February 7, 2019

Summary of the Latest Housing Finance Reform Proposal

Community Developments

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  • In a new blog post, Enterprise’s Vice President of Policy Development and Research Andrew Jakabovics summarizes and responds to Senator Mike Crapo’s (R-ID) recent outline for housing finance reform. The proposal would convert Fannie Mae and Freddie Mac (the government-sponsored enterprises, or GSEs) into private guarantors of mortgage-backed securities that would then be sold through a platform operated by Ginnie Mae. The new Ginnie Mae–backed securities would carry an explicit full-faith and credit guarantee from the federal government that would be paid for by the GSEs, and by any other guarantors who enter the market later. The outline also proposes to eliminate any affordable housing goals and duty to serve obligations, replacing them with a new “Market Access Fund.” Jakabovics argues that eliminating the explicit commitment to affordable housing is a step in the wrong direction and that the housing finance system should be designed from the start to serve eligible borrowers of modest and mid-priced homes in the normal course of business and without special programs. Learn more about the reform outline as well as Enterprise’s initial reaction to the proposal on our blog.
  • Federal Reserve Board Governor Lael Brainard stated that she wants to see the three federal banking agencies to work together on Community Reinvestment Act (CRA) reform rather than pursue separate tracks. Speaking at a CRA research symposium hosted by the Federal Reserve Bank of Philadelphia, Brainard said “if there is one common thread, it is that support for the Community Reinvestment Act is broad and deep.” Stakeholders largely agree that elements of the CRA require modernization, particularly how assessment areas are determined. In late 2018, the Office of the Comptroller of the Currency (OCC) made the unusual step in issuing an advanced notice of proposed rulemaking on CRA reform without the participation of the other two agencies responsible for CRA enforcement. (American Banker, February 1) In November, Enterprise shared our priorities for modernizing CRA, including preserving a focus on affordable housing; updating assessment areas to address national lending and investment challenges; and retaining an explicit investment test with an emphasis on community development activities. Read more about Enterprise’s priorities for CRA reform on our blog.
  • Until they face natural disasters and other calamitous events, many homeowners do not realize that their homeowner’s insurance does not cover the full cost of rebuilding. To help homeowners get ahead of this trend, CoreLogic has released a primer that explains why reconstruction costs are often higher than the home valuation itself. This resource aims to prevent homeowners from finding themselves underinsured after disasters and enable them to rebuild without defaulting on their mortgage. (CoreLogic, February 6)
  • Yesterday the U.S. Impact Investing Alliance (USIIA) and the Beeck Center for Social Impact and Innovation at Georgetown University released a set of principles and an impact measurement framework to help guide the development of the Opportunity Zones market. Executive Director of the USIIA Fran Seegull stated that in order for Opportunity Zones to achieve a transformative impact, including equitable growth and economic opportunity, “it is important that those entering this market remain committed to transparency and community engagement.” (PRNewswire, February 6)
  • On Tuesday, Nevada Senator Catherine Cortez Masto (D-NV) introduced a bill that would restore a Dodd-Frank rule designed to protect homebuyers from discriminatory lending practices by requiring commercial lenders to provide lending data to the public. The Home Loan Quality Transparency Act would reimplement a rule that requires any bank or lender that issued more than 25 mortgage loans per year to release information on these loans to the public. The legislation would require greater transparency on mortgage lending based on loan category, home type, and the race, gender, and ethnicity of the buyer in order to protect vulnerable communities from redlining and other discriminatory practices. (CityLab, February 6)


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