In Case You Missed It: A Look at Recent National Housing Policy News

Federal Tax Legislation

Hawkins Advisory on Tax Advantaged Bond Provisions in House and Senate Tax Bills

This advisory from Hawkins Delafield & Wood LLP provides a concise side-by-side summary of the House and Senate private activity bond provisions.

New Legislation Aims to Address Affordable Housing Needs

The 9% Low-Income Housing Tax Credit (LIHTC) program escaped change in both the House and Senate tax reform bills.  In light of continuing support for LIHTCs, Senator Kaine has joined Senator Maria Cantwell of Washington and Senator Orrin Hatch of Utah as a sponsor of the Affordable Housing Credit Improvement Act of 2107.  This bill would expand and enhance the LIHTC program to better address the nation’s substantial shortage of affordable rental housing.

HUD/FHA Administrative Challenges

FHA Losing Customers Rapidly as Premiums Spur Refinancing

FHA’s high insurance premiums and life-of-loan coverage requirements are spurring a substantial run-off of quality loans from its homeownership portfolio due to prepayments.  This is driving efforts to reduce the FHA premium (rumored to happen soon) and/or repeal of the life-of-loan coverage requirement (see October 31, 2017 postings).

HUD Not Data Act Compliant, Underreported Billions of Dollars, Report Says

HUD continues to struggle in replacing/upgrading its legacy IT systems and processes that put the administration of its programs at risk.  This article summarizes the findings of a recent Inspector General report finding HUD in noncompliance with the federal Digital Accountability and Transparency Act’s required reporting deadline.

Fannie Mae Expected to Soon Introduce New Construction Loan Program

Lack of adequate affordable home purchase inventory poses a challenge to Fannie Mae and other affordable housing lenders, including VHDA, in meeting first-time homebuyer needs.  In response, Fannie Mae is considering a new pilot single family construction loan program to help address some of the challenges faced by buyers seeking both construction and permanent financing.

J.D. Power Reveals Top Mortgage Originators in Consumer Satisfaction

J.D. Power’s 2017 U.S. Primary Mortgage Origination Satisfaction Survey revealed that the mortgage industry’s promise of technology creating a faster and easier mortgage origination process does not appear to be fully recognized,  as customer satisfaction fell due to perception of slower loan processing.

In Case You Missed It: A Look at Recent National Housing Policy News

Federal Tax Bill Summaries

The following two articles briefly summarize the initial provisions of the House tax reform legislation that directly impact housing and the initial housing industry reaction to them.

GOP Tax Plan Met With Caution and Concern

A brief overview of industry reaction to provisions curtailing the mortgage interest deduction and related changes impacting the homeownership market.

House Tax Reform Bill Eliminates Private Activity Bonds and Historic and New Market Tax Credits

A brief summary of provisions impacting affordable housing programs, especially those supporting affordable rental development.

MBA President Stevens:  Only Congress Can Provide Legitimacy, Public Confidence to Housing Reform

This article summarizes testimony by MBA President David Stevens outlining MBA’s position on GSE reform that recommends recasting the GSE’s current charters and allowing a multiple-Guarantor model that features at least two entities and preferably more.

A Broke, and Broken, Flood Insurance Program

In October, the National Flood Insurance Program, which has been in the red since Hurricane Katrina in 2005, exhausted its $30 billion borrowing capacity and had to get a bailout just to keep paying current claims. Congress must decide by December 8 whether to keep the National Flood Insurance Program going.

Trump Team Targets Special 'QM' Status for GSEs

The 2013 CFPB mortgage underwriting rule exempted GSE and other governmental loans from the “Qualified Mortgage” (QM) requirements including the debt-to-income (DTI) limitations set on QM loans.  As the GSE and FHA share of mortgages has grown, and as DTI ratios for governmental loans have steadily increased above the QM limits, pressure has grown on the CFPB to align QM DTI standards with current GSE underwriting practices.

Homeownership Stuck in Neutral as Rents Rise

Third quarter homeownership rate estimates show homeownership trending up from its recent low in 2016, but at an anemic rate of increase.  This articles summarizes current trends in homeownership along with trends in rents and home prices.

Black Knight: Housing Remains Affordable Despite Price Acceleration

Black Knight’s look at trends in “payment-to-income” ratio for home purchase concludes that while home prices continue to rise, U.S. housing remains more affordable than long-term benchmarks.

NAR forecasts existing home sales to rise to post-crisis high in 2018

NAR forecasts home sales to continue rising in 2018, but acknowledges the headwinds the market faces, especially for first-time buyers, and the challenges to market growth posed by current tax reform proposals.

In Case You Missed It: A Look at Recent National Housing Policy News

Freddie Mac Finds 'Widening' Affordable Rental Shortfall

A new research report released by Freddie Mac finds that the already-acute shortfall of affordable rental apartments has widened "considerably" over the past six years.  The report looked at loans Freddie Mac Multifamily financed multiple times between 2010 and 2016. It found 11.2 percent were affordable to very low-income households--those with incomes no greater than 50 percent of area median income--at the first financing.   At the second financing, rents had increased so significantly that just 4.3 percent of the same units were affordable to very low-income households. This represented a 60-plus percent reduction in the number of units deemed affordable to very low-income households.  Freddie Mac Multifamily said increasing rents and stagnant household incomes are behind the problem, which it said could become worse unless the affordable apartment supply grows to match increasing demand from lower-income renters.  Previous Freddie Mac research found rising costs of land and construction have also widened the supply gap.

Three Market Updates from the MBA Annual Convention:

• MBA Forecast: Commercial/Multifamily Originations Flat in 2018 Summary of MBA multifamily forecasts for year-end 2017 and 2018
• MBA Economists:  Here’s What Mortgage Rates Are Going to Do In 2018 and Beyond Summary of MBA home mortgage market forecasts for 2018
• MBA Economic and Mortgage Finance Outlook Brief set of slides with charts summarizing MBA’s outlook

Urban Wire:  America Isn’t in a Housing Bubble, but Some Cities Might Be

Are we in a housing bubble?  We think of a housing bubble as house price growth that isn’t sustainable because it isn’t consistent with underlying fundamentals, like income and job growth. To determine whether a bubble exists, we must look at both factors: the change in house price levels and the underlying fundamentals.  Nationally, over the past five years, the increase in house prices has outpaced inflation by 34 percent cumulatively since 2012. Though noteworthy, the increase is less than half the pace seen between 1997 and 2006, which saw house price growth outpace inflation by 87 percent.  This study reviewed data from the 37 largest metro areas.  The Washington MSA compares favorably with other large metro areas and shows little risk of a price bubble.

Bill Introduced to Eliminate FHA Life of Loan Insurance Premium

A bill, entitled the Making FHA More Affordable Act, has been introduced by Rep. Maxine Waters, D-Calif., the ranking member on the House Financial Services Committee.  The bill would repeal the life of loan requirement and reinstate the FHA’s previous policy of requiring borrowers to pay mortgage insurance premiums until the outstanding principal balance reaches 78% of the original home value.  The FHA changed its policy and instituted the life of loan policy back in 2013, as part of an effort to improve the health of the FHA’s flagship fund, the Mutual Mortgage Insurance Fund.  Now, with the MMI Fund on better footing, Waters is pushing for the elimination of the life of loan policy to benefit low and moderate income homebuyers.  The bill is supported by the National Association of Realtors (NAR) and several other industry groups.

The Hill:  Stevens Will Step Down as Head of Mortgage Bankers Group Next Year

David Stevens, who is recovering from cancer, announced that he will step down as head of MBA in September 2017.

MBA President:  GSE Reform is Within Reach

At the end of the Mortgage Bankers Association (MBA) national convention in Denver, President David Stevens made a surprise announcement that he would retire effective Sept. 30, 2018.  Prior to this, however, he fielded questions from VantageScore President Barrett Burns and MBA members during a Q&A breakout session. Stevens answered several questions covering a range of issues, but much of the discussion focused on reform of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, a pressing issue in the mortgage industry at this time.