Additional Testimony on Rural Development Funding for FY 2015
This week, NAHMA submitted testimony to the Senate Appropriations Subcommittee on Agriculture, Rural Development and the FDA regarding the US Department of Agriculture’s budget request for fiscal year 2015. The testimony is nearly identical to what NAHMA submitted to the House Appropriations Committee last week with the majority of the testimony focused on Rural Development’s requested funding and new legislative authorities for its Section 521 Rural Rental Assistance (RA) Program.
On March 27, the Secretary for the U.S. Department of Agriculture, Tom Vilsack, appeared before the Senate Appropriations Subcommittee on Agriculture to discuss the Obama Administration’s budget request for agriculture and Rural Development programs in FY 2015. However, RA and other multifamily housing programs were only mentioned in passing – the Subcommittee’s Ranking Member, Roy Blunt (R-MO), stated that he looks forward to working with Secretary Vilsack on increasing oversight of the Rental Assistance program. Still, it is important that NAHMA submitted our testimony ahead of this hearing so that lawmakers could be prepared to inquire more about the budget proposal for multifamily programs.
To view NAHMA’s testimony, please
click here.
Housing Finance Reform Proposed in the House of Representatives
On March 27th, Representative Maxine Waters (D-CA) introduced her Housing Opportunities Move the Economy (HOME) Forward Act of 2014, a bill which seeks comprehensive reform of the housing finance market. Similar to other housing finance legislation introduced in the House and Senate, the HOME Forward Act would eliminate the government-sponsored enterprises’ (GSEs) Fannie Mae and Freddie Mac and replace them with a more flexible approach that places more credit risk in the markets rather than the federal government.
Congresswoman Waters’ HOME Forward Act would establish the National Mortgage Finance Administration with the purpose of ensuring access to affordable mortgage credit, including 30-year fixed mortgages, and protecting taxpayers for absorbing losses incurred in the secondary markets in periods of economic stress. Under this Administration, a new lender-owned Mortgage Securities Cooperative would be created that will be the single issuer of government-guaranteed securities and will be governed on a “one-member, one-vote basis”. The Act creates an explicit government guarantee, which would be paid for by the housing finance industry and used to capitalize a catastrophic insurance fund. Small financial institutions will have direct access to a “cash window” in order to preserve their access to the secondary market.
Additionally, the HOME Forward Act contains many provisions which aim to strengthen the multifamily market and improve “transparency, accountability, and efficiency” within affordable housing. First, the bill requires the collection each year of 10 basis points for each dollar outstanding of mortgages guaranteed under FHFA’s common securitization platform, including multifamily securities. These collected funds would be divided as such:
- 75% would go to the Housing Trust Fund, a fund established in the Housing and Economic Recovery Act of 2008 with the purpose of increasing the supply of affordable housing for low-income families. The Housing Trust Fund was intended to be funded by Fannie Mae and Freddie Mac. However, when these two GSEs were placed into conservatorship by the U.S. Treasury in September of 2008, contributions were suspended.
- 15% would go to the Capital Magnet Fund, which is an account within the Community Development Financial Institution (CDFI) Fund from the Treasury Department. The Capital Magnet Fund is used to develop, preserve, rehab, or purchase affordable housing intended for low-income individuals/families.
- 10% would go to a newly created Market Access Fund, which is intended to promote innovation in housing finance and affordable housing through rental programs for families with incomes not exceeding 120% of AMI and through the development of abandoned and foreclosed properties.
Next, the bill seeks to reform the financing options for multifamily properties by building on the strength of the successful multifamily business programs developed by the GSEs. These businesses will be transferred to a proposed Multifamily Platform that would be created by the Mortgage Securities Cooperative. The Multifamily Platform would foster a liquid multifamily finance market, purchase and securitize multifamily mortgages, facilitate credit loss mitigation and ensure that rural and underserved areas have access to the secondary mortgage market. Banks or non-bank mortgage originators that currently meet the GSEs’ affordability standards would be eligible members of the Multifamily Platform.
The National Mortgage Finance Administration would establish standards for the Platform with minimum underwriting criteria for multifamily mortgages as well as internal controls and liquidity reserves. Furthermore, the Administration would be required to establish a capital structure plan for the Platform with risk-based capital requirements. An “Initial Capitalization Amount” would be created for the Multifamily Platform along with a segregated “Initial Capitalization Fund”.
Although the bill seeks to maintain the GSEs’ multifamily business, it would repeal its mandatory affordable housing goals. According to a summary of the bill, the repeal of this requirement is offset by a “broad duty [on behalf of lenders] to serve the entire market, including underserved urban and rural markets.” Maxine Waters’ legislation comes as both House and Senate lawmakers debate over housing finance reform. While many members of Congress agree that Fannie and Freddie must be eliminated, there is still disagreement over measures to ensure affordable multifamily housing is supported through reforms. NAHMA will follow the progress of this and other housing finance reform bills as they progress.
To Read a summary of this bill, please
click here to be redirected to the House Financial Services website (minority site).
