News

House Committee Passes FY-19 THUD Funding Bill; Modest Increases for Most Housing Programs

The US House of Representatives Appropriations Transportation, Housing & Urban Development Subcommittee released its draft FY-2019 T-HUD funding language on May 15 and approved the measure on May 16 by a voice-vote.   The full Appropriations committee subsequently passed the legislation with modest changes on May 23.  The legislation includes a net discretionary total of $43.6 billion for the Department of Housing and Urban Development, an increase $941 million above the fiscal year 2018 enacted level and $11.9 billion above the request. The measure is scheduled to marked-up today (May 16).  The initial draft maintains comparable funding levels for critical HUD programs to what was recently adopted for FY-2018.   The measure is not currently scheduled for consideration on the floor of the House of Representatives.  The Senate T-HUD Appropriations Committee is expected to begin consideration of its version of the legislation in the coming weeks.

Funding Highlights include:

Making Sense of Jobs and Employment Data

Wall Street expectations were running high earlier this month in advance of the Bureau of Labor Statistics (BLS) March 2018 employment report. On the heels of February’s strong numbers and a string of seven straight years of private sector gains, investors projected 185,000 new jobs would be added to payrolls, and the unemployment rate would drop from its 5-month 4.1% plateau to 4.0%.

But, the anticipated April 6 report provided some lower than expected numbers—only 103,000 jobs were added in March and the unemployment rate stayed at 4.1% for a sixth consecutive month. Still there is no consensus if the news was good or bad for the economy with varied reactions from different parties.

While economists and politicians continue their debates, we cannot lose sight of the importance of these numbers to NH&RA members. In this article, I provide additional color around the monthly jobs numbers.

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Economic and Fixed Income Insights, May 23, 2018

Presented by Stifel, Nicolaus & Company, Inc.

Minutes from the Federal Open Market Committee’s May gathering indicated Fed officials are on track to raise rates again “soon,” and markets have priced a June hike as a near certainty.  The Committee’s view of the overall economy remains generally positive, but the sustainability of recent price pressures remains a concern for the policymakers.  Also of concern to the officials is the flattening yield curve.  Even as the 10-year UST has recently crossed the 3% threshold, the front end of the curve has outpaced the benchmark, and the spread between the 2-year and 10-year UST has tightened to just 49 basis points.  Further flattening will only evoke more unease as an inverted curve has preceded all major recessions in recent history.  Today, the 10-year US note is yielding 3.06%, and the 30-year bond stands at 3.21%.  In the tax-exempt market, both the 10-year and 30-year MMD climbed 4 basis points for the week to yield 2.55% and 3.07% respectively.

Interest Rate Observations

Source: Thomson Reuters, Bloomberg. The table above reflects market conditions as of May 22, 2018.

Important Disclosures

This material was prepared by Stifel, Nicolaus & Company, Incorporated (“Stifel”). This material is for informational purposes only and is not an offer or solicitation to purchase or sell any security or instrument or to participate in any trading strategy discussed herein. The information contained is taken from sources believed to be reliable, but is not guaranteed by Stifel as to accuracy or completeness. Past performance is not necessarily a guide to future performance. Stifel does not provide accounting; tax or legal advice and clients are advised to consult with their accounting, tax or legal advisors prior to making any investment decision.

 

Stifel, Nicolaus & Company, Incorporated is a broker-dealer registered with the United States Securities and Exchange Commission and is a member FINRA, NYSE & SIPC. © 2018

C. Lamar Seats Named DAS for Multifamily at HUD; Senate Confirms Brian Montgomery as FHA Commissioner

HUD has announced that C. Lamar Seats as the Deputy Assistant Secretary for the Office of Multifamily Housing Programs. Lamar brings more than 25 years of experience in commercial, market and affordable multifamily mortgage banking through his previous leadership roles with various lending institutions. Immediately before beginning his Federal career with HUD, Lamar was a Managing Director at M&T Realty Capital Corporation where he was responsible for multifamily agency loan production with FHA, Fannie Mae, and Freddie Mac. Prior to that, he was CEO of Bellwether Enterprise Real Estate Capital LLC, Senior VP of Enterprise Community Investment, Inc., and Senior VP of Reilly Mortgage Group, respectively.

The Senate also confirmed Brian Montgomery as commissioner of the Federal Housing Administration (FHA) with a vote of 74-23 on May 23, 2018. This marks Montgomery’s second term as FHA commissioner after he held the position under former President George W. Bush and for six months under President Barack Obama. Montgomery was also acting secretary of the U.S. Department of Housing and Urban Development.

HUD Suspends Affirmatively Furthering Fair Housing Rule Indefinitely

On May 23, HUD has issued three separate but related notices in the Federal Register indefinitely suspending the implementation of the 2015 Affirmatively Furthering Fair Housing (AFFH) rule and removing its Assessment of Fair Housing (AFH) tool for local governments. This was achieved by withdrawing the Local Government Assessment Tool developed by HUD for use by local governments that receive Community Development Block Grants, HOME Investment Partnerships Program, Emergency Solutions Grants, or Housing Opportunities for Persons With AIDS formula funding from HUD when conducting and submitting their own Assessment of Fair Housing (AFH) under the Affirmatively Furthering Fair Housing (AFFH) regulations. HUD has indicated in the Federal Register that since its initial implementation it has become aware of significant deficiencies in the Tool impeding completion of meaningful assessments by program participants and as a result is withdrawing the Local Government Assessment Tool. Following this withdrawal of the Local Government Assessment Tool, HUD will review the Assessment Tool and its function under the AFFH regulations to make it less burdensome and more helpful in creating impactful fair housing goals. Accordingly, this withdrawal notice also solicits comments and suggestions geared to creating a less burdensome and more helpful AFH Tool for local governments.

The notices can be viewed at:

House Delays Action on White House Rescissions Affecting Prior HUD and RD Appropriations

The House has put off a vote on President Trump’s proposed rescission request, which recently passed legal muster under a Government Accountability Office study (only $134 million, all from the Transportation Department, was decided as improper to impound of the total $15.2 billion).

House Majority Leader Kevin McCarthy (R-CA) stated the reason is simply an already full docket of for the House to consider between now and the Memorial Day recess. Some have speculated that a delay may also be in place to allow the White House to remove some more politically sensitive issues from the document to better ensure passage in the House, where members are fully aware of elections in less than 6 months.

The effects of such rescissions would be detrimental to affordable housing and community development, clawing back millions of dollars from HUD, Rural Development, the CDFI Fund, and Capital Magnet Fund.

–May 16, 2018– The Trump Administration sent a proposal to Congress on May 8 that calls for the rescission of over $15 billion in prior appropriated federal funds. The following affordable housing and community development related programs would be affected:

  • Over $41 million – HUD’s Public Housing Capital Fund
  • $40 million – Rural Housing Service Rental Assistance Program (Dept. of Agriculture)
  • $2 million – Rural Community Facilities (Dept. of Agriculture)
  • $22.7 million – CDFI Fund (Treasury)
  • $151.2 million – Capital Magnet Fund (Treasury)

NH&RA strongly opposes this proposal and is coordinating with industry partners on a formal response, which will be released shortly.  The plan remains a proposal and has not been put into law.

Economic and Fixed Income Insights – May 16, 2018

Economic and Fixed Income Insights

Housing disappointed in April as starts dropped 3.7%, driven by an 11.3% decline in multifamily units, and permits fell 1.8%.  Residential construction activity has been lackluster in recent months as builders are grappling with the rising costs of materials and labor.  Rising rates are expected to further inhibit residential construction over the near term.  In contrast with housing, retail sales and industrial output both picked up in April, setting second quarter GDP on a path to 3% growth.  In the bond market, yields continue to rise on expectations of further Fed tightening.  The benchmark 10-year US note finished 9 basis points higher for the week to yield 3.07%, and the 30-year bond stands at 3.20%.  Tax-exempt yields trended higher with Treasuries. The 10-year MMD climbed 8 basis points to yield 2.51% and the 30-year MMD finished the week 6 basis points higher to yield 3.03%.

Interest Rate Observations

Source: Thomson Reuters, Bloomberg. The table above reflects market conditions as of May 15, 2018.

Important Disclosures

This material was prepared by Stifel, Nicolaus & Company, Incorporated (“Stifel”). This material is for informational purposes only and is not an offer or solicitation to purchase or sell any security or instrument or to participate in any trading strategy discussed herein. The information contained is taken from sources believed to be reliable, but is not guaranteed by Stifel as to accuracy or completeness. Past performance is not necessarily a guide to future performance. Stifel does not provide accounting; tax or legal advice and clients are advised to consult with their accounting, tax or legal advisors prior to making any investment decision.

Stifel, Nicolaus & Company, Incorporated is a broker-dealer registered with the United States Securities and Exchange Commission and is a member FINRA, NYSE & SIPC. © 2018