In the remaining weeks before the scheduled mark-up of the Johnson-Crapo housing finance reform bill (see Memo, 3/14) on April 29 by the Senate Committee on Banking, Housing, and Urban Affairs, numerous parties and interest groups are issuing comments on ways to improve the bill.
The National Council of La Raza (NCLR) and other civil rights organizations held a forum on April 16 titled “Rebuilding our Communities through Sustainable Home Ownership: A Conversation with Civil Rights Leaders,” at which HUD Secretary Shaun Donovan spoke.
Secretary Donovan focused on the importance of advancing the Johnson-Crapo bill while acknowledging the bill’s shortcomings. He said, “Under the current [housing finance] structure, low wealth families and minority communities are not getting mortgages while taxpayers remained on the hook for potential losses in the housing market. Without comprehensive housing finance reform, [government sponsored enterprises] have no incentive to expand credit.” He also discussed new and proposed tools such as housing counseling initiatives to promote sustainable homeownership. He cited the need to strengthen the Fair Housing language in the bill as one of HUD’s concerns.
Secretary Donovan also mentioned the rental housing provisions of the bill, referencing the National Housing Trust Fund (NHTF), saying, “The new system would also generate up to $5 billion a year for housing trust funds that would increase access to homeownership with tools like down payment assistance, as well as help produce affordable rental housing. I know this forum is focused on ownership, but let’s not forget the role that renting plays in our lives. Whether you are a young professional just starting out, or a veteran returning home from overseas, affordable rental housing can serve as an important stepping stone to homeownership. So these trust funds are key to achieving the larger goal of sustainable homeownership.”
Following the forum, NCLR issued a “Call to Action” to its members to call contact Senators to tell them that “housing finance reform must include meaningful access to affordable housing and a real commitment to the Latino community.”
The National Community Reinvestment Coalition (NCRC) issued a paper with nine recommendations on ways to improve the Johnson-Crapo bill and is circulating a sign-on letter urging changes before the bill goes forward. The NCRC recommendations center on assuring fair access to the market for all communities. Two pertain specifically to the market incentive fee that would generate revenue for the NHTF, the Capital Magnet Fund (CMF), and the Market Access Fund (MAF). The bill would allow participants in the mortgage insurance system to “opt out” of serving underserved communities by paying the highest possible fee. NLIHC and many others agree the opt-out provision should be dropped.
The bill also would allow the regulator to suspend the requirement to pay the market access fee upon a finding that doing so would contribute to the “financial instability of the Mortgage Insurance Fund.” A similar provision in the Housing and Economic Recovery Act of 2008 led to the current suspension of funding to NHTF and CMF. NLIHC has offered language to the Banking Committee staff to amend this provision.
The Urban Institute has also issued a paper with corrections, titled Johnson-Crapo GSE Discussion Draft: A Few Suggestions for Improvement, which focuses on two areas: the structure of provisions that place private capital in the first loss position and the structure of the market incentive fee that would be used to fund the NHTF, CMF, and MAF. The authors say that the structures of these two components of the bill have “intellectual appeal” but are “in practice, impossible to calibrate.” They recommend that “private capital should be provided exclusively by guarantors, and the affordable housing incentive structure should be replaced with an explicit loan-level fee structure, to create greater certainty on the part of market participants” in order to better serve underserved markets.
NLIHC strongly supports the treatment of the NHTF in the bill, and urges Senators to oppose any amendment that would weaken resources going to the NHTF. The bill would provide for a 10 basis point fee on all transactions that go through the Federal Mortgage Insurance Corporation (FMIC), estimated to generate $5 billion a year. The NHTF would receive 75%. NLIHC also supports changes to the bill to assure that underserved communities have access to credit, and to assure that existing Fair Housing and anti-discrimination laws are preserved in the bill. On behalf of 709 national, state, and local signatory organizations, NLIHC delivered a letter to Chairman Johnson and Ranking Member Crapo on April 4 thanking them for providing robust funding for the NHTF in their bill (see Memo, 4/4).
While the Senate Banking Committee is scheduled to hold its mark-up of the bill on April 29, there is some speculation that the mark-up may be moved back a week to allow more time to negotiate amendments that address stakeholder concerns.
Read Secretary Donovan’s remarks at: http://1.usa.gov/1nClLk2
Read the NCLR statement at: http://bit.ly/1kS86pd
Read the NCRC recommendations at: http://bit.ly/1jjXFaV
Read the Urban Institute recommendations at: http://urbn.is/1qZkCVM