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NCSHA Washington Report | November 17, 2023

Published on November 17, 2023

Washington Report NCSHA

The new edition of NCSHA’s annual State HFA Factbook, along with recent analysis by the major bond rating agencies, provides a clear picture of how HFAs have continued to meet the affordable homeownership needs of their states in historically challenging market conditions.

Through diversified capital sources. We wrote a couple weeks ago that HFAs have responded to high interest rates in part by issuing more tax-exempt mortgage revenue bonds, which enable them to fund lower-cost mortgages, while still utilizing mortgage-backed securities as well.

HFAs also have dramatically increased their taxable bond issuance, which Moody’s Investors Service projects will reach $7 billion in 2023, up from $2.9 billion in 2022, and accounting for almost 25 percent of total HFA homeownership financing this year.

Using rigorous underwriting and targeted assistance. S&P Global Ratings reports HFA-backed mortgages have a rate of “serious delinquency” of 1.1 percent as of the second quarter of the year, “slightly lower than the 1.6% national rate for all loans … and significantly lower than the 3.7% Mortgage Bankers’ Association national rate for FHA loans.”

HFAs’ abilities to connect borrowers to mortgage forbearance and modification options through servicers and federal agencies, and to provide direct aid through the Homeowner Assistance Fund, are among the reasons.

With expanded down payment assistance. HFAs are providing more than $1 billion annually in down payment assistance, increasing the amounts per borrower in response to higher home prices. In 2022, state HFA DPA averaged roughly $10,400, compared to $7,200 in 2019, according to NCSHA’s State HFA Factbook. Eight in 10 HFA borrowers received DPA from the agencies in 2022.

Importantly, according to S&P, “in general asset quality hasn’t weakened as use of DPA programs has reached new highs.”

This current picture is consistent with longer-term trends that reflect HFAs’ remarkable resilience during a period that included a global pandemic, high inflation, and the unprecedented dynamic in which “the U.S. owner-occupied housing market is now experiencing both a mobility and an inventory crisis.” In the midst of it all, “HFA assets have increased by 17.3% and debt by 11.7% over the past five years,” according to Fitch Ratings’ annual deep-dive on HFA finances.

The share of homeowners who benefit from FHA insurance is often seen as a proxy for the lower-income and minority buyers, and indeed 56 percent of HFA home buyers had it in 2022. Yet the HFA buyers on average were significantly more likely to be low income and minority — and have much smaller mortgages — compared to FHA-insured borrowers overall.

While it’s undoubtedly the case that “HFAs are nimble and have an arsenal of tools to aid in volatile market conditions,” their stellar performance in the most challenging of times owes considerable thanks to the lenders and loan servicers, financial advisors, investment bankers and underwriters, counsel, developers, software and information systems providers, and others on which HFAs rely.

Most are also affiliate members of NCSHA, whose expertise and advice are of great value to us in our efforts to advocate for the agencies in Washington, DC. We thank them as well.
Stockton-Williams-Washington-Report

Stockton Williams | Executive Director

Washington Report will return December 1.

State HFA Emergency Housing Assistance

In This Issue

Senate Approves House-Passed Bill to Keep Government Funded into 2024
Late Wednesday, the Senate passed legislation to keep the federal government funded into 2024, averting a shutdown that would otherwise have occurred at midnight tonight. The so-called “laddered” continuing resolution (CR), which passed the Senate by a vote of 87–11 and earlier passed the House by a vote of 336–95, sets two new funding deadlines early in the new year: January 19 for several agencies, including the Department of Housing and Urban Development, and February 2 for the rest of the government. In addition to extending funding for federal agencies, the CR extends the authority of the National Flood Insurance Program through February 2.

IRS Issues 2024 Housing Credit, Private Activity Bond Volume Caps
Last week, the Internal Revenue Service published Revenue Procedure 2023-34 outlining the inflation adjustments for numerous federal tax provisions, including the amount of Housing Credit and Private Activity Bond (PAB) authority each state will receive next year. In 2024, state Housing Credit agencies will receive the greater of $2.90 per capita or $3,360,000, up from $2.75 per capita or $3,185,000 in 2023. The PAB cap for 2024 will be the greater of $125 per capita or $378,230,000, up from $120 per capita or $358,845,000 in 2023.

FHA Annual Report Highlights Agency’s Lending to Underserved Borrowers, Loss Mitigation Efforts
The Federal Housing Administration (FHA) Tuesday released its 2023 Annual Report to Congress. The report finds FHA continued to play a critical role in supporting home financing for first-time home buyers and other underserved borrowers in fiscal year 2023. Eighty-two percent of the home purchase mortgages FHA endorsed in FY23 went to first-time home buyers, compared to 48 percent for the market as a whole. Compared to other market participants, FHA served three times as many Black borrowers by share of its total forward mortgage insurance endorsements than the rest of the market and 1.5 times as many Hispanic borrowers. FHA’s serious delinquency rate at the end of FY23 was 3.93 percent, down from a peak of 11.9 percent in November 2020 and nearly identical to its level directly before the pandemic. The capital ratio for FHA’s Mutual Mortgage Insurance Fund, which funds FHA’s single-family forward and reverse mortgage programs, declined slightly to 10.5 percent but remains more than five times above its statutory minimum. More information is available in NCSHA’s blog.

FHFA Announces Lower Annual Multifamily Caps for Fannie Mae, Freddie Mac
The Federal Housing Finance Agency (FHFA) announced Tuesday the 2024 multifamily housing loan purchase caps for the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. The 2024 caps are $70 billion for each firm, down from $75 billion in 2023. FHFA is reducing the caps because it expects the multifamily mortgage market to contract slightly next year. As it has since 2020, FHFA also will require each GSE to devote at least half of its multifamily business in 2024 to affordable housing or other mission-driven activities. An appendix lists the various activities that count as mission driven, which once again include loans on properties financed by the Housing Credit. In addition, loans that preserve affordability at workforce housing properties subject to rent or income restrictions will not count toward the GSEs’ 2024 lending caps. FHFA released a fact sheet summarizing the new caps in more detail.

NCHSA in the News
Tax Credit Advisor, November 2023 edition, NCSHA’s Healthy Housing, Healthy Communities Initiative Builds Partnerships That Link Affordable Housing and Healthcare Sectors
Route Fifty, 11.9.23, A dispute over Amtrak funding derailed a vote on THUD

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