Federal Housing Funding and Policy

Historic Shifts are Underway

What Precipitated the Shifts that

are Underway• Economic Crash 2008-2012• Housing Bubble Bursts – Massive

Federal and Private Losses in Housing

• Federal Budget Trajectory• Toxic Politics

What’s in Flux? • Budget– FY14– Sequester– CR / Debt Ceiling

• Tax Reform• CRA• Fair Housing• Mortgage Finance

– GSE Reform– Dodd-Frank

Federal Budget Trends

Federal Budget Trends

Federal Budget Trends

Federal Budget Trends

Vouchers

• Renewals – FY10-FY13 …but Costs • New Vouchers are Rare (HUD-VASH)• Few Existing Voucher Holders have lost

their Homes…Yet• PHAs are Struggling with Admin Cuts (-17%)• Very Difficult to serve Populations <50%

AMI • Homelessness Successes at Risk

Vouchers: Virginia PHA Survey

• 7% avg reduction in voucher funding in 2013

• 765 housing vouchers expected to be cut across the 9 PHAs / local governments responding

• 14.5% average reduction in admin fees

Project Based Section 8

• Project Based Renewals – HUD Strategy to “short fund”

• Impact on Investor / Lender Confidence • RA (rural) – New RA but declining• Very Difficult to serve Populations below

50% AMI • Homelessness Successes at Risk

HOME and CDBG

• Block Grants more Vulnerable than S/8• HOME (50% cut since FY10) – WAPO story• Losses here Ripple through AH • GAP Funding• Project Infrastructure• Rehab

• Virginia has lost $20m in CDBG (29%) and $18m in HOME since FY10

Public Housing

• PH Capital - $2.5b to $1.77b• PH Operating - $4.78 to $4.05• RAD – transition of PH to S8• 70,000 unit cap will be met this year

• Choice Communities• 4-5 awards per year

Rural Housing

• 515 Rental Production Slashed 60%• RA Cuts less Steep / Renewals at Risk• 502 Direct down 20%• Administration Favors 538, 502

Guarantee• Budget Neutral

• Politics Counts !

Sequester : the Train has left the

Station?

• Budget Control Act of 2011– $1.2 Trillion in Savings 2013-2021– FY 13 was 5.1% across the board (defense

to take 50% of the cuts)– Delay meant actual cuts to Housing of 7+

%– Will continue until 2021 unless changed

in a CR or otherwise re-legislated in budget bill

CR/ Debt Ceiling: A Train Wreck here / on the Way ?• September 30 – CR• Sept/Oct – Debt Ceiling• Syria has used up a lot of space • De-funding Obamacare added to the

House CR – sent to Senate • Likely Outcome: CR with Sequester?

Tax Reform: Possible? • The Sky is

Falling! …or is it?• Baucus / Hatch in

Senate • @Simpler Taxes • Dave Camp in

House• Complacency is

HIGH RISK – 1986

Tax Reform: Possible?

• What is at risk ? LIHTC, NMTC

• Bill in Oct ? – will not include LIHTCs

• 2.5 million affordable homes

• Momentum… 2014 ?

Community Reinvestment Act • Q & A Revisions• Comments

deadline in May• Recognizes

Changes in Banking regarding:– Proximity of

Depositors– Proximity of Loan

Recipients

Community Reinvestment Act • What the “local

community” means• May recognize the

value of CD activities outside assessment area

• Regional/statewide /national investments may meet goals

New Fair Housing Guidance

•Clarity / Simpler Template for Analysis of Impediments •Focus on concentrated poverty / “communities of opportunity” •Strategies must either move people to COO or Transform into COO •What is the Impact?

Mortgage Finance Reform

•What should be the role of the federal government in our national housing finance system?

Mortgage Finance Reform

• GSE Reform: Source of Mortgage Capital

• Dodd-Frank – Underwriting Guidelines

• FHA – Meeting LMI housing needs

GSE Reform

•Warner – Corker•Wind Down Fannie and Freddie•Replace with a Smaller FMIC•Common Securitization Platform•Competitive System (10 or more guarantors

GSE Reform

•Warner / Corker - S1217•Wind Down Fannie and Freddie•Replace with a Smaller FMIC•Common Securitization Platform•Competitive System (10 or more guarantors

GSE Reform

•Preserve Access to Capital even during Economic Downturns

•All geographies•All housing types

•SF Mortgages – 30 year / fixed•Rental – esp. Smaller, Rural •Implications for future

•Rate•Terms•Fees

GSE Reform - NHTF

• …the Corporation shall— charge and collect a fee in an amount equal to not less than 5 basis points and not more than 10 basis points for each dollar of the outstanding principal balance of eligible mortgages … and allocate … 80 percent of such fee amounts to the Secretary of Housing and Urban Development to fund the Housing Trust Fund

GSE Reform

GSE Reform

Dodd-Frank: QM & QRM Re-Shaping SF Underwriting

• Qualified Mortgage “safe harbors”– Eight “factors” – ability to pay– Back end ratio of 43%– Generally balloon loans are

discouraged w/exceptions for rural – Credit history

Dodd-Frank: QM & QRM Re-Shaping SF Underwriting

• Qualified Residential Mortgage – Risk Sharing–Down payment– Current rule backs off 20% DP but

leaves the door open– Comments until Oct. 30

May You Live in Interesting Times

寧為太平犬不做亂世人Better to be a dog in peaceful times than a man in chaotic times.