Newsletter: April 2022
April 1, 2022
Spring has brought several housing finance developments as we watched the cherry blossoms come and go here in Washington, D.C. For Women’s History Month, USMI spoke to prominent industry leaders. The organization also submitted a comment letter to the Federal Housing Finance Agency (FHFA) on its proposed Strategic Plan for fiscal years 2022-2026. Earlier this week, housing also received significant attention in the White House’s proposed budget for fiscal year 2023, with big increases in funding for the U.S. Department of Housing and Urban Development (HUD) and its programs. We also continue to await the full Senate confirmation of Sandra Thompson to lead the FHFA. And, as regulators, the government sponsored enterprises (GSEs), and industry continue to seek ways to improve access, affordability, and equitable housing, Fannie Mae released a working paper on the transaction costs and ongoing expenses that families encounter when purchasing a home. These and other issues are below.
In honor of Women’s History Month, USMI spoke to prominent leaders in the housing finance industry to discuss their important contributions and some of the most pressing issues facing the industry today. These women are industry executives that lead major companies, manage portfolios and credit risk, and work to solve some of the industry’s greatest challenges, including those around greater access to affordable, equitable, and sustainable mortgage credit.
- Teresa Bryce Bazemore, President & CEO, Federal Loan Home Bank of San Francisco
- Meghan C. Bartholomew, Executive Vice President, Radian Group Inc.
- Marcia Davies, COO, Mortgage Bankers Association; Founder, mPower
- Paula C. Maggio, Executive Vice President, General Counsel & Secretary, MGIC
- Faith Schwartz, Founder & Principal, Housing Finance Strategies
- Debra Still, President & CEO, Pulte Financial Services
It is important to understand the impact women have had on changing trends in the housing and mortgage markets. Research by the Urban Institute found that over the past 30 years, “the share of households headed by women increased 17 percentage points, and by 2019, households headed by women accounted for half of all households,” adding that “[t]his trend holds across all racial and ethnic groups, with Black households having the highest share of households headed by women (60 percent).” A recent housing trends report by the National Association of REALTORS® found that single women made up 22 percent of homebuyers in 2020 while single men only made up 9 percent.
On March 11, USMI submitted a comment letter on FHFA’s proposed “Strategic Plan for Fiscal Years 2022-2026.” In its letter, USMI expressed support for objectives and policies to secure the GSEs’ safety soundness, foster housing finance markets that promote equitable access to affordable and sustainable housing, and responsibly steward the agency’s infrastructure.
USMI also recommended that FHFA work in concert with the Federal Housing Administration (FHA) to ensure that pricing promotes borrower choice and allows the GSEs to advance access and affordability in the housing finance system in a sustainable way, backed by private capital. USMI also supports a transparent and objective process to assess and, where appropriate, approve new GSEs products, activities, and pilot programs. Finally, USMI recommends that FHFA increase transparency and access to mortgage origination and performance data to allow industry participants and other stakeholders to truly serve as partners to the GSEs on initiatives that aim to promote equitable housing, address barriers to homeownership, and continue prudent risk management.
President Biden’s proposed budget for the 2023 fiscal year includes a 19 percent budget increase for HUD, meaning $11.6 billion more than this year’s funding. The raise would seek to address the lack of housing supply, racial inequality, and homelessness. The budget includes $35 billion for a new “Housing Supply Fund,” $100 million in down payment assistance (DPA) for low-income households, $15 million for a Home Equity Accelerator Loan (HEAL) product pilot, $86 million for fair housing activities to support efforts to end housing discrimination, and $382 million to maintain, modernize, and enhance HUD’s IT systems, infrastructure, and cybersecurity. HUD Secretary Marcia Fudge said in a statement, “[t]his Budget tells the American people that the President, and our agency, view housing as a foundational platform to help address the most urgent challenges facing our nation.”
On March 16, the Senate Banking Committee advanced the nomination of Sandra Thompson to serve as the next FHFA Director. The vote passed 13 to 11 with all Democrats and one Republican voting to move Thompson’s nomination to the Senate floor. The committee also advanced the nominations of Jerome Powell for a second term as Chairman of the Federal Reserve (23 to 1), Lael Brainard to serve as Vice Chair of the Federal Reserve (16 to 8), and Dr. Philip Jefferson (24 to 0) to join the Federal Reserve Board. The committee vote for a fourth Federal Reserve nominee, Dr. Lisa Cook, was tied and the Senate voted 50 to 49 on March 29 to discharge her nomination from the Senate Banking Committee.
Fannie Mae recently published a working paper titled, “Mortgage costs as a share of housing costs—placing the cost of credit in broader context.” The paper focuses on placing the cost of credit in a broader context. The authors write that “the largest contributors to housing costs are consistently non-mortgage ongoing costs,” noting the largest expenses for all borrowers include “utilities, property taxes, and home improvement expenses.” The paper also highlights that “[t]he fees charged to cover borrower credit risk that are part of the cost of the mortgage, GSE g-fees (roughly four percent) and PMI [private mortgage insurance] (roughly one to three percent) are a relatively small part of the cost of homeownership.” As regulators, the GSEs, and industry work to address issues around affordability and equitable homeownership, it is critical to address these issues and to have other data and analysis to understand different borrower costs, challenges, and barriers to homeownership.
USMI sent letters to all members of the Senate Finance Committee, including Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID), encouraging them to co-sponsor S. 3590, the Middle Class Mortgage Insurance Premium Act of 2022. USMI wrote, “[t]his important bipartisan legislation would expand eligibility for and make permanent the tax deduction for MI premium payments for borrowers who put less than 20 percent down to purchase their home and qualify for financing thanks to private MI or government-backed MI through the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the U.S. Department of Agriculture (USDA).” Highlighting that million of low- to moderate-income taxpayers benefit from this deduction each year, USMI adds that “[i]t is finally time for Congress to make permanent the deductibility of mortgage insurance premiums.” A bipartisan version of the bill was previously introduced in the U.S. House of Representatives in December 2021 by Reps. Ron Kind (D-WI) and Vern Buchanan (R-FL).
The Washington Business Journal reported that two local chapters of Habitat for Humanity —Washington, D.C. and Northern Virginia — are combining operations in an effort to support and increase supply of affordable housing in the region. The merged chapters have set a goal to serve 1,000 families in Greater Washington by 2030, while scaling its other programs, like home-repair services and re-stores. Habitat DC-NOVA will celebrate and kick off the new merger with a May launch event, which will be co-chaired by Madi Ford of Audeo Partners and Lindsey Johnson, President of USMI. Habitat DC-NOVA also received a $3.5 million boost from McKenzie Scott to further its mission and ability to build homes and communities. USMI continues to emphasize the lack of affordable housing supply as one of the greatest issues to affordable homeownership and supports the work of Habitat for Humanity and other organizations that make tangible differences to build homes and communities. For more information on the Habitat DC-NOVA launch event see here.
Earlier this week, former Freddie Mac CEO Don Layton published an article for the Joint Center for Housing Studies (JCHS) of Harvard University titled, “A Modest Suggestion: The Four Government Mortgage Agencies Should Produce a Unified Report on Mission Activities.” Layton recommended that Fannie Mae, Freddie Mac, FHA, and the VA “produce, at first annually but then quarterly, a single, unified, and comprehensive report on their secondary market mission activities to illustrate how well the government has utilized taxpayer support to reach the goal of successfully improving homeownership, especially for underserved groups of families.” USMI has long supported a consistent, transparent, and coordinated approach to the federal government’s housing policy to best support homebuyers, existing homeowners, and appropriately manage mortgage credit risk.