Federal Housing News
July 11, 2014
NATIONAL HOUSING TRUST FUND
New Housing Finance Reform Measure Introduced in House, Funding for NHTF Included
Representatives John Delaney (D-MD), John Carney (D-DE), and Jim Himes (D-CT) introduced H.R. 5055, the Partnership to Strengthen Homeownership Act, on July 10. The bill is the third major housing finance reform proposal by Members of Congress this year. Like the Johnson-Crapo bill (see Memo, 5/16) and House Committee on Financial Services Ranking Member Maxine Waters’ draft Housing Opportunities Move the Economy (HOME) Forward Act (see Memo, 3/28), H.R. 5055 provides for substantial funding for the NHTF.
Just as other proposals being considered in the House and Senate, the bill would wind down the government sponsored enterprises Fannie Mae and Freddie Mac. The bill would create a mortgage insurance program run through the Government National Mortgage Association (Ginnie Mae), a government-owned corporation housed at HUD. The bill would provide a full government guarantee on qualifying mortgage securities backed by mortgages that meet certain eligibility criteria. As proposed, private capital would have a minimum 5% first-loss risk position. The remaining risk would be split between Ginnie Mae and private reinsurers.
Under the bill, in return for insuring securities, Ginnie Mae would charge a fee of 10 basis points on the total principal balance of insured mortgages. The bill would apply 75% of this fee revenue to the National Housing Trust Fund (NHTF), 15% to the Capital Magnet Fund, and 10% to a new Market Access Fund. This is identical to what the Johnson-Crapo and Waters bills do for the NHTF. However, unlike other the other bills, H.R. 5055 adds FHA mortgages in the determining the base upon which the 10 basis point fee is assessed. Thus, the overall fund would be valued at $6 billion a year, $1 billion more than the amount provided in the other bills. The amount going to the NHTF would be $4.5 billion.
NLIHC and the NHTF campaign are pleased with the strong support for the NHTF in H.R. 5055, as well as in the Johnson-Crapo and Waters measures. NLIHC President and CEO Sheila Crowley said in a letter to the sponsors of H.R. 5055, “I want to thank you for creating a robust dedicated source of revenue for the National Housing Trust Fund (NHTF) in the Partnership to Strengthen Home Ownership Act. We are grateful for your strong support of the NHTF and your prioritization of the housing needs of very poor people.”
H.R. 5055 would also add oversight provisions if contributions to the NHTF must be temporarily suspended. Under the current statute that governs the NHTF, the Federal Housing Finance Agency (FHFA) can “temporarily” suspend contributions to the NHTF if the contributions would lead to financial instability of Fannie Mae and Freddie Mac, but there is no requirement that suspension be reconsidered at any point. This has resulted in the nearly six year suspension of their obligation to fund the NHTF.
H.R. 5055 has more stringent suspension language, specifying that contributions can be suspended for one year upon the submission of a written determination from the Ginnie Mae Director to the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs. A suspension of funds could be extended for additional one-year periods, provided that for each requested extension, the Ginnie Mae Director provides information to the House and Senate demonstrating that suspension is still necessary.
The bill, like the Johnson-Crapo bill, would create a tribal set-aside within the NHTF of the greater of $20 million or 2% of the total amount provided to the NHTF. It would also increase the NHTF small state minimum to the greater of $10 million or 1% of the amount of NHTF provided to states.
A fourth housing finance reform bill, the Protecting American Taxpayers and Homeowners (PATH) Act, introduced by House Committee on Financial Services Chair Jeb Hensarling (D-TX) in 2013, would largely privatize the housing finance system and abolish the NHTF. While the measure has advanced through the Financial Services Committee last year, it is not expected to be considered by the full House of Representatives before the end of the 113th Congress.
H.R. 5055 has nine original cosponsors, all Democrats. They are Representatives Bill Foster (IL), Danny Heck (WA), Gregory Meeks (NY), Patrick Murphy (FL), William Owens (NY), Jared Polis (CO), Mike Quigley (IL), David Scott (GA), Kristen Sinema (AZ) and Peter Welch (VT). The bill has been referred to the House Committee on Financial Services.
The text of H.R. 5055 is at: http://bit.ly/1jI2Y9L
NLIHC’s letter is at: http://bit.ly/1qa2Rq4
Castro and Donovan Nominations Approved by Senate
On July 9, the Senate approved the nomination of San Antonio Mayor Julián Castro for the position of HUD Secretary by a vote of 71-26, with all Democrats and 18 Republicans voting in support of his nomination. Mayor Castro was nominated for the position after current HUD Secretary Shaun Donovan was tapped for the position of Office of Management and Budget (OMB) Director.
On July 10, the Senate approved the nomination of Secretary Donovan for the position of OMB Director by a vote of 75-22, again with all Democrats and with 23 Republicans voting in favor of Mr. Donovan. Mr. Donovan will replace former OMB Director Sylvia Mathews Burwell who now serves as Secretary of the Department of Health and Human Services.
Both Mayor Castro and Secretary Donovan are expected to be sworn in to their new positions shortly.
NLIHC President and CEO Sheila Crowley said in a press release after the vote, “While we are sorry to lose Shaun Donovan at HUD, we look forward to working with him at OMB and to building an equally strong partnership with Secretary Castro. I am confident that Secretary Castro will emphasize HUD’s responsibilities for assuring that the housing needs of low income people are addressed.”
Ms. Crowley added, “Secretary Donovan and the Obama Administration have advocated for the funding of the National Housing Trust Fund, and we hope that Secretary Castro will carry on that support. Specifically, we urge him to push for housing finance reform that provides significant funding for the National Housing Trust Fund as does the bipartisan Johnson-Crapo bill. We also urge Secretary Castro to move swiftly to issue the final regulations for the National Housing Trust Fund.”
Ms. Crowley also encouraged Mayor Castro to issue final regulations on Affirmatively Furthering Fair Housing, and to protect existing housing programs funded through the annual appropriations process.
The NLIHC press release is at: http://nlihc.org/press/releases/4913
Proposed Rule Would Create New Type of PHA Consortium
On July 11, HUD’s Office of Public and Indian Housing (PIH) published a proposed rule that would create an additional type of consortium for public housing agencies (PHAs). The proposal would allow two or more PHAs to join to carry out the planning, reporting, and other administrative and management functions of the Housing Choice Voucher (HCV) program. This new type of consortium would be called a “single-Annual Contributions Contract consortium,” or “single-ACC consortium.” An ACC is the contract between HUD and a PHA setting out the terms and conditions under which HUD funds the PHA. The single-ACC consortium would become a separate legal entity, considered a single PHA with a single jurisdiction and a single set of reporting requirements for the purpose of the HCV program.
The proposed rule states two primary goals for single-ACC consortia: increased administrative efficiency and increased resident choice in locating housing in a broader geographic area, without the administrative burden entailed when a resident seeks to move from one PHA jurisdiction to another, known as voucher portability.
As proposed, a single-ACC consortium’s jurisdiction would include the jurisdictions of each of its member PHAs. Jurisdiction boundaries between members would no longer exist. A consortium would be required to prepare and submit a single 5-Year PHA Plan and Annual Plans. That PHA Plan must establish a single set of policies. Individual PHAs would not be required to also submit individual PHA Plans.
HUD anticipates greater administrative efficiency because there would be one set of reporting and audit requirements, consolidated operations, a centralized waiting list, and a single set of policies and procedures. According to the preamble, PHAs could choose to form a consortium advisory board or other mechanisms to provide for a greater level of local control.
The proposed rule requires PHAs to remain in a consortium for at least five years. After that period, a PHA could decide to withdraw from the consortium, or the consortium could choose to dissolve.
PHAs participating in the Moving to Work (MTW) demonstration are not allowed to form or join a consortium.
Section 13 of the Housing Act of 1937 was amended by the Quality Housing and Work Responsibility Act of 1998 to allow consortia for the purpose of administering any or all of the housing programs of the PHAs in the consortium. However, the regulations (24 CFR part 943) did not provide for single-ACC consortia. The proposed rule reflects HUD’s existing authority to establish this new category of consortium designed to solely administer the HCV program.
A “multiple-ACC consortium” is already allowed. This type of consortium is made up of two or more PHAs that join together and select a lead PHA to carry out planning, reporting, and other administrative functions for member PHAs. Multiple-ACC consortia may administer the public housing program as well as the HCV program. The consortium submits a joint 5-Year PHA Plan and joint Annual Plans that apply to all member PHAs. Each member PHA in a multiple-ACC consortium retains its own ACC, has its own jurisdiction, and continues to operate in their own jurisdiction. Member PHAs may enter into memoranda of understanding to operate within the jurisdictions of other member PHAs.
The FY14 Appropriations Act amended the definition of “public housing agency” to include in the general definition, “a consortium of such entities or bodies as approved by the Secretary” (see Memo, 6/27). According to the preamble to the proposed rule, this new language gives HUD the opportunity to extend single-ACC consortia beyond the HCV program. However, the proposed rule would only apply to the HCV program. The preamble states that HUD plans future revisions to the regulations to allow single-ACC consortia to other PIH programs.
NLIHC has long supported the use of consortia to administer the voucher program for both improved service to applicants and greater efficiency in operating the program.
Comments are due September 9, 2014.
The proposed rule is at: http://1.usa.gov/1mOjO5n
New Affordable Housing Partnership Between HUD and Treasury
A new three-component partnership between HUD and the Department of the Treasury was announced on June 26. One of the components would help the rental market, while two would help homeowners and the homeowner market.
Under the component that would help the rental market, the Federal Financing Bank (FFB), housed at Treasury, will support the construction and preservation of rental housing by financing multifamily loans insured under the Federal Housing Administration’s (FHA) Risk-Sharing program. According to press releases from HUD and Treasury, this will significantly reduce the interest rate for affordable multifamily apartment buildings compared to the cost of tax-exempt bonds under current market conditions. FFB is authorized to fund any obligation fully guaranteed by another federal agency. Under the Risk-Sharing program, FHA covers 100% of the outstanding principal balance plus 100% of the accrued interest if there is a default.
The first deal in this arrangement will be conducted in partnership with the New York City Housing Development Corporation (NYC-HDC) to support restoration of affordable rental housing damaged by Super Storm Sandy in Far Rockaway, Queens.
According to the National Council of State Housing Agencies (NCSHA), “The Risk-Sharing Program has traditionally provided state Housing Finance Agencies (HFAs) with a sustainable low-cost source of financing to support the development of affordable multifamily properties, but the recent economic downturn had made it difficult for HFAs to use the program efficiently. Consequently, the Administration, along with NCSHA and its member agencies, has been pushing Congress to allow Ginnie Mae to securitize loans issued under the program. Allowing the FFB to finance such loans will help lower costs in the interim.”
FHA Commissioner Carol Galante said in a HUD press release, “To help the many hard working families who cannot find affordable rental housing, we are partnering with the Treasury Department, to broaden our efforts to create and preserve safe, decent and affordable rental housing by allowing more Housing Finance Agencies access to the capital they need to build or maintain affordable multifamily apartment buildings.”
Under the second component of the new partnership, Treasury is extending the Making Home Affordable (MHA) program through December 31, 2016. MHA allows underwater homeowners to permanently modify their mortgages to avoid foreclosure. Treasury reports that the program has served more than 1.3 million homeowners to date.
Finally, Treasury announced a new effort to spur lending in the private label securities (PLS) market. According to a Treasury press release, “Prior to the housing crisis, private label securities provided access to credit for many qualified Americans who did not meet Government Sponsored Enterprises (GSEs) and FHA eligibility requirements…Since the crisis, Treasury officials have been working with regulators to put in place reforms that address the flaws in the securitization and lending practices that played a role in the financial crisis. Nevertheless, many of the largest investors have not returned to the market, resulting in very little issuance and few mortgage financing options for borrowers aside from government-supported channels.”
To better determine how to rebuild the PLS market, Treasury issued a Request for Comment in the Federal Register on June 30. Treasury indicated that a series of forthcoming stakeholder meetings will be held to explore ways in which private lending can be increased.
The HUD press release is at: http://1.usa.gov/1mOjO5n
The Treasury press release is at: http://1.usa.gov/TO9lvq
The NCSHA blog is at: http://bit.ly/1oVxWtU
The Treasury press release with details about the PLS request for comment is at: http://1.usa.gov/1mdPiTY
The Treasury Federal Register request for comment is at: http://1.usa.gov/1tIc1vd
CASTRO CONFIRMED AS HUD SECRETARY. On July 9 by a 71-26 vote the full Senate confirmed Julián Castro to replace Shaun Donovan as Secretary of HUD. The Senate has not yet voted on Donovan’s nomination as the new OMB director. (See HAC News, 5/28/14.)
CIVIL RIGHTS ANNIVERSARY NOTED. President Obama proclaimed July 2, 2014, as the 50th Anniversary of the Civil Rights Act, which was signed into law by President Lyndon B. Johnson on July 2, 1964.
SECTION 514/516 PREAPPLICATIONS DUE SEPTEMBER 2. Section 514 loans and Section 516 grants can be used for new construction or purchase and substantial rehabilitation of rental housing for farmworkers. Section 521 Rental Assistance is available. The maximum award is $3 million. Contact a USDA RD state office.
HUD OFFERS FY14 AND FY15 HOPE VI MAIN STREET FUNDS. Governments of counties, cities, and townships with populations under 50,000 are eligible for grants to replace unused commercial space with affordable housing in historic or traditional central business districts. Deadline is August 18. Contact Lawrence Gnessin, HUD, lawrence .email@example.com.
TREASURY AND HUD ANNOUNCE RENTAL HOUSING INITIATIVE. The Treasury Department’s Federal Financing Bank will finance mortgages made by Housing Finance Agencies and insured by FHA under its risk-sharing programs. Treasury is also extending the Making Home Affordable homeowner assistance program for at least one year and requesting public input by August 8 on ways to improve the private label securities market for housing finance.
CRA REGULATORS UPDATE LIST OF DISTRESSED OR UNDERSERVED NONMETRO MIDDLE-INCOME GEOGRAPHIES. The annual list identifies census tracts where bank activities will be considered as “community development” under the Community Reinvestment Act. There are slightly fewer tracts on the list in 2014 than in 2013, presumably reflecting some improvement in the economy.
NEW REPORT EXAMINES RURAL RENTAL HOUSING. Rural America’s Rental Housing Crisis: Federal Strategies to Preserve Access to Affordable Rental Housing in Rural Communities, published by the National Rural Housing Coalition, documents the successes of USDA’s rental housing programs and the challenges facing them now, including preservation and Section 521 Rental Assistance funding.
NEW YORK TIMES PIECE ON RURAL POVERTY DRAWS CRITICISM. “What’s the Matter with Eastern Kentucky?” by Annie Lowrey describes economic decline in Clay County, KY and wonders whether moving away might be residents’ best option. Tim Marema and Betsy Taylor respond with critical posts on the Daily Yonder.
HAC CALCULATES 8,000 USDA PROPERTIES WILL PAY OFF LOANS BY 2020. The oldest Section 515 and 514 loans are reaching the end of their 50-year mortgage terms. “Maturating USDA Multi-Family Housing Loans will Impact Ten-ants” explains that when a Section 515 or 514 loan is paid off, some tenant benefits (such as Section 521 Rental Assistance) are terminated. Tenant protection rules apply to prepayments but not to payoffs of mature loans. HAC’s Rural Policy Note recommends that USDA ask project owners to notify tenants well in advance of payoff.
CONCENTRATION OF POVERTY HAS INCREASED, CENSUS BUREAU REPORTS. The proportion of U.S. residents living in census tracts with poverty rates of 20% or higher fell from 1990 to 2000, then increased from 18.1% in 2000 to 25.7% in 2010. While the overall U.S. population grew by 10% over the decade, the number of people in these high poverty areas increased by about 56%. Of the people living in high poverty tracts in 2010, 51.1% lived in cities at the center of metropolitan areas, 28.6% in suburbs, and 20.4% in nonmetro areas. Census’s report, Changes in Areas with Concentrated Poverty: 2000 to 2010, includes maps and tables with data by state, race, age, and more.