USMI Roundup: Developments in Housing Finance
2021 is off to a quick start as the Biden administration has made housing policy a key focus during its first month in office. U.S. Mortgage Insurers (USMI) is ready to work with the new administration and Congress to advance sound housing policies that create a more equitable and sustainable housing finance system. Below are some of the key developments from the beginning of the year:
USMI Publishes Op-Ed in The Hill on Housing Affordability
USMI Co-Signs Letter with Diverse Collation to Biden Administration on Housing Recovery
President Biden Signs Executive Order on Housing Equity
USMI Sends Letter to HUD Secretary-Designee Marcia Fudge
USMI Publishes Blog on the New Congress
What We Are Reading
- USMI Publishes Op-Ed in The Hill on Housing Affordability. On January 31, The Hill published an op-ed by USMI President Lindsey Johnson titled, “We must increase access to affordable mortgages for minority borrowers.” Johnson outlines ways the housing finance system can use data-driven, targeted approaches to reduce barriers to affordable mortgages for Black and Hispanic households. She notes that while COVID-19 has compounded existing racial and economic gaps, there are several long-term issues that unnecessarily increase costs or create barriers for minority borrowers seeking to become homeowners. Impending changes like the recently finalized capital requirements for the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, could further stress mortgage affordability; while current policies like the GSEs’ arbitrary loan-level price adjustments (LLPAs) further drive up costs and push homeownership out of reach.
Johnson called on policymakers to recognize the critical role of low down payment mortgage options in facilitating homeownership, noting that more than 80 percent of first-time homebuyers used these options in the past several years. She also called for more targeted assistance programs for borrowers who may lack intergenerational wealth or equity from a previous home to contribute to a down payment, and highlighted Rep. Al Lawson’s (D-FL) First-Time Homeowners Assistance Act and President Biden’s interest in a first-time homebuyer tax credit. Johnson also recommends that the Biden administration assemble a housing affordability task force that “includes broad representation from industry, consumer advocate community, and government to formulate an action plan, build consensus, and get to work.”
- USMI Co-Signs Letter with Diverse Collation to Biden Administration on Housing Recovery. On January 21, USMI joined the Black Homeownership Collaborative, along with more than 30 industry stakeholders, on a letter to the Biden administration requesting that the American Rescue Plan include assistance to homeowners impacted by COVID-19. The group noted the growing risk to homeownership caused by the pandemic, which has profound implications for people of color, adding that “our country cannot afford to see more damage done to minority homeowners.”
Specifically, the signatories urged President Biden to include in his relief proposal to Congress a $25 billion Housing Assistance Fund, modeled on the 2010 Hardest Hit Fund, to facilitate direct assistance to homeowners. The direct assistance would provide funds to state housing finance agencies to help households experiencing COVID-19 related hardship bring their mortgage loans current. The letter also called on the Biden administration to extend the foreclosure moratorium and continue to process forbearance applications on federally-backed mortgages.
The National Housing Conference (NHC), National Fair Housing Alliance (NFHA), Mortgage Bankers Association (MBA), Local Initiatives Support Corporation (LISC), and the Leadership Conference on Civil and Human Rights, were among the letter’s signatories.
- President Biden Signs Executive Order on Housing Equity. On January 26, President Biden issued an executive order titled, “Memorandum on Redressing Our Nation’s and the Federal Government’s History of Discriminatory Housing Practices and Policies.” The order highlighted that throughout the 20th century, the U.S. government “systematically implemented racially discriminatory housing policies,” the effects of which can be seen today in the racial homeownership gap and the systemic barriers to safe, accessible, and affordable housing for traditional marginalized groups, including people of color. The order further called on the federal government to play a critical role “in overcoming and redressing this history of discrimination and in protecting against other forms of discrimination by applying and enforcing Federal civil rights and fair housing laws.” Before signing the executive order, President Biden stressed that his administration will strive to implement policies that embrace equity, and not merely equality, in order to address systemic issues and provide for equal access to the American Dream of homeownership. To this end, President Biden called on the Secretary of Housing and Urban Development (HUD) to review several rules enacted in 2020 and ensure that all rules comply with HUD’s statutory duty to further fair housing and prevent practices with an unjustified discriminatory effect.
- USMI Sends Letter to HUD Secretary-Designee Marcia Fudge. Last week, USMI sent HUD Secretary-designate Fudge a letter, outlining several policies HUD should consider to ensure it is effectively promoting sustainable and affordable diverse homeownership. USMI cautioned against simply lowering credit costs, such as reducing the Federal Housing Administration (FHA) mortgage insurance premiums, as doing so will likely only increase demand during a time when supply constraints in the market have caused home prices to increase by nearly 12 percent just in the past year. Further, it will push affordability out of reach for many homeowners, especially borrowers on the lower end of the market. As FHA continues to support borrowers through the COVID-19 crisis, it will be important to not take actions that could potentially undermine FHA’s ability to help existing and future borrowers. The letter also called on policymakers to explore targeted policies to support borrowers most in need, such as targeted down payment assistance (DPA) programs for borrowers who may not even have the resources for a 3 or 3.5 percent down payment, and considering establishing reserve accounts to promote sustainable homeownership. USMI noted, “it is more important than ever that the government-backed FHA program and the conventional market backed by private MI operate in a consistent and coordinated manner,” as the two play an important and distinct role in the market and should not compete for market share.
Meanwhile, the Senate Banking Committee voted 17 to 7 yesterday to approve Honorable Marcia Fudge as HUD Secretary. She now awaits a confirmation vote by the full U.S. Senate.
- USMI Publishes Blog on New Congress. USMI posted a blog providing an overview of the 117th Congress with insights on new members to the House Financial Services Committee and Senate Banking Committee, as well as priorities for COVID-19 relief and housing policy.
- What We Are Reading. The Urban Institute published a new report titled, “The Future of Headship and Homeownership,” which examined trends in homeownership in the United States through 2040 based on current housing policies. The report found that the United States will likely see modest declines in homeownership, mostly for Black households, and that decreasing the racial homeownership gap would require expanded financial education, re-examining the mortgage qualification process, and implementing programs that sustain homeownership for borrowers with less wealth, especially people of color.