Washington Report | May 18, 2018
Representatives of HFAs active with Fannie Mae and Freddie Mac were in Washington this week discussing key business issues and new opportunities with these longtime and increasingly important partners. More than 40 HFAs are delivering financing through Fannie Mae HFA Preferred Products, which have generated $25 billion in lending to fund more than 184,000 home mortgages. HFA business with Freddie Mac is at a smaller scale but growing.
The foundation of HFA-GSE relationships is a shared commitment to safe and sound affordable housing lending that fills gaps in the market. This week’s discussions illuminated emerging areas of collaboration in expanding access to credit, generating new housing supply, and achieving efficiencies where feasible through more standardized approaches. HFAs’ abilities to do more for and with the GSEs depends on partnership parameters that work for both parties — and a policy and regulatory environment that supports their collaboration.
It has been almost a decade since the U.S Treasury Department announced that Fannie and Freddie would be placed under the “temporary” conservatorship of the Federal Housing Finance Agency, and it looks like another Congress will conclude without passing legislation to revamp the housing finance system. Yet two of the most insightful industry observers suggest that mortgage market regulatory changes could come as soon as next year, regardless of whether Congress acts. In a new paper, Mark Zandi and Jim Parrott assert, “With a new director of the FHFA next year, we are likely to see a meaningful shift in the role of Fannie Mae and Freddie Mac.”
Zandi and Parrott refer to the fact that the term of FHFA Director Mel Watt, who was nominated by President Obama and confirmed by the Senate in 2013, ends December 31, 2018. The Administration’s appointment of Watt’s successor will be one of its most consequential housing policy decisions, as the FHFA director has the authority to substantially shape the role Fannie and Freddie play in affordable housing.
Treasury Secretary Mnuchin, testifying in February before the House Financial Services Committee, confirmed in answers to questions from Committee Chairman Jeb Hensarling (R-TX) that the FHFA director can, for example, choose not to enforce the GSEs’ statutory affordable housing goals, suspend all GSE contributions to the Housing Trust Fund, and discontinue the Home Affordable Refinance Program.
Alternatively, the FHFA director can authorize what NCSHA is advocating: new HFA-GSE solutions to emerging market needs, supported by the FHFA’s own stated understanding in the agency’s 2014 Strategic Plan that “HFAs have historically provided access to credit and lower down payment lending for lower- and moderate-income families and have proven, strong performance records.”
In both the legislative and regulatory environments, the HFA value proposition in the housing finance system as a preferred, advantaged partner of the GSEs — based on a common mission and demonstrable lending performance — must be constantly protected, forcefully articulated, and strategically advanced.
Stockton Williams | Executive Director
In This Issue
- Study Documents Superior Lending Performance of State HFAs
- NCSHA Participates in Fannie Mae and FHFA Work Sessions
- House Appropriations Subcommittee Approves HUD FY 2019 Funding Bill
- Representatives Duffy and Cleaver Introduce Voucher Mobility Demonstration Bill
- House Committee Discusses Opportunity Zones
- Administration Nominates Michael Bright to Be Ginnie Mae President
- Congressional Briefing Focuses on Housing as Infrastructure
- CohnReznick Finds Housing Credit Property Performance High and Improving
- Terner Center Study Finds Economic Mobility, Educational Success for Housing Credit Tenants
- Looking Ahead
Single-family loans originated through state HFA programs perform substantially better than similar loans to low- and moderate-income (LMI) borrowers, according to a major study released yesterday.
The study examines data on more than 1 million Fannie Mae-guaranteed loans to first-time LMI homebuyers from 2005 to 2014, around 10 percent of which were originated through HFA programs. Overall, HFA loans were 20 percent less likely to experience a long-term default, and 30 percent less likely to be foreclosed.
The paper attributes this strong performance, in large part, to HFAs’ high-touch mortgage servicing practices and homeownership counseling. It credits HFAs with serving lower income borrowers than the conventional market and suggests that HFA programs offer Fannie Mae a way to meet its affordable housing goals without compromising the quality of its portfolio. The authors have published a commentary summarizing their findings on Fannie Mae’s website.
Fannie Mae this week held its 8th annual “HFA Training Summit” for HFAs who partner with Fannie Mae to support affordable homeownership. NCSHA’s Stockton Williams delivered remarks stressing the importance and impacts of the HFA-Fannie Mae relationship. Stockton, along with NCSHA’s Garth Rieman and Greg Zagorski, joined staff from 26 HFAs, local agencies, and HFA industry partners for a series of sessions focusing on the most pressing topics facing HFA homeownership programs, including the shortage of affordable single-family inventory, digitized mortgage lending, and HFA-lender relationships.
Stockton, Garth, and Greg also participated in a session convened by the Federal Housing Finance Agency to explore ways that HFAs, mortgage loan originators, and the GSEs can optimize lending processes and procedures.
The House HUD Appropriations Subcommittee on May 16 approved its Fiscal Year (FY) 2019 funding bill, which provides $43.6 billion in total net discretionary spending for HUD programs, $941 million more than the FY 2018 enacted level and $11.9 billion more than the Administration’s FY 2019 budget request.
While maintaining most of the funding increases enacted in FY 2018, the FY 2019 bill would fund the HOME Investment Partnerships program (HOME) at $1.2 billion, $162 million less than FY 2018. The bill provides increases for both Section 8 project-based rental assistance and voucher programs, but not as much as some experts say is necessary to fully fund expected contract renewal costs. During the markup, Subcommittee Chairman Mario Diaz-Balart (R-FL) noted though that while the bill’s overall funding level was higher than in FY 2018, the HUD budget needs on average $1 billion more a year just to renew expiring rental assistance contracts, leaving less funds for other programs. More information is in NCSHA’s blog.
On May 16, House Financial Services Housing & Insurance Subcommittee Chairman Sean Duffy (R-WI) and Ranking Member Emanuel Cleaver (D-MO) introduced the Housing Choice Voucher Mobility Demonstration Act of 2018, HR 5793. The bill would authorize HUD to competitively select interested PHAs to participate in a demonstration through which they would encourage Section 8 Housing Choice Voucher recipients to move to lower poverty neighborhoods to expand access to opportunity areas.
Interested PHAs would be required to submit a “Regional Housing Mobility Plan” that would identify: the number of PHAs participating, the number of vouchers each PHA would make available for the demonstration program out of their existing programs, the community-based organizations and businesses that will participate and their commitment, required waivers for the execution of the Plan, specific actions to accomplish the goals, and criteria to identify areas of opportunity.
On May 17, the congressional Joint Economic Committee (JEC) held a hearing to consider how Opportunity Zones can help low-income communities. Witnesses at the hearing included John Lettieri, Co-Founder and President of Economic Innovation Group (EIG); Terri Ludwig, CEO of Enterprise Community Partners; and Maurice Jones, President and CEO of Local Initiatives Support Corporation (LISC). Ludwig and Jones focused on the need for federal guidance and oversight. Letteri emphasized the need for flexibility and nationwide applicability to, “unlock the vast creativity and problem-solving potential of communities and the marketplace in ways that would not be possible under a more prescriptive policy framework.”
On May 15, the Trump Administration announced its nomination of Michael Bright to serve as the President of the Government National Mortgage Association (Ginnie Mae). Bright is currently Acting President, Executive Vice President, and Chief Operating Officer of Ginnie Mae and has been with the organization since July 2017. Prior to joining Ginnie Mae, Bright served as a senior financial policy advisor to Senate Banking Committee member Bob Corker (R-TN) when Corker was drafting and working on the Corker-Warner GSE reform bill. Bright also worked at the Milken Institute, BlackRock, the Office of the Comptroller of Currency, and other mortgage companies.
Bright has participated in NCSHA conferences in the past, including the most recent HFA Institute. NCSHA met with Bright last year after he began work at Ginnie Mae. We expect the Senate Banking Committee to hold a nomination hearing for Bright soon.
On May 15, the National Association for County Community and Economic Development (NACCED), with support from the Campaign for Housing and Community Development Funding (CHCDF), held a congressional briefing titled “Housing is Infrastructure.” The briefing was the first official Infrastructure Week event dedicated to exploring the critical role affordable housing programs play in meeting infrastructure needs across the country. Panelists highlighted the economic impact of key affordable housing programs and urged Congress to support them, including passing the Affordable Housing Credit Improvement Act, H.R. 1661 and S.B. 548.
A recent CohnReznick study finds that Low Income Housing Tax Credit (Housing Credit) properties are operating more successfully than in any other period during the program’s history. Based on data from more than 22,000 Housing Credit properties, 33 Housing Credit syndicators, and two of the nation’s largest institutional investors, the report demonstrates that the cumulative foreclosure rate was well below 1 percent, physical occupancy is 97.9 percent, and debt coverage ratios are higher than in 2008. The report also states that per-unit cash flow has dramatically increased since 2008, but to put that in perspective, the total sum of positive cash flow per property is less than $55,000 per year.
Living in Housing Credit properties helps residents achieve greater economic mobility, improved educational performance among children, and generally higher quality neighborhoods, according to a new report published by U.C. Berkeley’s Terner Center for Housing Innovations. The report, based on more than 250 resident surveys across 18 California Housing Credit properties, found that almost 60 percent of working-age Housing Credit residents were employed, with the vast majority of those unemployed either in school or a stay-at-home parent, retired, or disabled. A majority of respondents attributed being able to pursue further education and their children’s school success to the housing stability the Housing Credit properties provide.
- May 21 | Early Discounted Registration and Hotel Cutoff | Housing Credit Connect
- June 15, Midnight ET | Entry Deadline | Annual Awards for Program Excellence
- June 19 – 22 | Housing Credit Connect | Chicago, IL
- May 22 | HUD Housing Counseling Federal Advisory Committee Public Meeting (Teleconference)
- June 12 | Financial Services Roundtable Housing Policy Council
Stockton Williams is speaking at this annual meeting.
- June 13 | 2018 Affordable Housing Tax Credit Coalition Spring Meeting
Jennifer Schwartz is a panelist during the Legislative Update.
- June 15 | National Housing Conference Annual Policy Symposium 2018
Legislative and Regulatory Activity
- May 21 – 25, TBD | Markup of the FY 2019 HUD appropriations bill | House Appropriations Committee
- May 22, 10:00 a.m. ET | Hearing to examine the Hardest Hit Fund | House Oversight and Government Reform Subcommittees on Intergovernmental Affairs and Government Operations
Witnesses include representatives from the U.S. Department of the Treasury, Special Inspector General for the Troubled Asset Relief Program, Alabama Housing Finance Authority, North Carolina Housing Finance Agency, and Nevada Affordable Housing Assistance Corporation.
- May 23, 10:00 a.m. ET | Hearing on “Ten Years of Conservatorship: The Status of the Housing Finance System” | Senate Banking Committee
- June 1 | Submit comments to NCSHA on Recommendations for the Treasury/IRS 2018 – 2019 Priority Guidance Plan
- June 4 – 8, TBD | Markup of the FY 2019 HUD appropriations bill | Senate HUD Appropriations Subcommittee