White House Unveils Housing Finance Reform Plan

The Trump administration released on September 5 a plan outlining legislative and administrative reforms to the nation’s housing finance system. The proposal includes the recapitalization and release from federal government conservatorship of Fannie Mae and Freddie Mac and the elimination of the entities’ affordable housing goals, which would be replaced with a “more efficient, transparent, and accountable mechanism.”

The Senate Banking Committee is scheduled to hold a hearing on the proposal on September 10 with Treasury Secretary Steven Mnuchin, HUD Secretary Ben Carson, and Federal Housing Finance Agency Director Mark Calabria. Committee Chair Mike Crapo responded to the White House proposal stating, “My preference is to fix the housing finance system through legislation, and I look forward to working with all of my colleagues as we move forward.  At the same time, it is important for the administration to begin moving forward on key administrative reforms.…”

Ranking Member Sherrod Brown criticized the proposal, saying, “President Trump’s housing plan will make mortgages more expensive and harder to get. I’m urging the President: Make it easier for working people to buy or rent their homes, not harder." House Financial Services Chairwoman Maxine Waters (D-CA) also released a statement criticizing the proposal, saying it would cause “significant damage for low-income persons and communities of color.”

The White House proposal would eliminate Fannie Mae’s and Freddie Mac’s affordable housing goals, suggesting that the goals suffer from a lack of transparency and accountability to taxpayers. While the administration recommends replacing the goals with a more transparent framework, it provides few details about how that new system would work in practice. Moreover, the administration notes that an alternative approach could be adopted. Under this approach, an assessment could be periodically collected from the guarantors and administered as an appropriation through HUD’s on-budget housing programs. Providing on-budget funding to HUD programs, however, could result in fewer affordable housing investments overall if Congress were to offset regular spending on housing programs by the amount collected by the guarantors.The proposal does not specifically mention changes to the national Housing Trust Fund, which is funded through a small annual assessment on Fannie Mae’s and Freddie Mac’s books of business. In past bipartisan efforts, funding for the Housing Trust Fund would have been increased to $3.5 billion annually.

“Achieving comprehensive housing finance reform requires moving the conversation forward, not back - but the administration recycles old, tired proposals that have been refuted and rebuked,” said NLIHC President and CEO Diane Yentel in a press statement. “Among other unacceptable proposals, the administration would eliminate Fannie Mae and Freddie Mac’s affordable housing goals, reduce access to credit for historically underserved borrowers, and neglect to increase funding for the national Housing Trust Fund (HTF).”

HUD also released a set of recommendations, including eliminating the cap on public housing units that can convert under the Rental Assistance Demonstration (RAD), which allows public housing agencies to attract Low Income Housing Tax Credits and other resources to rehabilitate and preserve the rental homes by converting to Section 8 rental assistance contracts. The current statutory cap on RAD is 455,000 units.

HUD’s proposal would also realign housing assistance programs within the agency. Currently, the Federal Housing Administration (FHA) commissioner oversees both mortgage insurance programs at the FHA and HUD rental assistance programs, including project-based rental assistance, Section 202 Housing for the Elderly, and Section 811 Housing for People with Disabilities, among others. Under the proposal, the role of the FHA commissioner would be separated from its responsibilities overseeing HUD programs. Instead, a new Office of Rental Subsidy and Asset Oversight would be created to oversee HUD’s major rental assistance programs, including project-based rental assistance, public housing, and Housing Choice Vouchers. The proposal would establish the Office of Native American Programs as a separate office, led by a presidentially appointed, Senate-confirmed assistant secretary.

Read the White House proposal at: https://bit.ly/2lFeMR8

Stream the hearing at: https://bit.ly/2kkdMlu

Read Diane’s press statement at: https://bit.ly/2lKlBks