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Legislative & Regulatory Priorities

NALHFA Adopted Legislative and Regulatory Priorities

for the First Session of the 113 th Congress

In its first session the 113 th Congress is expected to focus almost exclusively on efforts to reduce the federal budget deficit through budget cuts and achieve a comprehensive reform of the Internal Revenue Code, "with everything on the table,” including so-called tax expenditures such as municipal bonds and Low-Income Housing Tax Credits. It may also continue the debate on the future of the Housing Finance system and the role that Fannie Mae and Freddie Mac may play in that system. In addition, there are also a number of regulatory issues that could adversely

affect local Housing Finance Agency (HFA) programs and operations.

Background

Taxes

In anticipation of the vulnerability of the tax-exemption for issuing municipal bonds, NALHFA leaders played a key role in the establishment of the Municipal Bonds For America Coalition. This issuer-led Coalition, chaired by NALHFA Board Secretary Marc Jahr, has already begun an intensive advocacy program designed to bring grassroots pressure on members of Congress to preserve the tax exemption and resist any attempt to limit the value of the exemption by a cap. The exemption is at risk in both the negotiations over raising the debt ceiling and again in tax reform. NALHFA has also been participating in the ACTION Coalition to protect the Low-Income Housing Tax Credit program.

Tax-exempt housing bonds and Low-Income Housing tax Credits are critical tools to help local Housing Finance Agencies use to expand affordable housing opportunities. Their preservation unharmed is essential.

HUD Appropriations

In the second session of the 112 th Congress both the full House and the Senate Appropriations Committee approved their respective versions of the FY 2013 Transportation and Housing and Urban Development Appropriations bills. NALHFA helped lead an advocacy effort that gained increased funding for CDBG in both bills and an increase of $200 million for the HOME program in the House bill. Acting first, the Senate Appropriations Committee approved S. 2322, which provided a $152 million increase in CDBG formula grants to $3.1 billion, level funding for HOME at $1 billion and sufficient funding to renew all tenant-based and project-based rent subsidy contracts. In addition, the bill contained language explicitly providing that grantees may use of to 20% of their entitlement amount for planning and administration. (NALHFA and others in the CDBG Coalition successfully lobbied to have a reduction to 10% in the cap that was included in the House version dropped from the final FY 2012 THUD Appropriations bill.) S 2322, the FY 2013 bill, was never brought to the Senate floor.

In June the full House passed H.R. the FY 2013 THUD bill. It included a $300 million increase in CDBG formula grants to $3.3 billion, $1.2 billion for HOME but insufficient funding to renew all project-based Section 8 rent subsidies.

In late August 2012 the congressional leadership decided to pass a continuing resolution to fund all of the federal government at FY 2012 levels through March 27, 2013. NALHFA and the CDBG Coalition successfully urged the Appropriations Committee leadership to exclude from the CR a $300 million set-aside in CDBG formula grants for disaster assistance.

During the fall, congressional staff resolved the differences between the two versions and it is ready for final action sometime before March 27, 2013.

Therefore, in FY 2014 NALHFA will continue to advocate for the restoration of funding for CDBG and HOME to the FY 2011 levels of $3.3 billion and $1.6 billion. Funding at these levels is critical to maintain the federal government’s commitment to its national policy (first enunciated in the National Housing Act of 1937) of a decent home in a suitable living environment for every America. In addition, NALHFA must advocate for full funding for the renewal of project-based and tenant-based Section 8 rent subsidies.

GSEs

Since being placed into receivership by the Federal Housing Finance Agency in September 2008, Fannie Mae and Freddie Mac have operated as wards of the federal government. The congressional leadership in the 111 th Congress deferred action on their reform until the 112 th Congress and the 112 th Congress to the 113 th. The future of their composition and charters, including relationship to the federal government, are sure to be controversial. Some have suggested that they be wound down and terminated over a period of years. The Obama Administration unveiled its proposals early in 2011. They included three options:

     
  • Majority of the mortgage market to be supported by private capital with the federal government’s role limited to FHA to support credit-worthy, low- and moderate income borrowers
  •  
  • Builds on option one with a guarantee mechanism that serves as a backstop during crisis periods
  •  
  • Catastrophic federal insurance to stand behind private capital in addition to FHA

NALHFA must be part of the debate and seek to maintain the critical role of the GSE’s in the housing finance system. This includes serving as a secondary market for single-family and multifamily mortgages, and providing credit enhancement, insurance product and liquidity support for HFA programs.

New Issue Bond Purchase Program

Background

The capital market for tax-exempt housing bonds has still not returned to normal by early 2013 and is not expected to so long as the nation’s economy is in recovery. Local Housing Finance Agencies cultivated a terrific partner in the U.S Department of the Treasury when it responded to NALHFA’s recommendation that it create a market for their tax-exempt single-family and multifamily housing bonds in October 2009. Using authority granted to it by the Housing and Economic Recovery Act of 2008 Treasury committed to purchase a total of $15.3 billion in tax-exempt housing bonds in 2010 which were securitized by Fannie Mae and Freddie Mac. Through NALHFA’s advocacy important changes were made to the program in 2010 to facilitate local HFA participation. As of September 30, 2011, 44 of 47 local HFAs had created nearly 17,000 affordable housing opportunities for first-time homebuyers and very low-income renters. This included assisting 7,540 homebuyers, 97% of whom are first-time homebuyers and creating or preserving 9,427 rental units are affordable to very low-income households with incomes at or below 60% of area median income.

Local Housing Finance Agencies need a second round of the Treasury New Issue Bond Purchase program and, through NALHFA, will seek its authorization either from the Treasury or the Federal Reserve.

Regulatory Issues

Background

There a number of regulatory issues that NALHFA has been actively working to influence, many of which implement key sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act are still unresolved. These include the definition of "municipal advisor,” the definition of "qualified mortgage” and the definition of "qualified residential mortgage.” In addition, NALHFA and others have worked with FHA to clarify that down payment assistance provided by housing finance agencies and state and local governments is exempt from the prohibition on seller-financed assistance from a third party pursuant to the Housing and Economic Recovery Act of 2008. HUD published a Rule in December 2012 that clarified that down payment assistance provided by an HFA or state or local government "directly” was exempt from the HERA prohibition and could allow the homeowner to qualify for FHA mortgage assistance.

NALHFA provided written comments on each of these issues and will continue to be engaged in any needed follow up.

Approved by the NALHFA Board of Directors on January 11, 2013


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