HUD Secretary, FHFA Director Testify Before Senate Banking Committee
On June 9, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing on the oversight of housing regulators. Secretary Ben Carson of the Department of Housing and Urban Development and Director Mark Calabria of the Federal Housing Finance Agency testified before the full committee.
Director Calabria updated the committee on the steps the Federal Housing Finance Agency has taken to aid homeowners during the COVID-19 pandemic. In his testimony, he stated that there is still much work to be done when it comes to building capital for Fannie Mae and Freddie Mac, and voiced his strong support for housing finance reforms. He stated that the COVID-19 pandemic provided evidence of critical vulnerabilities in the mortgage system that put taxpayers and the housing market at risk. And that Fannie Mae and Freddie Mac lack the capital to withstand a serious housing downturn. He discussed why in order to provide a stronger foundation on which to weather periods of financial stress, the Federal Housing Finance Agency released a re-proposed capital rule on May 20, and how it would help Fannie Mae and Freddie Mac fulfill its statutory mission across the economic cycle.
In his testimony, Secretary Carson highlighted the Federal Housing Administration’s response during the pandemic, stating that the Federal Housing Administration acted quickly to help protect single-family homeowners who lost their jobs or experienced economic hardship due to the COVID-19 pandemic. These actions were identical to those of the Federal Housing Finance Agency and also featured a payment deferral program to avoid large lump-sum payments. Secretary Carson also addressed the expansion of Ginnie Mae’s pass-through assistance program.
Secretary Carson noted during the hearing that the CARES Act adopted in March provided more than $12 billion to HUD programs including $3 billion in Community Development Block Grant funds and more than $1 billion for rental assistance programs. Of the $12.4 billion that HUD received from the CARES Act, $9.1 billion has already been allocated and Secretary Carson said the remaining Community Development Block Grant funds will be allocated by October 1st. The remaining $2.96 billion Emergency Solutions Grant fund allocations were also announced by the Secretary during the hearing. Regarding rent payments, Secretary Carson urged HUD-assisted renters to recertify their incomes with their local Public Housing Authorities if they need lower rent payments due to COVID-19.
A few Senators expressed their opinion that many Americans still need more targeted rental assistance and expanded unemployment benefits. While expressing to the committee that HUD will closely monitor the unfolding economic situation and its impact on the state of housing, Secretary Carson did not comment on any plans for future housing-related COVID-19 funding.
Senator Sherrod Brown, Ranking Member of the Senate Banking Committee, expressed his concerns with Secretary Carson’s leadership and voiced his frustration with a HUD proposal to alter how the agency identifies and remedies housing discrimination. Specifically, Senator Brown urged Secretary Carson to reject changes proposed in the HUD August 2019 Proposed Rulemaking on Fair Housing Act’s Disparate Impact Standard. To view the full Senate hearing, click here.
Treasury Secretary Testifies on Implementation of Paycheck Protection Program
On June 10th, Secretary of the Treasury Steve Mnuchin and Small Business Administration Administrator Jovita Carranza, testified before the Senate Small Business and Entrepreneurship Committee on the implementation of the Paycheck Protection Program.
Secretary Mnuchin praised the Paycheck Protection Program and senators on both sides of the aisle agreed the latest unemployment report from May, which saw the unemployment rate drop to 13.3% with some 2.5 million jobs regained, was the result, in part, to jobs saved through the program. Chairman of the Small Business and Entrepreneurship Committee, Senator Marco Rubio (R-FL), estimated during the hearing that at the current loan numbers, the Paycheck Protection Program saved roughly 50 million jobs, and that without the program, the U.S. would have witnessed the extinction of a majority of small businesses.
Secretary Mnuchin said the Trump administration wants to work on providing further economic relief, whether through the Paycheck Protection Program, tax credits, or other avenues. He stated that a fourth round of fiscal stimulus should include help for the travel industry, retail and leisure businesses, and possibly more direct-cash assistance for American families. However, while the Trump administration has also discussed a capital gains tax cut, Secretary Mnuchin indicated it’s not the best approach to the current crisis.
Over $130 billion remains untapped in the second round of funding and the period in which the funds must be spent was extended from eight to 24 weeks, to help still struggling industries still such as restaurants and hotels. Originally the program rules required that borrowers spend 75 percent of their funds on payroll to have their loans forgiven. Last week that threshold was reduced to 60 percent, and Secretary Mnuchin confirmed to Senator Rubio during the hearing that even borrowers who spend less than that on payroll will be eligible for partial loan forgiveness, so long as 60 percent of the amount forgiven went to payroll.
Several senators raised concerns at the hearing about the program’s reach among minority-owned businesses and want the Secretary to direct more funds to minority-owned businesses and provide easier access to the funds for small-business owners with prior felony convictions, to which the Secretary agreed.
The Senate is still, however, no closer to reaching an agreement on another round of stimulus. Senate Democrats continue to demand financial assistance for states whose budgets have been hit by declining revenue, while Senate Republicans are garnering support for liability protections for businesses.
House Democrats passed the HEROES Act in May, which included an additional $3.5 trillion in emergency relief for COVID-19, but Republicans in control of the Senate have rejected that proposal and plan to wait until late July before considering their own alternative.
To view the full Senate Small Business Committee hearing, click here.
House Hearing Focuses on Rent and Evictions
On June 10th, the House Financial Services Subcommittee on Housing, Community Development and Insurance held a hearing, The Rent Is Still Due: America’s Renters, COVID-19 and an Unprecedented Eviction Crisis, which featured witnesses and testimony on the impact COVID-19 will have on evictions and rental assistance.
Witnesses detailed the role systemic racism plays in housing segregation, as well as the pandemic’s disproportionate impact on black and Latino workers and the need for rental assistance programs to consider equity concerns and reduce housing discrimination. Concerns were also raised during the hearing that the COVID-19 pandemic has exacerbated a pre-existing housing shortage of roughly 7.3 million units, and panelists urged Congress to provide additional renter assistance. Witness testimony linked housing availability to public health and members of the committee heard the importance a stable housing situation can play in helping people protect themselves from COVID-19.
Some members of the committee noted that the federal government plays a smaller role in rental housing regulation than in the mortgage market – rental housing oversight is instead left to states, resulting in a patchwork of regulations, while others noted that an eviction moratorium is not a long-term solution, as owed rent will continue to build up over time and small-scale landlords will have to forgo revenue.
Questions were also heard about the current amount of rental assistance provided in the HEROES Act, as well as concerns on how best to disburse rental assistance funding (including if funding should be directed through project-based Section 8 and the HOME program instead of, or in addition to Emergency Solutions Grants), how to best promote racial equity in the disaster response, and how to help small landlords navigate loss of income and maintenance demand during the pandemic.
The full House Financial Services Subcommittee hearing can be viewed here.