10/22/2019 - The End of Affordable Housing? A Review of the Trump Admin...(EventID=110118)

Video Description

Tuesday, October 22, 2019 (10:00 AM) -- Hearing: The End of Affordable Housing? A Review of the Trump Administration’s Plans to Change Housing Finance in America Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/FinancialDems/ Follow us on Twitter: https://twitter.com/FSCDems --- There will be one panel with the following witnesses: • The Honorable Steven T. Mnuchin, Secretary, U.S. Department of the Treasury • The Honorable Dr. Benjamin S. Carson, Secretary, U.S. Department of Housing and Urban Development • The Honorable Dr. Mark A. Calabria, Director, Federal Housing Finance Agency Background On March 27, 2019, the Trump Administration released a memo, directing Treasury Secretary Mnuchin to develop a plan for reforming Fannie Mae and Freddie Mac (the Enterprises) and directing Department of Housing and Urban Development (HUD) Secretary Carson to develop a plan for reforming Ginnie Mae and the Federal Housing Administration (FHA). On September 5, 2019, Treasury and HUD responded to that memo with their respective plans. Summary of Treasury and HUD Plans The Treasury and HUD plans lay out both legislative recommendations that would require Congressional action, and administrative recommendations that could be implemented without Congressional action. The administrative recommendations in the Treasury plan would largely depend on action by the Federal Housing Finance Agency (FHFA) while the administrative recommendations in the HUD plan would be carried out by HUD. The plans do not provide legislative language associated with the legislative recommendations. In general, the legislative and administrative recommendations in both plans broadly aim to limit the federal role in the housing finance system. Legislative Recommendations The Treasury plan includes legislative recommendations that provide the basic framework for structural reforms that would create a multi-guarantor system with Ginnie Mae at the center. Ginnie Mae would be given additional authority to offer an explicit, paid-for guarantee of the timely payment of principal and interest on mortgage-backed securities (MBS) backed by eligible conventional singlefamily and multifamily mortgage loans. The Enterprises would be re-chartered on the same charter that would be available to potential competitor guarantors. The Federal Housing Finance Agency (FHFA) would continue to regulate the guarantors and would have the authority to approve new guarantors as well as foster competition between the guarantors. The availability of a government guarantee through Ginnie Mae would be conditioned on an FHFA-approved guarantors taking the first-loss position on the MBS through specified credit enhancement on the mortgage collateral securing the MBS. FHFA would set underwriting standards for eligible loans, and the guarantors would be prohibited from investing in mortgage-related assets or other investments except to the limited extent necessary to engage in the business of securitizing governmentguaranteed MBS. In order to preserve small lender access, each guarantor would be required to maintain a nationwide presence, operate a cash window for small lenders, and be prohibited from offering volumebased discounts. The plan does not discuss whether the guarantors would continue to allocate 4.2 basis points of the unpaid principal balance of new business purchases to fund the Housing Trust Fund and Capital Magnet Fund, but the statutory affordable housing goals would be replaced with a new fee that would be made available through appropriations to fund affordable housing programs targeted to first time homebuyers, low and moderate income, rural, and other historically underserved borrowers. The replacement of the affordable housing goals with a fee is similar to the approach taken in the leaked discussion draft from Senator Corker, which was widely criticized by civil rights groups and other advocates. Under the legislative recommendations in HUD’s plan, FHA would be re-chartered as an autonomous government corporation within HUD. It is unclear how this would affect the budgets of FHA and HUD. However, given that HUD’s plan states that this would “provide the agency tools and resources necessary to make appropriate risk decisions to respond to changing markets,” this could may also include eliminating or decreasing the offsetting receipts that FHA currently provides for the overall HUD budget, allowing FHA to keep more or all of those receipts. Today, HUD program funding is offset, in part, by FHA receipts. HUD’s plan would also reorganize its current offices by making the FHA Commissioner’s role and responsibilities distinct and separate from the Assistant Secretary for Housing, who would be tasked with overseeing a new Office of Rental Subsidy and Asset Oversight that would oversee all of HUD’s multifamily housing subsidy programs, public...