Federal Housing Funding and Policy Historic Shifts are Underway

1. Federal Housing Funding and Policy Historic Shifts are Underway

2. What Precipitated the Shifts that are Underway • Economic Crash 2008-2012 • Housing Bubble Bursts – Massive Federal and Private Losses in Housing • Federal Budget Trajectory • Toxic Politics

3. What’s in Flux? • Budget • FY14 • Sequester • CR / Debt Ceiling • Tax Reform • CRA • Fair Housing • Mortgage Finance • GSE Reform • Dodd-Frank

4. Federal Budget Trends

5. Federal Budget Trends

6. Federal Budget Trends

7. Federal Budget Trends

8. Renewals – FY10-FY13 …but Costs • New Vouchers are Rare (HUD-VASH) • Few Existing Voucher Holders have lost their Homes…Yet • PHAs are Struggling with Admin Cuts (-17%) • Very Difficult to serve Populations <50% AMI • Homelessness Successes at Risk Vouchers

9. Vouchers: Virginia PHA Survey • 7% avg reduction in voucher funding in 2013 • 765 housing vouchers expected to be cut across the 9 PHAs / local governments responding • 14.5% average reduction in admin fees

10. Project Based Renewals – HUD Strategy to “short fund” • Impact on Investor / Lender Confidence • RA (rural) – New RA but declining • Very Difficult to serve Populations below 50% AMI • Homelessness Successes at Risk Project Based Section 8

11. Block Grants more Vulnerable than S/8 • HOME (50% cut since FY10) – WAPO story • Losses here Ripple through AH • GAP Funding • Project Infrastructure • Rehab • Virginia has lost $20m in CDBG (29%) and $18m in HOME since FY10 HOME and CDBG

12. PH Capital - $2.5b to $1.77b • PH Operating - $4.78 to $4.05 • RAD – transition of PH to S8 • 70,000 unit cap will be met this year • Choice Communities • 4-5 awards per year Public Housing

13. 515 Rental Production Slashed 60% • RA Cuts less Steep / Renewals at Risk • 502 Direct down 20% • Administration Favors 538, 502 Guarantee • Budget Neutral • Politics Counts ! Rural Housing

14. Sequester : the Train has left the Station? • Budget Control Act of 2011 • $1.2 Trillion in Savings 2013-2021 • FY 13 was 5.1% across the board (defense to take 50% of the cuts) • Delay meant actual cuts to Housing of 7+% • Will continue until 2021 unless changed in a CR or otherwise re-legislated in budget bill

15. CR/ Debt Ceiling: A Train Wreck here / on the Way ? • September 30 – CR • Sept/Oct – Debt Ceiling • Syria has used up a lot of space • De-funding Obamacare added to the House CR – sent to Senate • Likely Outcome: CR with Sequester?

16. Tax Reform: Possible? • The Sky is Falling! …or is it? • Baucus / Hatch in Senate • @Simpler Taxes • Dave Camp in House • Complacency is HIGH RISK – 1986

17. Tax Reform: Possible? • What is at risk ? LIHTC, NMTC • Bill in Oct ? – will not include LIHTCs • 2.5 million affordable homes • Momentum… 2014 ?

18. Community Reinvestment Act • Q & A Revisions • Comments deadline in May • Recognizes Changes in Banking regarding: • Proximity of Depositors • Proximity of Loan Recipients

19. Community Reinvestment Act • What the “local community” means • May recognize the value of CD activities outside assessment area • Regional/statewide /national investments may meet goals

20. New Fair Housing Guidance Clarity / Simpler Template for Analysis of Impediments Focus on concentrated poverty / “communities of opportunity” Strategies must either move people to COO or Transform into COO What is the Impact?

21. Mortgage Finance Reform • What should be the role of the federal government in our national housing finance system?

22. Mortgage Finance Reform • GSE Reform: Source of Mortgage Capital • Dodd-Frank – Underwriting Guidelines • FHA – Meeting LMI housing needs

23. GSE Reform Warner – Corker Wind Down Fannie and Freddie Replace with a Smaller FMIC Common Securitization Platform Competitive System (10 or more guarantors

24. GSE Reform Warner / Corker - S1217 Wind Down Fannie and Freddie Replace with a Smaller FMIC Common Securitization Platform Competitive System (10 or more guarantors

25. GSE Reform Preserve Access to Capital even during Economic Downturns All geographies All housing types SF Mortgages – 30 year / fixed Rental – esp. Smaller, Rural Implications for future Rate Terms Fees

26. GSE Reform - NHTF • …the Corporation shall— charge and collect a fee in an amount equal to not less than 5 basis points and not more than 10 basis points for each dollar of the outstanding principal balance of eligible mortgages … and allocate … 80 percent of such fee amounts to the Secretary of Housing and Urban Development to fund the Housing Trust Fund

27. GSE Reform

28. GSE Reform

29. Dodd-Frank: QM & QRM Re-Shaping SF Underwriting • Qualified Mortgage “safe harbors” • Eight “factors” – ability to pay • Back end ratio of 43% • Generally balloon loans are discouraged w/exceptions for rural • Credit history

30. Dodd-Frank: QM & QRM Re-Shaping SF Underwriting • Qualified Residential Mortgage • Risk Sharing • Down payment • Current rule backs off 20% DP but leaves the door open • Comments until Oct. 30

31. May You Live in Interesting Times 寧為太平犬不做亂世人 Better to be a dog in peaceful times than a man in chaotic times.