Freddie Mac Tag Archives

Freddie Mac Publishes White Papers on Rural Affordable Housing in Appalachia & Indian Country

Freddie Mac has published two new white papers titled, “Spotlight on Underserved Markets: LIHTC in Rural Middle Appalachia”  and “Spotlight on Underserved Markets: LIHTC in Indian Areas.”

In the first paper, Freddie Mac explores Middle Appalachia’s multifamily housing market with a special focus on the primary means of developing affordable housing in undeserved markets: the Low-Income Housing Tax Credit (LIHTC) program. We take a look at the market size of this subsidy program, including the geographic distribution of properties receiving LIHTC allocations, its importance in serving lower-income households, and we highlight some challenges to development based on demographic, economic and topographical factors.  Below are some of the key findings of the research:

  • There are 5.4 million residents in rural Middle Appalachia as defined by Duty to Serve. This represents 1.7 percent of the total U.S. population and 7.2 percent of the nation’s rural population.
  • The population of rural Middle Appalachia skews older than the nation as a whole.
  • Income in rural Middle Appalachia is 40 percent lower than the national average and 20 percent lower than the rural average.
  • Rental housing, and multifamily rental housing in particular, is rare in rural Middle Appalachia. Only 26.7 percent of households are renters (compared to 36.4 percent nationally). Of these renter households, only 16.7 percent rent multifamily units (compared to 42.6 percent nationally).
  • Developing new rental housing often requires multiple sources of capital. The LIHTC program is the most popular housing subsidy for providing affordable housing and, on average, supports about 25 properties in rural Middle Appalachia each year.
  • Although LIHTC properties support a small percentage of all households in rural Middle Appalachia compared with the nation, they support a relatively high percentage of Middle Appalachian multifamily renters and play a vital role in providing affordable rental housing for tenants who would otherwise be severely rent-burdened.

In the second paper, Freddie Mac aims to provide clarity on the definition of Indian Areas and explore the role that the
LIHTC program plays in providing affordable multifamily rental housing for tribal members throughout the nation. It examines the market size of this subsidy program, as well as demographic and economic characteristics of Indian Areas, and we highlight some challenges to LIHTC development that are unique to this market.  Some of the key findings of the research:

  • Multifamily rental housing is rare in Indian Areas. The multifamily stock that does exist typically requires housing subsidies, namely the LIHTC program.
  • Debt financing for LIHTC housing is very limited. As such, projects heavily depend on tax credit equity and housing grants.
  • LIHTC properties in Indian Areas tend to be very small. Only 3.4 percent of the properties have 100 or more units, compared with 23.3 percent in the nation.
  • Set-asides for tribal LIHTC projects are offered by three states, while several others have preferences for projects that serve this population.
  • The poverty rate and unemployment rate among tribal members is more than double that of the nation. Household income is 31 percent lower. This makes the development and operation of affordable housing more difficult, particularly without subsidies.
  • There are over 2,000 LIHTC properties in Indian Areas supporting over 80,000 units. However, this is an overestimate of the tribal LIHTC stock because not all properties that fall within the boundaries of Indian Areas specifically focus on serving tribal members.
  • The unique definition of Indian Areas makes it difficult to precisely measure demographic, economic and housing characteristics.
  • Despite these challenges, tribal housing authorities successfully develop LIHTC housing in Indian Areas each year, though the rate of development is too slow to close the gap in housing over the near or moderate term.

 

 

Senate Committee To Hold Oversight Hearing on GSE Pilot Programs

The Senate Committee On Banking, Housing and Urban Affairs will meet in on October 18 to conduct a hearing entitled “Oversight of Pilot Programs at Fannie Mae and Freddie Mac.”  The witnesses will be:

  • Ms. Sandra Thompson, Deputy Director, Division of Housing Mission and Goals, Federal Housing Finance Agency; 
  • Mr. Timothy J. Mayopoulos, Chief Executive Officer, Fannie Mae; and
  • Mr. Donald H. Layton, Chief Executive Officer, Freddie Mac.

It is unclear at time of press which Pilot Programs will be addressed during the hearing, which will be webcast live.

House Financial Services Committee Schedules GSE Reform Hearing on Sept. 27

The Committee on Financial Services will hold a hearing entitled “Oversight of the Federal Housing Finance Agency’s role as conservator and regulator of the Government Sponsored Enterprises” on Thursday, September 27, 2018, at 10:30 a.m. in room 2128 of the Rayburn House Office Building. This will be a two-panel hearing with the following witnesses:

Panel One:

  • The Honorable Laura Wertheimer, Inspector General, Federal Housing Finance Agency

Panel Two:

  • The Honorable Melvin Watt, Director, Federal Housing Finance Agency
  • Mr. Timothy Mayopoulos, CEO, Federal National Mortgage Corporation (Fannie Mae)
  • Mr. Donald Layton, CEO, Federal Home Loan Mortgage Corporation (Freddie Mac)

The Housing and Economic Recovery Act (“HERA”) of 2008 created the Federal Finance Housing Agency (“FHFA”). FHFA is an independent agency charged with the supervision, regulation, and oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Bank System, which includes the 11 Federal Home Loan Banks. On September 7, 2008, then-FHFA Director, James Lockhart, used the statutory authority provided by HERA to place both Fannie Mae and Freddie Mac into conservatorship.

This hearing will examine the FHFA’s performance as the regulator and conservator of the Government Sponsored Enterprises, which include Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Specifically, the Committee will examine FHFA’s policies and procedures used to supervise Fannie Mae and Freddie Mac, the FHFA’s structure, and the need to reform the housing finance system in the United States.

House Members Introduce Bipartisan GSE Reform Measure

On September 6, the tenth anniversary of the federal government’s takeover of Fannie Mae and Freddie Mac, retiring House Financial Services Committee chair Jim Hensarling (R-TX) released a discussion draft for the Bipartisan Housing Finance Reform Act. The measure is co-sponsored by Reps. John Delaney (D-MD) and Jim Himes (D-NY) and would eliminate Fannie Mae and Freddie Mac, moving most of their functions into Ginnie Mae.  Billed as a “grand bargain” the measure would codify an explicit government Mortgage Backed Securities (MBS) guarantee into law, coupled with an affordability program in exchange for placing the taxpayer in a catastrophic loss position only diffusing the credit risk beyond two GSEs, and creating market competition.

While, in Hensarling’s estimation, comprehensive market-based reform which he prefers is not currently achievable, the new bill, proposes using a relationship between the private sector and Ginnie Mae in place of the current GSEs to guarantee qualified privately insured mortgage-backed securities. According to the press announcement, the new process would “allow qualified mortgages backed by an approved private credit enhancer with regulated, diversified capital resources to access the explicit, full government securitization guarantee provided by Ginnie Mae.”

Loan originators would have to acquire coverage from an approved “credit enhancer,” or private mortgage credit guarantor, to use the Ginnie Mae system. That would function as a private capital buffer on the loan, which could then be securitized by any of Ginnie Mae’s more than 400 approved issuers with an explicit, full government guarantee of mortgage-backed securities.

Hensarling warned that if the political will to enact reform stalls, the Trump Administration, which plans to announce a new Federal Finance Housing Agency director in January, can institute the reforms administratively.  “And I call on them to do so,” Hensarling concludes.

Given the short amount of time left in the current legislative session, it is unlikely that the measure will be enacted before 115th session of Congress concludes this winter.  However, additional hearings and debate is possible and the measure could serve as a starting point for GSE reform in the 116th Congress.  Click here for a section by section summary of the legislation.