NCSHA Washington Report | November 3, 2023
Economists will untangle the various causes of the runup in home mortgage interest rates — inflation and its causes, the Fed’s rate-hiking response, the pullback from mortgage-backed securities (MBS) purchases by the Fed, GSEs, and big banks, to name three — for years to come. The immediate issue is what, if anything, can and will be done by federal policymakers to rein in runaway home financing costs.
The Mortgage Bankers Association, National Association of Realtors, and National Association of Home Builders said in an October 9 letter to Fed Chairman Jerome Powell that “ongoing market uncertainty about the Fed’s rate path is contributing to recent interest rate hikes and volatility.” They called on Powell to state publicly that the Fed “does not contemplate future rate hikes” and that it won’t sell any more of its MBS holdings “until and unless the housing finance market has stabilized and mortgage-to-Treasury spreads have normalized.”
This could be called the “do-no-(more)-harm” approach.
Scott Olson, executive director of the Community Home Lenders of America, which represents independent mortgage banks, and former MBA CEO and FHA commissioner David Stevens in a recent op-ed made “one simple request” of the Fed: “Step back in to buy long-term mortgages now.” (They also suggested the Treasury Department allow Fannie and Freddie to temporarily increase their mortgage holdings to boost MBS demand and push down mortgage loan rates.)
This could be seen as the “clean-up-after-your-mess” response.
On Wednesday, Powell announced the Fed would leave rates unchanged for now, while he “danced around questions” about future hikes, and said the Fed has no plans to stop reducing its bond holdings. Some, such as MBA chief economist Mike Fratantoni, see Powell’s pause as a prelude to a rate cut in the second quarter of next year.
In the here and now, HFAs have been responding to the higher rate environment in part by ramping up their issuance of tax-exempt mortgage revenue bonds (MRBs), which can deliver a significant advantage to borrowers in a market where the average 30-year rate has been above seven percent for three straight months.
In 2022, MRBs funded the majority of HFA-financed mortgages for the first time in a decade, according to NCSHA’s latest State HFA Factbook. A new report from Moody’s Investors Service estimates MRBs will account for 54 percent of the $29 billion in homeownership financing it projects from HFAs this year.
Nevertheless, HFAs, like other market participants, urgently need a better-functioning capital market for conventional mortgages. HFAs’ abilities to issue MBS, along with MRBs and taxable bonds, have made most of them significantly more impactful in their states than they otherwise could have been for the past decade, while broadening their borrower base and reducing risks in the balance sheets coming out of the Great Recession.
Even if you think eight percent mortgage rates aren’t necessarily “crazy,” all things considered, they’re bad news for the people HFAs serve.
Stockton Williams | Executive Director
State HFA Emergency Housing Assistance
In This Issue
- NCSHA Welcomes New Members
- Senate Passes THUD FY24 Funding Bill; House Action Delayed
- Members of Congress Urge Treasury to Clarify GSEs Are Not Tax-Exempt Controlled Entities
- HUD, HHS Launch Housing and Services Accelerator; HHS Issues Grants for Homeless-Focused Initiatives
- Administration Announces Initiatives to Address Artificial Intelligence
- HUD Issues Rule on Modernizing Housing Counseling Services
- HUD Announces FY23 Housing Counseling Training Funding Opportunity
- FHFA Report Finds GSEs Met 2022 Affordable Housing Goals, Duty-to-Serve Obligations
- CFPB Publishes Proposed Rule on Personal Financial Data Rights
- NCSHA in the News
- Looking Ahead
NCSHA Welcomes New Members
NCSHA welcomed these organizations as affiliate members in October: CoreLogic; Federal Home Loan Bank of Boston; Fidelity Investments; HomeFree-USA; Massachusetts Housing Partnership; and RealtyBid, a Covius Solution. If you work with a partner interested in becoming a member, please contact Phaedra Stoger.
Senate Passes THUD FY24 Funding Bill; House Action Delayed
On November 1, the Senate passed by an 82 to 15 margin with strong bipartisan support an appropriations package including the Transportation, Housing and Urban Development (THUD) bill, continuing efforts to finalize spending legislation before the end of the current continuing resolution on November 17. Among other priorities, the Senate THUD bill maintains level funding in Fiscal Year 2024 (FY24) for the HOME Investment Partnerships program and retains previously included language intended to resolve outstanding issues related to the Performance-Based Contract Administrator program.
Meanwhile, the House Rules Committee completed work on a rule to allow consideration on the floor of its version of THUD legislation, which would cut the HOME program by two-thirds to $500 million in FY24. While the full House began voting on a number of amendments to the bill on Thursday, disagreement over cuts to Amtrak led to a postponement in floor activity on the bill until next week at the earliest.
Members of Congress Urge Treasury to Clarify GSEs Are Not Tax-Exempt Controlled Entities
Twenty bipartisan members of the House of Representatives, including 11 members of the Ways and Means Committee, today sent Secretary Janet Yellen a letter urging the U.S. Department of Treasury to provide guidance clarifying that Fannie Mae and Freddie Mac are not tax-exempt controlled entities (TECEs). Questions about the tax status of the Government Sponsored Enterprises (GSEs) as it relates to the federal government’s conservatorship of the GSEs have raised concerns among Housing Credit investors who had invested through multi-investor funds that include Fannie Mae, leading to Fannie Mae’s withdrawal from all such funds in 2023 and its request to the Federal Housing Finance Agency last summer to alter its Duty-to-Serve Underserved Market Plan for 2022 – 24 to substantially reduce its commitment to investing in rural areas. TECEs and other investors in multi-investor funds that include a TECE are not entitled to certain tax benefits associated with Housing Credit investments. These multi-investor funds often play a substantial role in investments in rural properties, especially smaller rural deals, thus Fannie’s withdrawal from all multi-investor funds has consequences for such developments. (Freddie has limited its Housing Credit investments to proprietary funds since rejoining the equity market in 2018.)
A bipartisan group of Senators sent a similar letter to Yellen last June.
HUD, HHS Launch Housing and Services Accelerator; HHS Issues Grants for Homeless-Focused Initiatives
Yesterday, the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Health and Human Services (HHS) jointly announced a new Housing and Services Partnership Accelerator program to support states in developing and expanding housing-related supports and services for Medicaid-eligible people with disabilities and older adults who are experiencing or at risk of homelessness. HUD and HHS will choose four states to participate in the accelerator, each of which will assemble an interdisciplinary team for a 12-month learning collaborative focused on navigating payment models and rates, data integration and sharing, and other issues to advance collaboration and coordination, optimize resources, cover funding gaps, and align state and local policies. Participating teams will include the state Medicaid agency and state and community organizations focused on homelessness and housing, aging and disability, substance abuse, public health, and more. To apply, state teams must submit a letter of intent by November 15 and an application by December 1. HHS and HUD are hosting an information session on the accelerator on November 13 at 2:00 ET. Registration for this information session is required.
HHS also announced grant awards totaling $2.1 million to nine recipient organizations that will participate in its new Affordable Housing and Supportive Services Demonstration pilot program and awards totaling nearly $4 million for the Runaway and Homeless Youth program.
All three of these initiatives support the work of the U.S. Interagency Council on Homelessness (USICH), which brings together 19 federal agencies involved in federal homelessness strategy. Members of USICH this week elected HHS Secretary Xavier Becerra and U.S. Department of Agriculture Secretary Tom Vilsack as chair and vice chair, respectively; each will serve for a one-year term.
Administration Announces Initiatives to Address Artificial Intelligence
On Monday, President Biden issued the Executive Order on Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence. This wide-ranging executive order seeks to establish new standards for artificial intelligence (AI) safety and security, protect Americans’ privacy, and advance equity and civil rights. Relating to housing and housing finance, the executive order encourages the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB) to require the entities they regulate to use appropriate methodologies, including AI tools, to ensure compliance with federal law; evaluate their underwriting models for bias or disparities affecting protected groups; and assess automated collateral valuation and appraisal processes in ways that minimize bias.
Further, the executive order directs HUD and the CFPB to issue guidance on the use of tenant screening systems to facilitate compliance with certain laws, including the Fair Housing Act and the Fair Credit Reporting Act, and how the use of data, such as criminal records, eviction records, and credit information, can lead to discriminatory outcomes in violation of federal law. It further directs HUD and CFPB to issue guidance clarifying how the Consumer Financial Protection Act of 2010 and the Equal Credit Opportunity Act apply to the advertising of housing, credit, and other real estate-related transactions through digital platforms and directs the Treasury Secretary to issue a public report on best practices for financial institutions to manage AI-specific cybersecurity risks.
HUD Issues Rule on Modernizing Housing Counseling Services
Last week, HUD published a proposed rule that would amend the current requirements governing the use of technology for the delivery of housing counseling services. Prior to a temporary waiver issued during the Covid-19 pandemic, HUD-approved housing counseling agencies were required to provide in-person counseling. The temporary waiver allowed counseling agencies to conduct counseling via video conferencing technology in lieu of meeting in person. The waiver is set to expire after December 31, requiring counseling agencies to return exclusively to in-person counseling. The proposed rule would allow agencies to continue to use technology to provide housing counseling services to their clients as long as they offer in-person counseling upon request or refer the client to another agency capable of accommodating the client’s preference. HUD is accepting comments on the proposed rule through December 26. To inform NCSHA’s comments, please send feedback to Glenn Gallo by December 11.
HUD Announces FY23 Housing Counseling Training Funding Opportunity
On October 31, HUD’s Office of Housing Counseling published a notice of funding opportunity for its Housing Counseling Training Grant Program. HUD is making $2.75 million available in this round of funding for qualified nonprofit organizations to help support the training of housing counselors. Organizations applying for this funding are not required to be HUD-approved housing counseling agencies. HUD will hold a webinar on November 14 at 1:00 p.m. ET to provide more information about the funding opportunity and review the application process. Applications are due to HUD by midnight on November 29.
FHFA Report Finds GSEs Met 2022 Affordable Housing Goals, Duty-to-Serve Obligations
FHFA Monday released its 2023 Annual Housing Report outlining Fannie Mae and Freddie Mac’s affordable housing activities in 2022 and evaluating whether they met their affordable housing obligations. FHFA has determined Fannie Mae and Freddie Mac met their single-family and multifamily affordable housing goals for 2022. The report includes data on the loan characteristics of single-family mortgages purchased by Fannie Mae and Freddie Mac in 2021 and 2022 compared to the market as a whole. The data shows the firms’ support for home purchase loans for low- and moderate-income home buyers slightly exceeded the larger market in those years. FHFA also has determined Fannie Mae and Freddie Mac met their obligations under the Duty-to-Serve Underserved Markets rule in 2022 but notes some areas where both firms could improve. Fannie Mae and Freddie Mac exceeded their 2022 targets for Housing Credit investments for properties in rural areas and for equity investments in Housing Credit properties. In total, Fannie Mae and Freddie Mac made 887 Housing Credit investments in 2022, including investments in 95 rural properties.
CFPB Publishes Proposed Rule on Personal Financial Data Rights
On Tuesday, CFPB issued a proposed rule to implement personal financial data rights under the Consumer Financial Protection Act of 2010. The proposed rule would require depositories and non-depository entities to make available to consumers and authorized third parties certain data relating to consumers’ transactions and accounts; establish obligations for third parties accessing a consumer’s data, including important privacy protections for that data; and provide basic standards for data access. Comments on this proposed rule are due to the CFPB by December 29.
NCSHA in the News
Affordable Housing Finance, 10.31.23, NCSHA Updates Recommended Practices for Housing Credit Administration
Brunswick Times-Gazette, 10.31.23, Virginia Housing announces appointment of Interim CEO
Notes from Novogradac, 10.31.23, NCSHA Revises and Expands LIHTC Recommended Practices
Delaware Business Times, 10.26.31, DSHA receives national recognition for affordable rental housing program
USA Today, 10.25.31, What is a good down payment for a house?
Legislative and Regulatory Activities
- November 14 – 15 | Federal Housing Finance Agency’s Property Insurance Symposium
- November 15 | Letters of Intent Due | HUD-HHS Housing and Services Partnership Accelerator
- November 16 | CDFI Fund Webinar on New Markets Tax Credits
- November 29 | Applications Due | HUD Housing Counseling Training Funding Opportunity
- December 1 | Applications Due | HUD-HHS Housing and Services Partnership Accelerator
- December 11 | Comments Due to NCSHA | HUD Housing Counseling Services Proposed Rule
- December 26 | Comments Due | HUD Housing Counseling Services Proposed Rule
NCSHA, State HFA, and Industry Events
- November 7 – 8 | ProLink Technology Live 2023 | Virtual
Stockton Williams is speaking at this event. - November 16 – 17 | National Association of Home Builders Mortgage Roundtable | New York, NY
Stockton Williams is participating in this event. - December 13, 12:00 p.m. – 5:30 p.m. ET | NCSHA’s AI and Affordable Housing: A National Symposium | Virtual
