[Senate Hearing 116-444]
[From the U.S. Government Publishing Office]
S. Hrg. 116-444
OVERSIGHT OF HOUSING REGULATORS
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING THE ACTIONS THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
AND FEDERAL HOUSING FINANCE AGENCY HAVE TAKEN TO IMPLEMENT THE CARES
ACT, ADDRESS AND/OR MINIMIZE THE ECONOMIC IMPACT OF THE ONGOING COVID-
19 PANDEMIC, AND OTHER RECENT REGULATORY DEVELOPMENTS
__________
JUNE 9, 2020
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available at: https: //www.govinfo.gov /
__________
U.S. GOVERNMENT PUBLISHING OFFICE
44-628 PDF WASHINGTON : 2023
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
MIKE CRAPO, Idaho, Chairman
RICHARD C. SHELBY, Alabama SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania JACK REED, Rhode Island
TIM SCOTT, South Carolina ROBERT MENENDEZ, New Jersey
BEN SASSE, Nebraska JON TESTER, Montana
TOM COTTON, Arkansas MARK R. WARNER, Virginia
MIKE ROUNDS, South Dakota ELIZABETH WARREN, Massachusetts
DAVID PERDUE, Georgia BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana CATHERINE CORTEZ MASTO, Nevada
MARTHA McSALLY, Arizona DOUG JONES, Alabama
JERRY MORAN, Kansas TINA SMITH, Minnesota
KEVIN CRAMER, North Dakota KYRSTEN SINEMA, Arizona
Gregg Richard, Staff Director
Laura Swanson, Democratic Staff Director
Matt Jones, Counsel
Beth Cooper, Democratic Professional Staff Member
Megan Cheney, Democratic Professional Staff Member
Stanley Hardy, Democratic Professional Staff Member
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Charles J. Moffat, Hearing Clerk
Jim Crowell, Editor
(ii)
C O N T E N T S
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TUESDAY, JUNE 9, 2020
Page
Opening statement of Chairman Crapo.............................. 1
Prepared statement........................................... 39
Opening statements, comments, or prepared statements of:
Senator Brown................................................ 3
Prepared statement....................................... 40
WITNESSES
Benjamin S. Carson, Secretary, Department of Housing and Urban
Development.................................................... 6
Prepared statement........................................... 41
Responses to written questions of:
Senator Brown............................................ 53
Senator Tillis........................................... 58
Senator Moran............................................ 59
Senator Menendez......................................... 59
Senator Tester........................................... 65
Senator Warren........................................... 69
Senator Van Hollen....................................... 71
Senator Cortez Masto..................................... 75
Senator Smith............................................ 82
Mark A. Calabria, Director, Federal Housing Finance Agency....... 7
Prepared statement........................................... 43
Responses to written questions of:
Senator Brown............................................ 83
Senator Tillis........................................... 86
Senator Moran............................................ 87
Senator Menendez......................................... 88
Senator Tester........................................... 90
Senator Warren........................................... 92
Senator Van Hollen....................................... 95
Senator Cortez Masto..................................... 96
Additional Material Supplied for the Record
Letter submitted by CUNA......................................... 103
Letter submitted by NAFCU........................................ 105
(iii)
OVERSIGHT OF HOUSING REGULATORS
----------
TUESDAY, JUNE 9, 2020
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10 a.m., in room SD-G50, Dirksen
Senate Office Building, Hon. Mike Crapo, Chairman of the
Committee, presiding.
OPENING STATEMENT OF CHAIRMAN MIKE CRAPO
Chairman Crapo. This hearing will come to order. The
hearing room has been configured to maintain the recommended
six-foot social distancing between Senators, witnesses, and
other individuals in the room necessary to operate the hearing,
which we have kept to a minimum.
This will be a hybrid hearing. Some Members will be here in
present, the witnesses are here in person, and others will be
coming in by video conference.
I remind everyone, once you start speaking there will be a
slight delay before you are displayed on the screen, if you are
coming in remotely. To minimize background noise, please click
the Mute button until it is your turn to speak or ask
questions. If there is any technology issue, as usual, we will
move to the next Senator until it is resolved.
I remind all Senators and the witnesses that the five-
minute clock still applies. You should all have a box on your
screens, those of you who are operating remotely, that is
labeled Clock, that will show the time that is remaining. At 30
seconds I am going to try to remember to gently tap the gavel
to remind Senators that their time is expiring.
To simplify the speaking order process, Senator Brown and I
have again agreed to go by seniority for this hearing.
With that we welcome our Federal housing regulators, The
Honorable Benjamin S. Carson, Secretary of the Housing and
Urban Development, and The Honorable Mark A. Calabria, Director
of the Federal Housing Finance Agency. Welcome back to both of
you.
Today we will receive testimony on your agencies' recent
activities, operations, and ongoing efforts to promote access
to quality affordable housing while also ensuring the safety
and soundness of the housing finance market. Your agencies'
missions have never been more critical. The disruption of
COVID-19 on the U.S. economy has hit homeowners and the housing
market especially hard. We have already seen a huge number of
mortgage borrowers enter forbearance, while many landlords are
struggling to make ends meet, and countless renters are unsure
whether they will be able to make their next payment.
In March, HUD and FHFA acted swiftly to prohibit
foreclosures and evictions for millions of residential
borrowers facing financial hardship due to the pandemic. Soon
after, Congress passed the Coronavirus Aid Relief and Economic
Security Act, or CARES Act, codifying and extending these
protections and providing financial relief to renters.
Title IV of the CARES Act contains three housing
provisions. Section 4022 imposes a 60-day eviction and
foreclosure moratorium for single-family borrowers with a
federally backed mortgage loan. It also allows struggling
homeowners up to 1 year of loan forbearance.
Section 4023 extends similar relief to federally backed
multifamily borrowers who are current on their mortgage
payments. They can request up to 90 days forbearance so long as
they do not evict a tenant or charge late fees solely for
nonpayment of rent during the pandemic.
Section 4024 imposes a 120-day moratorium on evictions,
fees, and penalties for tenants who live in multifamily units
that participate in a Federal assistance program or have a
Government-backed mortgage.
Title XII of the CARES Act provides $12.4 billion of
emergency supplemental appropriations for HUD programs and
activities to further soften the economic blow of the pandemic
across the many communities that HUD serves.
In addition to implementing the CARES Act, HUD and FHFA
have taken important actions to further protect borrowers and
mortgage servicers during the pandemic. Both agencies have
extended the eviction and foreclosure moratorium for qualifying
homeowners through at least the end of June.
The agencies have also taken steps to ensure borrowers are
not facing large, looming debt payments. Director Calabria
recently reiterated that borrowers in forbearance with a Fannie
Mae- or Freddie Mac-backed mortgage will not owe a lump sum at
the end of the forbearance. FHFA has further announced a new
payment-deferred option which allows borrowers who are able to
return to making their normal monthly mortgage payment the
ability to repay their missed payments at the time the home is
sold, refinanced, or at maturity.
HUD has similarly implemented the National Emergency
Partial Claim, which allows eligible FHA borrowers in
forbearance to reinstate their loans by authorizing servicers
to advance funds on their behalf. Like FHFA, repayment of any
missed monthly payments is deferred until the back end of the
loan.
In recognizing the undue burden that the pandemic has
placed on the mortgage servicing industry, HUD and FHFA have
acted quickly to address the liquidity gap. HUD has expanded
issuer assistance to include the Pass Through Assistance
Program, or PTAP, which allows servicers to apply for
assistance in meeting principal and interest payments, and FHFA
has announced that no mortgage servicer will be responsible for
advancing more than 4 months of missed principal and interest
payments on a loan.
While America is taking steps to return to work and relax
stay-at-home orders, the recovery is only just beginning. I
thank our witnesses for their swift and prudent actions to date
and for their continued commitment and collaboration at this
time.
This Committee is also focused on working with HUD and FHFA
to identify and tailor overly burdensome regulations in an
effort to create conditions that will lead to a forceful
economic recovery.
Secretary Carson, I applaud you for spearheading the
ongoing efforts to identify and eliminate regulatory barriers
to affordable housing production in this country. This will
play a big part in bringing about a stronger, quicker economic
rebound.
Finally, the pandemic has underscored the need for a
stable, well-capitalized housing market in times of stress.
FHFA has recently taken up a crucial step toward safety and
soundness in proposing a thorough, thoughtful regulatory
capital framework for Fannie Mae and Freddie Mac. As Americans
face financial uncertainty, it is long past time to make the
hard decisions and address this last unfinished business of the
2008 financial crisis. Director Calabria, thank you for your
considerable efforts here, and I look forward to our continued
work together on this topic.
Thank you both again for joining us here today. Senator
Brown.
OPENING STATEMENT OF SENATOR SHERROD BROWN
Senator Brown. Thank you, Mr. Chairman. Thank you to our
two witnesses, Dr. Calabria and Dr. Carson. Over the past 2
weeks, protesters have taken to the streets demanding justice,
justice for Mr. Floyd, Ms. Taylor, and Mr. Arbery, and so many
other Black Americans who have been killed in acts of
extraordinary violence, too often at the hands of police.
Justice for millions of Americans who, for hundreds of
years have lived under a system that perpetuates inequality and
systemic racism. Protesters, young and old, Black and white, in
urban and rural communities are all marching like generations
before them, risking their lives, praying for and demanding
justice and real change. They demand economic justice. Our
society calls their work essential but pays too many essential
workers so little that they cannot afford an apartment, much
less dream to own a home.
Millions of American workers don't have a bank account.
Saving for retirement is out of reach. They do not benefit when
the Dow Jones hits 27,000. Americans are demanding reforms to
our criminal justice system and equitable healthcare system
that protects Black and brown mothers and their babies, and
support for Black and brown communities so another economic
crisis does not leave them further behind Wall Street and the
wealthy and the privileged.
Both of you before us today are central to that fight for
economic and racial justice. HUD's mission was shaped by our
Nation's struggle for civil rights.
Chairman Crapo. Senator Brown is speaking and is being
broadcast but we cannot get the signal in this room, so we are
going to have him continue his remarks. I apologize to our
witnesses that you may not hear his introductory remarks before
I go to your testimony.
Senator Brown. OK. All right. Just 6 months--Dr. Carson
knows the history--just 6 months after John Lewis and the foot
soldiers of Selma were beaten crossing the Edmund Pettus
Bridge, President Johnson signed a bill that created HUD to
address the need for investment in communities that had been
left behind.
Shortly after HUD's creation, the Kerner Commission warned
that our Nation was moving toward two societies, one Black, one
white, separate and unequal. It took the assassination of Dr.
King for Congress to act on one of the central recommendations
of that report, creating a fair housing law. Fifty years ago,
Congress entrusted HUD with implementing the Fair Housing Act.
Our country charged your agency, Mr. Secretary, with rooting
out discrimination and actively working to make it easier for
everyone to find and afford a home.
Fundamentally, we all pretty much want the same thing--a
place that is safe in a community we care about, where we can
get to work and our kids have good school with room for our
family, whether that is three children or an aging parent, or a
beloved pet. All of us should get to define what home looks
like for all of us, for each of us. We should be able to find
it and afford it without crippling stress every single month.
Everyone should have the opportunity to build wealth for
their family by owning a home. To make that reality the reality
for everyone, we cannot rely on the housing market to sort
itself out, not when centuries of discrimination are baked into
it, when we have decades of laws that distort the market in
favor of banks and against families. That is what your job is,
to the two witnesses, to fix that.
Secretary Carson, under your leadership, instead of
addressing the deep inequities in our housing system, you are
trying to systematically dismantle basic civil rights
protections that previous generations marched for and endured
beatings for and laid down their lives for. Your department
refuses to do its job of promoting economic inclusion and
working to undue the historic Government-driven patterns of
housing discrimination like redlining and restrictive
covenants. You want to abandon the legal standard affirmed by
the Supreme Court, the legal standard used to bring housing
discrimination lawsuits.
That is not just my opinion. Mr. Chairman, look at letter
after letter that civil rights leaders sent to your agency
opposing your actions. And both heads of the agencies before us
today are pushing plans that will make home ownership more
expensive, harder to get, particularly for borrowers of color.
This is what happens when the ideologues in this Administration
push Wall Street's agenda instead of what regular people
actually need.
Before this pandemic hit, families of color were spending
more of their income on housing than were white families, and
they were disproportionally likely to experience homelessness.
This was fueled, in part, by the Federal Government's failure
to protect Black and brown and immigrant borrowers from
predatory subprime lenders before the 2008 crisis, despite
knowing that lenders were targeting them. Forty years of gains
in Black ownership and wealth were eviscerated.
Now Black families are experiencing this public health and
economic crisis with just one-tenth the wealth of white
families. They are more likely to work at jobs where their
corporate employers did not pay them enough to begin with.
We are dangerously close to repeating mistakes of a decade
ago. Nearly half of Black and 40 percent of brown renters
report that they are unlikely to be able to make their next
payment. Think of that--almost half of them unlikely to be able
to make their next payment.
We are in the middle of a crisis, and you either do not
know, Mr. Secretary and Mr. Calabria, you either do not know or
you do not care. You are plowing ahead with undoing civil
rights protections while in Ohio and across the country they
are opening eviction courts. Twenty million Americans are
unemployed.
Some have been able to pay their rent or the mortgage but
only because we passed emergency unemployment insurance earlier
this year. It is set to expire this summer, at the end of July.
President Trump and Leader McConnell are refusing to extend it.
Of course we should not be surprised. It is part of Republican
leaders' decades-long effort to undermine and weaken this
social insurance, unemployment benefits, that all of us pay
into. Leader McConnell and President Trump see no urgency.
Those are McConnell's words, no urgency to help people.
Democrats have plans to get more help directly to working
families. Our emergency rental assistance bill provides $100
billion to help with rent and utility bills so we can help
renters avoid impossible choices between rent and groceries or
prescriptions or draining their savings or going to a payday
lender. It has already passed the House. It sits on the
Majority Leader's desk, collecting dust. For millions of
families the bills keep coming, the clock keeps ticking, the
stress keeps mounting.
Before this pandemic, President Trump and his wealthy
cabinet members either did not realize or did not care that
behind the rosy stock market data this economy was already
broken for millions of workers, and for Black and brown workers
it never worked for many of them to begin with. And now the
Trump administration either does not realize or does not care
that the bottom is falling out for these families.
People in this country, in every one of our States, in
Hawaii and in Montana and in Minnesota and Rhode Island and
Idaho and Ohio, people are tired of the lack of action and the
lack of accountability. Before the pandemic, the Trump
administration's idea of housing reform was to, quote, ``level
the playing field for Wall Street.'' That is kind of a
definition of out of touch.
Enough is enough. Today we want to hear that you
understand, Mr. Secretary and Mr. Calabria, we want to hear
that you understand both the magnitude of the current crisis
and the inequities built into our housing system for
generations. It is about time you are actually going to do
something to fix it instead of making it worse.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you, Senator Brown. I am going to
wait until he adjusts his phone a little bit. I think we are
getting there.
We will now move to our witnesses, and Secretary Carson,
why don't you begin first.
STATEMENT OF BENJAMIN S. CARSON, SECRETARY, DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT
Mr. Carson. All right. Thank you, Chairman Crapo and
Ranking Member Brown--I guess I am glad I did not hear most of
what you had to say--and Members of the Committee. Thank you
for this opportunity to discuss the steps the U.S. Department
of Housing and Urban Development is taking to maximize our
Nation's response to the COVID-19 national emergency. These
actions reflect both my work with the White House Coronavirus
Task Force and the measures developed at HUD to protect the
health and safety of the American public.
I want to begin by recognizing the unprecedented health
care and economic challenges facing Americans today. This
disease is impacting families and communities across the
Nation. As HUD Secretary, my highest priority has been to
ensure Americans don't lose their homes and to safeguard those
at greatest risk of the virus, including homeless and low-
income communities.
I also want to thank our Nation's medical professionals and
first-line responders who have sacrificed so much to keep
Americans safe and healthy. As a medical doctor, I am inspired
daily by their unwavering commitment to their fellow citizens.
On March 27, President Trump signed into law the CARES Act.
In total, the CARES Act provided more than $12 billion in
funding to HUD programs. Recognizing the unprecedented nature
of the global pandemic, I directed my staff to immediately
begin the process of getting these funds to communities most
impacted by COVID-19.
As of today, HUD has announced allocations for over $9
billion in funding. This includes $3 billion in CDBG funds, $4
billion in ESG funds, $685 million for the Public Housing
Operating fund, $380 million for Tenant Based Rental
Assistance, $800 million in Project Based Rental Assistance,
$200 million in IHBG funds--that's Indian Housing Block Grants,
$75 million for the Section 811 Mainstream Housing Choice
Voucher program, and $65 million for HOPWA funds.
In the coming weeks, HUD will continue to expedite getting
the funding provided by the CARES Act into the hands of
communities.
Prior to the passage of the CARES Act, FHA acted quickly to
help protect single-family homeowners who lost their jobs or
were experiencing economic hardship as a result of COVID-19, by
implementing a 60-day moratorium on foreclosures and evictions,
which was subsequently extended through June 30. The CARES Act
also provided a 120-day eviction moratorium for tenants in
certain federally supported rental properties, including
properties with FHA-insured single-family or multifamily
mortgages.
FHA further announced a tailored set of mortgage payment
relief options for single-family homeowners with FHA-insured
mortgages who are experiencing financial hardship because of
the pandemic. This includes CARES Act forbearance, which allows
borrowers to request up to 6 months of forbearance and extend
for up to 6 months. Also included was an extension period for
calling a loan due for those with a Home Equity Conversion
Mortgage.
FHA also implemented the COVID-19 National Emergency
Standalone Partial Claim for borrowers on forbearance. This
option will help eligible homeowners resume their mortgage
payments and avoid a lump sum repayment of arrears by deferring
repayment to the end of the mortgage.
Ginnie Mae expanded its pass-through assistance program,
PTAP, to help address potential issuer liquidity challenges
caused by the borrower forbearance requirements implemented by
FHA and other Federal mortgage insurance programs. PTAP
provides last-resort financing to cover the difference between
issuers' available funds and scheduled payment of principal and
interest to mortgage-backed security holders. The timely
payment of P&I to mortgage-backed holders, consistent with
Ginnie Mae's statutory guaranty, is essential to the liquidity
of the MBS market and the confidence of investors who finance
housing through the Ginnie Mae program.
In December 2018, President Trump signed Executive Order
13853, establishing the White House Opportunity and
Revitalization Council. I have had the honor of chairing this
Council since its establishment.
In response to the ongoing and unprecedented global
pandemic, President Trump has directed me and the Council to
utilize its talented structure and build on its original intent
with a renewed focus to expand efforts to protect and promote
our most vulnerable communities. The Council will work to
ensure that minority and underserved communities are kept safe
from this invisible enemy, now and into the future. In the
coming weeks, the Council will identify different policy
approaches needed to help advance opportunity for these
communities.
Thanks to the leadership of President Trump, I am proud of
the work this entire Administration, and especially the 7,500
employees of HUD, are doing each and every day to fight this
invisible enemy and meet the needs of the American people. I am
grateful to this Committee for its bipartisan commitment to
meeting this challenge. Thank you.
Chairman Crapo. Thank you, Secretary Carson. Director
Calabria.
STATEMENT OF MARK A. CALABRIA, DIRECTOR, FEDERAL HOUSING
FINANCE AGENCY
Mr. Calabria. Chairman Crapo, Ranking Member Brown, and
distinguished Members of this Committee----
Chairman Crapo. Could you turn your mic on?
Mr. Calabria. Chairman Crapo, Ranking Member Brown, and
distinguished Members of the Committee, thank you for the
invitation to appear at today's hearing. Let me also thank you,
Chairman Crapo, for those very kind words at the beginning.
Let me also make it very clear, there is not a single civil
rights protection that FHFA has rolled back during my time, not
one. Any assertions to the contrary are simply false.
We have acted swiftly at FHFA, we have acted prudently, and
we have prioritized borrowers and renters in the housing market
from day one. We have worked in close partnership with FHA and
Ginnie Mae. I want to recognize and thank Secretary Carson, HUD
Deputy Secretary Montgomery, and acting Ginnie Mae President
Seth Appleton for their partnership and leadership.
Let me also thank the employees of FHFA. They are our
greatest asset. Their well being has been my top priority. Our
teleworking flexibilities have enabled our employees to be safe
and manage at-home obligations while continuing to fulfill the
agency's vital mission.
We have also continued to foster an environment where
everyone at FHFA feels safe, respected, and valued for their
differences. The unrest across our Nation in recent weeks
reaffirms why fairness, diversity, and inclusion are core
values to me personally and our agency. FHFA has one of the
most diverse workforces among Federal regulatory agencies. Our
diversity is, and will remain, a key source of FHFA's success.
During this crisis, Americans should not have worry about
losing their homes. FHFA has worked closely with our regulated
entities to support borrowers and renters while ensuring the
proper functioning of the mortgage market, both during and
after this crisis. Our actions have been and continue to be
data driven.
The actions I will discuss today apply to mortgages backed
by Fannie Mae and Freddie Mac. With that said, FHFA's policies
have helped set standards for the entire market. For homeowners
facing foreclosure before COVID-19, we suspended all
foreclosures and evictions through at least June 30th. We will
extend that date if necessary. For borrowers financially
impacted by COVID-19, we allowed homeowners to take a time-out
from mortgage payments through forbearance.
We then announced that borrowers in forbearance who return
to making monthly payments can repay what they missed when they
sell their home or refinance their loan. We have emphasized
that those who can make their mortgage payments should continue
doing so.
Of borrowers with enterprise-backed mortgages in
forbearance, about one-third continue to make payments. Last
month, FHFA directed the enterprises to treat such borrowers as
current if they want to buy a new home or refinance.
To support renters, FHFA and the enterprises developed a
multi-forbearance program for the first time in history.
Importantly, we mandated that tenants cannot be evicted for the
nonpayment of rent during forbearance. At FHFA's direction, the
enterprises created online look-up tools that allow renters and
borrowers to determine if they are eligible for eviction
protection or forbearance.
We have also helped clarify consumers' options. We updated
the scripts that servicers use when talking to borrowers about
forbearance. We have emphasized to servicers in the public that
no lump sum is required at the end of forbearance. We partnered
with the CFPB to launch the Borrower Protection Program, and
FHFA helped develop a website that consolidates Federal
information about mortgage relief options, renter protections,
and how to avoid scams.
We have also taken action to support the proper function of
the mortgage market. To ensure the safety of market
participants, FHFA authorized several loan-closing, employment
verification, and appraisal flexibilities at least through June
30th. We instituted a 4-month limit on servicers' obligations
to advance principal and interest payments on loans in
forbearance. This provides stability and clarity to the
mortgage market.
To support lenders' liquidity, FHFA enabled the enterprises
to purchase certain eligible single-family mortgages in
forbearance. Prior to this, the enterprises had never purchased
mortgages in forbearance. Our policy provides a new option to
lenders and to the enterprises.
I am proud of what FHFA has done to help homeowners in the
housing market deal with this crisis. At this point, as
referenced in my written testimony, I am encouraged by what the
data tell us about the state of the market, the capacity of
servicers, and forbearance rates.
But this does not mean all is well. The crisis has provided
ample evidence of the critical vulnerabilities in our mortgage
system that put taxpayers, borrowers, and our housing market at
risk. Most notably, Fannie and Freddie have lacked the capital
to withstand a serious downturn of the housing market. This
undermines their countercyclical role and jeopardizes their
core important mission.
To provide the enterprises a stronger foundation on which
to weather periods of financial distress such as COVID-19, on
May 20th, FHFA released a re-proposed capital rule. This rule
would help each enterprise remain safe and sound to fulfill its
statutory mission across the economic cycle. It is essential to
build a strong, resilient housing finance system that supports
sustainable and affordable home ownership.
However, I should emphasize only Congress can enact the
reforms necessary to fix the structural flaws in our housing
finance system. To that end, next week I will submit FHFA's
annual report to Congress that includes several legislative
recommendations. Reform is long overdue. Strengthening FHFA's
regulatory and supervisory authorities simply to be on par with
what other safety and soundness regulators have will ensure the
enterprises will be well regulated and capitalized outside of
conservatorship.
I look forward to the opportunity to hear your questions.
Thank you for the opportunity to be here this morning.
Chairman Crapo. Thank you, Director Calabria, and I look
forward to your recommendations for resolution of our housing
system.
My first question will be to both of you. As you both know,
Congress acted boldly and aggressively in the CARES Act to help
renters and homeowners make it through this economic crisis,
including through extending forbearance, prohibiting evictions,
and prohibiting foreclosures across a broad portion of the
market.
Now, 10 weeks later, from your perspective, could you
briefly tell me, how would you characterize the current state
of the housing market and what are some of the policy tradeoffs
that we need to consider now as we move forward toward the next
COVID-19 response?
Secretary Carson, do you want to go first?
Mr. Carson. Yes. Well, clearly this is a very serious time
period that we are in, which was the reason that we acted so
quickly in conjunction with this Committee and other portions
of the Government, because if a person is worried about their
health, the health of their family, the last thing they need to
be worried about is whether they are going to lose their home,
and, therefore, quickly enacting the forbearance for
homeowners, you mentioned the partial claim, which is interest-
free, by the way. Payments are tacked onto the end of the
mortgage.
There are a host of other forbearance measures that we are
taking. All of these have had a very important positive impact,
so that things have not deteriorated to the level that most
people thought that they would. We are still not resting on any
laurels. We are still going to be extremely vigilant in looking
at the market. You know, everybody, I think, was taken aback by
last month's report. We expected a 22 percent decline in the
market and instead had a 0.6 percent increase.
You know, there are a lot of interesting things going on.
It speaks to the impact of the interventions that have been
done but also to the resilience of American people and their
willingness to do what it takes. You know, most renters, over
90 percent have continued to be able to pay their rent.
So it is really quite impressive what the American people
are able to do, and we have to recognize that the underlying
economic infrastructure of this Nation is actually very strong.
You know, we were just on a rocket ship, and then this
coronavirus came along, and we intentionally had to stop the
economy. But remember, that underlying factors that created
that strong economy are still there. And what we have attempted
to do is bridge the gap so that we don't have to start all over
again, and that we can just resume the upward trend for
everyone.
Chairman Crapo. Director Calabria.
Mr. Calabria. Let me start with the forbearance numbers.
The most recent numbers for Fannie and Freddie loans are about
6.6 percent. We have seen, over the last few weeks, those
numbers start to stabilize, and, in fact, within the GSE
portfolio you see almost as many borrowers canceling their
forbearance programs as you see rolling on.
I was certainly concerned that both going into May and
going into June we would see spikes in the forbearance rates in
Fannie and Freddie's books, and we did not. So I think we have
seen a stabilization.
As was mentioned in my remarks, about a third of those
borrowers continue to make their payments, which I think is a
real positive. Clearly, the biggest problems facing the economy
going forward, which ultimately impact the housing market, is
employment. So writ large, I think the single most important
thing we can do is figure out how to put people back to work. I
think that is the primary focus.
Let me, last, say that I certainly, over the last few
months, have been concerned about what the direction of the
housing market would be coming out of COVID-19. I have to say I
have been very pleasantly surprised. Purchase mortgage
applications, for instance, in recent weeks, have been even
higher than they were a year ago. We have seen home sales
really pop back up. And I would both
emphasize that the home sales activity and the mortgage
purchase activity I think have been far stronger than anyone
projected.
Seemingly, it is the case that apparently a lot of people
in quarantine spent their time looking at homes online, because
again, a number of them decided to buy homes when we came out
of this.
So I would emphasize, I think the housing market itself is
in a relatively strong point, and where we really need to be
focused on primarily is the labor market.
Chairman Crapo. All right. Thank you to both of you. My
time has expired. Senator Brown.
Senator Brown. Thank you, Mr. Chairman. Dr. Carson, do you
know that people working in jobs right through the pandemic--
retail workers, millions of retail workers, custodians, food
service people, security people, home health aides--do you know
that people working in these jobs right through the pandemic
don't get paid enough to afford to rent a modest one-room
apartment?
Mr. Carson. I do, and that is one of the reasons that we
are concentrating on the people who were most severely affected
by this pandemic, and what are the reasons that they were most
severely affected. One of those reasons----
Senator Brown. Mr. Chairman--I am going to cut you off
there, Dr. Carson. You act like you talk about the economy was
on a rocket, going up like a rocket when the pandemic hit. The
fact is these are workers in the economy that have been working
through the pandemic, the workers I'm talking about, they
don't--because corporations are not paying them enough.
We had an affordable housing crisis in this country long
before the current public health crisis, upon which you blame
the entire economic problems in this country. Your agencies are
making things worse, whether it is through budget cuts to
affordable housing or trying to make mortgages more expensive
or harder to get or dismantling fair housing protections.
So I want to turn to that. Secretary Carson, I have been
writing to you, and many Members of this Committee have joined
me in this, from Minnesota and Hawaii and Nevada and Montana
and Rhode Island. All of us have been writing to you about
HUD's decision to not enforce our Nation's fair housing law.
Let me give you some examples. NAACP's legal defense fund
said housing and HUD's FHA proposal is a, quote, ``blatant and
egregious attempt to undermine the premise of the Fair Housing
Act, is an absolute regression in fair housing practices.''
Urban League President, Marc Moriel, said that HUD's proposed
disparate impact rule is directly at odds with the Fair Housing
Act in its basic purpose, and if enacted would destroy
disparate impact liability as we know it.
A coalition of 45 civil rights groups, including Unidos and
the Leadership Conference of Civil and Human Rights, told HUD
the same rule was, quote, ``in direct contradiction to HUD's
mission, decades of legal precedent, and the Supreme Court's
recent decision in inclusive communities,'' unquote. Now these
45 groups--these 45 groups, Mr. Secretary, represent tens and
tens and tens of millions of Americans. This is our country.
You are ignoring them and if these comments come even partially
true, it will be devastating for equality in this country.
Why are you still moving forward with these proposed rules,
against the wishes of tens and tens of millions of Americans?
Mr. Carson. You know, I abhor anything that even smacks of
unfairness for people, but we also want things that actually
work, not things that have been there for decades and have not
resulted in any improvement. Therefore, we are doing things a
little bit differently. You know, when we are looking at AFFH,
we are looking at the real reason that there is segregation.
The real reason that there is segregation is not because there
is a bunch of George Wallaces standing in the doorways. It is
because people can only afford to live in certain places. And,
therefore, we are moving toward a model where we encourage the
development of affordable and decent housing, not just in one
area but throughout lots of different areas.
Senator Brown. Mr. Secretary, there is no real evidence
that that is what you are doing. There is certainly no evidence
that this Administration wants to see higher wages so that
workers actually can afford decent places to live--opposition
to the minimum wage, taking away the overtime rules, 100,000
people in my State lost thousands of dollars in overtime
because this Administration, of which you are so happily a
part, always comes down on the side of corporate interest,
against workers.
Let me go somewhere else on this, my last question, Mr.
Chairman. Last week, the city of Columbus opened up its
convention center to begin processing evictions. Courts are
doing that all over the country. One advocate told me about a
client who was trying to avoid eviction because her son, who is
deployed in the Navy, is returning home and she does not want
him to find her a shelter.
We are in a national crisis. Reflect on that for a moment.
Twenty million people have lost their jobs. We are using arenas
as eviction courts in cities around the country. Dr. Carson,
you are the top housing authority in this country, so tell us--
you are the person--tell us how many people does HUD expect
will lose their homes, how many does HUD expect will become
homeless in the weeks and months ahead? How many?
Mr. Carson. We will be working very hard to make sure that
no one who we----
Senator Brown. No, Mr. Secretary, how many do you expect--
already some have become homeless. These eviction courts, many
of them continue to operate. We know when the deadline comes
off, when it expires, we know more people will be homeless. The
point is, we have, and everybody on this Committee, every
Democrat on this Committee, supports $100 billion in the
emergency eviction fund and $75 billion, Jack Reed's bill, the
unemployment emergency foreclosure fund, to keep people from
losing their homes. Twenty million Americans unemployed. Half
of Black renters surveyed told the U.S. Census they have little
or no confidence they can pay their rent next month.
Do you want to answer the simple question, how many people
are going to be homeless? How many people are going to lose
their homes? And what are you, as an Administration, going to
do about it when President Trump and Senator McConnell simply
say ``there is no sense of urgency. We do not have to do
another package. We do not have to fix this. We will just let
happen what is going to happen''?
Thank you, Mr. Chairman.
Chairman Crapo. Senator Scott.
Senator Scott. Thank you, Mr. Chairman, and thank you to
both of the panelists for being here this morning. I want to
continue on the eviction conversation. I think it is really an
important conversation for us to engage in. And perhaps Senator
Brown's passion is well placed. There is a lot of fear around
evictions. There is a lot of fear around people being able to
pay their rent.
The CARES Act contains extensive measures on eviction
moratoriums for households renting in apartment buildings that
are financed by federally backed mortgages. We did this to make
sure that families would not end up on the streets during a
pandemic and their ensuing job losses. But as we pivot to a
recovery and better job numbers, my question is this. As you
think through the eviction conversation, can the moratorium
actually make it harder for renters? Are they not accruing a
bigger and bigger balance that they have to pay 1 day, and will
that not actually lead to more evictions and not less
evictions?
So I think there is a way, and I do appreciate his passion.
I say that sincerely. But I think the other side of the coin is
that we may be setting people up for long-term failure if, in
fact, we don't start looking at the picture from the end of the
crisis back as opposed to at the beginning of the crisis
forward.
Either panelist.
Mr. Carson. Senator, that is a very astute observation,
and, you know, the fact of the matter is when we extend the
forbearance and people still owe money, that is not helpful.
What is helpful is trying to create an environment such as we
were enjoying a few months ago, where people have employment,
people have opportunities to climb the ladder.
We are very interested in creating affordable housing in
lots of different places, and those are the kinds of things
that really empower people. And we are very interested in
programs where people can be able to save some money, so that
they can actually make a down payment on a home, because that
is the principle mechanism of wealth accumulation in this
country. We are not interested in continuing a bunch of old
programs that kept people impoverished for generations.
Senator Scott. Thank you. Director, anything to add to
that?
Mr. Calabria. Thank you, Senator. I think you did touch
upon a very important point, which is, you know, fundamentally,
what we want to be able to do is grow the jobs and income so
that people can pay their rent rather than simply try to avoid
evictions. Although I certainly will note that we moved very
quickly before the CARES Act to put a moratorium on evictions
for Fannie and Freddie loans. We will certainly extend that if
necessary. It currently goes to June 30th. But the fundamental
point of how are we growing jobs income, how are we dealing
with lack of housing supply, I think all of these things are
critical to deal with.
Senator Scott. Thank you very much. One final question.
This is on forbearance measures. Director and Secretary, as far
as I can tell you two have been very receptive and open, and
frankly, we have had many conversations. We do not always agree
on the outcome but at least you are both available for that
conversation, so I thank you both for that.
The GSEs and the FHA have been working with lenders and
servicers to implement the extensive forbearance measures we
put in through the CARES Act. For the Director, you and I have
spoken on this before, but as of today can you give me an
update or an assessment of the forbearance assistance being
provided to borrowers in loans owned by the GSEs, as well for
Secretary Carson, can you give me an update or assessment on
forbearance through the FHA?
Mr. Calabria. The current GSE numbers, as of this morning,
are 6.6 percent of Fannie and Freddie loans in forbearance. I
will note about a third of those are continuing to make their
payment, and we have seen that flatline over the last couple of
weeks. So it certainly seems to have stabilized.
Senator Scott. Good.
Mr. Carson. And, you know, last week was actually the first
time started going back in the other direction. We are at 12.4
percent right now, which is a much smaller number than had been
anticipated and predicted by many. We will continue to work
extremely hard to push that down further.
Senator Scott. I only have about 30 seconds left. Would you
agree that with the surprising job numbers in May that perhaps
the worst of it is over, and that as we start climbing out,
getting folks re-engaged in their monthly responsibilities, is
a good thing long-term for their savings and retirement funds?
Because ultimately, the one thing I keep thinking about are
people who have limited incomes and limited savings, the
deferral has been helpful, and that is good news. But I am
afraid of creating an issue where that one, two, or 3 months
divided over several months is still a bit too much for people
to absorb. So the faster we get back to normal, the better off
we will be, especially as the economy starts to percolate a
little bit.
Mr. Carson. You are so right, Senator, and that is why it
is so very important that we utilize the information that we
have learned about COVID-19 so that we can live with it and not
be dominated by it.
Senator Scott. Thank you, sir. Thank you both.
Chairman Crapo. Senator Reed.
Senator Reed. Thank you very much, Mr. Chairman. Director
Calabria, let me direct some questions to you. I do understand
that through your forbearance programs that people have been
temporarily forgiven from their mortgage requirements, but at
the end of that forbearance period, which will terminate,
thousands and thousands of people could be foreclosed on their
homes. Similarly, renters could be evicted. Is that the real
situation we are looking at?
Mr. Calabria. So Senator, we certainly want to minimize
that, and I want to emphasize that within Fannie and Freddie
loans nobody will be required to make a lump-sum payment. So
our default option is to add that to the end of the loan or
whenever the house is paid off. So we are really trying to make
sure that there is no payment shock at all, there is no change
in the monthly payment for the borrower or the renter, and we
are trying to be able to make sure that people can get current
again as much as we can.
So certainly we are really focused on trying to minimize
how many of these loans actually eventually go into real
delinquency or into foreclosure, so we are certainly very much
focused on that.
Senator Reed. Well, but the reality is that legally that
landlord or that mortgage holder can walk in the next day, if
the next payment isn't made, even if you are tacking on the
forbearance at the very end of the loan, and say, ``You have
not paid, and you are out.'' And that is an incentive that
many--unfortunately, I do not think can avoid.
You have situations, also, where there are individual
mortgages that are not federally related, so they already could
have been foreclosed. But the situation, I think, is such that
we are looking at--and you put your finger on it, in one
sense--we are looking at a real employment problem and a funds
problem, that even if your forbearance is tacked on at the end,
people still might not be able to pay.
And that would suggest to me that we need to do several
things. First, we have to extend unemployment compensation,
because many of the people who are sort of--as you have alluded
to and so has the Secretary--are still paying, are doing so
only because they are getting unemployment compensation,
enhanced unemployment compensation.
But two, we have to go right to the source of the problem,
provide resources to individual mortgagors and renters so that
they can basically pay their rent or their mortgage, and in
addition, it takes the pressure off the landlords and the
banks, so that they actually have funds.
Can you conceive of a program--would not that make more
sense than just simply stopping one day and crossing our
fingers and hoping everything is OK?
Mr. Calabria. Well, Senator, I certainly agree that top-
line--the point about this being fundamentally a jobs income
issue and do think that is where we should focus. I do want to
say, in terms of Fannie and Freddie loans in forbearance,
generally borrowers do not walk away from their home if there
is positive equity, and we are seeing less than 1 percent of
these borrowers across the board in a negative equity position.
So as long as we have a strong housing market, which again,
is an open question--I certainly do not have a crystal ball in
that regard--but in the strength of the current housing market,
I do not think there will be a lot of borrowers walking away.
But that does not change the fundamental point you raise, which
is absolutely correct that this is fundamentally an income jobs
issue.
Senator Reed. And we have to deal with getting the income
to the people, through unemployment compensation together with
some subsidy or some help for their rent or their mortgage.
Otherwise--and again, I do not see anyone wanting to walk away
from their house----
Mr. Calabria. I agree.
Senator Reed.----what I do see is people wanting to go in
there and foreclose on a house and sell it to someone else at a
profit. That is the way the system seems to operate, to me, and
that would be quite--that would be an option that they will
have once we stop forbearing and we stop providing unemployment
compensation benefits.
So again, I think this is something that we have to take
very seriously. Rhode Island Housing has estimated that in
Rhode Island 30,000 individual households will be at risk of
additional foreclosure when the unemployment benefits
terminate. They will be out on the street very quickly. And we
know, also--and one of the things about this crisis is most of
those households will be minority households. They do not have
the resources, they do not have the financial support, they do
not have the money stashed away to make it a couple more
months. They will be the first ones out.
And as far as affordable housing goes, we have tried, I
know on the Appropriations Committee, to put money in for
affordable housing as best we can, but it is a fraction of what
we need. And this Administration has not been talking about
affordable housing. They should talk about it more, and they
should put more money in their budgets. We plus-up affordable
housing approach.
So we have a crisis ahead of us, and simply sitting back
and saying we will not demand immediate repayment of the
forbearance and we are so pleased at some of the other things
we have seen, misses the point dramatically. Thank you.
Chairman Crapo. Senator Cotton.
Senator Cotton. Thank you, Mr. Chairman. Thank you for your
testimonies today.
Mr. Calabria, I will address this at you. I have long had
some concern about mortgaging servicing assets, mainly from the
vantage point of homeowners who could get confused, or worse,
they could run into problems if they try to resolve payment
issues on their mortgage, when those homeowners are working
with a company that is often not in their community, or the
original bank through which they got their loan. However,
markets have had to evolve since 2008, because of regulations
and other factors, and that has pushed a lot of that mortgage
servicing activity on banks and into independent servicers.
So that is the world that we live in now, but the concern
for homeowners' financial protection is only more acute now as
the CARES Act, well-intentioned though it was, could end up
causing dislocation in this market because of the forbearance
mandates and the costs mortgage servicers are having to
shelter.
I know that you have said that the mortgage servicing
industry as a whole is well capitalized, enough to withstand a
large degree of forbearance and absorbing the impacts of the
coronavirus lockdowns, but I just wondered if you could talk a
little bit more about the upper limit to that capacity,
forbearance take-up rate, for instance, that, in your opinion,
might bring the mortgage service industry up to its limits.
Mr. Calabria. Thank you, Senator. Let me start with
emphasizing that for the 346 nonbank servicers that Fannie and
Freddie do business with, we get quarterly financials for each
and every one of them. We also, for the larger of the nonbank
servicers, we get weekly or even daily contact for some of
them.
So first I want to assure you that our analysis on the
servicer side is very data driven. We are looking at the
financials for these entities. We are monitoring them. Every
morning I get a heightened watch list of servicers, and I am
happy to say that that list is shorter, it is smaller today
than it was 2 months ago, and even 2 weeks ago.
And I would go as far to say that servicers are in a better
financial position today than they were in March. When we have
seen servicers who we thought were a little close to the line,
if you will, we have worked with Fannie and Freddie to
encourage those servicers to go out and raise liquidity. Many
of them have, and many of them have raised substantial
liquidity.
And so our estimates are that you probably could have,
within the Fannie and Freddie book--and I really want to
emphasize that that is our view on this, and that, of course,
issues at Ginnie Mae or issues at private label may be
different and are different--but for certainly in the Fannie
and Freddie book you would really have to see forbearance rates
get over 30 percent before there would really be stress among
the industry, and that this would be systemic. And that is, of
course, why we put the 4-month limitation in place, so that no
servicer would be on the hook for 12 months.
Senator Cotton. OK. Thank you for that answer. Mr.
Chairman, I have got to get off to chair a hearing of my own,
so I yield back my time.
Chairman Crapo. Thank you. Senator Menendez.
Senator Menendez. Secretary Carson, it has been over 2
months now since the CARES Act became law. The Act provided $5
billion in desperately needed and flexible CDBG funding
communities to address both the health and economic aspects of
COVID response.
But today, HUD has only released about $3 of the funds
Congress appropriated, and furthermore, there was a major lack
of clarity from HUD on the rules around the first disbursement,
which caused confusion and delays as the recipients desperately
sought answers to questions like whether they could use the
funds for PPE, COVID testing, or supporting small businesses.
So my question to you, Mr. Secretary, when does HUD plan to
release the remaining CDBG funds provided under the CARES Act?
Mr. Carson. Well, thank you very much for your question,
Senator. As you probably know, the time in which we have
released the first set of funds for CDBG was a record amount of
time. The reason that was done without a Federal Register
notice is because a Federal Register notice is not required in
those situations for the money to be disbursed and for it to
actually be used. And I hope we have made that clear to
everybody.
Having said that, Federal Register notice for that will be
coming out in the very, very near future.
As far as the----
Senator Menendez. Do you have some timeframe here that--I
mean, the reason Congress provided these monies is obviously to
deal with the challenges that these municipalities have. They
have greater demands, they have less revenues that are taking
place as a result of all the social distancing measures that
took place, so all their different forms of revenues are
lessened. So this CDBG money, for some essential programs, is
critical.
Mr. Carson. Well, of the $12.4 billion, $9.1 billion of it
has already been allocated, and much of that has been utilized
already, using the grant formulas that are already in
existence.
The last portion of that will be allocated by October 1st.
Senator Menendez. Are you going to--by October 1st?
Mr. Carson. Yes.
Senator Menendez. That is way too late. That is not what
Congress intended.
Mr. Carson. Well, that----
Senator Menendez. The demand is now, and there is no way
that we should be waiting until October for that to happen.
Mr. Carson. All the statutory requirements and timing will
be met.
Senator Menendez. Let me switch to another topic. On
December 18, 2018, I and a series of other Senators sent you a
letter raising concerns about HUD implementing an unofficial
policy denying FHA-insured loans to DACA recipients, and we
asked HUD to clarify that it was, in fact, a new policy. Your
agency responded, saying, quote, ``It has not implemented any
policy changes during the current Administration, either
informal or formal, with respect to FHA eligibility
requirements for DACA recipients,'' close quote.
Then on February 12, 2019, FHA Administrator Montgomery
testified before the House Appropriations Committee, saying the
policy has been, quote, ``unchanged for many years.'' On
February 22, 2019, HUD officials met with my senior staff and
other Senate staff to brief them on the FHA policy related to
DACA recipients. Those officials affirmed that there have been
no policy changes.
Mr. Secretary, you even testified before the House
Committee on Appropriations in April of 2019, that you were
unaware of any changes in policy related to DACA recipients
receiving FHA loans, and said, quote, ``I am sure we have
plenty of DACA recipients who have FHA mortgages.''
However, FOIA documents released on Friday revealed that
HUD officials were actively discussing, and had implemented, a
policy prohibiting the issuance of FHA loans to DACA recipients
as early as March of 2018, if not sooner.
So, Mr. Secretary, why did you and other HUD officials
conceal and misrepresent this policy change to Members of
Congress?
Mr. Carson. Senator, I have concealed nothing at all. Do
people have conversations? Yes they do, and I am sure they will
continue to have those conversations. Am I privy to all their
conversations? No. Do their conversations change the policies?
Absolutely not.
Senator Menendez. Well, it evidently has changed the
policy, because I have heard from so many lawfully present DACA
recipients, social security numbers, everything that we would
expect from any law-abiding citizen, who have been denied,
mortgage companies who have said that FHA has changed the
rules. And so all of your Department's testimony to date is
totally out of the realm of what it, in fact, has been recorded
as saying. That is what the FOIA documents show. So this
Department has changed the rules on DACA recipients.
Mr. Carson. I think the whole thing started as the result
of a question that was asked about it, and it then came to
light that maybe some rules were being violated and people
decided that they better pay closer attention to the rules.
Senator Menendez. Well, that is simply not what has
happened. We will follow up, Mr. Chairman.
Mr. Carson. OK.
Chairman Crapo. Thank you. Senator McSally.
Senator McSally. Thank you, Mr. Chairman, Secretary Carson,
Director Calabria. Good to see you again.
Director Calabria, FHFA currently guarantees $5.7 trillion
in mortgages, which I know you are aware of but suffice it to
say that plays a critical role in getting us through this
pandemic. And in your testimony you said that 6.4 percent of
Fannie and Freddie mortgages have entered forbearance. Those
are many of my constituents in that 6.4 percent, and we have
heard from several of them who are getting conflicting
information and a lot of misunderstanding or confusion over the
process of forbearance, and oftentimes just different,
depending on who they are dealing with.
And so while you have this public forum, and the
opportunity to speak to constituents like mine who are looking
for this forbearance, can you explain in layman's terms how the
forbearance was designed to work, what the process should look
like for the borrowers, what should the lenders and servicers
be doing to ensure they are following the law, and what
consequences are there for lenders or servicers that fail to
process forbearance requests?
Mr. Calabria. Thank you, Senator. Let me first emphasize
that in response to the varying answers that servicers were
giving, we drafted a script Fannie and Freddie have sent to all
of their servicers. This was done some time ago. So all
borrowers, regardless of who their lender is, if it is a Fannie
and Freddie loan they should essentially get the same script.
They should get the same answers. They should get the same
options. And Fannie and Freddie do follow up with the servicers
to make sure that is the case.
For borrowers listening, let me first emphasize that there
is no requirement at all for the missed payments to be made up.
So if you have missed 2, 3 months, if it is a Fannie and
Freddie loan, and I believe this is also the case with FHA, no
one will be asking you to pay that back all at once. Of course,
if you can that is great too.
Let me also emphasize if you have been one of those
borrowers in forbearance who have made your payments, you are
immediately able to refinance if you choose.
We will have a waterfall of different options, but if you,
the borrower who have missed payments, do not contact the
lender when you resume your payments, we will automatically
take those payments and put them on the end of the loan,
interest free. So let's say, for instance, you have missed
$3,000 in payments and you have got a $250,000 mortgage. It
will now become a $253,000 mortgage. Of course, it is not
amortized. And that is simply paid back when you sell the home
or when you refinance. And we think this is fair to borrowers.
We think it is fair to lenders. It keeps the exact same
payments, so when you resume and you can make the payment you
used to be able to make, again, that will be pushed.
If you cannot--so let's say you're back to work but you are
not making what you are used to, and you cannot afford the
previous payment, then we will underwrite you to a modification
option where we can come up with a payment that is affordable.
But that will have to be something where you have to reach out
to your servicer and work with them for that option.
So again, I want to emphasize if you were in forbearance,
you started resuming your payments, we are simply going to tack
it on the end automatically, and that will be reflected in your
monthly statement, but your monthly payment will not change.
Senator McSally. OK, great. And then on May 13th, FHFA
announced the payment deferment plan. Again, that is different
than a forbearance request. So as my constituents are looking
at their options, can you explain, in plain English, the
difference between the payment deferment plan and the
forbearance?
Mr. Calabria. So the forbearance is at the beginning of
this where the payments are not forgiven. They are just pressed
on pause. So, you know, instead of making your monthly payment
you call up to your servicer, and you have to contact your
servicer--I think this part is so crucial--you have to call or
at least sign up, and a number of lenders do allow you to do
this online. So you have to enroll in the forbearance plan.
Again, it is not forgiven. It is just going to be tacked on to
the end of the mortgage. And at the time when you start to
resume, then whatever you have missed will be put back on the
mortgage.
So I do think it is critical to keep in mind it is not
forgiven. It is a pause. You still have to pay it. And, in
fact, you know, for many households if you can pay it you are
probably better of continuing to pay it. But again, it is a
time-out, basically, and that is the way to think about it.
Senator McSally. OK. But that is different than the payment
deferral plan that your agency came up with, just to clarify,
right? Or----
Mr. Calabria. It is in that the forbearance is what happens
on the front end, while you are missing the payment or not
making the payment, and the payment deferral was what happens
when you are out of forbearance.
Senator McSally. OK. Got it. Thank you. I also want to
share, in my remaining time, my concern about renters. There is
a single mom on my street who I talked to this weekend who is
now coming up on 4 months of rent. And perhaps her homeowner
actually has been given some relief--I do not know the
circumstances--but as we are allowing grace to happen for the
owners, I don't know if you could share--I don't know, there is
not much time, but Secretary Carson, what else can be done for
the renters to ensure that they are not put in a situation of
potential eviction once the grace periods might end?
Mr. Carson. Look, it is very important for the renters to
make sure that they are in contact with the PHAs and with the
owners, to work something out. They also can have a
reassessment of their income made so that their rent obligation
can be lowered. But it does require proactivity on behalf of
the renter.
Senator McSally. OK. Great. Thanks. I am out of time. I
appreciate it.
Mr. Carson. Thank you, Senator.
Chairman Crapo. Senator Tester.
Senator Tester. Yeah. Thank you, Mr. Chairman. Thank you,
Ranking Member Brown, and I want to thank both Dr. Carson and
Mr. Calabria for being here today.
Kind of going off of what Senator Menendez said on the CDBG
grants, Dr. Carson, and the fact that they are not out and we
are two and a half months after the CARES Act has been passed,
the same thing could be said, even to a greater extent, on the
emergency solution grant. Two and a half months after Congress
has passed the CARES Act, just 2.5 percent of the homeless
assistance money has been available, you know, basically two
and a half months after we approved the CARES Act.
Can you tell me why this is the case?
Mr. Carson. Well, first of all, the rest of that ESG money
is being announced today, so all $4 billion of it will be
allocated. An announcement was made as of today.
Senator Tester. Why did it take so long?
Mr. Carson. This is record time, Senator.
Senator Tester. Yeah, but we are in a pandemic, in a
pandemic with a lot of other things that are going on, and I do
not think Congress passed--and I think it is what Senator
Menendez was referring to too--I do not think Congress passed
the CARES Act in a record amount of time, I might add, to have
it going out in mid summer and fall.
Mr. Carson. But do recognize, sir, that the initial amount
of ESG went out the first week after the bill was signed, and
that was $1 billion. We also made it clear that people could
utilize the monies that they already had. They could be
repurposed.
Senator Tester. Yeah. Homeless assistance, though, that
simply is not the case. I mean, it did not get out. And it is
good you are getting it out now. I just hope it is not too
late.
Let me touch a little bit on Senator McSally's question,
and others who have asked this question, on rental forgiveness.
We have got a situation where people have lost their jobs and
they cannot pay rent, so we are telling them it is OK, you do
not have to pay your rent until you get your feet back under
you. In the meantime, we have got people who own property who
may have loans on that property. They might be through whoever,
whatever mechanism they might have used.
Can anybody tell me what the plan is for not only keeping
the renters in their home when, hopefully, we get out of this
sooner than later, and what is the plan for the property owner
that rents that property to the renter, that does not get those
rental payments?
Mr. Carson. Well, first of all, you might be surprised,
because you probably cannot see this. But this is the rent
payment tracker, 4 months' rent result, for 2019 versus 2020.
You can see that it has not changed very much--97.7 percent of
people were paying last year, 94.6 percent now. So people have
been paying, significantly, their rent.
We are still concerned about it, obviously, and that is why
I mentioned that if you do not see any prospect of being able
to get a job, which I do not think is going to be the case for
most people, but if that is the case, you can have your income
readjusted so that your rent will be readjusted down.
Senator Tester. I got it. I got it and I appreciate that,
but what about the folks who own the homes that are being
rented out, or the apartments that are being rented out, that
have loans on those, that may not have gotten the income from
the rent because the rent was not paid?
Mr. Carson. Those individuals are businesses and they
qualify for PPP.
Senator Tester. Do you think that is adequate enough right
now to take care of any sort of liability that they might have?
Mr. Carson. It seems to be working, quite frankly.
Senator Tester. OK. All right. Mr. Calabria, in April,
ProPublica reported--they found that despite a ban on evictions
during the crisis, landlords in four States were proceeding
with eviction filings during this pandemic. Are you aware of
that, number one, and number two, what are you doing about it,
if you are aware of it?
Mr. Calabria. So, Senator, we certainly have heard of
landlords moving forward. We have not seen evidence on whether
those properties are Fannie- or Freddie-backed or not. I will
note that we do not have enforcement authority over landlords.
When we hear complaints, we give those complaints to the CFPB.
I believe the CFPB tries to get those to the State attorneys
general. But we do not typically have statutory enforcement
authority in this area.
Senator Tester. So there is not much you can do about it,
is what you are saying.
Mr. Calabria. Correct, other than try to bring attention to
it, try to encourage the--I mean, if we believe that a landlord
who is getting forbearance is violating the terms of the
forbearance, we can stop the forbearance. But we certainly have
no ability to bring an enforcement action, if you will, against
landlords.
Senator Tester. OK. Thank you, Mr. Chairman.
Chairman Crapo. Thank you. Senator Moran.
Senator Moran. Mr. Chairman, thank you. Mr. Secretary and
Dr. Calabria, thank you for joining us.
Dr. Calabria, I want to draw my attention to you in my
questions. First of all, I would like to talk about risk
weighting for single family versus multifamily. Under the
FHFA's Enterprise Capital Re-Proposal, in my view there is a
confusing disparity between how the risk weighting is applied
to single family versus how it is applied to multifamily.
In determining, as I understand it, the single-family FHFA
relied on the crisis of 2008 for a factual basis to make that
determination. However, on the multi side, there was an
indication by FHFA that that was not the appropriate way to
look at it for multifamily.
But in terms of losses, back in 2008 and 2009, multifamily
2007 vintage cumulative losses were 1.3 percent, while single-
family losses were 3.6 percent. Based upon that comparison, it
surprises me that the indications by the re-proposal is the
risks are higher in regard to multifamily, when it seems to me
the evidence shows exactly the opposite.
Why then, relative to single family, is FHFA penalizing
multifamily against the data? You have indicated that FHFA may
be overfinancing multifamily housing. Are these two things
related? I want to make sure that we are making a risk
calculation based upon the facts, not based upon a desire to
reduce the financing of multifamily.
Mr. Calabria. Thank you, Senator, for that question, and
let me first say that I could not agree with you more on
everything. All of this should be driven by the facts and the
data.
Let me start with your last question, in terms of there is
a preexisting multifamily activity cap and then there is the
capital rule treatment of multifamily, and those are indeed two
different things. There is nothing in the capital rule that is
meant to drive the activity more or less of multifamily. Again,
those two are different. And, in fact, the current re-proposal
is a re-proposal of a 2018 rule that was crafted by my
predecessor. In the multifamily part of that rule, almost
exactly the same as it was in the 2018 rule, very modest
changes were made.
But I also want to clarify a couple of issues that I think
are critical here. While the re-proposal attempts to use more
bank-like language so that analysts and commentators who
understand the Basel process can read our proposed rule and
have more of an apples-and-apples approach, I do want to
emphasize that unlike in the banking world where the risk
buckets are somewhat fixed--so, for instance, we are all aware
with the 50 percent risk weight that banks have on single-
family mortgages, well, that 50 percent is the same for
everything that fits in that bucket, whereas the average risk
weights on both single family and multifamily in the proposed
rule are driven by the composition of the loans.
And so what you have really seen is that the composition of
both multifamily and single-family loans to date is different
than it was in 2008, and I am certainly very appreciative that
the multifamily performed functionally pretty well.
Let me also emphasize that the cap on multifamily that we
set still has Fannie and Freddie about where they have been in
the marketplace, which is essentially their highest market
share they have had in decades. So we have not pulled back
Fannie and Freddie from the multifamily market. We tried to
make sure, of course, that it performs differently.
And also we are seeing, in this environment, so for
instance Fannie and Freddie do have a significant amount of
both seniors housing and student housing in the multifamily
sector that are both under stress that we are keeping an eye
on. Again, I am not overly concerned, but again, it is a
possibility of that being a different crisis this time around
than the last crisis.
But I last want to emphasize that it is a proposed rule. We
are taking comment. We certainly expect and welcome commentary
from the multifamily industry and others. We will obviously go
through those comments. We will be thoughtful about it, we will
be thorough about it, and we will be data-driven about it, and
I promise you we will be transparent about it.
Senator Moran. Dr. Calabria, thank you. Would you commit
that you would inform my staff and provide data----
Mr. Calabria. Absolutely.
Senator Moran. Thank you. And you will also follow up about
other alternatives for that kind of lending for multifamily,
what you see is available.
My time has expired. I thank the Chairman. I thank you, Dr.
Calabria.
Mr. Carson. Thank you, Senator.
Chairman Crapo. Thank you. Senator Schatz.
Senator Schatz. Thank you, Mr. Chairman, Ranking Member.
Dr. Calabria, half of all renters live in apartments owned by
individual landlords, and FHFA provides for eviction
protections for renters in multifamily properties that take
advantage of CARES Act mortgage forbearance. But the same
protections are not extended to renters in the one- to four-
unit buildings with loans receiving CARES Act forbearance.
Are you considering extending the protections prior to
announcing the forbearance program?
Mr. Calabria. Senator, I remind you that Section 4022 of
CARES, which handles the single family, which is where the
single-family rental is, we are mandated, essentially, on, if
you will, the honor system, where we have to provide the
forbearance. Where, by contrast, in 4023 of CARES, which covers
the multifamily, you do have these requirements for there to be
an exchange of, in exchange for forbearance there will be no
eviction on nonpayment of rent.
So our conclusion is that for us to place legal mandates on
non-eviction, on tenants in single-family properties under
4022, Congress would have to amend that section.
Senator Schatz. Thank you. A couple of other things about
where the discretion lies between the Congress and FHFA. You
referred to a foreclosure moratorium which expires at the end
of this month, and you said you are at least giving
consideration to extending that moratorium. Is that correct?
Mr. Calabria. Yes, Senator.
Senator Schatz. And what is your timeframe for deciding
that and what is the timeframe under consideration in terms of
an extension?
Mr. Calabria. We will be making that decision--we will be
making that announcement certainly within a week. I think
because we can always extend it as we move along, I certainly
think, at a minimum, we would want to extend it a month. At a
maximum, I do not think we would want it to be any more than 2
months, just because we can always extend it again as we start
to see how the economy evolves.
So my preference here is to give people enough certainty
without necessarily locking us in.
Senator Schatz. And the July 24th expiration of the
eviction moratorium, likewise, is that in the Congress' hand or
do you have discretion other than the sort of complication
related to LIHTC units?
Mr. Calabria. We can extend for GSEs. Obviously, the CARES
Act covers all Federal-related mortgages, not simply Fannie and
Freddie. So, for instance, USDA, VA. If there was to be an
extension for those, we could not do that at FHFA but we could
extend the foreclosure moratorium.
And I really want to emphasize the part of what we have
done on the foreclosure moratorium are foreclosures that were
in process pre-CARES Act. So there were a number, for Fannie
and Freddie, probably about 200,000 ongoing foreclosures pre-
COVID, and it is important to remember that we paused those as
well, because we wanted to be able to facilitate social
distancing. And we are looking at continuing that, and that is
a separate, outside of the 4022 and 4023.
Senator Schatz. I want you to, in your minds, good
conversation has happened related to what will happen once the
current CARES Act provisions related to housing expire. But if
you would provide to the Committee sort of a set of predictions
and recommendations for our consideration as we look at the
next round of legislation, to understand what is going to
happen next in the event that we do nothing at all. How many
people would be out on the streets? How many people would be in
foreclosure? How many people would be evicted? And what is
within the Administration's authority to provide some
flexibility to those individuals, but also probably more
importantly, what we are going to need to do, as a Congress, to
make sure that we don't face a cliff.
And I know Ranking Member Brown has been very clear about
this. You know, there are a lot of technical aspects of this,
but basically what we are looking at is that people have their
bills piling up and up and up, and that means that they are
experiencing some relief right now. But as I heard Secretary
Carson and you, Director Calabria, talk about the best solution
to this being, you know, job growth, that may be true enough,
but we know even in the most optimistic scenario that job
growth is not going to come fast enough to help people with
their rent and mortgage, not as a statistical matter.
Individuals will be helped as they find employment. But we
have got 40 million individuals who are unemployed, and those
jobs are not coming back very quickly. And so as housing
agencies it is a little bit of a rhetorical sleight of hand to
say, well, we have just got to wait until the job market
recovers. That is going to be years before we are fully
recovered.
One final question, Secretary Carson. Are you comfortable
with an October deadline for pushing out the CDBG money?
Mr. Carson. That is the deadline.
Senator Schatz. No, I understand that.
Mr. Carson. Bear in mind that the----
Senator Schatz. I understand what you said, Secretary,
before, to two previous Senators who asked you this question,
and I understand that you are saying you are within the
statutory framework. That is not what I am asking you. I am
asking you, understanding how urgent the situation,
understanding that we are experiencing Depression-levels of
unemployment, understanding that we are in a global pandemic,
that seems rather casual to think, well, we are within the
statutory mandate, when you know that people across the country
are suffering.
So my question is, is there any way you could see fit to go
back to your agency and accelerate the process of pushing out
these CDBG funds? We are not saying that you are violating the
law. We are saying that people need the money now, and would
you consider pushing it out a little more quickly?
Chairman Crapo. And if you could be brief, please. We are
way over time.
Mr. Carson. OK. The statutory requirement for ESG is June
25th. It is out today, the 9th. So it does not mean when the
deadline is that we are going to wait that long. We are going
to get it out as fast as we possibly can.
Chairman Crapo. Thank you. Senator Van Hollen.
Senator Van Hollen. Thank you, Mr. Chairman, and I thank
the witnesses today. You have had a lot of questions about the
impact of job loss and therefore the loss of income, and
therefore the difficulty so many people have in paying rent. I
think even the most optimistic scenarios show that millions of
Americans will remain unemployed, through no fault of their
own, beyond July 31st, and, of course, after July 31st, the
enhanced unemployment compensation benefits would expire unless
we extend them.
So just a quick question to both of you. Do you agree that
it makes sense, to the extent that we will continue to have
millions employed, to extend enhanced unemployment insurance to
help people pay their rent as this emergency continues?
Mr. Carson. Well, I think it is obviously going to be very
important for us to monitor the situation, see how much
recovery is going on, and obviously we are not going to sit
idly by and watch millions of Americans suffer for something
that is not their fault.
Senator Van Hollen. So, Mr. Secretary, just to clarify, at
the end of July, if it is clear that we will continue to have
millions of people unemployed, through no fault of their own,
you would support continuing enhanced unemployment compensation
in some form?
Mr. Carson. As necessary.
Senator Van Hollen. All right. Mr. Calabria, do you have an
opinion on that?
Mr. Calabria. Senator, I will just remind you we are an
independent agency, not part of the Administration, not part of
the negotiations, so I will leave what the next package looks
like between Congress and the Administration.
Senator Van Hollen. No, I understand that, but you are also
somebody who is well versed on these housing issues and you
have an understanding of the impact of people not paying their
rent, or not able to pay their rent. So you do not have any
opinion on it?
Mr. Calabria. I certainly share the point about there being
a broader income job dynamic. I certainly think the number of
Senators, for instance, who have raised issues about the $600
further being some percentage of the unemployed that are
receiving more than they actually would in wages. I guess at
the risk of the old clich? about a two-handed economist, there
are tradeoffs here, and I think fundamentally the reason you
and your colleague are elected are to weigh those tradeoffs.
Senator Van Hollen. Well, Mr. Secretary, we will do that.
There is a work-share program we will be talking to more of our
colleagues about, which both provides, you know, the benefit of
the employer, small business, being able to share reduced hours
and wages with the unemployment system.
Mr. Secretary, in response to an earlier question, I think
it was to Senator McSally, you mentioned the process at HUD for
income recertification. For people who lost income, they can
recertify. Has HUD put out additional information recently to
better inform
tenants about the fact that they have to do that and that that
option is available to them?
Mr. Carson. Yes, we have, at HUD.gov/coronavirus.
Senator Van Hollen. Great. And have you thought of
expediting that process? In other words, we know a lot of
people are losing their income because they are losing their
jobs. Is there a way to expedite that recertification process
so people can get the benefit of it earlier rather than later?
Mr. Carson. We have our Assistant Secretary who is in
constant communication with the various PHAs and others to
inform them of what the process is and how to access that
process quickly.
Senator Van Hollen. Mr. Secretary, if you could--not right
now, but if you could get us the information on how many people
have requested recertifications, you know, since the emergency
hit, and how many have received it, could you get us that
information?
Mr. Carson. I would be happy to.
Senator Van Hollen. Thank you. Director Calabria, you
recently released your re-proposed capital rules for GSEs.
Moody's economist, Mark Zandi, has estimated that the change
will raise interest rates on low-income borrowers and could
raise mortgage payments on a $200,000 mortgage by $58 per
month. Isn't it a fact that this proposal will increase
interest rates and that they will be disproportionately borne
by lower-income households?
Mr. Calabria. I would disagree with that analysis and
certainly note that Mr. Zandi is on the board of a mortgage
insurer that has a strong economic interest in not seeing us do
this rule. So I certainly would not put him forward as an
unbiased expert in this.
I would also note, Senator, we have had a decade since the
financial crisis of arguments by Wall Street that somehow
raising capital will destroy lending in this country. That has
not been the case. I will note today that many commercial banks
in the jumbo market are able to make mortgages and they hold
twice the capital that the rule requires and do so at costs
that are equal to or less than what Fannie and Freddie are
charging.
So, Senator, I think it is just critical that we have
financial stability. We know in moments of stress, when large
institutions like Fannie and Freddie are undercapitalized it is
low- and moderate-income households that are most impacted.
Senator Van Hollen. I know my time is up, Mr. Chairman. If
you could just provide us your estimate of the impact this
proposal will have on interest rates and mortgage payments for
lower-income households. Can you get us detailed information on
that?
Mr. Calabria. Senator, we will look into that and see what
we can provide.
Senator Van Hollen. Well, it seems to me that in making
this kind of decision it would be essential to have that
information, so I hope you can put it together, and I look
forward to getting it.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you. Senator Cortez Masto.
Senator Cortez Masto. Thank you, Mr. Chairman and Ranking
Member Brown. I so appreciate Secretary Carson and Director
Calabria for being here. Director Calabria, thank you for being
on the phone with me last week as well. I really appreciate it.
So, you know, I am looking online in the Urban Institute.
There is an article that says, ``New data suggests that COVID-
19 is widening housing disparities by race and income.'' In
fact, the first paragraph into this article says that ``racial
and economic disparities in access to safe and affordable
housing existed long before the COVID-19 pandemic. And new data
from the U.S. Census Bureau suggest that the pandemic and its
economic fallout is only widening these divides.''
Would you both agree with that?
Mr. Carson. Absolutely.
Mr. Calabria. Yes.
Senator Cortez Masto. Thank you. So then let me start with
you, Secretary Carson. I am listening to your testimony and I
have been bouncing between here and Energy and Natural
Resources, but from what I listened to your testimony and then
also in your written statement you note the initial funds that
Congress has provided to help people with housing assistance,
but I do not hear or see any answers about how your department
will respond to the increasing numbers of African Americans,
Latinos, and low-income people who face rapidly increasing
housing costs and eviction, what you are doing to address that.
So I guess my first question to you is, as HUD calculated
the assistance formulas, did your researchers prioritize
communities with high proportions of African Americans and
Latinos, and did you take that into consideration?
Mr. Carson. Your voice keeps going in and out, so I am not
getting the full question, but I think you are asking are we
doing statistical analysis of the communities that we are
trying to help, and looking at the demographic data, and is
that somehow being utilized in the policies that we create.
Would that be an accurate portrayal?
Senator Cortez Masto. Absolutely. Thank you. Thank you.
That is accurate.
Mr. Carson. Yes. Of course we always look at the
demographics, and we do recognize that there is a significant
disparity, based on the environment in which you live. You
know, the COVID-19 crisis has made it very clear that
comorbidities such as hypertension and diabetes and obesity and
asthma have a tremendous negative impact in terms of morbidity
and mortality. And----
Senator Cortez Masto. And I appreciate that, and believe
me, I appreciate that, particularly coming from your
background. But let me ask you this. You are Secretary of
Housing and Urban Development right now, and so as you look at
this data, which you do not disagree with, what are you doing
right now, particularly during this pandemic, to address the
issue that we see more of this economic disparity within these
communities? And I have not heard, in this conversation we have
had today, how you, as the Secretary of HUD, are specifically
addressing this.
So that is my first question to you.
Mr. Carson. Well, what we are doing is utilizing the White
House Council on Opportunity and Revitalization, which is a
multiagency council, to address the underlying causes for those
disparities. That means housing specifically, that means
education, that means communication, that means transportation,
it means looking at----
Senator Cortez Masto. I appreciate that and I appreciate
what the White House is trying to do, but my question to you is
specifically, what policies and programs are you doing as the
Secretary of Housing? What specifically are you doing to
address this issue?
Mr. Carson. Well see, we recognize that this is going to be
an all-of-Government approach to solve these kinds of problems.
These are not just a HUD problem. They are not just an HHS
problem. It is a combination of utilizing all of these
together, recognizing what the underlying causes of these
problems are. It is because people have----
Senator Cortez Masto. I appreciate that, and I appreciate
the all-in approach and the wrap-around service approach and
the holistic approach. But you are the Secretary of HUD, and so
we are looking for specific programs and policies out of your
Department to address the housing piece, and I have not heard
that, and I think that is the frustration we are hearing today
from many of the Senators.
Let me--I do not have much time left so I will submit the
rest of my questions for the record. Thank you.
Chairman Crapo. Thank you. Senator Jones.
Senator Jones. Thank you. I appreciate the opportunity to
be here, and to both the witnesses, thank you so much for being
here and giving us information, and for your service. I
appreciate that.
I would like to ask Secretary Carson a little bit about the
issues involving radon and radon testing. As you know, and we
have discussed, there have been numerous reports, a million or
so instances where it is estimated that radon exists in public
housing, and that is a serious hazard for potential lung
cancer, and 21,000 Americans die of lung cancer every year.
The President's budget includes $5 million for the Health
Homes Program. I appreciate and comment your recognizing what a
problem this is.
But one of the problems we see is that public housing
authorities also have to provide and make sure that housing is
habitable, and when a unit is not being inhabited, though, they
somehow get panelized.
Huntsville Housing Authority, in Alabama, north Alabama, in
particular has had this problem and said that they do not have
the money at this time to fix the housing in those units.
I want to make sure we invest in safe, healthy housing, but
if the monies are not there, I don't want to see some of these
public housing authorities being penalized. So is HUD adjusting
its policy so we don't penalize these PHAs while they are
waiting for sufficient funds to remove hazardous materials such
as radon?
Mr. Carson. We are. Thank you for mentioning the $5
million, which is the first time that that kind of money has
been dedicated to radon. But we also have a Healthy Homes grant
of $20 million, which can be utilized for radon as well.
We have also changed the inspection protocol so that it
will be a part of the inspection, and obviously, as you
probably know, there are State and local requirements regarding
radon as well, and we will be assessing whether those are being
followed during the inspection process.
Senator Jones. All right. Well, thank you, but my real
question is that as these public housing authorities are
waiting to abate the radon and these units are standing empty,
are you adjusting your policy so that these PHAs do not get
somehow penalized for having vacant places--vacant buildings,
vacant apartments?
Mr. Carson. If the apartments are vacant but they are not
following the protocols that are mandated by State and local
law, yes, they will still be penalized. We cannot allow people
to simply ignore those regulations.
Senator Jones. No, no. That was not my question, sir. I
mean, it takes time between getting the money. I mean, they do
not have the money. It takes time to get the funds in to abate
the radon, and for PHAs that are doing everything they can to
comply with the law, are you trying to give some adjustments
for their good faith compliance and they simply do not have the
money, or are you going to just continue to penalize them, even
though they just fully do not have the funds to comply?
Mr. Carson. If they make it clear that they have recognized
the problem and they are in the process of addressing it and
they are just waiting for the funding to do so, of course we
will provide them an appropriate waiver.
Senator Jones. All right. Great. Thank you, sir. Thank you
for that.
Staying with you, Secretary Carson, I appreciate a lot of
what is being implemented with the CARES Act, and recognizing
the disparate impact that this crisis, this healthcare crisis
has had on minority populations. But I think, and I would be
remiss if I have not pointed out that prior to this crisis your
Department has also issued a number of rules and has done some
things that I think completely turn on its head the role of HUD
in trying to prevent discrimination.
For instance, the new rule--and you and I have talked about
this--that does away with the disparate impact proposed rule I
think is going to make it almost impossible to provide and sue
on race-based issues. You have got rules, the mixed status
rule, which I think is also going to create problematic areas
to try to prove discrimination.
The Fair Housing Initiatives program for the 2021 budget, I
think is less than what should be. And, you know, I am really
concerned about the proposed rule where, in 2018, the Trump
administration delayed and then rescinded the Obama
administration's rule regarding recipients of HUD funds in
localities to undertake a comprehensive analysis of fair
housing barriers. Your proposed rule now completely eliminates
tools involving race and segregation and instead focuses on
removing regulatory barriers to develop.
So as we move out of this crisis, Mr. Secretary, I am
asking you, can you commit to making sure that the Housing
Department goes back and starts looking at discrimination? We
are in a crisis in this country involving race. Everyone is
seeing it. It is not just police and law enforcement. Can you
commit to making sure that in terms of the housing across this
country, your Department is going to take another look at the
rules that you have implemented and to try to make sure that it
is both fair, equitable, and does everything in the
Government's power to prevent discrimination of any sort?
Mr. Carson. We will definitely commit to doing everything
we can to prevent discrimination and create fair housing. No
question about that.
Senator Jones. All right. Thank you, sir. Thank you, Mr.
Chairman.
Chairman Crapo. Thank you. Senator Warner.
Senator Warner. Thank you, Mr. Chairman. I would like to go
to Director Calabria. Thank you for the opportunity we have had
to speak on a number of times. We do not always agree but I
really do appreciate your willingness to engage with me. And I
want to come back to, actually, our favorite subject, the GSEs.
I think the last couple of months we have seen the
importance of the Government's role in supporting the mortgage
market. As a matter of fact, it appears to me that outside the
Government-supported mortgage market the rest of the market is
not really doing that well, and you can point out that Congress
has not been very effective at our reform efforts. I am
concerned about some of the Administration's plans.
So with that as a backdrop, as we get into your plans on
how we get the entities out of conservatorship, can you address
how you think the current economic challenges may impact the
timing of the GSEs release? Obviously I would think investors
would [inaudible] what were retained earnings, some of the
interest of the investors might be diminished. Speak to that as
well as how we actually make sure that we have got that real
plan and make sure the GSEs wholly pay for that Government
backstop.
Mr. Calabria. Well, thank you, Senator. A number of
questions in there, and let me say it is always a pleasure to
talk to you, and I hope you at least always feel that when we
disagree it is. It is always in a very transparent manner and a
very fair and open manner.
Let me also emphasize that as an independent regulator I
really cannot speak to the Administration's plan. I do want to
make a point about preparing for exiting conservatorship, that
I believe this is not a choice on my part. It is a statutory
mandate. The framework of the Housing and Economic Recovery Act
requires me to get Fannie and Freddie into a safe and sound
condition, which is consistent with exiting conservatorship.
At this point, where we are in the COVID crisis, where we
are in the housing market is I think this will likely delay an
exit by 3 to 4 months, but I would certainly underline there
are a tremendous amount of unknowns in here.
It was touched upon by a couple of Members, if we start to
have a number of forbearance loans eventually go into default
and go into actual perhaps foreclosure or serious delinquency,
we will have to take those loans out of pools, put them onto
the balance sheets.
So for Fannie and Freddie the really big price tag, if you
will, with this, we probably will not see that until the fourth
quarter. And so, again, we are still seeing how this evolves. I
would simply say it is too soon to really tell, and by 3 to 4
months should really be taken with an extremely wide margin of
error.
Senator Warner. I just hope you will keep us, those of us
who are very involved in this subject, informed. Obviously the
market is changing, and the interest of the private investors,
I think, I want to follow that.
It appears, as well, that the existing shareholders from
any bank, you are going to simply walk away from the
Government's preferred position without any compensation I
think would be helpful in terms of giving everybody a little,
you know, downstream guidance. To just clear up, I hope you
would not support walking away from the Government's position
without a sanction.
Mr. Calabria. Well, I would emphasize that what happens to
the Government's investment is fundamentally the responsibility
of Treasury and the Administration to decide. I certainly think
that we should make sure that the Government gets recouped
fairly. But again, I do want to emphasize that this is
fundamentally the Treasury Department's decision.
Senator Warner. Yeah. You are a smart guy and you have got
a pretty good amount of influence in all this, and I want to
make sure--I do think it is important that we send that signal
to the market that the Government is not going to walk away
from its preferred position without compensation.
I know that Senator Van Hollen has raised this issue, but I
want to just re-emphasize my interest as well in making sure
that LMI communities, that we have got really data-driven
metrics on how, I think, the COVID crisis has disproportionally
affected communities of color, and having that data will be
really important as we think about how we protect these
communities on a going-forward basis.
I am down to my last 9 seconds and I would like to continue
our discussion on risk sharing. I am concerned that if we end
up with a solution where we go back to a too-big-to-fail
duopoly. And I know not all of the risk-sharing experiments
have fully worked, but I think it would be a challenge to come
to a pre-2008 crisis without risk sharing to the too-big-to-
fail entities. But I know we will continue those conversations.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you, Senator Warner. Senator Smith.
Senator Smith. Thank you, Chair Crapo and Ranking Member
Brown, and thanks to both of you for being here testifying
before our Committee today.
I want to talk about the economic and health and racial
equity crisis that is sweeping through our country. Mr. George
Floyd was murdered by Minneapolis police officers in my
hometown. This stuff is a tragedy and it never should have
happened, and we cannot look away from this deep injustice. It
reveals, I know, a systemic racism and inequity that exists in
policing and in our society, and it is intolerable.
You know, I have listened to Black people in my community
who have said to me, with anguish and fear and frustration,
that ``all we want is to know that the police won't attack us
and kill us. All we want is to be treated equally.'' And we
know that we need to seek justice for Mr. Floyd and his family,
but people are marching in the streets because they are
demanding more, and we need to listen and respond.
Now they are demanding that we dramatically transform our
policing systems in this country, but they are also demanding
that we seek out and change and address the disparities and the
discrimination that exists in all of our communities, including
in our housing systems. And this, of course, as several of us
have mentioned already today, the pandemic is even increasing
this divide.
In Minneapolis, we have the third-highest homeownership
rate in the country, but the fifth-biggest gap in home
ownership between white households and households of color. The
typical Black family in Minneapolis earns less than half of the
typical white family, 44 percent. Roughly 25 percent of Black
families in Minneapolis own their own home, which is one of the
lowest rates in the country. And we know that home ownership is
the way that most Americans build wealth and economic
stability.
So why has this happened? We know that historic racism is
at the root of this. In the 20th century, in Minneapolis,
racist redlining strategies barred families of color from
buying houses and renting in so many neighborhoods. In the
1960s, we built big freeways that decimated historically Black
communities in Minneapolis and St. Paul, like the Rondo
neighborhood. One in eight African American families in St.
Paul lost their homes when we built the I-94 freeway through
the Twin Cities.
These disparities that I am talking about in Minnesota are
ours, but we see them everywhere in this country. So Secretary
Carson, we need to work to fulfill the promise of the Fair
Housing Act. This is from 1968, when a young Senator from
Minnesota, Walter Mondale, helped to write that landmark
legislation, and we know that its promise has not yet been
fulfilled. And we had rules like the Affirmative Furthering
Fair Housing Rule that were written to do just that. But HUD,
under your leadership, has undermined this rule and your
agency's effort to oversee fair housing.
So Secretary Carson, I believe so strongly that in this
moment we have a moral responsibility to change the systems in
housing that perpetuate these deep inequities that I have just
described, that we all know are there. We need to continue to
move forward in the way that we have or we can actually finally
do something about this.
So I ask you, Secretary Carson, to please consider the
voices of my constituents, the voices of civil rights leaders
and advocates, and to seize this moment to make the kind of
change that we need to make around fair housing. You have the
power to do this. You can use the power of your agency to do
this.
Now I want to ask you something specific related to these
inequities, related specifically to the issues of homelessness
on Tribal land. The COVID-19 pandemic has exposed huge racial
and economic disparities and the inequities that I have just
been talking about. We see this on Tribal lands. We see the
devastating impact on Tribal lands. According to the National
Alliance to End Homelessness, people experiencing homelessness
are uniquely vulnerable to COVID-19 because of food insecurity
and crowded shelter conditions and all of the dangers that we
see with encampments, with not enough hygiene stations, not
enough help.
So knowing that these risk factors are there, it makes no
sense to me that Tribes are not eligible to apply for the HUD
homelessness assistance grants. Senator Murkowski and I have a
bill to fix this. And so my question to you, Secretary Carson,
is do you think that Tribe should be able to access these
homelessness assistance grants so that they can reduce some of
this overcrowding and help families find safe and stable
housing?
Mr. Carson. There have been a number of programs, and I am
sure you are familiar with the Indian Housing Block Grant
Program and the Indian CDBG Program, which provides the same
kinds of relief as the program that you are talking about. But
do I believe that they should be entitled to significant help
because of the disparities? The answer is yes.
Senator Smith. Thank you, Secretary Carson. We are going to
push forward this legislation. I think it is very important.
And I will follow up separately with more questions, especially
related to sprinkler systems in multifamily units, which has
been such a big problem in public housing projects. Thank you.
Chairman Crapo. Thank you. Senator Sinema. Is she on video
and audio? Senator?
Senator Sinema. Mr. Chairman, can you hear me?
Chairman Crapo. I can. So you will be with us on audio. Go
ahead.
Senator Sinema. That is right, and thank you. Thanks to all
of our witnesses for being here today.
Economists reported this week that the recession officially
began in February, and I hear from Arizonans about how our
ongoing public health crisis and a bad economy create
significant headaches and hardships for families across the
State.
Arizonans worry about their health and safety. An
increasing number are concerned about how they will make ends
meet. The Senate must act to provide meaningful relief to
families and small businesses, stabilize the economy, fight the
spread of coronavirus, and help our State and local governments
provide essential services during these challenging times.
Secretary Carson, thank you for being with us today. I want
to talk about what we mean when we say eviction or foreclosure.
These are families likely facing homelessness, so they will
need to find shelter and food. There are unprecedented
waitlists for shelter services across my State. Arizonans face
very difficult circumstances that hurt our most vulnerable,
including children, and this is largely through no fault of
their own.
What does it mean to you personally when an American family
loses their home?
Mr. Carson. Well, having a home is one of the things that
gives people stability and confidence, and the ability to take
advantage of other things in society. So obviously it is very
important.
Senator Sinema. So what would you tell a family that is
facing foreclosure or eviction?
Mr. Carson. Well, you would tell them that you are going to
try to help them. That is what we are here for.
Senator Sinema. You know, many Arizonans are struggling to
keep their lives together right now, and it is hard for
families to stay strong without safe and affordable housing. We
have got to find ways to turn those words of ``we want to help
you'' into action.
But this is a growing problem in Arizona, particularly in
our multifamily rental market. I have spoken to property owners
who have told me that over 50 percent of their tenants missed
rent payments in April or May, and we see court dockets filled
with eviction notices. That is why I am concerned that
Arizonans are struggling to get access to rental assistance.
The State of Arizona dedicated $5 million to help
struggling renters, but there has been tons of red tape and
substantial delays. Very little of those funds have gone out,
and people need relief.
Do you have people in the Department of Housing who can
provide technical assistance and share best practices with the
State of Arizona as we address these challenges?
Mr. Carson. We do and we would be happy to provide them.
And also we could use your help, in helping to deregulate some
of the barriers that are preventing the building of affordable
housing in Arizona and other parts of the country. This is what
is creating a lot of the problem, skyrocketing prices while
people's incomes are not going up.
Senator Sinema. I will say, Secretary, I am surprised to
hear the term of needing more deregulation in Arizona. As you
may know, I am a strong proponent of regulatory reform, but
Arizona is a State that has some of the most relaxed
regulations of any State in the country.
Mr. Carson. And we appreciate that.
Senator Sinema. I just want to talk a little bit about my
own experience. As you may know, Secretary, I was homeless as a
child, and my family lived in housing insecurity for over 3
years. I lived without running water and without electricity.
So I am looking for a Department of Housing to provide more
empathy and to provide active assistance to families who are on
the verge of losing their homes, like my family did because of
tough times.
Right now, unprecedented numbers of families in Arizona are
facing these tough times, through no fault of their own,
through a global pandemic that is not manmade. And yet they are
on the verge of homelessness without seeing any kind of help in
sight.
So before my times expires, I want to bring up one last
issue for you. You know, we see increased rates of seniors who
are experiencing homelessness in Arizona. The rate has nearly
doubled in the last few years, and I do not think the Federal
Government has a good solution for this population because most
of the current efforts focus on getting people back to work.
Your budget proposes a small increase in the Section 202
program, but we clearly need more affordable housing options
for seniors. Given that we are in this global pandemic that
disproportionately impacts seniors, what can we do to quickly
address this issue and help keep seniors in their homes?
Mr. Carson. Well, I think we have to recognize that we have
an ever-growing incidence of seniors and we need to start
concentrating on the type of housing for seniors that is most
appropriate, where they may have some shared living space but
perhaps their private facilities for bathroom and sleeping.
That also gives them the opportunity to intermingle with
others, and as you probably know if you know anything about
mental health, that that is essential as you grow older.
So we need to be thinking about those kinds of things that
are changing in our society and addressing them specifically.
Senator Sinema. Well, Mr. Secretary, I see that my time has
expired, and as a licensed clinical social worker I actually
have a lot of experience in the issues of mental health. My
concern is that we are not taking action to provide either the
support that is needed for mental health or the physical
security of many of our seniors who are facing homelessness in
our country.
Thank you, Mr. Chairman. I yield back.
Chairman Crapo. Thank you. That concludes our testimony.
Senator Brown. Mr. Chairman?
Chairman Crapo. But Senator Menendez has asked for a few
minutes for an additional question, and Senator Brown has asked
to make a statement, a concluding statement. So we will
conclude the hearing with that, and we will go to you, Senator
Menendez.
Senator Menendez. Thank you, Mr. Chairman, very much for
the courtesy. Secretary Carson, briefly, I want to go back to
the DACA issue, since you mentioned taking a closer look at the
rules. Don't DACA recipients have social security numbers?
Isn't that correct?
Mr. Carson. I believe they do.
Senator Menendez. And they have work permits--isn't that
correct?
Mr. Carson. Many of them do, yes.
Senator Menendez. And most of them have lived in the United
States since they were children. Is that correct?
Mr. Carson. Yes.
Senator Menendez. And they have legal presence. Isn't that
correct?
Mr. Carson. They are present, yes.
Senator Menendez. There are here present and legally,
according to DHS. The Department of Homeland Security has
always defined DACA recipients as having legal presence, so
that point is clear.
So HUD could have made the determination to interpret
lawful residency--as it has in the past because in the past
DACA recipients did receive and were eligible for FHA and had
dutifully performed their responsibilities--to include DACA. In
fact, HUD made a choice to exclude DACA recipients from FHA
loans by defining ``lawful residency'' in a different way, in a
manner to exclude them, which is made clear in the FOIA
documents.
So HUD did change the rules, because before a DACA
recipient not only was eligible but received mortgages, if they
were a responsible borrower, and now they cannot. So HUD
changed the rules, and they did not reveal this change
publicly, and misrepresented to Congress that a change had
taken place.
Yesterday, several colleagues and I sent a letter to HUD's
Inspector General, requesting that they open an investigation
into how this decision was made and why Congress was misled for
so long. And I just want to ask you, will you commit to fully
cooperating with that investigation?
Mr. Carson. Not only will we cooperate with the
investigation but I would be delighted to work with you on
looking at that rule.
Senator Menendez. Well, I would accept that offer and
hopefully look to return to what your Department used to do.
And if somebody changed it underneath your--you know,
underneath you, as somebody at a lower range, and that is not
your view, then I would embrace you changing back to what it
was, where DACA recipients who are lawfully present under the
Department of Homeland Security were eligible, did receive
mortgages, and have been responsible borrowers. I would love
for that to be the outcome. I appreciate your answer to both
deal with the Inspector General and your offer, which I would
certainly accept.
Mr. Carson. Great.
Senator Menendez. Thank you.
Mr. Carson. Thank you.
Chairman Crapo. And then we will conclude with Senator
Brown with a brief concluding statement. Senator Brown.
Senator Brown. Mr. Chairman, thank you. Thank you for your
courtesy always and your fair-mindedness. I appreciate that.
I want to just close with a couple of points. First, Mr.
Calabria, I appreciate your denial of rolling back civil rights
protections and your comments. My comments were directed at the
Secretary and at HUD. I apologize if you thought they were
directed at you all. So your agency has a role in monitoring
the Fair Housing Act. Your housing finance reform proposals
will, in fact, though, disproportionately hurt Black and brown
communities.
Second, Mr. Calabria, I also appreciate your repeated
emphasis relative to the few Americans who have lost their
homes during this crisis so far, despite the worst unemployment
numbers of our lifetimes. Dr. Carson, renters themselves,
though, are telling us they are in trouble, particularly Black
and brown renters. To the extent many are paying, they are
taking on more debt that they cannot afford. They are making
impossible choices.
They are relying--really importantly, relying on the
expanded unemployment insurance we passed. That expansion, as a
number of my colleagues have noted, is set to expire in a
little more than a month. The President and my Republican
colleagues refuse to extend it. Many of you remember the only
amendment Senator McConnell allowed on the Senate floor to the
CARES Act was to eliminate the expanded unemployment. We need
to act now to put money in workers' pockets and pass emergency
rental assistance. We need to do both.
Finally, Secretary Carson, over the weekend you said the
President will offer up remarks about racial healing over the
next week. I hope you are right about that. It is going to be
pretty hard, though, when he has spent his entire career--and I
know you know this and I know you cannot acknowledge it
publicly. I assume you acknowledge it privately, but this
President has spent his entire career dividing people, from the
Central Park 5 to birtherism to calling Mexicans rapists, to
immigrant children ripped from their parents, to dominating
protesters. You know that. You ran against him. You know that.
We know why he does it and so do you--to distract from his
Administration's record, including your record, his
Administration's record of betraying workers and treating Black
and brown Americans as expendable. Ultimately it comes down to
leadership.
Just for a moment, contrast the President with the words of
another leader responding to calls for justice in the streets,
who said, we shouldn't use violence to silence protestors. He
said, quote, ``We must eliminate the problems from which they
stem.'' That came from the Governor of your State when you were
growing up, a Republican Governor by the name of George Romney,
in Detroit, in 1967. He responded by listening and taking
action. He worked to pass a fair housing law in Michigan. He
worked to implement the Fair Housing Act, in a job you have
now, as HUD Secretary. President Nixon fired him for it.
The American people are waiting on my Republican colleagues
and you, Mr. Secretary, to show that same courage today. You
have called for dialogue, Mr. Secretary, but you refuse to
listen to all the people who have stood up against your civil
rights rollbacks, against your budget cuts, against your
housing finance reforms that would make it harder for people of
color in this country to buy homes.
You call for dialogue but today you said you were glad to
not be able to hear what I have to say. That is OK, Mr.
Secretary. Whether or not you prefer to hear me, I hope you
listen to the demands for justice from people all over this
country.
Thank you, Mr. Chairman.
Chairman Crapo. That concludes the questioning and comments
for today's hearing. For Senators who wish to submit questions
for the record those questions are due to the Committee by
Tuesday, June 16th. We ask our witnesses to respond to those
questions as quickly as you can.
Again, to both of you, I appreciate the work that you are
doing, and appreciate you being here to testify to us today in
this oversight hearing.
This hearing is adjourned.
Mr. Carson. Thank you.
[Whereupon, at 12:06 p.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and
additional material supplied for the record follow:]
PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO
Today, we welcome the Federal housing regulators, The Honorable
Benjamin S. Carson, Secretary of Housing and Urban Development, and the
Honorable Mark A. Calabria, Director, Federal Housing Finance Agency.
Welcome back to you both. Today we will receive testimony on your
agencies' recent activities, operations and ongoing efforts to promote
access to quality, affordable housing while also ensuring the safety
and soundness of the housing finance market.
Your agencies' missions have never been more critical.
The disruption of COVID-19 on the U.S. economy has hit homeowners
and the housing market especially hard.
We have already seen a huge number of mortgage borrowers enter
forbearance, while many landlords are struggling to make ends meet, and
countless renters are unsure whether they will be able to make their
next payment.
In March, HUD and FHFA acted swiftly to prohibit foreclosures and
evictions for millions of residential borrowers facing financial
hardship due to the pandemic.
Soon after, Congress passed the Coronavirus Aid, Relief and
Economic Security Act, or CARES Act, codifying and extending these
protections and providing financial relief to renters.
Title IV of the CARES Act contains three Housing provisions:
Section 4022 imposes a 60-day eviction and foreclosure moratorium for
single-family borrowers with a federally backed mortgage loan. It also
allows struggling homeowners up to 1 year of loan forbearance.
Section 4023 extends similar relief to federally backed multifamily
borrowers who are current on their mortgage payments. They can request
up to 90-days forbearance so long as they do not evict a tenant or
charge late fees solely for nonpayment of rent during the pandemic.
Section 4024 imposes a 120-day moratorium on evictions, fees and
penalties for tenants who live in multifamily units that participate in
a Federal assistance program or have a Government-backed mortgage.
Title XII of the CARES Act provides $12.4 billion of emergency
supplemental appropriations for HUD programs and activities, to further
soften the economic blow of the pandemic across the many communities
HUD serves.
In addition to implementing the CARES Act, HUD and FHFA have taken
important actions to further protect borrowers and mortgage servicers
during pandemic.
Both agencies have extended the eviction and foreclosure moratorium
for qualifying homeowners through at least the end of June.
The agencies have also taken steps to ensure borrowers are not
facing large, looming debt payments. Director Calabria recently
reiterated that borrowers in forbearance with a Fannie Mae- or Freddie
Mac-backed mortgage will not owe a lump sum at the end of forbearance.
FHFA has further announced a new payment deferral option which
allows borrowers, who are able to return to making their normal monthly
mortgage payment, the ability to repay their missed payments at the
time the home is sold, refinanced, or at maturity.
HUD has similarly implemented the National Emergency Partial Claim,
which allows eligible FHA borrowers in forbearance to reinstate their
loans by authorizing servicers to advance funds on their behalf. Like
FHFA, repayment of any missed monthly payments is deferred until the
back end of the loan.
In recognizing the undue burden the pandemic has placed on the
mortgage servicing industry, HUD and FHFA have acted quickly to address
the liquidity gap. HUD has expanded issuer assistance to include the
Pass-Through Assistance Program (PTAP), which allows servicers to apply
for assistance in meeting principal and interest payments, and FHFA has
announced that no mortgage servicer will be responsible for advancing
more than four months of missed principal & interest payments on a
loan.
While America is taking steps to return to work and relax stay-at-
home orders, the recovery is only just beginning. I thank our witnesses
for their swift and prudent actions to date, and for their continued
commitment and collaboration at this time.
This Committee is also focused on working with HUD and FHFA to
identify and tailor overly burdensome regulations in an effort to
create conditions that will lead to a forceful economic recovery.
Secretary Carson, I applaud you for spearheading the ongoing
efforts to identify and eliminate regulatory barriers to affordable
housing production in this country. This will play a big part in
bringing about a stronger, quicker economic rebound.
Finally, the pandemic has underscored the need for a stable, well-
capitalized housing market in times of stress.
FHFA has recently taken a crucial step toward safety and soundness
in proposing a thorough, thoughtful regulatory capital framework for
Fannie Mae and Freddie Mac.
As Americans face financial uncertainty, it is long past time to
make the hard decisions and address this last unfinished business of
the 2008 financial crisis.
Director Calabria, thank you for your considerable efforts here,
and I look forward to our continued work together on this topic.
Thank you once again to our witnesses for joining us here today.
______
PREPARED STATEMENT OF SENATOR SHERROD BROWN
Thank you, Mr. Chairman, over the past two weeks, protesters have
taken to the streets demanding justice: Justice for George Floyd and
Breonna Taylor and Ahmaud Arbery and so many other Black Americans who
have been killed in acts of extraordinary violence, too often at the
hands of police.
And justice for millions of Americans who for hundreds of years
have lived under a system that perpetuates inequality and systemic
racism.
Protestors young and old, Black and white, in urban and rural
communities are all marching, like generations before them, risking
their lives, praying for and demanding justice--and real change.
They are demanding economic justice. Our society calls their work
essential but pays too many ``essential workers'' so little they can't
afford an apartment, much less dream to own a home.
Millions of workers don't have a bank account, and saving for
retirement is out of reach. They don't benefit when the Dow Jones hits
27,000.
Americans are demanding reforms to our criminal justice system, an
equitable healthcare system that protects Black and brown mothers and
their babies, and support for Black and brown communities, so another
economic crisis doesn't leave them further behind Wall Street and the
wealthy and privileged.
Both of you before us today are central to that fight for economic
and racial justice.
HUD's mission was shaped by our Nation's struggle for civil rights.
Just 6 months after John Lewis and the footsoldiers of Selma were
beaten crossing the Edmund Pettus Bridge, President Lyndon B. Johnson
signed the bill that created HUD to address the need for investment in
communities that had been left behind.
Shortly after HUD's creation, the Kerner Commission warned that our
Nation was moving towards ``two societies, one Black, one white--
separate and unequal.''
It took the assassination of Martin Luther King, Jr., for Congress
to act on one of the central recommendations of that report--creating a
fair housing law.
Fifty years ago, Congress entrusted HUD with implementing the Fair
Housing Act. Our country charged your agency with rooting out
discrimination, and actively working to make it easier for EVERYONE to
find and afford a home.
Fundamentally, we all pretty much want the same thing--a place
that's safe, in a community we care about, where we can get to work and
our kids have a good school, with room for our family--whether that's
three kids, or an aging parent, or a beloved pet.
All of us should get to define what home looks like for us. We
should be able to find it and afford it without crippling stress every
single month. And everyone should have the opportunity to build wealth
for their family by owning a home.
To make that the reality for everyone, we can't rely on the housing
market to sort itself out--not when centuries of discrimination are
baked into it, not when we have decades of laws that distort the market
in favor of banks and against families.
That's what your job is--to fix that.
Secretary Carson--under your leadership, instead of addressing the
deep inequities in our housing system, you are trying to systematically
dismantle basic civil rights protections that previous generations
marched for and endured beatings for and laid down their lives for.
And your Department refuses to do its job of promoting economic
inclusion and undoing the historic, Government-driven patterns of
housing discrimination like redlining and restrictive covenants.
You want to abandon the legal standard--affirmed by the Supreme
Court--used to bring housing discrimination lawsuits.
This isn't just my opinion--look at letter after letter that civil
rights leaders sent to your agency, opposing your actions.
And both heads of the agencies before us today are pushing plans
that will to make home ownership more expensive and harder to get,
particularly for borrowers of color.
This is what happens when the ideologues in this Administration
push Wall Street's agenda, instead of what people actually need.
Before this pandemic hit, families of color were spending more of
their income on housing than white families, and they were
disproportionately likely to experience homelessness.
This was fueled in part by the Federal Government's failure to
protect Black and brown and immigrant borrowers from predatory subprime
lenders before the 2008 crisis, despite knowing that lenders were
targeting them.
Forty years of gains in Black home ownership and wealth were
eviscerated.
Now, Black families are experiencing this public health and
economic crisis with just one-tenth of the wealth of White families,
and they're more likely to work at jobs where their corporate employers
didn't pay them enough to begin with.
We are dangerously close to repeating the mistakes of a decade ago.
Nearly half of Black and 40 percent of Latino renters report that
they're unlikely to be able to make their next payment.
We're in the middle of a crisis. And you either don't know, or
don't care.
You're plowing ahead with undoing civil rights protections, while
in Ohio they're reopening eviction courts. Twenty million Americans are
unemployed. Some have been able to pay the rent or the mortgage but
only because we passed emergency Unemployment Insurance earlier this
year. It's set to expire this summer--and the president and Leader
McConnell are refusing to extend it. Of course we shouldn't be
surprised--it's all part of Republican leaders' decades-long effort to
weaken this social insurance that all of us pay into.
Leader McConnell and President Trump see no urgency--Leader
McConnell's words, no urgency--to help people.
Democrats have plans to get more help directly to working families.
Our emergency rental assistance bill provides $100 billion to help with
rent and utility bills, so we can help renters avoid impossible
choices--between rent and groceries, or prescriptions, or draining
their savings, or going to a payday lender. It already passed the
House. But it is sitting on the Majority Leader's desk collecting dust.
For millions of families, the bills keep coming and the clock keeps
ticking and the stress keeps mounting.
Before this pandemic, President Trump and his wealthy cabinet
members didn't realize or didn't care that behind the rosy stock market
data, this economy was already broken for millions of workers--and for
Black and brown workers, it never worked to begin with.
And now the Trump administration either doesn't realize or doesn't
care that the bottom is falling out for those families.
People are tired of the lack of action and the lack of
accountability. Before the pandemic, the Trump administration's idea of
housing ``reform'' was to, quote, ``level the playing field'' . . . for
Wall Street.
That might be the definition of ``out of touch.''
Enough is enough. Today we want to hear that you understand both
the magnitude of the current crisis, and the inequities built into our
housing system for generations. It's about time you actually going to
do something to fix it, instead of making it worse.
______
PREPARED STATEMENT OF BENJAMIN S. CARSON
Secretary, Department of Housing and Urban Development
June 9, 2020
Chairman Crapo, Ranking Member Brown, and Members of the Committee,
thank you for this opportunity to discuss the steps the U.S. Department
of Housing and Urban Development (HUD) is taking to maximize our
Nation's response to the COVID-19 National Emergency. These actions
reflect both my work with the White House Coronavirus Task Force and
the measures developed at HUD to protect the health and safety of the
American public.
I want to begin by recognizing the unprecedented healthcare and
economic challenges facing Americans today. This disease is impacting
families and communities across the Nation. As HUD Secretary, my
highest priority has been to ensure Americans don't lose their homes
and to safeguard those at greatest risk of the virus--including
homeless and low-income communities.
I also want to thank our Nation's medical professionals and first-
line responders who have sacrificed so much to keep Americans safe and
healthy. As a medical doctor, I am inspired daily by their unwavering
commitment to their fellow citizens.
Coronavirus Aid, Relief, and Economic Security (CARES) Act
On March 27, President Trump signed into law the CARES Act. In
total, the CARES Act provided more than $12 billion in funding to HUD
programs. Recognizing the unprecedented nature of the global pandemic,
I directed my staff to immediately begin the process of getting these
funds to communities most impacted by COVID-19.
As of the beginning of the month, HUD has announced allocations for
over $6 billion in funding. This includes:
$3 billion in Community Development Block Grant (CDBG)
funds
$1 billion in Emergency Solutions Grant (ESG) funds
$685 million for the Public Housing Operating fund
$380 million for Tenant Based Rental Assistance (TBRA)
$800 million in Project Based Rental Assistance (PBRA)
$200 million in Indian Housing Block Grant (IHBG) funds
$75 million for the Section 811 Mainstream Housing Choice
Voucher program
$65 million in Housing Opportunities for Persons with AIDS
(HOPWA) funds
In the coming weeks, HUD will continue to expedite getting the
funding provided by the CARES Act into the hands of communities.
Federal Housing Administration (FHA)
Prior to the passage of the CARES Act, FHA acted quickly to help
protect single-family homeowners who lost their jobs or were
experiencing economic hardship as a result of COVID-19 by implementing
a 60-day moratorium on foreclosures and evictions, which was
subsequently extended through June 30. The CARES Act also provided a
120-day eviction moratorium for tenants in certain federally supported
rental properties, including properties with FHA-insured single-family
or multifamily mortgages.
FHA further announced a tailored set of mortgage payment relief
options for single-family homeowners with FHA-insured mortgages who are
experiencing financial hardship because of the pandemic. This includes
CARES Act forbearance, which allows borrowers to request up to 6 months
of forbearance and extend for up to six months. Also included was an
extension period for calling a loan due for those with a Home Equity
Conversion Mortgages (HECM).
FHA also implemented the COVID-19 National Emergency Standalone
Partial Claim for borrowers on forbearance. This option will help
eligible homeowners resume their mortgage payments and avoid a ``lump
sum'' repayment of arrears by deferring repayment to the end of the
mortgage.
Ginnie Mae
Ginnie Mae expanded its pass-through assistance program (PTAP) to
help address potential issuer liquidity challenges caused by borrower
forbearance requirements implemented by FHA and other Federal mortgage
insurance programs. PTAP provides last-resort financing to cover the
difference between issuers' available funds and scheduled payment of
principal and interest (P&I) to mortgage-backed security (MBS) holders.
The timely payment of P&I to MBS holders, consistent with Ginnie Mae's
statutory guaranty, is essential to the liquidity of the MBS market and
the confidence of investors who finance housing through the Ginnie Mae
program.
White House Opportunity and Revitalization Council
In December 2018, President Trump signed Executive Order 13853
establishing the White House Opportunity and Revitalization Council. I
have had the honor of chairing this Council since its establishment.
In response to the ongoing and unprecedented global pandemic,
President Trump has directed me and the Council to utilize its talented
structure and build on its original intent with a renewed focus to
expand efforts to protect and promote our most vulnerable communities.
The Council will work to ensure that minority and underserved
communities are kept safe from this invisible enemy, now and into the
future. In the coming weeks, the Council will identify different policy
approaches needed to help advance opportunity for these communities.
Conclusion
Thanks to the leadership of President Trump, I'm proud of the work
this entire Administration--and especially the 7,500 employees of HUD--
are doing each and every day to fight this invisible enemy and meet the
needs of the American people. I'm grateful to this Committee for its
bipartisan commitment to meeting this challenge. Thank you.
______
PREPARED STATEMENT OF MARK A. CALABRIA
Director, Federal Housing Finance Agency
June 9, 2020
Chairman Crapo, Ranking Member Brown, and distinguished Members of
the Committee, thank you for the invitation to appear at today's
hearing.
The Federal Housing Finance Agency (FHFA) has acted swiftly and
prudently to respond to COVID-19. We continue to update our policies as
the challenges facing renters, borrowers, and market participants
evolve. We have worked in close partnership with FHA and Ginnie Mae in
developing many of our policies. I want to thank Secretary Carson, HUD
Deputy Secretary Montgomery, and Acting Ginnie Mae President Seth
Appleton for their partnership and leadership.
FHFA's Actions to Protect Agency Workforce and Maintain Mission Focus
FHFA's hard-working employees are the Agency's greatest asset.
Their well-being is my top priority. Our teleworking flexibilities have
enabled our staff to remain safe and manage at-home obligations, while
continuing to fulfill the Agency's vital mission.
The FHFA team has gone above and beyond during these uncertain and
challenging times. In March, our telework test transitioned the very
next day into full-time mandatory telework for the Agency. FHFA
employees quickly adapted to the new environment and the Agency
maintained continuity of operations during this crisis with crucial
support from the Office of the Chief Operating Officer.
The Office of Technology and Information Management has kept the
FHFA workforce productive and connected by rapidly deploying critical
remote tools and staff training, meeting employees' IT equipment needs,
and safeguarding the Agency's network capacity, connectivity, and
security. The Office of Facilities Operations Management has
established protocols and procedures for keeping our employees and
headquarters safe and healthy, working tirelessly to provide employees
with the equipment and office supplies needed to set up and sustain
their remote workstations. The Office of Human Resources Management has
been instrumental in ensuring employees have the support they need to
remain engaged and productive, including by developing work schedule
and leave flexibilities, expanding the Agency's Employee Assistance
Program, and meeting special accommodation requests resulting from our
remote-work posture.
Across the board, the FHFA team has seamlessly transitioned to a
virtual environment. This includes the hiring, on-boarding, and
training processes that are essential for FHFA to continue developing
and retaining a highly talented and effective workforce. The Office of
Budget and Financial Management and Enterprise Program Management
Office, working with FHFA's COVID-19 Task Force, have helped the Agency
stay coordinated on the updated guidance provided by various Government
entities, health officials, and local authorities. I am proud of the
flexibility, cooperation, and hard work of every member of the FHFA
team during this pandemic.
The Office of Congressional Affairs and Communication has remained
engaged with and accessible to members of Congress and their staff.
Since March, FHFA's legislative affairs team has held dozens of remote
congressional meetings and briefings to discuss Agency policies and
provide technical assistance with legislation. This is a testament to
FHFA's dedicated staff and our ongoing commitment to responding to
congressional inquiries in a timely manner, maintaining transparency,
and connecting the Agency's many subject matter experts to legislative
staff.
In responding to the COVID-19 national emergency, FHFA has worked
closely with our peer financial regulators and other Federal agencies.
Through regular communication channels, FHFA and these agencies
continue to share, in real-time, challenges, ideas, and solutions to
help each other develop best practices based on the latest guidance
available. Timely information sharing has enabled FHFA to respond to
evolving COVID-19 related challenges in a rapid, nimble, and effective
manner.
FHFA has continued to foster an environment where everyone feels
safe, respected, and valued for our differences. The senseless violence
and loss of innocent life that has roiled our Nation in recent weeks--
and that tears apart too many
communities across the country--highlight the importance of this work
both in the workplace and beyond. The unrest across our Nation in
recent weeks reaffirms why fairness, diversity, and inclusion are core
values for me personally and our Agency. FHFA has one of the most
diverse workforces amongst Federal regulatory agencies. Our diversity
is--and will remain--a key source of FHFA's success. I commend FHFA's
Office of Minority and Women Inclusion (OMWI) for its steadfast support
of the Agency's workforce during this time. This includes OMWI's work,
with my support, to launch FHFA's Diversity Advisory Council, which
aims to ensure diversity in all aspects of the Agency's employment and
contracting practices and to create regular programs that engage
employees on professional and personal diversity and inclusion issues.
OMWI is also playing an essential role in helping FHFA employees
affected by the recent events and tensions across the country, offering
training, listening sessions, and other resources.
Across all divisions and offices, FHFA's employees have remained
focused on fulfilling the Agency's important mission, united by a
shared vision that, during this crisis, Americans should not have to
worry about losing their homes. We have worked closely with our
regulated entities, Fannie Mae and Freddie Mac (the Enterprises) and
the Federal Home Loan Banks (FHLBanks), to support borrowers and
renters, while ensuring the proper functioning of the mortgage market
both during and after this crisis. Our actions have been--and continue
to be--data driven.
FHFA's Strong Research Capabilities Are Key to Agency's Data Driven
Policymaking
Through oversight of the regulated entities, FHFA collects and
analyzes a significant amount of data on trends in the housing and
mortgage markets. This enables the Agency to respond appropriately to
market developments, promote market efficiency and stability, and
disseminate information to improve the public's understanding of
housing finance markets. Economic research and data analytics are core
competencies of effective safety and soundness supervision, which is
essential to preparing the Agency and the Enterprises to responsibly
exit and operate safely outside of conservatorship. That is why, from
the beginning of my term, one of my top priorities has been to
strengthen FHFA's research and data analysis capabilities.
For instance, the Agency has enhanced the accessibility of existing
data products, such as quarterly and monthly house price indexes
(HPIs). FHFA produces the Nation's only public, freely available HPIs
that measure changes in single-family house prices based on data that
cover all 50 States and over 400 American cities and extend back to the
mid-1970s. The HPIs are built from tens of millions of home sales and
offer insights about house price fluctuations at the national, census
division, State, metro area, county, ZIP code, and census tract levels.
On May 26, with the publication of the HPI report for the first quarter
of 2020, FHFA launched a new interactive dashboard, available on the
Agency's website, that illustrates house-price trends across the top
100 Metropolitan Statistical Areas.
In addition to increasing the exposure of existing data products,
FHFA has taken several steps to elevate and expand the Agency's
research capabilities and contributions. In January 2020, as part of an
organizational realignment, FHFA created the Division of Research and
Statistics (DRS) to strengthen the Agency's data collection and
analysis capabilities. DRS is FHFA's center for economic and market
research, data development, and statistical analysis to support the
Agency's divisions and offices engaged in oversight, supervision,
rulemaking, and policy development. The division examines trends and
risks in housing and housing finance markets, advances modeling
capabilities, develops and maintains data, evaluates policy impacts,
and engages with research communities outside of the Agency.
The research and data analysis capabilities that FHFA created and
continues to strengthen within DRS have been critical to supporting the
Agency's data-driven response to COVID-19. For instance, DRS has
enhanced FHFA's capacity to monitor housing and mortgage markets by
leveraging existing data sources and seeking out new ones. This has
provided a comprehensive view of the state of the mortgage market prior
to the pandemic and it has enabled FHFA to understand, in real time,
how circumstances have changed over the course of the crisis.
The State of the Market Before and During COVID-19 Crisis
At the start of 2020, the American housing market was in a strong
position. A low interest rate environment and stable labor markets
drove robust demand and price appreciation. Home price growth in the
first quarter of 2020 outpaced annual growth from the same period a
year ago as falling interest rates and shrinking inventories for sale
led prices higher just prior to the COVID-19 crisis. Nationwide, house
prices increased 1.7 percent in the first quarter of 2020, up 5.7
percent compared to the first quarter of 2019. FHFA's seasonally
adjusted monthly index for March was up 0.1 percent from February.
Because of the lag between contract signing and sale closing when
FHFA's data are recorded, the first quarter's housing statistics were
relatively unaffected by the COVID-19 outbreak. However, this does not
account for any modifications or cancellations of sales later in March.
Existing home sales had been on a steady upward trajectory since
early 2019, after declining throughout 2018 due to rising rates. The
National Association of Realtors' months' supply of existing homes for
sale in February reached its lowest level since the series started in
1999, driving home prices upward at a faster rate in the first quarter.
Single-family housing starts in February 2020 reached the highest 3-
month rate since November 2006, on a seasonally adjusted basis, after
more than 10 years of slow but steady increases.
In response to COVID-19, financial markets endured a severe
dislocation in March. Uncertainty over public health and the economic
impacts of the pandemic caused financial liquidity to dry up,
significantly disrupting the financing, lending, and hedging activities
of mortgage lenders as well as many other market participants. Spreads
between the 30-year fixed rate mortgage rate and 10-year Treasury yield
widened during this period. Even Treasuries experienced periods of
rising yields as a marketwide rush to cash led investors to sell off
their most liquid assets in response to redemption demands.
Employment fell by more than 20 million jobs between February and
May, an unprecedented demand shock and hardship to households. The
unemployment rate reached 13.3 percent in May from its 50-year low of
3.5 percent in February. Despite the dramatic drop in demand, the
months' supply of existing homes for sale remained near historic lows
in April as the inventory of homes available for sale also decreased.
This has thus far provided support to home prices. In the multifamily
market, thus far, turnover has been lower than normal, and more renters
are continuing to pay rent than projections had forecasted.
FHFA's Policy Response: Supporting Borrowers and Renters
From the beginning of this crisis, FHFA's policy, conservatorship,
and research teams have worked together to produce forecasts and
estimates of the future impact of COVID-19 on our mortgage market,
based on key indicators such as unemployment insurance claims and house
prices. They have also developed models to support decision making
regarding loan modifications, servicing, and other issues. This
internal research, monitoring, and analysis have helped to inform and
guide FHFA's policy actions.
One of our top priorities has been to support renters and
homeowners struggling to pay for housing because of COVID-19. To do
this, FHFA has directed the Enterprises to put in place certain
protections. The Enterprises own or guarantee approximately $5.7
trillion in mortgages. That includes about 43 percent of multifamily
units, which represents about 8.6 million households and more than half
of single-family mortgages or about 28 million homeowners. FHFA's
policies apply to all single-family homeowners and multifamily property
owners with an Enterprise-backed mortgage. In addition, FHFA's policies
also help to set workable standards for the entire market.
For homeowners facing foreclosure before COVID-19, we suspended all
foreclosures and evictions for at least 60 days. FHFA later extended
this foreclosure and eviction moratorium through at least June 30.
For borrowers financially impacted by COVID-19, we allowed
homeowners to take a timeout from mortgage payments through
forbearance. We then announced that borrowers in forbearance who can
return to making their regular monthly payments can repay missed
payments when they sell their home or refinance their loan. This new
payment deferral option simplifies options for borrowers and provides
an additional tool for mortgage servicers.
FHFA also took action specifically to protect renters struggling to
pay rent because of COVID-19. It is important to recognize that the
Enterprises do not have a contractual relationship with tenants. Their
relationship is with the property owners or landlords. Therefore, if a
multifamily loan is performing and the property owner does not seek
forbearance, the Enterprises cannot impose requirements on the
landlords.
On March 23, FHFA announced the Enterprises' policies providing a
forbearance option for multifamily property owners with an Enterprise-
backed mortgage that prohibits tenants from being evicted for the
nonpayment of rent during forbearance. On March 27, the President
signed the CARES Act, which provides a 120-day eviction moratorium for
renters in properties with an Enterprise-backed mortgage, even if the
property owner does not enter forbearance. As a result, renters living
in multifamily properties with an Enterprise-backed mortgage cannot be
evicted for either 4 months or the duration of the property owner's
forbearance period, whichever is longer; and all late fees, charges,
and penalties are waived for both borrowers and tenants during the
eviction moratorium or forbearance period.
While the single-family forbearance program was modeled on prior
disaster response efforts, the multifamily forbearance programs with
tenant protections were developed from the ground up. After putting
these programs in place, at FHFA's direction, the Enterprises created
online lookup tools that show whether a single-family or multifamily
property has a mortgage owned or guaranteed by Fannie Mae or Freddie
Mac. This information indicates whether renters are covered by the
CARES Act's eviction protections and whether single-family borrowers
are eligible to apply for forbearance.
Since implementing the single-family and multifamily forbearance
programs, FHFA has closely monitored the data to understand the
responses by borrowers and the market. As a staffer on this Committee
during the 2008 financial crisis, I saw firsthand the importance of
resisting the pressure to ``act first, analyze later'' that arises in a
period of financial stress. In a crisis, panic can lead to ill-
conceived policy responses and send confounding signals to the market.
It is imperative to remain calm and make decisions based on careful,
thoughtful analysis of the most up-to-date data available. This has
been a fundamental objective of FHFA during the COVID-19 national
emergency.
Early in the crisis, there were a wide variety of predictions about
the future effects of COVID-19 on housing markets. Some observers
contended that forbearance rates would reach as high as 25 to 50
percent. Given the unprecedented nature of the pandemic and the high
degree of uncertainty about the economic impact, FHFA carefully
monitored the data we received from our Division of Research and
Statistics, the Enterprises, and market participants to ensure we were
developing and updating our policies in response to the facts on the
ground. At this point, I remain encouraged by what the data is telling
us about the trajectory of forbearance rates.
Data developed internally at the Enterprises and by industry groups
indicate that Enterprise forbearance rates remain manageable. After
rising precipitously in April, the rate of forbearance uptake slowed
during the last few weeks of May. According to data released by the
Mortgage Bankers Association, as of May 24, 6.4 percent of total
Enterprise-backed mortgages were in forbearance, compared to 11.8
percent of mortgages backed by Ginnie Mae (see Figure 1). In March,
just over 1 percent of borrowers with loans in Enterprise mortgage-
backed securities (MBS) were 30- or 60-days delinquent on payment. By
May, this rate increased to 5.2 percent, according to RiskSpan. The 30-
and 60-day combined delinquency rate remains below the estimated rate
of forbearance as some borrowers who have requested forbearance are
nonetheless continuing to make payments on their loan. FHFA's internal
analysis shows that approximately 130,000 units of multifamily housing
are in properties receiving forbearance from Fannie Mae or Freddie Mac,
representing about 1.5 percent of outstanding multifamily mortgage
balances at the Enterprises.
Figure 1
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The mortgage market still faces challenges. Responding to
substantial Federal support in the form of MBS purchases by the Federal
Reserve, spreads between the current coupon MBS and 10-year U.S.
Treasury have largely returned to levels observed at the beginning of
2020, at least for the to-be-announced (TBA) market. On the other hand,
spreads between the 30-year fixed mortgage rate and the 10-year
Treasury yield remain high. These primary market spreads have declined
in recent weeks, but they have not yet returned to precrisis levels
(see Figure 2). This is likely a result of ongoing uncertainty about
the pace of economic and labor market recovery, the impacts on mortgage
servicing rights, and constrained lender capacity to absorb increased
levels of borrower demand.
Figure 2
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
However, current mortgage rates reported by Freddie Mac and the
Mortgage Bankers Association are at the lowest point on record in the
series dating back to 1971 and 1990, respectively. And FHFA continues
to work with the Enterprises to ensure that borrowers can access new
purchase and refinancing opportunities at historically low rates. For
instance, at FHFA's direction, the Enterprises have issued new guidance
that borrowers in forbearance who continue to make payments will be
treated as current when it comes to refinancing their loan or buying a
new home. In addition, borrowers' credit history will not be negatively
impacted by entering a COVID-19 related forbearance plan.
We have also helped clarify consumers' options. We have emphasized
that those who can make their mortgage payments should continue doing
so. We updated the scripts that servicers use when talking to borrowers
about forbearance. We have emphasized to servicers and the public that
no lump sum repayment is required at the end of forbearance. We
partnered with the Consumer Financial Protection Bureau to launch the
Borrower Protection Program. And FHFA helped develop a website that
consolidates Federal information about mortgage relief options, renter
protections, and how to avoid scams.
FHFA's Policy Response: Ensuring the Proper Functioning of the Mortgage
Market
Working with our regulated entities, FHFA has also taken several
steps to ensure the mortgage market continues to function properly both
during and after this crisis.
To ensure the safety of market participants, FHFA authorized
several loan-closing, employment-verification, and appraisal
flexibilities. The changes include allowing desktop and exterior-only
appraisals, providing alternative methods to demonstrate construction
completion and satisfy borrower documentation requirements, allowing
renovation disbursements, and expanding the use of power of attorney,
appraisal waivers, and remote online notarization. FHFA put these
flexibilities in place for 60 days and then extended them through at
least June 30.
Moving forward, we will continue to closely monitor the situation
and update our policies based on what borrowers, appraisers, lenders,
Government services, and other market participants are experiencing on
the ground. This crisis has highlighted how much of the real estate
process as we know it currently depends on face-to-face interactions.
Changes made in response to the pandemic will likely accelerate the
uptake of streamlined methods and models, jumpstarting the use of more
e-mortgage tools across the industry. As business practices adapt to
new realities, FHFA will continue working with stakeholders, consumer
groups, and other regulators to streamline the homebuying process in a
prudent manner that meets the health needs of the Nation.
In April, FHFA recognized that nonbank servicers needed clarity to
serve the market through the crisis. In response, we instituted a four-
month limit on servicers' obligations to advance principal and interest
payments on loans in forbearance. When a mortgage loan is in a MBS,
Fannie Mae servicers with a scheduled payment remittance had been
responsible for advancing the principal and interest payment regardless
of borrower payments. Freddie Mac servicers, who are generally
responsible for advancing scheduled interest, are only obligated to
advance four months of missed borrower interest payments. FHFA's policy
established a 4-month advance obligation limit for Fannie Mae scheduled
servicing, which is consistent with the current policy at Freddie Mac.
To keep the mortgage market working for current and future
borrowers, and to help originators continue lending, FHFA enabled the
Enterprises for a limited period of time to purchase certain single-
family mortgages in forbearance that meet their criteria. Charging a
fee for these transactions is consistent with FHFA's statutory mandate
to ``preserve and conserve assets'' and the Enterprises' charter
requirement to purchase only those loans that meet the standards
imposed by private institutional mortgage investors. Prior to this, the
Enterprises had never purchased loans in forbearance. Our policy
provides a new option to lenders and the Enterprises.
Additionally, FHFA took several steps to ensure the Federal Home
Loan Bank System could continue to support member liquidity and housing
finance markets. We relaxed liquidity requirements in a countercyclical
fashion. We reminded the FHLBanks of their obligation to offer advances
up to 10 years in maturity to meet their members' needs and their
ability under FHFA regulations to provide below-cost advances during
disasters like the COVID-19 pandemic.
We allowed the FHLBanks to accept Paycheck Protection Program loans
as collateral when making loans to their members and allowed them to
accept as collateral loans that have been modified or that are in
COVID-19 related forbearance. To avoid exacerbating potential liquidity
problems, FHFA deferred certain deadlines related to the FHLBanks'
transition from LIBOR-based exposures, while continuing our efforts to
prepare for the eventual end of LIBOR. To protect the safety and
soundness of the FHLBanks, FHFA issued guidance related to collateral
and pricing policies aimed at ensuring that all members are treated
fairly and that every FHLBank can continue to provide liquidity to
institutions and communities in its district.
It is important to recognize the vital support that the FHLBanks
provided to the market in response to the financial stress caused by
the pandemic. A core function of the FHLBanks is to provide liquidity
in times of stress. This support is critical for small and community
banks that often do not have access to other sources of low-cost
funding. When the COVID-19 crisis began, the FHLBanks stepped up to
keep liquidity in the market, meeting unprecedented advance demand from
their member financial institutions.
In March, while other liquidity sources dried up, FHLBank System
advances grew by $189.4 billion--or 30.7 percent--at their peak. For
the quarter ending March 31, FHLBank System advances increased 25.8
percent to $806.9 billion. While access to long term debt markets was
severely limited, the System was able to fund this increased advance
demand largely through discount notes and floating rate bonds indexed
to the Secured Overnight Financing Rate (SOFR). For the first quarter
of 2020, outstanding debt increased to $1.18 trillion, growing at the
fastest pace in recent history.
As advances and assets grew, earnings decreased significantly
because of reduced net interest spread and mark-to-market accounting
effects. Compared to the fourth quarter of 2019, net interest income
fell a substantial $350 million (28.6 percent) to $872 million, and net
income decreased $262 million (29.5 percent) to $627 million.
Nevertheless, for the first quarter of 2020, FHLBank System retained
earnings grew $141 million to $20.7 billion, or 1.6 percent of total
assets.
Following the injections of liquidity provided by the Federal
Reserve and the CARES Act, the FHLBanks' balance sheets--both advances
and debt outstanding--have fallen to or below precrisis levels (see
Figure 3). This is exactly what the FHLBanks are supposed to do as
countercyclical providers of liquidity. And it is why FHFA is focused
on protecting the System's safety and soundness. It is critical that
the Banks remain capable of being a source of liquidity when their
members and the economy need it most.
Figure 3
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Assessing FHFA's Policy Response: The State of the Market Today
I am proud of what FHFA has done to help borrowers, renters, and
the housing market deal with this crisis. FHFA recognizes that more
work remains. The crisis caused by COVID-19 is not over. The full
economic and financial impact of the pandemic is not yet known. The
future state of the labor market remains uncertain. The mortgage market
is still under stress. For these reasons, the FHFA team is still hard
at work to ensure our policies continue to respond to the challenges as
they evolve. We remain committed to working with other Federal
agencies, Congress, our regulated entities, and stakeholders to get
through this difficult time. That said, at this point, I am encouraged
by what the data tells us about the state of the mortgage market and
the capacity of servicers following FHFA's robust policy response.
Total monthly Enterprise principal and interest payments are
approximately $32 billion. Of that, about 40 percent, approximately $13
billion, of the advance obligation rests with the Enterprises. About
$11 billion, approximately a third, rests with depositories. Therefore,
roughly $8 billion, approximately a quarter, of the potential monthly
advance obligation rests with nonbanks. At a 6.5 percent forbearance
rate this translates into approximately $520 million per month of
nonbank incremental advance needs. And, as noted above, not all
borrowers in forbearance have stopped making mortgage payments. As a
result of FHFA's 4-month limit on servicers' obligations to advance
principal and interest payments on loans in forbearance, nonbanks'
total 4-month obligation is approximately $2.1 billion.
Were forbearance rates to rise dramatically to 15 percent, nonbank
servicers' monthly advance obligations would be roughly $1.2 billion.
FHFA's analysis of servicer capacity indicates that servicers as a
whole have multiples of that number available should they need it.
FHFA's internal modeling projects that forbearance rates will not reach
as high as 15 percent. But this type of analysis provides useful
context to the forbearance rates we are seeing today. In addition, both
Fannie Mae and Freddie Mac programs allow servicers to use a portion of
mortgage payoffs from refinancings to help cover these advance
obligations. This has a significant impact especially under the Fannie
Mae program.
In addition, servicers have recently increased their available
liquidity. Total nonbank liquidity increased by 9 percent to $36
billion in the first quarter of 2020. Of that, unencumbered cash and
equivalents made up $13 billion, an increase of 19 percent from
December 31, 2019. At the end of April, nonbank servicers' cash
positions improved compared to the end of March and profitability
increased. This was driven by the stability in the 10-year Treasury
bond, which led to stability in mortgage servicing rights (MSR) values
combined with strong volume and wide margins.
Servicing buyers are beginning to return to the MSR purchase
market, providing access to liquidity especially for smaller firms that
have been forced to hold servicing. Lenders have shown a willingness to
renew warehouse lines of credit and some appetite to offer new credit
for MSR Advance Facility Financing.
Following some contraction in mortgage market activity in March and
April, the purchase market appears to be rebounding (see Figure 4), and
combined purchase and refinance mortgage application activity has
increased to levels last seen in 2013. According to analysis by the
American Enterprise Institute based on data from Optimal Blue on
mortgage loan applications receiving rate locks in May, average credit
scores, debt-to-income, and loan-to-value ratios have not changed
dramatically on a year-over-year basis for conventional loans. The
Enterprises, at the direction of FHFA, will continue to take measured
and responsible steps to maintain a prudent risk profile and address
layered risks. Moving forward, FHFA will continue to closely monitor
all sources of market data and let the data drive our decisions.
Figure 4
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Looking Ahead: The Urgent Need To Build Capital at the Enterprises and
Advance Housing Finance Reform
But this does not mean that all is well. This crisis has provided
ample evidence of the critical vulnerabilities in our mortgage system
that put taxpayers and our housing market at risk. Most notably, Fannie
Mae and Freddie Mac lack the capital to withstand a serious housing
downturn. This undermines their countercyclical role and jeopardizes
their important mission.
To provide the Enterprises a stronger foundation on which to
weather periods of financial stress, on May 20, FHFA released a
reproposed capital rule. This rule will help each Enterprise become
safe and sound to fulfill its statutory mission across the economic
cycle. It is essential to building a strong, resilient housing finance
system that supports sustainable and affordable home ownership.
Only Congress can enact the reforms necessary to fix the structural
flaws in our housing finance system. To that end, next week, I will
submit FHFA's Annual Report to Congress that includes several
legislative recommendations to strengthen FHFA with additional
regulatory and supervisory authorities similar to those of other
independent Federal financial regulators. I stand ready to work with
all who share the goal of building a stronger, more resilient housing
finance system in America.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM BENJAMIN S. CARSON
Q.1. Under a final rule issued in December 2016, all housing
counselors at HUD-certified housing counseling agencies must
complete individual HUD certification by August 1, 2020, in
order to provide counseling services. The COVID-19 pandemic may
pose challenges to completing the testing requirement for
certification, particularly if a counselor does not have the
technological capability necessary to complete an online exam
and planned to sit for an in-person, proctored exam. According
to the latest information available from HUD Exchange, in 15
States less than 40 percent of counseling agencies had even one
counselor who had completed certification. Lack of certified
counselors could pose a challenge to helping the many
homeowners and renters who will face housing challenges in the
months ahead.
How will HUD ensure that counselors at HUD-certified
counseling agencies have sufficient time to complete the
certification process so that all States will have the
necessary counseling resources for homeowners and renters? Will
HUD move the August 1, 2020, deadline or otherwise alter
certification requirements to ensure there are sufficient
resources available in all States?
A.1. HUD's Office of Housing Counseling has focused its work
throughout the past year to ensure that housing counselors and
housing counseling agencies have sufficient time and resources
to prepare for and successfully complete the HUD Housing
Counselor certification examination. Because of the difficulty
adding new certified counselors due to the pandemic, HUD
published an Interim Final Rule effective July 31 that extended
the certification deadline through August 1, 2021.
Q.2. Secretary Carson, in response to a question from Senator
Scott about eviction moratoria, you said that HUD was
interested in creating affordable housing. I share your
interest in creating more affordable housing in all
neighborhoods throughout the country. But new affordable units
built in the coming years will not help families who are
currently facing eviction. If they are displaced, these
families may find themselves at increased risk of homelessness
or doubling up, putting them at greater risk for contracting
COVID-19. We have been told the homeless system already needs
an additional $11.5 billion, on top of the $4 billion provided
in the CARES Act, just to serve those without adequate,
socially distanced shelter. That does not account for the
increased need if more renters are displaced.
Secretary Carson, how do you propose to help renters--
particularly those who were not receiving Federal assistance
before the pandemic--so that they do not find themselves
homeless in the coming weeks and months?
A.2. Earlier this month, the Administration issued its
Executive order (EO) to temporarily HALT evictions during the
COVID-19 pandemic. American renters who meet certain conditions
cannot be evicted if they have exhausted their best efforts to
pay rent, and are likely to become homeless as a result.
HUD continues to work with housing providers and renters to
prevent any threat to the housing stability of Americans, which
is central to their health and well-being, especially in the
wake of the coronavirus. Since the onset of this pandemic, the
Department has taken proactive measures to keep Americans in
their homes, including allowing the use of CDBG-CV and ESG-CV
for the purposes of rental assistance.
To assist families in mitigating any hardships that may
arise, HUD has provided an Eviction Prevention and Stability
Toolkit. The Toolkit encourages Public Housing Authorities
(PHA) and Housing Choice Voucher (HCV) landlords to plan for
and implement strategies to keep families stably housed and
mitigate economic hardships due to Coronavirus. HUD also
published a Multifamily Tenant Brochure to inform and address
rent payment concerns of tenants living in multifamily
properties.
The Toolkit is composed of a PHA best practices guide,
tenant brochure with tips to avoid eviction, HCV landlord flyer
to encourage engagement with tenants before the moratorium
expires, and repayment agreement guidance in addition to sample
documents to provide increased clarity for landlords and
renters utilizing the resources.
For FHA-insured multifamily properties where the owner is
receiving forbearance mortgage payment relief, tenants cannot
be evicted solely for nonpayment of rent for the duration of
the forbearance period. HUD issued guidance on July 1 for
owners of these properties, including a new online brochure for
owners to share with tenants.
Q.3. In response to a question from Senator McSally, you stated
that struggling renters could have a reassessment of their
income in order to obtain a rent adjustment so they can avoid
falling behind on their payments. The ability to come in for a
rent adjustment when a family loses a job or income is an
important feature of the federally assisted housing programs,
in that it helps residents weather job losses and downturns
without the further setback of an eviction or accrual of debts
they won't be able to repay. This feature also provides
reassurance to landlords participating in the Section 8 voucher
program that they will be paid in full. As you know, however,
such rent adjustments are only available for federally assisted
renters. As HUD reported in March 2020, HUD assists only about
1-in-4 very low-income renter households and only about 1-in-10
renter households nationwide, leaving 9 out of 10 renters
unable to ask for the rent adjustment you described.
How does HUD propose to help the 9 in 10 renters who do not
receive HUD assistance if they fall behind on rent payments, or
are already 4 months behind, as Senator McSally described?
A.3. For those families that are income eligible for HUD
programs, they are encouraged to apply to any and all programs
for which they qualify. In addition to the regular HCV program,
there are also more than 500,000 special purpose vouchers for
specific populations, projects for elderly and disabled
families and others that can assist our most vulnerable
unassisted families.
Rental Assistance is also an eligible use of CDBG-CV
funding, however, it is temporary assistance (6 months) and the
families would need to work with the grantee to address longer
term housing needs.
Q.4. Several times during the hearing, you referenced the
National Multifamily Housing Council (NMHC) rental payment
tracker data as evidence that renters are continuing to make
rental payments. While the NMHC presents one data point, this
data only represents about 25 percent of all units and those
units are in professionally-managed buildings. According to the
NMHC on its June 9th release, this data does not paint a full
picture of what is happening across the rental market:
``These are trying times for the country, and we are
reminded on a regular basis how crucial safe and secure
housing is during a period of uncertainty and upheaval,
so we are glad to see that residents who live in
professionally managed properties continue to pay their
rent,'' said Doug Bibby, NMHC President. ``While our
Rent Payment Tracker metric continues to show the
resilience and strength of the professionally managed
apartment industry, it does not necessarily tell the
whole story, as it doesn't capture rent payments for
smaller landlords or for affordable and subsidized
properties, and according to Harvard, more than half of
renters with at-risk wages due to the pandemic live in
single-family and small multifamily rentals with 2-4
units.''
``There are serious signs of economic dislocation
outside of our reporting universe that underscore the
need for Congress to pass a direct rental assistance
program and extend unemployment benefits before it's
too late,'' said Bibby. ``According to the Harvard
Joint Center for Housing Studies, nearly a fifth of
households with at-risk wages in small multifamily
apartments may have difficulty paying rent. In
addition, 32 percent of renter respondents to the
Census Bureau's Household Pulse Survey reported no or
slight confidence in their ability to pay next month's
rent.''
In addition to the NMHC data you referenced, what other
data sources, including those provided by other agencies like
the U.S. Census Household Pulse data, does HUD use to monitor
the rental market? Given the limitations of the NMHC data, will
you appropriately caveat the use of this data in the future?
A.4. HUD is carefully monitoring the Census Pulse Survey data
and working with the Census Bureau to edit the rent-related
questions on the survey to improve its accuracy given the
practices by property managers to collect partial rent payments
throughout the month while still considering tenants current on
rent. HUD is also working with industry partners to obtain rent
payment data for Low-Income Housing Tax Credit and other
professionally-managed subsidized rental housing.
It is HUD's experience that collecting complete, accurate,
and timely data from the millions of owners of small rental
properties is difficult. This is why HUD is very supportive of
the Census Bureau's Pulse Survey.
Q.5. In response to a question from Senator Tester about the
financial challenges facing smaller property owners if renters
are unable to make payments, you stated that those property
owners were
eligible for PPP and that PPP seems to be meeting those needs.
However, I continue to hear confusion about whether property
owners are eligible for PPP based on the SBA's Interim Final
Rule and FAQs, and the National Multifamily Housing Council
reports that there is outstanding litigation on the issue. For
PPP loans to be forgiven, the majority of the funds must go to
payroll expenses, which may be a smaller proportion of the
financial need for smaller or sole proprietor landlords.
Please clarify whether small landlords are eligible for PPP
under SBA rules.
A.5. While the program has now terminated, the Small Business
Administration is in the best position to respond to questions
about PPP terms and conditions.
Q.6. Through the CARES Act, Congress provided almost $2 billion
($1.935B) to help local communities serve their residents
through the Public Housing and Housing Choice Voucher programs.
To date, only about $1 billion ($1.065B) has been made
available to public housing agencies for these purposes. The
nearly $900 million in CARES Act funds remaining are needed to
help our lowest-income residents maintain stable and safe
housing.
When and how do you plan to allocate the remainder of these
funds?
A.6. All Public Housing Operating Funds ($685 million) provided
through the CARES Act were obligated to PHAs on May 1, 2020.
The Office of Public and Indian Housing (PIH) published a
notice on July 31, 2020, that established the eligibility
criteria for the $400 million of supplemental HAP made
available through the CARES Act. The supplemental HAP funding
is available for PHAs that either (1) experience a significant
increase in voucher PUC due to extraordinary
circumstances (referred to as Extraordinary Circumstances), or
(2) despite taking reasonable cost saving measures, as
determined by the Secretary, would otherwise be required to
terminate rental assistance for families as a result of
insufficient funding (referred to as Shortfall Funds). The
deadline for submitting Extraordinary Circumstances
applications is October 31, 2020, and the eligibility
evaluation and determination for funding awards will be
performed on a rolling basis.
As of September 14, 2020, the Office of Housing Voucher
Programs (OHVP) has made available $849.9 million of the CARES
Act admin fee supplemental funding. PIH Notice 2020-08 made
available $377 million, and PIH Notice 2020-18 made available
$472 million. From this total, $841.7 was awarded to PHAs
administering the HCV Program and $8.2 million for PHAs
administering the Mainstream Vouchers.
Additionally, PIH Notice 2020-17 made available $400
million in CARES Act HAP supplemental funding to PHAs
administering the HCV Program. So far, $257.5 million has been
awarded under the Extraordinary Circumstances category for
COVID-19 related PUC increases. Shortfalls Funds will be
awarded in December 2020.
Finally, the OHVP, through PIH Notice 2020-20, made
available $10 million to PHAs in CARES Act Mod Rehab HAP
supplemental funding for owners participating in the Moderate
Rehabilitation Program to respond to COVID related HAP cost
increases, including vacancy payments. So far, $9.42 million
has been obligated, and the PHAs will request these funds
through budget revisions.
Q.7. Senator Grassley and I have a bipartisan bill--the
Fostering Stable Housing Opportunities Act--to make it easier
for youth to access a voucher on demand as they age out of care
anywhere in the country and encourage partnerships between
housing and child welfare agencies. I am hopeful that Congress
will enact our bill this year and set up a permanent pathway to
housing stability for young people exiting foster care across
the country.
In the meantime, Congress also provided $20 million in
FY2020 funding to provide new Family Unification Program (or
FUP) vouchers for youth. Half of these funds are to be made
available for youth through noncompetitive allocations to PHAs
that have partnered with child welfare agencies, akin to the
model in our bill. But I understand these FY2020 funds haven't
been made available yet. Ohio foster care alumni are concerned
that youth will face homelessness if they exit care into this
economic crisis.
Although HUD recently issued FY2019 FUP vouchers in April,
they will be allocated to specific PHAs rather than being
available nationwide as youth age out of care.
I know this is an issue of concern to you, as well, so I am
hopeful that you will work to make the FY2020 funds available
for youth quickly.
Can you tell me when you plan to make these new FY2020 FUP
funds available for youth?
A.7. There has been no gap in the availability of Foster Youth
to Independence (FYI) initiative vouchers. HUD continues to
make awards under FYI utilizing 2019 Tenant Protection Voucher
(TPV) funds. An Office of Public and Indian Housing (PIH)
notice announcing the availability of up to $10 million from
FY2020 will be announced in the fall of 2020. HUD also expects
to be able to announce the availability of an additional $10
million to be made available competitively to serve the same
population of foster youth.
Q.8. Mr. Secretary, I am concerned that there are certain CARES
Act funds that has not yet been disbursed for use in our
communities. For example, the Department has not yet disbursed
the $50 million appropriated for the Section 202 program for
housing for the elderly and the $15 million appropriated for
Section 811 housing for persons with disabilities. In fact, HUD
has not yet published guidance on how owners of these
properties can apply for the funds.
These funds are urgently needed to help keep vulnerable
elderly residents and those with disabilities safe during this
pandemic, particularly those who live in buildings with
congregate facilities. The nonprofit owners of this housing are
responsible for the health and safety of their vulnerable
residents and have incurred additional costs to meet these
needs, including purchasing personal protective equipment for
both staff and residents, adjusting staff hours and personnel,
erecting barriers in dining areas, and other mitigation efforts
to allow for appropriate physical distancing. Owners have also
incurred expenses to help residents safely self-quarantine.
While the Multifamily Office at HUD has put out several FAQ
Guidance documents, there is still significant uncertainty
among sponsors regarding which expenses incurred to address the
health and safety needs of residents during COVID-19 will be
considered operating costs that are eligible for Federal
support.
When does HUD plan to issue guidance to owners on eligible
costs and process for applying for CARES Act funds necessary to
keep residents safe during this emergency?
A.8. In responding to this unprecedented national emergency,
HUD's Office of Multifamily Housing has attempted to balance
the known financial impacts from COVID-19 with the significant
uncertainty about both potential future impacts and the
possibility of additional congressionally appropriated
emergency funding. HUD has met with many stakeholders to learn
about the impacts they are facing and is carefully monitoring
the impact on residents in HUD-assisted properties.
HUD obligated a portion of the Section 202 CARES Act
supplemental funds in July for processing contract renewals as
well as funding shortfalls. In addition, HUD issued Housing
Notice 2020-08 on July 23 to provide guidance to sponsors/
owners of properties receiving HUD project-based assistance
(including Section 202, Section 811 and Section 8) on accessing
additional supplemental funds to provide assistance for project
level COVID-19 expenses to prevent, prepare for, or respond to,
COVID-19. HUD is currently processing an initial round of
COVID-19 supplemental payment requests received from project
owners in August and anticipates most of these requests will be
paid by October 1.
------
RESPONSE TO WRITTEN QUESTION OF SENATOR TILLIS
FROM BENJAMIN S. CARSON
Q.1. I am concerned that HUD is contemplating new regulations
that will reduce access to mortgage credit, specifically, FHA-
insured loans with downpayment assistance (DPA) provided by a
governmental entity. These loan products are utilized by
minority populations at a higher rate, so regulation that
reduce access to DPA will impact minority populations
significantly. Even more concerning, HUD is apparently
contemplating this rulemaking absent data on the pricing and
performance of these loans on a governmental entity-specific
level. Such action would be contrary to Congress' intent, as
expressed when passing legislation in 1978, that HUD not limit
DPA from a governmental entity except as clearly necessary to
protect taxpayers. Can you commit to that you will not engage
in rulemaking that has the potential of reducing access to
mortgage credit for FHA-insured loans with DPA from a
governmental entity without first collecting the pricing and
performance on these loans on a governmental entity-specific
level, as Congress requested in HUD's FY2020 appropriations
bill?
A.1. FHA has documented that purchased mortgages with
downpayment assistance (DPA) tend to perform worse than
purchase mortgages without DPA in its Annual Report to Congress
on the Financial Status of the FHA Mutual Mortgage Insurance
Fund for Fiscal Year 2019. This report is available at https://
www.hud.gov/sites/dfiles/Housing/documents/
2019FHAAnnualReportMMIFund
.pdf.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
FROM BENJAMIN S. CARSON
Q.1. In the wake of the COVID-19 crisis, several States have
proposed laws or Executive orders that would include some form
of mortgage foreclosure moratorium and forbearance and loan
modification requirements.
These bills would impose differing standards that would
force lenders and servicers to follow a patchwork of State and
potentially local regulation based on the location of the
property making it impossible for lenders to employ a
consistent national approach to aiding their customers
financially impacted by the pandemic.
If this State-by-State trend continues, could the resultant
patchwork of laws and requirements make it more difficult for
home buyers to obtain the credit that they need?
A.1. See answer to Question 2 below.
Q.2. In your view, should we be steering the States away from
trying to impose these laws?
A.2. When States issue loss mitigation requirements via law or
Executive order that differ from FHA requirements or Federal
law, FHA requirements preempt State laws. Further, the adoption
of inconsistent State laws has the effect of increasing costs
for servicers and increasing their risk of noncompliance with
FHA requirements. As a result, servicers may be less willing to
purchase or service new mortgages made to higher risk
borrowers. This in turn may reduce the availability of credit
and increase costs to borrowers.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR MENENDEZ FROM BENJAMIN S. CARSON
Housing Counseling
Q.1. When the protections in the CARES Act run out, we could be
facing a foreclosure crisis even greater than the one we faced
in the Great Recession. Families unable to pay their mortgage
will need to navigate the complexity of requesting and
accessing mortgage relief programs. Homeowners already in
forbearance will have to work with their mortgage servicers to
repay forborne amounts and housing counselors can provide
critical resources that allow them to keep their homes.
As the COVID-19 pandemic continues to disproportionately
affect minority and low-income communities, are you considering
encouraging housing counselors to reach out to more minority
and low-income borrowers?
A.1. The Department consistently and strongly encourages HUD-
approved Housing Counseling Agencies and their counselors to
reach out to minority borrowers, low-income borrowers and
renters, and consumers in rural and underserved areas. As
community-based organizations, housing counseling agencies have
a long history of being trusted partners in their local
communities. Many HUD-approved Housing Counseling Agencies
utilize proactive and culturally appropriate outreach
strategies to assist individuals and families in need.
HUD supports these efforts through regular outreach,
informational materials, training, and dialogue with housing
counselors and HUD-approved Housing Counseling Agencies on HUD,
FHA, and other Federal policies and programs that can assist
families impacted by the COVID-19 National Emergency.
Q.2. On HUD's ``Coronavirus Resources'' webpage, HUD provides
homeowners with a link to find HUD-approved housing counselors.
Given that HUD is already referring homeowners to housing
counselors, do you believe Congress should consider increasing
resources for HUD-approved housing counselors to help American
families make educated mortgage decisions as the country works
through this crisis? If not, why not?
A.2. Access to the housing counseling services can improve home
retention, and prevent evictions, and as such HUD supports the
continued provision of resources for this important function.
The appropriate funding level for HUD's Housing Counseling
program will be determined by assessing these needs in light of
other HUD and COVID-related funding priorities.
Section 202 Housing
Q.3. More than 2 months ago, the CARES Act provided $50 million
to HUD for the Section 202 Housing for the Elderly program,
including up to $10 million to help affordable senior housing
communities get residents through this pandemic. Section 202
residents are older, have lower incomes, and face significant
health challenges, compared to other seniors in the community.
Meanwhile, HUD Section 202 senior housing communities are
spending thousands if not tens of thousands a month on
disinfecting and cleaning, PPE, services like security and
meals, and extra staffing costs.
Can you tell me why HUD has yet to get these emergency
resources to the more than 3,000 Section 202 communities, and
when does HUD expect to distribute these funds to Section 202
communities?
A.3. In responding to this unprecedented national emergency,
HUD's Office of Multifamily Housing has attempted to balance
the known financial impacts from COVID-19 with the significant
uncertainty about both potential future impacts and the
possibility of additional congressionally appropriated
emergency funding. HUD has met with many stakeholders to learn
about the impacts they are facing, and is carefully monitoring
the impact on residents in HUD-assisted properties.
HUD obligated a portion of the Section 202 CARES Act
supplemental funds in July for processing contract renewals as
well as funding shortfalls. In addition, HUD issued Housing
Notice 2020-08 on July 23 to provide guidance to sponsors/
owners of properties receiving HUD project-based assistance
(including Section 202, Section 811 and Section 8) on accessing
additional supplemental funds to provide assistance for project
level COVID-19 expenses to prevent, prepare for, or respond to,
COVID-19. HUD is currently processing an initial round of
COVID-19 supplemental payment
requests received from project owners in August and anticipates
most of these requests will be paid by October 1.
Public Housing
Q.4. On Thursday, May 14, HUD sent an email informing Public
Housing Agencies (PHAs) that ``CARES Act Supplemental Operating
Funds may only be drawn down to pay for immediate needs and
cannot be held as reserves.'' The email noted that, unlike
regular Operating Funds, CARES Act Supplemental Operating Funds
cannot be drawn down all at once, held by the agency, and then
used for future costs of non-immediate eligible activities even
if those expenses occur before the expiration of the CARES Act
supplemental funding. Why has HUD placed restrictions on the
draw down and use of the CARES Act Supplemental Operating
Funds?
A.4. PHAs may draw down CARES Act funding to pay for ongoing
public housing costs, including regular Operating and Capital
Fund activities, as well as expanded COVID-19 activities as
described in PIH Notice 2020-07. The immediate needs
requirement imposed by HUD is consistent with the current
practice in the Capital Fund program, and required by the cash
management requirements included in 2 CFR Part 200 whereby
grantees and the Federal agency must limit the time between the
draw down and expenditure of funding. Unlike ``regular''
Operating Funds, which are required to be provided at a rate of
\1/12\ th of eligibility per month regardless of
immediate needs, HUD expedited the obligation of all CARES Act
funding to PHAs to ensure that PHAs had access to their entire
amount in less than 35 days to ensure PHAs could begin
addressing program costs as quickly as possible.
Q.5. Through the CARES Act, Congress provided $1.935 billion to
help local communities serve their residents through the Public
Housing Operating Fund and Housing Choice Voucher program but,
as of June 8th, only $1.065 billion has been made available to
Public Housing Agencies. Why has HUD failed to release the
additional funding provided by Congress? When does HUD expect
to release the remaining $870 million appropriated by Congress
for the Public Housing Operating Fund and the Housing Choice
Voucher program?
A.5. All Public Housing Operating Funds ($685 million) provided
through the CARES Act were obligated to PHAs on May 1, 2020.
The Office of Public and Indian Housing (PIH) published a
notice on July 31, 2020, that established the eligibility
criteria for the $400 million of supplemental HAP made
available through the CARES Act. The supplemental HAP funding
is available for PHAs that either (1) experience a significant
increase in voucher PUC due to extraordinary circumstances, or
(2) despite taking reasonable cost saving measures, as
determined by the Secretary, would otherwise be required to
terminate rental assistance for families as a result of
insufficient funding (heretofore referred to as Shortfall
Funds). The deadline for submitting applications is October 31,
2020, and the eligibility evaluation and determination for
funding awards will be performed on a rolling basis.
As of September 14, 2020, the Office of Housing Voucher
Programs (OHVP) has made available $849.9 million of the CARES
Act admin fee supplemental funding. PIH Notice 2020-08 made
available $377 million, and PIH Notice 2020-18 made available
$472 million. From this total, $841.7 was awarded to PHAs
administering the HCV Program and $8.2 million for PHAs
administering the Mainstream Vouchers.
Q.6. Does HUD have a proposal on how to handle resident's past
due rent payments once HUD's eviction moratorium ends, ensuring
that residents are set-up for success and are not stuck with an
unaffordable balloon payment?
A.6. HUD has strongly encouraged PHAs and owners to enter into
repayment agreements for past due rent to position residents
for stability and circumvent an unaffordable balloon payment
after the eviction moratorium expires. In July 2020, HUD
provided PHAs with an ``Eviction Prevention and Stability
Toolkit.'' The Toolkit promotes housing stability by offering
several resources from existing HUD guidance and innovative
practices from PHAs. For example, the Toolkit includes a PHA
brochure that recommends PHAs adopt policies for retroactive
interim reexaminations, conduct direct outreach to households
behind on rent, and review policies on minimum rent and
financial hardship exemptions. In addition, the Toolkit also
centralizes HUD's current guidance on repayment agreements and
provides three sample repayment agreements from PHAs. The
Toolkit also includes a tenant brochure with weblinks and/or
phone numbers to key benefits to ensure families are set-up for
success. (e.g., weblinks to TANF, SNAP, unemployment services,
economic impact payments, free tax preparation, childcare for
essential workers, immediate jobs available during COVID-19,
and non-Federal emergency assistance for rent, utilities, and
other basic necessities.)
Additionally, HUD has effectuated several statutory and
regulatory waivers through the broad CARES Act waiver authority
which will support PHAs in expeditiously processing requests
for interim recertifications of income. These include waivers
of third-party verifications of income, delays in routine
annual recertifications of income, expedited adoption of
administrative policies, and other administrative waivers to
allow PHAs to focus efforts on those families hardest hit by
the pandemic.
Q.7. Does HUD have enough funds to cover all vouchers for
families currently in Housing Choice Voucher program? If not,
how much additional funding is required?
A.7. When comparing current available funding to actual and
estimated expenses for the CY, HUD may have enough money to
cover all leased and issued vouchers for the remainder of the
year, thus avoiding any potential terminations of vouchers for
families due to insufficient funding. However, this premise is
based solely on January to June 2020 financial systems data
projected through 12/31/2020. This data is constantly evolving
based on local conditions such as the state of PHA Operations,
timeframes for processing interim income decreases that tenants
experience and PHA policies on admission, recertifications and
rent/occupancy issues.
HUD will award $400 million in CARES Act Supplemental HAP
funding to PHAs (including Moving to Work (MTW) PHAs) that
experienced a significant increase in PUC due to extraordinary
circumstances in CY 2020; or to shortfall PHAs that, despite
taking reasonable cost savings measures, would otherwise be
required to terminate rental assistance for families as a
result of insufficient funding for either the Mainstream
Program and/or HCV Program. HUD will continue to closely
monitor the data associated with estimating HAP need and will
provide updates as needed.
Q.8. Since the start of the COVID-19 crisis, how many families
is HUD serving through the Housing Choice Voucher program? Has
HUD seen an increase, decrease, or continuity in the number of
families it serves through the program?
A.8. On March 1, the HCV program (both MTWs and non-MTWs) was
serving 2.273 million families. In April, the program was
serving 2.278 million families. With data to date, the HCV
program is serving 5,000 more families than at the start of the
COVID-19 national emergency. May numbers made available in mid-
July showed that the HCV program held steady and continued to
serve 2.278 million families.
CARES Act Implementation and Access to Credit
Q.9. Secretary Carson, even though mortgage interest rates are
at historic lows, it's still too difficult for consumers to
access credit to purchase or refinance their home. Obviously
many factors contribute to this, but I'm concerned that the way
FHA implemented the CARES Act forbearance provisions may have
exacerbated this situation.
For example, FHA last week released guidance on loans for
which the borrower experiences a COVID-19-related hardship
shortly after closing and enters forbearance. While these loans
are now largely eligible for FHA insurance, FHA will hold the
lender liable for a large share of the losses if the borrower
can't resume payments.
Likewise, Director Calabria, your agency belatedly allowed
the GSEs to purchase loans that enter forbearance soon after
closing, but only with steep price discounts. This may create a
disincentive for banks to provide loans to any borrowers who
may need CARES Act forbearance and may be perpetuating problems
borrower are facing in accessing credit. It seems like the
rational response for lenders is to turn away borrowers with a
higher risk of going into forbearance, like people that work in
restaurants or other businesses hurt by COVID, or borrowers
with lower FICO scores.
Can you both explain how you are evaluating the impact of
these policies on access to credit?
A.9. FHA issued a policy on June 4, 2020, that provided FHA
insurance eligibility for single-family mortgages that went
into forbearance after closing but before receiving an FHA
insurance endorsement. The intention of this policy was to
assure the residential real estate market that FHA insurance
would be available for these mortgages. FHA believes the policy
effectively manages risks to FHA's Mutual Mortgage Insurance
Fund. Because the Department has provided this clarity, lenders
may continue to offer FHA financing using prudent lending
practices, without the need for credit overlays that would
restrict the ability of traditional FHA borrowers to obtain
mortgage financing.
Under FHA's June 4, 2020, policy, lenders must indemnify
FHA against the loss of up to 20 percent of the original
mortgage amount for up to two years. This aligns the public and
private incentives associated with these loans appropriately.
While FHA currently estimates that the number of mortgages that
it will endorse under the new policy will be small, the partial
indemnification requirement ensures that the risks associated
with these loans are not borne entirely by the American
taxpayer. This policy also eliminates any private incentive to
place borrowers affected by the COVID-19 National Emergency
into mortgages that they are financially unable to sustain.
FHA will track the loans insured under this policy and
carefully monitor the market to ensure this policy is
effective.
Q.10. Can you share the overall projected losses for FHA and
FHFA from buying loans that go into forbearance postclosing?
A.10. On a preliminary basis and based on current loss
mitigation policies, FHA expects 40 to 50 percent of FHA-
insured single-family mortgages receiving COVID-19 forbearance
to default. Overall projected losses for these mortgages are
expected to be between 40 to 50 percent of the defaulted loan's
unpaid principal balance, resulting in approximately a 20
percent overall loss rate. Actual default and loss rates will
depend on many variables, including unemployment and home price
trends and potential changes to loss mitigation policies.
MOU
Q.11. In a speech earlier this year, Director Calabria
mentioned a Memo of Understanding (MOU) was in development
between FHFA and HUD. Secretary Carson and Director Calabria,
can you provide details on what you expect to be included in
this MOU? Additionally, please provide a timeline of when
Congress can expect the MOU to be released.
A.11. The revised MOU between the Federal Housing Finance
Agency (FHFA) and HUD is intended to replace an existing MOU
between HUD, through FHA, and FHFA regarding the sharing of
information that was executed on January 21, 2010. The revised
MOU continues to provide for the sharing of data, which will be
used to further the respective supervisory, regulatory, and
other lawful responsibilities of the agencies, which now
specifically includes Ginnie Mae as an additional participating
component of HUD.
Additionally, consistent with the terms of the MOU, data
may be shared to facilitate the development and implementation
of the housing reform plans contained in the Presidential
Memorandum dated March 27, 2019, including the ``Housing
Finance Reform Plan'' issued by HUD, dated September 2019. The
MOU provides for protections for the use and retention of all
shared information. The MOU also identifies the applicable
authorities for each agency to enter into and share
information. There is not a timeline for completion at this
time.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER
FROM BENJAMIN S. CARSON
Q.1. Rented Homes and Apartments--Secretary Carson, during the
hearing I asked you about what is being done for renters and
for property owners. You responded that you thought the
paycheck protection program was working and sufficient for
these businesses.
Can you please expand on how the Paycheck Protection
Program is helping these folks who own the homes and apartments
with mortgages that are being rented out and but are not
receiving rent due to the crisis?
A.1. While the program has now terminated, the Small Business
Administration is in the best position to respond to questions
about PPP terms and conditions.
Q.2. Affordable Housing--I have been concerned about the
availability and affordability of housing particularly in rural
America since long before this crisis, as I discussed the last
time you were both before this Committee. This crisis is only
going to make those problems worse. Congress needs to work to
address this affordability and availability crisis in America.
What are you doing to make sure that the resources your
agencies have are making it to rural America and other
underserved areas?
A.2. HUD is dedicated to ensuring that rural and underserved
areas can make use of HUD programs to address affordability.
FHA insurance programs are available without geographic limits
and are utilized to facilitate more affordable debt for single-
family, multifamily, and healthcare facility lending in
underserved communities.
HUD plans to announce $10 million in grant awards for the
Self-Help Ownership Program next month to support home
ownership. HUD published its NOFA on June 18, 2020, and is
currently reviewing applications.
In addition, manufactured housing is an important
affordable home-ownership solution, including in rural and
underserved areas. HUD's Office of Manufactured Housing
Programs has been proactively addressing COVID-19 issues
impacting the manufactured housing industry. Several policy
waivers have been put in place to allow home installations to
continue to occur, despite supply chain issues and social
distancing measures. These measures, in addition to the
successful continuation of administering all aspects of the
Federal manufactured housing program during this period of
crisis, are vital in support of the housing needs within rural
America and other underserved areas.
Housing Programs in Indian Country
Q.3. During a Senate Committee on Indian Affairs oversight
hearing in October, I asked Assistant Secretary Kurtz about the
Section 184 Indian Home Loan Guarantee Program and HUD's work
to update the Section 184 regulations. What's the status of
these proposed regulations?
A.3. HUD is still actively working on developing a proposed
rule for publication and public comment. HUD conducted 18
tribal
consultation sessions and considered all tribal feedback
received at these sessions when developing the rule. The
current COVID-19 National Emergency has delayed rulemaking
efforts as the Department has been working tirelessly to
provide emergency funding to Tribal communities under the CARES
Act, and help Tribes ensure the health and safety of families.
Despite this delay, HUD is still planning on issuing the rule
early next year and looks forward to receiving additional
feedback from Tribes, borrowers, lenders, and the general
public.
Q.4. During the same hearing I asked the Department to look at
ways to better partner with Native CDFIs on Section 184
lending. Has HUD increased outreach to Native CDFIs?
A.4. HUD has been working to increase outreach to Native CDFIs
to promote the Section 184 Indian Home Loan Guarantee program
and to encourage their participation in the program. Since the
hearing, HUD staff met with the CDFI Fund to explore ways to
conduct additional outreach and agreed to collaborate on future
technical assistance targeting Native CDFIs.
Additionally, in November of 2019, HUD actively
participated in the Native CDFI Network's 2019 Policy Summit to
promote the program to CDFIs in attendance. To date, there are
at least four Native CDFIs that are actively participating in
the program, and HUD will continue to encourage Native CDFIs to
participate in the program and provide critical capital to
Native American borrowers.
Q.5. As you know, the biggest obstacle to home ownership facing
many low- to moderate-income and minority families is not
monthly payment, but rather down payment. As a result,
downpayment assistance provided by national, State and local
government downpayment assistance organizations can be critical
to providing a pathway to home ownership, particularly for
minority and low- to moderate-income borrowers.
HUD announced that it intends to proceed with a rulemaking
to limit downpayment assistance (DPA) programs offered by
Government entities and, in particular, DPA programs that
operate nationally, such as those offered by a number of Native
American tribes. If promulgated as HUD has indicated, HUD's
proposed rule would prevent these Native American housing
finance agencies, which currently assist many low- to moderate-
income and minority home buyers across the country from
operating nationally. I have a number of concerns with HUD's
initiative and will look forward to continuing a dialogue on
this issue so that we can move forward on a well-informed and
sensible housing policy that responsibly serves all Americans.
A.5. HUD looks forward to this continued dialogue.
Q.6. HUD's policy to limit tribal organizations to serving only
enrolled members of their respective tribes is a very
significant departure from the U.S. Government's 86-year policy
of self-determination and self-governance. HUD's policy
initiative as currently drafted would prevent Native American
tribes from being able to operate businesses off of their
respective reservations or to limit their products and services
to only enrolled members. I have significant concerns that this
initiative would set a terrible precedent and has been alarming
to Native American tribal organizations. Why are HUD and the
Trump administration advocating a policy that could prevent
Native American tribes from being able to sustain themselves?
A.6. The Administration is not advocating a policy that could
prevent Native American tribes from being able to sustain
themselves. HUD plans to engage in rulemaking to fully
implement the amendments made by the Housing and Economic
Recovery Act of 2008 (HERA), which prohibit any portion of a
borrower's downpayment from being provided by an entity that
financially benefits from the transaction.
While HERA's prohibition on assistance from the seller is
explicit in the statute, there are still questions as to the
scope of the prohibition when the downpayment assistance is
provided by Government entities that may benefit financially
from the transaction. Because FHA has an obligation to ensure
its programs are operating in full compliance with the law, FHA
is pursuing rulemaking to define the circumstances in which
governmental entities providing downpayment assistance are
deriving a financial benefit from the transaction.
Q.7. The Administration and HUD's own requirements mandate that
HUD engage in meaningful, face-to-face consultation before HUD
begins to work on a rule that would impact Native American
tribes. However, even before we were faced with the current
Pandemic, HUD was moving towards rulemaking, without fulfilling
its mandated tribal consultation requirements. It is my
understanding that a number of tribal organizations have
submitted comments and sent letters to HUD on this issue. Why
has HUD failed to engage in meaningful tribal consultation?
A.7. HUD's policy is to consult with tribal organizations early
in the rulemaking process on matters that have tribal
implications. On February 14, 2020, HUD issued a notice of
Tribal Consultation on HUD's proposed rule regarding mortgage
insurance for transactions involving downpayment assistance,
with a comment period of 30 days. As further stated in that
notice, if a proposed rule is published in the Federal
Register, tribes will have another opportunity to comment
through the public comment process.
Q.8. HUD's upcoming rulemaking could set a very significant
precedent by turning back the U.S. Government's 86-year policy
of self-determination and self-governance towards Native
American tribes if the department moves forward with this rule.
Do you commit to engaging in a meaningful tribal consultation
process before even working on a proposed rule? By engaging in
meaningful tribal consultation, HUD would then be able to get a
better understanding of these programs.
A.8. See answer to Question 7 above.
Q.9. It appears to me that HUD has taken the position that the
FHA-insured loans being assisted by Government entities,
particularly ``national'' Government entities, providing
downpayment assistance are a risk to the FHA Mutual Mortgage
Insurance Fund without sufficient, or any, data. I have
significant concerns with HUD taking action without sufficient
data or consultation to
inform the process. Please provide an explanation as to why it
believes that national lenders operating national programs are
riskier than those that only operate in a narrow geographic
area? And please provide an explanation as to why HUD believes
low- to moderate-income and minority borrowers pose a greater
risk than borrowers who are receiving downpayment assistance
from their families or other sources? What is HUD's rational
for concern over these two factors?
A.9. FHA-insured purchase mortgages with downpayment assistance
(DPA) tend to perform worse than those purchase mortgages
without DPA. As discussed in the 2019 Annual Report to Congress
on the Financial Status of the FHA Mutual Mortgage Insurance
Fund (Annual Report to Congress):
Early Payment Defaults (EPDs) for FHA-insured
single-family mortgages with downpayment assistance are
over 60 percent higher than for mortgages without
downpayment assistance sources of funds over the last 2
fiscal years (See FHA Annual Report to Congress,
Exhibit I-18 and Table B-18.)
Seriously delinquencies (SDQs) for FHA-insured
single-family mortgages with downpayment assistance are
between 50 percent and 60 percent higher than for
mortgages without downpayment assistance. (See FHA
Annual Report to Congress, Exhibit I-19 and Table B-
19.)
Serious delinquency rates tend to increase as
mortgages age. Seasoned mortgages with downpayment
assistance from governmental entities are associated
with the highest serious delinquency rates (See FHA
Annual Report to Congress Exhibit I-19 and Table B-19.)
While HUD recognizes the importance of providing
downpayment assistance for many FHA borrowers, FHA also has a
statutory obligation to insure mortgages that meet the National
Housing Act's requirements for the borrower's minimum cash
investment, including its explicit prohibition on downpayment
assistance from certain sources.
Q.10. Because I am not alone in the concern that HUD does not
have the granular level of data it needs to make informed
decisions on this issue, in last year's congressional
appropriations process, my colleagues and I added report
language to the appropriations bill, which recommended that HUD
begin to collect a more granular level of pricing and default
performance data for each national, State, and local housing
finance agency. Since 2000, this granular level of data has
been collected for each nonprofit providing downpayment
assistance to borrowers, and it would be valuable to both HUD
and Congress for that the same type of data be collected for
each Government entity. The language that we included in our
Report was supported both the industry and the consumer
advocacy community. However, despite Congress' recommendation
that HUD begin to collect this data, which is very easy to do
because the systems are already programmed to do so, HUD has
failed to do so. Why? When will HUD begin collecting this data?
A.10. FHA has documented that purchase mortgages with
downpayment assistance (DPA) tend to perform worse than
purchase mortgages without DPA in its Annual Report to Congress
on the Financial Status of the FHA Mutual Mortgage Insurance
Fund for Fiscal Year 2019. This report is available at https://
www.hud.gov/sites/dfiles/Housing/documents/
2019FHAAnnualReportMMI
Fund.pdf.
Q.11. Will you make this data public? This would provide the
additional benefit of analysis performed by the broader housing
community, including the housing industry, think tanks, and
consumer advocate organizations.
A.11. See answer to Question 10 above.
Q.12. Will you commit to collecting, analyzing and making
public this data before you proceed on any DPA rulemaking?
Doing so would ensure that HUD would be able to make informed
policy decisions on this issue.
A.12. See answer to Question 10 above.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
FROM BENJAMIN S. CARSON
Q.1. When will HUD release the $50 million in Section 202
Housing for the Elderly program funding provided by the CARES
Act?
A.1. In responding to this unprecedented national emergency,
HUD's Office of Multifamily Housing has attempted to balance
the known financial impacts from COVID-19 with the significant
uncertainty about both potential future impacts and the
possibility of additional congressionally appropriated
emergency funding. HUD has met with many stakeholders to learn
about the impacts they are facing and is carefully monitoring
the impact on residents in HUD-assisted properties.
HUD obligated a portion of the Section 202 CARES Act
supplemental funds in July for processing contract renewals as
well as funding shortfalls. In addition, HUD issued Housing
Notice 2020-08 on July 23 to provide guidance to sponsors/
owners of properties receiving HUD project-based assistance
(including Section 202, Section 811 and Section 8) on accessing
additional supplemental funds to provide assistance for project
level COVID-19 expenses to prevent, prepare for, or respond to,
COVID-19. HUD is currently processing an initial round of
COVID-19 supplemental payment requests received from project
owners in August and anticipates most of these requests will be
paid by October 1.
Q.2. When will HUD release the remaining $200 million in
Section 8 Project-Based Rental Assistance funding provided by
the CARES Act?
A.2. On July 23, HUD issued Housing Notice 2020-08 to provide
guidance to owners on requesting CARES Act funds to address
COVID-related expenses at properties with rental assistance in
the project-based Section 8, Section 202, and Section 811
programs. Together with CARES Act funds allocated to properties
to offset reductions in tenant incomes related to the pandemic,
this is expected to fully utilize CARES Act funds for the
multifamily portfolio.
Q.3. HUD does not require radon testing or mitigation in public
housing units, despite indoor radon being the leading cause of
lung cancer among nonsmokers. HUD is tasked, under law, with
developing policy ``for dealing with radon contamination . . .
to ensure that occupants of [public housing] are not exposed to
hazardous levels of radon'' to meet the statutory national goal
of having ``air within buildings in the United States . . . as
free of radon as the ambient air outside of buildings.'' At the
hearing, regarding radon in public housing, you stated, ``We've
also changed the inspection protocol so that it will be a part
of the inspection.''
When did HUD update the Real Estate Assessment Center
standards to include radon inspections or mitigation? How,
specifically, is radon testing/mitigation scored in the updated
inspection protocol?
A.3. All HUD-assisted public housing must conform to HUD's
Uniform Physical Condition Standards (UPCSRIN) in 24 CFR part
5, subpart G. It is through these regulations that HUD has
defined ``decent, safe, sanitary and in good repair.'' These
regulations do not explicitly require testing for, or
mitigation of, radon; nonetheless, PHAs' responsibility to
maintain safe housing extends to the mitigation of radon when
it is detected. Compliance with UPCS is confirmed through
physical inspections performed by HUD's Real Estate Assessment
Center (REAC). Physical inspections typically occur every 1-3
years and include a visual assessment of unit conditions,
hazards and certain documentation. REAC inspectors do not
perform any environmental testing. However, to provide
additional assurance that HUD-assisted housing properties are
testing for and remediating radon in accordance with Federal
laws, regulations and contract provisions during FY2020, HUD
has worked with the Office of Management and Budget and
incorporated this objective into the Single Audit Act
compliance testing process. HUD has also included a requirement
in the Uniform Guidance compliance supplement requiring PHA's
auditors' test for this compliance objective. When
noncompliance is identified, HUD will follow-up with the PHA to
bring that agency into compliance.
Q.4. Does HUD have any subsequent plans to require or support
radon testing or mitigation in public housing?
A.4. In FY21, REAC will continue its proactive approach of
developing effective protocols directed at environmental
hazards. REAC plans are to initiate the development of a
quality control protocol for radon. To fully implement this
service requires the funds be made available to ensure the REAC
staff can obtain the appropriate training, certifications, and
the purchase of required testing equipment and supplies. Once
obtained, a demonstration/feasibility study will be conducted,
which will assist in the development of a streamlined radon
protocol intended as a means for HUD/REAC to conduct oversight
inspections to ensure that HUD-assisted properties and their
contractors are actively and correctly addressing the
applicable laws and regulations concerning radon. Upon
successful development of a streamlined radon oversight
protocol, it is REAC's intention to propose the implementation
of this oversight inspection as a new REAC service in FY22.
Q.5. Do you support requiring Federal radon testing in public
housing units?
A.5. REAC will continue to coordinate with other offices and
departments to develop information and guidance on radon for
PHAs to provide important background information on the issue
as well as guidance on radon testing and mitigation using the
most current consensus standards. Also, HUD supports radon
testing as part of its future environmental testing to be
performed by REAC, but additional information from the FY21
Budget request for OLHCHH for the radon testing and mitigation
demonstration will be helpful to inform efforts.
Q.6. HUD has expressed its intention to proceed with a
rulemaking to limit downpayment assistance, including
downpayment assistance offered by nationally operated
Government entities, such as those programs offered by Native
American tribal nations. Have you considered the impact of this
potential rulemaking on self-governance and self-determination
for tribal nations? Will HUD attempt to engage in meaningful
tribal consultation before proceeding with any such rulemaking?
A.6. HUD's policy is to consult with tribal organizations early
in the rulemaking process on matters that have tribal
implications. On February 14, 2020, HUD issued a notice of
Tribal Consultation on HUD's proposed rule regarding mortgage
insurance for transactions involving downpayment assistance,
with a comment period of 30 days. As further stated in that
notice, if a proposed rule is published in the Federal
Register, tribes will have another opportunity to comment
through the public comment process.
Q.7. In 2016, HUD found that ``transgender and gender
nonconforming persons continue to experience significant
violence, harassment, and discrimination in attempting to
access programs, benefits, services, and accommodations'' and
reported that ``transgender persons are often discriminatorily
excluded from shelters or face dangerous conditions in the
shelters that correspond to their sex assigned at birth.'' Do
you support the rights of transgender individuals to seek
public shelter consistent with their gender identity?
A.7. HUD expects shelter providers to follow all applicable
laws related to discrimination.
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RESPONSES TO WRITTEN QUESTIONS OF
SENATOR VAN HOLLEN FROM BENJAMIN S. CARSON
Q.1. Secretary Carson, the FY2019 Appropriations Bill [PL. 116-
94] authorized the Housing Mobility Pilot Program. Can you
please provide a status update on the program? What additional
resources can Congress provide to encourage this program's
success?
A.1. On July 15, HUD published the Housing Choice Voucher
Mobility Demonstration implementation notice in the Federal
Register. PHAs have until October 13, 2020, to submit an
application for participating in the demonstration. The
implementation notice incorporates both the FY2019 funding as
well as funds appropriated in the FY2020 bill for the
demonstration. HUD anticipates making between 5-10 awards by
the end of 2020.
Income Recertification
Q.2. How many HUD tenants have requested an income
recertification? How many tenants does HUD estimate will ask
for such recertification during the crisis?
A.2. For the public housing program, PHAs have reported to HUD
143,412 interim recertifications for the third FY quarter
(April--June). For context, this is not significantly different
than the first and second FFY quarters which reported interim
recertifications of 142,915 and 141,071, respectively.
Collectively, since the beginning of the FFY, total tenant
payments (TTP) within the public housing program have dropped
from about $313 million for the first quarter to about $300
million in the third quarter, reflecting that families within
the public housing program have experienced a 4 percent drop in
TTP.
HUD is not able to project a total number of
recertifications during the pandemic because it is unclear when
the pandemic will end, and the number of recertifications are
impacted by actions taken by Congress and States to provide
additional benefits to families.
Within the same time period, the HCV program received
378,000 income recertifications. The below chart offers a
comparison of month-over-month since 2017.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
For the project-based Section 8. 202 and 811 programs,
annual and interim recertifications increased dramatically
after the start of the pandemic. The monthly total numbers and
cumulative totals are reflected in the table below. HUD is not
able to estimate a total number of recertifications during the
pandemic because it is unclear when the pandemic will end, and
the number of recertifications are impacted by actions by
Congress and States to provide additional benefits to families.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Q.3. Has HUD proactively reached out to families to inform them
of their right to request an interim recertification and, if
so, what specific actions has HUD taken?
A.3. PHAs administer the PH and HCV programs and are the
primary communicator with the families participating in these
programs. HUD has encouraged PHAs to reach out to families to
remind them of their obligation to inform the PHAs should they
experience a decrease in income. The right to request an
interim income reexamination in the event of a decrease is a
fundamental component of the programs and families are informed
of this upon entry to the program and income is also verified
during the annual reexamination process.
HUD has also strongly encouraged PHAs to utilize their
CARES Act PH and HCV funds, along with regular appropriated
eligible funding to purchase or upgrade technology that would
enable a PHA to conduct its processes virtually and reduce any
delays in acting on these requests.
Similar to the Office of Public Housing, Multifamily
housing does not have direct communications with subsidized
renters and relies on other means to broadly reach them. To
that end Multifamily Housing issued COVID-19 guidance for
residents, https://www.hud.gov/sites/dfiles/Housing/documents/
MF-Tenant-Concerns-COVID-19-Brochure.pdf, and COVID-19 guidance
for landlords https://www.hud.gov/sites/dfiles/Housing/
documents/Tenant-Brochure-Final.pdf, to all Multifamily
stakeholders, subsidized tenant stakeholder groups, and owner/
management agent groups. These brochures are also on
Multifamily Housing's webpage under Asset Management COVID-19
Guidance. Additionally, Multifamily has extensive COVID-19
related Q&As on the HUD website related to the recertification
and interim recertification processes, including relaxing
documentation submission and in person meeting requirements.
The brochures and Q&As remind tenants of their ability to have
their income recertified when they experience an income loss
and instruct landlords to inform and work with tenants on
recertifications.
Q.4. Would HUD consider instructing PHAs and owners to
interpret a nonpayment of rent as a request for an interim
recertification?
A.4. No. HUD regulations require families to request an interim
recertification when they have lost income. Although some
residents may not be aware of the availability of interim
reporting requirements for income decreases, there could be
other factors involved for nonpayment of rent. Thus, in July
2020, HUD provided PHAs with a brochure in the ``Eviction
Prevention and Stability Toolkit'' that encourages PHAs to
conduct direct outreach to households behind on rent to
determine the cause of nonpayment. PHAs were advised to review
their records, and coordinate with HCV owners, to determine how
many, and which families are behind on rent. From there, PHAs
were encouraged to coordinate with staff that are most
connected to residents in order to engage in direct outreach to
families with past due balances to have immediate and ongoing
conversation with the families in order to prevent eviction.
The PHA brochure also informed PHAs that some households
may not be aware of the availability of interim reporting
requirements if their income decreases and to consider
reviewing their policy on retroactive interim recertifications.
In addition, some households may have mistakenly believed that
they did not need to pay rent during the moratorium or they
chose not to pay rent. Direct outreach would help clarify
uncertainties and ensure that families continue being housed.
Several other best practices specific to direct outreach were
included in the PHA brochure, as well as information on key
partners and resources that could be made available to the PHA
and/or tenant.
Multifamily Housing requirements also require residents to
request an interim recertification when there has been a loss
of income. It should be noted that the Offices of Multifamily
Housing and Public Housing have consistently attempted to align
their policy guidance on these issues to ensure programmatic
consistency and reduce administrative burden on our program
participants and staff.
Q.5. Throughout the duration of the pandemic would HUD agree to
cease all of its regulatory guidance that permits the denial or
delay of prompt interim recertifications?
A.5. HUD has strongly encouraged PHAs to review and potentially
revise their interim reexamination policies to allow for
retroactive adjustments in response to the COVID-19 pandemic.
Given that PHAs are facing operational concerns due to COVID-19
and are facing increasing requests for interim reinstatement,
HUD is reluctant to proscribe additional deadlines on the
processing of interim recertifications. Nevertheless, HUD
encourages PHAs to make interim recertifications retroactive to
the date of income loss, and to provide for flexible repayment
agreements to ensure families are not burdened with untenable
rent payments. Ultimately, however, PHAs have discretion for
the timing of interim recertifications, and the terms of
repayment agreements.
The Office of Multifamily Housing has encouraged landlords
to work with tenants on interim recertifications and, as
previously mentioned, has issued Q&As to allow for interim
recertifications and recertifications without direct contact
and submission of paper documentation. Multifamily Housing
interim recertifications can be processed retroactively when
extenuating circumstances may cause delays in reporting loss of
income, so the Office sees no need to cease its current
guidance.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM BENJAMIN S. CARSON
Q.1. Will the Department of Housing and Urban Development
rescind the disparate impact rule and the Affirmatively
Furthering Fair Housing rule, both of which are opposed by fair
housing leaders, attorneys general, and members of the Senate?
A.1. On September 3, 2020, HUD issued on its website the
``HUD's Implementation of the Fair Housing Act's Disparate
Impact Standard'' final rule (FR-6111-F-03)(RIN: 2529-AA98).
See https://www.hud.gov/program-offices/general-counsel/
OtherOpinions (the rule is pending publication in the Federal
Register). The final rule amends HUD's 2013 disparate impact
standard regulation to better reflect the Supreme Court's 2015
ruling in Texas Department of Housing and Community Affairs v.
Inclusive Communities Project, Inc. and to provide
clarification regarding the application of the standard to
State laws governing the business of insurance. This Final Rule
also establishes a uniform standard for determining when a
housing policy or practice with a discriminatory effect
violates the Fair Housing Act and provides greater clarity of
the law for individuals, litigants, regulators, and industry
professionals.
HUD is planning to withdraw the ``Affirmatively Furthering
Fair Housing'' final rule (FR-6123-P-02)(RIN: 2577-AA97). The
withdrawal of RIN 2577-AA97 will be reflected on HUD's Fall
2020 Semiannual agenda. On August 7, 2020, HUD issued the
``Preserving Community and Neighborhood Choice'' (PCNC) final
rule which became effective on September 8, 2020. https://
www.federalregister.gov/documents/2020/08/07/2020-16320/
preserving-community-and-neighborhood-choice. The PCNC final
rule repealed the 2015 AFFH rule and its related accretions.
The new rule returns to the original understanding of what the
AFFH certification was for the first 11 years of its existence:
AFFH certifications will be deemed sufficient provided grantees
took affirmative steps to further fair housing policy during
the relevant period.
Q.2. Do you see it as HUD's responsibility to eliminate
discrimination in housing, reduce racial and income
segregation, and provide housing that enable children to attend
good schools and parents to have access to jobs and services?
A.2. HUD is concerned about any policy or practice that limits
housing choice on a basis prohibited by the Fair Housing Act
and other applicable civil rights authorities. The Fair Housing
Act is administered by HUD and prohibits discrimination in the
sale, rental and financing of most housing in the United States
because of race, color, religion, sex, national origin,
disability, or familial status. Significantly, HUD improved its
complaint processing time from FY18 to FY19 by 16 percent and
in FY19 HUD obtained over $12 million in compensation for
victims of housing discrimination.
In addition to HUD's important day-to-day complaint
processing, HUD has also tackled significant national issues
like discriminatory online advertising practices by major
advertisers such as Facebook and Google to ensure people are
not being denied housing opportunities on a prohibited basis.
Q.3. Do you think racial segregation erodes the economic well-
being of families of color by limiting them to neighborhoods
with high levels of poverty?
A.3. HUD is concerned about any policy or practice that limits
housing choice on a basis prohibited by the Fair Housing Act
and continues to vigorously enforce this law. However, the
greater force in housing segregation is poverty--people not
having the financial means to live where they want to live,
closer to jobs and better schools. Segregation today is rarely
caused by overt discriminatory policies. It is caused by a lack
of housing choice and regulatory barriers that limit the
availability of affordable housing.
To promote greater housing choice and economic opportunity,
the Trump administration has signed into law programs like
Opportunity Zones that are driving billions of dollars of
capital into underserved communities where affordable housing
may exist, but opportunity currently does not. The White House
Council on Eliminating Regulatory Barriers to Affordable
Housing, chaired by Secretary Carson, is also examining ways to
increase housing supply by removing the multitude of overly
burdensome regulatory barriers that artificially raise the cost
of housing development.
Q.4. Do you think it is HUD's responsibility to identify
segregation and promote integration?
A.4. The Fair Housing Act prohibits discrimination and HUD
enforces this important law. HUD is concerned about any policy
or practice that limits housing choice on a basis prohibited by
the Fair Housing Act and other civil rights authorities. HUD
will do everything possible to address these issues wherever
they arise.
Q.5. Do you believe that the racial segregation that we see in
our communities is a result of policy--not choice--but Federal,
State, and local policies that invested in white communities
and disinvested in Black communities?
A.5. The Fair Housing Act prohibits discrimination and HUD
enforces this important law. HUD is concerned about any policy
or practice that limits housing choice on a basis prohibited by
the Fair Housing Act and other civil rights authorities. HUD
will do everything possible to address these issues wherever
they arise.
Q.6. What has HUD done to ensure that the 5 million households
assisted by HUD benefited from the $1,200 relief payments and
the expanded Unemployment Insurance?
A.6. To ensure families receive maximum benefit from the
expanded unemployment benefits and $1,200 Economic Impact
Payments, HUD, using its existing statutory authorities, has
excluded these payments from the calculation of income in its
rental assistance and community development programs, thus
preventing tenant rent payments from increasing. Additionally,
HUD released the 2020 Economic Impact Payments Toolkit as a
guide for HUD grantees to reach all eligible Americans who may
not have received the Economic Impact Payments.
Q.7. Nationwide, there are 47 million rental units. According
to the Urban Institute, more than 17 million of them will need
help paying rent due to job loss. How much does HUD estimate it
would cost to keep all eligible low-income renters housed for 6
months?
A.7. Unemployment benefits and the Paycheck Protection Program
have helped many renters make rent payments. Prior to the
pandemic, 7.72 million Very Low-Income (VLI) renters had worst-
case housing needs, primarily paying more than half their
income for rent, and about 10 percent were 30 days or more
behind on their rents. Increased unemployment could make this
problem worse.
However, the amount of additional rental assistance needed
is highly dependent on (i) unemployment benefit amounts, (ii)
the speed of economic recovery, and (iii) schools employing
remote learning. On this last point, many VLI renters are
household heads with children who could have more difficulty
returning to work if children are at home. This, in turn, could
impact their ability to pay rent. Because there is a good deal
of uncertainty on these three points, HUD cannot provide an
estimated amount of funding needed for rental assistance.
HUD looks forward to continued conversations with Congress
on the right mix of benefits to prevent evictions and
homelessness.
Q.8. The Urban Institute estimates it would cost approximately
$96 billion to assist an estimated 17.6 million renter
households needing rental assistance due to the economic
impacts of COVID-19 for 6 months. Do you agree with their
estimate of funds needed for the 17 million families to facing
eviction?
A.8. HUD is unable to provide an estimated cost at this time.
Q.9. What is HUD's plan to avoid evictions of 17 million
families due to the COVID-19 depression?
A.9. Earlier this month, the Administration issued its
Executive order (EO) to temporarily HALT evictions during the
COVID-19 pandemic. American renters who meet certain conditions
cannot be evicted if they have exhausted their best efforts to
pay rent, and are likely to become homeless as a result.
HUD has also strongly encouraged PHAs and owners to enter
into repayment agreements for past due rent to position
residents for stability and circumvent an unaffordable balloon
payment after the eviction moratorium expired.
In July 2020, HUD provided PHAs with an ``Eviction
Prevention and Stability Toolkit,'' https://www.hud.gov/
program_offices/public_indian_housing/covid_19_resources. The
Toolkit promotes housing stability by offering several
resources from existing HUD guidance and innovative practices
from PHAs. For example, the Toolkit includes a PHA brochure
that recommends PHAs adopt policies for retroactive interim
reexaminations, conduct direct outreach to households behind on
rent, and review policies on minimum rent and financial
hardship exemptions. In addition, the Toolkit also centralizes
HUD's current guidance on repayment agreements and provides
three sample repayment agreements from PHAs. The Toolkit also
includes a tenant brochure with weblinks and/or phone numbers
to key benefits to ensure families are set-up for success,
e.g., weblinks to TANF, SNAP, unemployment services, economic
impact payments, free tax preparation, childcare for essential
workers, immediate jobs available during COVID-19, and non-
Federal emergency assistance for rent, utilities and other
basic necessities. HUD also published a Multifamily Tenant
Brochure to inform and address rent payment concerns of tenants
living in multifamily properties.
For FHA-insured multifamily properties where the owner is
receiving forbearance mortgage payment relief, tenants cannot
be evicted solely for nonpayment of rent for the duration of
the forbearance period. HUD issued guidance on July 1 for
owners of these properties, including a new online brochure for
owners to share with tenants.
Additionally, HUD has effectuated several statutory and
regulatory waivers through the broad CARES Act waiver authority
that will support PHAs in expeditiously processing requests for
interim recertifications of income. These include waivers of
third-party verifications of income, delays in routine annual
recertifications of income, expedited adoption of
administrative policies, and other administrative waivers to
allow PHAs to focus efforts on those families hardest hit by
the pandemic.
Q.10. How many vouchers will HUD request to help families who
have lost family members to the pandemic or had jobs that will
not return quickly?
A.10. Under current Housing Choice Vouchers (HCV) program
rules, PHAs can set preferences for families based on community
needs. PHAs could provide a preference for recently unemployed
families or for families that have experienced other financial
hardships due to COVID-19.
Q.11. If the Emergency Rental Assistance Act which provides
rental assistance funds were to pass, would HUD be able to
qualify and assist families with rental assistance quickly? Why
or why not? What resources will HUD need to distribute rental
assistance funds quickly?
A.11. HUD does not perform client eligibility determinations.
Qualifying families for assistance would be determined by the
grantee (e.g., State and local entities) administering the
funding.
Q.12. How quickly could HUD certify landlords to participate in
voucher programs?
A.12. Landlord eligibility is determined at the PHA level and
not at HUD. PHAs have the discretion to adopt screening
policies and eligibility criteria that govern landlord
participation. As such, the amount of time to determine
eligibility of an owner will differ at each PHA.
Q.13. In Nevada, we have seen a dramatic increase in demand for
housing since the outbreak of the pandemic. The funds Congress
provided for Veterans housing vouchers--VASH--have been very
helpful. Would you support additional vouchers in the next
congressional relief package, so that these men and women can
transition into a permanent housing solution without delay?
A.13. The FY2020 Appropriations bill provided an additional $40
million for HUD-VASH, and a PIH notice for PHAs to self-
identify their interest in receiving additional HUD-VASH
vouchers was released on July 8, 2020. The HUD-VASH FY20
Registration of Interest Notice details the availability of
additional HUD-VASH vouchers in 2020 that HUD will be awarding
this year.
Statistics on HUD-VASH in Nevada:
There are 3 PHAs currently administering 1,834
total HUD-VASH vouchers. Of those, 1,464 were leased as
of April. That is an overall utilization rate of 80
percent.
Leasing breakout by PHA:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Q.14. Will HUD work closely with eviction courts to keep
families safely housed? If so, how?
A.14. HUD encourages PHAs and owners to provide residents with
frequent and accurate information and to take steps to keep as
many residents stably housed as possible. As part of this
effort, HUD encourages PHA leadership and multifamily owners to
ensure that residents and staff across the agency are aware of
new policies and procedures. PHA staff are encouraged to also
review their records, and coordinate with owners, to determine
which households are behind on rent and determine the cause of
nonpayment. In tandem with this effort, PHAs can identify the
range of options and resources available to promote housing
stability.
Q.15. In light of the need for stable and affordable housing
for everyone in our country to avoid spreading COVID-19, will
you withdraw HUD's rule that would prohibit any ineligible
family member from living in a unit in which one or more
eligible members are receiving assistance?
A.15. HUD remains committed to serving the American people
through its ordinary operations. Suspending all rulemaking
would be inconsistent with this work.
Q.16. Are DACA recipients eligible for FHA-insured loans?
A.16. See answer to Question 18 below.
Q.17. If not, HUD previously permitted DACA recipients to
obtain FHA-insured loans as a matter of practice. What changed
in HUD's interpretation of the law?
A.17. See answer to Question 18 below.
Q.18. If DACA recipients are not able to receive FHA-insured
loans, why did HUD not offer the opportunity for public input
or communicate this information to approved lenders or
Congress?
A.18. These questions incorrectly state that DACA recipients
were previously eligible to obtain FHA-insured mortgages and
that there was a change in policy. Both statements are
incorrect. DACA recipients were ineligible for FHA-insured
loans during the Obama administration, and HUD has not
implemented any policy changes during the Trump administration,
either formal or informal, with respect to FHA eligibility
requirements for DACA recipients.
DACA recipients are not eligible for FHA-insured mortgages.
This policy predates the creation of DACA by at least nine
years. Since at least 2003, FHA has maintained published policy
that non-U.S. citizens without lawful residency ``are not
eligible for FHA-insured loans.'' This same policy was
incorporated into FHA's Single-Family Housing Policy Handbook
in September 2015--under the previous Administration--and
clearly states that ``[n]on-U.S. citizens without lawful
residency in the United States are not eligible for FHA-insured
mortgages.''
Q.19. In light of the current pandemic, will HUD cancel the
2020 Continuum of Care NOFA and provide funding based on the
previous year's allocation?
A.19. HUD is currently evaluating the most effective way to
allocate FY2020 CoC funding so it can be used to assist
grantees respond to COVID-19.
Q.20. I am concerned by how long it took to get CARES Act
Emergency Solutions Grants funding out into the field--when, in
much of the country, it was needed in March. Could you explain
why it took so long for HUD to get these funds out?
A.20. HUD's Emergency Solutions Grants (ESG) funds were fully
allocated within 90 days of enactment and are now available to
be disbursed to grantees. All ESG grantees are, and have been,
encouraged to submit substantial amendments and action plans to
their local HUD field office at their earliest convenience in
order to have their grant agreements signed, at which point
they can begin accessing funds.
Q.21. Last month, the HUD Office of Inspector General published
another report on its review of 30 FHA servicers' website. The
report found that servicers' websites provided incomplete,
inconsistent, dated, and unclear guidance to borrowers related
to their forbearance options under the CARES Act. Servicers
should not provide misleading information that lump sum
payments at the end of the forbearance period are expected. How
will you ensure that servicers provide clear and fair guidance
on forbearance to homeowners?
A.21. None of FHA's Single-Family loss mitigation home
retention options require a lump-sum payment at the end of a
forbearance period. FHA published Mortgagee Letter 2020-06 on
April 1, 2020, which provided servicers of FHA-insured
mortgages with a specific COVID-19 loss mitigation option
intended to assist FHA-insured borrowers with their forborne
payments.
FHA has taken extensive steps to ensure servicers are
fairly and correctly applying loss mitigation guidance,
including forbearances under the CARES Act. For instance, HUD
presented a live webinar on April 8, 2020, open to all FHA
servicers, covering all new COVID-19 National Emergency policy
contained in Mortgagee Letter 2020-06. To date, FHA has also
held three additional live webinars, open to all FHA servicers,
to ensure that servicers provide clear and fair guidance on the
application of CARES Act forbearance and other loss mitigation
policies. More than 2,300 individuals attended these sessions.
Additional tools for servicers are also available, including a
resource page on HUD.gov that includes interagency fact sheets
for both servicers and borrowers detailing the key requirements
for forbearance under the CARES Act.
To ensure homeowners and renters have the most up-to-date
and accurate housing assistance information during the COVID-19
National Emergency, HUD is a partner in an interagency mortgage
and housing assistance website in conjunction with the Federal
Housing Finance Agency, Consumer Financial Protection Bureau,
and Departments of Veterans Affairs and Agriculture, available
at https://www.cfpb.gov/housing.
Q.22. How will you ensure any lender seeking payment on the FHA
guarantee has provided documentation on its compliance with
loss mitigation requirements?
A.22. FHA ensures compliance with its requirements in
connection with FHA insurance claim payments through a post
claim audit process. Additionally, FHA conducts quality
assurance reviews to ensure servicers are operating under FHA
guidelines when administering the loss mitigation program.
Q.23. Will you ensure FHA conducts oversight of servicers with
appropriate sampling and review of companies and borrowers?
A.23. Such oversight is part of FHA's standard operational
practices. FHA ensures compliance with its requirements in
connection with FHA insurance claim payments through a post
claim audit process. Additionally, FHA conducts quality
assurance reviews to ensure servicers are operating under FHA
guidelines when administering their loss mitigation programs.
Q.24. Will you ensure FHA establishes a robust complaint and
appeals process for borrowers who believe they have been
subject to unfair treatment related to noncompliance with FHA's
servicing requirements, including its loss mitigation
requirements?
A.24. Yes. FHA has a vested interest in preventing foreclosures
and helping delinquent borrowers remain in their homes.
Borrowers may contact the FHA Resource Center for assistance
with questions regarding loss mitigation. Furthermore, HUD is a
partner with the Federal Housing Finance Agency, Consumer
Financial Protection Bureau, and Departments of Veterans
Affairs and Agriculture on a COVID-19 consumer resources
website that includes prominent links for consumers to file
complaints if they believe they are being unfairly treated. The
website can be found at https://www.cfpb.gov/housing.
Q.25. Will you report annually to Congress regarding the types
and volume of complaints received from borrowers who allege the
rules for loss mitigation were not followed?
A.25. FHA will respond to congressional information requests,
as legally appropriate.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SMITH
FROM BENJAMIN S. CARSON
Fire Sprinklers in Public Housing
Q.1. Secretary Carson, late last year, five Minnesotans were
killed in a tragic fire in the Cedar-Riverside neighborhood of
Minneapolis. The fire ravaged a 25-story apartment tower
managed by HUD through the Minneapolis Public Housing
Authority.
The building in Minneapolis, like so many other public
housing high-rises, was built long before 1992, when the
Federal law requiring sprinkler systems in new multifamily
public housing properties was passed. Because this apartment
complex is exempt from the sprinkler requirement, MPHA would
have to divert funding from other maintenance needs in order to
voluntarily install an automatic sprinkler system.
Unfortunately, this is easier said than done. Prior to the
fire, Minneapolis Public Housing Authority reported $152
million in immediate capital needs, including $69 million that
it required for mechanical systems--which includes plumbing and
fire safety needs.
Minneapolis, like other public housing authorities, has
limited funding available to address these deferred maintenance
needs. In December, I wrote to you about this issue and asked
you why your Department continues to propose ``zeroing out''
the Public Housing Capital Fund--the primary source of
maintenance and construction funding for public housing
authorities.
In your response, you identified the nationwide backlog of
maintenance needs but did not commit to supporting increased
appropriations in the Capital Fund or for fire sprinkler
installations specifically.
Secretary Carson, can you commit to supporting increases in
the Public Housing Capital Fund so that local public housing
authorities can do the work necessary to make these buildings
safe for the families that live there?
A.1. HUD shares the understanding that fire sprinkler systems
are an essential element of fire safety. Public Housing has an
estimated capital needs backlog of approximately $26 billion,
and Capital Fund grants alone are not sufficient to address the
significant needs in the portfolio. Given fiscal constraints,
HUD recognizes the need for State and local governments to
share a greater role in the provision of affordable housing.
The Administration encourages PHAs to work with State and local
governments to supplement the Federal appropriation with non-
Federal funding to address additional public housing needs.
Q.2. Are you aware of the number of public housing high rises
that do not have fire sprinkler systems installed?
A.2. HUD provides oversight of PHAs that manage and operate
Public Housing programs. PHAs are required to comply with
Federal laws and HUD regulations as well as State and local
laws. In this case, Federal law exempts multifamily properties
with housing assistance constructed prior to October 26, 1992,
from the requirement to install fire sprinkler systems.
However, this law does not limit the authority of a State to
implement or enforce laws or standards to establish
requirements for fire prevention and control. Furthermore,
HUD's regulations related to physical condition standards and
inspection requirements under 24 CFR 5.703(c) require a
building's fire protection system to be free of health and
safety hazards, operable, and in good repair.
In order to conduct a ``complete assessment,'' HUD
anticipates that a formal research study would have to be
undertaken which would involve additional planning and a
resource commitment but would provide the most reliable
information on this issue. HUD does not currently have
sufficient information to provide the number of units that
currently lack a sprinkler system.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM MARK A. CALABRIA
Q.1. In your testimony you stated that Fannie Mae and Freddie
Mac's default option is to add forborne payments to the end of
the loan. However, Fannie Mae's Lender Letter states that a
borrower must be evaluated for a workout option, starting with
the payment deferral option you referenced, ``[i]f the servicer
determines that the borrower is unable to resolve the
delinquency through a reinstatement and cannot afford a
repayment plan.''\1\ Similarly, Freddie Mac's Bulletin requires
a servicer to verify that a borrower ``[i]s unable to afford a
repayment plan or full reinstatement of the Mortgage.''\2\
These guides appear to make payment deferral the third step in
the Enterprises' loss mitigation waterfalls--behind
reinstatement and repayment plans--and it is unclear how
servicers will determine that borrowers are unable to afford
reinstatement or a repayment plan. Further, recently released
servicer incentive payments show that repayment plans and
payment deferral each offer servicers a $500 incentive, making
them financially equal for servicers even if they are not for
borrowers.
---------------------------------------------------------------------------
\1\ LL-2020-07.
\2\ Bulletin 2020-15.
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Does FHFA interpret payment deferral to be the third step
in the loss mitigation waterfall for borrowers experiencing a
hardship due to COVID-19? If so, how are servicers to determine
whether a borrower is or is not able to make a reinstatement
payment or complete a repayment plan? If not, why do the
Enterprises' guides include references to reinstatement and
repayment plans in the evaluation criteria for payment
deferral?
A.1. Recognizing that most homeowners will not be able to repay
their COVID-19 forbearance in a lump sum after the forbearance
period ends, the Federal Housing Finance Agency (FHFA)
established the payment deferral option, which adds the
homeowners' missed payments to the end of their mortgage.
Servicers are instructed to evaluate borrowers for the
appropriate loss mitigation option at the end of the
forbearance period. This evaluation should take place in a
conversation between the homeowner and the servicer with a goal
of figuring out the best option for the homeowner upon exiting
forbearance. Additionally, choosing which option is best will
entirely depend on the homeowner's circumstances at the time,
chief among them is whether the homeowner can afford the same
payment in effect before the forbearance.
Servicers are instructed to follow a ``waterfall'' of
options that proceed in the following order:
1. Reinstatement (lump sum payment)
2. Repayment (payment above the regular mortgage payment
until the homeowner is caught up)
3. Payment deferral (adding the payments to the end of the
mortgage), or
4. Flex Mod (extending the term of the loan and/or lowering
the interest rate until the payment becomes affordable
to the borrower).
While less likely to be utilized, the first two options
should be available to homeowners who are willing and have the
financial means to use them. It is important to emphasize, as
FHFA has done since the start of the COVID forbearance
programs, that homeowners do not have to repay a forbearance in
a lump sum unless they choose to do so.
Fair Lending Analysis Capital Rule
Q.2. Did FHFA's Office of Fair Lending Oversight or any other
office within FHFA conduct a fair lending review of the capital
rule FHFA released on May 20, 2020? If so, please provide the
results of that analysis. If not, why not?
A.2. FHFA's reproposed Regulatory Capital Framework Rule for
Fannie Mae and Freddie Mac (the Enterprises) is based on the
same structure as the prior proposal that was issued in July
2018. For the July 2018 proposed rule, the Agency completed a
fair lending analysis on certain risk multipliers and that
analysis led to changes incorporated into the May 2020 proposed
capital rule. In general, there were limited changes from the
first proposal and those changes were mission driven. As with
the process followed by former FHFA Director Mel Watt with the
2018 proposal, the FHFA analysis of fair lending is used to
address any needed changes in a rule and those changes are
affected prior to finalization and publication of the rule.
Q.3. Please provide FHFA's analysis of the affect FHFA's
capital rule proposal, issued on May 20, 2020, would have on
mortgage costs for single-family mortgage borrowers. Please
provide any analysis by income, FICO score, downpayment amount,
debt-to-income ratio, or product features that FHFA may have
done, as well as any breakdown of changes that result from
adjustments to up-front and ongoing guarantee fee costs. Please
also provide any assumptions that FHFA made in this
calculations.
A.3. In developing the reproposed Enterprise Regulatory Capital
Framework Rule, the Agency undertook its normal review of
factors that could be affected by a change in capital standards
and will look to public comments received as important to the
adoption of a final rule. Throughout the rulemaking process,
FHFA remains bound to the statutory requirements of Congress in
the Housing and Economic Recovery Act of 2008 (HERA), as
specified in Section 1110 of HERA.
I share the observation of then-Chair of the Federal
Reserve, Janet Yellen, as voiced before this Committee in 2016:
We are putting our rules very often in situations where
Congress has decided there is a safety and soundness
issue they want us to address by imposing safeguards in
a particular area, and our job is to figure out how to
do that where Congress has already judged that the
benefits are worthwhile.\3\
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\3\ https://www.govinfo.gov/content/pkg/CHRG-114shrg99726/pdf/
CHRG-114shrg99726.pdf.
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The decision to impose a risk-based capital standard on
Fannie Mae and Freddie Mac was a decision made by Congress in
2008. Accordingly, Congress has already judged the benefits of
such a rule as exceeding any potential costs.
I would also agree with those on this Committee who have
stated that cost-benefit analysis can help resist any type of
regulatory change. The enhancements in the reproposal ensure
each Enterprise's safety and soundness and its ability to
fulfill its statutory mission across the economic cycle,
particularly during periods of financial stress. The reproposal
is also a critical step toward responsibly ending the
conservatorships, as directed by Congress.
Despite comment period procedures, your Committee should
communicate with FHFA on any data or other matters related to
the rulemaking that would be helpful to our adoption and
implementation of the rule. We will examine the information you
provide to make an informed decision.
Q.4. In response to a question from Senator Tester, you stated
that FHFA had not seen any evidence of whether properties where
landlords were moving forward with evictions had loans backed
by Fannie Mae or Freddie Mac. The ProPublica story Senator
Tester referenced in his question, published in April, cited
eviction filings made since the CARES Act passed at least two
Fannie Mae financed properties. Subsequent reporting has
indicated that at least some of these eviction filings were
reversed, which suggests that the evictions did not comply with
either the CARES Act or State or local law.\4\ Last week, I
wrote to you regarding concerns I'd received about evictions
taking place in additional properties with Fannie Mae- and
Freddie Mac-backed loans. It is my understanding that the
concerns referenced in my letter were also submitted directly
to FHFA.
---------------------------------------------------------------------------
\4\ https://www.propublica.org/article/despite-federal-ban-
landlords-are-still-moving-to-evict-people-during-the-pandemic
---------------------------------------------------------------------------
Director Calabria, in light of court records indicating
that property owners with enterprise-backed loans are
continuing to file for eviction, what is FHFA doing to ensure
that enterprise borrowers are complying with Federal law? Does
FHFA need additional authority to ensure compliance with
Section 4023 or Section 4024 of the CARES Act?
A.4. FHFA has worked closely with the Enterprises to review and
address any new evictions on multifamily properties with
mortgages backed by Fannie Mae and Freddie Mac. When we learn
of a situation like this, the Enterprise will contact the
servicer of the loan, who will contact the borrower/landlord to
assess the situation. FHFA has been made aware of approximately
250 cases wherein an improper eviction appeared to occur and,
after review with the servicer and Enterprise, we determined
that very few of these were evictions for nonpayment of rent
(some of them filed just before the CARES Act was enacted).
Those evictions were withdrawn by the landlord. It should be
noted that evictions unrelated to COVID-19 may proceed. These
include health violations, noise rules, conduct of illegal
activities, and requests from State authorities.
The CARES Act did not give FHFA the authority to directly
deal with landlords on this, and the Agency is not the
appropriate enforcement organization since eviction processes
are driven by State and local courts. Neither FHFA nor the
Enterprises have contractual authority over, or a relationship
to, tenants. FHFA and the Enterprises also have little ability
to penalize a landlord. However, landlords should be complying
with all laws and regulations, including the CARES Act
moratorium on evicting a tenant for nonpayment of rent. If a
landlord has been found in violation of law and has not
corrected the situation, their forbearance agreement may be
canceled and/or their mortgage may be accelerated.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
FROM MARK A. CALABRIA
Q.1. Do you think the recently proposed Enterprise Capital Rule
will reduce the GSEs' footprint in the market, and--if so--what
is FHFA doing to ensure that replacement lending is available,
either on bank balance sheets or through PLS?
A.1. My goal for the proposed capital rule is to ensure that
the Enterprises have a sufficient level of high-quality capital
they need to survive a downturn while fulfilling their
countercyclical mission, balancing the need to preserve
affordability in the mortgage market. Ensuring that the
Enterprises are appropriately capitalized to their risk helps
to ensure that they can continue to fulfill their mission to
support home ownership and affordable rental housing. The
objective of the rule is not to drive a particular market
share.
Q.2. For multifamily housing, initial analysis suggests the
reproposal requires approximately 67 percent more total capital
than the 2018 proposal which could result in an increased cost
to multifamily mortgages of up to 39 basis points.
What analysis has FHFA done on the impact of this cost
increase on affordable and workforce Multifamily development
activity?
A.2. FHFA's newly proposed capital rule is based on the 2018
proposal with some simplifications and refinements. This
framework captures the unique nature of each Enterprise's
multifamily business and its particular risk drivers, and sets
exposure-specific credit risk capital requirements that are
generally similar to those in the 2018 proposal. The two main
risk characteristics are debt service coverage ratio and mark-
to-market loan-to-value ratio. By focusing on the risks of the
Enterprises' multifamily portfolios with a greater level of
refinement than an equivalent bank capital requirement, each
Enterprise will have sufficient capital to continue its
affordable housing mission.
Q.3. How will the increase in mortgage costs from Fannie and
Freddie increase housing costs in secondary and tertiary
markets where Fannie and Freddie are often the primary source
of lending?
A.3. The proposed capital rule does not mandate an increase in
mortgage costs. That said, FHFA has received comments that
address a range of potential effects of capital rule changes,
and they are currently under review. FHFA will consider the
information provided through comments in moving to a final
rule.
Q.4. What analysis has FHFA performed regarding the ability of
private capital to fill funding gaps, especially in the
secondary and tertiary markets?
A.4. FHFA monitors the effects of the Enterprises' current
practices and standards on secondary and tertiary markets and
will continue to do so. The comments provided on the proposed
capital rule on the impact across the range of market
participants will be considered.
Q.5. What analysis did FHFA perform to determine the updated
multifamily capital risk weighting should be effectively double
that of single family (51 percent vs. 26 percent)?
A.5. When adjusted for the quality of the portfolios and credit
risk transfer, the multifamily risk weighting under the new
proposed rule is only 30 percent. This compares to bank capital
requirements for multifamily of 50 percent. Our analysis
included in the proposed rule shows that, compared to the 2018
proposal, the estimated amount of capital dedicated to
multifamily under the new rule has increased by less than $1
billion (from $16.9 billion to $17.8 billion) on $655 billion
of multifamily assets.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
FROM MARK A. CALABRIA
Q.1. In the wake of the COVID-19 crisis, several States have
proposed laws or Executive orders that would include some form
of mortgage foreclosure moratorium and forbearance and loan
modification requirements.
These bills would impose differing standards that would
force lenders and servicers to follow a patchwork of State and
potentially local regulation based on the location of the
property making it impossible for lenders to employ a
consistent national approach to aiding their customers
financially impacted by the pandemic.
If this State-by-State trend continues, could the resultant
patchwork of laws and requirements make it more difficult for
home buyers to obtain the credit that they need?
A.1. Yes, that is a possibility. While States have a role in
foreclosures and evictions, the efforts of FHFA, the
Enterprises and Enterprise servicers are frustrated at times by
hurriedly enacted and conflicting State laws and Executive
orders. Where such laws or orders provide differing dates,
differing requirements or new liabilities, it becomes difficult
for Federal programs to operate in a seamless fashion. These
laws may impose more obligations or, in some instances, fewer.
Simply put, the comprehensive Federal programs should not face
added uncertainty and confusion in assisting homeowners and
tenants. Some States have acted to exclude ``federally
related'' mortgages from their actions, which avoids this
problem.
Q.2. In your view, should we be steering the States away from
trying to impose these laws?
A.2. While States have a role in foreclosures and evictions,
the efforts of FHFA, the Enterprises and Enterprise servicers
are frustrated at times by hurriedly enacted and conflicting
State laws and Executive orders. Where such laws or orders
provide differing dates, differing requirements or new
liabilities, it becomes difficult for Federal programs to
operate in a seamless fashion. These laws may provide more
obligations or, in some instances, fewer. Simply put, the
comprehensive Federal programs should not face added
uncertainty and confusion in assisting homeowners and tenants.
Some States have acted to exclude ``federally related''
mortgages from their actions, which avoids this problem.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR MENENDEZ FROM MARK A. CALABRIA
CARES Act Implementation and Access to Credit
Q.1. Secretary Carson, even though mortgage interest rates are
at historic lows, it's still too difficult for consumers to
access credit to purchase or refinance their home. Obviously
many factors contribute to this, but I'm concerned that the way
FHA implemented the CARES Act forbearance provisions may have
exacerbated this situation.
For example, FHA last week released guidance on loans for
which the borrower experiences a COVID-19-related hardship
shortly after closing and enters forbearance. While these loans
are now largely eligible for FHA insurance, FHA will hold the
lender liable for a large share of the losses if the borrower
can't resume payments.
Likewise, Director Calabria, your agency belatedly allowed
the GSEs to purchase loans that enter forbearance soon after
closing, but only with steep price discounts. This may create a
disincentive for banks to provide loans to any borrowers who
may need CARES Act forbearance and may be perpetuating problems
borrower are facing in accessing credit. It seems like the
rational response for lenders is to turn away borrowers with a
higher risk of going into forbearance, like people that work in
restaurants or other businesses hurt by COVID, or borrowers
with lower FICO scores.
Can you both explain how you are evaluating the impact of
these policies on access to credit?
A.1. To keep the mortgage market working for current and future
borrowers, and to help originators continue lending, FHFA
enabled the Enterprises to purchase certain single-family
mortgages in forbearance that meet their other underwriting
criteria. On April 22, 2020, FHFA announced that the
Enterprises would be able to purchase loans that went into
forbearance after closing. This was a new flexibility that had
not been an option before. Prior to this announcement, lenders
would not have been able to deliver those loans to the
Enterprises. By definition, this action provided additional
liquidity to the mortgage market that would have otherwise been
absent.
Deliveries of these loans to the Enterprises remained low.
Through mid-September, about 5,900 loans in forbearance were
delivered at a time the industry was experiencing a record
number of originations. Based on the Enterprises' second
quarter acquisitions of purchase mortgages in 2019 and 2020,
loan risk factors such as average credit scores, debt-to-income
(DTI), and loan-to-value (LTV) ratios have changed only
slightly this year compared to last. Refinance acquisitions in
the second quarter had higher credit scores, lower DTIs, and
lower LTVs.
Because the additional charge was applied only to the
lender, and after closing, individual borrowers were not
charged higher fees on their mortgage.
There were no ``steep price discounts'' applied to these
loans. There was simply a pricing change that reflected the
decline in the value of said loans. The Enterprises have
offered to purchase such loans at prices far higher than that
found in the remainder of the mortgage market. News reports
indicate that such loans sold in the private market have faced
a pricing decline of as much as 25 percent.
Q.2. Can you share the overall projected losses for FHA and
FHFA from buying loans that go into forbearance postclosing?
A.2. Prior to our April 22, 2020, announcement, lenders were
unable to deliver loans that entered forbearance after closing
but before delivery, therefore there is no historical
information available. FHFA approved the Enterprises purchasing
these loans with appropriate pricing adjustments to reflect the
additional risk of the loan. While lenders and mortgage
borrowers could not have anticipated the pandemic emergency,
the Enterprises have a responsibility to purchase loans that
are made responsibly and are sustainable. The actions taken by
the Enterprises during the pandemic to protect renters and
borrowers are conservatively projected to cost the Enterprises
at least $6 billion and could be higher depending on the path
of the economic recovery.
Those expenses are expected to at least include:
$4 billion in loan losses due to projected
forbearance defaults;
$1 billion in foreclosure moratorium losses; and
$1 billion in servicer compensation and other
forbearance expenses.
FHFA has a statutory responsibility to ensure safety and
soundness at the Enterprises through prudential regulation. The
Enterprises' Congressional Charters require expenses to be
recovered via income, allowing the Enterprises to continue
helping those most in need during the pandemic.
MOU
Q.3. In a speech earlier this year, Director Calabria mentioned
a Memo of Understanding (MOU) was in development between FHFA
and HUD. Secretary Carson and Director Calabria, can you
provide details on what you expect to be included in this MOU?
Additionally, please provide a timeline of when Congress can
expect the MOU to be released.
A.3. The MOU with HUD remains under discussion and would update
a decade old document. The updated MOU would clarify
information sharing between FHFA and FHA and Ginnie Mae. For
example, the MOU would facilitate communication on servicer
eligibility and liquidity issues.
Credit Risk Transfer
Q.4. Previously, FHFA issued guidance for Credit Risk Transfer
(CRT) market following the increase in forbearance requests in
the aftermath of Hurricane Harvey. Now that 4.73 million
homeowners--or 8.9 percent of all mortgages--are in mortgage
forbearance plans as a result of the coronavirus pandemic, does
the FHFA plan to issue similar guidance to the CRT market?
A.4. No. The Federal Housing Finance Agency will not direct the
Enterprises to override the plain language of the prospectus.
This decision is founded in legal constructs as well as the
agency's duties as regulator and conservator, detailed in the
Housing and Economic Recovery Act of 2008.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER
FROM MARK A. CALABRIA
Q.1. I have been concerned about the availability and
affordability of housing particularly in rural America since
long before this crisis, as I discussed the last time you were
both before this Committee. This crisis is only going to make
those problems worse. Congress needs to work to address this
affordability and availability crisis in America.
What are you doing to make sure that the resources your
agencies have are making it to rural America and other
underserved areas?
A.1. I share those concerns, particularly as someone who grew
up in rural America. The housing problems facing rural America
are distinctly different from those facing urban and suburban
communities. While FHFA is not a grant-making agency, and hence
does not directly have resources to commit to rural, or other,
areas, the entities under our jurisdiction, Fannie Mae, Freddie
Mac and the Federal Home Loan Banks are addressing underserved
markets, specifically including the rural housing market, is
through the Duty to Serve Program. This program requires the
Enterprises to facilitate a secondary market for mortgages on
housing for very low-, low-, and moderate-income families in:
manufactured housing, affordable housing preservation, and
rural housing markets.
When the Enterprises began limited re-entry into the Low-
Income Housing Tax Credit equity market in 2017, FHFA's
approval included an annual cap of $500 million in equity per
Enterprise. Within this funding cap, all investments above $300
million in a given year are required to be in Duty to Serve-
defined rural areas or must support particular types of
transactions that have difficulty attracting investment. Duty
to Serve credit is provided for Enterprise LIHTC equity
investments in rural areas due to the lower share of LIHTCs
invested in rural areas and the less advantageous pricing that
LIHTCs in rural areas may command. We now have 2 full years of
Duty to Serve performance, 2018 and 2019.
FHFA expects to use the planning process conducted by the
Enterprises when developing their next 3-year plan for the
Affordable Housing Goals and the Duty to Serve program to
ensure that there is improvement in providing housing
opportunities in these difficult-to-serve areas.
Among the accomplishments the Enterprises reported from
their 2 full years of Duty to Serve performance in 2018 and
2019 were:
Rural Housing Market
Both Enterprises re-entered the LIHTC equity market
in 2018. Fannie Mae committed $118 million in LIHTC
equity to rural areas in 2018 and $196.2 million in
2019, much in high-needs rural regions such as Middle
Appalachia and Mississippi Delta.
Freddie Mac committed $72.8 million in LIHTC equity
in rural areas in 2018 and $111.9 million in 2019, also
with much committed in high needs rural regions.
Both Enterprises exceeded the 2018 targets in their
plans for loan purchases in high-needs rural regions.
In 2019, Fannie Mae invested in 98 rural LIHTC
projects, including 4,263 units affordable to
households earning 60 percent of the area median income
or below, which is about 98 percent of the total units
in those rural projects. This more than doubles their
transactions compared to 2018.
Fannie Mae committed significant resources to
establishing its Initiative for Native American Home
Ownership.
Manufactured Housing Market:
The Enterprises have increased Duty to Serve-
eligible manufactured housing unit loan purchases by a
combined 39 percent from 2016 to 2019.
Both Enterprises made extensive efforts in rolling
out new products that support manufactured housing that
looks like site-built housing.
Both Enterprises have also conducted extensive
research and evaluation of manufactured housing titled
as chattel.
Both Enterprises have created new products and
purchased substantial loans that provide for tenant pad
lease protections.
Affordable Housing Preservation Market:
Both Enterprises supported preserving and
renovating distressed public housing units by
purchasing loans on properties participating in HUD's
Rental Assistance Demonstration Program.
Freddie Mac increased its support for financing
small multifamily buildings, including through small
financial institutions. These products have not
commonly been successful in secondary market execution.
Fannie Mae has increased its support for loans that
fund purchasing or rehabilitating distressed
properties.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
FROM MARK A. CALABRIA
Q.1. At the hearing you stated you are considering extending
the June 30 eviction and foreclosure moratorium ``if
necessary.''
What information are you using to make a determination
about extending the moratorium?
A.1. On August 27, 2020, FHFA extended the single-family
eviction and foreclosure moratorium until at least December 31,
2020, and it may be extended again. FHFA has been closely
monitoring unemployment rates, delinquencies, forbearance
rates, as well as stay at home orders and national and State
emergency orders in effect due to the coronavirus. We do not
want to put anyone out of their home during a pandemic. We also
try to coordinate with other Federal agencies, including HUD,
VA, and USDA. Consistent with the CFPB Servicing Rules,
foreclosure proceedings are paused while borrowers are actively
pursuing loss mitigation.
Q.2. Based on that information, what specifically would lead
you to extend, or not extend, the moratorium?
A.2. On August 27, 2020, FHFA extended the eviction and
foreclosure moratorium until at least December 31, 2020, and it
may be extended again. As I mentioned during the June 9th
hearing, FHFA has the authority to extend the eviction and
foreclosure moratorium for single-family Enterprise loans, and
we will be monitoring the markets and other developments
closely to make those decisions. Our goal in this extension is
to help keep people in their homes during the pandemic by
minimizing the numbers of foreclosures and evictions.
Q.3. If you are modeling unemployment as part of your
decisionmaking, what levels of unemployment are you testing
your model at?
A.3. FHFA monitors the official unemployment rate published by
the Bureau of Labor and Statistics (U-3), as well as the
measure of total unemployed, plus all marginally attached
workers, plus total employed part time for economic reasons as
a percent of the civilian labor force plus all marginally
attached workers (U-6).
Q.4. In making your decision, are you modeling or considering
the impact of millions of Americans losing access to the
additional $600 in unemployment benefits after July 31, 2020?
A.4. Yes, such enters into FHFA's consideration. Both the
extended unemployment benefits and the stimulus checks
certainly helped homeowners pay their bills. Because of the
CARES Act forbearance programs implemented at the Enterprises
and the solutions for borrowers as they exit forbearance, at
this time we do not foresee an immediate wave of new
foreclosures, although there were 200,000 foreclosures in
process pre-COVID-19 that are also on hold.
Q.5. In making your decision, are you considering the results
of the most recent U.S. Census Bureau Household Pulse Survey
regarding renter and owner confidence to make next month's
housing payments?
A.5. Yes, our analysis of the unemployment data indicates that
renters have been particularly affected by this crisis. At this
time the forbearance rate for Enterprise single-family loans
has stabilized and public data from the National Multifamily
Housing Council Rent Payment Tracker show that more than 86
percent of renters paid their rent as of mid-September 2020.
The most recent U.S. Census Bureau Household Pulse Survey (Week
1) is consistent with this information, with about 88 percent
of renters and percent of homeowners having confidence in their
ability to make next month's payment. We will continue to
monitor these statistics.
Q.6. The latest U.S. Census Bureau Household Pulse Survey
contains a concerning warning about ending the eviction and
foreclosure moratoriums prematurely. The data shows that 9
percent of U.S. homeowners and 30 percent of renters have no or
little confidence they can make their next month's housing
payment. This concern is particularly pronounced for Black and
Hispanic or Latino Americans. Fifteen percent of Black
homeowners and more than 43 percent of Black renters have no or
little confidence they can make their next month's housing
payment. More than 18 percent of Hispanic or Latino homeowners
and more than 40 percent of renters have no or little
confidence they can make their next month's housing payments.
Is FHFA considering these racial disparities in making a
decision about extending the eviction and foreclosure
moratorium?
A.6. FHFA recognizes the broad impact of COVID-19 on various
markets and borrowers and tenants. Actions taken by FHFA and
the Enterprises have helped all borrowers or tenants across all
geographic and demographic segments.
Q.7. How will FHFA ensure that ending either moratorium will
not have a disproportionate negative impact on Black and
Hispanic or Latino renters and homeowners, potentially leading
to significant racial disparities in evictions and
foreclosures?
A.7. As I mentioned during the June 9th hearing, FHFA has the
authority to extend the foreclosure and REO eviction moratorium
for single-family Enterprise loans, and we will be monitoring
the markets and other developments closely to make those
decisions. On August 27, 2020, FHFA extended the foreclosure
and REO eviction moratorium until at least December 31, 2020,
and it may be extended again. There are available solutions for
homeowners who have been negatively affected by COVID-19 or its
economic effects, including the CARES Act forbearance programs
implemented at the Enterprises, and options like payment
deferral and flex mod when the forbearance ends. We encourage
homeowners who have been negatively affected by COVID-19 to
reach out to their servicer for a forbearance if they need one.
FHFA recognizes the broad impact of COVID-19 on various
markets, borrowers, and tenants. Actions taken by FHFA and the
Enterprises have helped all borrowers or tenants across all
geographic and demographic segments.
Q.8. You have stated your plan to deal with distressed
servicers is to turn them into subservicers or transfer their
servicing to other parties, and have said, ``We've seen that we
can transfer servicing in a way that's not too disruptive.''
Servicers have legal consumer protection obligations during
loan servicing transfers. In 2013 the CFPB expressed concern
about the large number and size of servicing transfers, made
loan servicing transfers a focus of its supervision activities,
and issued guidance for mortgage servicing companies on their
legal obligations to consumers. Have there been any servicer
transfers since March 27, 2020? What is your plan to protect
consumer rights in any servicer transfers?
A.8. We have been monitoring servicer liquidity very closely
and it has remained sufficient throughout this emergency due to
servicers raising capital themselves, Ginnie Mae's Pass-Through
Assistance Program, and our own decision to limit servicer
obligations to 4 months of principal and interest. Because of
this, we have not had to transfer servicing due to distressed
servicers, and I am hopeful that we will not need to do so.
That said, it is more costly to service delinquent loans,
including those with a CARES Act forbearance, and servicing
compensation has not changed since before the 2008 crisis.
In an effort to ensure that there is no disruption to
borrowers, FHFA conducts after action reviews for 3 months for
large servicing transfers, including review of any
delinquencies, complaints to call centers, and distressed
loans. Current Enterprise practice when loan servicing is
transferred, is to exclude from those transfers any loans with
loss mitigation such as forbearance still in process to
minimize the effect on the borrower. We have also established a
partnership with CFPB that allows us to review complaints
against mortgage loan servicers.
The partnership will allow us to better understand the
nature of complaints being filed and identify opportunities for
FHFA to work with the Enterprises to address any policy issues.
Q.9. FHFA recently issued a notice of proposed rulemaking for
the Proposed Enterprise Regulatory Capital Framework.
Please describe how DFAST results informed the development
of the proposal.
A.9. The proposed rule includes a stress capital buffer of 75
basis points of adjusted total assets. FHFA considered the
Enterprises' comprehensive losses in the DFAST scenario, along
with other factors, to inform the calibration of the stress
capital buffer in the proposed rule.
Q.10. In response to my QFRs from the September 10, 2019,
Banking Committee on housing reform, I asked whether FHFA has
analyzed the effects of bank-like capital requirements on home
prices. You said that you had not yet done so. Have you
conducted this analysis in conjunction with the proposal?
A.10. In developing the reproposed Enterprise Regulatory
Capital Framework Rule, the Agency undertook its normal review
of factors that may be affected by a change in capital
standards and looks to public comments received as important to
the adoption of a final rule. Throughout, FHFA remains bound to
the statutory requirements of Congress and conducted a
thoughtful review of the impact while remaining bound to the
statutory requirements in the Housing and Economic Recovery Act
of 2008 (HERA), as specified in Section 1110.
Similar to what then-Chair of the Federal Reserve Janet
Yellen told this Committee in 2016:
We are putting our rules very often in situations where
Congress has decided there is a safety and soundness
issue they want us to address by imposing safeguards in
a particular area, and our job is to figure out how to
do that where Congress has already judged that the
benefits are worthwhile.
I would also agree with those on this Committee who have
stated that cost-benefit analysis can help resist any type of
regulatory change. The enhancements in the reproposal ensure
each Enterprise's safety and soundness and its ability to
fulfill its statutory mission across the economic cycle, in
particular during periods of financial stress. The reproposal
is also a critical step toward responsibly ending the
conservatorships, as directed by Congress.
Q.11. In response to my QFRs from the September 10, 2019,
Banking Committee on housing reform, I asked whether FHFA has
analyzed the effects of bank-like capital requirements on low-,
moderate-, and middle-income borrowers and first-time home
buyers. You said that you had not yet done so. Have you
conducted this analysis in conjunction with the proposal?
A.11. As I mentioned in response to a prior question, FHFA is
continuing to evaluate data and conduct empirical work on this
issue. FHFA recognizes the broad impact of COVID-19 on various
markets and borrowers and tenants. Actions taken by FHFA and
the Enterprises have helped all borrowers or tenants across all
geographic and demographic segments.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR VAN HOLLEN FROM MARK A. CALABRIA
Q.1. Director Calabria, can you please provide an analysis of
how the Enterprise Regulatory Capital Framework [RIN-2590-AA95]
will impact housing prices of low- and moderate-income
families? If the price of housing increases as a result of this
proposed rule, how might that impact the housing market? If an
analysis has not been conducted, please explain why not, and
whether the FHFA plans to conduct one?
A.1. In developing the reproposed Enterprise Regulatory Capital
Framework Rule, the agency conducted a thoughtful review of the
impact while remaining bound to the statutory requirements from
Congress in HERA.
Similar to what then Chair of the Federal Reserve Janet
Yellen told this Committee in 2016:
We are putting our rules very often in situations where
Congress has decided there is a safety and soundness
issue they want us to address by imposing safeguards in
a particular area, and our job is to figure out how to
do that where Congress has already judged that the
benefits are worthwhile.\1\
---------------------------------------------------------------------------
\1\ https://www.govinfo.gov/content/pkg/CHRG-114shrg99726/pdf/
CHRG-114shrg99726.pdf.
I would also agree with those on this Committee who have
stated that cost-benefit analysis can help resist any type of
regulatory change. The enhancements in the reproposal ensure
each Enterprise's safety and soundness and its ability to
fulfill its statutory mission across the economic cycle, in
particular during periods of financial stress. The reproposal
is also a critical step toward responsibly ending the
conservatorships, as directed by Congress.
FHFA monitors effects under current Enterprise practices
and standards on all market segments including low- and
moderate-income households. In line with statutory
requirements, the comments provided on the Proposed Capital
Rule will be considered for analyses provided on the impact
across the range of market participants.
Q.2. The affordable housing goals and the Duty to Serve
underserved markets rule are important to ensure the GSEs are
meeting their chartered public mission. Is FHFA planning to
make significant changes to the affordable housing goals and
the duty to serve underserved markets rule? What is the agency
weighing in rewriting these rules? Will access to credit,
equity, and fair lending be central components of any new rule?
A.2. On July 17, 2020, FHFA issued a proposed rulemaking for
the affordable housing goals. Because of the uncertainty
affecting the market during the coronavirus emergency, the
Agency has proposed continuing with the current housing goals
through 2021 and expects to propose a longer-term rule next
year. The Enterprises are on a 3-year cycle with their Duty to
Serve plans, and we will be working with them to seek public
comment on a revised plan for 2021 given the current economic
uncertainty.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM MARK A. CALABRIA
Q.1. How will the FHFA ensure that the servicers and lenders
follow your required forbearance plans?
A.1. Each Enterprise has issued guidance to its servicers
outlining the terms of CARES Act forbearance and how to ensure
that a homeowner's request for forbearance is handled
appropriately. To avoid confusion, FHFA and the Enterprises
have released scripts that servicers should use to communicate
options for both entering and exiting forbearance.
In addition to the regular review and oversight that each
Enterprise conducts with its servicers to assess compliance
with the Enterprises' respective servicing guidelines, FHFA has
established a partnership with CFPB, called the Borrower
Protection Program, that allows us to review complaints filed
by homeowners against mortgage loan servicers. The partnership
has allowed us to better understand the nature of complaints
being filed, and identify opportunities for FHFA to work with
the Enterprises on policy and communication challenges.
Finally, servicers are aware that repeated violations for which
they do not undertake corrective actions can lead to alteration
of Enterprise business dealings with the servicer.
Q.2. What information will the FHFA receive from its Borrower
Protection Agreement with the Consumer Financial Protection
Bureau?
A.2. FHFA was pleased to announce the Borrower Protection
Program as a joint initiative with CFPB on April 15, 2020. The
program was created to enable CFPB and FHFA to share servicing
information in order to protect homeowners seeking assistance
during the coronavirus national emergency. Under the program,
CFPB has made complaint information available to FHFA via a
secure electronic interface. In return, FHFA has made
information available to CFPB about forbearances,
modifications, and other loss mitigation initiatives undertaken
by the Enterprises.
Currently, FHFA has been surveying the types and frequency
of complaints. FHFA has been reviewing particular complaints
that have been made against individual firms identified in the
complaint database as well as complaints made in the press,
congressional inquiries, or by other means. We have also been
conducting more regular searches for complaints made against a
subset of servicers. The Agency will, as applicable, use what
it learns to inform its routine interactions with the
Enterprises, highlighting opportunities for additional follow-
up or investigation to ensure that Enterprise policy is being
carried out in accordance with the seller/servicer guides.
Q.3. How will the FHFA monitor and address disparities in
delinquency rates amongst servicers to ensure that those
borrowers who are facing a financial hardship and eligible for
forbearance can receive it?
A.3. If FHFA identifies disparate outcomes that it believes
Enterprise or FHFA policy changes could address, the Agency
will work to address them using all available authority. The
Agency does not have enforcement or examination authorities
related to mortgage servicers.
Q.4. If the FHFA receives information or identifies trends
among mortgage servicers that do not fall within the CFPB's
supervisory authority, will the FHFA communicate those findings
to the appropriate regulator to ensure compliance with
servicing laws and policies? If not, why not?
A.4. Yes. Prior to the establishment of the Borrower Protection
Program, FHFA lacked a formalized mechanism to refer potential
legal violations to the appropriate regulatory authorities. I
am committed to ensuring that Fannie Mae and Freddie Mac
servicers and originators fully comply with all their legal
obligations. FHFA will not tolerate the Enterprises
facilitating bad behavior by their counterparties. As there was
no existing mechanism to address these issues when I started my
term as Director, I thank the Committee and its Members for
their patience as we create such a mechanism.
Q.5. Will the FHFA and the CFPB publish regular, public updates
on the Borrower Protection Program to share findings and
actions? If not, why not?
A.5. Given that the Borrower Protection Program is quite new,
it is simply too early to know what we will find and if such
information can be shared publicly. FHFA will look to share
whatever findings can be appropriately and legally made public.
However, at the present time, FHFA does not have plans to
publish any findings or actions based on data related to the
complaint database, as it is owned and controlled by CFPB. When
any changes or adjustments are made to a policy based on
complaints lodged with CFPB, FHFA or the Enterprises will make
those policy decisions public through news releases or guide
changes.
Q.6. Last year, I, Senator Menendez, and 19 other senators
wrote to you, urging FHFA to keep a language preference
question and housing counseling information on the Uniform
Residential Loan Application. As we continue to work through
this crisis, people who do not speak English as a first
language will be among those hardest hit. In light of this
pandemic, will FHFA rescind its rule and include the language
preference question on the Uniform Residential Loan Application
form?
A.6. No. In August 2019, FHFA directed the Enterprises
regarding changes to the Uniform Residential Loan Application
(URLA) and released them from any previous directives that
required adherence to instructions that were inconsistent with
FHFA's authorities as a conservator. The URLA was transferred
back to the Enterprises after the design and development phase
was completed. As a result, the Enterprises have transitioned
to industry's implementation of the URLA form and collection of
data that will modernize the Enterprises' underwriting systems.
The new form and data
collection began testing in March 2020, will become effective
in January 2021, and will become mandatory in March 2021.
Further questions on changes to the URLA should be posed
directly to the Enterprises.
Q.7. How will FHFA ensure servicers provide assistance to
borrowers who are not proficient in English?
A.7. FHFA recognizes the importance of homeowners receiving
accurate information when they talk to their servicers about
forbearance. Therefore, FHFA directed the Enterprises to
publish scripts for servicers to use that walk a borrower
through the basics of a COVID-19 forbearance and their options
for repayment when the forbearance is over. In June 2020,
FHFA's Mortgage Translations clearinghouse was updated to add
forbearance servicer scripts and the revised Mortgage
Assistance Application from Fannie Mae and Freddie Mac in
English, Spanish, Chinese, Vietnamese, Korean, and Tagalog
(www.fhfa.gov/MortgageTranslations).
The Enterprises completed their drafting of a COVID-19
Servicing Educational Brochure. The brochure highlights
mortgage relief options and other borrower resources for COVID-
19 impacted borrowers. Translation of the brochure into
Spanish, Chinese, Vietnamese, Korean, and Tagalog should be
complete by the end of September 2020.
Q.8. Will you require the inclusion of housing counseling
information on the Uniform Residential Loan Application?
A.8. No. In August 2019, FHFA instructed the Enterprises
regarding changes to the Uniform Residential Loan Application
(URLA) and released them from any previous directives that
required adherence to instructions that were inconsistent with
FHFA's authorities as a conservator. The URLA was transferred
back to the Enterprises after the design and development phase
had been completed. As a result, the Enterprises have
transitioned to industry's implementation of the URLA form and
collection of data that will modernize the Enterprises'
underwriting systems. This will improve overall efficiency. The
new form and data began testing in March 2020, will become
effective in January 2021, and will become mandatory in March
2021.
FHFA committed to developing an optional standardized
format and question for use by stakeholders regarding housing
counseling information. This standardized format would enable
standardized data collection for those stakeholders using and
collecting such data.
Q.9. Does the Federal Housing Finance Agency plan to review the
Community Lending Plans of the 11 Federal Home Loan Banks to
ensure they are meeting the needs of cities, towns and Native
American reservations struggling with unemployment and business
closure?
A.9. FHFA currently conducts annual reviews of the 11 Federal
Home Loan Banks' (FHLBanks) Community Lending Plans to ensure
that the FHLBanks describe the credit needs and market
opportunities for targeted community lending in their Districts
and that they describe their strategies to address those
identified needs. The Affordable Housing Program (AHP) final
rule published in November 2018, expanded the scope of those
Community Lending Plans. Beginning in 2021, the FHLBanks will
also be required to identify and assess significant affordable
housing needs in their Districts, and to describe their
strategies to address those needs through the (AHP). FHFA will
continue to review the plans. But the Agency does not currently
conduct, nor does it plan in the future to conduct, an
independent review of the FHLBanks' identified credit needs,
market opportunities for targeted community lending, or
significant affordable housing needs.
Q.10. In that review of Community Lending Plans, will you raise
concerns if you find areas lagging, such as investments for
tribes or Black and Latino neighborhoods hard hit by job loss?
In your review, are the Federal Home Loan Banks investing in
low-income minority communities with fewer nonprofit and
private developers or are their investments, specifically in
the AHP and CICA programs, or are they investing in communities
with more experienced nonprofit developers with more private
sector partners?
A.10. As noted above, FHFA reviews the FHLBanks' strategies to
address the credit needs identified in the Community Lending
Plans. In 2021, FHFA will expand its review to include an
assessment of the FHLBanks' strategies to address the
significant affordable housing needs identified in the
Community Lending Plans in accordance with the 2018 amendments
to the AHP regulation. However, FHFA does not conduct
independent analyses of the FHLBanks' identified needs.
Q.11. Do you think the Federal Home Loan Banks are responding
adequately to the economic crisis in their States and
communities?
A.11. The FHLBanks have responded to this economic crisis by
continuing to be available to meet their members' liquidity
needs. Because of FHFA's supervisory emphasis on business
resiliency planning, nearly all FHLBank staff were able to work
remotely during the peak of the crisis while continuing to
perform their usual functions. The FHLBanks have also
established special programs to support members and their
communities.
The central function of the FHLBanks is to provide
liquidity to the housing finance market so that potential
homeowners can access mortgages, thereby providing an important
economic support to members and their communities. The Banks
served this role most notably in the early weeks of the crisis,
responding to member demand and increasing advances by slightly
over 30 percent during March. They continue to serve this role.
In line with guidance from FHFA, the FHLBanks have offered
flexibility on pledged collateral to include loans in
forbearance due to COVID-19, have allowed members to pledge PPP
loans, and/or have facilitated subordination agreements to
allow members to pledge loans to their Federal Reserve Bank.
In addition, the FHLBanks have responded to the crisis by
offering discounted or zero-cost advances to members, using
regulatory exceptions that allow for pricing below the cost of
funds for special purposes that involve some social benefit,
such as providing relief from a natural disaster. FHFA has also
worked with the FHLBanks to allow them to offer Community
Investment Cash Advance (CICA) program funds to assist the
types of entities eligible for loans under the PPP. Some Banks
have also provided grants to certain community partners or made
charitable contributions in their communities.
Q.12. Please provide information on Federal Home Loan Bank
investments and grants to tribal reservations. Please provide
annual investment by program type--CICA, CIP, AHP, etc.--by
year and by FHLBank over the past 20 years.
A.12. FHFA collects information on AHP awards to projects
located on tribal land (not reservations) and does not collect
this information for CICA or CIP. Because the data is not
public, we have sent this information to your staff under
separate cover as confidential and not intended for public
dissemination. The data sent includes information only for
those FHLBanks that have made awards on tribal lands and does
not include AHP awards made to projects sponsored by tribal or
Native entities that are not located on tribal lands.
Q.13. Did the Federal Home Loan Bank provide the same loan
maturity extension for the half-a-million mortgages in their
Mortgage Partnership Program?
A.13. Three FHL Banks currently operate as providers for the
approved mortgage purchase programs:
Mortgage Partnership Finance (MPF) with the Chicago
Bank as provider and nine Banks holding mortgage
loans--Boston, New York, Pittsburgh, Atlanta, Chicago,
Des Moines, Topeka, Dallas, and San Francisco
(currently, Atlanta no longer purchases AMA);
Mortgage Purchase Program (MPP) at the Cincinnati
Bank and at the Indianapolis Bank.
Though mortgage loans owned by the Banks are not subject to
the requirements of the CARES Act, the MPF and MPP programs
offer forbearance and loss mitigation options for borrowers
negatively affected by COVID-19.
The MPF program closely aligns to the CARES Act and allows
for forbearance and forbearance extensions for a period of up
to 12 months for a COVID-19 hardship. The first 90-day COVID-19
forbearance will be granted without a hardship documentation
requirement. Following the initial 90-day forbearance, an MPF
servicer may extend forbearance in separate, shorter
incremental periods, not to exceed 12 months. Forbearance
beyond the initial 90-days requires borrower-hardship
certification.
Cincinnati MPP has authorized up to 6 months of
forbearance for COVID-19 hardship. The servicer must
make quality right party contact and receive verbal
verification of the hardship for a borrower to be
eligible for forbearance. Forbearance for longer than 6
months must be approved by the Cincinnati Bank.
Indianapolis MPP has authorized an initial 90-days
of forbearance for a COVID-19 hardship, but the
forbearance can be extended in 60-day increments up to
210 days. The borrower must certify they are
experiencing a COVID-19 hardship to be eligible for
forbearance. After 210 days of forbearance, the loan
can be sent to the Indianapolis Bank for review and
possible further extension.
The CARES Act does not address options at the end of the
forbearance period. The Enterprises offer various options at
the end of the forbearance period, including the option to
defer payments to the end of the mortgage term (payment
deferral). MPF and MPP offer repayment options other than full
reinstatement (lump sum), and the MPF program offers an option
for payment deferral similar to the program offered by the
Enterprises.
The MPF program's COVID-19 post-forbearance options
include full reinstatement, repayment plan, COVID-19
payment deferral plan, and loan modification.
The Cincinnati MPP program's COVID-19 post-
forbearance options include full reinstatement, a
repayment plan (up to 12 months), and loan
modification. Cincinnati MPP servicers must obtain
prior approval for payment plans in excess of 12 months
or for a modification to any terms of the mortgage.
The Indianapolis MPP program's COVID-19 post-
forbearance options (reviewed for in the following
order) include full reinstatement, repayment plan, and
loan modification.
Additional Material Supplied for the Record
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