Real Estate Industry Urges FHFA to Avoid Linking New Regulations to GSE Financing

FHFA logo

The Roundtable and an industry coalition recently submitted separate comments in response to a Request for Input from the Federal Housing Finance Agency (FHFA) on multifamily properties with mortgages backed by Fannie Mae and Freddie Mac (the Enterprises). The letters encourage the FHFA to remain focused on the Enterprises’ stated mission “to serve as a reliable source of liquidity and funding for housing finance and community investment.” The industry comments also raise concerns about the FHFA imposing counterproductive property restrictions, such as rent control, on multifamily properties backed by loans from the Enterprises. (Roundtable comments, July 28 and Industry coalition comments, July 31)

Industry Solutions

  • The Roundtable’s comments encouraged the FHFA—the regulator and conservator of the Enterprises—to focus on its pivotal role in America’s housing finance market by maintaining Enterprise support of the multifamily affordable housing market, particularly for low-income households. The letter noted that the imposition of counterproductive restrictions on Enterprise-backed financing and private rental housing providers would lead to less investment and development in the affordable housing market, especially during this time of market uncertainty.
  • The Roundtable letter expressed support for measures to:
    • Enhance the Low-Income Housing Tax Credit (LIHTC);
    • Support initiatives that explicitly tie federal funding of infrastructure and other federal funding for “green” initiatives to local assurances to improve exclusionary zoning;
    • Reduce regulatory costs, including a broad range of fees, standards and other requirements imposed at different stages of the development and construction process; and,
    • Stabilize the GSEs to ensure appropriate liquidity in mortgage markets.
  • The Roundtable’s July 28 letter also noted the important role of institutional investors as a source of capital for affordable housing. The comments emphasized how FHFA should not disincentivize this important source of capital for expanding the housing infrastructure.

Coalition Comments

FHFA RFI response coalition graphic

  • The real estate coalition’s July 31 letter reiterated that the best way to help the nation’s renters find affordable housing is to keep the Enterprises focused on financing housing creation. The real estate organizations note that rental housing is already a heavily regulated industry that should not be subject to a one-size-fits-all set of new “protections” that conflict with the unique housing needs of individual markets.  
  • National Multifamily Housing Council President Sharon Wilson Géno said, “When we have market dynamics like we do now, where we have really high interest rates and difficulty accessing capital, the GSEs are even more important. If they start putting mandatory restrictions and rent caps on their products, people are going to go back into that private market at higher cost, and that’s going to increase rent and decrease affordability.” (PoliticoPro, Aug. 1)

This week, Senate Banking Chair Sherrod Brown (D-OH) and 17 Senate Democrats also responded to the FHFA by supporting rent increase limits and other tenant measures on properties with federally backed loans from the GSEs. (Senate Banking Committee letter, Aug. 1)

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Bipartisan “Physical” Infrastructure Agreement Announced; Separate Package on “Social Infrastructure” Tied to Reconciliation Path

Infrastructure Chicago interexchange

President Joe Biden and a bipartisan group of senators yesterday announced a tentative agreement to address the nation’s “physical” infrastructure – as Democrats indicated that its passage into law would depend on enactment of a separate, much larger “social” infrastructure bill structured to bypass Republican votes through a budget “reconciliation” process. 

Goals and Pay-Fors 

  • The total cost of the physical infrastructure deal, according to the White House, is $1.2 trillion over eight years, with $579 billion in new spending for investments in transit, roads, bridges, the electrical grid, and other systems. (White House Fact Sheet, June 24)
  • The 21-member bipartisan Senate group also released a document outlining how the agreement would be funded while avoiding new taxes. Among the pay-fors listed: 
    • Leverage private sector investment through incentivizing use of public private partnerships, expanding use of Private Activity Bonds, and encouraging asset recycling.
    • Create direct-pay municipal bonds to attract more investment in public infrastructure.
    • Repurpose unused COVID relief funds. 

Jeff DeBoer RER Meeting

  • Roundtable President and CEO Jeffrey DeBoer, above, said, “Americans depend on safe and efficient roads, bridges, and mass transit to commute all across the country. Our nation’s buildings and the people in them depend on reliable supplies of water, power, and broadband to function, and meet the evolving demands of business and individual tenants. In turn, infrastructure and real estate are synergistic, and have a two-way relationship.”
  • DeBoer added, “The package has potential to impact GDP, promote job growth, keep the U.S. competitive with other countries that are massively investing in their own infrastructure, and expand the overall economy.”

Next: Reconciliation

Capitol Hill trees clouds in the evening

  • President Biden said that signing the bipartisan physical infrastructure deal into law would be contingent on a separate bill addressing his administration’s “social infrastructure” agenda on matters such as education and child care. “If the [physical infrastructure bill] is the only one that comes to me, I’m not signing it.” Biden said (Wall Street Journal, June 24)
  • Democratic leaders are aiming to move the “social” infrastructure bill through the budget reconciliation process which would only require a simple, 51-vote majority in the Senate. (NPR, June 24)
  • House Speaker Nancy Pelosi (D-CA) said yesterday, “We will not take up a bill in the House until the Senate passes the bipartisan bill and a reconciliation bill. If there is no bipartisan bill, then we’ll just go when the Senate passes a reconciliation bill.” (The Hill, June 24)
  • Senate Majority Leader Schumer stated his timeline is to have both the bipartisan infrastructure bill and the budget reconciliation bill passed in July. (Politico, June 24) 

Housing — New FHFA Director 

FHFA logo

  • President Biden on June 23 removed Fannie Mae and Freddie Mac’s chief regulator, hours after the U.S. Supreme Court ruled that the Federal Housing Finance Agency’s (FHFA) loan director is insufficiently accountable to the president. (CNBC and BloombergLaw, June 23)
  • Mark Calabria, a Trump administration appointee, focused much of his efforts at FHFA trying to end Fannie and Freddie’s 12 years under government conservatorship. A Biden White House official said, “It is critical that the agency (FHFA) implement the Administration’s housing policies.” (CNBC, June 23)
  • Calabria was replaced on an acting basis with FHFA Deputy Director Sandra Thompson. Since 2013, Thompson has led FHFA’s housing and regulatory policy, capital policy, financial analysis, fair lending and all mission activities for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. (FHFA statement, June 24) 

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) works on issues related to Fannie Mae and Freddie Mac and their impact on commercial real estate.

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Senate Confirms Mark Calabria as FHFA Director Overseeing Fannie Mae and Freddie Mac

The Senate yesterday confirmed Mark Calabria, previous chief economist to Vice President Mike Pence, as director of the Federal Housing Finance Agency (FHFA) – the federal regulator overseeing Fannie Mae, Freddie Mac and the multi-trillion dollar Federal Home Loan Bank System. 

The Senate yesterday confirmed Mark Calabria, previous chief economist to Vice President Mike Pence, as director of the Federal Housing Finance Agency (FHFA) – the federal regulator overseeing Fannie Mae, Freddie Mac and the multi-trillion dollar Federal Home Loan Bank System.

  • Calabria will now have broad influence over reshaping the role of the Government Sponsored Enterprises (GSEs) brought under government conservatorship during the financial crisis. 
  • Senate Banking Committee Chairman Mike Crapo (R-ID) said on the Senate floor yesterday that Calabria “committed to working with me, and other members of this body, to reach a comprehensive solution on ending the conservatorship of Fannie and Freddie, once and for all.  He agrees with me, and many others, that action on housing finance reform is the prerogative of Congress, and that after over a decade of conservatorship, it is long overdue.”  (Politico, April 4) 
  • Sen. Crapo and President Trump last week launched separate efforts aimed at reforming the multi-trillion-dollar financial market for single-family and multifamily mortgages, including the GSEs’ Fannie Mae and Freddie Mac.  Chairman Crapo’s  recent housing reform outline proposes to return the GSEs to private control.  (Roundtable Weekly, Feb. 8) 
  • Sen. Crapo will be a featured speaker at next week’s Spring Roundtable Meeting in Washington. 
  • President Trump last week released a presidential memo directing “the Secretary of the Treasury and the Secretary of Housing and Urban Development to craft administrative and legislative options for housing finance reform.”  (Wall Street Journal, March 27) 
  • President Trump also aims to end the GSEs’ conservatorship, “promote competition in the housing finance market … create a system that encourages sustainable homeownership and protects taxpayers against bailouts.”  The memo supports the preservation of the 30-year fixed-rate mortgage. ( White House announcement, March 27) 
  • A coalition of 23 national real estate organizations, including The Real Estate Roundtable, sent a letter supporting Calabria’s confirmation this week to Senate leadership.  (Coalition confirmation support letter, April 1) 

The Real Estate Roundtable and 27 industry organizations last month submitted principles for reforming the GSEs. (Roundtable Weekly, March 1)