analysis, from last December, noted that, while Fannie and Freddie’s moves to reflect rental payment history have had “promising early results,” the new capital framework for the companies promulgated by the regulator, the Federal Housing Finance Agency, “discourages expanding the use of rental payment history.”

The Federal Housing Administration announced last September that it would consider “positive rental payment history” in evaluating an applicant’s creditworthiness for an FHA-insured mortgage. Yet an executive at one large FHA lender suggests that, since “the underwriting process is still technically a manual process,” the agency’s technology will need to evolve.

Industry players and policymakers are also wrestling with the challenges of ensuring a return to rental payment reporting doesn’t end up inadvertently penalizing a would-be borrower for a small-scale negative event, like a lone late payment or landlord error.

These challenges are worth trying to solve. Freddie Mac recently reported that, among the first 100,000 enrolled in its renter credit building program, two-thirds saw their credit scores improve. The potential exists (again), as Michael Stegman writes, for rent reporting, “with thoughtful development, to create a more inclusive mortgage approval system that makes homeownership possible for more people.”

Stockton Williams | Executive Director

State HFA Emergency Housing Assistance

In This Issue

• NCSHA Welcomes New Members
• FHA Cuts Single-Family Annual Mortgage Insurance Premium
• HUD Meets with HFAs, NCSHA, Others on Section 811 Program
• NCSHA Signs Letter Expressing Concerns with Financial Data Transparency Act
• HUD Issues Update on Build America, Buy America Policy
• FHFA Proposes Changes to GSE Capital Requirements
• NCSHA in the News
• Looking Ahead

NCSHA Welcomes New Members
These organizations joined NCSHA as affiliate members in January and February: Abt Associates Inc., CliftonLarsonAllen LLP, Nebraska Department of Economic Development, The NRP Group, and Raza Development Fund. If you work with a partner interested in becoming a member, please contact Phaedra Stoger.

FHA Cuts Single-Family Annual Mortgage Insurance Premium
The White House announced Wednesday the U.S. Department of Housing and Urban Development (HUD) would lower annual single-family mortgage insurance premiums for Federal Housing Administration-insured home purchase loans. A mortgagee letter FHA released Wednesday morning explained that FHA will reduce the annual mortgage insurance premium from .85 to .55 percent for most borrowers, effective for loans endorsed on or after March 20. The administration estimates 850,000 home buyers and homeowners will benefit from the lower premiums in 2023.

In a statement, NCSHA commended the administration for this move. Vice President Kamala Harris held an event Wednesday with housing leaders at Bowie State University in Maryland to discuss the fee reduction, attended by NCSHA Director of Housing Advocacy and Strategic Initiatives Garth Rieman and other housing group representatives at the White House’s invitation. For more information, see NCSHA’s blog.

HUD Meets with HFAs, NCSHA, Others on Section 811 Program
On Wednesday, NCSHA joined disability rights advocates, HFAs, property developers, and other federal stakeholders for a listening session at HUD headquarters to discuss a variety of topics related to the Section 811 Supportive Housing for Persons with Disabilities Program, which provides funding to develop and subsidize rental housing with supportive services available for very low- and extremely low-income adults with disabilities. The Consolidated Appropriations Act for fiscal year 2023 provided HUD with an additional $148.3 million in capital advance and Project Rental Assistance (PRA) funds for the Section 811 program, and HUD convened the listening session to inform its development of a notice of funding opportunity to deploy these resources.

During the session, disability rights advocates described the unique challenges individuals living with a disability face in finding affordable housing that provides the necessary supportive services to allow them to thrive in their communities. HFAs in attendance explained their experiences as grantees for funding under the Section 811 PRA program, which requires the HFAs to partner with other state agencies to provide case management and supportive services for residents of Section 811 units. Developers present identified a number of factors that go into their decision-making about whether to develop Section 811 properties, including preferences in some states’ qualified allocation plans for Housing Credit allocations. Civil rights attorneys from the Department of Justice articulated states’ obligations under the landmark Olmstead case, which held that segregation of individuals with disabilities is illegal under the Americans with Disabilities Act and public entities must endeavor to provide community-based services to persons with disabilities when appropriate. Representatives from the Centers for Medicare and Medicaid Services described the unique role state Medicaid programs often play in the Section 811 program’s successful administration.

NCSHA Signs Letter Expressing Concerns with Financial Data Transparency Act
Organizations in the Public Finance Network, composed of groups representing state and local governments, governmental entities, authorities, and other municipal securities issuers and including NCSHA, the National Governors Association, and the Government Finance Officers Association, sent a February 21 letter to Treasury Secretary Janet Yellen and Securities and Exchange Commission Chairman Gary Gensler to express concerns about the recently enacted Financial Data Transparency Act (FDTA) of 2022. This law requires federal agencies and regulators to develop machine-readable data standards for municipal securities issuers and will affect the way they prepare their financial statements and submit information to the Municipal Securities Rulemaking Board.

The letter explains that issuer financial statements are often complex and may present financial information that differs from others depending on the type of entity preparing the statement as well as the variability of applicable state laws and practices. The letter asks Treasury and the SEC to work with municipal issuer groups to gather input as they engage in rulemaking to develop standards under the FDTA.

HUD Issues Update on Build America, Buy America Policy
On February 15, HUD issued a proposed Public Interest Phased Implementation Waiver for how Build America, Buy America (BABA) provisions will apply to projects supported by HUD Federal Financial Assistance (FFA). In addition to extending the previous waiver issued by HUD on November 23, which was set to expire on February 21, the new proposed waiver includes a proposed implementation timeline for various HUD FFA programs across a variety of product categories, summarized in a table on pages 7 and 8 of the proposed waiver. NCSHA previously signed a letter asking HUD to explicitly exempt affordable housing programs from BABA requirements. While HUD has not indicated a willingness to do so in its newest waiver, the timeline provides continued relief until 2024 at the earliest for the HOME and Housing Trust Fund programs. The deadline to comment on HUD’s proposed waiver is March 3.

Separately, the Office of Management and Budget (OMB) issued its own proposed rule seeking input from interested stakeholders on the appropriate definitions for products in the categories referenced above. The deadline to comment on OMB’s proposed rule is March 13.

FHFA Proposes Changes to GSE Capital Requirements 
The Federal Housing Finance Agency (FHFA) Thursday proposed several modifications to its Enterprise Regulatory Capital Framework for Fannie Mae and Freddie Mac (the Enterprises). The framework, which was finalized in 2020, requires the Enterprises to hold specific levels of capital for the various assets they have on their books. The proposed changes could make it easier for the Enterprises to support affordable housing by reducing some of the capital requirements, including lowering by 40 percent the risk multiplier for multifamily mortgages that include subsidies from government affordable housing programs; changing how the Enterprises determine the median credit score for a single-family mortgage in a manner that will result in more households being assigned higher credit scores and lowering the mortgage capital requirements; and reducing the risk weighting for comingled mortgage securities that include loans guaranteed by both Fannie Mae and Freddie Mac. FHFA is seeking comments for 60 days after the proposed rule is published in the Federal Register, which should be soon. Contact Greg Zagorski by April 7 with any input you would like NCSHA to consider as it drafts comments on behalf of all HFAs.

NCSHA in the News
Bankrate.com, 2.20.23, ​​The housing gender gap: Why women still face roadblocks in homeownership, home equity and home values

Looking Ahead…

Legislative and Regulatory Activities

• March 3 | Comments Due | DOE Request for Information on IRA Home Energy-Efficiency Rebate Programs
• March 3 | Comments Due | HUD Proposed Public Interest Phased Implementation BABA Waiver
• March 3 | Comments Due to NCSHA | OMB Proposed Rule on Build America, Buy America
• March 10 | Comments Due to NCSHA | Affirmatively Furthering Fair Housing Proposed Rule
• March 13 | Comments Due | OMB Proposed Rule on Build America, Buy America
• March 14 | Application Deadline | HUD Notice of Funding Opportunity for Addressing Lead-Based Paint and Other Housing-Related Hazards
• March 14 | Comments Due | Joint HHS HUD Proposed Rule on Partnerships with Faith-Based and Neighborhood Organizations
• March 20 | Comments Due to NCSHA | HUD Advanced Notice of Proposed Rulemaking on Section 8 Program Regulations Standardization
• March 24 | Comments Due to NCSHA | USDA Proposed Rule on Section 538 Guaranteed Rural Rental Housing Program
• March 28 | Application Deadline | Community Compass Technical Assistance and Capacity Building Program
• March 28 | FHFA Listening Session: Enterprise Single Family Social Bond Program Policy
• April 3 | Comments Due to NCSHA | FHFA RFI on Enterprise Single-Family Social Bond Program
• April 3 | Comments Due | HUD Advanced Notice of Proposed Rulemaking on Section 8 Program Regulations Standardization
• April 3 | Comments Due | USDA Proposed Rule on Section 538 Guaranteed Rural Rental Housing Program
• April 7 | Comments Due to NCSHA | FHFA Proposed Changes to GSE Capital Requirements
• April 7 | Comments Due to NCSHA | HUD RFI on HUD’s 203(k) Rehabilitation Program
• April 10 | Comments Due | Affirmatively Furthering Fair Housing Proposed Rule
• April 17 | Comments Due | FHFA RFI on Enterprise Single-Family Social Bond Program
• April 17 | Comments Due | HUD RFI on HUD’s 203(k) Rehabilitation Program

NCSHA, State HFA, and Industry Events

• February 28 | Noon – 5:45 p.m. ET | NCSHA’s Toward a Racially Just Housing System: Continuing Steps | Virtual
• February 28 | SAHF Webinar: Tools & Approaches for Resident-Centered Outcomes Measurement in Affordable Housing
• March 1 | Discounts End on Early Registration, Hotel Rates for NCSHA’s 2023 Legislative Conference
• March 6 – 9 | NH&RA Annual Meeting | Bonita Springs, FL
  Stockton Williams will speak at this event.
• March 8 – 10 | National Affordable Housing Management Association’s Biannual Top Issues in Affordable Housing Conference | Washington, DC
  Stockton Williams and Jennifer Schwartz will speak at this event.
• March 15 | National Housing Conference’s Solutions for Housing Communications | Washington, DC
  Stockton Williams will speak at this event.
• March 27 – 29 | NCSHA’s 2023 Legislative Conference | Washington, DC
• March 30 | National Community Reinvestment Coalition Just Economy Conference 2023 | Washington, DC
  Garth Rieman will speak at this event.
• April 12 | E&A Team’s Annual Accessibility Summit | Virtual
  Jim Tassos will speak at this event.
• April 17 – 19 | Nebraska Investment Finance Authority’s 2023 Annual Conference | Lincoln, NE
  Jennifer Schwartz will speak at this event.
• April 25 – 27 | Affordable Housing Investors Council’s 2023 Spring Meeting | Baltimore, MD
  Stockton Williams will speak at this event.

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