Comment Detail

Comment

NCRC has nearly 600 community-based and community reinvestment organizations and partners across the country that focus on increasing the flow of private capital into traditionally underserved communities. We promote access to basic banking services, including credit and savings, affordable housing, small business lending and investments for vibrant communities.

At the outset, we support the progress FHFA has made from their early notices around the Duty to Serve rule on adding affordable homeownership preservation to the regulatory activities in the affordable housing preservation underserved market. We support the financing of shared equity, energy efficiency and distressed assets, and we urge you to build on those affordable homeownership activities.

LOAN PRODUCTS

Affordable Homeownership: Mortgage products are critical for affordable homeownership. There were a number of loan products the Enterprises used to provide in a safe and sustainable manner – products that weathered the financial crisis – that we would urge you to consider again. In some cases, these products would fit within statutory activities because there are related to state and local programs in the affordable homeownership preservation underserved market. They might also be additional activities in that market. Some would fit as products in rural markets. Others will facilitate affordable homeownership more broadly. I will run through a list of prior mortgage products that the Enterprises should consider re-introducing:

1. Location efficient/smart commute mortgages: If a borrower lived close to a subway, then the loan product allowed consideration of what the borrower would save by not using a car. Because the buyer had more money in their pocket, they got credit for the potential savings. Fannie Mae tried different products like this.

2. HOME Choice: Mortgage products for those with disabilities allowed low downpayment with pre- and post-counseling.

3. Sweat Equity products: When the borrower didn’t have cash, the borrower could spend nights and weekend to fix up their home. These products were valuable in the Colonias along the Mexican border. Local nonprofits would help buy the house and lot as an intermediary and help the family and provide construction support.

4. HOME Stay Mortgage: Product had a built in safety net in case of involuntary job loss, etc. This included mortgage cancellation coverage for 4-6 months in case of income volatility, which is a much bigger challenge today.

5. Native American Mortgage products. On tribal lands, you can’t own the dirt but can own the home. Tribe owns the dirt. The GSEs customized mortgage products for various tribes: Chippewa, Apache, Lakota Sioux, Chickasaw and Creek tribal lending. Fannie no longer has targeted Native American products, for example. They have a standard loan product that can be used on tribal trust land.

6. Nonprofit Developer Renovation Product: Enterprises would provide the developer low cost financing that would be secured to the property and would allow renovation (e.g. for small single family/duplex/-3-4 unit properties to sell in their community or invest in as rental).

7. Different Construction Lending Product

8. Bridge Loan Products: In cases where the neighborhood is gentrifying and nonprofits want to buy property but are competing against large public REITs and high end developers, Enterprises provided bridge financing to nonprofits to buy the property like the REIT and develop them and to get permit financing.

9. 9. Acquisition Development Loan product: Products used for construction and included permit financing.

ENTERPRISE PORTFOLIO PRODUCTS
10. Working Mortgage Product: This allowed automatic deduction from a checking account during a pay schedule, which allowed paying down the mortgage more quickly. This was a portfolio product. Would not work for a MBS execution.

11. Modifiable mortgage: Borrower could qualify for a lower rate mortgage without refinancing. Allowed a direct transaction with the lender.

12. Workforce housing products: Nonprofit and GSEs would both have first mortgage on the property at a low interest rate. Underwrite the loan as a normal risk loan. Borrower might receive down payment assistance from a local nonprofit and Fannie would underwrite the loan as first lien and allow a discount on the interest rate.

RENTAL:
13. Multifamily Lending Products: Products for public housing authorities to rehabilitate and renovate housing units. Instead of a mortgage, Fannie would get a pledge of their HUD capital grants for the next 10-15 years. Subject to appropriations risk, but it is a worthy investment.

Section 515 and 538: We are also happy to see Duty to Serve credit for loan purchases related to the Sections 515 and 538 programs.

OTHER:
14. Aging Populations. The U.S. is a graying nation and with a growing aging population, we would also urge loan products, purchases and investments in new construction and renovations that make it possible for the elderly to age in place.

HOUSING COUNSELING:
We urge the Enterprises to support and help finance more housing counseling. Although the Enterprises did not include a counseling requirement, we would urge housing counseling for chattel loan borrowers. We also urge you to extend your existing $500 grant to lenders for housing counseling to the manufactured housing andrural market programs.

CDFIs: ACTIVITIES & EQUITY INVESTMENTS
We support the provisions in the rule providing incentives for activities with Community Development Financial Institutions (CDFIs). Importantly, loan purchases from CDFIs should be eligible for Duty to Serve credit. In addition, we would urge FHFA to allow the Enterprises to resume investments in CDFIs.

Fannie used to invest in CDFIs in a number of ways, such as:
i) Invest in their stock as a non-controlling owner;
ii) Invest as an early investor as a way to attract other investors;
a) Used to make deposits from $50,000 and up.

LIHTC: We also support the resumption of Low Income Housing Tax Credit (LIHTC) investments in rural areas, including high-needs rural regions and populations. We know FHFA has this under review.

NEIGHBORHOOD STABILIZATION:
We also want to emphasize the importance of neighborhood stabilization outcomes with distressed asset financing and for a stronger relationship with nonprofits in your neighborhood stabilization programs.

RESIDENTIAL ECONOMIC DIVERSITY ACTIVITIES
We also support extra credit for residential economic diversity activities and particularly where products, purchases and investments reinforce and support work under HUD’s Affirmatively Furthering Fair Housing (AFFH) rule. There are 15 communities in the country that have completed their comprehensive fair housing assessments under AFFH so we would like to see to Duty to Serve credit in support of those communities and those areas that have community plans that promote mixed-income housing and integration in gentrifying neighborhoods. These are also areas where banks may be investing for CRA credit.

OUTREACH:
Because of the conservatorship, the Enterprises are not currently providing grants, which we believe are key to capacity building and providing sustainable homeownership opportunities to underserved borrowers and communities – low income, rural and minority. In the absence of grantmaking, outreach to effective intermediaries is absolutely critical to reach underserved communities and key demographics where we want to see improvements in the homeownership rate. Some effective intermediaries have been: minority realtors, minority financial institutions, churches, nonprofits and others that are serving underserved borrowers and communities. The Enterprises used to spend millions on outreach, far less than they spend today. The lack of funding for grants and outreach is inhibiting the ability of the Enterprises to facilitate access to credit in traditionally underserved communities.