    [Senate Hearing 117-750]
    [From the U.S. Government Publishing Office]

                                                          S. Hrg. 117-750

                   EXAMINING THE U.S. DEPARTMENT OF AGRI-
                     CULTURE'S RURAL HOUSING SERVICE: STAKE-
                     HOLDER PERSPECTIVES

    =======================================================================

                                    HEARING

                                  BEFORE THE

                                SUBCOMMITTEE ON
                        HOUSING, TRANSPORTATION, AND COMMUNITY
                                   DEVELOPMENT

                                    OF THE

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

     EXAMINING THE U.S. DEPARTMENT OF AGRICULTURE'S RURAL HOUSING SERVICE
       FOCUSING ON HOW TO IMPROVE ACCESS TO HOUSING IN RURAL COMMUNITIES

                                   __________

                               SEPTEMBER 20, 2022

                                   __________

      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
    53-650 PDF                  WASHINGTON : 2023

    -----------------------------------------------------------------------------------

             COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                         SHERROD BROWN, Ohio, Chairman

    JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
    ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
    JON TESTER, Montana                  MIKE CRAPO, Idaho
    MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
    ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
    CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
    CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
    TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
    KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
    JON OSSOFF, Georgia                  JERRY MORAN, Kansas
    RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                         STEVE DAINES, Montana

                         Laura Swanson, Staff Director

                     Brad Grantz, Republican Staff Director

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                            Pat Lally, Hearing Clerk

                                     ______

       Subcommittee on Housing, Transportation, and Community Development

                          TINA SMITH, Minnesota, Chair

              MIKE ROUNDS, South Dakota, Ranking Republican Member

    JACK REED, Rhode Island              RICHARD C. SHELBY, Alabama
    ROBERT MENENDEZ, New Jersey          MIKE CRAPO, Idaho
    JON TESTER, Montana                  BILL HAGERTY, Tennessee
    CATHERINE CORTEZ MASTO, Nevada       CYNTHIA LUMMIS, Wyoming
    CHRIS VAN HOLLEN, Maryland           JERRY MORAN, Kansas
    JON OSSOFF, Georgia                  KEVIN CRAMER, North Dakota
    RAPHAEL WARNOCK, Georgia             STEVE DAINES, Montana

                    Tim Everett, Subcommittee Staff Director

             Kathleen Gayle, Republican Subcommittee Staff Director

                       Adam Schiff, Legislative Assistant

                                      (ii)

                                C O N T E N T S

                                  ----------

                          TUESDAY, SEPTEMBER 20, 2022

                                                                       Page

    Opening statement of Chair Smith.................................     1
        Prepared statement...........................................    24

    Opening statements, comments, or prepared statements of:
    Senator Rounds...................................................     2
        Prepared statement...........................................    25

                                   WITNESSES

    Senator Jeanne Shaheen of New Hampshire..........................     4
    Elizabeth Glidden, Deputy Executive Director, Minnesota Housing
      Partnership....................................................     7
        Prepared statement...........................................    25
        Responses to written questions of:
            Senator Cortez Masto.....................................    41
    Marcia Erickson, CEO, GROW South Dakota..........................     8
        Prepared statement...........................................    29
        Responses to written questions of:
            Senator Cortez Masto.....................................    42
    Tonya Plummer, Director, Native American Housing Programs,
      Enterprise Community Partners..................................    10
        Prepared statement...........................................    34
        Responses to written questions of:
            Senator Cortez Masto.....................................    47
    David Battany, Executive Vice President, Capital Markets, Guild
      Mortgage Company...............................................    11
        Prepared statement...........................................    37

                  Additional Material Supplied for the Record

    Letter submitted by National Housing Law Project.................    51
    Statement submitted by National Rural Housing Coalition..........    58
    Statement submitted by Housing Assistance Council................    65

                                     (iii)

     EXAMINING THE U.S. DEPARTMENT OF AGRICULTURE'S RURAL HOUSING SERVICE:
                            STAKEHOLDER PERSPECTIVES

                                  ----------

                          TUESDAY, SEPTEMBER 20, 2022

                                   U.S. Senate,
      Committee on Banking, Housing, and Urban Affairs,
        Subcommittee on Housing, Transportation, and Community
                                                   Development,
                                                        Washington, DC.
        The Subcommittee met at 2:30 p.m., via Webex and in room
    538, Dirksen Senate Office Building, Hon. Tina Smith, Chair of
    the Subcommittee, presiding.

                 OPENING STATEMENT OF CHAIR TINA SMITH

        Chair Smith. Good afternoon. I call this Subcommittee to
    order.
        Good afternoon. Senator Rounds, I want to thank you for
    working together with me on today's hearing focusing on what we
    can do to improve access to housing in rural communities. I
    want to thank Chair Brown for his encouragement and support of
    our Subcommittee work, and I want to thank Senator Shaheen from
    New Hampshire for joining us today as well.
        So small towns and rural places are creative,
    entrepreneurial, diverse, and wonderful places to live and to
    work and to raise a family. They produce our food and our
    energy. They are hubs of manufacturing and small business,
    education, health care, arts, and culture. And when I travel to
    rural communities in Minnesota, I find hardworking, passionate
    people who love their communities and want them to be even
    better.
        Yet, we know that for many rural communities the shortage
    of affordable housing is an enormous impediment to attracting
    new business, new residents, and new talent. The reality is if
    you do not have a safe, affordable place to live, nothing else
    in your life works or in your community, not your job, not your
    education, not your health. Housing challenges can be about
    families trying to find a place to live for disabled family
    members or seniors that are faced with living in overcrowded
    conditions. I mean, it could be workers who want to take a job
    in a grain elevator or a meat processor or a manufacturing
    facility, but the closest home they can find is 40 miles away.
        One hiring manager in Minnesota told me that they spend
    almost half their time just helping new employees find housing,
    and I know that Senator Rounds has heard similar stories in
    South Dakota.
        And I am grateful to you for the work that we have been
    able to do in a bipartisan way on this Subcommittee to look for
    solutions to some of these problems.
        The U.S. Department of Agriculture's Rural Housing Service,
    which Congress created in 1949, plays an important role in
    supporting the development of single and multifamily housing in
    small towns and rural places across the United States. RHS is a
    trusted and well-known partner for rural America, which faces
    unique challenges when it comes to developing and financing
    housing.
        This is our Subcommittee's second hearing focused on rural
    housing. In May, we heard from Xochitl Torres Small, who is the
    Under Secretary for Rural Development. She runs the Rural
    Housing Service, and she shared several ideas for how to
    improve Rural Housing Service's administrative systems to keep
    housing affordable for residents of Section 515 properties as
    those properties--those USDA mortgages for those properties
    mature.
        Following the hearing, Senator Rounds and I made a public
    call for input on RHS programs, and we received nearly two
    dozen responses. I appreciate so much the thoughtful comments,
    and we learned a lot from them. Nearly all the letters we
    received pointed to the importance of fully funding the Rural
    Housing Service, and I certainly agree with that. Commenters
    also noted the importance of making administrative
    improvements, similar to what we heard from Secretary Torres
    Small.
        We also heard about the need to decouple rental assistance
    from Section 515 mortgages. As properties with these mortgages
    age and their mortgages mature, many low-income families are at
    risk of unaffordable rent increases. Senator Shaheen and I
    introduced a bill yesterday to fix this problem, and I
    appreciate your partnership on this issue.
        In addition, we heard about the unique challenges that
    Native communities face in obtaining mortgages, particularly on
    trust land. Senator Rounds and I have been working on a bill to
    expand an innovative USDA pilot program to address this issue,
    and I look forward to hearing more from our witnesses about
    that today as well.
        Finally, we received some very interesting suggestions for
    addressing other issues that exist, including how to update
    home repair programs, options to prevent foreclosures, which
    can both help keep residents in their homes and save the USDA
    money, and opportunities to reduce burdens and bureaucratic red
    tape on homeowners and renters, especially very low income
    families.
        So I look forward to hearing from all of today's witnesses
    about these issues and more, and I hope that we can continue
    the productive conversations that we have had so far about how
    to address the housing challenges facing small towns and rural
    places.
        Senator Rounds, I recognize you for your opening remarks.

                OPENING STATEMENT OF SENATOR MIKE ROUNDS

        Senator Rounds. Thank you, Madam Chair. Once again, I want
    to thank you for the cooperative effort in which this
    Subcommittee has continued to work, and I want to thank our
    witnesses, specifically, Ms. Erickson, for joining us virtually
    from Sisseton, South Dakota, for offering your stakeholder
    feedback on how to improve the Rural Housing Service, or RHS.
        In South Dakota, RHS has played a large role in supporting
    affordable home ownership and rental housing for lower-income
    families. I believe there are a number of ways that we can
    streamline and modernize RHS to more effectively serve rural
    Americans. Over the last several months, our offices have been
    collecting recommendations from stakeholders, like those
    testifying today, on ways to achieve this. Their proposals have
    included commonsense reforms such as increasing the threshold
    for mortgage requirements on 504 loans, requiring USDA to
    provide more data transparency along with an annual report on
    RHS programs, improving staffing, updating old IT systems, and
    more.
        Over the last several decades, the number of loans made
    through the Section 502 Guaranteed Loan Program has increased
    while the number of loans made through the Section 502 Direct
    Loan Program has declined. The Direct Loan Program, a more
    expensive program that exposes taxpayers to greater risk, was
    failing to reach communities, more specifically, members of
    tribal communities, in a meaningful way.
        In order to better serve Native American communities, USDA
    launched a 502 lending pilot program in 2018, where USDA
    partnered with Native community development financial
    institutions to help Native American families realize that
    dream of home ownership. I look forward to hearing Ms. Erickson
    discuss the successes of that pilot program in South Dakota.
    Although the pilot program was successful, it has not yet been
    expanded.
        The results of a 2022 National Rural Housing Coalition
    survey of organizations working with RHS on administering the
    502 direct program demonstrates how broken the program remains.
    The survey found that there was a wide variation of house
    Section 502 loans that were administered, there was
    inconsistent staffing of loan applications, and loan processing
    was often delayed, sometimes stretching to 70 days or longer.
        That is why as we look to make updates to RHS I think it is
    important to include the bill Chairwoman Smith and I have
    partnered to expand the 502 lending pilot program. We should be
    promoting innovative strategies like this that utilize public
    private partnerships to make certain funds reach the
    communities that really do need them.
        We will also be looking at ways to streamline regulatory
    requirements for programs and increase flexibility for the
    smallest communities as cumbersome processes have deterred
    nonprofits from utilizing programs. In that vein, staffing and
    IT upgrades are imperative as we evaluate how to make RHS as
    effective as possible. RHS is using software that, in some
    cases, is nearly 25 years old. The outdated technology can
    delay applications from perspective renters and buyers and
    scare away perspective landlords that are interested in
    utilizing RHS programs for their properties. As a USDA lender,
    I am interested in hearing Mr. Battany's perspective on ways to
    upgrade processes.
        Thank you again to all of our witnesses for being here
    today, and I look forward to the conversation.
        Thank you, Madam Chair.
        Chair Smith. Thank you, Senator Rounds.
        And now I would like to invite Senator Shaheen, who is
    visiting our Committee this afternoon, to make a few comments.
    Thank you.

          STATEMENT OF SENATOR JEANNE SHAHEEN OF NEW HAMPSHIRE

        Senator Shaheen. Well, thank you very much, Chair Smith,
    Ranking Member Rounds, and Senator Tester, for all of the work
    that you have been doing to address rural housing and also for
    giving me the opportunity to be here this afternoon to talk
    about some of the challenges we are facing with respect to
    housing in rural areas in New Hampshire and also the
    legislation that Senator Smith already referenced to address
    some of those issues.
        Right now, New Hampshire, like I am sure many parts of the
    country, is in the midst of an affordable housing crisis.
    According to the 2022 Residential Rental Cost Survey, which was
    conducted in New Hampshire by the New Hampshire Housing Finance
    Authority, the vacancy rate for all rentals in New Hampshire is
    just 0.5 percent. That is not 5 percent; that is 0.5 percent.
    That is compared to a vacancy rate in the Northeast of 4.9
    percent and, nationally, of 5.8 percent.
        And meanwhile, rents across our State continue to increase
    at an alarming rate. The cost for a 2-bedroom unit has
    increased almost 26 percent in the past 5 years. Now this is a
    statewide crisis, but in some of our rural areas the problem is
    even worse. In Grafton County, which is in the western part of
    New Hampshire, along the Connecticut River and borders Vermont,
    the vacancy rate is just 0.3 percent, and rents have increased
    an astonishing 48 percent over the past 5 years.
        Now in many of our rural communities, as you all know, USDA
    Rural Housing Service Programs remain a critical source of
    affordable housing for our lowest-income and most vulnerable
    residents. Many of them are elderly or disabled, but some of
    these programs are showing signs of strain as they mature.
        The Section 515 loan program, which was originally
    established almost 60 years ago, is one of those programs that
    requires attention today to ensure that it can be successful
    into the future. Under current market conditions, in many
    communities, when a Section 515 loan matures, there are very
    strong incentives for the property owner simply to leave the
    program altogether and convert the units to market rate.
        In fact, we have had two properties in the Lakes Region of
    New Hampshire, which is more in the eastern part of our State,
    which were recently saved from this very fate, including one
    complex that sits on Lake Winnipesaukee, our State's largest
    lake, which could easily have been converted to luxury
    apartments which would command very high rents. It was only
    through the timely intervention of Lakes Region Community
    Developers, which is a mission-driven nonprofit, that this
    outcome was avoided and tenants' homes were preserved, but
    unfortunately, the residents of many other properties in New
    Hampshire and across rural America are not so lucky.
        Legislation I introduced last week with Chair Smith, the
    Strategy and Investment in Rural Housing Preservation Act, is
    designed to address some of these incentives, tilting them back
    in favor of preserving vital, affordable rural housing stock
    and protecting low-income residents from displacement. To do
    so, the bill gives USDA and property owners flexibility to
    restructure existing Section 515 loans to ensure that these
    properties remain affordable for years to come.
        Even where restructuring is not possible, the bill helps
    protect residents by allowing rental assistance to be
    decoupled, as Senator Smith alluded to earlier, from the
    underlying loan but to remain in place at the property or by
    allowing the resident to transfer their rental assistance to
    another eligible property.
        Finally, the bill requires USDA to establish a plan for
    preserving affordable rental housing in rural areas, in
    consultation with an advisory committee composed of a variety
    of interested stakeholders that includes tenants and property
    owners.
        The affordable housing crisis in our rural communities is
    an enormous challenge that no single piece of legislation or
    single action is going to be able to solve, but I believe this
    legislation, like so many of the other initiatives that this
    Subcommittee is working on, is an important step that will help
    prevent immediate harm by preserving existing affordable units
    as we all consider additional measures to create more
    affordable housing in communities where it is needed most.
        Thank you again, Chair Smith, Ranking Member Rounds, and
    all Members of the Subcommittee, Senator Tester, for letting me
    join you today and for the work that you doing, and I stand
    ready to be helpful in any way I can as you bring forward
    legislation.
        Chair Smith. Thank you, Senator Shaheen.
        I now want to welcome our witnesses here today, and I will
    turn to Senator Rounds to introduce Marcia Erickson from South
    Dakota.
        Senator Rounds. Thank you, Madam Chair.
        It is my pleasure to introduce Marcia Erickson, the CEO of
    GROW South Dakota. Marcia has been with GROW South Dakota for
    more than 30 years and has served as CEO for 17 years. GROW
    South Dakota is a statewide nonprofit organization located in
    Sisseton, South Dakota, that provides programs and loan
    products to advance housing, community, and economic
    development. She is also the President of the Board of
    Directors for the National NeighborWorks Association.
        Marcia has a broad range of experience in mobilizing and
    administering resources from private, State, and Government
    funding sources. As a loan packager for the USDA Rural Housing
    Development 502 Direct Loan Program, Marcia is well situated to
    give useful feedback to the Subcommittee on ways to improve RHS
    programs.
        Thank you again, Marcia, for joining us virtually and for
    being willing to represent the interests of South Dakotans in
    Washington.
        Chair Smith. Thank you so much, and welcome, Ms. Erickson.
        I would turn now to Senator Tester to introduce Tonya
    Plummer.
        Senator Tester. Yeah, thank you, Chair Smith and Ranking
    Member Rounds, for holding this hearing.
        And, Senator Rounds, you know that you are number 1 in 17
    Select, and if you----
        Senator Rounds. I was going to say that, but I did not know
    if you wanted me to break that news.
        Senator Tester. No. And if you guys wonder what we are
    talking about, you need to go to Nats Park, and I will give you
    a hint it has to do with good beer and good fun.
        I have the distinct pleasure to introduce Tonya Plummer,
    who is the Director of Native American Housing Programs at the
    Enterprise Community Partners, where she works with folks from
    across the country to build capacity and to improve Native
    housing. She also serves on the Montana Board of Housing. Tonya
    is an enrolled member of the Assiniboine and Sioux and Cree
    heritage.
        Tonya has previously led a Native CDFI based on Ft. Belknap
    Indian Reservation, where she has deep ties. During her time
    there, she helped grow the national CDFI network and foster
    Montana Native home ownership opportunities.
        We are glad to have you here today, Tonya, and we look
    forward to this hearing.
        Madam Chair.
        Chair Smith. Thank you, Senator Tester, and welcome, Ms.
    Plummer.
        I would like to introduce Elizabeth Glidden, who is the
    Deputy Executive Director of the Minnesota Housing Partnership.
    As Deputy Executive Director, Elizabeth manages the Minnesota
    Housing Partnership policy and program initiatives with a focus
    on expanding housing and community development opportunities
    for historically underserved communities.
        I have to say as a personal note it is wonderful to welcome
    Ms. Glidden. She and I have known each other since our days
    working together in city government in the city of Minneapolis,
    when I was Chief of Staff for the Mayor and she served and was
    a leader on the City Council, including on housing issues then.
        I would like to welcome David Battany to the Committee, who
    is the Executive Vice President for Capital Markets at Guild
    Mortgage Company. Mr. Battany has more than 30 years of
    leadership experience in single-family lending and is
    responsible for all of Guild Mortgage's Government agency
    lending, including USDA's Rural Housing Service loans. Mr.
    Battany serves as a member of the Mortgage Bankers
    Association's Residential Board of Governors and cochairs the
    Mortgage Bankers Association's Affordable Homeownership
    Advisory Council, and he is cochair of the National Housing
    Conference 2022 Black Homeownership Collaborative and is a
    board member of Habitat for Humanity.
        And I also learned from greeting David that he hails from
    far western Colorado, so issues of rural communities are near
    and dear to his heart.
        With that, I just have a few reminders. This hearing is in
    hybrid format. Our Members may be both in person and remote as
    well as having witnesses testify, as we do today, both in
    person and by video. If there is any technology issues, we will
    move to the next witness until it is resolved.
        For witnesses, you all have 5 minutes for your opening
    statements. Each of you will have a clock in front of you or on
    your screen. Your full written statement will also be part of
    the record.
        For Ms. Erickson, who is joining virtually, you will hear a
    bell ring when you have 30 seconds remaining and then again
    when your time has expired.
        And, Ms. Glidden, I recognize you for your opening
    statement.

      STATEMENT OF ELIZABETH GLIDDEN, DEPUTY EXECUTIVE DIRECTOR,
                     MINNESOTA HOUSING PARTNERSHIP

        Ms. Glidden. Thank you, Chairwoman Smith and Members of the
    Subcommittee. My name is Elizabeth Glidden, and I am the Deputy
    Executive Director of the Minnesota Housing Partnership, a
    nonprofit organization that advocates for equitable housing
    policy, produces data-informed research, and delivers community
    development services across the United States. We specialize in
    serving rural communities and Native nations, and in the past
    year alone we have provided direct technical assistance to 36
    rural communities, including 14 Native nations.
        So what does the housing affordable crisis look like for
    rural communities? Rural residents have fewer housing options
    and are more likely to live in substandard housing than their
    urban peers due to older housing stock and less compliance and
    enforcement of codes. In Minnesota, 41 percent of rural renters
    are cost burdened, meaning they are paying more than 30 percent
    of their income for housing.
        To serve the housing affordability needs of rural
    residents, Minnesota has been an early and enthusiastic adopter
    of USDA's Section 515 program. In Minnesota, Section 515 homes
    make up almost 20 percent of all subsidized housing units in
    rural areas of Minnesota. That percentage is much higher in
    some areas of the State, where 515 units can make up more than
    45 percent of available affordable homes. This means that a
    Section 515 property may provide the only affordable housing
    option within a community or for many miles around.
        The average income of Minnesota's Section 515 residents
    utilizing rental assistance is less than $12,000. This means
    that these very deeply affordable properties are critical in
    rural communities.
        A long-time concern has been mortgage maturations of 515
    properties as we still do not have a preservation or
    replacement strategy for these rural homes. The peak of
    mortgage maturations for Section 515 properties in the Midwest
    States is 2030, about 10 years before the peak occurs in other
    areas of the United States, and according to the Housing
    Assistance Council Minnesota actually leads the Nation in the
    number of properties that are exiting the 515 program. In the
    past 5 years, about 1,100 units, representing more than a tenth
    of all 515 properties in Minnesota, have exited. In addition to
    mortgage maturations, the reasons for these exits include
    owners prepaying their mortgages, owners selling outside of the
    USDA transfer process to avoid it, and deteriorating property
    conditions.
        As 515 properties often are coupled with Section 521 rental
    assistance, this helps ensure that these homes are affordable
    to our lowest-income rural residents. And as was mentioned in
    other opening comments, under current law, when a USDA mortgage
    is paid off, the 515 or the 514 or 516 property loses its 521
    rental assistance, which can result in displacement, housing
    instability, and loss of community for those residents, but
    also, a property may face negative financial consequences from
    the loss of rental assistance.
        Decoupling the mortgage from rental assistance can support
    continued housing stability for rural residents by allowing the
    rental assistance to continue at a property that no longer as a
    qualifying mortgage. And in States like Minnesota, with
    increasing mortgage maturations and other exits, this is an
    option that needs serious consideration.
        We agree with our colleagues at the National Rural Housing
    Coalition and the Housing Assistance Council that decoupling
    should be paired with increased funding for USDA's Rural
    Housing Service programs, such as the Multifamily Preservation
    and Revitalization Program, and that implementation conditions
    must be included with any program change. We support the
    conditions that are set forth in the Shaheen-Smith bill as
    providing appropriate conditions for decoupling among other
    supports for rural housing.
        In addition, I would like to mention that we have policy
    recommendations that included funding necessary for
    preservation and program operations for USDA's programs, that
    transfers to mission-focused nonprofits must continue to be
    incentivized, including with technical assistance, and that 521
    rental assistance provided in the American Rescue Plan should
    receive serious consideration for extension.
        Thank you so much to the Subcommittee for allowing me time
    to speak. I look forward to any comments and questions.
        Chair Smith. Thank you very much.
        We will now turn to Ms. Erickson, who is joining us
    virtually, for your testimony.

          STATEMENT OF MARCIA ERICKSON, CEO, GROW SOUTH DAKOTA

        Ms. Erickson. Thank you, Chairwoman Smith, Ranking Member
    Rounds, and Members of the Subcommittee. As the CEO of GROW
    South Dakota, the housing programs offered by USDA have been
    extremely important to the work that we do and the communities
    that we serve. The perspectives that I share with the Committee
    today are both some of those benefits and some of the
    challenges of these programs.
        The 502 Direct Loan Program is a great resource and an
    option for affordable housing. This program assists low-income
    applicants to obtain housing by providing payment assistance.
    However, the length of time for approval on the 502 direct home
    loans can be discouraging to homebuyers. A shortened
    application process, staffing levels sufficient to address the
    need, and upgraded technology for loan processing would greatly
    improve the 502 Direct Loan Program.
        The Native American Rural Homeownership Improvement Act,
    introduced by Senator Smith and Senator Rounds, expands an
    existing USDA 502 Direct Loan Relending Program to partner with
    Native Community Development Financial Institutions. These
    Native CDFIs work daily in their communities and have the
    background and the experience that is needed to close those
    first mortgage loans for Native home borrowers. This is a prime
    example of a program that works. It should be replicated, and
    it should be permanently authorized. GROW South Dakota supports
    this bipartisan legislation.
        In many of our rural communities, the Section 515
    multifamily program does provide the only decent and affordable
    rental housing in the community. Over the last few years, with
    the transition to a more regional approach for the USDA
    offices, the response times have become delayed. The servicing
    agents are overloaded and unable to respond in a timely manner.
    We support increased staffing resources to enhance the
    efficiency and the effectiveness of the 515 multifamily
    program.
        The USDA 504 program provides direct loans and grants to
    low-income applicants to repair their homes. GROW South Dakota
    supports increasing the total funds that can be awarded to
    households, expand the eligibility to grant recipients, and
    raise the average median income limits. With broader
    eligibility and higher awards per household, rural residents
    will have better access to funds needed to repair their
    substandard homes.
        The Rural Community Development Initiative helps nonprofits
    to further their community development work. GROW South Dakota
    recommends an amendment to the grant scoring on the median
    household income for the communities where the recipients are
    physically located. Many times, recipients are physically
    located in an area where the median household income levels are
    higher than what is allowed for the maximum scoring, but yet,
    they are serving communities that are less than 70 percent of
    the State and national median income. This regulation change
    would better reach all low-income communities. We also support
    increased funding for the RCDI.
        In another area, mortgage lending on tribal trust land is a
    challenge, in part, caused by the delays in processing of title
    and mortgage-related documents by the Department of Interior
    Bureau of Indian Affairs. The BIA must review and process the
    mortgage before it can be finalized. The consequences of these
    delays have resulted in financial institutions exiting this
    market, loss of capital flowing into tribal communities, and
    tribal populations not being able to access affordable mortgage
    products.
        The Tribal Trust Land Homeownership Act is important for
    Native Americans to have access to home and business loans.
    Thank you, Senators Smith, Rounds, Tester, and Thune for
    introducing this very important legislation.
        In closing, I applaud the efforts being made by Congress to
    increase the resources to USDA RHS and to ensure that programs
    are structured so that recipients can use them flexibly to meet
    our local needs. Thank you for working to create solutions in a
    bipartisan manner and for your time today. I look forward to
    answering any questions you may have.
        Chair Smith. Thank you very much.
        I will now invite Ms. Plummer to provide your opening
    remarks.

     STATEMENT OF TONYA PLUMMER, DIRECTOR, NATIVE AMERICAN HOUSING
                PROGRAMS, ENTERPRISE COMMUNITY PARTNERS

        Ms. Plummer. Thank you, Chair Smith, Ranking Member Rounds,
    and Members of the Committee. Thank you for the opportunity to
    share perspectives on USDA's Rural Housing Services with you
    today, and thank you, Senator Tester, for the introduction.
        My name is Tonya Plummer. I am the Director of Native
    American Housing Programs for Enterprise Community Partners,
    where we work to make home and community a place of pride,
    power, and belonging for tribes all across the country.
        My career has focused on housing and home ownership because
    I have experienced in a deeply personal way its role in
    providing stability, security, and the ability to rise above
    circumstances. My grandmother was born in a teepee on the banks
    of Enemy Swim in Sisseton, South Dakota. My grandfather was
    born in a tent on the Missouri River just outside the Ft.
    Belknap Reservation of Montana. Neither ever owned a home.
        From them came my father, born on the Ft. Belknap
    Reservation, who built his home on trust lands over several
    years, with cash, going years without running water until he
    could afford that amenity.
        I was 20 years old when NAHASDA was first authorized, and 2
    years later I became the first homeowner in my family. I
    purchased my first home in Montana with a USDA rural housing
    loan. I have spent my career helping others create a home and
    in bringing this experience to elevate opportunities for
    tribes. I am severely disheartened at the lack of products and
    resources for Indian Country.
        In advance of my recommendations, I do want to acknowledge
    the recent positive outreach and efforts of USDA Rural Housing
    staff to tackle the tough issues for mortgage banking, mortgage
    lending in Indian Country and to be present and available
    thought partners.
        I also want to acknowledge the complexities of applying
    broad changes to all rural and tribal areas, where the markets,
    courts, rates of growth, and ecosystems of support are unique
    and varied. It is critically important to be cognizant of this
    in drafting legislation and careful of unintended consequences.
        We are very pleased to see the Committee's interest in
    supporting USDA's Rural Housing Service. Our submitted written
    testimony is much more robust, and in it we offer specific
    solutions and recommendations toward progress. But to summarize
    today's focus, we will touch on three proposed areas of reform
    needed to improve the accessibility and effectiveness of RHS
    programs, including:
        Number one, increased rural housing resources and
    technology. RHS programs are extremely valuable but
    underutilized due to limited staff and technology, and that
    disparity negatively impacts rural and Native Americans who
    rely on them as some of the best and only products designed for
    rural and Native needs. We encourage creative solutions such as
    the national expansion of the Section 502 direct relending
    pilot, so successful in South Dakota--a few of my partners are
    here behind me supporting--that leans into Native CDFIs as
    natural partners in the deployment of USDA funds and also the
    renewal of appropriations to Section 525 Technical and
    Supervisory Assistance, or TSA, grants.
        Number two, the USDA Section 502 subsidy recapture is
    damaging in Native communities and should never be expected on
    tribal trust lands. Tribal members on trust lands already come
    to the closing table with less equity because their land is
    given no value, and the application of a subsidy recapture
    assures that they will never build it at a rate comparable to
    nontribal members on fee-simple lands, where a buy-sell market
    exists. Recently, in one tribal community, a father with a 502
    direct loan passed away, and in order to keep the family housed
    in the home they had to come up with $22,000 of subsidy
    recapture.
        However, broadly removing the recapture in communities
    where value appreciation is seen and a shared equity model
    makes sense, could harm the USDA budget formulas and
    potentially decrease dollars available for Section 502 lending.
    A nuanced approach, we feel, is needed and the subsidy
    recapture should be treated one way on tribal land, one way in
    appreciating markets, and another way in depreciating markets.
        The proposed application, number three, of Federal
    foreclosure proceedings currently available to HUD but not to
    USDA on Section 515 multifamily preservation products is to be
    addressed. While we appreciate the need to streamline recovery
    and especially to ensure long-term affordability, we recognize
    the tribal courts and jurisdictions are sovereign and that
    tribal sovereignty must be recognized. There is a fear and
    frustration around the way these proceedings play out on tribal
    lands, and we encourage further, deeper consultation with
    NAIHC, with the policy committees of the native coalitions in
    Minnesota, South Dakota, and Montana, and others to determine
    viable solutions to expedite the process while respecting
    tribal sovereignty.
        In conclusion, I thank you for inviting me to share my
    experiences and perspectives today. On behalf of Enterprise
    Community Partners, I would like to thank the Committee,
    especially Chair Smith and Ranking Member Rounds, for their
    leadership on rural and tribal housing issues, as well as the
    bipartisan cooperation on issues that affect so many Americans
    in every corner of our country. We look forward to continuing
    in partnership with you.
        Chair Smith. Thank you so much for your testimony.
        I now turn to Mr. Battany.

     STATEMENT OF DAVID BATTANY, EXECUTIVE VICE PRESIDENT, CAPITAL
                    MARKETS, GUILD MORTGAGE COMPANY

        Mr. Battany. Chair Smith, Ranking Member Rounds, Senator
    Tester, thank you for the privilege to testify on behalf of the
    Mortgage Bankers Association.
        Lenders are indispensable partners to USDA's Rural Housing
    Service as we are both the providers and the servicers of these
    loans. These programs are worthy of our Nation's commitment to
    them.
        In 2021, there were 114,000 mortgage loans backed by USDA.
    This represented less than half of 1 percent of all total loan
    volume. The average loan size was $180,000. The total amount of
    Section 502 guaranteed loans obligated for Minnesota was $448
    million and $170 million for South Dakota. It is imperative to
    be mindful of this small market share and smaller loan size
    when discussing proposals that might further restrict lending
    or impose additional costs on service delivery.
        The focus of my testimony is the opportunity to build on
    recent progress that RHS lending can better serve consumers and
    industry participants alike. We can advance this objective by
    addressing three areas: better workflow, better technology, and
    if these two areas are achieved, better loan products.
        I would like to start my discussion on better workflow by
    commending RHS on its recently proposed rule to implement a
    provision of HOTMA enacted in 2016 to enable the Secretary to
    delegate approval authority to preferred lenders. Lack of any
    delegation authority is a major barrier and has kept RHS out of
    alignment with FHA and VA lending. In some cases, response
    times from RHS to approve a loan can take up to 10 days, and
    this may result in some borrowers delaying or losing their
    closing date. For financing multifamily properties, delays can
    be a deal killer. Building for rural workforce housing require
    a combination of debt, tax credits, and equity financing that
    must come together quickly or they will be applied to other
    deals. USDA should proceed with updates that provide full
    delegation to all approved lenders to be responsive to their
    customers' needs for both residential and multifamily lending.
        The technology backbone of RHS operations is widely
    acknowledged as outdated. It is less advanced than those used
    by several other Government housing agencies, Fannie Mae and
    Freddie Mac, and lenders. USDA should have the budget to ensure
    RHS can keep pace with changes in the market, evolving data
    security threats, and changes in the ways which mortgage loans
    are originated and serviced.
        The technology focus for RHS is centered on its Guaranteed
    Underwriting System (GUS). Further work is needed to ensure the
    system fully supports RHS borrowers and lenders. For example,
    RHS imposes limits on the number of runs a lender can make for
    each borrower, making it difficult for a lender to perform pre
    qualifications. RHS offerings need to be more attractive for
    loan officers working on the ground with consumers. When a
    problem occurs with a system, it often requires substantial
    manual intervention.
        RHS should also update its interfaces for the remittance of
    annual fees. Today, servicers must manually review and submit
    payments, which is cumbersome and outdated.
        Once capacity is improved, various RHS loan parameters
    should be reviewed to ensure they do not restrict access to
    credit or responsible use of RHS offerings. The RHS debt to
    income limits, for example, are far more stringent than those
    associated with other types of Government lending. RHS
    requirements related to borrower reserves, borrower deposits,
    existing trade lines, qualifying income, and tax transcript
    history would benefit from sensible updates as well. Congress
    and USDA could examine limits in the program's population size
    and geographic parameters.
        Finally, RHS can expand pilot projects and finance a
    broader variety of housing types to match GSE standards,
    including manufactured housing and accessory dwelling unit. RHS
    financing will increase affordable housing options in rural
    areas. The Subcommittee should review the lien payment required
    under the Direct Loan Program and work to ensure that Federal
    funds are provided in a timely manner to serve borrowers
    throughout the entire year.
        Once again, on behalf of all MBA members, I appreciate the
    opportunity to testify, and I also deeply appreciate the USDA's
    ongoing engagement with lenders and other stakeholders. I look
    forward to your questions.
        Chair Smith. Thank you so much.
        We are now going to turn to Members of the Committee for
    questions. Each Member has 5 minutes, and I am going to defer
    to Senator Tester.
        Senator Tester. Well, thank you, Madam Chair, and I want to
    thank all the folks who have testified today. I appreciate your
    testimony.
        Several of you mentioned that the USDA RHS programs were
    valuable but they are underutilized because of limited staff
    and technology. That disparity negatively impacts rural and
    Native communities who rely on this program's resources as some
    of the best and some of the only products designed for rural
    and Native needs.
        So I will ask you, Tonya, and anybody else can jump in
    after Tonya is done: Are there creative solutions to explore
    here, and other than more staff, more technology, which is
    huge, are there any other changes to the programs that you see
    obvious?
        Ms. Plummer. Thank you for the question, Senator. Two
    creative ways that we saw to expand the staffing shortages that
    are at USDA--I think portions of USDA staff in South Dakota are
    functioning at 25 percent of what they were 5 years ago, but
    that was really fixed by the----
        Senator Tester. Say that again. Did you say that the
    staffing today is 25 percent of what it was 5 years ago?
        Ms. Plummer. Correct.
        Senator Tester. OK. So why is that?
        Ms. Plummer. I believe it is because of an underfunding of
    the USDA Rural Housing programs.
        Senator Tester. OK.
        Ms. Plummer. And that is a much layered issue to----
        Senator Tester. No, no, no. I just wondered if that is a
    choice that Congress made or if it is a choice the Agency made.
    It would be interesting to find that out. Keep going. Thanks
    for pointing that out.
        Ms. Plummer. We have experienced the same issues in
    Montana. I think we have partners at the table in Montana who
    very much want to come alongside and do better and just do not
    have the staff. So as an executive director of a CDFI, to run
    deals and scenarios, all I could get was an e-mail of the
    handbook. Not for lack of desire or want, it is just nobody has
    done those programs, nobody knows how to do them in Indian
    Country, and there is nobody to really figure out how to
    facilitate it.
        So we would really encourage leaning into the national
    expansion of Senate Bill 2092 because the Native CDFIs on the
    ground are networked through the Native CDFI network. They are
    networked through strong and growing coalitions in South
    Dakota, Montana, New Mexico, Minnesota. There is strength in
    those numbers there. They have peer-to-peer learning models
    where they can lean into each other for best practices,
    especially when it comes to using outdated technology like the
    GUS system. That is a beast to work with, and as an underwriter
    I struggled with that system as well.
        Senator Tester. OK. Anybody else like to respond to that
    question? Go ahead.
        Ms. Glidden. Thank you, Senator. Minnesota Housing
    Partnership is one of a small number of organizations that has
    provided technical assistance through the Multifamily
    Preservation Technical Assistance Program, and while I do not
    think that that is a full solution to the depth of issues with
    staffing and technology, it is a very important program not
    only for 515s but for others as well. So permanently
    authorizing the MFTA program and increasing those resources
    could be important.
        A second issue I wanted to mention was simplifying
    processes. In the 515 area, I would recommend simplifying the
    transfer process by instituting a two-step transfer, and I can
    go into that more if desired.
        Senator Tester. OK. I have a question for Mr. Battany. You
    talked about RHS's closing response can take up to 10 days.
    What is the standard?
        Mr. Battany. For most lenders, they are delegated for most
    products like FHA, VA, Fannie Mae, and Freddie Mac products. So
    the USDA's requirement that they review the loan to make the
    conditional commitment is somewhat unique. There are some
    private investors that require that, but it is not common for
    Fannie Mae, Freddie Mac, FHA, and VA loans.
        So the process, depending on weekends and timing and staff
    shortages, can be 1 day, 2 days, and sometimes 10 days. So the
    problem is if there is ever a Government shutdown or anything
    that could delay a human's ability to respond, it does slow the
    process down.
        Senator Tester. OK. Could you--and I will say this to Tonya
    because you brought it up. A thing called a subsidy recapture,
    tell me when that is used or why that is used, either one. Or,
    you can do it, Mr. Battany. I do not care, just as long as I
    get an answer.
        Ms. Plummer. The idea is really centered around the concept
    of shared equity and sort of increasing the affordability of
    the home and the entry point, and so by applying the subsidy
    early on in the loan process the rate is drawn down to
    somewhere around 1, 2 percent in order to increase the
    affordability of the home. But that is not a permanent benefit
    because it has to be repaid back in the event that the
    homeowner sells the home or passes away, you know, or ends
    ownership in their hands.
        Senator Tester. I got you.
        Ms. Plummer. But I know one of the pilot CDFIs that are
    part of the national relending pilot, they do not even use it
    because it is just felt as a bitter sting and a bite. It does
    not work in those communities. It discourages the resale of
    that home.
        Senator Tester. Gotcha. OK. Thank you, Madam Chair.
        Thank you. Thank you all.
        Chair Smith. Thank you, Senator Tester.
        Senator Rounds.
        Senator Rounds. Thank you, Madam Chair.
        First, thank you, all of you, for the information that you
    are providing to us, and this has been very helpful already
    just in your opening testimonies. As a rural stakeholder who
    helps build--or, who helps administer USDA programs, I know
    that you have experienced a burdensome process and the lack of
    flexibility that comes with that; you have expressed that.
        Ms. Erickson, I would like to address this question to you.
    How would you like to see USDA increase flexibility for our
    smallest communities in South Dakota to promote uptake of the
    USDA RHS programs?
        Ms. Erickson. There is a variety of things that can be done
    to increase flexibility. There are so many intricacies in loan
    packaging, for instance, that you mentioned. It is difficult
    for the packagers to get to the end product. Small credit
    issues, self-employment, and everything like that takes extra
    time, but the technology to support that would be one step, as
    we have already discussed, and the staffing resources.
        Another thing that we are up against a lot of times is just
    communication. There has been a lack of responsiveness from the
    USDA Loan Servicing Center, which could be improved. We have
    shared loans with Rural Development that have been foreclosed
    and may sit empty for a length of time before they are made
    available for resale, and part of that is due to being able to
    effectively communicate with them. I think if those
    communication lines were improved, we could be more efficient
    and possibly help some of those homebuyers through our HUD
    counselors, with financial education and budgeting, or maybe
    even provide assistance to help bring their loans current.
        There are other flexibility areas like the 504 loan and
    grant program. We often refer our seniors to the grant program,
    and it can be coupled with a loan. Our seniors that are low
    income are very cautious about taking out a loan, and I can
    understand that.
        When we were doing home improvement on a house, a lady was
    making lunch. And I said, oh, how nice. I am sorry to interrupt
    your lunch. Do you ever go out for senior meals?
        And she said that the senior meals are too expensive.
        So when I went back to look at her income, it just was
    Social Security income, and she was trying to keep up her house
    with Social Security income and pay for her utilities,
    medicine, and food. Very, very hard. And they are afraid to
    take out that loan portion.
        So, increase the grant portion would be one recommendation
    that I have, and greater flexibility. Working with both focus
    groups and our communities would be a great start also.
        Senator Rounds. Thank you.
        Mr. Battany, as a USDA lender, you are instrumental in
    getting money into the hands of rural Americans, and you have
    seen the inefficiencies of RHS firsthand. Could you detail for
    the Subcommittee the single most important update you would
    like to see?
        Mr. Battany. My view is the single most important update
    would be to increase funding which would allow RHS to make more
    investments in technology. And much of USDA staff perform
    functions that are very manual in nature in response to the
    inefficiencies in the current system, so the investments in the
    technology would free up staff to be more available to provide
    better communications and service.
        So I would suggest that the investment, or the increased
    investment, in RHS funding for the technology would also pay
    the dividend of improving communications and helping create
    better awareness of the programs and the functions and
    requirements of each program to reduce confusion and create
    more certainty with mortgage lenders and with consumers.
        Senator Rounds. Thank you.
        Ms. Plummer, the 502 relending pilot program has been
    extremely successful in South Dakota, and you made note of it
    earlier. Currently, our Native CDFIs even have waiting lists
    for individuals wanting to participate in the program. How
    would legislation like the Native American Rural Homeownership
    Improvement Act make an impact in States like Montana?
        Ms. Plummer. I think between the tribal communities there I
    think the pipeline was--I cannot remember how--it is immense,
    and I believe there would be immediate access to home ownership
    in those tribal communities. We have been working hard to build
    a Montana Native Home Ownership Coalition, patterned similarly
    after South Dakota, to increase capacity among all those CDFIs,
    to have the systems in place, the training in place, to
    immediately deploy USDA funds as a part of that pilot if it
    were to be passed. So the impact would be very real and
    immediate.
        Senator Rounds. It is really a matter of the CDFIs actually
    understanding how to work in Indian Country and on reservations
    and with tribal trust land, isn't it, and it is a matter of
    understanding the current regional situation?
        Ms. Plummer. They already know their communities. Native
    CDFIs are so close to the problem. They are good at building
    the social and emotional infrastructure. They are good
    counselors. Many times, they understand the complicated land
    processes that USDA staff just stumble over and are intimidated
    by. And so I think the education is actually the other way
    around with USDA staff having a chance to understand how Native
    communities think, live, breathe, and how to work within those
    land systems.
        Senator Rounds. Thank you.
        Thank you, Madam Chair.
        Chair Smith. Thank you, Senator Rounds.
        So in 1963, over 16,000 rural rental properties,
    translating to well over half a million affordable units, have
    been financed through the Rural Housing Service's 515 program.
    And in Minnesota, there are currently about 450 properties, as
    I understand it, with Section 515 mortgages. Residents in these
    properties are making somewhere in the neighborhood of $17,000
    a year, and these households are more likely to be headed by a
    woman and more likely to be headed by a person of color.
        And we know that even more properties--we are going to see
    properties leaving this portfolio soon, a big impact in
    Minnesota because we have been a strong adopter in this
    program, but all over the country.
        So when properties exit the 515 program, they may lose
    rental assistance funding, some properties are no longer
    required to keep rental assistance affordable, and that means
    those residents are kind of, you know, up a tree.
        Ms. Glidden, let me just ask you, so what happens to a
    tenant if they are living in a property where that mortgage
    expires?
        Ms. Glidden. So when the mortgage expires, if that property
    has 521 rental assistance, then that rental assistance also
    goes away from the property. Knowing what happens to the
    tenants is something that we have been trying to dig into more
    deeply. This is also part of our analysis that looked at what
    are other housing--affordable properties in the areas. And what
    we find is that there, frankly, are very few, if any,
    opportunities in many communities in Minnesota for residents to
    stay within community once those rents increase and once the
    mortgage expires, and so those residents are left without a
    home and without the community.
        Chair Smith. Yeah, yeah, they have to leave. Everything is
    up in the air. And as we know, there is such a shortage of
    affordable housing in rural communities. It is not surprising
    that some of those residents end up living in their cars or
    living with family. I mean, it is very, very, very disruptive.
        So let me just ask all of the panel. As we think about this
    large number of 515 properties leaving the program as their
    mortgages mature, what are your best recommendations for how we
    should be addressing this challenge? I just open that question
    up to everybody.
        Ms. Glidden. I will maybe start off. So I had talked a
    little bit earlier in response to a question about technical
    assistance. The reason I mention this is that right now, while
    there is a declining interest in 515 properties from private
    owners and investors, it is mission-driven owners that are
    maintaining strong interest in 515s, community-based owners.
    And so we think that we need to do all we can to assist those
    mission-based owners, those nonprofits, and housing authorities
    in being able to access those properties and maintain them as
    affordable. So technical assistance is one way to assist those
    very small organizations in being able to understand the 515
    transfer process, being able to apply it, being able to manage
    through that system.
        A second item that I had mentioned was simplifying the
    transfer process. Right now, even if you are completely
    committed to trying your best, you have no profit motivation to
    maintain that property as affordable. The transfer process is a
    tremendous process.
        And I know that USDA is open to a two-step transfer
    process. This would be one idea for streamlining the transfer
    process, where you would be able to have a nonprofit owner
    close on the property and then have a second step where they
    would be able to develop a rehab plan and secure the funding
    that is necessary to ensure that property is in the proper
    condition----
        Chair Smith. Because that is--I am sorry to interrupt, but
    that gets at the issue that many of these properties are in
    dire need of being refurbished and repaired and improved so
    that they are decent places for people to live. Is that
    correct?
        Ms. Glidden. Absolutely. So many, if not almost all, of
    these properties will need rehab, will need that assistance,
    which means a need to be able to secure the funding----
        Chair Smith. Right.
        Ms. Glidden. ----to be able to assist those properties.
        Chair Smith. If it was easier to roll over the mortgage for
    that property, refinance it in some ways, you could use that as
    a source of funding for refurbishing the property?
        Ms. Glidden. Yes. But part of another issue is that some of
    the resources that we need to continue to assist with these
    restructurings, the MPR program, are not funded to a level that
    we are able to assist new properties. Right now, they are still
    running through a backlog assisting those properties. And so
    right in this moment, where we need to be helping and assisting
    mission-driven owners to be able to secure ongoing
    affordability of properties, we do not have the resources, and
    we do not have the policy in place to help that take place.
        Chair Smith. Yeah. Thank you very much.
        Senator Moran.
        Senator Moran. Chairwoman, thank you. Thank you and Senator
    Rounds for hosting this hearing, and I thank the panelists for
    being here.
        I am sure I am stating something that is obvious, but there
    is no conversation in a community that does not occur, about
    housing, for--maybe takes 2 or 3 minutes before that becomes
    the topic of conversation if you are talking to an employer, to
    a plant manager, to a chamber of commerce executive, to a
    mayor, to a city manager. The conversations in Kansas revolve
    around this topic plus childcare.
        Let me ask just a few questions first. In today's high
    inflation times, do our housing programs take into account
    those circumstances, or does it become even more difficult to
    solve housing needs with the ever increasing cost of materials
    and rent and the cost of construction?
        Mr. Battany, I see you were shaking your--nodding your head
    with me, so I assume there was an answer there.
        Mr. Battany. Yes, the cost of labor and cost of materials
    are driving up construction prices. One of the solutions that
    is available in the industry, which is not currently used by
    USDA and would be one of my recommendations, are manufactured
    homes. Fannie Mae and Freddie Mac have rolled out new higher
    standards for homes that the trade institutions call them
    CrossMods. And these are homes that are 2 to 3 bedrooms, 2
    bathrooms, 2,000 square feet, that are built to the same
    standards as stick-built, site-built homes.
        I have personally toured these homes. These homes are
    indistinguishable. If you walk through a home with a building
    engineer, you will have a difficult time to know if it was site
    built versus factory-built.
        The benefit of factory-built is you can build them very
    quickly. The homes are built in 10 days in a factory, in a
    controlled, indoor environment, and the cost of construction is
    anywhere from 20 to 30 percent less due to the efficiencies you
    have building onsite and repeating processes.
        And in many rural areas, where workforce housing is a
    challenge or labor is a challenge, both the cost of labor is a
    challenge but also the availability of labor in rural markets,
    to have a home built in a factory that can then be transported,
    installed in a couple months onsite--typically, the modules are
    installed. Then the pitched roofs, garages, and porches are
    built and attached onsite.
        But these homes, for many workforce and rural residents,
    could be a very key part to solve both the lack of housing
    units and the cost of construction.
        Senator Moran. I thank you for your answer. I was not
    certain. Are you saying that there is an impediment toward
    programs' financing allowing that type of factory construction?
        Mr. Battany. Yes. In today's USDA RHS guidelines, there are
    pilot programs in a few States where this can be done, but as a
    standard program parameter, only new construction that is being
    financed at the time can be built. So existing manufactured
    homes are not eligible for the programs, and so if USDA could
    align with Fannie Mae and Freddie Mac standards, for example,
    that would allow more of this housing to flow to this part of
    the market.
        Senator Moran. Is there any justification for the position
    that Rural Development takes on this topic?
        Mr. Battany. I think this is more of a newer item to hit
    the market. I do not know there is necessarily a strong
    argument against it. Historically, some of the older homes did
    not appreciate as well because they were not built to the same
    standards, but if they follow Fannie Mae and Freddie Mac
    guidelines to the same high standards, then there should not be
    any issue with respect to the quality of the homes or their
    value as an investment.
        Senator Moran. Mr. Battany, you indicated something that
    caught my attention, and I heard this yesterday from my own
    Rural Development Director, our State director. It was not--
    well, I do not want to put words in her mouth, but the emphasis
    was on we need money, resources, appropriations for staffing,
    which is different than we need another program or we need to
    fund programs higher. I heard that from some of the witnesses
    today.
        But the ability for USDA to meet the demands is lacking
    because lack of people, lack of personnel. Is that a common
    circumstance, I assume, across the country?
        Mr. Battany. Yes, that is a very widespread feedback from
    lenders who work with USDA. The teams are wonderful, but they
    are just spread thin. And a lot of the things they spend time
    on are manual processes that could be eliminated through
    technology, and they could better spend their time on being
    more responsive on communications, responding to e-mails, being
    more available for phone calls and just helping lenders because
    every lender who does not get helped is a borrower who is
    waiting for an answer. So the improved customer service to
    lenders will flow through to borrowers.
        Senator Moran. Ms. Plummer, would you tell me something I
    probably should already know, but what are the Department of
    Interior BIA programs that are particularly valuable in
    housing, or does the tribal community rely upon USDA?
        Ms. Plummer. Excuse me. I would say the latter. The BIA, I
    believe they have the home improvement program. That is not as
    broadly used as it could be, and it is largely for restoration.
        But in terms of encouraging new development and new
    finance, there are no programs offered by the Bureau of Indian
    Affairs, and so tribal communities lean into either Section 184
    home loans, which historically--it is becoming more and more of
    a conforming product and inaccessible for tribal communities. I
    believe there are 7 percent of HUD 184 loans that actually are
    performed on trust lands, and so there needs to be some work on
    that front.
        For that reason, more have leaned into USDA and the
    programs available there and have been creative about things
    like the relending pilot.
        Senator Moran. Thank you very much.
        Thank you.
        Chair Smith. Thank you, Senator Moran.
        Senator Daines, you are recognized for 5 minutes.
        Senator Daines. Madam Chairman, thank you, as well as to
    Ranking Member Rounds, and thanks to all the witnesses here
    today. It is great to have a Montanan with us as well, a
    special thank you to Ms. Plummer for your willingness to make
    the journey here and to testify as well.
        I hear consistently from our first responders, our
    teachers, other critical workers in Montana that it is almost
    impossible to find homes to rent, let alone buy, that are safe
    and, of course, affordable. In the past 2 years, construction
    times have been protracted by material and worker shortages.
        This is the business I grew up in. My mom and dad were in
    the homebuilding business in the Gallatin Valley since the
    early 1970s. I spent my summers usually working construction
    and building houses. So we have watched this for a long time.
        In our tribal communities, it is especially true. We may
    have as many as 14 people crammed into a single-family home.
    The importance of addressing this shortage cannot be
    overstated. We are going to have to find solutions to help
    Montanans house their families as well as their loved ones.
        As we both know, the cost of construction tends to increase
    exponentially the further a build site is from materials, from
    parts, and from labor sources. I have heard in some tribal
    communities the costs are much, much higher on a per-square-
    foot basis than in more urban areas. Home builders have
    estimated recent lumber price increases alone have added nearly
    $20,000 to the price of an average home.
        Ms. Plummer, could you comment on how inflation has
    affected housing projects in Indian country?
        Ms. Plummer. Sure. Thank you for the question, Senator, and
    first of all, thank you for recognizing the dire need that we
    are experiencing in Indian Country. There is no doubt that
    inflation, I think, has a serious impact on the everyday lives
    of urban, rural, and Native Americans all over the country.
        I believe in tribal communities, especially, it is felt
    more broadly on the development side. There are very few homes
    that exist to finance already. So concentration on the building
    of housing stock is as important as the concentration on
    housing finance. That is difficult with the limited--increase
    of cost in goods and materials and also with a limited task
    force.
        So one thing that we have done to help facilitate improving
    that is work on building a strong Montana Native Homeownership
    Coalition with membership from our Native CDFIs, banks, and
    credit unions, our TDHEs, from every tribal nation across the
    State to come together around solutions.
        We have taken some cues from the South Dakota Native
    Homeownership Coalition and their construction internship
    program that builds the skills of Native workers in their own
    home communities, finds somebody who can sign off on their
    journeyman status so that they can retain employment right at
    home, and then also partners with the Native CDFI to provide
    financial education so that those new workers understand how to
    build their business and become self-employed. So we are really
    looking heavily at facilitating that across the State of
    Montana.
        Senator Daines. Ms. Plummer, thanks for your insights.
        I want to note that if you look back at last spring, in the
    midst of soaring lumber prices and shortages nationwide, lumber
    prices rose about 100 percent. They crested in April at 300
    percent. We all saw that dynamic.
        And by the way, if we look back home in Montana, Ms.
    Plummer, during that same period, our lumber production in
    Montana actually decreased by 11 percent while costs were
    soaring by nearly 300 percent, as our national forests failed
    to meet basic timber harvest targets.
        I will tell you, as a kid growing up, we had 30 active
    sawmills in Montana. Today, we are down to six. We could have
    offset some of these market dynamics had we simply been
    managing our forests, surrounded by millions of acres of
    national forest that get tied up in litigation, and we cannot
    get in there and thing them. It helps a lot of great
    environmental wins by doing so but, importantly, keeping lumber
    prices lower and loggers on the job.
        A lot of attention has been given to housing pressure in
    urban communities, but often rural areas and Indian Country are
    overlooked. Smaller communities have fewer workers. They have
    fewer resources to address their housing needs.
        As you know personally, we have some first-rate community
    colleges and vocational schools right there in Montana. And,
    Ms. Plummer, could you share with us how tribal colleges and 2-
    year colleges are critical to developing this pipeline of
    skilled workers?
        Ms. Plummer. Sure. When we started to look at building a
    coalition, one thing that we did across the State was some
    asset mapping to determine which communities had a strong
    tribal college or community college that we could lean into to
    access their trades programs, to look at facilitating that
    construction internship program and providing employment for
    those folks that graduate right out of the gate. So they are in
    every single tribal community across the State of Montana. And
    just really we have not figured out a way to make that happen,
    but I think there is a lot of potential to make that happen.
        Senator Daines. Great. Well, the need is not going away, so
    go forth. Thank you, Ms. Plummer.
        Chair Smith. Thank you so much, Senator Daines.
        I believe a Member or two is interested in doing a second
    round of questions, and so we will proceed with that. I have
    just one question, and then I believe Senator Moran has a
    question, maybe Senator Rounds.
        I want to just dive back into this issue that we are
    calling decoupling, but it essentially gets at the challenge
    that we have when these 515 mortgages mature, they go away, and
    there is a tie between the rental assistance that could be
    provided to people in that mortgage. So when the mortgage goes
    away, the rental assistance goes away. It is sort of like a
    double whammy of badness for people that are trying to figure
    out how to stay in an affordable home.
        Now there is work being done on this. The President's
    budget in fiscal '23 suggested that Congress decouple the
    rental assistance from the Section 515 loans. Work is happening
    on the Senate Ag Appropriations Committee and, of course, the
    bill that Senator Shaheen and I are working on as well.
        I would just like to turn maybe to Ms. Glidden, and then I
    would love to hear anyone else's comments, if you could just
    talk about why this decoupling of these two programs would be
    beneficial to helping to address one of the challenges we face
    in terms of affordable housing in rural communities.
        Ms. Glidden. Thank you, Senator Smith. So I might just
    start with saying that, you know, we have talked before about
    the mortgage goes away and so that is the support to the
    property for maintaining the rents as affordable. And then when
    the rental assistance goes away, that is both a loss to the
    resident, which is the priority, but it also affects the
    property's ability to maintain as affordable, which also needs
    to be considered when we have so few affordable properties in
    many of these rural communities.
        So with decoupling, this would allow that rental assistance
    product to remain with the unit, and then it would also help
    create an opportunity to create conditions that would ensure
    that that property remains affordable into the future. And I
    will note that that is something that colleagues at other
    national organizations have pointed out is very critical to
    decoupling, from the National Rural Housing Coalition and
    NAIHC, that ensuring that there are some conditions around
    decoupling so that property owners then have those requirements
    to ensure the property is maintained in safe condition, that
    there is a restrictive use agreement. So we want to ensure
    those protections stay in place, but it can be a good way to
    retain some affordability when otherwise it would be
    completely, possibly gone.
        Chair Smith. Thank you.
        Would anyone else like to comment on that? Yes, Ms.
    Plummer.
        Ms. Plummer. I will just add my experience is more in
    single-family housing development and finance, and so I cannot
    speak eloquently to this product. But I do have a codirector,
    Robin, who has worked quite often with Elizabeth Glidden on
    this, and I have heard her discuss these issues. I believe that
    she would support everything that you have said today, and we
    would welcome the chance to follow up with questions for the
    record and additional commentary after today.
        Chair Smith. Thank you very much. I appreciate that, and I
    will look forward to--as we continue to work on this and to
    fine-tune it, we will be sure to rely on all of your expertise.
    Thank you very much.
        Senator Moran.
        Senator Moran. Chairman, thank you. I just did not want to
    be remiss. We have been working, Senator Shaheen and I, in our
    appropriations subcommittee in regard to the Department of
    Commerce and USTR in regard to trade issues, particularly
    tariffs.
        And, Mr. Battany, you may be the most appropriate to ask
    this question. We have been working--we have been trying to get
    the Administration to negotiate a trade agreement with Canada
    in regard to lumber, and then we have the lingering issue of
    tariffs on steel. Could you comment on the expense or cost
    associated with those tariffs and what it means to homebuilding
    today?
        Mr. Battany. Yes. Unquestionably, those increased costs
    have directly and dramatically increased the cost of home
    ownerships, and this indirectly also increases rental costs
    because with inflation in general materials across the board,
    but the specific increases in lumber cost in particular but
    also in steel and other costs. Those components, combined with
    the higher inflation on the labor costs, have resulted in much
    higher cost to construct homes.
        It also gives incentives for builders to build more higher
    end homes and less entry-level homes. And as costs go up, homes
    become more unaffordable. At the same time, interest rates go
    up, and homes become more unaffordable. A person who was an
    aspiring September 26, 2022, homebuyer now has to become a
    renter, and that creates more demand for rental and pushes rent
    prices higher.
        So the increased cost of lumber trickles down through the
    entire ecosystem and impacts both homebuyers and renters in
    terms of higher cost of housing.
        Senator Moran. Thank you.
        Chair Smith. Thank you so much. I believe we have no
    further questions from the Members, so I want to thank all of
    our witnesses for being here today and for providing testimony.
        Before we close, I would like to ask unanimous consent to
    enter statements for the record from the National Rural Housing
    Coalition, the National Housing Law Project, and the Housing
    Assistance Council, without objection. Without objection, so
    ordered.
        For Senators who wish to submit questions for the record,
    those questions are due 1 week from today, which will be
    Tuesday, September 27th.
        For our witnesses, you will have 45 days to respond to any
    questions for the record. Thank you again for that.
        Senator Rounds, I think we have lots of very practical,
    commonsense ideas for ways that this program can be improved to
    work better for rural communities, and I am excited to work
    with you on this.
        Senator Rounds. Thank you, Madam Chair, and I would just
    say to our panelists today, thank you very much for a very
    informative question and answer.
        Chair Smith. With that, this hearing is adjourned.
        [Whereupon, at 3:48 p.m., the hearing was adjourned.]
        [Prepared statements, responses to written questions, and
    additional material supplied for the record follow:]
                     PREPARED STATEMENT OF CHAIR TINA SMITH
        Good afternoon. Sen. Rounds, thank you for working together with me
    on today's hearing, focusing on what we can do to improve access to
    housing in rural communities.
        Thank you to Sen. Shaheen for joining us today as well.
        Small towns and rural places are creative, entrepreneurial,
    diverse, and wonderful places to live, work, and raise a family.
        They produce our food and our energy. They're hubs of manufacturing
    and small business, education, health care, and arts and culture. And,
    when I travel to rural communities in Minnesota, I find hardworking,
    passionate people who love their communities and want to make them even
    better.
        Yet, we know that for many rural communities, the shortage of
    affordable housing is an enormous impediment to attracting new
    businesses, new residents and new talent.
        The reality is, if you don't have a safe, affordable place to live,
    nothing else in your life or your community works. Not your job. Not
    your education. Not your health.
        Housing challenges can be about families trying to find a place to
    live for disabled individuals, or seniors living in overcrowded
    conditions. It could be workers who want to take a job at a grain
    elevator, meat processor or a manufacturing facility but the closest
    home they can afford is 40 miles away.
        One hiring manager, in Minnesota, told me that they spend almost
    half their time helping new employees find housing.
        I know Sen. Rounds has heard similar stories in South Dakota. I'm
    grateful to Senator Rounds that we have been able to work in a
    bipartisan way on this Subcommittee to look for solutions to some of
    these challenges.
        The U.S. Department of Agriculture's Rural Housing Service (RHS),
    which Congress created in 1949, plays an important role in supporting
    the development of single- and multi-family housing in small towns and
    rural places across the United States. RHS is a trusted and well-known
    partner for rural America, which faces unique challenges when it comes
    to developing and financing housing.
        This is our Subcommittee's second hearing focused on rural housing.
    In May, we heard from Xochitl Torres Small, the Under Secretary for
    Rural Development. She runs the Rural Housing Service, and she shared
    several ideas to improve the Rural Housing Service's administrative
    systems and to keep housing affordable for residents of Section 515
    properties as those properties' USDA mortgages mature.
        Following the hearing, Sen. Rounds and I made a public call for
    input on RHS programs, and we received nearly two dozen responses. I
    appreciate all of the thoughtful comments, and we learned a lot from
    them.
        Nearly all of the letters pointed to the importance of fully
    funding the Rural Housing Service, and I certainly agree. Commenters
    also noted the importance of making administrative improvements,
    similar to what we heard from Under Secretary Torres Small.
        We also heard about the need to decouple rental assistance from
    Section 515 mortgages. As properties with these mortgages age and their
    mortgages mature, many low-income families are at risk of unaffordable
    rent increases. Sen. Shaheen and I introduced a bill yesterday to fix
    this problem, and I appreciate her partnership on this issue.
        In addition, we heard about the unique challenges that Native
    communities face in obtaining mortgages, particularly on trust land.
    Sen. Rounds and I have worked together on a bill to expand an
    innovative USDA pilot program to address this issue, and I look forward
    to hearing more from out witnesses about that today.
        Finally, we received interesting suggestions for addressing other
    issues, including:

        ways to update the home repair programs,

        options to prevent foreclosures, which can both help keep
            residents in their homes and may save the USDA money, and

        opportunities to reduce burdens and bureaucratic red tape
            on homeowners and renters--especially very low-income families.

        I look forward to hearing from all of today's witnesses about these
    issues and more, and I hope we can continue the productive discussions
    we've had so far about addressing the housing challenges facing small
    towns and rural places.
                                     ______

                   PREPARED STATEMENT OF SENATOR MIKE ROUNDS
        Thank you, Madam Chair and thank you to our witnesses, specifically
    Ms. Erickson for joining us virtually from Sisseton, South Dakota, for
    offering your stakeholder feedback on how to improve the Rural Housing
    Service.
        In South Dakota, RHS has played a large role in supporting
    affordable home ownership and rental housing for lower income families.
    I believe there are a number of ways we can streamline and modernize
    RHS to more effectively serve rural Americans. Over the last several
    months, our offices have been collecting recommendations from
    stakeholders like those testifying today on ways to achieve this. Their
    proposals have included commonsense reforms such as increasing the
    threshold for mortgage requirements on 504 loans, requiring USDA to
    provide more data transparency along with an annual report on RHS
    programs, improving staffing, updating old IT systems and more.
        Over the last several decades, the number of loans made through the
    Section 502 Guaranteed Loan Program has increased while the number of
    loans made through the Section 502 Direct Loan program has declined.
    The direct loan program, a more expensive program that exposes
    taxpayers to greater risk, was failing to reach communities, more
    specifically members of tribal communities, in a meaningful way. In
    order to better serve Native American communities, USDA launched a 502-
    lending pilot program in 2018 where USDA partnered with Native
    Community Development Financial Institutions to help Native American
    families realize that dream of home ownership. I look forward to
    hearing Ms. Erickson discuss the successes of that pilot program in
    South Dakota.
        Although the pilot program was successful, it has not yet been
    expanded. The results of a 2022 National Rural Housing Coalition survey
    of organizations working with RHS on administering the 502 Direct
    Program demonstrates how broken the program remains. The survey found
    that there was a wide variation of how section 502 loans were
    administered, there was inconsistent staffing of loan applications and
    loan processing was often delayed--sometimes stretching to 70 days or
    longer. That's why, as we look to make updates to RHS, I think it
    important to include the bill Chairwoman Smith and I have partnered on
    to expand the 502-lending pilot program. We should be promoting
    innovative strategies like this that utilize public-private
    partnerships to make certain funds reach the communities that really
    need them. We will also be looking at ways to streamline regulatory
    requirements for programs and increase flexibility for the smallest
    communities, as cumbersome processes have deterred nonprofits from
    utilizing programs.
        In that vein, staffing and IT upgrades are imperative as we
    evaluate how to make RHS as effective as possible. RHS is using
    software that, in some cases, is nearly 25 years old. The outdated
    technology can delay applications from prospective renters and buyers
    and scare away prospective landlords that are interested in utilizing
    RHS programs for their properties. As a USDA lender, I'm interested in
    hearing Mr. Battany's perspective on ways to upgrade processes.
        Thank you again to all of our witnesses for being here today and I
    look forward to the conversation.
                                     ______

                    PREPARED STATEMENT OF ELIZABETH GLIDDEN
            Deputy Executive Director, Minnesota Housing Partnership
                               September 20, 2022
    Introduction
        Chairwoman Smith and Members of the Subcommittee. Thank you for the
    opportunity to testify regarding rural housing issues. My name is
    Elizabeth Glidden, and I am the Deputy Executive Director of Minnesota
    Housing Partnership or MHP. MHP is a nonprofit organization that
    advocates for equitable housing policy, produces data informed research
    to inform solutions, and delivers community development services across
    the United States.
        We specialize in serving rural communities and Native Nations with
    programs such as our Housing Institute, Native Community Development
    Institute, Emerging Developer Initiative, and Strengthening Rural
    Communities. In the past year alone, we have provided direct technical
    assistance to 36 rural communities including 14 Native Nations. In
    addition, we prioritize rural issues with original research and public
    policy solutions, including as a board member of the National Rural
    Housing Coalition, an active member of the Rural Preservation Working
    Group convened by the Housing Assistance Council, and by convening
    community-based rural developers to develop administrative and public
    policy recommendations for rural housing programs.
    Rural Housing Issues in Minnesota
        Rural communities are experiencing a housing affordability crisis.
    In Greater Minnesota (the geography outside of the seven-county Twin
    Cities metropolitan area), 24 percent of households are cost burdened,
    or paying more than 30 percent of their monthly income on housing
    costs, a number that increases to 41 percent for rural renter
    households. Two-thirds of renter households in Greater Minnesota earn
    less than $50,000 a year, which is under 50 percent of the State's area
    median income.
        In Minnesota, rural residents have fewer housing options and are
    more likely to live in substandard housing than their urban peers, due
    to older housing stock, and less compliance and enforcement of codes.
    More than 40 percent of homes in Greater Minnesota are over 50 years
    old, built prior to 1970. New construction permits remain low in many
    rural areas, with some communities going years without a new
    multifamily housing project.
    Importance of 515 properties
        Minnesota was an early and enthusiastic adopter of the USDA's
    Section 515 program, which provides low interest loans for rental homes
    for very low- and low-income households. In return for low-cost
    financing, borrowers of Section 515 loans are restricted in the amount
    of rent they can charge tenants, with 30-year loans amortized over 50
    years. When loans mature, or properties otherwise exit the 515 program,
    the owner is no longer required to keep rents affordable to any
    particular income, which can result in displacement and housing
    insecurity for current residents and a loss of available housing to
    future residents.
        Section 515 properties make up a substantial portion of the
    affordable rental options for Minnesota's rural households, with such
    properties located in 82 of Minnesota's 87 counties. Of the total
    subsidized housing units in Greater Minnesota, Section 515 homes made
    up almost 19 percent of that total in 2020. That percentage is higher
    in some areas of Minnesota, as 515 units make up more than 45 percent
    of the available affordable homes in multiple counties. A Section 515
    property may provide the only affordable housing options within a
    community or for miles around.
        Minnesota's 515 properties are smaller in size than the U.S.
    average, at 21 units compared to 31, indicating that policy solutions
    must be flexible to address variations across the country in the 515
    portfolio. The Section 515 program is unique in rural communities in
    that it provides very deep subsidies, especially when combined with
    rental assistance, which is the case for a super majority of units. The
    average annual income of Minnesota's Section 515 residents utilizing
    rental assistance is less than $12,000. Forty percent of Midwestern 515
    properties are designated for seniors, higher than in other areas of
    the U.S., although the number of units designated for families
    continues to increase. Nationally and in Minnesota, we are not meeting
    the market need for homes affordable to extremely low-income residents,
    especially in rural communities, so preserving the Section 515 homes we
    have is even more critical to the housing stability of lowest income
    rural residents.

    Section 515 Maturing Mortgages and Property Exits at a Crisis for Rural
            Households
        The Midwest, and Minnesota, will see much of its Section 515
    properties mature out of the program earlier than the U.S. overall. The
    peak of mortgage maturation for Section 515 properties in Midwest
    States is 2030, about 10 years before the peak of mortgage maturations
    for the United States. According to the Housing Assistance Council
    (HAC), Minnesota currently leads the Nation in the number of properties
    exiting the program. Between 2016 and 2021, over 80 properties, with
    1,153 units, exited the 515 program, representing more than one-tenth
    of all Section 515 properties in Minnesota. Our loss of affordable
    rural homes will continue to accelerate in the coming years.
        In addition to mortgage maturation, the decrease in Section 515
    housing is impacted by factors such as owners prepaying their
    mortgages, owners selling outside of the USDA transfer process to avoid
    it, and deteriorating property condition such that rehab may cost more
    than property value.
    Decouple Rental Assistance From Mortgages, With Conditions
        Section 515 rental housing and 514/516 farmworker housing
    properties are frequently coupled with Section 521 Rental Assistance,
    ensuring these homes are affordable to our lowest income rural
    residents. In Minnesota 96 percent of Section 515 properties have at
    least one unit with rental assistance; and 68 percent of all units have
    rental assistance. Under current law, when a mortgage is paid off a
    Section 515 or 514/516 property loses its Section 521 Rental
    Assistance. When rental assistance is removed from a property,
    residents may face displacement, housing instability, and loss of
    community. Also, a property may also face negative financial
    consequences from the loss of rental assistance.
        Decoupling the mortgage from rental assistance is a policy solution
    that can support continued housing stability for rural residents, as
    USDA preservation resources are limited, by allowing rental assistance
    to continue at a property that no longer has a qualifying mortgage. As
    properties in States like Minnesota are currently facing a high number
    of mortgage maturations and other exits, this is an option that needs
    serious consideration.
        We agree with our colleagues at the National Rural Housing
    Coalition, Housing Assistance Council, and others that decoupling
    should be paired with increased funding for USDA's Rural Housing
    Service programs, such as the Multifamily Preservation and
    Revitalization Program (MPR) and 515 program, and that implementation
    conditions should be included with any program change. We support
    provisions in S. 4762 (A bill to establish a permanent rural housing
    preservation and revitalization program, and for other purposes) and
    H.R. 1728 (Strategy and Investment in Rural Housing Preservation Act),
    which would require properties seeking to decouple to:

        Sign a restrictive use agreement and multiyear rental
            assistance contract, preferably for 20 years

        Demonstrate that they have tried to access other
            preservation funding before pursuing decoupling as a last
            resort

        Agree to maintain the housing as decent, safe, and sanitary
            and in conformity with provisions established in Title V of the
            Housing Act
    Funding Necessary for Preservation and Program Operations
        Past underinvestment in USDA's Rural Housing programs has increased
    the housing challenges faced by rural residents. Due to lack of
    resources, USDA has not offered loans for new construction of
    multifamily rental housing in over a decade, and there is a backlog of
    approximately 200 applications for rental preservation resources, so
    that projects in need of these scarce resources must continue to delay
    preservation activities if they can't identify alternative sources.
    Recent estimates shared by the USDA identify that $30 billion is needed
    over the next 30 years to preserve 80 percent of the existing section
    515 portfolio.
        We are pleased that the fiscal year 2023 budget includes increases
    to many rural housing programs, including increases for 515's and to
    the Multifamily Preservation and Revitalization Program (MPR). We
    appreciated the Presidents' recommended increase to USDA rural housing
    programs, and hope this is the track we take, but more investments will
    be needed to preserve rental housing and ensure rental assistance
    remains accessible. We need these investments sufficiently to support
    healthy rural communities, and preserve valuable USDA financed assets.
        We were also pleased that the Inflation Reduction Act included $100
    million for USDA Rural Development administrative costs. We urge the
    Committee to encourage USDA to allocate a significant share of those
    funds for the Rural Housing Service to support its field structure and
    upgrade its information technology.
    Incentivize Transfers to Mission-Focused Nonprofits
        MHP is one of a small number of organizations that have provided
    technical assistance pursuant to the Multifamily Preservation Technical
    Assistance (MFTA) program. This program provides competitive grants to
    eligible organizations to provide technical assistance and other
    services to support preservation of affordable homes through the
    transfer of Section 515 properties from current owners to nonprofits or
    public housing authorities.
        Through a 2018 grant, MHP assisted four rural housing and community
    development authorities with the RD transfer process, preserving 82
    units as affordable properties in Minnesota and Illinois, and helped
    515 transfer property owners secure 18\1/2\ million dollars in loans,
    low-income housing tax credits, and loan funds from bonds. Through the
    term of the grant, MHP worked on preservation strategies for a total
    330 Section 515 units. MHP, in partnership with Enterprise Community
    Partners, will continue supporting nonprofit transfers with a recent
    award of USDA technical assistance grant funds, with MHP serving 12
    central region States.
        Many of the organizations MHP has supported are very small rural
    nonprofits or housing authorities that are new to owning 515
    properties, new to working with USDA, new to USDA's complex transfer
    process, and some are even new to multifamily development and ownership
    generally. While there is declining interest in 515 ownership from
    private owners and investors, mission driven owners maintain a strong
    interest in the 515 program as one of the few affordable housing
    resources available to rural residents. To continue to incentivize
    nonprofit transfers we recommend:

        Permanently authorize the MFTA program. Today, MFTA is
            funded through appropriations, but not authorized.
            Authorization will ensure the program remains stably funded and
            is permanent part of the preservation tools of Rural Housing
            Service.

        Simplify the transfer process by instituting a two-step
            transfer. This would allow a transfer to a nonprofit owner to
            close, with time then allowed to develop a rehab plan and
            funding. Today, a buyer must have prior to closing funding for
            all capital needs as determined by a Capital Needs Assessment
            and any adjusted reserve requirement. This process change would
            eliminate a critical administrative barrier to preservation,
            one that creates sometimes insurmountable burden to small
            community-based nonprofits.

        Set aside funding for smaller organizations in the Section
            515 and MPR programs.
    Extend Section 521 Rental Assistance
        The American Rescue Plan Act included $100 million for Section 521
    rental assistance for previously unassisted units and households,
    allowing the USDA's Rural Housing Service to extend rental assistance
    coverage to 27,000 units in 3,700 properties. This funding, which is
    set to run out at the end of fiscal year 2022, ensures housing
    stability for tens of thousands of rural residents and has helped to
    stabilize the longterm preservation needs of the fragile USDA
    multifamily portfolio. Removing rental assistance from these units will
    create tremendous hardship for the households they support today, as
    well as hastening the deterioration of USDA properties--both
    circumstances we cannot afford.
        Thank you for the opportunity to address the Committee. I look
    forward to any comments or questions the Committee may have.
    References
    MHP's State of the State's Housing 2021, https://mhponline.org/state-
        of-the-states-housing-2021/.
    515 Properties in Minnesota: Preserving Affordable Rental Properties in
        Rural Communities, https://mhponline.org/515-properties-in-
        minnesota-preserving-affordable-rental-housing-in-rural-
        communities/.
    An Update on Maturing Mortgages in USDA's Section 515 Rural Rental
        Housing Program (HAC 2022), https://ruralhome.org/update-maturing-
        mortgages-usda-section-515-rural-rental-housing-program/.
                                     ______

                     PREPARED STATEMENT OF MARCIA ERICKSON
                             CEO, GROW South Dakota
                               September 20, 2022
    Introduction
        Thank you, Chairwoman Smith, Ranking Member Rounds, and Members of
    the Subcommittee. I am Marcia Erickson, Chief Executive Officer for
    GROW South Dakota. Thank you for the opportunity to provide testimony
    on Examining the U.S. Department of Agriculture's Rural Housing
    Service: Stakeholder Perspectives.
        I started my career over 30 years ago working at GROW South Dakota
    and have been the Chief Executive Officer for more than half of that
    time. I carry a Master of Science Degree in Community Economic
    Development from Southern New Hampshire University. I am also a
    graduate of Achieving Excellence in Community Development from
    Harvard's Kennedy School of Government. Some of my current affiliations
    are National NeighborWorks Association (NNA) Board President, Rural
    Local Initiative Support Corporation (Rural LISC) Rural Advisory
    Committee, Small Business Development Center Advisory Board (South
    Dakota), South Dakota Community Action Partnership President, and
    NeighborWorks America Rural Advisory Committee. Past affiliations
    include the Chair of the Federal Home Loan Bank of Des Moines Advisory
    Council, Langford Community Foundation Advisory Board Member and
    Founder, and Marshall County Healthcare Board Chair.
        My testimony draws on these experiences and a diverse set of
    programs delivered by GROW South Dakota. GROW South Dakota is a
    statewide organization that administers several Federal, State, and
    local programs through three separate private nonprofit organizations
    under our GROW South Dakota branding umbrella. Our organization assists
    South Dakota residents and communities in community, housing, and
    economic development. GROW South Dakota has two certified Community
    Development Financial Institutions (CDFIs) within our purview. We also
    are a designated Community Action Agency, a partner of Rural LISC, and
    an exemplary rated member of NeighborWorks America. Together with our
    fellow South Dakota NeighborWorks organizations, in 2021 we leveraged
    an additional $66 in public and private investment for every $1 of
    NeighborWorks America grant funding awarded to organizations in our
    State. I share the Subcommittee's perspective that the current state of
    the housing programs offered by USDA Rural Housing Services (RHS) is
    crucial to rural communities across the country, yet challenges to the
    successful implementation of these programs remain.
        I have worked with both the National NeighborWorks Association, the
    trade association representing NeighborWorks affiliate organizations,
    and Rural LISC to survey organizations across the Nation to gather
    recommendations on improving USDA RHS programs and operations. These
    surveys found that community-based organizations consider RHS resources
    vital for their affordable housing and community development work.
    Respondents also reported that USDA RHS needs additional staffing and
    resources to oversee and administer their programs.
    Section 502 Direct Loan Program
        The 502 Direct Loan Program is a great option and asset for rural
    families to secure an affordable mortgage. This program allows USDA to
    provide single-family direct housing loans in rural areas to eligible
    low- and very-low-income applicants who are unable to obtain credit
    elsewhere. The 502 Direct Loan Program provides decent, safe and
    sanitary single-family housing in eligible rural areas by providing
    payment assistance to increase an applicant's repayment ability.
    Payment assistance is a type of subsidy that reduces mortgage payments,
    easing the financial burden on the household. The amount of assistance
    is determined by the adjusted family income. Borrowers are required to
    repay all or a portion of the payment subsidy received over the life of
    the loan when the title to the property transfers or the borrower is no
    longer living in the dwelling. \1\
    ---------------------------------------------------------------------------
         \1\ U.S. Department of Agriculture Rural Development. Single
    Family Housing Direct Home Loans. n.d. 11 September 2022. https://
    www.rd.usda.gov/programs-services/single-family-housing-programs/
    single-family-housing-direct-home-loans
    ---------------------------------------------------------------------------
        GROW South Dakota recommends relaxing or eliminating the repayment
    of subsidies under the 502 Direct Loan Program. The subsidy payback at
    the end of the amortization can negatively impact the ability of low-
    income families to gain generational wealth. According to CNBC, in
    2019, homeowners in the U.S. had a median net worth of $255,000, while
    renters had a net worth of just $6,300. \2\
    ---------------------------------------------------------------------------
         \2\ CNBC. Here's the average net worth of homeowners and renters.
    24 August 2021. 11 September 2022. https://www.cnbc.com/select/average-
    net-worth-homeowners-renters
    ---------------------------------------------------------------------------
        The interest rate of the 502 Direct Loan Program can also increase
    each year based on household income increases. This can be problematic.
    If a low-income homeowner receives a pay increase, their loan payment
    becomes higher, making it less advantageous to seek career development
    or other job advancement opportunities. We recommend examining both the
    subsidy payback and considering adjusting the increments on increases
    of income to a higher level.
        In addition, the length of time for the direct home loan approval
    process can be discouraging to potential low-income homebuyers. A
    shortened application process, staffing levels sufficient to address
    the need, and improved technology would greatly improve the Section 502
    Direct Loan Program and ultimately serve more rural families.
    Native American Rural Homeownership Improvement Act
        GROW South Dakota appreciates and applauds the leadership of
    Senator Rounds and Senator Smith in introducing the Native American
    Rural Homeownership Improvement Act (S. 2092). This legislation will
    expand an existing USDA 502 Direct Native Relending Program which
    allows the USDA to partner with Native CDFIs, informed by a successful
    demonstration implemented by two Native CDFIs in South Dakota--Four
    Bands Community Fund on the Cheyenne River Indian Reservation and
    Mazaska Owecaso Otipi Financial on the Pine Ridge Reservation.
        This pilot made Native CDFIs eligible borrowers under the Section
    502 Direct Loan Program, allowing these entities to relend to families
    for the rehabilitation, construction, and acquisition of affordable
    housing on trust land. Native CDFIs throughout the country work daily
    in their communities and have the background and experience needed to
    close first mortgage loans with Native borrowers. Their administration
    of these funds will improve the deployment of the 502 loan funds to
    assist a greater number of Native families and households. This is a
    prime example of a Federal program that works, should be expanded, and
    be permanently authorized. GROW South Dakota supports the passage of
    this bipartisan legislation, as well as the inclusion of annual funding
    for these purposes beginning in the Fiscal Year 2023 appropriations
    bill.
        Providing this authority for Native CDFIs to lend Section 502 loan
    funds is a similar model to USDA Rural Development's Intermediary
    Relending Program (IRP), which has been a successful business lending
    program for many years. The IRP program provides loans to local
    intermediaries to re-lend to businesses. This is an efficient and
    effective method to deliver essential USDA resources to local economies
    to create and retain jobs. We believe that delegating more
    responsibilities to mission-based lenders such as CDFIs is an important
    way for USDA to meet its mission of serving low-income families in
    often hard-to-serve small communities.
        Finally, the responsiveness of USDA's loan servicing center could
    be improved and enhanced. Foreclosed homes by USDA Rural Development
    may sit empty for significant lengths of time before they are made
    available for resale due to the inability of partners to effectively
    communicate with the loan servicing center. If communication lines were
    improved, GROW South Dakota could also be more efficient and successful
    in helping homeowners with financial education and possibly providing
    assistance to bring their loans current.
    Section 515 Rural Rental Housing Program
        For many rural communities, the Section 515 Rural Rental Housing
    Program provides the only decent and affordable rental housing in the
    community. This program provides necessary rental housing options for
    low-income households. Tenants in Section 515 properties have an annual
    average income of only $14,6653, with many units occupied by seniors
    and people with disabilities. \3\
    ---------------------------------------------------------------------------
         \3\ United States Department of Agriculture Rural Development.
    Results of the 2021 Multi-Family Housing Annual Fair Housing Occupancy
    Report. 12 May 2022. 18 September 2022. https://www.rd.usda.gov/sites/
    default/files/RDUL-MFHreport-0.pdf
    ---------------------------------------------------------------------------
        According to Mills Property Management--a property management
    contractor with GROW South Dakota--reduced USDA staffing and a
    reorganization to more regional offices have lengthened response times
    and led to processing delays over the last few years. USDA servicing
    agents have become overloaded and unable to respond to questions,
    reserve for replacement requests, conduct budget approvals, and
    complete other programmatic tasks in a timely manner. \4\ These
    communication delays have also contributed to the transfer of unused
    Section 521 rental assistance out of the State, hurting small-town
    rural properties in our communities as these resources are vital for
    preserving property affordability and ensuring tenants are not cost-
    burdened. We support increased staffing resources for USDA, additional
    Section 521 Rental Assistance funding, and the full renewal of existing
    resources, including those provided in the American Rescue Plan.
    ---------------------------------------------------------------------------
         \4\ Lamfers, Jessica. Mills Property Management Finance Director
    Maureen Nelson. 13 September 2022. Email.
    ---------------------------------------------------------------------------
        Many Section 515 multifamily projects are in need of additional
    repairs and major renovations due to deferred maintenance. We support
    increased resources for the Multifamily Preservation and Revitalization
    Program (MPR) since it provides USDA the ability to defer existing
    loans and provide ``soft second'' loans and grants.
        Projects in rural communities are not only in need of structural
    capital needs. Projects that are over 30-40 years old are in
    competition with newly constructed units that have amenities such as
    dishwashers, in-unit washers/dryers, garages, and updated security
    systems. Some of these quality-of-life items require a full renovation
    of the USDA Rural Development 515 projects in order to be considered.
        When an owner considers additional financing for 515 properties for
    substantial renovation in the form of a loan, it is difficult to
    finance as the amount of rent allowed is limited. If a loan is approved
    with an increase in rent, the USDA Rural Development subsidy typically
    will be increased to offset the difference between the tenant's ability
    to pay only 30 percent of their income and the higher rent. In essence,
    the subsidy may be assisting with making the loan payment. If USDA
    provides a loan to the project and also provides an increase in subsidy
    due to increased rent, it may be more effective and efficient to
    provide the project grant funding.
        Appraisals that are necessary when considering USDA Rural
    Development or third-party loans are an added expense to the project.
    While USDA Rural Development may consider the tax-assessed value of a
    property, it can be difficult to approve if the valuation is low. In
    rural areas, it is challenging for the property to meet the appraised
    value after renovation when taking into consideration the additional
    and existing debt of the property. GROW South Dakota would support
    creating a capital pool for experienced nonprofits in the lending field
    to finance Section 515 projects requiring renovations and to support
    the preservation of these properties. Nonprofits have greater
    regulatory flexibility with lending requirements and can serve as a
    conduit to fill this void. Congress should consider providing
    appropriations for the USDA Multifamily Housing Preservation Loan Fund
    program, which previously provided support through a delegated lending
    structure.
        Finally, for 515 projects, USDA Rural Development properties are
    difficult to transfer to new ownership due to prepayment debt covenants
    on the project. Potential buyers interested in affordable multifamily
    housing solutions may be forced to assume USDA Rural Development debt
    in order to maintain access to subsidies. GROW South Dakota welcomes
    any legislative intervention available to ease the burden from
    nonprofits during these difficult transfers. Access to subsidies
    continues to be critical for nonprofits like GROW South Dakota to serve
    our communities by providing and preserving affordable multifamily
    units. Nonprofits that own 515 projects also have limited funding and
    revenue to complete the necessary updates for deferred maintenance.
    Because of this, these organizations are being forced to sell projects
    to private parties who remove the units from the USDA Rural Development
    program and increase rents.
    504 Single Family Repair Loans and Grants
        The staff of GROW South Dakota work daily in our rural communities
    and see firsthand the need for home repairs. When driving through a
    rural community, it is easy to see the need for shingles and siding
    from property to property, but there is also a need for health and
    safety issues that may be causing risks inside the home. Further, when
    GROW South Dakota has peer-to-peer meetings with groups and
    organizations deteriorating housing is always at the forefront of the
    discussions. This is clearly displayed in our organization, as GROW
    South Dakota has 151 families on our waitlist pending home
    improvements, and unfortunately, our funding is limited to address
    these needs.
        The USDA 504 program provides direct loans and/or grant funds to
    very low-income applicants to repair their homes. GROW South Dakota
    often refers homeowners to the USDA 504 program. However, many of our
    low-income clients looking for home improvement assistance are not
    comfortable taking out a loan, even with the very favorable interest
    rate. This program would benefit from greater regulatory flexibility
    and an increase in the grant funds per household. This grant currently
    allows a maximum grant award of $10,000 \5\ for those over 62 and with
    very-low income. GROW South Dakota's home improvement project costs
    have increased beyond this award ceiling, even for one major
    improvement, such as shingling, while many homes need more than one
    home repair item completed. GROW South Dakota supports increasing the
    total grant funds awarded to households, expanding the eligibility of
    grant recipients and the use of funds, and raising Average Median
    Income eligibility limits. With rising repair costs, broader
    eligibility flexibilities, and higher awards per household, rural
    residents will have better access to funds for needed home repairs.
    ---------------------------------------------------------------------------
         \5\ USDA Rural Dvelopment. ``Together, America Prospers''. n.d.
    Single Family Housing Repair Loans and Grants. 19 September 2022.
    https://www.rd.usda.gov/sites/default/files/508-rd-fs-rhs-
    sfh504homerepair.pdf
    ---------------------------------------------------------------------------
    Housing Preservation Grant (HPG)
        The HPG program helps to repair or provide rehabilitation of
    housing owned by low-income rural households. The USDA Housing
    Preservation Grant (HPG) is both complex and difficult to administer.
    Reducing regulatory barriers from the grant application stage to the
    assistance provided to low-income families will increase the program's
    impact.
        During the application stage, GROW South Dakota asks for the public
    comment process to be removed from the HPG process. The 15-day comment
    period window is often shortened by the notice of available funding
    listings being close to the submission date. Although we have not
    administered this program for some time, we never received a public
    comment as a result of this requirement, and it has only added to our
    administrative burden in issuing this program.
        The HPG program also requires the State Housing Preservation
    Offices (SHPOs) to review and approve preservation activities, such as
    replacing windows, while other Federal programs such as the Department
    of Energy's Weatherization Assistance Program have negotiated
    streamlined processes with little or no consultation with the SHPO to
    comply with the National Historic Preservation Act. \6\ USDA Rural
    Development would further its impact under HPG by modeling the
    Department of Energy's streamlined process for review and approval.
    Therefore, we recommend Congress expand resources for HPG since these
    activities are needed in our communities while also incorporating
    administrative reforms to increase the program's impact.
    ---------------------------------------------------------------------------
         \6\ Office of Energy Efficiency & Renewable Energy. Historic
    Preservation--Executed Programmatic Agreements. n.d. 18 September 2022.
    https://www.energy.gov/eere/wipo/historic-preservation-executed-
    programmatic-agreements
    ---------------------------------------------------------------------------
    Rural Community Development Initiative
        The Rural Community Development Initiative (RCDI) is the only
    specific capacity-building program offered through USDA's RD Programs.
    This program helps scale the ability of nonprofits to further their
    affordable housing and community development work in rural areas. GROW
    South Dakota recommends changing the RCDI grant scoring on the median
    household income for the communities where the recipients are
    physically located. \7\ Many times, local partnering development groups
    or recipients are physically located in an area where the median
    household income levels are higher than allowed for scoring the maximum
    points in the grant application, but they are serving communities that
    are less than or equal to 70 percent of the State or national median
    household income. This change would allow RCDI resources to better
    reach all low-income communities. We also support increased funding for
    RCDI.
    ---------------------------------------------------------------------------
         \7\ Department of Agriculture. FR Vol. 87. 8 February 2022. 18
    September 2022. https://www.govinfo.gov/content/pkg/FR-2022-02-08/pdf/
    2022-02624.pdf
    ---------------------------------------------------------------------------
    Tribal Trust Land Homeownership Act
        The South Dakota Native Homeownership Coalition is a collaborative
    group of key agencies dedicated to increasing home ownership
    opportunities for Native Americans in the State of South Dakota. GROW
    South Dakota has worked closely with the South Dakota Native
    Homeownership Coalition since its inception, initially securing and
    administering a USDA RCDI grant to help set roots for this successful
    coalition. However, home ownership continues to be a major challenge on
    trust land.
        Mortgage lending on Tribal Trust and Restricted Land is a challenge
    to home ownership in part caused by delays in the processing of title
    and mortgage-related documents by the Department of Interior Bureau of
    Indian Affairs (BIA). The loans involving property on trust land must
    be reviewed and processed by the BIA before the mortgage can be
    finalized and guaranteed by the relevant Federal agency.
        The unintended consequences of these delays have resulted in large
    financial institutions exiting this market, loss of capital flowing
    into Tribal Communities, Tribal members with homesite leases opting for
    higher-cost chattel loans, frustration by lenders needing to refresh
    documents due to time delays, and tribal populations not able to access
    affordable mortgage products.
        To the BIA's credit over the past three years, they have made
    mortgages a priority in their title work and have created an Indian
    Affairs Mortgage Handbook to standardize mortgage package processing
    across their 12 Regions. The Handbook is a step in the right direction
    as it provides guidance related to timelines, but more work must be
    done to ensure the BIA adheres to its timelines. Given the disparities
    in obtaining access to home loans on trust land compared to fee simple,
    we support the Tribal Trust Land Homeownership Act (S. 3381). This bill
    would codify the mortgage document processing times included in the
    Mortgage Handbook, promote better communication between the BIA and the
    lending industry, and require the GAO to report on the BIAs efforts at
    digitizing documents for the purpose of streamlining and expediting the
    completion of mortgage packages for residential mortgages on trust
    land.
        This legislation is of critical importance as we collectively
    strive to provide Native Americans wishing to live on their land the
    same access to home loans available to any American citizen purchasing
    or renovating their home on fee simple lands. GROW South Dakota
    appreciates Senators Thune, Smith, Rounds, and Tester for their
    leadership in introducing this legislation to address this need.
    Other
        As a nonprofit CDFI partnering with USDA Rural Development through
    several programs, flexible program design and capital to address a
    variety of rural affordable housing and community development remain a
    core need. When local leaders have the resources, along with effective
    regulations informed by community practitioners, we can make
    substantial progress in serving rural households. GROW South Dakota
    recognizes that Federal funding needs parameters and grantees require
    accountability, yet burdensome regulations often hinder our progress in
    delivering critical assistance. I have seen that type of funding, I
    have worked with that type of funding, and the cost to administer such
    programs sometimes exceeds the value. I applaud the efforts being made
    in Congress to increase resources for USDA RHS and to ensure that
    programs are structured so that CDFIs and other recipients can use them
    flexibly to meet local needs.
    Summary
        GROW South Dakota's aim is to help find solutions together with our
    community members to address the housing problems we face and put
    forward comprehensive, implementable solutions using a unified voice.
    However, we recognize each community has different needs and
    strengths--effective policy does not always mean one-size-fits-all, but
    we do know that housing impacts every single community. This is where
    we start.
        Thank you for working on creating solutions in a bipartisan manner
    and for looking to stakeholders like myself and my fellow witnesses to
    inform those solutions. I look forward to working with each of you to
    promote legislation that will change the future of housing and our
    families across the State and the Nation. Thank you for your time and I
    look forward to answering any questions you may have.
                                     ______

                      PREPARED STATEMENT OF TONYA PLUMMER
       Director, Native American Housing Programs, Enterprise Community
                                    Partners
                               September 20, 2022
        Chair Smith, Ranking Member Rounds, and Members of the Committee,
    thank you for the opportunity to share perspectives on the USDA's Rural
    Housing Service (RHS) with you today.
        My name is Tonya Plummer. I am an enrolled tribal member of
    Assiniboine, Sioux and Cree heritage with roots in the Sisseton
    Wahpeton Sioux Tribe of South Dakota and the Fort Belknap Indian
    Community in Montana. Early in my career I gained several years of
    experience in mortgage banking, working all sides of the lending
    process, ending as an underwriter, and working deals with USDA loans in
    17 Western States with over 70 branch offices. It has been a challenge
    and a joy to apply that experience to help create home ownership
    opportunities for tribal members living within the bounds of the
    reservation on trust lands. I stepped away from mortgage banking to
    start and direct a Native CDFI focused on home ownership before coming
    to Enterprise Community Partners, where I'm focused on expanding their
    work on affordable housing and community development in tribal
    communities across the country.
        Enterprise is a national nonprofit working to make home and
    community places of pride, power and belonging for all. In order to
    create that change, we draw on our strength as an end-to-end housing
    platform, providing programmatic and advisory services, capital and
    community development under one roof. We advocate on a nonpartisan
    basis for sound public policy at every level of Government. We develop
    and deploy programs and support community organizations on the ground
    nationwide, in urban, suburban and rural areas. We invest capital to
    build and preserve rental homes, and we own and operate 13,000
    apartments and provide resident services for 22,000 people. In short,
    our work contributes to thriving, supportive and equitable communities
    that prioritize safe, stable, and affordable housing options.
        Over the past 40 years, Enterprise has collaborated with thousands
    of local partners to build and preserve 873,000 affordable homes,
    invested $54 billion across all 50 States and improved millions of
    lives. Our strategic priorities are advancing racial equity, building
    climate resilience and upward mobility and creating and preserving
    housing people can afford.
        Enterprise's Tribal Nations and Rural Communities Team has sought
    to support safe, decent, and culturally appropriate housing on tribal
    lands and rural communities since 1997. Enterprise's commitment to
    rural and tribal communities is deep: over the last 20 years Enterprise
    has invested more than $990 million in grants, loans and equity, and
    developed more than 16,000 affordable homes in rural communities
    nationwide. Our team offers technical assistance, trainings, peer
    learning sessions, and other capacity building services to expand
    access to home ownership opportunities and develop or preserve
    affordable rural rental homes.
        Much of this work is supported by Federal contracts through HUD's
    Rural Housing and Economic Development program, USDA's Rural Community
    Development Program and the USDA 515 TA Program, for which we have just
    been awarded $1.4 million in contracts.
        In advance of my recommendations, I want to acknowledge the recent
    positive outreach and efforts of USDA Rural Housing Staff to tackle the
    tough issues for mortgage lending in Indian Country and be present and
    available thought partners, collaborating with a broader array of
    stakeholders towards the goals of removing barriers, making USDA
    housing products more attainable, and realizing a greater impact of
    these programs on the lives of rural Americans and Native Americans.
        I also want to acknowledge the complexities of applying broad
    changes to all areas including rural markets as well as the vastly
    underdeveloped and underserved tribal trust land areas. Though they
    fall under the rural umbrella, the markets, courts and ecosystems of
    support are varied, making it difficult to analyze and assess intended
    outcomes across the board. It is of critical importance to be cognizant
    of this in drafting legislation and careful of unintended consequences.
        Enterprise applauds the Committee's interest in and support of the
    USDA's RHS. The needs of rural residents are profound across the
    country, and these programs are too often overlooked. Seventy percent
    of the United States' 473 persistent poverty counties are in rural
    areas, predominantly in Indian Country, the Mississippi Delta, the
    Colonias, and Appalachia. A 2021 study by Redfin found that single
    family homes for sale in rural areas were down 44 percent year over
    year--the largest drop in rural inventory since Redfin began tracking.
    Because of the unequal distribution of traditional financing for homes,
    USDA RHS funding represents one of the only opportunities for home
    ownership for many rural Americans. There is also a serious shortage of
    affordable rental housing in rural communities, where incomes are often
    lower, making it difficult to finance the construction and development
    of rental housing, often even more so than in urban and suburban
    communities. The Low-Income Housing Tax Credit (Housing Credit), which
    is our Nation's most effective tool for the development of affordable
    rental housing, is greatly over-subscribed, with developers requested
    nearly 2.5 times as many Housing Credits as there was available
    authority in 2020. As a result, the vast majority of subsidized rental
    housing in rural America relies on USDA RHS Section 515 funding to
    bring those small-scale rural rental housing projects to fruition.
    Because of the unique and vital role that USDA's Rural Housing Service
    plays, it is of utmost importance that it is a fully funded, modern
    organization with adequate staffing and streamlined regulations that
    respect the unique needs of rural and tribal communities.
    Technology and Staffing
        For RHS to function at the highest possible level, appropriate
    staff coverage and cross training is important. One person cannot be
    the only expert in an issue, or the only person able to complete a
    process. When staff leave for other jobs, retirement, or temporary
    leave, it can create gaps that are open until a new person is hired, or
    the person returns from work. For work in tribal communities
    specifically, it can be difficult to find a staff person who
    understands the specific requirements of working on tribal lands, for
    example. It's been said there have been only five Section 502 loans
    closed on trust lands in the last year and even fewer USDA Guaranty
    loans. Despite a clear desire to do more, the existing State and
    program directors simply do not have the experience with the product
    nor the staff to provide meaningful assistance beyond a reference to a
    chapter of the handbook. The existing barrier to accessing meaning help
    deepens the divide, leaving some of the best products designed for
    rural America on the shelf and Native lands and homes red-lined because
    they are complicated and yet, the staffing weakness did not have to
    impact the deployment of loans. In 2018, due to the smart partnerships
    in the initial Section 502 Direct relending Pilot, which turned USDA's
    two loans to Mazaska and Four Bands into an additional 19 solid
    performing mortgage loans that otherwise would not have been achieved.
    More broadly, to facilitate meaningful progression toward loan
    closings, it would be helpful if multiple staff members were cross
    trained and able to help 502 program partners walk though loan
    scenarios and interpret the regulations. Overall, staff capacity for
    USDA RHS has been a serious challenge. In some areas of South Dakota,
    USDA offices are currently functioning with 25 percent of the staff
    they had 5 years ago.
        This USDA 502 Direct relending pilot is an example of a smart
    approach to overcoming staffing shortages, demonstrating that expanding
    partnerships with Native CDFI's can alleviate the pressure on highly
    limited USDA staff by tapping into the wealth of local expertise and
    community knowledge. Enterprise supports efforts to scale up this pilot
    program nationally.
        Enterprise also recommends reviving appropriations funding for the
    Technical Supervisory Assistance Program (TSA grant) as an additional
    means of extending USDA RHS outreach and resources to create bridges to
    rural and tribal communities and organizations with limited capacity.
    We encourage this TSA Program remain broadly and easily accessible in
    order to expand outreach and limit bureaucracy for programs that are
    already hard to understand and apply for.
        In combination, expanding partnerships like the 502 pilot, reviving
    the TSA Program, and increasing funding for USDA staff and technology
    will go a long way towards adequately meeting the demand of the rural
    and tribal markets and achieving the objectives of the Rural Housing
    Service.
    Subsidy Recapture
        The USDA's Section 502 Direct Rural Housing Loan (Section 502),
    despite being a very cost-effective way for low-income earners to
    achieve home ownership, has its shortcomings. It can be difficult for
    loans to be made due to lack of USDA staffing, technology and
    consistent funding. Utilizing these loans on tribal land can also be
    difficult, a problem that would be remedied by S. 2092, the Native
    American Rural Homeownership Improvement Act. Enterprise Community
    Partners is grateful to the Members of this Committee who have
    supported that bill.
        Section 502 can be further complicated by the recapture or balloon
    payment that comes at the end of the mortgage term or at time of sale,
    and this needs to be addressed. In certain cases, eliminating subsidy
    recapture is good and will allow people to better build wealth from
    home ownership. However, this is a nuanced issue and not all markets
    with 502 housing stock are the same. In addition, eliminating subsidy
    recapture altogether will have an impact on the USDA Scorecard and
    subsequent budget authority, potentially resulting in the unintended
    consequence of significantly decreasing the allocation of Section 502
    dollars available.
        As a result, Enterprise proposes that subsidy recapture from the
    USDA's Section 502 be treated differently in different situations to
    allow the program to more appropriately ensure that increasing equity
    in homes enables future home ownership. Subsidy recapture should be
    treated one way on tribal land, one way in appreciating markets, and
    one way in depreciating markets.
        Section 502 loans on tribal trust land should never require
    repayment, because the land is not given any value in the assessments
    and there remains an unproven rate of appreciation but a recognition
    that equity built over time is the simply the result of paying down the
    loan and not of a paired appreciation in land or market value. Tribal
    members in tribal communities, especially those with a large, rural
    trust land base, already come to the closing table with less equity and
    the application of a subsidy recapture assures they will not build it
    at a rate comparable to nontribal members on fee simple lands where a
    buy/sell market exists. Recently, in one tribal community, a father
    with a 502 Direct loan passed away, and in order to keep the family
    housed in the home, they had to come up with $22,000 of subsidy
    recapture. The subsidy is not seen as a benefit, and there are South
    Dakota Native CDFI re-lenders who do not utilize Section 502 because
    the recapture is seen as a burden to carry rather than a means of
    affordability and security.
        Outside of tribal land, subsidy recapture should more closely
    replicate a shared equity model. In some rural places, homes with
    Section 502 loans may substantially increase in value between when the
    home is purchased and when the owner wishes to sell. In these cases,
    the full subsidy recapture represents only a relatively small
    percentage of gained equity. The recapture is thus justified and
    fulfills the goal of providing money to further subsidize new
    homeowners.
        However, in no circumstances should repaying a Section 502 subsidy
    leave a borrower underwater, or discourage or prevent them from selling
    a house that they would otherwise wish to sell. In rural areas with
    stagnant or even depreciating housing values, this is too often the
    case. Capping subsidy recapture at a certain percentage of gained
    equity will prevent this problem. Government support for home
    ownership, at its heart, is a question of wealth building. If the home
    has not appreciated enough to pay back the subsidy, it would be waived
    under this proposal.
    Foreclosures of Properties With USDA Loans
        Enterprise understands the desire and need to streamline
    foreclosure but have concerns as previously expressed about the
    foreclosure issue on tribal lands. This is particularly an area where a
    nuanced approach is critical. We look forward to continuing to work
    with Congress to develop legislation that ensures tribal sovereignty is
    respected.
        The Multifamily Foreclosure Act of 1981 allows the Secretary of
    Housing and Urban Development to conduct nonjudicial foreclosures of
    multifamily mortgages held by HUD by designating a foreclosure
    commissioner in a State. The foreclosure commissioner may bypass the
    court process generally required for a foreclosure, allowing the
    property to be sold quickly. Importantly, the Act also requires that
    any subsidized rental properties subject to foreclosure retain their
    income restrictions, even after they are sold again.
        Outside of tribal lands, a similar foreclosure process for RHS
    mortgages would be appropriate. Foreclosures on properties with
    mortgages held by the USDA currently can take years to complete, and
    there is no requirement that affordable properties stay affordable
    after foreclosure or subsequent sale. The result is that properties
    with delinquent mortgages become vacant, which presents both a public
    safety hazard and a lost opportunity for affordable housing in rural
    communities. A nonjudicial foreclosure process that is faster to
    navigate and requires the preservation of affordability requirements
    would allow affordable housing groups to buy these properties, make
    necessary renovations and bring them back into use as affordable
    housing.
        It's extremely difficult to buy a USDA property out of
    receivership. There is no inventory of foreclosed buildings with USDA
    mortgages, the way there is for HUD. Enterprise is currently receiving
    USDA funding through four separate Section 515 Technical Assistance
    contracts to work with communities across the country to provide
    assistance on transfers, and this work would be greatly benefitted by a
    list of properties that are available for purchase and can be retained
    as affordable housing in rural communities.
        On tribal land, any foreclosure process must respect tribal
    sovereignty. When a tribe has foreclosure laws, tribal courts, rather
    than State courts, have jurisdiction over foreclosures. These tribal
    laws must not be disregarded in changes to foreclosure laws. While we
    recognize the need for a streamlined process and affordability measures
    on fee simple lands, we move with caution around the unintended
    consequence of damaging tribal relationships, setting a wrong precedent
    on tribal lands and hindering the furtherance of any USDA financing at
    all on tribal lands. We recommend further consultation with National
    American Indian Housing Council (NAIHC), NCN and the policy committees
    of several State coalitions on this issue.
        Ensuring respect for tribal sovereignty and bringing affordable
    multifamily housing with delinquent USDA mortgages back into service as
    affordable housing quickly do not need to be opposing goals. Enterprise
    Community Partners would welcome the opportunity to work with our
    partners at NAIHC and the Native Homeownership Coalitions in South
    Dakota and Montana to engage further on discussions of foreclosures on
    tribal land and reach a solution.
    Conclusion
        Thank you for inviting me to share my experiences and perspectives
    today. On behalf of Enterprise Community Partners, I would like to
    thank the Subcommittee, and especially Chair Smith and Ranking Member
    Rounds for their leadership on rural and tribal housing issues, as well
    as their bipartisan cooperation on issues that affect so many Americans
    in every corner of the country. The issues addressed in this testimony
    are just the beginning, as rural and tribal affordable housing faces
    profound and urgent challenges in alleviating inequality, preserving
    scarce units, and ensuring that more can be built. Enterprise looks
    forward to continuing our partnership with Congress to provide safe,
    stable housing for Native Americans and in rural communities.
                                     ______

                      PREPARED STATEMENT OF DAVID BATTANY
       Executive Vice President, Capital Markets, Guild Mortgage Company
                               September 20, 2022
        Chair Smith, Ranking Member Rounds, and Members of the
    Subcommittee, thank you for the opportunity to testify on behalf of the
    Mortgage Bankers Association (MBA). \1\ My name is David Battany, and I
    am the Executive Vice President for Capital Markets at Guild Mortgage.
    Incorporated in 1960, Guild Mortgage was one of the first lenders to
    participate in the Rural Housing Service's (RHS) programs and is now
    the fourth-largest rural mortgage lender nationwide. At Guild, I lead
    the company's efforts in the capital markets and am responsible for
    overseeing our work in pricing, hedging, credit policy, and investor
    relationships. Guild is a top five rural lender in Nevada, Montana,
    North Dakota, and South Carolina and we perform both lending and
    servicing throughout the country.
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         \1\ The Mortgage Bankers Association (MBA) is the national
    association representing the real estate finance industry, an industry
    that employs more than 390,000 people in virtually every community in
    the country. Headquartered in Washington, DC, the association works to
    ensure the continued strength of the Nation's residential and
    commercial real estate markets, to expand home ownership, and to extend
    access to affordable housing to all Americans. MBA promotes fair and
    ethical lending practices and fosters professional excellence among
    real estate finance employees through a wide range of educational
    programs and a variety of publications. Its membership of more than
    2,200 companies includes all elements of real estate finance:
    independent mortgage banks, mortgage brokers, commercial banks,
    thrifts, REITs, Wall Street conduits, life insurance companies, credit
    unions, and others in the mortgage lending field. For additional
    information, visit MBA's website: www.mba.org.
    ---------------------------------------------------------------------------
        I currently serve as a member of MBA's Residential Board of
    Governors and cochair of MBA's Affordable Homeownership Advisory
    Council. MBA's policy and advocacy efforts on rural housing matters
    have focused on providing education to members and other stakeholders
    regarding RHS offerings, promoting system upgrades at RHS, and ensuring
    RHS programs operate efficiently for the benefit of borrowers as well
    as industry participants. MBA supports ensuring RHS programs are
    appropriately targeted, accessible to borrowers, and deliverable for
    lenders.
        I am also cochair of the Credit and Lending Committee of the
    National Housing Conference 2022 Black Homeownership Collaborative and
    a board member of Habitat for Humanity. On a personal note, I grew up
    in rural Colorado and the values instilled in me there have stayed with
    me throughout my career in the mortgage industry.
    The Lender's Perspective
        I applaud the Subcommittee's oversight of the U.S. Department of
    Agriculture's (USDA) Rural Housing Service and your consideration of
    the lender perspective of rural home ownership programs. Lenders are
    indispensable partners to RHS, as they are both the providers and
    servicers of RHS loans. These programs are worthy of our Nation's
    commitment to them. RHS loan programs play a vital role in increasing
    the availability of mortgage credit for rural Americans.
        This hearing comes at a time when there are new challenges to
    serving rural homeowners--from helping our employees and customers
    recover from the economic impact of COVID-19 to originating a home loan
    when the average contract interest rate for 30-year fixed-rate
    mortgages with conforming loan balances just rose to 6.01 percent. The
    focus of my testimony, however, is the opportunity to build on recent
    progress to make RHS lending better serve consumers and industry
    participants alike. The Subcommittee can advance this objective by
    addressing three areas: better workflow, better technology, and, if
    these two areas are achieved, better loan products.
    The Rural Mortgage Market
        The rural market is constrained by its very nature with limited
    housing supply, much of which is aging single-family housing. Rural
    residents do, however, have available to them to varying degrees the
    same housing finance options available to other borrowers in addition
    to RHS programs. These include options offered by Fannie Mae, Freddie
    Mac, the Federal Housing Administration (FHA), and the Department of
    Veterans Affairs (VA), as well as loans offered without Government
    backing. RHS home loans are offered by a wide variety of mortgage
    lenders--from independent mortgage banks (who issued 73 percent of such
    loans in 2021), to depository institutions, including community banks
    and credit unions--throughout the country. Although small relative to
    the scale of the multitrillion-dollar mortgage market, RHS loans are
    meaningful lifelines to economic security for the individuals they help
    and the communities they bolster.
        In 2021, the mortgage industry originated $1.8 trillion in new
    loans and refinanced $2.5 trillion. In that same year, the total volume
    of USDA/Farm Service Agency loans was 114,524 loans. This represented
    just 0.49 percent of all loan volume. The total amount of Section 502
    Guaranteed Single-Family Housing Loans obligated, for example, was $448
    million in Minnesota and $170 million in South Dakota. The average loan
    size was approximately $180,000, less than half the national average
    for a conventional loan. It is imperative to be mindful of this small
    market share and smaller loan size when discussing any potential
    reforms and proposals that might further restrict lending or impose
    additional costs on service delivery.
    Better Workflow
        I would like to start by commending RHS on its new proposed rule to
    implement a provision of the Housing Opportunity Through Modernization
    Act (HOTMA), enacted in 2016, to enable the Secretary of Agriculture to
    delegate approval authority to ``Preferred Lenders.'' USDA currently
    does not delegate approval authority to lenders in this manner. This is
    a major barrier to more robust lender participation and puts RHS out of
    alignment with the processes available in FHA and VA lending. The
    existing processes require a conditional commitment from USDA staff,
    and while such commitments are rarely denied, there are instances in
    which delays in receiving such commitments can cause problems for
    borrowers and lenders. Market participants have noted that, in some
    cases, these delays can extend as long as ten days. In such cases,
    borrowers often have missed their closing dates, causing significant
    problems with their transactions. USDA should move forward with a more
    comprehensive set of process updates that provide full delegation to
    approved lenders. This overdue change would accelerate approval
    processing timeframes to the benefit of applicants and bring USDA into
    closer alignment with FHA and VA practices.
        Delays in closing can be a ``deal-killer'' for financing
    multifamily properties, as well. Apartments and buildings for workforce
    housing require a combination of debt, tax credits, and equity
    financing that must come together quickly or they will be applied to
    other deals. One MBA member, for example, relayed to me that he was
    unable to close apartment projects in Tennessee and Texas because of
    months' long delays waiting for a response from RHS.
        The RHS staff has shown a commitment to fostering strong
    relationships with lenders and servicers throughout the industry.
    Improvements could be made, however, in the ability of lenders and
    servicers to get timely clarification on program guidelines when
    contacting RHS representatives, as well as making policy changes and
    guideline updates more readily accessible.
    Better Technology
        The aging technological infrastructure supporting the backbone of
    RHS operations is widely acknowledged as outdated and in need of
    substantial upgrades. The systems in place at RHS are less advanced
    than those used by several other Government housing agencies, Fannie
    Mae and Freddie Mac, or most lenders. Dedicated resources are needed to
    ensure RHS can keep pace with changes in the market, evolving data
    security threats, and changes in the ways in which mortgage loans are
    originated and serviced.
        Much of the technology focus for RHS is centered on its Guaranteed
    Underwriting System (GUS). The use of an automated underwriting system
    decreases time-consuming and expensive manual file reviews, improves
    performance monitoring, and reduces program risk, but further work is
    needed to ensure this system fully supports RHS borrowers and lenders.
    Additional investments in the GUS interfacing with industry loan
    origination systems, for example, would make RHS offerings more
    attractive for loan officers working ``on the ground'' with consumers.
    When problems occur, they often require substantial manual intervention
    and data re-entry to support the program's mission. Under the current
    design, RHS imposes limits on the number of ``runs'' a lender can make
    for each borrower, making it difficult for a lender to perform
    prequalifications without exceeding the maximum limit. More broadly,
    updated technological infrastructure is needed to ensure the secure
    operations of RHS programs.
        RHS has begun to assess and collect a $25 per-loan technology fee
    from lenders in the Section 502 program. While this funding has already
    delivered results, it has increased the cost of each loan and created a
    nonappropriated fund that should be reviewed closely. MBA believes that
    USDA and Congress should provide sufficient funding for RHS technology
    upgrades through the annual appropriations process and ensure adequate
    oversight of information technology modernization efforts. RHS should
    also update its interfaces for the remittance of annual fees from
    lenders for RHS products to create an efficient, automated, and secure
    integration between the USDA and servicers' systems. Today, servicers
    must manually review and submit payments of annual fees--a process
    which is cumbersome and outdated.
        I would also encourage USDA to engage in and leverage the Mortgage
    Industry Standards Maintenance Organization's (MISMO) industry
    standards setting process in support of its modernization initiatives.
    Using MISMO standards helps eliminate friction and bifurcation across
    the industry by creating consistency in loan data and loan processes.
    Better Loan Products
        Once the capacity to serve rural borrowers is improved, various RHS
    loan parameters could be reviewed to ensure they are not unduly
    restricting access to credit or responsible use of RHS offerings. The
    RHS debt-to-income limits, for example, are far more stringent than
    those associated with other types of Government-backed lending. RHS
    requirements related to borrower reserves, borrower deposits, existing
    tradelines, qualifying income, and tax transcript history would benefit
    from sensible updates, as well. Congress and USDA also should
    collaborate to examine existing population limits on RHS loan
    eligibility to ensure the program's geographic parameters remain
    appropriate.
        RHS also could explore options for increasing the availability of
    financing for a variety of different types of housing types to match
    GSE standards. These options include loans secured by both new and
    existing manufactured housing throughout the country, as well as for
    accessory dwelling units (ADUs). These housing types have benefited
    from advances in technology and design that make them promising
    approaches to increase the supply of high-quality, affordable housing
    in rural communities.
        Although most lending is completed through the guaranteed loan
    program, I also would like to bring to your attention concerns
    regarding Single-Family Housing Section 502 Direct Loans. Congress
    should ensure funds are provided in a timely manner to enable the
    program to serve borrowers throughout the entire year. In some
    instances, lenders have needed to hold a loan until additional funds
    are made available. Further, rural housing loan volume may be impacted
    by the ``subsidy recapture'' imposed through the Direct Loan program.
    The Government subsidy provided for these loans is subject to repayment
    when the property is sold. This creates a disincentive for those
    homeowners who are aware of it to sell a home, and for many others, a
    very unwelcome surprise if they do sell. An unresolved lien on a
    property can delay the loan closing and even stop a sale when a
    homeowner cannot repay the subsidy. I would encourage the Subcommittee
    to evaluate the utility of this lien repayment requirement, which if
    properly addressed could (in a small way) bolster the supply of
    affordable rural housing.
    Other Rural Lending Issues
        MBA commends Chair Smith and Ranking Member Rounds for taking
    action to improve and encourage access to quality affordable housing on
    trust land through your sponsorship of S. 3381, the Tribal Trust Land
    Homeownership Act of 2021. For Department of Housing and Urban
    Development (HUD)/Section 184 Native American Loan Guarantees, the
    Bureau of Indian Affairs must locate and produce a Title Status Report
    that is used in lieu of title insurance in those transactions. These
    are all paper files and often are subject to lengthy processing delays.
    Your legislation will reduce processing delays, thereby encouraging
    more lenders to participate in trust land mortgage lending.
        Rural communities face a well-documented shortage of suitable
    housing stock and underproduction of homes that meet the needs of the
    rural workforce. I would encourage the Subcommittee to advance a
    combination of legislation that together opens the aperture for new
    housing, such as the bipartisan S. 902, the Housing Supply and
    Affordability Act (HSAA), which creates a new Local Housing Policy
    Grant (LHPG) program administered by HUD to support local efforts to
    expand housing supply. Zoning reforms, combined with diversification of
    Federal and State financing for rural housing, such as robust Low- and
    Middle-Income Housing Tax Credits and the financing made available in
    S. 4445, the Affordable Housing Bond Enhancement Act, will strengthen
    the rural housing supply.
        Finally, borrowers in rural areas would be well served by greater
    access to remote online notarization (RON). As the Federal investment
    in broadband access reaches rural communities, they will be able to use
    a remote online notary in the loan closing process. Authority to
    perform RON, however, currently is limited to 41 States. I would
    encourage the Subcommittee Members to support S. 1625, the SECURE
    Notarization Act, introduced by Senators Warner (D-VA) and Cramer (R-
    ND), to help rural borrowers access a more reliable and timely mortgage
    closing process.
    Conclusion
        Once again, on behalf of all MBA members, I appreciate the
    opportunity to comment on the Rural Housing Service's loan programs. I
    also deeply appreciate USDA's ongoing engagement with lenders and other
    stakeholders to address the three specific topics that I have outlined
    today. I look forward to your questions and to working with the
    Subcommittee to develop practical solutions to the issues addressed at
    this hearing.
                   RESPONSES TO WRITTEN QUESTIONS OF
              SENATOR CORTEZ MASTO FROM ELIZABETH GLIDDEN

    Q.1. Please describe any community land trusts your
    organization has participated in, if any. Are there any lessons
    you have learned from community land trusts?

    A.1. Through MHP's role as a provider of technical assistance,
    we have helped communities explore and implement community land
    trusts in rural areas. Currently, MHP is helping West Central
    Minnesota Community Action (WCMCA), located in Elbow Lake,
    Minnesota, to create a community land trust. WCMCA, which
    serves five rural counties next to Minnesota's border with
    North and South Dakota, explored a land trust as a solution to
    the affordability crisis residents in the region have been
    experiencing. With a community land trust, they will be able to
    develop homes at a significant cost reduction, thanks to
    funding available through the Minnesota Housing Finance
    Authority and FHLB. To date, they have closed on two community
    land trust homes, confirming that the land trust model works in
    very rural areas.
        The community land trust model has been popular throughout
    Minnesota in helping provide affordable home ownership
    opportunities, particularly for underserved and Black,
    Indigenous, and households of color. In some cases, such as
    Northeast Minnesota which has a strong community land trust
    producer (the nonprofit One Roof), there has been significant
    interest in community land trusts regionally because of their
    ability to increase affordable housing ownership stock and
    production. Community land trust have leveraged community
    development block grant funds (CDBG) well and have provided
    tremendous community benefit with long term affordability, a
    benefit that balances the challenge of needing a high upfront
    investment.

    Q.2. Please describe interactions your organization may have
    had with your regional Federal Home Loan Bank. What investments
    have FHLBanks made in your organization?

    A.2. MHP does not build, own or manage housing. Rather, we
    provide technical assistance to rural communities and Native
    nations to achieve their community development and housing
    objectives; thus, we have not received investments from FHLB in
    our organization but have helped other organizations secure
    FHLB resources for their housing goals and projects.
        MHP has extensive experience assisting many local
    governments, housing organizations, and Tribal Nations to
    secure and utilize grant funds through the competitive FHLB
    Affordable Housing and Community Investment program. These
    funds have been instrumental in providing gap funding to
    projects that otherwise would not have been able to move
    forward due to a lack of non-debt-related upfront construction
    and rehab funding.
        Projects MHP has helped secure funds for have included
    everything from rehabbing a Section 515 project in rural South
    Dakota, to leveraging a competitive Indian Housing Block Grant
    in the creation of eight units of elder housing on a Minnesota
    reservation, to supporting several local governments in
    providing additional owner-occupied rehab and downpayment
    assistance dollars to low-income households. FHLB funds are
    frequently utilized to leverage existing programs or funding
    streams, often extending the number of households being served
    in a community.
        Another valuable program we want to highlight that we have
    utilized from FHLB is the Native American Homeownership
    Initiative, where eligible enrolled Tribal households may
    receive up to $15,000 for downpayment, closing cost,
    counseling, and/or rehabilitation assistance through an FHLB
    member bank.

    Q.3. Will your organization participate with the Federal
    Housing Finance Agency review of the Federal Home Loan Banks if
    you have suggestions?

    A.3. We have not yet participated in this review but will seek
    future opportunities to participate in roundtable discussions
    and submit comments.
        Thank you for this opportunity to provide responses.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
               SENATOR CORTEZ MASTO FROM MARCIA ERICKSON

    Q.1. Please describe any community land trusts your
    organization has participated in, if any. Are there any lessons
    you have learned from community land trusts?

    A.1. While GROW South Dakota does not personally participate in
    community land trusts (CLTs), 21 NeighborWorks America
    Organizations have experience operating as a CLT. There are an
    estimated 225 CLTs in the United States, overseeing
    approximately 12,000 owner-occupied units. \1\ The successes of
    these organizations inform the entire NeighborWorks network of
    the opportunities that exist to implement and expand
    cooperative housing models, in turn creating lasting affordable
    housing, promoting neighborhood stabilization, and generating
    wealth-building opportunities for low- and moderate-income
    families. CLTs provide a unique method of serving the market,
    oftentimes operating as an effective and generative community
    development anchor. Particularly as inflationary pressures
    constrain affordable housing and community development
    activities, more municipal, State, and Federal leaders are
    recognizing the reliability of CLTs to retain that
    affordability and support communities.
    ---------------------------------------------------------------------------
         \1\ Thaden, ``The State of Shared-Equity Homeownership''.
    ---------------------------------------------------------------------------
        CLTs are effective community development entities that
    increase housing affordability to a portion of the housing
    market. Traditional CLT models require the buyer to be below 80
    percent average median income while having sufficient income to
    qualify for a first mortgage and maintain the home. CLTs are a
    good alternative to renting for many low- and middle-income
    households, especially as this population is feeling the
    pressures of rising housing costs. Shared equity housing is the
    model implemented by CLTs, empowering residents to own and
    build equity on otherwise unaffordable homes while ensuring
    that the unit can be sold at an affordable price to the next
    owner through resale restrictions tailored to their markets.
    This way should the unit appreciate before the time of resale,
    the homeowner and the CLT share any increase in the value of
    the property. This resale process is managed by the CLT. As the
    value of the home grows, so does the built-in subsidy to the
    next buyer to keep the unit affordable and keep the CLT
    operational. CLTs expand access to home ownership through this
    permanent affordability, which can be beneficial particularly
    when resources funding a downpayment assistance program may be
    limited and competitive. CLTs create permanently affordable
    units that build wealth for a legacy of homeowners, which a
    mission-driven nonprofit might want to consider in lieu of or
    in addition to providing downpayment assistance for only a
    single household.
        There are numerous shining examples of CLTs in the
    NeighborWorks network, including the country's largest CLT--
    Champlain Housing Trust in Burlington, VT, with over 3,100
    homes (rental, co-op and home ownership) in its portfolio--
    which is known as one of the initial leaders in developing and
    perfecting the shared equity home model. Another NeighborWorks
    CLT, NeighborWorks Dakota Home Resources, is a fellow South
    Dakota NeighborWorks organization and National NeighborWorks
    Association member located in Deadwood, SD. NeighborWorks
    Dakota Home Resources has 30 properties in Western South Dakota
    plus shared ownership on an affordable apartment.
        DLT charges a $25 monthly lease payment for use of the lot.
    The homeowner receives a 99-year lease with a 99-year extension
    option. The homeowner also pays property taxes on both the land
    and the home. The CLT pays for the cost of the land and the
    homebuyer owns the home and pays the $25 monthly lease payment.
    If the lot cost is $55,000, then the homeowner could save $340
    per month by using the land trust ($55,000 loan, 30-year term,
    7 percent rate = $365.92 - $25 lease = $340.91). These savings
    can be the difference between an opportunity to own a home and
    build wealth versus renting indefinitely. Particularly when the
    Nation is seeing a widening home ownership gap between White
    households and non-White households, expanding affordable
    options for families to transition away from renting presents
    an innovative intervention to address these racial disparities.
        Unsurprisingly, a $25 lease payment does not cover total
    operating expenses for a CLT, therefore additional financing is
    required to handle servicing the land trust. CLTs must layer
    other affordable housing and community development subsidies
    for successful operations, including Federal programs. Such
    resources must be flexibly implementable, allowing CLTs to pull
    from various sources to secure sufficient servicing and
    operating resources, and close financing gaps to continue to
    serve low- and moderate-income households and retain the
    affordability of these units. As Congress considers housing and
    community development legislation, be that new authorizations
    or reforms to key programs such as HOME or CDBG, CLTs must be
    included as eligible recipients to continue the success of
    these innovative home ownership models. Policymakers must
    understand how beneficial CLTs can be to bring a household into
    home ownership.
        Many lessons can be learned from CLTs and applied to
    different markets, geographies, populations, and to address a
    variety of community needs. As housing costs rise and the gap
    between affordable and market-rate housing widens, a CLT can
    preserve a stock of accessible and affordable homes. CLTs can
    also be used to issue homeowner education, legal assistance,
    and financial literacy. Some are also known to help homeowners
    with renovations and repairs, as well as intervene to prevent
    foreclosure.
        CLTs also revitalize neighborhoods that experience
    disinvestment--remote rural areas and urban areas alike. The
    service lines of CLTs continue to diversify, meeting the
    different needs of different markets. Many CLTs have begun to
    acquire land for non-housing purposes to incentivize commercial
    investment or ensure community control within a development.
    One example of this innovative approach is Beyond Housing in
    St. Louis, MO, where their CLT strengthens their local
    community not only by providing permanently affordable homes,
    but also by issuing economic development and employment
    opportunities through constructing and operating a local movie
    theater, grocery store, and bank for the St. Louis community.
    CLTs can revitalize commercial areas by offering affordable
    leases to community services and businesses, all conducted by a
    Board of Directors that is made up of members of the community.
    These successes fortify the importance of community
    participation in neighborhood development, and such engagement
    allows for the successful implementation and operation of these
    initiatives.

    Q.2. Please describe interactions your organization may have
    had with your regional Federal Home Loan Bank? What investments
    have FHLBanks made in your organization?

    A.2. GROW South Dakota has successfully partnered with the
    Federal Home Loan Bank Des Moines, IA, for 25 years using the
    competitive Affordable Housing Program (AHP). This funding has
    helped our organization successfully provide home improvement
    measures totaling over $7.37 million and assisting over 1,100
    homeowners. We have partnered with two separate financial
    institutions that sponsored our projects.
        The home improvement grants are directed to low-income
    households at 50 percent or below the Area Medium Income and to
    special needs households such as seniors and persons with
    disabilities. Home improvement grants are provided to
    homeowners needing repairs to their homes. Eligible activities
    include roofing, siding, plumbing, electrical, weatherization,
    HVAC, energy efficiency measures, or health and safety
    measures. More than two-thirds of the homes in our service
    area--totaling 51 counties of eastern South Dakota--are over 35
    years old, and nearly one-third are more than 70 years old.
        Home improvements were the highest-rated needs in a recent
    community needs assessment conducted by GROW South Dakota. In
    the survey, 74 percent of respondents rated home improvement as
    a high or moderate need. AHP funds from the Federal Home Loan
    Bank allow GROW South Dakota to assist low-income households in
    making necessary improvements to their homes to make them
    safer, healthier, and more energy efficient.
        Our average home improvement costs have increased over our
    25-year history with our current average cost per home at
    $16,500 for one major home improvement. The demand for housing
    improvements is robust based on our current pipeline of
    requests for these types of projects. GROW South Dakota
    currently has more than 160 requests for home rehabilitation
    opportunities.
        One example of the increasing need for home repairs is an
    individual in northeast South Dakota that recently retired.
    Shortly after retiring, she divorced and was living only on
    social security. The house she owned needed serious repairs
    that were not affordable on her fixed income. Drafty windows
    and floors made the home hard to heat, and her bathroom was in
    dire need of significant repairs. Her neighbor referred her to
    GROW South Dakota for assistance.
        Through the FHLB program, her home improved in a short
    time. Her bathroom now has a new tub and toilet along with an
    exhaust fan. Carbon monoxide detectors were also installed. On
    the outside, her house has new siding and eaves. ``My house
    looks like a new home. It is so nice and easy to clean, and
    there is not cold air leaking anymore,'' she stated. She has
    received many compliments about the work that was done, and can
    now enjoy retirement without having to worry about repairs.
        The AHP is a critical source of funding for low-income
    individuals to address unique housing needs. FHLB is a crucial
    partner and conduit to positively improve housing conditions
    for low-income families in our community.

    Q.3. Will your organization participate with the Federal
    Housing Finance Agency review of the Federal Home Loan Banks if
    you have suggestions?

    A.3. GROW South Dakota participated in the Federal Housing
    Finance Agency (FHFA) comment period regarding the Federal Home
    Loan Bank's (FHLB) role in promoting affordable housing and
    community investment through the Affordable Housing Program
    (AHP). Our comments were focused on the importance of the AHP
    program.
        The FHLB AHP has been key to addressing the unique home
    improvement needs of rural and financially vulnerable
    homeowners through GROW South Dakota's work in eastern South
    Dakota. As a result of our partnership with the FHLB Des
    Moines, IA, over $7.37 million has been invested in local South
    Dakota communities assisting over 1,100 homeowners. Currently,
    GROW South Dakota has more than 160 requests on a waiting list
    pending home rehabilitation.
        By law, each FHLB must establish an AHP and contribute 10
    percent of its earnings to its AHP. However, with the dire need
    for home preservation due to aging housing stock, more funding
    should be allocated to this program beyond the 10 percent
    threshold. Continued access to AHP is critical as it is an
    invaluable resource to the homeowners that need it most. Home
    is the foundation for vulnerable households. The AHP helps low-
    income individuals stay in their homes as is demonstrated in
    the following life-changing event from a homeowner who did not
    have an adequate heating system or plumbing.
        GROW South Dakota received a call from a senior resident in
    need of assistance with heating her house. When the
    weatherization team went to her home, they discovered energy
    inefficiencies as well as safety concerns. The heating unit was
    not adequately ventilated, which could cause carbon monoxide
    poisoning. The windows were leaking, creating drafting in the
    house, and there was no insulation in the attic, walls, or
    under the floor making the house very cold. Most significantly,
    there was no indoor bathroom. The homeowner had been using an
    outhouse as a restroom and would go to friends and neighbors
    when she needed to shower.
        GROW South Dakota insulated the house and provided new
    storm windows. Our organization also replaced the old unvented
    space heater with a vented space heater and installed an
    exhaust fan above the stove. Besides the lifesaving installment
    of a new heating unit, the most significant improvement, with
    assistance from the FHLB AHP funding, was an addition to the
    house. This senior citizen now has an indoor bathroom with a
    shower, sink, toilet, and water hookups for a washing machine.
        She stated, ``Because of this program, I no longer have to
    worry about CO2 poisoning. I have adequate heat and no wind
    blowing through the windows and doors. For the first time, I
    don't have to walk to the outhouse and worry about falling. I'm
    able to take a shower without going to someone else's house. To
    say what I have received from the program has been life-
    changing would be a complete understatement.''
        The FHLB has made a significant difference in GROW South
    Dakota's work with home repairs, but there are many more needs
    in our communities. We recommend the 10 percent AHP
    contribution earnings be increased. This funding helps secure
    needed affordable and safe housing while creating and
    supporting healthy communities.
        GROW South Dakota also participated in a robust listening
    session on November 7, 2022, in Pierre, South Dakota, with
    Joshua Stallings, Deputy Director, FHFA Division of Bank
    Regulation, and Michela Barba, Principal Advisor, FHFA,
    present. Our session primarily focused on the unique challenges
    of serving Native American and rural communities in South
    Dakota.
        Key points addressed included the importance of regional
    banks with smaller geographies working directly with community
    advocates to promote affordable, sustainable, equitable, and
    resilient housing and community investment. Smaller geographic
    areas for regional banks encourage partner communication and
    help address the local housing and community needs that have
    the most significant impact in rural and financially vulnerable
    areas. This holds true with access to capital for low-cost
    mortgages with FHLB being a supplier of funds.
        The FHLB is a supplier of lendable funds to financial
    institutions of all sizes and many types, including community
    banks, credit unions, commercial and savings banks, insurance
    companies and community development financial institutions
    (CDFI). The steady supply of lendable funds from the FHLB helps
    U.S. lenders invest in local needs including housing, jobs and
    economic growth. \2\ CDFIs should be reviewed for FHLB
    membership and provided with unique collateral opportunities to
    inclusively meet the local investment needs. CDFIs with lengthy
    histories and solid backgrounds do not increase risk for the
    FHLB or weaken the system. GROW South Dakota has two certified
    CDFIs under our organizational umbrella with a historic
    repayment rate of 98-99 percent between housing and business
    loans with a 50-year history in the revolving loan fund
    industry.
    ---------------------------------------------------------------------------
         \2\ FHLBanks. (2022). Retrieved 2022, from https://fhlbanks.com/.
    ---------------------------------------------------------------------------
        Further, CDFIs should be permitted to submit AHP projects
    without a bank sponsor. While sponsoring banks can support and
    bolster partnerships, this requirement has also halted AHP
    projects with Native organizations. Native groups stressed that
    it is difficult if not impossible to find a sponsor.
        Finally, the AHP application is onerous and cumbersome, and
    organizations have had to hire consultants to write the grant
    application. It was noted that one group would not apply for
    AHP funds due to regulations and difficulty in administering.
    This prevents Native communities from benefitting from the
    Banks' affordable housing and community development programs.
    Our recommendation was to engage an active group of CDFI
    organizations and housing advocates to review and analyze the
    regulations in a thorough process to determine which items
    specifically hinder progress.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                SENATOR CORTEZ MASTO FROM TONYA PLUMMER

    Q.1. Is Enterprise tracking American Rescue Plan and CARES
    funds supported tribal housing investments? Can you share your
    research?

    A.1. HUD's Office of Native American Programs (ONAP) has
    matched Indian Community Development Block Grant (ICDBG)
    recipients with technical assistance providers, who will work
    with tribes to complete needs assessment workplans to identify
    strategies to spend down their American Rescue Plan Act funds.
    Enterprise's Advisors team, which provides technical assistance
    and capacity building, is currently working with 27 tribes
    across the country. However, Enterprise has not conducted any
    comprehensive research on tribal housing investments supported
    by funds from the American Rescue Plan Act or the CARES Act,
    nor are we aware of any groups conducting such research.

    Q.2. Please describe any community land trusts your
    organization has participated in, if any. Are there any lessons
    you have learned from community land trusts?

    A.2. While Enterprise Community Partners has not directly
    purchased land from a community land trust for housing
    construction, our CDFI, Enterprise Community Loan Fund (ECLF)
    has provided loans to land trusts, and Enterprise Community
    Partners is actively engaged in policy conversations about
    making HOME funds easily usable for community land trusts.
        In early 2022, ECLF provided a $3.2 million loan to the Bay
    Area Community Land Trust for their purchase of a 13-unit
    apartment building on Solano Avenue in North Berkeley. The
    funding, combined with $3.9 million from the City of Berkeley,
    allowed the purchase of a privately owned building of rental
    units that had attempted to evict all its residents in 2019 and
    sell the building. The Bay Area Community Land Trust's purchase
    will allow the organization to acquire and complete renovations
    at the building. The building will have restricted rents and a
    portion of units restricted for tenants with incomes under 50
    percent and 80 percent area median income.
        In New York, since 2017, Enterprise has invested more than
    $12 million in grant funds to support 11 Community Land Trusts
    across New York State to strengthen their capacity and help
    expand their development pipeline. In the last round of grant
    support, which ended early this year, the participating
    Community Land Trusts acquired nearly 132 properties,
    rehabilitated 88, completed 57 new instructions, and demolished
    8 structures that will pave the way for new construction. In
    Denver, Enterprise Community Partners helped launch the Denver
    Regional Transit-Oriented Development (TOD) Fund in 2010. The
    TOD Fund supports land banking by providing capital needed to
    purchase key properties along current and future transit
    corridors for current or future development or preservation of
    housing. In 2022, ECLF invested $8.8 million in loans for the
    TOD Fund to acquire three properties and finance 462 new units
    of housing.
        Experience lending to and partnering with community land
    trusts has given Enterprise Community Partners a useful
    perspective on changes needed to Federal funding to ensure
    their usefulness to community land trusts. In coordination with
    national and State groups including the Council of State
    Community Development Agencies, Grounded Solutions Network, the
    National Council of State Housing Agencies and National
    NeighborWorks Association, Enterprise Community Partners has
    developed a series of recommendations in advance of proposed
    HOME rulemaking. The recommendations include several suggested
    changes to enable easier use by community land trusts.
        First, HUD should treat CLTs like all other entities that
    have nonprofit tax status under IRS rules. All CLTs should be
    able to access general HOME funding the same way other
    nonprofit entities are able to do so. Should the CLT also meet
    CHDO requirements, it should be able to access CHDO set-aside
    funds. Should the CLT meet the definition of CLT under Part B-
    Community Housing Partnership, it should be able to access CHDO
    set-aside funds, technical assistance, and capacity building
    funds.
        Second, HUD should clarify that CLT board composition
    requirements meet the CHDO requirements for low-income
    representation even if individual members who were low-income
    when they joined the board experience economic mobility during
    their tenure on the board. In addition, HUD should clarify that
    demonstrated capacity and a history of serving the local
    community are not required for CLTs per the statute.

    Q.3. Please describe interactions your organization may have
    had with your regional Federal Home Loan Bank? What investments
    have FHLBanks made in your organization?

    A.3. Enterprise Community Partners' CDFI, Enterprise Community
    Loan Fund (ECLF) has been a member of the Federal Home Loan
    Bank of Atlanta since 2015 and has found their membership to be
    positive and useful. The FHLBank of Atlanta is willing to lend
    expertise, answer questions about their product offerings, and
    brainstorm about how they might be of use to ECLF, as well as
    provide support on paperwork and applications. This high level
    of service is notable because ECLF is one of the smaller
    members. ECLF often utilizes advances from the FHLBank Atlanta
    because the advances are one of the only sources of 20-year
    debt capital available to CDFIs. Prior to ECLF's membership,
    the longest-term debt capital they could access was 10 years,
    until last year, when 15-year capital became available. These
    advances from the CIP also have guaranteed lower interest
    rates.
        ECLF started applying for funding from FHLBank Atlanta a
    few years after becoming a member and has participated in both
    the Affordable Housing Program (AHP) and the Community
    Investment Program (CIP). On behalf of development partners,
    ECLF has applied for AHP grants for 13 projects, for which a
    total of $6,167,520 has been awarded. This funding has
    supported the development of 13 projects with a total of 924
    units with a total development cost of $203,633,549. When ECLF
    partners to help a developer access AHP money, they will also
    often make a loan to the developer themselves, and the FHLB
    Atlanta will frequently subsidize the interest rate on that
    loan as well.
        The Federal Home Loan Bank of New York has also been a
    philanthropic partner for Enterprise, giving a total of $1
    million in grants to Enterprise Community Partners over the
    past 2 years. In June 2021, FHLBank New York awarded $500,000
    to Enterprise's Equitable Path Forward project to allow
    Enterprise to provide consulting and advisory services to up to
    eight affordable housing developers led by Black, Indigenous,
    and People of Color (BIPOC) housing providers. In September
    2022, FHLBank New York granted another $150,000 to that
    project, along with $350,000 to support Enterprise's Asset
    Management University, a statewide initiative that offers
    training and learning resources for affordable housing
    operators in New York, with the aim of better equipping them to
    oversee the financial, physical, and operational health of
    their housing portfolios.
        Enterprise Community Partners' Mountain, Tribal Nations and
    Rural (MTNR) team has recently entered into an agreement with
    the Federal Home Loan Bank of Dallas to conduct a basic needs
    assessment for tribal communities in New Mexico. This needs
    assessment will fulfill FHLBank Dallas' FHFA requirements to
    identify opportunities to invest in Native and tribal
    communities through the Affordable Housing Program. The team
    will draw on existing relationships with tribal housing
    providers and advocates in New Mexico to help inform this work.
    The MTNR team also frequently encourages technical assistance
    recipients to work with their FHLBank and views the FHLBanks as
    an important source of gap funding. The MTNR team provides
    technical assistance in a variety of forums, including through
    the Rural Rental Preservation Academy, Multi-Family Housing
    Non-Profit Transfer Technical Assistance Grants through the
    USDA Rural Housing Service, and the ElevateNV Affordable
    Housing Development Training Series. In each case, the MTNR
    team refers recipients to work with their FHLBank to access gap
    funding. The Federal Home Loan Bank of San Francisco is also a
    sponsor of the ElevateNV series through a grant to the Nevada
    Housing Coalition.

    Q.4. Will your organization participate with the Federal
    Housing Finance Agency review of the Federal Home Loan Banks if
    you have suggestions?

    A.4. Enterprise Community Partners is monitoring the Federal
    Housing Finance Agency's ``FHLBank System at 100'' process but
    has not yet participated. Given the success of the programs for
    ECLF's loans to affordable housing development, we support the
    FHLBanks putting a larger percentage of profits towards their
    Affordable Housing Programs, as outlined in your Federal Home
    Loan Banks' Mission Implementation Act. If future listening
    sessions are announced regarding topics on which Enterprise can
    offer unique expertise, we may seek to participate.
                LETTER SUBMITTED BY NATIONAL HOUSING LAW PROJECT
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            STATEMENT SUBMITTED BY NATIONAL RURAL HOUSING COALITION
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