2020 Presidential Campaign: Housing Part 2

Celebrating NAHREP familia, cultura, politics, and grassroots action

Qué onda mi gente?!

The Republican National Convention is happening this week and, as promised, we’re going to cover what the Trump Administration has meant for housing and homeownership. While it is not the same to compare a plan, something that we have no clue will actually get enacted, to actual actions taken by a particular administration, it is still important to understand the different philosophies and priorities of the candidates for President we have before us.

The Trump Administration’s Housing Agenda

The Trump Administration has implemented policies over the last four years, stemming from agencies such as the Department of Housing and Urban Development (HUD), Federal Housing Finance Agency (FHFA), Federal Housing Administration (FHA), and the Consumer Financial Protection Bureau (CFPB), along with support for congressional legislation. The following will break down these actions as they relate to our policy positions in the State of Hispanic Homeownership Report, in addition to COVID responses and other notable housing actions.

Increasing Housing Inventory
Access to affordable credit (affordable and accessible mortgages for Latinos)
Immigration as an economic imperative
COVID response

What about increasing housing inventory?

Creation of White House Council on Eliminating Barriers to Affordable Housing: In June 2019, President Trump issued an executive order establishing this council, appointing HUD Secretary Ben Carson as the chair. He directed the group to “address, reduce, and remove the multitude of overly burdensome regulatory barriers that artificially raise the cost of housing development.” However, President Trump’s decision to rescind Affirmatively Furthering Fair Housing, a tool this council claimed would help address inventory, is concerning.

Tariffs that made building materials more expensive: A 10 percent tariff on $300 billion in Chinese products, 24 percent tariff on imported building material and tariffs on lumber have driven the cost of building homes significantly. National Association of Home Builders (NAHB) called this a $2.5-billion-dollar tax on housing. In California, arguably the state with the most severe housing shortage in the country, it is estimated that tariffs have added $20,000 to $30,000 to the cost of the average sized new home.

Labor shortage exacerbated by strict immigration policies: According to the Associated General Contractors of America, about 80 percent of construction firms are having a tough time filling open positions and a majority of their workers are immigrants. Stricter policies by the Trump Administration have exacerbated the construction labor shortage. The Labor Department forecasts the construction industry will need at least 750,000 additional workers by 2026.

What about access to credit?

Qualified Mortgage (QM) reform can make it easier for Latinos to qualify for a loan: This year, the CFPB announced that it would no longer use Debt-to-Income (DTI) ratio as the sole determinant of Qualified Mortgage, and that the QM Patch is to be extended until implementation of the new rule. It also got rid of Appendix Q, a document lenders use as guidance for how to document income, that made it difficult for non-W2 workers to gain access to mortgages. Read our blog on this issue here.

Addressed False Claims Act concerns in order to bring lenders back to FHA: The fear of being unduly penalized under the False Claims Act caused many lenders to retreat from FHA business altogether. HUD has released a revised Defect Taxonomy in an effort to streamline guidance for FHA-approved mortgagees. Read our blog on this issue here.

FHFA Capital Rule will make access to credit more expensive for communities of color: In May of this year, the Federal Housing Finance Agency (FHFA), the agency that regulates Fannie Mae and Freddie Mac, issued a notice of proposed rulemaking called the FHFA Capital Rule. This rule would require the Government Sponsored Enterprises (GSEs), aka Fannie and Freddie, to dramatically increase their capital requirements in order to make the enterprises more attractive to investors. Read our blog on this here.

The Community Reinvestment Act (CRA) is being weakened: The Office of the Comptroller of Currency (OCC) has proposed changes to the CRA exam structure. These changes will incentivize banks to invest in large projects, like bridges or stadiums, as opposed to mortgage loans to low-to-moderate income borrowers. Read our blog on it here.

Side note: I do want to say that QM reform, the Capital Rule and CRA reform are all still proposed rules. Since none of these have been implemented, time will tell how much these regulations will impact Latino borrowers.

FHA stopped insuring loans for DACA recipients: As of June 2019, HUD officially declared they were no longer backing FHA loans to DACA recipients on the grounds that DACA recipients do not have “lawful status.” Read our support for the Homeownership for Dreamers Act here.

What about ending discrimination in housing and advancing minority homeownership?

The creation of Opportunity Zones incentivizes investments in underserved communities: The Tax Cuts and Jobs Act of 2017 created an Opportunity Tax incentive, which is a tax credit designed to spur investment in low-income and undercapitalized communities.

Removal of the Affirmatively Furthering Fair Housing program will worsen housing inventory shortages: The Trump administration eliminated an Obama-era program intended to combat racial segregation in suburban housing, saying it amounted to federal overreach into local communities. The rule, introduced in 2015, required cities and towns to identify patterns of discrimination, implement corrective plans and report results.

Revision of the Disparate Impact Standard, though most mortgage industry heads have urged HUD to not make changes: HUD has proposed to revise the disparate impact standard, a rule that holds banks accountable for discrimination regardless of intent. Disparate impact is a legal tool used to combat unfair housing practices against minorities, especially practices that on their surface don’t employ explicitly racist or discriminatory terms. Changes to rule have not yet taken place. Read our letter to HUD here.

What about a protecting homeowners from the impact of COVID-19?

Extension of forbearance provisions mandated by the CARES Act and the passage of the CARES Act in general have been critical: The CARES Act mandated that all federally backed mortgages would have access to forbearance options during the pandemic. Going even further, FHA, FHFA, VA and USDA have all extended and broadened their efforts to protect borrowers and work to ensure families are able to keep their homes. This has included extending foreclosure moratoriums and prohibiting balloon payments at the end of the forbearance period. Read more about the CARES Act in our blog here.

FHA indemnification requirements causing credit overlays: One of the most harmful decisions for borrowers during the pandemic was FHA and FHFA’s decision to add penalties to lenders whose loans go into forbearance after the loan closes but before they are securitized. This has led to significant credit overlays, such as tighter credit score, down payment and debt-to-income requirements. Take action in support of the Promoting Access to Credit for Homebuyers Act here.

FHFA has imposed a 50 basis point fee on refinances: Recently, FHFA announcement that Fannie Mae and Freddie Mac will impose an “adverse market refinance fee” of 50 basis points for refinances over $125,000. The implementation of this fee has been extended to December 1, in order to allow families more time to recover from the pandemic. This gets both a downward check and an upward check because we recognize their efforts to be responsive by granting an extension and doing a low income carve out. Read our joint statement here.

Anything else?

Appointing Deputy Secretaries Pam Patenaude and Brian Montgomery: One of the best things this administration did was appointing seasoned housing veterans and NAHREP allies Deputy HUD Secretaries Pam Patenaude and Brian Montgomery to lead homeownership efforts and HUD and FHA. Deputy Secretary Pam Patenaude worked hard to improve the situation in Puerto Rico following Hurricane Maria and for that we are particularly grateful.

Funding FHA modernization efforts: Former FHA Commissioner Brian Montgomery secured $25 million in annual congressional appropriated funding for 5 years to create desperately needed upgrades to FHA technology infrastructure, digitizing everything.

We hope you found these two blogs useful familia. Now let’s have a conversation about the issues.

About Noerena Limón

Noerena Limón is NAHREP’s Executive Vice President of Public Policy and Industry Relations. Noerena heads the organization’s policy and advocacy efforts on issues ranging from homeownership, housing inventory, credit access and immigration.

Prior to joining NAHREP, Noerena spent six years at the Consumer Financial Protection Bureau (CFPB) and served as a political appointee under President Obama in the White House Office of Political Affairs.