Oversight of Housing Regulators — Hearing Before the Committee on Banking, Housing, and Urban Affairs (S. Hrg. 116-444)
Summary
Senate hearing document 116–444, Oversight of Housing Regulators, a hearing before the Committee on Banking, Housing, and Urban Affairs, United States Senate, dated June 9, 2020. The cover describes it as examining the actions the Department of Housing and Urban Development and Federal Housing Finance Agency have taken to implement the CARES Act and address the economic impact of the ongoing COVID–19 pandemic. The witnesses listed are Benjamin S. Carson, Secretary, Department of Housing and Urban Development, and Mark A. Calabria, Director, Federal Housing Finance Agency. Opening statements are listed for Chairman Crapo and Senator Brown.
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“Oversight of Housing Regulators — Hearing Before the Committee on Banking, Housing, and Urban Affairs (S. Hrg. 116-444).”
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S. HRG. 116–444
OVERSIGHT OF HOUSING REGULATORS
HEARING
BEFORE THE
COMMITTEE ON
BANKING, HOUSING, AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING THE ACTIONS THE DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT AND FEDERAL HOUSING FINANCE AGENCY HAVE
TAKEN TO IMPLEMENT THE CARES ACT, ADDRESS AND/OR MINIMIZE
THE ECONOMIC IMPACT OF THE ONGOING COVID–19 PANDEMIC, AND
OTHER RECENT REGULATORY DEVELOPMENTS
JUNE 9, 2020
Printed for the use of the Committee on Banking, Housing, and Urban Affairs
(
Available at: https: //www.govinfo.gov /
U.S. GOVERNMENT PUBLISHING OFFICE
44–628 PDF WASHINGTON : 2023
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
MIKE CRAPO, Idaho, Chairman
RICHARD C. SHELBY, Alabama SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania JACK REED, Rhode Island
TIM SCOTT, South Carolina ROBERT MENENDEZ, New Jersey
BEN SASSE, Nebraska JON TESTER, Montana
TOM COTTON, Arkansas MARK R. WARNER, Virginia
MIKE ROUNDS, South Dakota ELIZABETH WARREN, Massachusetts
DAVID PERDUE, Georgia BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana CATHERINE CORTEZ MASTO, Nevada
MARTHA MCSALLY, Arizona DOUG JONES, Alabama
JERRY MORAN, Kansas TINA SMITH, Minnesota
KEVIN CRAMER, North Dakota KYRSTEN SINEMA, Arizona
GREGG RICHARD, Staff Director
LAURA SWANSON, Democratic Staff Director
MATT JONES, Counsel
BETH COOPER, Democratic Professional Staff Member
MEGAN CHENEY, Democratic Professional Staff Member
STANLEY HARDY, Democratic Professional Staff Member
CAMERON RICKER, Chief Clerk
SHELVIN SIMMONS, IT Director
CHARLES J. MOFFAT, Hearing Clerk
JIM CROWELL, Editor
(II)
C O N T E N T S
TUESDAY, JUNE 9, 2020
Page
Opening statement of Chairman Crapo ................................................................. 1
Prepared statement .......................................................................................... 39
Opening statements, comments, or prepared statements of:
Senator Brown .................................................................................................. 3
Prepared statement ................................................................................... 40
WITNESSES
Benjamin S. Carson, Secretary, Department of Housing and Urban Develop-
ment ...................................................................................................................... 6
Prepared statement .......................................................................................... 41
Responses to written questions of:
Senator Brown ........................................................................................... 53
Senator Tillis ............................................................................................. 58
Senator Moran ........................................................................................... 59
Senator Menendez ..................................................................................... 59
Senator Tester ........................................................................................... 65
Senator Warren ......................................................................................... 69
Senator Van Hollen ................................................................................... 71
Senator Cortez Masto ................................................................................ 75
Senator Smith ............................................................................................ 82
Mark A. Calabria, Director, Federal Housing Finance Agency ........................... 7
Prepared statement .......................................................................................... 43
Responses to written questions of:
Senator Brown ........................................................................................... 83
Senator Tillis ............................................................................................. 86
Senator Moran ........................................................................................... 87
Senator Menendez ..................................................................................... 88
Senator Tester ........................................................................................... 90
Senator Warren ......................................................................................... 92
Senator Van Hollen ................................................................................... 95
Senator Cortez Masto ................................................................................ 96
ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD
Letter submitted by CUNA ..................................................................................... 103
Letter submitted by NAFCU .................................................................................. 105
(III)
OVERSIGHT OF HOUSING REGULATORS
TUESDAY, JUNE 9, 2020
U.S. SENATE,
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS,
Washington, DC.
The Committee met at 10 a.m., in room SD–G50, Dirksen Senate
Office Building, Hon. Mike Crapo, Chairman of the Committee,
presiding.
OPENING STATEMENT OF CHAIRMAN MIKE CRAPO
Chairman CRAPO. This hearing will come to order. The hearing
room has been configured to maintain the recommended six-foot so-
cial distancing between Senators, witnesses, and other individuals
in the room necessary to operate the hearing, which we have kept
to a minimum.
This will be a hybrid hearing. Some Members will be here in
present, the witnesses are here in person, and others will be com-
ing in by video conference.
I remind everyone, once you start speaking there will be a slight
delay before you are displayed on the screen, if you are coming in
remotely. To minimize background noise, please click the Mute but-
ton until it is your turn to speak or ask questions. If there is any
technology issue, as usual, we will move to the next Senator until
it is resolved.
I remind all Senators and the witnesses that the five-minute
clock still applies. You should all have a box on your screens, those
of you who are operating remotely, that is labeled Clock, that will
show the time that is remaining. At 30 seconds I am going to try
to remember to gently tap the gavel to remind Senators that their
time is expiring.
To simplify the speaking order process, Senator Brown and I
have again agreed to go by seniority for this hearing.
With that we welcome our Federal housing regulators, The Hon-
orable Benjamin S. Carson, Secretary of the Housing and Urban
Development, and The Honorable Mark A. Calabria, Director of the
Federal Housing Finance Agency. Welcome back to both of you.
Today we will receive testimony on your agencies’ recent activi-
ties, operations, and ongoing efforts to promote access to quality af-
fordable housing while also ensuring the safety and soundness of
the housing finance market. Your agencies’ missions have never
been more critical. The disruption of COVID–19 on the U.S. econ-
omy has hit homeowners and the housing market especially hard.
We have already seen a huge number of mortgage borrowers enter
forbearance, while many landlords are struggling to make ends
(1)
2
meet, and countless renters are unsure whether they will be able
to make their next payment.
In March, HUD and FHFA acted swiftly to prohibit foreclosures
and evictions for millions of residential borrowers facing financial
hardship due to the pandemic. Soon after, Congress passed the
Coronavirus Aid Relief and Economic Security Act, or CARES Act,
codifying and extending these protections and providing financial
relief to renters.
Title IV of the CARES Act contains three housing provisions.
Section 4022 imposes a 60-day eviction and foreclosure moratorium
for single-family borrowers with a federally backed mortgage loan.
It also allows struggling homeowners up to 1 year of loan forbear-
ance.
Section 4023 extends similar relief to federally backed multi-
family borrowers who are current on their mortgage payments.
They can request up to 90 days forbearance so long as they do not
evict a tenant or charge late fees solely for nonpayment of rent dur-
ing the pandemic.
Section 4024 imposes a 120-day moratorium on evictions, fees,
and penalties for tenants who live in multifamily units that partici-
pate in a Federal assistance program or have a Government-backed
mortgage.
Title XII of the CARES Act provides $12.4 billion of emergency
supplemental appropriations for HUD programs and activities to
further soften the economic blow of the pandemic across the many
communities that HUD serves.
In addition to implementing the CARES Act, HUD and FHFA
have taken important actions to further protect borrowers and
mortgage servicers during the pandemic. Both agencies have ex-
tended the eviction and foreclosure moratorium for qualifying
homeowners through at least the end of June.
The agencies have also taken steps to ensure borrowers are not
facing large, looming debt payments. Director Calabria recently re-
iterated that borrowers in forbearance with a Fannie Mae- or
Freddie Mac-backed mortgage will not owe a lump sum at the end
of the forbearance. FHFA has further announced a new payment-
deferred option which allows borrowers who are able to return to
making their normal monthly mortgage payment the ability to
repay their missed payments at the time the home is sold, refi-
nanced, or at maturity.
HUD has similarly implemented the National Emergency Partial
Claim, which allows eligible FHA borrowers in forbearance to rein-
state their loans by authorizing servicers to advance funds on their
behalf. Like FHFA, repayment of any missed monthly payments is
deferred until the back end of the loan.
In recognizing the undue burden that the pandemic has placed
on the mortgage servicing industry, HUD and FHFA have acted
quickly to address the liquidity gap. HUD has expanded issuer as-
sistance to include the Pass Through Assistance Program, or PTAP,
which allows servicers to apply for assistance in meeting principal
and interest payments, and FHFA has announced that no mortgage
servicer will be responsible for advancing more than 4 months of
missed principal and interest payments on a loan.
3
While America is taking steps to return to work and relax stay-
at-home orders, the recovery is only just beginning. I thank our
witnesses for their swift and prudent actions to date and for their
continued commitment and collaboration at this time.
This Committee is also focused on working with HUD and FHFA
to identify and tailor overly burdensome regulations in an effort to
create conditions that will lead to a forceful economic recovery.
Secretary Carson, I applaud you for spearheading the ongoing ef-
forts to identify and eliminate regulatory barriers to affordable
housing production in this country. This will play a big part in
bringing about a stronger, quicker economic rebound.
Finally, the pandemic has underscored the need for a stable,
well-capitalized housing market in times of stress. FHFA has re-
cently taken up a crucial step toward safety and soundness in pro-
posing a thorough, thoughtful regulatory capital framework for
Fannie Mae and Freddie Mac. As Americans face financial uncer-
tainty, it is long past time to make the hard decisions and address
this last unfinished business of the 2008 financial crisis. Director
Calabria, thank you for your considerable efforts here, and I look
forward to our continued work together on this topic.
Thank you both again for joining us here today. Senator Brown.
OPENING STATEMENT OF SENATOR SHERROD BROWN
Senator BROWN. Thank you, Mr. Chairman. Thank you to our
two witnesses, Dr. Calabria and Dr. Carson. Over the past 2 weeks,
protesters have taken to the streets demanding justice, justice for
Mr. Floyd, Ms. Taylor, and Mr. Arbery, and so many other Black
Americans who have been killed in acts of extraordinary violence,
too often at the hands of police.
Justice for millions of Americans who, for hundreds of years have
lived under a system that perpetuates inequality and systemic rac-
ism. Protesters, young and old, Black and white, in urban and
rural communities are all marching like generations before them,
risking their lives, praying for and demanding justice and real
change. They demand economic justice. Our society calls their work
essential but pays too many essential workers so little that they
cannot afford an apartment, much less dream to own a home.
Millions of American workers don’t have a bank account. Saving
for retirement is out of reach. They do not benefit when the Dow
Jones hits 27,000. Americans are demanding reforms to our crimi-
nal justice system and equitable healthcare system that protects
Black and brown mothers and their babies, and support for Black
and brown communities so another economic crisis does not leave
them further behind Wall Street and the wealthy and the privi-
leged.
Both of you before us today are central to that fight for economic
and racial justice. HUD’s mission was shaped by our Nation’s
struggle for civil rights.
Chairman CRAPO. Senator Brown is speaking and is being broad-
cast but we cannot get the signal in this room, so we are going to
have him continue his remarks. I apologize to our witnesses that
you may not hear his introductory remarks before I go to your tes-
timony.
4
Senator BROWN. OK. All right. Just 6 months—Dr. Carson knows
the history—just 6 months after John Lewis and the foot soldiers
of Selma were beaten crossing the Edmund Pettus Bridge, Presi-
dent Johnson signed a bill that created HUD to address the need
for investment in communities that had been left behind.
Shortly after HUD’s creation, the Kerner Commission warned
that our Nation was moving toward two societies, one Black, one
white, separate and unequal. It took the assassination of Dr. King
for Congress to act on one of the central recommendations of that
report, creating a fair housing law. Fifty years ago, Congress en-
trusted HUD with implementing the Fair Housing Act. Our coun-
try charged your agency, Mr. Secretary, with rooting out discrimi-
nation and actively working to make it easier for everyone to find
and afford a home.
Fundamentally, we all pretty much want the same thing—a
place that is safe in a community we care about, where we can get
to work and our kids have good school with room for our family,
whether that is three children or an aging parent, or a beloved pet.
All of us should get to define what home looks like for all of us,
for each of us. We should be able to find it and afford it without
crippling stress every single month.
Everyone should have the opportunity to build wealth for their
family by owning a home. To make that reality the reality for ev-
eryone, we cannot rely on the housing market to sort itself out, not
when centuries of discrimination are baked into it, when we have
decades of laws that distort the market in favor of banks and
against families. That is what your job is, to the two witnesses, to
fix that.
Secretary Carson, under your leadership, instead of addressing
the deep inequities in our housing system, you are trying to sys-
tematically dismantle basic civil rights protections that previous
generations marched for and endured beatings for and laid down
their lives for. Your department refuses to do its job of promoting
economic inclusion and working to undue the historic Government-
driven patterns of housing discrimination like redlining and restric-
tive covenants. You want to abandon the legal standard affirmed
by the Supreme Court, the legal standard used to bring housing
discrimination lawsuits.
That is not just my opinion. Mr. Chairman, look at letter after
letter that civil rights leaders sent to your agency opposing your ac-
tions. And both heads of the agencies before us today are pushing
plans that will make home ownership more expensive, harder to
get, particularly for borrowers of color. This is what happens when
the ideologues in this Administration push Wall Street’s agenda in-
stead of what regular people actually need.
Before this pandemic hit, families of color were spending more of
their income on housing than were white families, and they were
disproportionally likely to experience homelessness. This was
fueled, in part, by the Federal Government’s failure to protect
Black and brown and immigrant borrowers from predatory
subprime lenders before the 2008 crisis, despite knowing that lend-
ers were targeting them. Forty years of gains in Black ownership
and wealth were eviscerated.
5
Now Black families are experiencing this public health and eco-
nomic crisis with just one-tenth the wealth of white families. They
are more likely to work at jobs where their corporate employers did
not pay them enough to begin with.
We are dangerously close to repeating mistakes of a decade ago.
Nearly half of Black and 40 percent of brown renters report that
they are unlikely to be able to make their next payment. Think of
that—almost half of them unlikely to be able to make their next
payment.
We are in the middle of a crisis, and you either do not know, Mr.
Secretary and Mr. Calabria, you either do not know or you do not
care. You are plowing ahead with undoing civil rights protections
while in Ohio and across the country they are opening eviction
courts. Twenty million Americans are unemployed.
Some have been able to pay their rent or the mortgage but only
because we passed emergency unemployment insurance earlier this
year. It is set to expire this summer, at the end of July. President
Trump and Leader McConnell are refusing to extend it. Of course
we should not be surprised. It is part of Republican leaders’ dec-
ades-long effort to undermine and weaken this social insurance,
unemployment benefits, that all of us pay into. Leader McConnell
and President Trump see no urgency. Those are McConnell’s words,
no urgency to help people.
Democrats have plans to get more help directly to working fami-
lies. Our emergency rental assistance bill provides $100 billion to
help with rent and utility bills so we can help renters avoid impos-
sible choices between rent and groceries or prescriptions or drain-
ing their savings or going to a payday lender. It has already passed
the House. It sits on the Majority Leader’s desk, collecting dust.
For millions of families the bills keep coming, the clock keeps tick-
ing, the stress keeps mounting.
Before this pandemic, President Trump and his wealthy cabinet
members either did not realize or did not care that behind the rosy
stock market data this economy was already broken for millions of
workers, and for Black and brown workers it never worked for
many of them to begin with. And now the Trump administration
either does not realize or does not care that the bottom is falling
out for these families.
People in this country, in every one of our States, in Hawaii and
in Montana and in Minnesota and Rhode Island and Idaho and
Ohio, people are tired of the lack of action and the lack of account-
ability. Before the pandemic, the Trump administration’s idea of
housing reform was to, quote, ‘‘level the playing field for Wall
Street.’’ That is kind of a definition of out of touch.
Enough is enough. Today we want to hear that you understand,
Mr. Secretary and Mr. Calabria, we want to hear that you under-
stand both the magnitude of the current crisis and the inequities
built into our housing system for generations. It is about time you
are actually going to do something to fix it instead of making it
worse.
Thank you, Mr. Chairman.
Chairman CRAPO. Thank you, Senator Brown. I am going to wait
until he adjusts his phone a little bit. I think we are getting there.
6
We will now move to our witnesses, and Secretary Carson, why
don’t you begin first.
STATEMENT OF BENJAMIN S. CARSON, SECRETARY,
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Mr. CARSON. All right. Thank you, Chairman Crapo and Ranking
Member Brown—I guess I am glad I did not hear most of what you
had to say—and Members of the Committee. Thank you for this op-
portunity to discuss the steps the U.S. Department of Housing and
Urban Development is taking to maximize our Nation’s response to
the COVID–19 national emergency. These actions reflect both my
work with the White House Coronavirus Task Force and the meas-
ures developed at HUD to protect the health and safety of the
American public.
I want to begin by recognizing the unprecedented health care
and economic challenges facing Americans today. This disease is
impacting families and communities across the Nation. As HUD
Secretary, my highest priority has been to ensure Americans don’t
lose their homes and to safeguard those at greatest risk of the
virus, including homeless and low-income communities.
I also want to thank our Nation’s medical professionals and first-
line responders who have sacrificed so much to keep Americans
safe and healthy. As a medical doctor, I am inspired daily by their
unwavering commitment to their fellow citizens.
On March 27, President Trump signed into law the CARES Act.
In total, the CARES Act provided more than $12 billion in funding
to HUD programs. Recognizing the unprecedented nature of the
global pandemic, I directed my staff to immediately begin the proc-
ess of getting these funds to communities most impacted by
COVID–19.
As of today, HUD has announced allocations for over $9 billion
in funding. This includes $3 billion in CDBG funds, $4 billion in
ESG funds, $685 million for the Public Housing Operating fund,
$380 million for Tenant Based Rental Assistance, $800 million in
Project Based Rental Assistance, $200 million in IHBG funds—
that’s Indian Housing Block Grants, $75 million for the Section 811
Mainstream Housing Choice Voucher program, and $65 million for
HOPWA funds.
In the coming weeks, HUD will continue to expedite getting the
funding provided by the CARES Act into the hands of communities.
Prior to the passage of the CARES Act, FHA acted quickly to
help protect single-family homeowners who lost their jobs or were
experiencing economic hardship as a result of COVID–19, by imple-
menting a 60-day moratorium on foreclosures and evictions, which
was subsequently extended through June 30. The CARES Act also
provided a 120-day eviction moratorium for tenants in certain fed-
erally supported rental properties, including properties with FHA-
insured single-family or multifamily mortgages.
FHA further announced a tailored set of mortgage payment relief
options for single-family homeowners with FHA-insured mortgages
who are experiencing financial hardship because of the pandemic.
This includes CARES Act forbearance, which allows borrowers to
request up to 6 months of forbearance and extend for up to 6
7
months. Also included was an extension period for calling a loan
due for those with a Home Equity Conversion Mortgage.
FHA also implemented the COVID–19 National Emergency
Standalone Partial Claim for borrowers on forbearance. This option
will help eligible homeowners resume their mortgage payments and
avoid a lump sum repayment of arrears by deferring repayment to
the end of the mortgage.
Ginnie Mae expanded its pass-through assistance program,
PTAP, to help address potential issuer liquidity challenges caused
by the borrower forbearance requirements implemented by FHA
and other Federal mortgage insurance programs. PTAP provides
last-resort financing to cover the difference between issuers’ avail-
able funds and scheduled payment of principal and interest to
mortgage-backed security holders. The timely payment of P&I to
mortgage-backed holders, consistent with Ginnie Mae’s statutory
guaranty, is essential to the liquidity of the MBS market and the
confidence of investors who finance housing through the Ginnie
Mae program.
In December 2018, President Trump signed Executive Order
13853, establishing the White House Opportunity and Revitaliza-
tion Council. I have had the honor of chairing this Council since
its establishment.
In response to the ongoing and unprecedented global pandemic,
President Trump has directed me and the Council to utilize its tal-
ented structure and build on its original intent with a renewed
focus to expand efforts to protect and promote our most vulnerable
communities. The Council will work to ensure that minority and
underserved communities are kept safe from this invisible enemy,
now and into the future. In the coming weeks, the Council will
identify different policy approaches needed to help advance oppor-
tunity for these communities.
Thanks to the leadership of President Trump, I am proud of the
work this entire Administration, and especially the 7,500 employ-
ees of HUD, are doing each and every day to fight this invisible
enemy and meet the needs of the American people. I am grateful
to this Committee for its bipartisan commitment to meeting this
challenge. Thank you.
Chairman CRAPO. Thank you, Secretary Carson. Director
Calabria.
STATEMENT OF MARK A. CALABRIA, DIRECTOR, FEDERAL
HOUSING FINANCE AGENCY
Mr. CALABRIA. Chairman Crapo, Ranking Member Brown, and
distinguished Members of this Committee——
Chairman CRAPO. Could you turn your mic on?
Mr. CALABRIA. Chairman Crapo, Ranking Member Brown, and
distinguished Members of the Committee, thank you for the invita-
tion to appear at today’s hearing. Let me also thank you, Chairman
Crapo, for those very kind words at the beginning.
Let me also make it very clear, there is not a single civil rights
protection that FHFA has rolled back during my time, not one. Any
assertions to the contrary are simply false.
We have acted swiftly at FHFA, we have acted prudently, and
we have prioritized borrowers and renters in the housing market
8
from day one. We have worked in close partnership with FHA and
Ginnie Mae. I want to recognize and thank Secretary Carson, HUD
Deputy Secretary Montgomery, and acting Ginnie Mae President
Seth Appleton for their partnership and leadership.
Let me also thank the employees of FHFA. They are our greatest
asset. Their well being has been my top priority. Our teleworking
flexibilities have enabled our employees to be safe and manage at-
home obligations while continuing to fulfill the agency’s vital mis-
sion.
We have also continued to foster an environment where everyone
at FHFA feels safe, respected, and valued for their differences. The
unrest across our Nation in recent weeks reaffirms why fairness,
diversity, and inclusion are core values to me personally and our
agency. FHFA has one of the most diverse workforces among Fed-
eral regulatory agencies. Our diversity is, and will remain, a key
source of FHFA’s success.
During this crisis, Americans should not have worry about losing
their homes. FHFA has worked closely with our regulated entities
to support borrowers and renters while ensuring the proper func-
tioning of the mortgage market, both during and after this crisis.
Our actions have been and continue to be data driven.
The actions I will discuss today apply to mortgages backed by
Fannie Mae and Freddie Mac. With that said, FHFA’s policies have
helped set standards for the entire market. For homeowners facing
foreclosure before COVID–19, we suspended all foreclosures and
evictions through at least June 30th. We will extend that date if
necessary. For borrowers financially impacted by COVID–19, we al-
lowed homeowners to take a time-out from mortgage payments
through forbearance.
We then announced that borrowers in forbearance who return to
making monthly payments can repay what they missed when they
sell their home or refinance their loan. We have emphasized that
those who can make their mortgage payments should continue
doing so.
Of borrowers with enterprise-backed mortgages in forbearance,
about one-third continue to make payments. Last month, FHFA di-
rected the enterprises to treat such borrowers as current if they
want to buy a new home or refinance.
To support renters, FHFA and the enterprises developed a multi-
forbearance program for the first time in history. Importantly, we
mandated that tenants cannot be evicted for the nonpayment of
rent during forbearance. At FHFA’s direction, the enterprises cre-
ated online look-up tools that allow renters and borrowers to deter-
mine if they are eligible for eviction protection or forbearance.
We have also helped clarify consumers’ options. We updated the
scripts that servicers use when talking to borrowers about forbear-
ance. We have emphasized to servicers in the public that no lump
sum is required at the end of forbearance. We partnered with the
CFPB to launch the Borrower Protection Program, and FHFA
helped develop a website that consolidates Federal information
about mortgage relief options, renter protections, and how to avoid
scams.
We have also taken action to support the proper function of the
mortgage market. To ensure the safety of market participants,
9
FHFA authorized several loan-closing, employment verification,
and appraisal flexibilities at least through June 30th. We insti-
tuted a 4-month limit on servicers’ obligations to advance principal
and interest payments on loans in forbearance. This provides sta-
bility and clarity to the mortgage market.
To support lenders’ liquidity, FHFA enabled the enterprises to
purchase certain eligible single-family mortgages in forbearance.
Prior to this, the enterprises had never purchased mortgages in for-
bearance. Our policy provides a new option to lenders and to the
enterprises.
I am proud of what FHFA has done to help homeowners in the
housing market deal with this crisis. At this point, as referenced
in my written testimony, I am encouraged by what the data tell us
about the state of the market, the capacity of servicers, and for-
bearance rates.
But this does not mean all is well. The crisis has provided ample
evidence of the critical vulnerabilities in our mortgage system that
put taxpayers, borrowers, and our housing market at risk. Most no-
tably, Fannie and Freddie have lacked the capital to withstand a
serious downturn of the housing market. This undermines their
countercyclical role and jeopardizes their core important mission.
To provide the enterprises a stronger foundation on which to
weather periods of financial distress such as COVID–19, on May
20th, FHFA released a re-proposed capital rule. This rule would
help each enterprise remain safe and sound to fulfill its statutory
mission across the economic cycle. It is essential to build a strong,
resilient housing finance system that supports sustainable and af-
fordable home ownership.
However, I should emphasize only Congress can enact the re-
forms necessary to fix the structural flaws in our housing finance
system. To that end, next week I will submit FHFA’s annual report
to Congress that includes several legislative recommendations. Re-
form is long overdue. Strengthening FHFA’s regulatory and super-
visory authorities simply to be on par with what other safety and
soundness regulators have will ensure the enterprises will be well
regulated and capitalized outside of conservatorship.
I look forward to the opportunity to hear your questions. Thank
you for the opportunity to be here this morning.
Chairman CRAPO. Thank you, Director Calabria, and I look for-
ward to your recommendations for resolution of our housing sys-
tem.
My first question will be to both of you. As you both know, Con-
gress acted boldly and aggressively in the CARES Act to help rent-
ers and homeowners make it through this economic crisis, includ-
ing through extending forbearance, prohibiting evictions, and pro-
hibiting foreclosures across a broad portion of the market.
Now, 10 weeks later, from your perspective, could you briefly tell
me, how would you characterize the current state of the housing
market and what are some of the policy tradeoffs that we need to
consider now as we move forward toward the next COVID–19 re-
sponse?
Secretary Carson, do you want to go first?
Mr. CARSON. Yes. Well, clearly this is a very serious time period
that we are in, which was the reason that we acted so quickly in
10
conjunction with this Committee and other portions of the Govern-
ment, because if a person is worried about their health, the health
of their family, the last thing they need to be worried about is
whether they are going to lose their home, and, therefore, quickly
enacting the forbearance for homeowners, you mentioned the par-
tial claim, which is interest-free, by the way. Payments are tacked
onto the end of the mortgage.
There are a host of other forbearance measures that we are tak-
ing. All of these have had a very important positive impact, so that
things have not deteriorated to the level that most people thought
that they would. We are still not resting on any laurels. We are
still going to be extremely vigilant in looking at the market. You
know, everybody, I think, was taken aback by last month’s report.
We expected a 22 percent decline in the market and instead had
a 0.6 percent increase.
You know, there are a lot of interesting things going on. It
speaks to the impact of the interventions that have been done but
also to the resilience of American people and their willingness to
do what it takes. You know, most renters, over 90 percent have
continued to be able to pay their rent.
So it is really quite impressive what the American people are
able to do, and we have to recognize that the underlying economic
infrastructure of this Nation is actually very strong. You know, we
were just on a rocket ship, and then this coronavirus came along,
and we intentionally had to stop the economy. But remember, that
underlying factors that created that strong economy are still there.
And what we have attempted to do is bridge the gap so that we
don’t have to start all over again, and that we can just resume the
upward trend for everyone.
Chairman CRAPO. Director Calabria.
Mr. CALABRIA. Let me start with the forbearance numbers. The
most recent numbers for Fannie and Freddie loans are about 6.6
percent. We have seen, over the last few weeks, those numbers
start to stabilize, and, in fact, within the GSE portfolio you see al-
most as many borrowers canceling their forbearance programs as
you see rolling on.
I was certainly concerned that both going into May and going
into June we would see spikes in the forbearance rates in Fannie
and Freddie’s books, and we did not. So I think we have seen a sta-
bilization.
As was mentioned in my remarks, about a third of those bor-
rowers continue to make their payments, which I think is a real
positive. Clearly, the biggest problems facing the economy going
forward, which ultimately impact the housing market, is employ-
ment. So writ large, I think the single most important thing we can
do is figure out how to put people back to work. I think that is the
primary focus.
Let me, last, say that I certainly, over the last few months, have
been concerned about what the direction of the housing market
would be coming out of COVID–19. I have to say I have been very
pleasantly surprised. Purchase mortgage applications, for instance,
in recent weeks, have been even higher than they were a year ago.
We have seen home sales really pop back up. And I would both
11
emphasize that the home sales activity and the mortgage purchase
activity I think have been far stronger than anyone projected.
Seemingly, it is the case that apparently a lot of people in quar-
antine spent their time looking at homes online, because again, a
number of them decided to buy homes when we came out of this.
So I would emphasize, I think the housing market itself is in a
relatively strong point, and where we really need to be focused on
primarily is the labor market.
Chairman CRAPO. All right. Thank you to both of you. My time
has expired. Senator Brown.
Senator BROWN. Thank you, Mr. Chairman. Dr. Carson, do you
know that people working in jobs right through the pandemic—re-
tail workers, millions of retail workers, custodians, food service
people, security people, home health aides—do you know that peo-
ple working in these jobs right through the pandemic don’t get paid
enough to afford to rent a modest one-room apartment?
Mr. CARSON. I do, and that is one of the reasons that we are con-
centrating on the people who were most severely affected by this
pandemic, and what are the reasons that they were most severely
affected. One of those reasons——
Senator BROWN. Mr. Chairman—I am going to cut you off there,
Dr. Carson. You act like you talk about the economy was on a rock-
et, going up like a rocket when the pandemic hit. The fact is these
are workers in the economy that have been working through the
pandemic, the workers I’m talking about, they don’t—because cor-
porations are not paying them enough.
We had an affordable housing crisis in this country long before
the current public health crisis, upon which you blame the entire
economic problems in this country. Your agencies are making
things worse, whether it is through budget cuts to affordable hous-
ing or trying to make mortgages more expensive or harder to get
or dismantling fair housing protections.
So I want to turn to that. Secretary Carson, I have been writing
to you, and many Members of this Committee have joined me in
this, from Minnesota and Hawaii and Nevada and Montana and
Rhode Island. All of us have been writing to you about HUD’s deci-
sion to not enforce our Nation’s fair housing law.
Let me give you some examples. NAACP’s legal defense fund said
housing and HUD’s FHA proposal is a, quote, ‘‘blatant and egre-
gious attempt to undermine the premise of the Fair Housing Act,
is an absolute regression in fair housing practices.’’ Urban League
President, Marc Moriel, said that HUD’s proposed disparate impact
rule is directly at odds with the Fair Housing Act in its basic pur-
pose, and if enacted would destroy disparate impact liability as we
know it.
A coalition of 45 civil rights groups, including Unidos and the
Leadership Conference of Civil and Human Rights, told HUD the
same rule was, quote, ‘‘in direct contradiction to HUD’s mission,
decades of legal precedent, and the Supreme Court’s recent decision
in inclusive communities,’’ unquote. Now these 45 groups—these 45
groups, Mr. Secretary, represent tens and tens and tens of millions
of Americans. This is our country. You are ignoring them and if
these comments come even partially true, it will be devastating for
equality in this country.
12
Why are you still moving forward with these proposed rules,
against the wishes of tens and tens of millions of Americans?
Mr. CARSON. You know, I abhor anything that even smacks of
unfairness for people, but we also want things that actually work,
not things that have been there for decades and have not resulted
in any improvement. Therefore, we are doing things a little bit dif-
ferently. You know, when we are looking at AFFH, we are looking
at the real reason that there is segregation. The real reason that
there is segregation is not because there is a bunch of George Wal-
laces standing in the doorways. It is because people can only afford
to live in certain places. And, therefore, we are moving toward a
model where we encourage the development of affordable and de-
cent housing, not just in one area but throughout lots of different
areas.
Senator BROWN. Mr. Secretary, there is no real evidence that
that is what you are doing. There is certainly no evidence that this
Administration wants to see higher wages so that workers actually
can afford decent places to live—opposition to the minimum wage,
taking away the overtime rules, 100,000 people in my State lost
thousands of dollars in overtime because this Administration, of
which you are so happily a part, always comes down on the side
of corporate interest, against workers.
Let me go somewhere else on this, my last question, Mr. Chair-
man. Last week, the city of Columbus opened up its convention
center to begin processing evictions. Courts are doing that all over
the country. One advocate told me about a client who was trying
to avoid eviction because her son, who is deployed in the Navy, is
returning home and she does not want him to find her a shelter.
We are in a national crisis. Reflect on that for a moment. Twenty
million people have lost their jobs. We are using arenas as eviction
courts in cities around the country. Dr. Carson, you are the top
housing authority in this country, so tell us—you are the person—
tell us how many people does HUD expect will lose their homes,
how many does HUD expect will become homeless in the weeks
and months ahead? How many?
Mr. CARSON. We will be working very hard to make sure that no
one who we——
Senator BROWN. No, Mr. Secretary, how many do you expect—
already some have become homeless. These eviction courts, many
of them continue to operate. We know when the deadline comes off,
when it expires, we know more people will be homeless. The point
is, we have, and everybody on this Committee, every Democrat on
this Committee, supports $100 billion in the emergency eviction
fund and $75 billion, Jack Reed’s bill, the unemployment emer-
gency foreclosure fund, to keep people from losing their homes.
Twenty million Americans unemployed. Half of Black renters sur-
veyed told the U.S. Census they have little or no confidence they
can pay their rent next month.
Do you want to answer the simple question, how many people
are going to be homeless? How many people are going to lose their
homes? And what are you, as an Administration, going to do about
it when President Trump and Senator McConnell simply say ‘‘there
is no sense of urgency. We do not have to do another package. We
13
do not have to fix this. We will just let happen what is going to
happen’’?
Thank you, Mr. Chairman.
Chairman CRAPO. Senator Scott.
Senator SCOTT. Thank you, Mr. Chairman, and thank you to
both of the panelists for being here this morning. I want to con-
tinue on the eviction conversation. I think it is really an important
conversation for us to engage in. And perhaps Senator Brown’s pas-
sion is well placed. There is a lot of fear around evictions. There
is a lot of fear around people being able to pay their rent.
The CARES Act contains extensive measures on eviction morato-
riums for households renting in apartment buildings that are fi-
nanced by federally backed mortgages. We did this to make sure
that families would not end up on the streets during a pandemic
and their ensuing job losses. But as we pivot to a recovery and bet-
ter job numbers, my question is this. As you think through the
eviction conversation, can the moratorium actually make it harder
for renters? Are they not accruing a bigger and bigger balance that
they have to pay 1 day, and will that not actually lead to more
evictions and not less evictions?
So I think there is a way, and I do appreciate his passion. I say
that sincerely. But I think the other side of the coin is that we may
be setting people up for long-term failure if, in fact, we don’t start
looking at the picture from the end of the crisis back as opposed
to at the beginning of the crisis forward.
Either panelist.
Mr. CARSON. Senator, that is a very astute observation, and, you
know, the fact of the matter is when we extend the forbearance and
people still owe money, that is not helpful. What is helpful is trying
to create an environment such as we were enjoying a few months
ago, where people have employment, people have opportunities to
climb the ladder.
We are very interested in creating affordable housing in lots of
different places, and those are the kinds of things that really em-
power people. And we are very interested in programs where peo-
ple can be able to save some money, so that they can actually make
a down payment on a home, because that is the principle mecha-
nism of wealth accumulation in this country. We are not interested
in continuing a bunch of old programs that kept people impover-
ished for generations.
Senator SCOTT. Thank you. Director, anything to add to that?
Mr. CALABRIA. Thank you, Senator. I think you did touch upon
a very important point, which is, you know, fundamentally, what
we want to be able to do is grow the jobs and income so that people
can pay their rent rather than simply try to avoid evictions. Al-
though I certainly will note that we moved very quickly before the
CARES Act to put a moratorium on evictions for Fannie and
Freddie loans. We will certainly extend that if necessary. It cur-
rently goes to June 30th. But the fundamental point of how are we
growing jobs income, how are we dealing with lack of housing sup-
ply, I think all of these things are critical to deal with.
Senator SCOTT. Thank you very much. One final question. This
is on forbearance measures. Director and Secretary, as far as I can
tell you two have been very receptive and open, and frankly, we
14
have had many conversations. We do not always agree on the out-
come but at least you are both available for that conversation, so
I thank you both for that.
The GSEs and the FHA have been working with lenders and
servicers to implement the extensive forbearance measures we put
in through the CARES Act. For the Director, you and I have spo-
ken on this before, but as of today can you give me an update or
an assessment of the forbearance assistance being provided to bor-
rowers in loans owned by the GSEs, as well for Secretary Carson,
can you give me an update or assessment on forbearance through
the FHA?
Mr. CALABRIA. The current GSE numbers, as of this morning, are
6.6 percent of Fannie and Freddie loans in forbearance. I will note
about a third of those are continuing to make their payment, and
we have seen that flatline over the last couple of weeks. So it cer-
tainly seems to have stabilized.
Senator SCOTT. Good.
Mr. CARSON. And, you know, last week was actually the first
time started going back in the other direction. We are at 12.4 per-
cent right now, which is a much smaller number than had been an-
ticipated and predicted by many. We will continue to work ex-
tremely hard to push that down further.
Senator SCOTT. I only have about 30 seconds left. Would you
agree that with the surprising job numbers in May that perhaps
the worst of it is over, and that as we start climbing out, getting
folks re-engaged in their monthly responsibilities, is a good thing
long-term for their savings and retirement funds? Because ulti-
mately, the one thing I keep thinking about are people who have
limited incomes and limited savings, the deferral has been helpful,
and that is good news. But I am afraid of creating an issue where
that one, two, or 3 months divided over several months is still a
bit too much for people to absorb. So the faster we get back to nor-
mal, the better off we will be, especially as the economy starts to
percolate a little bit.
Mr. CARSON. You are so right, Senator, and that is why it is so
very important that we utilize the information that we have
learned about COVID–19 so that we can live with it and not be
dominated by it.
Senator SCOTT. Thank you, sir. Thank you both.
Chairman CRAPO. Senator Reed.
Senator REED. Thank you very much, Mr. Chairman. Director
Calabria, let me direct some questions to you. I do understand that
through your forbearance programs that people have been tempo-
rarily forgiven from their mortgage requirements, but at the end of
that forbearance period, which will terminate, thousands and thou-
sands of people could be foreclosed on their homes. Similarly, rent-
ers could be evicted. Is that the real situation we are looking at?
Mr. CALABRIA. So Senator, we certainly want to minimize that,
and I want to emphasize that within Fannie and Freddie loans no-
body will be required to make a lump-sum payment. So our default
option is to add that to the end of the loan or whenever the house
is paid off. So we are really trying to make sure that there is no
payment shock at all, there is no change in the monthly payment
15
for the borrower or the renter, and we are trying to be able to
make sure that people can get current again as much as we can.
So certainly we are really focused on trying to minimize how
many of these loans actually eventually go into real delinquency or
into foreclosure, so we are certainly very much focused on that.
Senator REED. Well, but the reality is that legally that landlord
or that mortgage holder can walk in the next day, if the next pay-
ment isn’t made, even if you are tacking on the forbearance at the
very end of the loan, and say, ‘‘You have not paid, and you are out.’’
And that is an incentive that many—unfortunately, I do not think
can avoid.
You have situations, also, where there are individual mortgages
that are not federally related, so they already could have been fore-
closed. But the situation, I think, is such that we are looking at—
and you put your finger on it, in one sense—we are looking at a
real employment problem and a funds problem, that even if your
forbearance is tacked on at the end, people still might not be able
to pay.
And that would suggest to me that we need to do several things.
First, we have to extend unemployment compensation, because
many of the people who are sort of—as you have alluded to and so
has the Secretary—are still paying, are doing so only because they
are getting unemployment compensation, enhanced unemployment
compensation.
But two, we have to go right to the source of the problem, pro-
vide resources to individual mortgagors and renters so that they
can basically pay their rent or their mortgage, and in addition, it
takes the pressure off the landlords and the banks, so that they ac-
tually have funds.
Can you conceive of a program—would not that make more sense
than just simply stopping one day and crossing our fingers and
hoping everything is OK?
Mr. CALABRIA. Well, Senator, I certainly agree that top-line—the
point about this being fundamentally a jobs income issue and do
think that is where we should focus. I do want to say, in terms of
Fannie and Freddie loans in forbearance, generally borrowers do
not walk away from their home if there is positive equity, and we
are seeing less than 1 percent of these borrowers across the board
in a negative equity position.
So as long as we have a strong housing market, which again, is
an open question—I certainly do not have a crystal ball in that re-
gard—but in the strength of the current housing market, I do not
think there will be a lot of borrowers walking away. But that does
not change the fundamental point you raise, which is absolutely
correct that this is fundamentally an income jobs issue.
Senator REED. And we have to deal with getting the income to
the people, through unemployment compensation together with
some subsidy or some help for their rent or their mortgage. Other-
wise—and again, I do not see anyone wanting to walk away from
their house——
Mr. CALABRIA. I agree.
Senator REED.——what I do see is people wanting to go in there
and foreclose on a house and sell it to someone else at a profit.
That is the way the system seems to operate, to me, and that
16
would be quite—that would be an option that they will have once
we stop forbearing and we stop providing unemployment compensa-
tion benefits.
So again, I think this is something that we have to take very se-
riously. Rhode Island Housing has estimated that in Rhode Island
30,000 individual households will be at risk of additional fore-
closure when the unemployment benefits terminate. They will be
out on the street very quickly. And we know, also—and one of the
things about this crisis is most of those households will be minority
households. They do not have the resources, they do not have the
financial support, they do not have the money stashed away to
make it a couple more months. They will be the first ones out.
And as far as affordable housing goes, we have tried, I know on
the Appropriations Committee, to put money in for affordable hous-
ing as best we can, but it is a fraction of what we need. And this
Administration has not been talking about affordable housing.
They should talk about it more, and they should put more money
in their budgets. We plus-up affordable housing approach.
So we have a crisis ahead of us, and simply sitting back and say-
ing we will not demand immediate repayment of the forbearance
and we are so pleased at some of the other things we have seen,
misses the point dramatically. Thank you.
Chairman CRAPO. Senator Cotton.
Senator COTTON. Thank you, Mr. Chairman. Thank you for your
testimonies today.
Mr. Calabria, I will address this at you. I have long had some
concern about mortgaging servicing assets, mainly from the van-
tage point of homeowners who could get confused, or worse, they
could run into problems if they try to resolve payment issues on
their mortgage, when those homeowners are working with a com-
pany that is often not in their community, or the original bank
through which they got their loan. However, markets have had to
evolve since 2008, because of regulations and other factors, and
that has pushed a lot of that mortgage servicing activity on banks
and into independent servicers.
So that is the world that we live in now, but the concern for
homeowners’ financial protection is only more acute now as the
CARES Act, well-intentioned though it was, could end up causing
dislocation in this market because of the forbearance mandates and
the costs mortgage servicers are having to shelter.
I know that you have said that the mortgage servicing industry
as a whole is well capitalized, enough to withstand a large degree
of forbearance and absorbing the impacts of the coronavirus
lockdowns, but I just wondered if you could talk a little bit more
about the upper limit to that capacity, forbearance take-up rate, for
instance, that, in your opinion, might bring the mortgage service
industry up to its limits.
Mr. CALABRIA. Thank you, Senator. Let me start with empha-
sizing that for the 346 nonbank servicers that Fannie and Freddie
do business with, we get quarterly financials for each and every
one of them. We also, for the larger of the nonbank servicers, we
get weekly or even daily contact for some of them.
So first I want to assure you that our analysis on the servicer
side is very data driven. We are looking at the financials for these
17
entities. We are monitoring them. Every morning I get a height-
ened watch list of servicers, and I am happy to say that that list
is shorter, it is smaller today than it was 2 months ago, and even
2 weeks ago.
And I would go as far to say that servicers are in a better finan-
cial position today than they were in March. When we have seen
servicers who we thought were a little close to the line, if you will,
we have worked with Fannie and Freddie to encourage those
servicers to go out and raise liquidity. Many of them have, and
many of them have raised substantial liquidity.
And so our estimates are that you probably could have, within
the Fannie and Freddie book—and I really want to emphasize that
that is our view on this, and that, of course, issues at Ginnie Mae
or issues at private label may be different and are different—but
for certainly in the Fannie and Freddie book you would really have
to see forbearance rates get over 30 percent before there would
really be stress among the industry, and that this would be sys-
temic. And that is, of course, why we put the 4-month limitation
in place, so that no servicer would be on the hook for 12 months.
Senator COTTON. OK. Thank you for that answer. Mr. Chairman,
I have got to get off to chair a hearing of my own, so I yield back
my time.
Chairman CRAPO. Thank you. Senator Menendez.
Senator MENENDEZ. Secretary Carson, it has been over 2 months
now since the CARES Act became law. The Act provided $5 billion
in desperately needed and flexible CDBG funding communities to
address both the health and economic aspects of COVID response.
But today, HUD has only released about $3 of the funds Con-
gress appropriated, and furthermore, there was a major lack of
clarity from HUD on the rules around the first disbursement,
which caused confusion and delays as the recipients desperately
sought answers to questions like whether they could use the funds
for PPE, COVID testing, or supporting small businesses.
So my question to you, Mr. Secretary, when does HUD plan to
release the remaining CDBG funds provided under the CARES
Act?
Mr. CARSON. Well, thank you very much for your question, Sen-
ator. As you probably know, the time in which we have released
the first set of funds for CDBG was a record amount of time. The
reason that was done without a Federal Register notice is because
a Federal Register notice is not required in those situations for the
money to be disbursed and for it to actually be used. And I hope
we have made that clear to everybody.
Having said that, Federal Register notice for that will be coming
out in the very, very near future.
As far as the——
Senator MENENDEZ. Do you have some timeframe here that—I
mean, the reason Congress provided these monies is obviously to
deal with the challenges that these municipalities have. They have
greater demands, they have less revenues that are taking place as
a result of all the social distancing measures that took place, so all
their different forms of revenues are lessened. So this CDBG
money, for some essential programs, is critical.
18
Mr. CARSON. Well, of the $12.4 billion, $9.1 billion of it has al-
ready been allocated, and much of that has been utilized already,
using the grant formulas that are already in existence.
The last portion of that will be allocated by October 1st.
Senator MENENDEZ. Are you going to—by October 1st?
Mr. CARSON. Yes.
Senator MENENDEZ. That is way too late. That is not what Con-
gress intended.
Mr. CARSON. Well, that——
Senator MENENDEZ. The demand is now, and there is no way
that we should be waiting until October for that to happen.
Mr. CARSON. All the statutory requirements and timing will be
met.
Senator MENENDEZ. Let me switch to another topic. On Decem-
ber 18, 2018, I and a series of other Senators sent you a letter rais-
ing concerns about HUD implementing an unofficial policy denying
FHA-insured loans to DACA recipients, and we asked HUD to clar-
ify that it was, in fact, a new policy. Your agency responded, say-
ing, quote, ‘‘It has not implemented any policy changes during the
current Administration, either informal or formal, with respect to
FHA eligibility requirements for DACA recipients,’’ close quote.
Then on February 12, 2019, FHA Administrator Montgomery tes-
tified before the House Appropriations Committee, saying the pol-
icy has been, quote, ‘‘unchanged for many years.’’ On February 22,
2019, HUD officials met with my senior staff and other Senate staff
to brief them on the FHA policy related to DACA recipients. Those
officials affirmed that there have been no policy changes.
Mr. Secretary, you even testified before the House Committee on
Appropriations in April of 2019, that you were unaware of any
changes in policy related to DACA recipients receiving FHA loans,
and said, quote, ‘‘I am sure we have plenty of DACA recipients who
have FHA mortgages.’’
However, FOIA documents released on Friday revealed that
HUD officials were actively discussing, and had implemented, a
policy prohibiting the issuance of FHA loans to DACA recipients as
early as March of 2018, if not sooner.
So, Mr. Secretary, why did you and other HUD officials conceal
and misrepresent this policy change to Members of Congress?
Mr. CARSON. Senator, I have concealed nothing at all. Do people
have conversations? Yes they do, and I am sure they will continue
to have those conversations. Am I privy to all their conversations?
No. Do their conversations change the policies? Absolutely not.
Senator MENENDEZ. Well, it evidently has changed the policy, be-
cause I have heard from so many lawfully present DACA recipi-
ents, social security numbers, everything that we would expect
from any law-abiding citizen, who have been denied, mortgage com-
panies who have said that FHA has changed the rules. And so all
of your Department’s testimony to date is totally out of the realm
of what it, in fact, has been recorded as saying. That is what the
FOIA documents show. So this Department has changed the rules
on DACA recipients.
Mr. CARSON. I think the whole thing started as the result of a
question that was asked about it, and it then came to light that
19
maybe some rules were being violated and people decided that they
better pay closer attention to the rules.
Senator MENENDEZ. Well, that is simply not what has happened.
We will follow up, Mr. Chairman.
Mr. CARSON. OK.
Chairman CRAPO. Thank you. Senator McSally.
Senator MCSALLY. Thank you, Mr. Chairman, Secretary Carson,
Director Calabria. Good to see you again.
Director Calabria, FHFA currently guarantees $5.7 trillion in
mortgages, which I know you are aware of but suffice it to say that
plays a critical role in getting us through this pandemic. And in
your testimony you said that 6.4 percent of Fannie and Freddie
mortgages have entered forbearance. Those are many of my con-
stituents in that 6.4 percent, and we have heard from several of
them who are getting conflicting information and a lot of misunder-
standing or confusion over the process of forbearance, and often-
times just different, depending on who they are dealing with.
And so while you have this public forum, and the opportunity to
speak to constituents like mine who are looking for this forbear-
ance, can you explain in layman’s terms how the forbearance was
designed to work, what the process should look like for the bor-
rowers, what should the lenders and servicers be doing to ensure
they are following the law, and what consequences are there for
lenders or servicers that fail to process forbearance requests?
Mr. CALABRIA. Thank you, Senator. Let me first emphasize that
in response to the varying answers that servicers were giving, we
drafted a script Fannie and Freddie have sent to all of their
servicers. This was done some time ago. So all borrowers, regard-
less of who their lender is, if it is a Fannie and Freddie loan they
should essentially get the same script. They should get the same
answers. They should get the same options. And Fannie and
Freddie do follow up with the servicers to make sure that is the
case.
For borrowers listening, let me first emphasize that there is no
requirement at all for the missed payments to be made up. So if
you have missed 2, 3 months, if it is a Fannie and Freddie loan,
and I believe this is also the case with FHA, no one will be asking
you to pay that back all at once. Of course, if you can that is great
too.
Let me also emphasize if you have been one of those borrowers
in forbearance who have made your payments, you are immediately
able to refinance if you choose.
We will have a waterfall of different options, but if you, the bor-
rower who have missed payments, do not contact the lender when
you resume your payments, we will automatically take those pay-
ments and put them on the end of the loan, interest free. So let’s
say, for instance, you have missed $3,000 in payments and you
have got a $250,000 mortgage. It will now become a $253,000 mort-
gage. Of course, it is not amortized. And that is simply paid back
when you sell the home or when you refinance. And we think this
is fair to borrowers. We think it is fair to lenders. It keeps the
exact same payments, so when you resume and you can make the
payment you used to be able to make, again, that will be pushed.
20
If you cannot—so let’s say you’re back to work but you are not
making what you are used to, and you cannot afford the previous
payment, then we will underwrite you to a modification option
where we can come up with a payment that is affordable. But that
will have to be something where you have to reach out to your
servicer and work with them for that option.
So again, I want to emphasize if you were in forbearance, you
started resuming your payments, we are simply going to tack it on
the end automatically, and that will be reflected in your monthly
statement, but your monthly payment will not change.
Senator MCSALLY. OK, great. And then on May 13th, FHFA an-
nounced the payment deferment plan. Again, that is different than
a forbearance request. So as my constituents are looking at their
options, can you explain, in plain English, the difference between
the payment deferment plan and the forbearance?
Mr. CALABRIA. So the forbearance is at the beginning of this
where the payments are not forgiven. They are just pressed on
pause. So, you know, instead of making your monthly payment you
call up to your servicer, and you have to contact your servicer—I
think this part is so crucial—you have to call or at least sign up,
and a number of lenders do allow you to do this online. So you
have to enroll in the forbearance plan. Again, it is not forgiven. It
is just going to be tacked on to the end of the mortgage. And at
the time when you start to resume, then whatever you have missed
will be put back on the mortgage.
So I do think it is critical to keep in mind it is not forgiven. It
is a pause. You still have to pay it. And, in fact, you know, for
many households if you can pay it you are probably better of con-
tinuing to pay it. But again, it is a time-out, basically, and that is
the way to think about it.
Senator MCSALLY. OK. But that is different than the payment
deferral plan that your agency came up with, just to clarify, right?
Or——
Mr. CALABRIA. It is in that the forbearance is what happens on
the front end, while you are missing the payment or not making
the payment, and the payment deferral was what happens when
you are out of forbearance.
Senator MCSALLY. OK. Got it. Thank you. I also want to share,
in my remaining time, my concern about renters. There is a single
mom on my street who I talked to this weekend who is now coming
up on 4 months of rent. And perhaps her homeowner actually has
been given some relief—I do not know the circumstances—but as
we are allowing grace to happen for the owners, I don’t know if you
could share—I don’t know, there is not much time, but Secretary
Carson, what else can be done for the renters to ensure that they
are not put in a situation of potential eviction once the grace peri-
ods might end?
Mr. CARSON. Look, it is very important for the renters to make
sure that they are in contact with the PHAs and with the owners,
to work something out. They also can have a reassessment of their
income made so that their rent obligation can be lowered. But it
does require proactivity on behalf of the renter.
Senator MCSALLY. OK. Great. Thanks. I am out of time. I appre-
ciate it.
21
Mr. CARSON. Thank you, Senator.
Chairman CRAPO. Senator Tester.
Senator TESTER. Yeah. Thank you, Mr. Chairman. Thank you,
Ranking Member Brown, and I want to thank both Dr. Carson and
Mr. Calabria for being here today.
Kind of going off of what Senator Menendez said on the CDBG
grants, Dr. Carson, and the fact that they are not out and we are
two and a half months after the CARES Act has been passed, the
same thing could be said, even to a greater extent, on the emer-
gency solution grant. Two and a half months after Congress has
passed the CARES Act, just 2.5 percent of the homeless assistance
money has been available, you know, basically two and a half
months after we approved the CARES Act.
Can you tell me why this is the case?
Mr. CARSON. Well, first of all, the rest of that ESG money is
being announced today, so all $4 billion of it will be allocated. An
announcement was made as of today.
Senator TESTER. Why did it take so long?
Mr. CARSON. This is record time, Senator.
Senator TESTER. Yeah, but we are in a pandemic, in a pandemic
with a lot of other things that are going on, and I do not think Con-
gress passed—and I think it is what Senator Menendez was refer-
ring to too—I do not think Congress passed the CARES Act in a
record amount of time, I might add, to have it going out in mid
summer and fall.
Mr. CARSON. But do recognize, sir, that the initial amount of
ESG went out the first week after the bill was signed, and that was
$1 billion. We also made it clear that people could utilize the mon-
ies that they already had. They could be repurposed.
Senator TESTER. Yeah. Homeless assistance, though, that simply
is not the case. I mean, it did not get out. And it is good you are
getting it out now. I just hope it is not too late.
Let me touch a little bit on Senator McSally’s question, and oth-
ers who have asked this question, on rental forgiveness. We have
got a situation where people have lost their jobs and they cannot
pay rent, so we are telling them it is OK, you do not have to pay
your rent until you get your feet back under you. In the meantime,
we have got people who own property who may have loans on that
property. They might be through whoever, whatever mechanism
they might have used.
Can anybody tell me what the plan is for not only keeping the
renters in their home when, hopefully, we get out of this sooner
than later, and what is the plan for the property owner that rents
that property to the renter, that does not get those rental pay-
ments?
Mr. CARSON. Well, first of all, you might be surprised, because
you probably cannot see this. But this is the rent payment tracker,
4 months’ rent result, for 2019 versus 2020. You can see that it has
not changed very much—97.7 percent of people were paying last
year, 94.6 percent now. So people have been paying, significantly,
their rent.
We are still concerned about it, obviously, and that is why I men-
tioned that if you do not see any prospect of being able to get a
job, which I do not think is going to be the case for most people,
22
but if that is the case, you can have your income readjusted so that
your rent will be readjusted down.
Senator TESTER. I got it. I got it and I appreciate that, but what
about the folks who own the homes that are being rented out, or
the apartments that are being rented out, that have loans on those,
that may not have gotten the income from the rent because the
rent was not paid?
Mr. CARSON. Those individuals are businesses and they qualify
for PPP.
Senator TESTER. Do you think that is adequate enough right now
to take care of any sort of liability that they might have?
Mr. CARSON. It seems to be working, quite frankly.
Senator TESTER. OK. All right. Mr. Calabria, in April, ProPublica
reported—they found that despite a ban on evictions during the cri-
sis, landlords in four States were proceeding with eviction filings
during this pandemic. Are you aware of that, number one, and
number two, what are you doing about it, if you are aware of it?
Mr. CALABRIA. So, Senator, we certainly have heard of landlords
moving forward. We have not seen evidence on whether those prop-
erties are Fannie- or Freddie-backed or not. I will note that we do
not have enforcement authority over landlords. When we hear com-
plaints, we give those complaints to the CFPB. I believe the CFPB
tries to get those to the State attorneys general. But we do not
typically have statutory enforcement authority in this area.
Senator TESTER. So there is not much you can do about it, is
what you are saying.
Mr. CALABRIA. Correct, other than try to bring attention to it, try
to encourage the—I mean, if we believe that a landlord who is get-
ting forbearance is violating the terms of the forbearance, we can
stop the forbearance. But we certainly have no ability to bring an
enforcement action, if you will, against landlords.
Senator TESTER. OK. Thank you, Mr. Chairman.
Chairman CRAPO. Thank you. Senator Moran.
Senator MORAN. Mr. Chairman, thank you. Mr. Secretary and
Dr. Calabria, thank you for joining us.
Dr. Calabria, I want to draw my attention to you in my ques-
tions. First of all, I would like to talk about risk weighting for sin-
gle family versus multifamily. Under the FHFA’s Enterprise Cap-
ital Re-Proposal, in my view there is a confusing disparity between
how the risk weighting is applied to single family versus how it is
applied to multifamily.
In determining, as I understand it, the single-family FHFA relied
on the crisis of 2008 for a factual basis to make that determination.
However, on the multi side, there was an indication by FHFA that
that was not the appropriate way to look at it for multifamily.
But in terms of losses, back in 2008 and 2009, multifamily 2007
vintage cumulative losses were 1.3 percent, while single-family
losses were 3.6 percent. Based upon that comparison, it surprises
me that the indications by the re-proposal is the risks are higher
in regard to multifamily, when it seems to me the evidence shows
exactly the opposite.
Why then, relative to single family, is FHFA penalizing multi-
family against the data? You have indicated that FHFA may be
overfinancing multifamily housing. Are these two things related? I
23
want to make sure that we are making a risk calculation based
upon the facts, not based upon a desire to reduce the financing of
multifamily.
Mr. CALABRIA. Thank you, Senator, for that question, and let me
first say that I could not agree with you more on everything. All
of this should be driven by the facts and the data.
Let me start with your last question, in terms of there is a pre-
existing multifamily activity cap and then there is the capital rule
treatment of multifamily, and those are indeed two different
things. There is nothing in the capital rule that is meant to drive
the activity more or less of multifamily. Again, those two are dif-
ferent. And, in fact, the current re-proposal is a re-proposal of a
2018 rule that was crafted by my predecessor. In the multifamily
part of that rule, almost exactly the same as it was in the 2018
rule, very modest changes were made.
But I also want to clarify a couple of issues that I think are crit-
ical here. While the re-proposal attempts to use more bank-like
language so that analysts and commentators who understand the
Basel process can read our proposed rule and have more of an ap-
ples-and-apples approach, I do want to emphasize that unlike in
the banking world where the risk buckets are somewhat fixed—so,
for instance, we are all aware with the 50 percent risk weight that
banks have on single-family mortgages, well, that 50 percent is the
same for everything that fits in that bucket, whereas the average
risk weights on both single family and multifamily in the proposed
rule are driven by the composition of the loans.
And so what you have really seen is that the composition of both
multifamily and single-family loans to date is different than it was
in 2008, and I am certainly very appreciative that the multifamily
performed functionally pretty well.
Let me also emphasize that the cap on multifamily that we set
still has Fannie and Freddie about where they have been in the
marketplace, which is essentially their highest market share they
have had in decades. So we have not pulled back Fannie and
Freddie from the multifamily market. We tried to make sure, of
course, that it performs differently.
And also we are seeing, in this environment, so for instance
Fannie and Freddie do have a significant amount of both seniors
housing and student housing in the multifamily sector that are
both under stress that we are keeping an eye on. Again, I am not
overly concerned, but again, it is a possibility of that being a dif-
ferent crisis this time around than the last crisis.
But I last want to emphasize that it is a proposed rule. We are
taking comment. We certainly expect and welcome commentary
from the multifamily industry and others. We will obviously go
through those comments. We will be thoughtful about it, we will
be thorough about it, and we will be data-driven about it, and I
promise you we will be transparent about it.
Senator MORAN. Dr. Calabria, thank you. Would you commit that
you would inform my staff and provide data——
Mr. CALABRIA. Absolutely.
Senator MORAN. Thank you. And you will also follow up about
other alternatives for that kind of lending for multifamily, what
you see is available.
24
My time has expired. I thank the Chairman. I thank you, Dr.
Calabria.
Mr. CARSON. Thank you, Senator.
Chairman CRAPO. Thank you. Senator Schatz.
Senator SCHATZ. Thank you, Mr. Chairman, Ranking Member.
Dr. Calabria, half of all renters live in apartments owned by indi-
vidual landlords, and FHFA provides for eviction protections for
renters in multifamily properties that take advantage of CARES
Act mortgage forbearance. But the same protections are not ex-
tended to renters in the one- to four-unit buildings with loans re-
ceiving CARES Act forbearance.
Are you considering extending the protections prior to announc-
ing the forbearance program?
Mr. CALABRIA. Senator, I remind you that Section 4022 of
CARES, which handles the single family, which is where the sin-
gle-family rental is, we are mandated, essentially, on, if you will,
the honor system, where we have to provide the forbearance.
Where, by contrast, in 4023 of CARES, which covers the multi-
family, you do have these requirements for there to be an exchange
of, in exchange for forbearance there will be no eviction on non-
payment of rent.
So our conclusion is that for us to place legal mandates on non-
eviction, on tenants in single-family properties under 4022, Con-
gress would have to amend that section.
Senator SCHATZ. Thank you. A couple of other things about
where the discretion lies between the Congress and FHFA. You re-
ferred to a foreclosure moratorium which expires at the end of this
month, and you said you are at least giving consideration to ex-
tending that moratorium. Is that correct?
Mr. CALABRIA. Yes, Senator.
Senator SCHATZ. And what is your timeframe for deciding that
and what is the timeframe under consideration in terms of an ex-
tension?
Mr. CALABRIA. We will be making that decision—we will be mak-
ing that announcement certainly within a week. I think because we
can always extend it as we move along, I certainly think, at a min-
imum, we would want to extend it a month. At a maximum, I do
not think we would want it to be any more than 2 months, just be-
cause we can always extend it again as we start to see how the
economy evolves.
So my preference here is to give people enough certainty without
necessarily locking us in.
Senator SCHATZ. And the July 24th expiration of the eviction
moratorium, likewise, is that in the Congress’ hand or do you have
discretion other than the sort of complication related to LIHTC
units?
Mr. CALABRIA. We can extend for GSEs. Obviously, the CARES
Act covers all Federal-related mortgages, not simply Fannie and
Freddie. So, for instance, USDA, VA. If there was to be an exten-
sion for those, we could not do that at FHFA but we could extend
the foreclosure moratorium.
And I really want to emphasize the part of what we have done
on the foreclosure moratorium are foreclosures that were in process
pre-CARES Act. So there were a number, for Fannie and Freddie,
25
probably about 200,000 ongoing foreclosures pre-COVID, and it is
important to remember that we paused those as well, because we
wanted to be able to facilitate social distancing. And we are looking
at continuing that, and that is a separate, outside of the 4022 and
4023.
Senator SCHATZ. I want you to, in your minds, good conversation
has happened related to what will happen once the current CARES
Act provisions related to housing expire. But if you would provide
to the Committee sort of a set of predictions and recommendations
for our consideration as we look at the next round of legislation,
to understand what is going to happen next in the event that we
do nothing at all. How many people would be out on the streets?
How many people would be in foreclosure? How many people would
be evicted? And what is within the Administration’s authority to
provide some flexibility to those individuals, but also probably more
importantly, what we are going to need to do, as a Congress, to
make sure that we don’t face a cliff.
And I know Ranking Member Brown has been very clear about
this. You know, there are a lot of technical aspects of this, but basi-
cally what we are looking at is that people have their bills piling
up and up and up, and that means that they are experiencing some
relief right now. But as I heard Secretary Carson and you, Director
Calabria, talk about the best solution to this being, you know, job
growth, that may be true enough, but we know even in the most
optimistic scenario that job growth is not going to come fast enough
to help people with their rent and mortgage, not as a statistical
matter.
Individuals will be helped as they find employment. But we have
got 40 million individuals who are unemployed, and those jobs are
not coming back very quickly. And so as housing agencies it is a
little bit of a rhetorical sleight of hand to say, well, we have just
got to wait until the job market recovers. That is going to be years
before we are fully recovered.
One final question, Secretary Carson. Are you comfortable with
an October deadline for pushing out the CDBG money?
Mr. CARSON. That is the deadline.
Senator SCHATZ. No, I understand that.
Mr. CARSON. Bear in mind that the——
Senator SCHATZ. I understand what you said, Secretary, before,
to two previous Senators who asked you this question, and I under-
stand that you are saying you are within the statutory framework.
That is not what I am asking you. I am asking you, understanding
how urgent the situation, understanding that we are experiencing
Depression-levels of unemployment, understanding that we are in
a global pandemic, that seems rather casual to think, well, we are
within the statutory mandate, when you know that people across
the country are suffering.
So my question is, is there any way you could see fit to go back
to your agency and accelerate the process of pushing out these
CDBG funds? We are not saying that you are violating the law. We
are saying that people need the money now, and would you con-
sider pushing it out a little more quickly?
Chairman CRAPO. And if you could be brief, please. We are way
over time.
26
Mr. CARSON. OK. The statutory requirement for ESG is June
25th. It is out today, the 9th. So it does not mean when the dead-
line is that we are going to wait that long. We are going to get it
out as fast as we possibly can.
Chairman CRAPO. Thank you. Senator Van Hollen.
Senator VAN HOLLEN. Thank you, Mr. Chairman, and I thank
the witnesses today. You have had a lot of questions about the im-
pact of job loss and therefore the loss of income, and therefore the
difficulty so many people have in paying rent. I think even the
most optimistic scenarios show that millions of Americans will re-
main unemployed, through no fault of their own, beyond July 31st,
and, of course, after July 31st, the enhanced unemployment com-
pensation benefits would expire unless we extend them.
So just a quick question to both of you. Do you agree that it
makes sense, to the extent that we will continue to have millions
employed, to extend enhanced unemployment insurance to help
people pay their rent as this emergency continues?
Mr. CARSON. Well, I think it is obviously going to be very impor-
tant for us to monitor the situation, see how much recovery is
going on, and obviously we are not going to sit idly by and watch
millions of Americans suffer for something that is not their fault.
Senator VAN HOLLEN. So, Mr. Secretary, just to clarify, at the
end of July, if it is clear that we will continue to have millions of
people unemployed, through no fault of their own, you would sup-
port continuing enhanced unemployment compensation in some
form?
Mr. CARSON. As necessary.
Senator VAN HOLLEN. All right. Mr. Calabria, do you have an
opinion on that?
Mr. CALABRIA. Senator, I will just remind you we are an inde-
pendent agency, not part of the Administration, not part of the ne-
gotiations, so I will leave what the next package looks like between
Congress and the Administration.
Senator VAN HOLLEN. No, I understand that, but you are also
somebody who is well versed on these housing issues and you have
an understanding of the impact of people not paying their rent, or
not able to pay their rent. So you do not have any opinion on it?
Mr. CALABRIA. I certainly share the point about there being a
broader income job dynamic. I certainly think the number of Sen-
ators, for instance, who have raised issues about the $600 further
being some percentage of the unemployed that are receiving more
than they actually would in wages. I guess at the risk of the old
clich? about a two-handed economist, there are tradeoffs here, and
I think fundamentally the reason you and your colleague are elect-
ed are to weigh those tradeoffs.
Senator VAN HOLLEN. Well, Mr. Secretary, we will do that. There
is a work-share program we will be talking to more of our col-
leagues about, which both provides, you know, the benefit of the
employer, small business, being able to share reduced hours and
wages with the unemployment system.
Mr. Secretary, in response to an earlier question, I think it was
to Senator McSally, you mentioned the process at HUD for income
recertification. For people who lost income, they can recertify. Has
HUD put out additional information recently to better inform
27
tenants about the fact that they have to do that and that that op-
tion is available to them?
Mr. CARSON. Yes, we have, at HUD.gov/coronavirus.
Senator VAN HOLLEN. Great. And have you thought of expediting
that process? In other words, we know a lot of people are losing
their income because they are losing their jobs. Is there a way to
expedite that recertification process so people can get the benefit
of it earlier rather than later?
Mr. CARSON. We have our Assistant Secretary who is in constant
communication with the various PHAs and others to inform them
of what the process is and how to access that process quickly.
Senator VAN HOLLEN. Mr. Secretary, if you could—not right now,
but if you could get us the information on how many people have
requested recertifications, you know, since the emergency hit, and
how many have received it, could you get us that information?
Mr. CARSON. I would be happy to.
Senator VAN HOLLEN. Thank you. Director Calabria, you recently
released your re-proposed capital rules for GSEs. Moody’s econo-
mist, Mark Zandi, has estimated that the change will raise interest
rates on low-income borrowers and could raise mortgage payments
on a $200,000 mortgage by $58 per month. Isn’t it a fact that this
proposal will increase interest rates and that they will be dis-
proportionately borne by lower-income households?
Mr. CALABRIA. I would disagree with that analysis and certainly
note that Mr. Zandi is on the board of a mortgage insurer that has
a strong economic interest in not seeing us do this rule. So I cer-
tainly would not put him forward as an unbiased expert in this.
I would also note, Senator, we have had a decade since the finan-
cial crisis of arguments by Wall Street that somehow raising cap-
ital will destroy lending in this country. That has not been the
case. I will note today that many commercial banks in the jumbo
market are able to make mortgages and they hold twice the capital
that the rule requires and do so at costs that are equal to or less
than what Fannie and Freddie are charging.
So, Senator, I think it is just critical that we have financial sta-
bility. We know in moments of stress, when large institutions like
Fannie and Freddie are undercapitalized it is low- and moderate-
income households that are most impacted.
Senator VAN HOLLEN. I know my time is up, Mr. Chairman. If
you could just provide us your estimate of the impact this proposal
will have on interest rates and mortgage payments for lower-in-
come households. Can you get us detailed information on that?
Mr. CALABRIA. Senator, we will look into that and see what we
can provide.
Senator VAN HOLLEN. Well, it seems to me that in making this
kind of decision it would be essential to have that information, so
I hope you can put it together, and I look forward to getting it.
Thank you, Mr. Chairman.
Chairman CRAPO. Thank you. Senator Cortez Masto.
Senator CORTEZ MASTO. Thank you, Mr. Chairman and Ranking
Member Brown. I so appreciate Secretary Carson and Director
Calabria for being here. Director Calabria, thank you for being on
the phone with me last week as well. I really appreciate it.
28
So, you know, I am looking online in the Urban Institute. There
is an article that says, ‘‘New data suggests that COVID–19 is wid-
ening housing disparities by race and income.’’ In fact, the first
paragraph into this article says that ‘‘racial and economic dispari-
ties in access to safe and affordable housing existed long before the
COVID–19 pandemic. And new data from the U.S. Census Bureau
suggest that the pandemic and its economic fallout is only wid-
ening these divides.’’
Would you both agree with that?
Mr. CARSON. Absolutely.
Mr. CALABRIA. Yes.
Senator CORTEZ MASTO. Thank you. So then let me start with
you, Secretary Carson. I am listening to your testimony and I have
been bouncing between here and Energy and Natural Resources,
but from what I listened to your testimony and then also in your
written statement you note the initial funds that Congress has pro-
vided to help people with housing assistance, but I do not hear or
see any answers about how your department will respond to the in-
creasing numbers of African Americans, Latinos, and low-income
people who face rapidly increasing housing costs and eviction, what
you are doing to address that.
So I guess my first question to you is, as HUD calculated the as-
sistance formulas, did your researchers prioritize communities with
high proportions of African Americans and Latinos, and did you
take that into consideration?
Mr. CARSON. Your voice keeps going in and out, so I am not get-
ting the full question, but I think you are asking are we doing sta-
tistical analysis of the communities that we are trying to help, and
looking at the demographic data, and is that somehow being uti-
lized in the policies that we create. Would that be an accurate por-
trayal?
Senator CORTEZ MASTO. Absolutely. Thank you. Thank you. That
is accurate.
Mr. CARSON. Yes. Of course we always look at the demographics,
and we do recognize that there is a significant disparity, based on
the environment in which you live. You know, the COVID–19 crisis
has made it very clear that comorbidities such as hypertension and
diabetes and obesity and asthma have a tremendous negative im-
pact in terms of morbidity and mortality. And——
Senator CORTEZ MASTO. And I appreciate that, and believe me,
I appreciate that, particularly coming from your background. But
let me ask you this. You are Secretary of Housing and Urban De-
velopment right now, and so as you look at this data, which you
do not disagree with, what are you doing right now, particularly
during this pandemic, to address the issue that we see more of this
economic disparity within these communities? And I have not
heard, in this conversation we have had today, how you, as the Sec-
retary of HUD, are specifically addressing this.
So that is my first question to you.
Mr. CARSON. Well, what we are doing is utilizing the White
House Council on Opportunity and Revitalization, which is a multi-
agency council, to address the underlying causes for those dispari-
ties. That means housing specifically, that means education, that
29
means communication, that means transportation, it means looking
at——
Senator CORTEZ MASTO. I appreciate that and I appreciate what
the White House is trying to do, but my question to you is specifi-
cally, what policies and programs are you doing as the Secretary
of Housing? What specifically are you doing to address this issue?
Mr. CARSON. Well see, we recognize that this is going to be an
all-of-Government approach to solve these kinds of problems. These
are not just a HUD problem. They are not just an HHS problem.
It is a combination of utilizing all of these together, recognizing
what the underlying causes of these problems are. It is because
people have——
Senator CORTEZ MASTO. I appreciate that, and I appreciate the
all-in approach and the wrap-around service approach and the ho-
listic approach. But you are the Secretary of HUD, and so we are
looking for specific programs and policies out of your Department
to address the housing piece, and I have not heard that, and I
think that is the frustration we are hearing today from many of the
Senators.
Let me—I do not have much time left so I will submit the rest
of my questions for the record. Thank you.
Chairman CRAPO. Thank you. Senator Jones.
Senator JONES. Thank you. I appreciate the opportunity to be
here, and to both the witnesses, thank you so much for being here
and giving us information, and for your service. I appreciate that.
I would like to ask Secretary Carson a little bit about the issues
involving radon and radon testing. As you know, and we have dis-
cussed, there have been numerous reports, a million or so instances
where it is estimated that radon exists in public housing, and that
is a serious hazard for potential lung cancer, and 21,000 Americans
die of lung cancer every year.
The President’s budget includes $5 million for the Health Homes
Program. I appreciate and comment your recognizing what a prob-
lem this is.
But one of the problems we see is that public housing authorities
also have to provide and make sure that housing is habitable, and
when a unit is not being inhabited, though, they somehow get
panelized.
Huntsville Housing Authority, in Alabama, north Alabama, in
particular has had this problem and said that they do not have the
money at this time to fix the housing in those units.
I want to make sure we invest in safe, healthy housing, but if
the monies are not there, I don’t want to see some of these public
housing authorities being penalized. So is HUD adjusting its policy
so we don’t penalize these PHAs while they are waiting for suffi-
cient funds to remove hazardous materials such as radon?
Mr. CARSON. We are. Thank you for mentioning the $5 million,
which is the first time that that kind of money has been dedicated
to radon. But we also have a Healthy Homes grant of $20 million,
which can be utilized for radon as well.
We have also changed the inspection protocol so that it will be
a part of the inspection, and obviously, as you probably know, there
are State and local requirements regarding radon as well, and we
30
will be assessing whether those are being followed during the in-
spection process.
Senator JONES. All right. Well, thank you, but my real question
is that as these public housing authorities are waiting to abate the
radon and these units are standing empty, are you adjusting your
policy so that these PHAs do not get somehow penalized for having
vacant places—vacant buildings, vacant apartments?
Mr. CARSON. If the apartments are vacant but they are not fol-
lowing the protocols that are mandated by State and local law, yes,
they will still be penalized. We cannot allow people to simply ig-
nore those regulations.
Senator JONES. No, no. That was not my question, sir. I mean,
it takes time between getting the money. I mean, they do not have
the money. It takes time to get the funds in to abate the radon,
and for PHAs that are doing everything they can to comply with
the law, are you trying to give some adjustments for their good
faith compliance and they simply do not have the money, or are
you going to just continue to penalize them, even though they just
fully do not have the funds to comply?
Mr. CARSON. If they make it clear that they have recognized the
problem and they are in the process of addressing it and they are
just waiting for the funding to do so, of course we will provide them
an appropriate waiver.
Senator JONES. All right. Great. Thank you, sir. Thank you for
that.
Staying with you, Secretary Carson, I appreciate a lot of what is
being implemented with the CARES Act, and recognizing the dis-
parate impact that this crisis, this healthcare crisis has had on mi-
nority populations. But I think, and I would be remiss if I have not
pointed out that prior to this crisis your Department has also
issued a number of rules and has done some things that I think
completely turn on its head the role of HUD in trying to prevent
discrimination.
For instance, the new rule—and you and I have talked about
this—that does away with the disparate impact proposed rule I
think is going to make it almost impossible to provide and sue on
race-based issues. You have got rules, the mixed status rule, which
I think is also going to create problematic areas to try to prove dis-
crimination.
The Fair Housing Initiatives program for the 2021 budget, I
think is less than what should be. And, you know, I am really con-
cerned about the proposed rule where, in 2018, the Trump adminis-
tration delayed and then rescinded the Obama administration’s
rule regarding recipients of HUD funds in localities to undertake
a comprehensive analysis of fair housing barriers. Your proposed
rule now completely eliminates tools involving race and segregation
and instead focuses on removing regulatory barriers to develop.
So as we move out of this crisis, Mr. Secretary, I am asking you,
can you commit to making sure that the Housing Department goes
back and starts looking at discrimination? We are in a crisis in this
country involving race. Everyone is seeing it. It is not just police
and law enforcement. Can you commit to making sure that in
terms of the housing across this country, your Department is going
to take another look at the rules that you have implemented and
31
to try to make sure that it is both fair, equitable, and does every-
thing in the Government’s power to prevent discrimination of any
sort?
Mr. CARSON. We will definitely commit to doing everything we
can to prevent discrimination and create fair housing. No question
about that.
Senator JONES. All right. Thank you, sir. Thank you, Mr. Chair-
man.
Chairman CRAPO. Thank you. Senator Warner.
Senator WARNER. Thank you, Mr. Chairman. I would like to go
to Director Calabria. Thank you for the opportunity we have had
to speak on a number of times. We do not always agree but I really
do appreciate your willingness to engage with me. And I want to
come back to, actually, our favorite subject, the GSEs.
I think the last couple of months we have seen the importance
of the Government’s role in supporting the mortgage market. As a
matter of fact, it appears to me that outside the Government-sup-
ported mortgage market the rest of the market is not really doing
that well, and you can point out that Congress has not been very
effective at our reform efforts. I am concerned about some of the
Administration’s plans.
So with that as a backdrop, as we get into your plans on how
we get the entities out of conservatorship, can you address how you
think the current economic challenges may impact the timing of
the GSEs release? Obviously I would think investors would [inaudi-
ble] what were retained earnings, some of the interest of the inves-
tors might be diminished. Speak to that as well as how we actually
make sure that we have got that real plan and make sure the
GSEs wholly pay for that Government backstop.
Mr. CALABRIA. Well, thank you, Senator. A number of questions
in there, and let me say it is always a pleasure to talk to you, and
I hope you at least always feel that when we disagree it is. It is
always in a very transparent manner and a very fair and open
manner.
Let me also emphasize that as an independent regulator I really
cannot speak to the Administration’s plan. I do want to make a
point about preparing for exiting conservatorship, that I believe
this is not a choice on my part. It is a statutory mandate. The
framework of the Housing and Economic Recovery Act requires me
to get Fannie and Freddie into a safe and sound condition, which
is consistent with exiting conservatorship.
At this point, where we are in the COVID crisis, where we are
in the housing market is I think this will likely delay an exit by
3 to 4 months, but I would certainly underline there are a tremen-
dous amount of unknowns in here.
It was touched upon by a couple of Members, if we start to have
a number of forbearance loans eventually go into default and go
into actual perhaps foreclosure or serious delinquency, we will have
to take those loans out of pools, put them onto the balance sheets.
So for Fannie and Freddie the really big price tag, if you will,
with this, we probably will not see that until the fourth quarter.
And so, again, we are still seeing how this evolves. I would simply
say it is too soon to really tell, and by 3 to 4 months should really
be taken with an extremely wide margin of error.
32
Senator WARNER. I just hope you will keep us, those of us who
are very involved in this subject, informed. Obviously the market
is changing, and the interest of the private investors, I think, I
want to follow that.
It appears, as well, that the existing shareholders from any bank,
you are going to simply walk away from the Government’s pre-
ferred position without any compensation I think would be helpful
in terms of giving everybody a little, you know, downstream guid-
ance. To just clear up, I hope you would not support walking away
from the Government’s position without a sanction.
Mr. CALABRIA. Well, I would emphasize that what happens to the
Government’s investment is fundamentally the responsibility of
Treasury and the Administration to decide. I certainly think that
we should make sure that the Government gets recouped fairly.
But again, I do want to emphasize that this is fundamentally the
Treasury Department’s decision.
Senator WARNER. Yeah. You are a smart guy and you have got
a pretty good amount of influence in all this, and I want to make
sure—I do think it is important that we send that signal to the
market that the Government is not going to walk away from its
preferred position without compensation.
I know that Senator Van Hollen has raised this issue, but I want
to just re-emphasize my interest as well in making sure that LMI
communities, that we have got really data-driven metrics on how,
I think, the COVID crisis has disproportionally affected commu-
nities of color, and having that data will be really important as we
think about how we protect these communities on a going-forward
basis.
I am down to my last 9 seconds and I would like to continue our
discussion on risk sharing. I am concerned that if we end up with
a solution where we go back to a too-big-to-fail duopoly. And I
know not all of the risk-sharing experiments have fully worked, but
I think it would be a challenge to come to a pre-2008 crisis without
risk sharing to the too-big-to-fail entities. But I know we will con-
tinue those conversations.
Thank you, Mr. Chairman.
Chairman CRAPO. Thank you, Senator Warner. Senator Smith.
Senator SMITH. Thank you, Chair Crapo and Ranking Member
Brown, and thanks to both of you for being here testifying before
our Committee today.
I want to talk about the economic and health and racial equity
crisis that is sweeping through our country. Mr. George Floyd was
murdered by Minneapolis police officers in my hometown. This
stuff is a tragedy and it never should have happened, and we can-
not look away from this deep injustice. It reveals, I know, a sys-
temic racism and inequity that exists in policing and in our society,
and it is intolerable.
You know, I have listened to Black people in my community who
have said to me, with anguish and fear and frustration, that ‘‘all
we want is to know that the police won’t attack us and kill us. All
we want is to be treated equally.’’ And we know that we need to
seek justice for Mr. Floyd and his family, but people are marching
in the streets because they are demanding more, and we need to
listen and respond.
33
Now they are demanding that we dramatically transform our po-
licing systems in this country, but they are also demanding that we
seek out and change and address the disparities and the discrimi-
nation that exists in all of our communities, including in our hous-
ing systems. And this, of course, as several of us have mentioned
already today, the pandemic is even increasing this divide.
In Minneapolis, we have the third-highest homeownership rate
in the country, but the fifth-biggest gap in home ownership be-
tween white households and households of color. The typical Black
family in Minneapolis earns less than half of the typical white fam-
ily, 44 percent. Roughly 25 percent of Black families in Minneapolis
own their own home, which is one of the lowest rates in the coun-
try. And we know that home ownership is the way that most Amer-
icans build wealth and economic stability.
So why has this happened? We know that historic racism is at
the root of this. In the 20th century, in Minneapolis, racist red-
lining strategies barred families of color from buying houses and
renting in so many neighborhoods. In the 1960s, we built big free-
ways that decimated historically Black communities in Minneapolis
and St. Paul, like the Rondo neighborhood. One in eight African
American families in St. Paul lost their homes when we built the
I–94 freeway through the Twin Cities.
These disparities that I am talking about in Minnesota are ours,
but we see them everywhere in this country. So Secretary Carson,
we need to work to fulfill the promise of the Fair Housing Act. This
is from 1968, when a young Senator from Minnesota, Walter Mon-
dale, helped to write that landmark legislation, and we know that
its promise has not yet been fulfilled. And we had rules like the
Affirmative Furthering Fair Housing Rule that were written to do
just that. But HUD, under your leadership, has undermined this
rule and your agency’s effort to oversee fair housing.
So Secretary Carson, I believe so strongly that in this moment
we have a moral responsibility to change the systems in housing
that perpetuate these deep inequities that I have just described,
that we all know are there. We need to continue to move forward
in the way that we have or we can actually finally do something
about this.
So I ask you, Secretary Carson, to please consider the voices of
my constituents, the voices of civil rights leaders and advocates,
and to seize this moment to make the kind of change that we need
to make around fair housing. You have the power to do this. You
can use the power of your agency to do this.
Now I want to ask you something specific related to these inequi-
ties, related specifically to the issues of homelessness on Tribal
land. The COVID–19 pandemic has exposed huge racial and eco-
nomic disparities and the inequities that I have just been talking
about. We see this on Tribal lands. We see the devastating impact
on Tribal lands. According to the National Alliance to End Home-
lessness, people experiencing homelessness are uniquely vulnerable
to COVID–19 because of food insecurity and crowded shelter condi-
tions and all of the dangers that we see with encampments, with
not enough hygiene stations, not enough help.
So knowing that these risk factors are there, it makes no sense
to me that Tribes are not eligible to apply for the HUD homeless-
34
ness assistance grants. Senator Murkowski and I have a bill to fix
this. And so my question to you, Secretary Carson, is do you think
that Tribe should be able to access these homelessness assistance
grants so that they can reduce some of this overcrowding and help
families find safe and stable housing?
Mr. CARSON. There have been a number of programs, and I am
sure you are familiar with the Indian Housing Block Grant Pro-
gram and the Indian CDBG Program, which provides the same
kinds of relief as the program that you are talking about. But do
I believe that they should be entitled to significant help because of
the disparities? The answer is yes.
Senator SMITH. Thank you, Secretary Carson. We are going to
push forward this legislation. I think it is very important. And I
will follow up separately with more questions, especially related to
sprinkler systems in multifamily units, which has been such a big
problem in public housing projects. Thank you.
Chairman CRAPO. Thank you. Senator Sinema. Is she on video
and audio? Senator?
Senator SINEMA. Mr. Chairman, can you hear me?
Chairman CRAPO. I can. So you will be with us on audio. Go
ahead.
Senator SINEMA. That is right, and thank you. Thanks to all of
our witnesses for being here today.
Economists reported this week that the recession officially began
in February, and I hear from Arizonans about how our ongoing
public health crisis and a bad economy create significant headaches
and hardships for families across the State.
Arizonans worry about their health and safety. An increasing
number are concerned about how they will make ends meet. The
Senate must act to provide meaningful relief to families and small
businesses, stabilize the economy, fight the spread of coronavirus,
and help our State and local governments provide essential services
during these challenging times.
Secretary Carson, thank you for being with us today. I want to
talk about what we mean when we say eviction or foreclosure.
These are families likely facing homelessness, so they will need to
find shelter and food. There are unprecedented waitlists for shelter
services across my State. Arizonans face very difficult cir-
cumstances that hurt our most vulnerable, including children, and
this is largely through no fault of their own.
What does it mean to you personally when an American family
loses their home?
Mr. CARSON. Well, having a home is one of the things that gives
people stability and confidence, and the ability to take advantage
of other things in society. So obviously it is very important.
Senator SINEMA. So what would you tell a family that is facing
foreclosure or eviction?
Mr. CARSON. Well, you would tell them that you are going to try
to help them. That is what we are here for.
Senator SINEMA. You know, many Arizonans are struggling to
keep their lives together right now, and it is hard for families to
stay strong without safe and affordable housing. We have got to
find ways to turn those words of ‘‘we want to help you’’ into action.
35
But this is a growing problem in Arizona, particularly in our
multifamily rental market. I have spoken to property owners who
have told me that over 50 percent of their tenants missed rent pay-
ments in April or May, and we see court dockets filled with eviction
notices. That is why I am concerned that Arizonans are struggling
to get access to rental assistance.
The State of Arizona dedicated $5 million to help struggling rent-
ers, but there has been tons of red tape and substantial delays.
Very little of those funds have gone out, and people need relief.
Do you have people in the Department of Housing who can pro-
vide technical assistance and share best practices with the State of
Arizona as we address these challenges?
Mr. CARSON. We do and we would be happy to provide them. And
also we could use your help, in helping to deregulate some of the
barriers that are preventing the building of affordable housing in
Arizona and other parts of the country. This is what is creating a
lot of the problem, skyrocketing prices while people’s incomes are
not going up.
Senator SINEMA. I will say, Secretary, I am surprised to hear the
term of needing more deregulation in Arizona. As you may know,
I am a strong proponent of regulatory reform, but Arizona is a
State that has some of the most relaxed regulations of any State
in the country.
Mr. CARSON. And we appreciate that.
Senator SINEMA. I just want to talk a little bit about my own ex-
perience. As you may know, Secretary, I was homeless as a child,
and my family lived in housing insecurity for over 3 years. I lived
without running water and without electricity. So I am looking for
a Department of Housing to provide more empathy and to provide
active assistance to families who are on the verge of losing their
homes, like my family did because of tough times.
Right now, unprecedented numbers of families in Arizona are
facing these tough times, through no fault of their own, through a
global pandemic that is not manmade. And yet they are on the
verge of homelessness without seeing any kind of help in sight.
So before my times expires, I want to bring up one last issue for
you. You know, we see increased rates of seniors who are experi-
encing homelessness in Arizona. The rate has nearly doubled in the
last few years, and I do not think the Federal Government has a
good solution for this population because most of the current efforts
focus on getting people back to work.
Your budget proposes a small increase in the Section 202 pro-
gram, but we clearly need more affordable housing options for sen-
iors. Given that we are in this global pandemic that disproportion-
ately impacts seniors, what can we do to quickly address this issue
and help keep seniors in their homes?
Mr. CARSON. Well, I think we have to recognize that we have an
ever-growing incidence of seniors and we need to start concen-
trating on the type of housing for seniors that is most appropriate,
where they may have some shared living space but perhaps their
private facilities for bathroom and sleeping. That also gives them
the opportunity to intermingle with others, and as you probably
know if you know anything about mental health, that that is essen-
tial as you grow older.
36
So we need to be thinking about those kinds of things that are
changing in our society and addressing them specifically.
Senator SINEMA. Well, Mr. Secretary, I see that my time has ex-
pired, and as a licensed clinical social worker I actually have a lot
of experience in the issues of mental health. My concern is that we
are not taking action to provide either the support that is needed
for mental health or the physical security of many of our seniors
who are facing homelessness in our country.
Thank you, Mr. Chairman. I yield back.
Chairman CRAPO. Thank you. That concludes our testimony.
Senator BROWN. Mr. Chairman?
Chairman CRAPO. But Senator Menendez has asked for a few
minutes for an additional question, and Senator Brown has asked
to make a statement, a concluding statement. So we will conclude
the hearing with that, and we will go to you, Senator Menendez.
Senator MENENDEZ. Thank you, Mr. Chairman, very much for
the courtesy. Secretary Carson, briefly, I want to go back to the
DACA issue, since you mentioned taking a closer look at the rules.
Don’t DACA recipients have social security numbers? Isn’t that cor-
rect?
Mr. CARSON. I believe they do.
Senator MENENDEZ. And they have work permits—isn’t that cor-
rect?
Mr. CARSON. Many of them do, yes.
Senator MENENDEZ. And most of them have lived in the United
States since they were children. Is that correct?
Mr. CARSON. Yes.
Senator MENENDEZ. And they have legal presence. Isn’t that cor-
rect?
Mr. CARSON. They are present, yes.
Senator MENENDEZ. There are here present and legally, accord-
ing to DHS. The Department of Homeland Security has always de-
fined DACA recipients as having legal presence, so that point is
clear.
So HUD could have made the determination to interpret lawful
residency—as it has in the past because in the past DACA recipi-
ents did receive and were eligible for FHA and had dutifully per-
formed their responsibilities—to include DACA. In fact, HUD made
a choice to exclude DACA recipients from FHA loans by defining
‘‘lawful residency’’ in a different way, in a manner to exclude them,
which is made clear in the FOIA documents.
So HUD did change the rules, because before a DACA recipient
not only was eligible but received mortgages, if they were a respon-
sible borrower, and now they cannot. So HUD changed the rules,
and they did not reveal this change publicly, and misrepresented
to Congress that a change had taken place.
Yesterday, several colleagues and I sent a letter to HUD’s In-
spector General, requesting that they open an investigation into
how this decision was made and why Congress was misled for so
long. And I just want to ask you, will you commit to fully cooper-
ating with that investigation?
Mr. CARSON. Not only will we cooperate with the investigation
but I would be delighted to work with you on looking at that rule.
37
Senator MENENDEZ. Well, I would accept that offer and hopefully
look to return to what your Department used to do. And if some-
body changed it underneath your—you know, underneath you, as
somebody at a lower range, and that is not your view, then I would
embrace you changing back to what it was, where DACA recipients
who are lawfully present under the Department of Homeland Secu-
rity were eligible, did receive mortgages, and have been responsible
borrowers. I would love for that to be the outcome. I appreciate
your answer to both deal with the Inspector General and your
offer, which I would certainly accept.
Mr. CARSON. Great.
Senator MENENDEZ. Thank you.
Mr. CARSON. Thank you.
Chairman CRAPO. And then we will conclude with Senator Brown
with a brief concluding statement. Senator Brown.
Senator BROWN. Mr. Chairman, thank you. Thank you for your
courtesy always and your fair-mindedness. I appreciate that.
I want to just close with a couple of points. First, Mr. Calabria,
I appreciate your denial of rolling back civil rights protections and
your comments. My comments were directed at the Secretary and
at HUD. I apologize if you thought they were directed at you all.
So your agency has a role in monitoring the Fair Housing Act. Your
housing finance reform proposals will, in fact, though, dispropor-
tionately hurt Black and brown communities.
Second, Mr. Calabria, I also appreciate your repeated emphasis
relative to the few Americans who have lost their homes during
this crisis so far, despite the worst unemployment numbers of our
lifetimes. Dr. Carson, renters themselves, though, are telling us
they are in trouble, particularly Black and brown renters. To the
extent many are paying, they are taking on more debt that they
cannot afford. They are making impossible choices.
They are relying—really importantly, relying on the expanded
unemployment insurance we passed. That expansion, as a number
of my colleagues have noted, is set to expire in a little more than
a month. The President and my Republican colleagues refuse to ex-
tend it. Many of you remember the only amendment Senator
McConnell allowed on the Senate floor to the CARES Act was to
eliminate the expanded unemployment. We need to act now to put
money in workers’ pockets and pass emergency rental assistance.
We need to do both.
Finally, Secretary Carson, over the weekend you said the Presi-
dent will offer up remarks about racial healing over the next week.
I hope you are right about that. It is going to be pretty hard,
though, when he has spent his entire career—and I know you know
this and I know you cannot acknowledge it publicly. I assume you
acknowledge it privately, but this President has spent his entire ca-
reer dividing people, from the Central Park 5 to birtherism to call-
ing Mexicans rapists, to immigrant children ripped from their par-
ents, to dominating protesters. You know that. You ran against
him. You know that.
We know why he does it and so do you—to distract from his Ad-
ministration’s record, including your record, his Administration’s
record of betraying workers and treating Black and brown Ameri-
cans as expendable. Ultimately it comes down to leadership.
38
Just for a moment, contrast the President with the words of an-
other leader responding to calls for justice in the streets, who said,
we shouldn’t use violence to silence protestors. He said, quote, ‘‘We
must eliminate the problems from which they stem.’’ That came
from the Governor of your State when you were growing up, a Re-
publican Governor by the name of George Romney, in Detroit, in
1967. He responded by listening and taking action. He worked to
pass a fair housing law in Michigan. He worked to implement the
Fair Housing Act, in a job you have now, as HUD Secretary. Presi-
dent Nixon fired him for it.
The American people are waiting on my Republican colleagues
and you, Mr. Secretary, to show that same courage today. You have
called for dialogue, Mr. Secretary, but you refuse to listen to all the
people who have stood up against your civil rights rollbacks,
against your budget cuts, against your housing finance reforms
that would make it harder for people of color in this country to buy
homes.
You call for dialogue but today you said you were glad to not be
able to hear what I have to say. That is OK, Mr. Secretary. Wheth-
er or not you prefer to hear me, I hope you listen to the demands
for justice from people all over this country.
Thank you, Mr. Chairman.
Chairman CRAPO. That concludes the questioning and comments
for today’s hearing. For Senators who wish to submit questions for
the record those questions are due to the Committee by Tuesday,
June 16th. We ask our witnesses to respond to those questions as
quickly as you can.
Again, to both of you, I appreciate the work that you are doing,
and appreciate you being here to testify to us today in this over-
sight hearing.
This hearing is adjourned.
Mr. CARSON. Thank you.
[Whereupon, at 12:06 p.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and addi-
tional material supplied for the record follow:]
39
PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO
Today, we welcome the Federal housing regulators, The Honorable Benjamin S.
Carson, Secretary of Housing and Urban Development, and the Honorable Mark A.
Calabria, Director, Federal Housing Finance Agency.
Welcome back to you both. Today we will receive testimony on your agencies’ re-
cent activities, operations and ongoing efforts to promote access to quality, afford-
able housing while also ensuring the safety and soundness of the housing finance
market.
Your agencies’ missions have never been more critical.
The disruption of COVID–19 on the U.S. economy has hit homeowners and the
housing market especially hard.
We have already seen a huge number of mortgage borrowers enter forbearance,
while many landlords are struggling to make ends meet, and countless renters are
unsure whether they will be able to make their next payment.
In March, HUD and FHFA acted swiftly to prohibit foreclosures and evictions for
millions of residential borrowers facing financial hardship due to the pandemic.
Soon after, Congress passed the Coronavirus Aid, Relief and Economic Security
Act, or CARES Act, codifying and extending these protections and providing finan-
cial relief to renters.
Title IV of the CARES Act contains three Housing provisions: Section 4022 im-
poses a 60-day eviction and foreclosure moratorium for single-family borrowers with
a federally backed mortgage loan. It also allows struggling homeowners up to 1 year
of loan forbearance.
Section 4023 extends similar relief to federally backed multifamily borrowers who
are current on their mortgage payments. They can request up to 90-days forbear-
ance so long as they do not evict a tenant or charge late fees solely for nonpayment
of rent during the pandemic.
Section 4024 imposes a 120-day moratorium on evictions, fees and penalties for
tenants who live in multifamily units that participate in a Federal assistance pro-
gram or have a Government-backed mortgage.
Title XII of the CARES Act provides $12.4 billion of emergency supplemental ap-
propriations for HUD programs and activities, to further soften the economic blow
of the pandemic across the many communities HUD serves.
In addition to implementing the CARES Act, HUD and FHFA have taken impor-
tant actions to further protect borrowers and mortgage servicers during pandemic.
Both agencies have extended the eviction and foreclosure moratorium for quali-
fying homeowners through at least the end of June.
The agencies have also taken steps to ensure borrowers are not facing large, loom-
ing debt payments. Director Calabria recently reiterated that borrowers in forbear-
ance with a Fannie Mae- or Freddie Mac-backed mortgage will not owe a lump sum
at the end of forbearance.
FHFA has further announced a new payment deferral option which allows bor-
rowers, who are able to return to making their normal monthly mortgage payment,
the ability to repay their missed payments at the time the home is sold, refinanced,
or at maturity.
HUD has similarly implemented the National Emergency Partial Claim, which al-
lows eligible FHA borrowers in forbearance to reinstate their loans by authorizing
servicers to advance funds on their behalf. Like FHFA, repayment of any missed
monthly payments is deferred until the back end of the loan.
In recognizing the undue burden the pandemic has placed on the mortgage serv-
icing industry, HUD and FHFA have acted quickly to address the liquidity gap.
HUD has expanded issuer assistance to include the Pass-Through Assistance Pro-
gram (PTAP), which allows servicers to apply for assistance in meeting principal
and interest payments, and FHFA has announced that no mortgage servicer will be
responsible for advancing more than four months of missed principal & interest pay-
ments on a loan.
While America is taking steps to return to work and relax stay-at-home orders,
the recovery is only just beginning. I thank our witnesses for their swift and pru-
dent actions to date, and for their continued commitment and collaboration at this
time.
This Committee is also focused on working with HUD and FHFA to identify and
tailor overly burdensome regulations in an effort to create conditions that will lead
to a forceful economic recovery.
Secretary Carson, I applaud you for spearheading the ongoing efforts to identify
and eliminate regulatory barriers to affordable housing production in this country.
This will play a big part in bringing about a stronger, quicker economic rebound.
40
Finally, the pandemic has underscored the need for a stable, well-capitalized
housing market in times of stress.
FHFA has recently taken a crucial step toward safety and soundness in proposing
a thorough, thoughtful regulatory capital framework for Fannie Mae and Freddie
Mac.
As Americans face financial uncertainty, it is long past time to make the hard
decisions and address this last unfinished business of the 2008 financial crisis.
Director Calabria, thank you for your considerable efforts here, and I look forward
to our continued work together on this topic.
Thank you once again to our witnesses for joining us here today.
PREPARED STATEMENT OF SENATOR SHERROD BROWN
Thank you, Mr. Chairman, over the past two weeks, protesters have taken to the
streets demanding justice: Justice for George Floyd and Breonna Taylor and
Ahmaud Arbery and so many other Black Americans who have been killed in acts
of extraordinary violence, too often at the hands of police.
And justice for millions of Americans who for hundreds of years have lived under
a system that perpetuates inequality and systemic racism.
Protestors young and old, Black and white, in urban and rural communities are
all marching, like generations before them, risking their lives, praying for and de-
manding justice—and real change.
They are demanding economic justice. Our society calls their work essential but
pays too many ‘‘essential workers’’ so little they can’t afford an apartment, much
less dream to own a home.
Millions of workers don’t have a bank account, and saving for retirement is out
of reach. They don’t benefit when the Dow Jones hits 27,000.
Americans are demanding reforms to our criminal justice system, an equitable
healthcare system that protects Black and brown mothers and their babies, and
support for Black and brown communities, so another economic crisis doesn’t leave
them further behind Wall Street and the wealthy and privileged.
Both of you before us today are central to that fight for economic and racial jus-
tice.
HUD’s mission was shaped by our Nation’s struggle for civil rights.
Just 6 months after John Lewis and the footsoldiers of Selma were beaten cross-
ing the Edmund Pettus Bridge, President Lyndon B. Johnson signed the bill that
created HUD to address the need for investment in communities that had been left
behind.
Shortly after HUD’s creation, the Kerner Commission warned that our Nation
was moving towards ‘‘two societies, one Black, one white—separate and unequal.’’
It took the assassination of Martin Luther King, Jr., for Congress to act on one
of the central recommendations of that report—creating a fair housing law.
Fifty years ago, Congress entrusted HUD with implementing the Fair Housing
Act. Our country charged your agency with rooting out discrimination, and actively
working to make it easier for EVERYONE to find and afford a home.
Fundamentally, we all pretty much want the same thing—a place that’s safe, in
a community we care about, where we can get to work and our kids have a good
school, with room for our family—whether that’s three kids, or an aging parent, or
a beloved pet.
All of us should get to define what home looks like for us. We should be able to
find it and afford it without crippling stress every single month. And everyone
should have the opportunity to build wealth for their family by owning a home.
To make that the reality for everyone, we can’t rely on the housing market to sort
itself out—not when centuries of discrimination are baked into it, not when we have
decades of laws that distort the market in favor of banks and against families.
That’s what your job is—to fix that.
Secretary Carson—under your leadership, instead of addressing the deep inequi-
ties in our housing system, you are trying to systematically dismantle basic civil
rights protections that previous generations marched for and endured beatings for
and laid down their lives for.
And your Department refuses to do its job of promoting economic inclusion and
undoing the historic, Government-driven patterns of housing discrimination like
redlining and restrictive covenants.
You want to abandon the legal standard—affirmed by the Supreme Court—used
to bring housing discrimination lawsuits.
This isn’t just my opinion—look at letter after letter that civil rights leaders sent
to your agency, opposing your actions.
41
And both heads of the agencies before us today are pushing plans that will to
make home ownership more expensive and harder to get, particularly for borrowers
of color.
This is what happens when the ideologues in this Administration push Wall
Street’s agenda, instead of what people actually need.
Before this pandemic hit, families of color were spending more of their income on
housing than white families, and they were disproportionately likely to experience
homelessness.
This was fueled in part by the Federal Government’s failure to protect Black and
brown and immigrant borrowers from predatory subprime lenders before the 2008
crisis, despite knowing that lenders were targeting them.
Forty years of gains in Black home ownership and wealth were eviscerated.
Now, Black families are experiencing this public health and economic crisis with
just one-tenth of the wealth of White families, and they’re more likely to work at
jobs where their corporate employers didn’t pay them enough to begin with.
We are dangerously close to repeating the mistakes of a decade ago. Nearly half
of Black and 40 percent of Latino renters report that they’re unlikely to be able to
make their next payment.
We’re in the middle of a crisis. And you either don’t know, or don’t care.
You’re plowing ahead with undoing civil rights protections, while in Ohio they’re
reopening eviction courts. Twenty million Americans are unemployed. Some have
been able to pay the rent or the mortgage but only because we passed emergency
Unemployment Insurance earlier this year. It’s set to expire this summer—and the
president and Leader McConnell are refusing to extend it. Of course we shouldn’t
be surprised—it’s all part of Republican leaders’ decades-long effort to weaken this
social insurance that all of us pay into.
Leader McConnell and President Trump see no urgency—Leader McConnell’s
words, no urgency—to help people.
Democrats have plans to get more help directly to working families. Our emer-
gency rental assistance bill provides $100 billion to help with rent and utility bills,
so we can help renters avoid impossible choices—between rent and groceries, or pre-
scriptions, or draining their savings, or going to a payday lender. It already passed
the House. But it is sitting on the Majority Leader’s desk collecting dust. For mil-
lions of families, the bills keep coming and the clock keeps ticking and the stress
keeps mounting.
Before this pandemic, President Trump and his wealthy cabinet members didn’t
realize or didn’t care that behind the rosy stock market data, this economy was al-
ready broken for millions of workers—and for Black and brown workers, it never
worked to begin with.
And now the Trump administration either doesn’t realize or doesn’t care that the
bottom is falling out for those families.
People are tired of the lack of action and the lack of accountability. Before the
pandemic, the Trump administration’s idea of housing ‘‘reform’’ was to, quote, ‘‘level
the playing field’’ . . . for Wall Street.
That might be the definition of ‘‘out of touch.’’
Enough is enough. Today we want to hear that you understand both the mag-
nitude of the current crisis, and the inequities built into our housing system for gen-
erations. It’s about time you actually going to do something to fix it, instead of mak-
ing it worse.
PREPARED STATEMENT OF BENJAMIN S. CARSON
SECRETARY, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
JUNE 9, 2020
Chairman Crapo, Ranking Member Brown, and Members of the Committee, thank
you for this opportunity to discuss the steps the U.S. Department of Housing and
Urban Development (HUD) is taking to maximize our Nation’s response to the
COVID–19 National Emergency. These actions reflect both my work with the White
House Coronavirus Task Force and the measures developed at HUD to protect the
health and safety of the American public.
I want to begin by recognizing the unprecedented healthcare and economic chal-
lenges facing Americans today. This disease is impacting families and communities
across the Nation. As HUD Secretary, my highest priority has been to ensure Amer-
icans don’t lose their homes and to safeguard those at greatest risk of the virus—
including homeless and low-income communities.
42
I also want to thank our Nation’s medical professionals and first-line responders
who have sacrificed so much to keep Americans safe and healthy. As a medical doc-
tor, I am inspired daily by their unwavering commitment to their fellow citizens.
Coronavirus Aid, Relief, and Economic Security (CARES) Act
On March 27, President Trump signed into law the CARES Act. In total, the
CARES Act provided more than $12 billion in funding to HUD programs. Recog-
nizing the unprecedented nature of the global pandemic, I directed my staff to im-
mediately begin the process of getting these funds to communities most impacted
by COVID–19.
As of the beginning of the month, HUD has announced allocations for over $6 bil-
lion in funding. This includes:
• $3 billion in Community Development Block Grant (CDBG) funds
• $1 billion in Emergency Solutions Grant (ESG) funds
• $685 million for the Public Housing Operating fund
• $380 million for Tenant Based Rental Assistance (TBRA)
• $800 million in Project Based Rental Assistance (PBRA)
• $200 million in Indian Housing Block Grant (IHBG) funds
• $75 million for the Section 811 Mainstream Housing Choice Voucher program
• $65 million in Housing Opportunities for Persons with AIDS (HOPWA) funds
In the coming weeks, HUD will continue to expedite getting the funding provided
by the CARES Act into the hands of communities.
Federal Housing Administration (FHA)
Prior to the passage of the CARES Act, FHA acted quickly to help protect single-
family homeowners who lost their jobs or were experiencing economic hardship as
a result of COVID–19 by implementing a 60-day moratorium on foreclosures and
evictions, which was subsequently extended through June 30. The CARES Act also
provided a 120-day eviction moratorium for tenants in certain federally supported
rental properties, including properties with FHA-insured single-family or multi-
family mortgages.
FHA further announced a tailored set of mortgage payment relief options for sin-
gle-family homeowners with FHA-insured mortgages who are experiencing financial
hardship because of the pandemic. This includes CARES Act forbearance, which al-
lows borrowers to request up to 6 months of forbearance and extend for up to six
months. Also included was an extension period for calling a loan due for those with
a Home Equity Conversion Mortgages (HECM).
FHA also implemented the COVID–19 National Emergency Standalone Partial
Claim for borrowers on forbearance. This option will help eligible homeowners re-
sume their mortgage payments and avoid a ‘‘lump sum’’ repayment of arrears by
deferring repayment to the end of the mortgage.
Ginnie Mae
Ginnie Mae expanded its pass-through assistance program (PTAP) to help address
potential issuer liquidity challenges caused by borrower forbearance requirements
implemented by FHA and other Federal mortgage insurance programs. PTAP pro-
vides last-resort financing to cover the difference between issuers’ available funds
and scheduled payment of principal and interest (P&I) to mortgage-backed security
(MBS) holders. The timely payment of P&I to MBS holders, consistent with Ginnie
Mae’s statutory guaranty, is essential to the liquidity of the MBS market and the
confidence of investors who finance housing through the Ginnie Mae program.
White House Opportunity and Revitalization Council
In December 2018, President Trump signed Executive Order 13853 establishing
the White House Opportunity and Revitalization Council. I have had the honor of
chairing this Council since its establishment.
In response to the ongoing and unprecedented global pandemic, President Trump
has directed me and the Council to utilize its talented structure and build on its
original intent with a renewed focus to expand efforts to protect and promote our
most vulnerable communities. The Council will work to ensure that minority and
underserved communities are kept safe from this invisible enemy, now and into the
future. In the coming weeks, the Council will identify different policy approaches
needed to help advance opportunity for these communities.
43
Conclusion
Thanks to the leadership of President Trump, I’m proud of the work this entire
Administration—and especially the 7,500 employees of HUD—are doing each and
every day to fight this invisible enemy and meet the needs of the American people.
I’m grateful to this Committee for its bipartisan commitment to meeting this chal-
lenge. Thank you.
PREPARED STATEMENT OF MARK A. CALABRIA
DIRECTOR, FEDERAL HOUSING FINANCE AGENCY
JUNE 9, 2020
Chairman Crapo, Ranking Member Brown, and distinguished Members of the
Committee, thank you for the invitation to appear at today’s hearing.
The Federal Housing Finance Agency (FHFA) has acted swiftly and prudently to
respond to COVID–19. We continue to update our policies as the challenges facing
renters, borrowers, and market participants evolve. We have worked in close part-
nership with FHA and Ginnie Mae in developing many of our policies. I want to
thank Secretary Carson, HUD Deputy Secretary Montgomery, and Acting Ginnie
Mae President Seth Appleton for their partnership and leadership.
FHFA’s Actions to Protect Agency Workforce and Maintain Mission Focus
FHFA’s hard-working employees are the Agency’s greatest asset. Their well-being
is my top priority. Our teleworking flexibilities have enabled our staff to remain safe
and manage at-home obligations, while continuing to fulfill the Agency’s vital mis-
sion.
The FHFA team has gone above and beyond during these uncertain and chal-
lenging times. In March, our telework test transitioned the very next day into full-
time mandatory telework for the Agency. FHFA employees quickly adapted to the
new environment and the Agency maintained continuity of operations during this
crisis with crucial support from the Office of the Chief Operating Officer.
The Office of Technology and Information Management has kept the FHFA work-
force productive and connected by rapidly deploying critical remote tools and staff
training, meeting employees’ IT equipment needs, and safeguarding the Agency’s
network capacity, connectivity, and security. The Office of Facilities Operations
Management has established protocols and procedures for keeping our employees
and headquarters safe and healthy, working tirelessly to provide employees with the
equipment and office supplies needed to set up and sustain their remote
workstations. The Office of Human Resources Management has been instrumental
in ensuring employees have the support they need to remain engaged and produc-
tive, including by developing work schedule and leave flexibilities, expanding the
Agency’s Employee Assistance Program, and meeting special accommodation re-
quests resulting from our remote-work posture.
Across the board, the FHFA team has seamlessly transitioned to a virtual envi-
ronment. This includes the hiring, on-boarding, and training processes that are es-
sential for FHFA to continue developing and retaining a highly talented and effec-
tive workforce. The Office of Budget and Financial Management and Enterprise Pro-
gram Management Office, working with FHFA’s COVID–19 Task Force, have helped
the Agency stay coordinated on the updated guidance provided by various Govern-
ment entities, health officials, and local authorities. I am proud of the flexibility, co-
operation, and hard work of every member of the FHFA team during this pandemic.
The Office of Congressional Affairs and Communication has remained engaged
with and accessible to members of Congress and their staff. Since March, FHFA’s
legislative affairs team has held dozens of remote congressional meetings and brief-
ings to discuss Agency policies and provide technical assistance with legislation.
This is a testament to FHFA’s dedicated staff and our ongoing commitment to re-
sponding to congressional inquiries in a timely manner, maintaining transparency,
and connecting the Agency’s many subject matter experts to legislative staff.
In responding to the COVID–19 national emergency, FHFA has worked closely
with our peer financial regulators and other Federal agencies. Through regular com-
munication channels, FHFA and these agencies continue to share, in real-time, chal-
lenges, ideas, and solutions to help each other develop best practices based on the
latest guidance available. Timely information sharing has enabled FHFA to respond
to evolving COVID–19 related challenges in a rapid, nimble, and effective manner.
FHFA has continued to foster an environment where everyone feels safe, re-
spected, and valued for our differences. The senseless violence and loss of innocent
life that has roiled our Nation in recent weeks—and that tears apart too many
44
communities across the country—highlight the importance of this work both in the
workplace and beyond. The unrest across our Nation in recent weeks reaffirms why
fairness, diversity, and inclusion are core values for me personally and our Agency.
FHFA has one of the most diverse workforces amongst Federal regulatory agencies.
Our diversity is—and will remain—a key source of FHFA’s success. I commend
FHFA’s Office of Minority and Women Inclusion (OMWI) for its steadfast support
of the Agency’s workforce during this time. This includes OMWI’s work, with my
support, to launch FHFA’s Diversity Advisory Council, which aims to ensure diver-
sity in all aspects of the Agency’s employment and contracting practices and to cre-
ate regular programs that engage employees on professional and personal diversity
and inclusion issues. OMWI is also playing an essential role in helping FHFA em-
ployees affected by the recent events and tensions across the country, offering train-
ing, listening sessions, and other resources.
Across all divisions and offices, FHFA’s employees have remained focused on ful-
filling the Agency’s important mission, united by a shared vision that, during this
crisis, Americans should not have to worry about losing their homes. We have
worked closely with our regulated entities, Fannie Mae and Freddie Mac (the Enter-
prises) and the Federal Home Loan Banks (FHLBanks), to support borrowers and
renters, while ensuring the proper functioning of the mortgage market both during
and after this crisis. Our actions have been—and continue to be—data driven.
FHFA’s Strong Research Capabilities Are Key to Agency’s Data Driven Pol-
icymaking
Through oversight of the regulated entities, FHFA collects and analyzes a signifi-
cant amount of data on trends in the housing and mortgage markets. This enables
the Agency to respond appropriately to market developments, promote market effi-
ciency and stability, and disseminate information to improve the public’s under-
standing of housing finance markets. Economic research and data analytics are core
competencies of effective safety and soundness supervision, which is essential to pre-
paring the Agency and the Enterprises to responsibly exit and operate safely outside
of conservatorship. That is why, from the beginning of my term, one of my top prior-
ities has been to strengthen FHFA’s research and data analysis capabilities.
For instance, the Agency has enhanced the accessibility of existing data products,
such as quarterly and monthly house price indexes (HPIs). FHFA produces the Na-
tion’s only public, freely available HPIs that measure changes in single-family house
prices based on data that cover all 50 States and over 400 American cities and ex-
tend back to the mid-1970s. The HPIs are built from tens of millions of home sales
and offer insights about house price fluctuations at the national, census division,
State, metro area, county, ZIP code, and census tract levels. On May 26, with the
publication of the HPI report for the first quarter of 2020, FHFA launched a new
interactive dashboard, available on the Agency’s website, that illustrates house-price
trends across the top 100 Metropolitan Statistical Areas.
In addition to increasing the exposure of existing data products, FHFA has taken
several steps to elevate and expand the Agency’s research capabilities and contribu-
tions. In January 2020, as part of an organizational realignment, FHFA created the
Division of Research and Statistics (DRS) to strengthen the Agency’s data collection
and analysis capabilities. DRS is FHFA’s center for economic and market research,
data development, and statistical analysis to support the Agency’s divisions and of-
fices engaged in oversight, supervision, rulemaking, and policy development. The di-
vision examines trends and risks in housing and housing finance markets, advances
modeling capabilities, develops and maintains data, evaluates policy impacts, and
engages with research communities outside of the Agency.
The research and data analysis capabilities that FHFA created and continues to
strengthen within DRS have been critical to supporting the Agency’s data-driven re-
sponse to COVID–19. For instance, DRS has enhanced FHFA’s capacity to monitor
housing and mortgage markets by leveraging existing data sources and seeking out
new ones. This has provided a comprehensive view of the state of the mortgage mar-
ket prior to the pandemic and it has enabled FHFA to understand, in real time, how
circumstances have changed over the course of the crisis.
The State of the Market Before and During COVID–19 Crisis
At the start of 2020, the American housing market was in a strong position. A
low interest rate environment and stable labor markets drove robust demand and
price appreciation. Home price growth in the first quarter of 2020 outpaced annual
growth from the same period a year ago as falling interest rates and shrinking in-
ventories for sale led prices higher just prior to the COVID–19 crisis. Nationwide,
house prices increased 1.7 percent in the first quarter of 2020, up 5.7 percent com-
pared to the first quarter of 2019. FHFA’s seasonally adjusted monthly index for
45
March was up 0.1 percent from February. Because of the lag between contract sign-
ing and sale closing when FHFA’s data are recorded, the first quarter’s housing sta-
tistics were relatively unaffected by the COVID–19 outbreak. However, this does not
account for any modifications or cancellations of sales later in March.
Existing home sales had been on a steady upward trajectory since early 2019,
after declining throughout 2018 due to rising rates. The National Association of Re-
altors’ months’ supply of existing homes for sale in February reached its lowest level
since the series started in 1999, driving home prices upward at a faster rate in the
first quarter. Single-family housing starts in February 2020 reached the highest 3-
month rate since November 2006, on a seasonally adjusted basis, after more than
10 years of slow but steady increases.
In response to COVID–19, financial markets endured a severe dislocation in
March. Uncertainty over public health and the economic impacts of the pandemic
caused financial liquidity to dry up, significantly disrupting the financing, lending,
and hedging activities of mortgage lenders as well as many other market partici-
pants. Spreads between the 30-year fixed rate mortgage rate and 10-year Treasury
yield widened during this period. Even Treasuries experienced periods of rising
yields as a marketwide rush to cash led investors to sell off their most liquid assets
in response to redemption demands.
Employment fell by more than 20 million jobs between February and May, an un-
precedented demand shock and hardship to households. The unemployment rate
reached 13.3 percent in May from its 50-year low of 3.5 percent in February. Despite
the dramatic drop in demand, the months’ supply of existing homes for sale re-
mained near historic lows in April as the inventory of homes available for sale also
decreased. This has thus far provided support to home prices. In the multifamily
market, thus far, turnover has been lower than normal, and more renters are con-
tinuing to pay rent than projections had forecasted.
FHFA’s Policy Response: Supporting Borrowers and Renters
From the beginning of this crisis, FHFA’s policy, conservatorship, and research
teams have worked together to produce forecasts and estimates of the future impact
of COVID–19 on our mortgage market, based on key indicators such as unemploy-
ment insurance claims and house prices. They have also developed models to sup-
port decision making regarding loan modifications, servicing, and other issues. This
internal research, monitoring, and analysis have helped to inform and guide FHFA’s
policy actions.
One of our top priorities has been to support renters and homeowners struggling
to pay for housing because of COVID–19. To do this, FHFA has directed the Enter-
prises to put in place certain protections. The Enterprises own or guarantee approxi-
mately $5.7 trillion in mortgages. That includes about 43 percent of multifamily
units, which represents about 8.6 million households and more than half of single-
family mortgages or about 28 million homeowners. FHFA’s policies apply to all sin-
gle-family homeowners and multifamily property owners with an Enterprise-backed
mortgage. In addition, FHFA’s policies also help to set workable standards for the
entire market.
For homeowners facing foreclosure before COVID–19, we suspended all fore-
closures and evictions for at least 60 days. FHFA later extended this foreclosure and
eviction moratorium through at least June 30.
For borrowers financially impacted by COVID–19, we allowed homeowners to take
a timeout from mortgage payments through forbearance. We then announced that
borrowers in forbearance who can return to making their regular monthly payments
can repay missed payments when they sell their home or refinance their loan. This
new payment deferral option simplifies options for borrowers and provides an addi-
tional tool for mortgage servicers.
FHFA also took action specifically to protect renters struggling to pay rent be-
cause of COVID–19. It is important to recognize that the Enterprises do not have
a contractual relationship with tenants. Their relationship is with the property own-
ers or landlords. Therefore, if a multifamily loan is performing and the property
owner does not seek forbearance, the Enterprises cannot impose requirements on
the landlords.
On March 23, FHFA announced the Enterprises’ policies providing a forbearance
option for multifamily property owners with an Enterprise-backed mortgage that
prohibits tenants from being evicted for the nonpayment of rent during forbearance.
On March 27, the President signed the CARES Act, which provides a 120-day evic-
tion moratorium for renters in properties with an Enterprise-backed mortgage, even
if the property owner does not enter forbearance. As a result, renters living in mul-
tifamily properties with an Enterprise-backed mortgage cannot be evicted for either
4 months or the duration of the property owner’s forbearance period, whichever is
46
longer; and all late fees, charges, and penalties are waived for both borrowers and
tenants during the eviction moratorium or forbearance period.
While the single-family forbearance program was modeled on prior disaster re-
sponse efforts, the multifamily forbearance programs with tenant protections were
developed from the ground up. After putting these programs in place, at FHFA’s di-
rection, the Enterprises created online lookup tools that show whether a single-fam-
ily or multifamily property has a mortgage owned or guaranteed by Fannie Mae or
Freddie Mac. This information indicates whether renters are covered by the CARES
Act’s eviction protections and whether single-family borrowers are eligible to apply
for forbearance.
Since implementing the single-family and multifamily forbearance programs,
FHFA has closely monitored the data to understand the responses by borrowers and
the market. As a staffer on this Committee during the 2008 financial crisis, I saw
firsthand the importance of resisting the pressure to ‘‘act first, analyze later’’ that
arises in a period of financial stress. In a crisis, panic can lead to ill-conceived policy
responses and send confounding signals to the market. It is imperative to remain
calm and make decisions based on careful, thoughtful analysis of the most up-to-
date data available. This has been a fundamental objective of FHFA during the
COVID–19 national emergency.
Early in the crisis, there were a wide variety of predictions about the future ef-
fects of COVID–19 on housing markets. Some observers contended that forbearance
rates would reach as high as 25 to 50 percent. Given the unprecedented nature of
the pandemic and the high degree of uncertainty about the economic impact, FHFA
carefully monitored the data we received from our Division of Research and Statis-
tics, the Enterprises, and market participants to ensure we were developing and up-
dating our policies in response to the facts on the ground. At this point, I remain
encouraged by what the data is telling us about the trajectory of forbearance rates.
Data developed internally at the Enterprises and by industry groups indicate that
Enterprise forbearance rates remain manageable. After rising precipitously in April,
the rate of forbearance uptake slowed during the last few weeks of May. According
to data released by the Mortgage Bankers Association, as of May 24, 6.4 percent
of total Enterprise-backed mortgages were in forbearance, compared to 11.8 percent
of mortgages backed by Ginnie Mae (see Figure 1). In March, just over 1 percent
of borrowers with loans in Enterprise mortgage-backed securities (MBS) were 30-
or 60-days delinquent on payment. By May, this rate increased to 5.2 percent, ac-
cording to RiskSpan. The 30- and 60-day combined delinquency rate remains below
the estimated rate of forbearance as some borrowers who have requested forbear-
ance are nonetheless continuing to make payments on their loan. FHFA’s internal
analysis shows that approximately 130,000 units of multifamily housing are in prop-
erties receiving forbearance from Fannie Mae or Freddie Mac, representing about
1.5 percent of outstanding multifamily mortgage balances at the Enterprises.
47
Figure 1
The mortgage market still faces challenges. Responding to substantial Federal
support in the form of MBS purchases by the Federal Reserve, spreads between the
current coupon MBS and 10-year U.S. Treasury have largely returned to levels ob-
served at the beginning of 2020, at least for the to-be-announced (TBA) market. On
the other hand, spreads between the 30-year fixed mortgage rate and the 10-year
Treasury yield remain high. These primary market spreads have declined in recent
weeks, but they have not yet returned to precrisis levels (see Figure 2). This is like-
ly a result of ongoing uncertainty about the pace of economic and labor market re-
covery, the impacts on mortgage servicing rights, and constrained lender capacity
to absorb increased levels of borrower demand.
48
Figure 2
However, current mortgage rates reported by Freddie Mac and the Mortgage
Bankers Association are at the lowest point on record in the series dating back to
1971 and 1990, respectively. And FHFA continues to work with the Enterprises to
ensure that borrowers can access new purchase and refinancing opportunities at
historically low rates. For instance, at FHFA’s direction, the Enterprises have
issued new guidance that borrowers in forbearance who continue to make payments
will be treated as current when it comes to refinancing their loan or buying a new
home. In addition, borrowers’ credit history will not be negatively impacted by en-
tering a COVID–19 related forbearance plan.
We have also helped clarify consumers’ options. We have emphasized that those
who can make their mortgage payments should continue doing so. We updated the
scripts that servicers use when talking to borrowers about forbearance. We have em-
phasized to servicers and the public that no lump sum repayment is required at the
end of forbearance. We partnered with the Consumer Financial Protection Bureau
to launch the Borrower Protection Program. And FHFA helped develop a website
that consolidates Federal information about mortgage relief options, renter protec-
tions, and how to avoid scams.
FHFA’s Policy Response: Ensuring the Proper Functioning of the Mortgage
Market
Working with our regulated entities, FHFA has also taken several steps to ensure
the mortgage market continues to function properly both during and after this cri-
sis.
To ensure the safety of market participants, FHFA authorized several loan-clos-
ing, employment-verification, and appraisal flexibilities. The changes include allow-
ing desktop and exterior-only appraisals, providing alternative methods to dem-
onstrate construction completion and satisfy borrower documentation requirements,
allowing renovation disbursements, and expanding the use of power of attorney, ap-
praisal waivers, and remote online notarization. FHFA put these flexibilities in
place for 60 days and then extended them through at least June 30.
Moving forward, we will continue to closely monitor the situation and update our
policies based on what borrowers, appraisers, lenders, Government services, and
other market participants are experiencing on the ground. This crisis has high-
lighted how much of the real estate process as we know it currently depends on
49
face-to-face interactions. Changes made in response to the pandemic will likely ac-
celerate the uptake of streamlined methods and models, jumpstarting the use of
more e-mortgage tools across the industry. As business practices adapt to new reali-
ties, FHFA will continue working with stakeholders, consumer groups, and other
regulators to streamline the homebuying process in a prudent manner that meets
the health needs of the Nation.
In April, FHFA recognized that nonbank servicers needed clarity to serve the
market through the crisis. In response, we instituted a four-month limit on
servicers’ obligations to advance principal and interest payments on loans in for-
bearance. When a mortgage loan is in a MBS, Fannie Mae servicers with a sched-
uled payment remittance had been responsible for advancing the principal and in-
terest payment regardless of borrower payments. Freddie Mac servicers, who are
generally responsible for advancing scheduled interest, are only obligated to advance
four months of missed borrower interest payments. FHFA’s policy established a 4-
month advance obligation limit for Fannie Mae scheduled servicing, which is con-
sistent with the current policy at Freddie Mac.
To keep the mortgage market working for current and future borrowers, and to
help originators continue lending, FHFA enabled the Enterprises for a limited pe-
riod of time to purchase certain single-family mortgages in forbearance that meet
their criteria. Charging a fee for these transactions is consistent with FHFA’s statu-
tory mandate to ‘‘preserve and conserve assets’’ and the Enterprises’ charter re-
quirement to purchase only those loans that meet the standards imposed by private
institutional mortgage investors. Prior to this, the Enterprises had never purchased
loans in forbearance. Our policy provides a new option to lenders and the Enter-
prises.
Additionally, FHFA took several steps to ensure the Federal Home Loan Bank
System could continue to support member liquidity and housing finance markets.
We relaxed liquidity requirements in a countercyclical fashion. We reminded the
FHLBanks of their obligation to offer advances up to 10 years in maturity to meet
their members’ needs and their ability under FHFA regulations to provide below-
cost advances during disasters like the COVID–19 pandemic.
We allowed the FHLBanks to accept Paycheck Protection Program loans as collat-
eral when making loans to their members and allowed them to accept as collateral
loans that have been modified or that are in COVID–19 related forbearance. To
avoid exacerbating potential liquidity problems, FHFA deferred certain deadlines re-
lated to the FHLBanks’ transition from LIBOR-based exposures, while continuing
our efforts to prepare for the eventual end of LIBOR. To protect the safety and
soundness of the FHLBanks, FHFA issued guidance related to collateral and pricing
policies aimed at ensuring that all members are treated fairly and that every
FHLBank can continue to provide liquidity to institutions and communities in its
district.
It is important to recognize the vital support that the FHLBanks provided to the
market in response to the financial stress caused by the pandemic. A core function
of the FHLBanks is to provide liquidity in times of stress. This support is critical
for small and community banks that often do not have access to other sources of
low-cost funding. When the COVID–19 crisis began, the FHLBanks stepped up to
keep liquidity in the market, meeting unprecedented advance demand from their
member financial institutions.
In March, while other liquidity sources dried up, FHLBank System advances grew
by $189.4 billion—or 30.7 percent—at their peak. For the quarter ending March 31,
FHLBank System advances increased 25.8 percent to $806.9 billion. While access
to long term debt markets was severely limited, the System was able to fund this
increased advance demand largely through discount notes and floating rate bonds
indexed to the Secured Overnight Financing Rate (SOFR). For the first quarter of
2020, outstanding debt increased to $1.18 trillion, growing at the fastest pace in re-
cent history.
As advances and assets grew, earnings decreased significantly because of reduced
net interest spread and mark-to-market accounting effects. Compared to the fourth
quarter of 2019, net interest income fell a substantial $350 million (28.6 percent)
to $872 million, and net income decreased $262 million (29.5 percent) to $627 mil-
lion. Nevertheless, for the first quarter of 2020, FHLBank System retained earnings
grew $141 million to $20.7 billion, or 1.6 percent of total assets.
Following the injections of liquidity provided by the Federal Reserve and the
CARES Act, the FHLBanks’ balance sheets—both advances and debt outstanding—
have fallen to or below precrisis levels (see Figure 3). This is exactly what the
FHLBanks are supposed to do as countercyclical providers of liquidity. And it is why
FHFA is focused on protecting the System’s safety and soundness. It is critical that
50
the Banks remain capable of being a source of liquidity when their members and
the economy need it most.
Figure 3
Assessing FHFA’s Policy Response: The State of the Market Today
I am proud of what FHFA has done to help borrowers, renters, and the housing
market deal with this crisis. FHFA recognizes that more work remains. The crisis
caused by COVID–19 is not over. The full economic and financial impact of the pan-
demic is not yet known. The future state of the labor market remains uncertain.
The mortgage market is still under stress. For these reasons, the FHFA team is still
hard at work to ensure our policies continue to respond to the challenges as they
evolve. We remain committed to working with other Federal agencies, Congress, our
regulated entities, and stakeholders to get through this difficult time. That said, at
this point, I am encouraged by what the data tells us about the state of the mort-
gage market and the capacity of servicers following FHFA’s robust policy response.
Total monthly Enterprise principal and interest payments are approximately $32
billion. Of that, about 40 percent, approximately $13 billion, of the advance obliga-
tion rests with the Enterprises. About $11 billion, approximately a third, rests with
depositories. Therefore, roughly $8 billion, approximately a quarter, of the potential
monthly advance obligation rests with nonbanks. At a 6.5 percent forbearance rate
this translates into approximately $520 million per month of nonbank incremental
advance needs. And, as noted above, not all borrowers in forbearance have stopped
making mortgage payments. As a result of FHFA’s 4-month limit on servicers’ obli-
gations to advance principal and interest payments on loans in forbearance,
nonbanks’ total 4-month obligation is approximately $2.1 billion.
Were forbearance rates to rise dramatically to 15 percent, nonbank servicers’
monthly advance obligations would be roughly $1.2 billion. FHFA’s analysis of
servicer capacity indicates that servicers as a whole have multiples of that number
available should they need it. FHFA’s internal modeling projects that forbearance
rates will not reach as high as 15 percent. But this type of analysis provides useful
context to the forbearance rates we are seeing today. In addition, both Fannie Mae
and Freddie Mac programs allow servicers to use a portion of mortgage payoffs from
refinancings to help cover these advance obligations. This has a significant impact
especially under the Fannie Mae program.
51
In addition, servicers have recently increased their available liquidity. Total
nonbank liquidity increased by 9 percent to $36 billion in the first quarter of 2020.
Of that, unencumbered cash and equivalents made up $13 billion, an increase of 19
percent from December 31, 2019. At the end of April, nonbank servicers’ cash posi-
tions improved compared to the end of March and profitability increased. This was
driven by the stability in the 10-year Treasury bond, which led to stability in mort-
gage servicing rights (MSR) values combined with strong volume and wide margins.
Servicing buyers are beginning to return to the MSR purchase market, providing
access to liquidity especially for smaller firms that have been forced to hold serv-
icing. Lenders have shown a willingness to renew warehouse lines of credit and
some appetite to offer new credit for MSR Advance Facility Financing.
Following some contraction in mortgage market activity in March and April, the
purchase market appears to be rebounding (see Figure 4), and combined purchase
and refinance mortgage application activity has increased to levels last seen in
2013. According to analysis by the American Enterprise Institute based on data
from Optimal Blue on mortgage loan applications receiving rate locks in May, aver-
age credit scores, debt-to-income, and loan-to-value ratios have not changed dra-
matically on a year-over-year basis for conventional loans. The Enterprises, at the
direction of FHFA, will continue to take measured and responsible steps to maintain
a prudent risk profile and address layered risks. Moving forward, FHFA will con-
tinue to closely monitor all sources of market data and let the data drive our deci-
sions.
Figure 4
Looking Ahead: The Urgent Need To Build Capital at the Enterprises and
Advance Housing Finance Reform
But this does not mean that all is well. This crisis has provided ample evidence
of the critical vulnerabilities in our mortgage system that put taxpayers and our
housing market at risk. Most notably, Fannie Mae and Freddie Mac lack the capital
to withstand a serious housing downturn. This undermines their countercyclical role
and jeopardizes their important mission.
To provide the Enterprises a stronger foundation on which to weather periods of
financial stress, on May 20, FHFA released a reproposed capital rule. This rule will
help each Enterprise become safe and sound to fulfill its statutory mission across
52
the economic cycle. It is essential to building a strong, resilient housing finance sys-
tem that supports sustainable and affordable home ownership.
Only Congress can enact the reforms necessary to fix the structural flaws in our
housing finance system. To that end, next week, I will submit FHFA’s Annual Re-
port to Congress that includes several legislative recommendations to strengthen
FHFA with additional regulatory and supervisory authorities similar to those of
other independent Federal financial regulators. I stand ready to work with all who
share the goal of building a stronger, more resilient housing finance system in
America.
53
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM BENJAMIN S. CARSON
Q.1. Under a final rule issued in December 2016, all housing coun-
selors at HUD-certified housing counseling agencies must complete
individual HUD certification by August 1, 2020, in order to provide
counseling services. The COVID–19 pandemic may pose challenges
to completing the testing requirement for certification, particularly
if a counselor does not have the technological capability necessary
to complete an online exam and planned to sit for an in-person,
proctored exam. According to the latest information available from
HUD Exchange, in 15 States less than 40 percent of counseling
agencies had even one counselor who had completed certification.
Lack of certified counselors could pose a challenge to helping the
many homeowners and renters who will face housing challenges in
the months ahead.
How will HUD ensure that counselors at HUD-certified coun-
seling agencies have sufficient time to complete the certification
process so that all States will have the necessary counseling re-
sources for homeowners and renters? Will HUD move the August
1, 2020, deadline or otherwise alter certification requirements to
ensure there are sufficient resources available in all States?
A.1. HUD’s Office of Housing Counseling has focused its work
throughout the past year to ensure that housing counselors and
housing counseling agencies have sufficient time and resources to
prepare for and successfully complete the HUD Housing Counselor
certification examination. Because of the difficulty adding new cer-
tified counselors due to the pandemic, HUD published an Interim
Final Rule effective July 31 that extended the certification deadline
through August 1, 2021.
Q.2. Secretary Carson, in response to a question from Senator Scott
about eviction moratoria, you said that HUD was interested in cre-
ating affordable housing. I share your interest in creating more af-
fordable housing in all neighborhoods throughout the country. But
new affordable units built in the coming years will not help fami-
lies who are currently facing eviction. If they are displaced, these
families may find themselves at increased risk of homelessness or
doubling up, putting them at greater risk for contracting COVID–
19. We have been told the homeless system already needs an addi-
tional $11.5 billion, on top of the $4 billion provided in the CARES
Act, just to serve those without adequate, socially distanced shel-
ter. That does not account for the increased need if more renters
are displaced.
Secretary Carson, how do you propose to help renters—particu-
larly those who were not receiving Federal assistance before the
pandemic—so that they do not find themselves homeless in the
coming weeks and months?
A.2. Earlier this month, the Administration issued its Executive
order (EO) to temporarily HALT evictions during the COVID–19
pandemic. American renters who meet certain conditions cannot be
evicted if they have exhausted their best efforts to pay rent, and
are likely to become homeless as a result.
HUD continues to work with housing providers and renters to
prevent any threat to the housing stability of Americans, which is
54
central to their health and well-being, especially in the wake of the
coronavirus. Since the onset of this pandemic, the Department has
taken proactive measures to keep Americans in their homes, in-
cluding allowing the use of CDBG–CV and ESG–CV for the pur-
poses of rental assistance.
To assist families in mitigating any hardships that may arise,
HUD has provided an Eviction Prevention and Stability Toolkit.
The Toolkit encourages Public Housing Authorities (PHA) and
Housing Choice Voucher (HCV) landlords to plan for and imple-
ment strategies to keep families stably housed and mitigate eco-
nomic hardships due to Coronavirus. HUD also published a Multi-
family Tenant Brochure to inform and address rent payment con-
cerns of tenants living in multifamily properties.
The Toolkit is composed of a PHA best practices guide, tenant
brochure with tips to avoid eviction, HCV landlord flyer to encour-
age engagement with tenants before the moratorium expires, and
repayment agreement guidance in addition to sample documents to
provide increased clarity for landlords and renters utilizing the re-
sources.
For FHA-insured multifamily properties where the owner is re-
ceiving forbearance mortgage payment relief, tenants cannot be
evicted solely for nonpayment of rent for the duration of the for-
bearance period. HUD issued guidance on July 1 for owners of
these properties, including a new online brochure for owners to
share with tenants.
Q.3. In response to a question from Senator McSally, you stated
that struggling renters could have a reassessment of their income
in order to obtain a rent adjustment so they can avoid falling be-
hind on their payments. The ability to come in for a rent adjust-
ment when a family loses a job or income is an important feature
of the federally assisted housing programs, in that it helps resi-
dents weather job losses and downturns without the further set-
back of an eviction or accrual of debts they won’t be able to repay.
This feature also provides reassurance to landlords participating in
the Section 8 voucher program that they will be paid in full. As you
know, however, such rent adjustments are only available for feder-
ally assisted renters. As HUD reported in March 2020, HUD as-
sists only about 1-in-4 very low-income renter households and only
about 1-in-10 renter households nationwide, leaving 9 out of 10
renters unable to ask for the rent adjustment you described.
How does HUD propose to help the 9 in 10 renters who do not
receive HUD assistance if they fall behind on rent payments, or are
already 4 months behind, as Senator McSally described?
A.3. For those families that are income eligible for HUD programs,
they are encouraged to apply to any and all programs for which
they qualify. In addition to the regular HCV program, there are
also more than 500,000 special purpose vouchers for specific popu-
lations, projects for elderly and disabled families and others that
can assist our most vulnerable unassisted families.
Rental Assistance is also an eligible use of CDBG–CV funding,
however, it is temporary assistance (6 months) and the families
would need to work with the grantee to address longer term hous-
ing needs.
55
Q.4. Several times during the hearing, you referenced the National
Multifamily Housing Council (NMHC) rental payment tracker data
as evidence that renters are continuing to make rental payments.
While the NMHC presents one data point, this data only rep-
resents about 25 percent of all units and those units are in profes-
sionally-managed buildings. According to the NMHC on its June
9th release, this data does not paint a full picture of what is hap-
pening across the rental market:
‘‘These are trying times for the country, and we are re-
minded on a regular basis how crucial safe and secure
housing is during a period of uncertainty and upheaval, so
we are glad to see that residents who live in professionally
managed properties continue to pay their rent,’’ said Doug
Bibby, NMHC President. ‘‘While our Rent Payment Track-
er metric continues to show the resilience and strength of
the professionally managed apartment industry, it does
not necessarily tell the whole story, as it doesn’t capture
rent payments for smaller landlords or for affordable and
subsidized properties, and according to Harvard, more
than half of renters with at-risk wages due to the pan-
demic live in single-family and small multifamily rentals
with 2–4 units.’’
‘‘There are serious signs of economic dislocation outside of
our reporting universe that underscore the need for Con-
gress to pass a direct rental assistance program and ex-
tend unemployment benefits before it’s too late,’’ said
Bibby. ‘‘According to the Harvard Joint Center for Housing
Studies, nearly a fifth of households with at-risk wages in
small multifamily apartments may have difficulty paying
rent. In addition, 32 percent of renter respondents to the
Census Bureau’s Household Pulse Survey reported no or
slight confidence in their ability to pay next month’s rent.’’
In addition to the NMHC data you referenced, what other data
sources, including those provided by other agencies like the U.S.
Census Household Pulse data, does HUD use to monitor the rental
market? Given the limitations of the NMHC data, will you appro-
priately caveat the use of this data in the future?
A.4. HUD is carefully monitoring the Census Pulse Survey data
and working with the Census Bureau to edit the rent-related ques-
tions on the survey to improve its accuracy given the practices by
property managers to collect partial rent payments throughout the
month while still considering tenants current on rent. HUD is also
working with industry partners to obtain rent payment data for
Low-Income Housing Tax Credit and other professionally-managed
subsidized rental housing.
It is HUD’s experience that collecting complete, accurate, and
timely data from the millions of owners of small rental properties
is difficult. This is why HUD is very supportive of the Census Bu-
reau’s Pulse Survey.
Q.5. In response to a question from Senator Tester about the finan-
cial challenges facing smaller property owners if renters are unable
to make payments, you stated that those property owners were
56
eligible for PPP and that PPP seems to be meeting those needs.
However, I continue to hear confusion about whether property own-
ers are eligible for PPP based on the SBA’s Interim Final Rule and
FAQs, and the National Multifamily Housing Council reports that
there is outstanding litigation on the issue. For PPP loans to be
forgiven, the majority of the funds must go to payroll expenses,
which may be a smaller proportion of the financial need for smaller
or sole proprietor landlords.
Please clarify whether small landlords are eligible for PPP under
SBA rules.
A.5. While the program has now terminated, the Small Business
Administration is in the best position to respond to questions about
PPP terms and conditions.
Q.6. Through the CARES Act, Congress provided almost $2 billion
($1.935B) to help local communities serve their residents through
the Public Housing and Housing Choice Voucher programs. To
date, only about $1 billion ($1.065B) has been made available to
public housing agencies for these purposes. The nearly $900 million
in CARES Act funds remaining are needed to help our lowest-in-
come residents maintain stable and safe housing.
When and how do you plan to allocate the remainder of these
funds?
A.6. All Public Housing Operating Funds ($685 million) provided
through the CARES Act were obligated to PHAs on May 1, 2020.
The Office of Public and Indian Housing (PIH) published a notice
on July 31, 2020, that established the eligibility criteria for the
$400 million of supplemental HAP made available through the
CARES Act. The supplemental HAP funding is available for PHAs
that either (1) experience a significant increase in voucher PUC
due to extraordinary
circumstances (referred to as Extraordinary Circumstances), or (2)
despite taking reasonable cost saving measures, as determined by
the Secretary, would otherwise be required to terminate rental as-
sistance for families as a result of insufficient funding (referred to
as Shortfall Funds). The deadline for submitting Extraordinary Cir-
cumstances applications is October 31, 2020, and the eligibility
evaluation and determination for funding awards will be performed
on a rolling basis.
As of September 14, 2020, the Office of Housing Voucher Pro-
grams (OHVP) has made available $849.9 million of the CARES
Act admin fee supplemental funding. PIH Notice 2020–08 made
available $377 million, and PIH Notice 2020–18 made available
$472 million. From this total, $841.7 was awarded to PHAs admin-
istering the HCV Program and $8.2 million for PHAs administering
the Mainstream Vouchers.
Additionally, PIH Notice 2020–17 made available $400 million in
CARES Act HAP supplemental funding to PHAs administering the
HCV Program. So far, $257.5 million has been awarded under the
Extraordinary Circumstances category for COVID–19 related PUC
increases. Shortfalls Funds will be awarded in December 2020.
Finally, the OHVP, through PIH Notice 2020–20, made available
$10 million to PHAs in CARES Act Mod Rehab HAP supplemental
funding for owners participating in the Moderate Rehabilitation
57
Program to respond to COVID related HAP cost increases, includ-
ing vacancy payments. So far, $9.42 million has been obligated, and
the PHAs will request these funds through budget revisions.
Q.7. Senator Grassley and I have a bipartisan bill—the Fostering
Stable Housing Opportunities Act—to make it easier for youth to
access a voucher on demand as they age out of care anywhere in
the country and encourage partnerships between housing and child
welfare agencies. I am hopeful that Congress will enact our bill this
year and set up a permanent pathway to housing stability for
young people exiting foster care across the country.
In the meantime, Congress also provided $20 million in FY2020
funding to provide new Family Unification Program (or FUP)
vouchers for youth. Half of these funds are to be made available
for youth through noncompetitive allocations to PHAs that have
partnered with child welfare agencies, akin to the model in our bill.
But I understand these FY2020 funds haven’t been made available
yet. Ohio foster care alumni are concerned that youth will face
homelessness if they exit care into this economic crisis.
Although HUD recently issued FY2019 FUP vouchers in April,
they will be allocated to specific PHAs rather than being available
nationwide as youth age out of care.
I know this is an issue of concern to you, as well, so I am hopeful
that you will work to make the FY2020 funds available for youth
quickly.
Can you tell me when you plan to make these new FY2020 FUP
funds available for youth?
A.7. There has been no gap in the availability of Foster Youth to
Independence (FYI) initiative vouchers. HUD continues to make
awards under FYI utilizing 2019 Tenant Protection Voucher (TPV)
funds. An Office of Public and Indian Housing (PIH) notice an-
nouncing the availability of up to $10 million from FY2020 will be
announced in the fall of 2020. HUD also expects to be able to an-
nounce the availability of an additional $10 million to be made
available competitively to serve the same population of foster
youth.
Q.8. Mr. Secretary, I am concerned that there are certain CARES
Act funds that has not yet been disbursed for use in our commu-
nities. For example, the Department has not yet disbursed the $50
million appropriated for the Section 202 program for housing for
the elderly and the $15 million appropriated for Section 811 hous-
ing for persons with disabilities. In fact, HUD has not yet pub-
lished guidance on how owners of these properties can apply for the
funds.
These funds are urgently needed to help keep vulnerable elderly
residents and those with disabilities safe during this pandemic,
particularly those who live in buildings with congregate facilities.
The nonprofit owners of this housing are responsible for the health
and safety of their vulnerable residents and have incurred addi-
tional costs to meet these needs, including purchasing personal pro-
tective equipment for both staff and residents, adjusting staff hours
and personnel, erecting barriers in dining areas, and other mitiga-
tion efforts to allow for appropriate physical distancing. Owners
58
have also incurred expenses to help residents safely self-quar-
antine.
While the Multifamily Office at HUD has put out several FAQ
Guidance documents, there is still significant uncertainty among
sponsors regarding which expenses incurred to address the health
and safety needs of residents during COVID–19 will be considered
operating costs that are eligible for Federal support.
When does HUD plan to issue guidance to owners on eligible
costs and process for applying for CARES Act funds necessary to
keep residents safe during this emergency?
A.8. In responding to this unprecedented national emergency,
HUD’s Office of Multifamily Housing has attempted to balance the
known financial impacts from COVID–19 with the significant un-
certainty about both potential future impacts and the possibility of
additional congressionally appropriated emergency funding. HUD
has met with many stakeholders to learn about the impacts they
are facing and is carefully monitoring the impact on residents in
HUD-assisted properties.
HUD obligated a portion of the Section 202 CARES Act supple-
mental funds in July for processing contract renewals as well as
funding shortfalls. In addition, HUD issued Housing Notice 2020–
08 on July 23 to provide guidance to sponsors/owners of properties
receiving HUD project-based assistance (including Section 202, Sec-
tion 811 and Section 8) on accessing additional supplemental funds
to provide assistance for project level COVID–19 expenses to pre-
vent, prepare for, or respond to, COVID–19. HUD is currently proc-
essing an initial round of COVID–19 supplemental payment re-
quests received from project owners in August and anticipates most
of these requests will be paid by October 1.
RESPONSE TO WRITTEN QUESTION OF SENATOR TILLIS
FROM BENJAMIN S. CARSON
Q.1. I am concerned that HUD is contemplating new regulations
that will reduce access to mortgage credit, specifically, FHA-in-
sured loans with downpayment assistance (DPA) provided by a gov-
ernmental entity. These loan products are utilized by minority pop-
ulations at a higher rate, so regulation that reduce access to DPA
will impact minority populations significantly. Even more con-
cerning, HUD is apparently contemplating this rulemaking absent
data on the pricing and performance of these loans on a govern-
mental entity-specific level. Such action would be contrary to Con-
gress’ intent, as expressed when passing legislation in 1978, that
HUD not limit DPA from a governmental entity except as clearly
necessary to protect taxpayers. Can you commit to that you will not
engage in rulemaking that has the potential of reducing access to
mortgage credit for FHA-insured loans with DPA from a govern-
mental entity without first collecting the pricing and performance
on these loans on a governmental entity-specific level, as Congress
requested in HUD’s FY2020 appropriations bill?
A.1. FHA has documented that purchased mortgages with down-
payment assistance (DPA) tend to perform worse than purchase
mortgages without DPA in its Annual Report to Congress on the Fi-
59
nancial Status of the FHA Mutual Mortgage Insurance Fund for
Fiscal Year 2019. This report is available at https://www.hud.gov/
sites/dfiles/Housing/documents/2019FHAAnnualReportMMIFund
.pdf.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
FROM BENJAMIN S. CARSON
Q.1. In the wake of the COVID–19 crisis, several States have pro-
posed laws or Executive orders that would include some form of
mortgage foreclosure moratorium and forbearance and loan modi-
fication requirements.
These bills would impose differing standards that would force
lenders and servicers to follow a patchwork of State and potentially
local regulation based on the location of the property making it im-
possible for lenders to employ a consistent national approach to
aiding their customers financially impacted by the pandemic.
If this State-by-State trend continues, could the resultant patch-
work of laws and requirements make it more difficult for home
buyers to obtain the credit that they need?
A.1. See answer to Question 2 below.
Q.2. In your view, should we be steering the States away from try-
ing to impose these laws?
A.2. When States issue loss mitigation requirements via law or Ex-
ecutive order that differ from FHA requirements or Federal law,
FHA requirements preempt State laws. Further, the adoption of in-
consistent State laws has the effect of increasing costs for servicers
and increasing their risk of noncompliance with FHA requirements.
As a result, servicers may be less willing to purchase or service
new mortgages made to higher risk borrowers. This in turn may
reduce the availability of credit and increase costs to borrowers.
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR MENENDEZ FROM BENJAMIN S. CARSON
Housing Counseling
Q.1. When the protections in the CARES Act run out, we could be
facing a foreclosure crisis even greater than the one we faced in the
Great Recession. Families unable to pay their mortgage will need
to navigate the complexity of requesting and accessing mortgage
relief programs. Homeowners already in forbearance will have to
work with their mortgage servicers to repay forborne amounts and
housing counselors can provide critical resources that allow them
to keep their homes.
As the COVID–19 pandemic continues to disproportionately af-
fect minority and low-income communities, are you considering en-
couraging housing counselors to reach out to more minority and
low-income borrowers?
A.1. The Department consistently and strongly encourages HUD-
approved Housing Counseling Agencies and their counselors to
reach out to minority borrowers, low-income borrowers and renters,
and consumers in rural and underserved areas. As community-
based organizations, housing counseling agencies have a long his-
60
tory of being trusted partners in their local communities. Many
HUD-approved Housing Counseling Agencies utilize proactive and
culturally appropriate outreach strategies to assist individuals and
families in need.
HUD supports these efforts through regular outreach, informa-
tional materials, training, and dialogue with housing counselors
and HUD-approved Housing Counseling Agencies on HUD, FHA,
and other Federal policies and programs that can assist families
impacted by the COVID–19 National Emergency.
Q.2. On HUD’s ‘‘Coronavirus Resources’’ webpage, HUD provides
homeowners with a link to find HUD-approved housing counselors.
Given that HUD is already referring homeowners to housing
counselors, do you believe Congress should consider increasing re-
sources for HUD-approved housing counselors to help American
families make educated mortgage decisions as the country works
through this crisis? If not, why not?
A.2. Access to the housing counseling services can improve home
retention, and prevent evictions, and as such HUD supports the
continued provision of resources for this important function. The
appropriate funding level for HUD’s Housing Counseling program
will be determined by assessing these needs in light of other HUD
and COVID-related funding priorities.
Section 202 Housing
Q.3. More than 2 months ago, the CARES Act provided $50 million
to HUD for the Section 202 Housing for the Elderly program, in-
cluding up to $10 million to help affordable senior housing commu-
nities get residents through this pandemic. Section 202 residents
are older, have lower incomes, and face significant health chal-
lenges, compared to other seniors in the community. Meanwhile,
HUD Section 202 senior housing communities are spending thou-
sands if not tens of thousands a month on disinfecting and clean-
ing, PPE, services like security and meals, and extra staffing costs.
Can you tell me why HUD has yet to get these emergency re-
sources to the more than 3,000 Section 202 communities, and when
does HUD expect to distribute these funds to Section 202 commu-
nities?
A.3. In responding to this unprecedented national emergency,
HUD’s Office of Multifamily Housing has attempted to balance the
known financial impacts from COVID–19 with the significant un-
certainty about both potential future impacts and the possibility of
additional congressionally appropriated emergency funding. HUD
has met with many stakeholders to learn about the impacts they
are facing, and is carefully monitoring the impact on residents in
HUD-assisted properties.
HUD obligated a portion of the Section 202 CARES Act supple-
mental funds in July for processing contract renewals as well as
funding shortfalls. In addition, HUD issued Housing Notice 2020–
08 on July 23 to provide guidance to sponsors/owners of properties
receiving HUD project-based assistance (including Section 202, Sec-
tion 811 and Section 8) on accessing additional supplemental funds
to provide assistance for project level COVID–19 expenses to pre-
vent, prepare for, or respond to, COVID–19. HUD is currently proc-
61
essing an initial round of COVID–19 supplemental payment
requests received from project owners in August and anticipates
most of these requests will be paid by October 1.
Public Housing
Q.4. On Thursday, May 14, HUD sent an email informing Public
Housing Agencies (PHAs) that ‘‘CARES Act Supplemental Oper-
ating Funds may only be drawn down to pay for immediate needs
and cannot be held as reserves.’’ The email noted that, unlike reg-
ular Operating Funds, CARES Act Supplemental Operating Funds
cannot be drawn down all at once, held by the agency, and then
used for future costs of non-immediate eligible activities even if
those expenses occur before the expiration of the CARES Act sup-
plemental funding. Why has HUD placed restrictions on the draw
down and use of the CARES Act Supplemental Operating Funds?
A.4. PHAs may draw down CARES Act funding to pay for ongoing
public housing costs, including regular Operating and Capital Fund
activities, as well as expanded COVID–19 activities as described in
PIH Notice 2020–07. The immediate needs requirement imposed by
HUD is consistent with the current practice in the Capital Fund
program, and required by the cash management requirements in-
cluded in 2 CFR Part 200 whereby grantees and the Federal agen-
cy must limit the time between the draw down and expenditure of
funding. Unlike ‘‘regular’’ Operating Funds, which are required to
be provided at a rate of 1⁄12 th of eligibility per month regardless of
immediate needs, HUD expedited the obligation of all CARES Act
funding to PHAs to ensure that PHAs had access to their entire
amount in less than 35 days to ensure PHAs could begin address-
ing program costs as quickly as possible.
Q.5. Through the CARES Act, Congress provided $1.935 billion to
help local communities serve their residents through the Public
Housing Operating Fund and Housing Choice Voucher program
but, as of June 8th, only $1.065 billion has been made available to
Public Housing Agencies. Why has HUD failed to release the addi-
tional funding provided by Congress? When does HUD expect to re-
lease the remaining $870 million appropriated by Congress for the
Public Housing Operating Fund and the Housing Choice Voucher
program?
A.5. All Public Housing Operating Funds ($685 million) provided
through the CARES Act were obligated to PHAs on May 1, 2020.
The Office of Public and Indian Housing (PIH) published a notice
on July 31, 2020, that established the eligibility criteria for the
$400 million of supplemental HAP made available through the
CARES Act. The supplemental HAP funding is available for PHAs
that either (1) experience a significant increase in voucher PUC
due to extraordinary circumstances, or (2) despite taking reason-
able cost saving measures, as determined by the Secretary, would
otherwise be required to terminate rental assistance for families as
a result of insufficient funding (heretofore referred to as Shortfall
Funds). The deadline for submitting applications is October 31,
2020, and the eligibility evaluation and determination for funding
awards will be performed on a rolling basis.
62
As of September 14, 2020, the Office of Housing Voucher Pro-
grams (OHVP) has made available $849.9 million of the CARES
Act admin fee supplemental funding. PIH Notice 2020–08 made
available $377 million, and PIH Notice 2020–18 made available
$472 million. From this total, $841.7 was awarded to PHAs admin-
istering the HCV Program and $8.2 million for PHAs administering
the Mainstream Vouchers.
Q.6. Does HUD have a proposal on how to handle resident’s past
due rent payments once HUD’s eviction moratorium ends, ensuring
that residents are set-up for success and are not stuck with an
unaffordable balloon payment?
A.6. HUD has strongly encouraged PHAs and owners to enter into
repayment agreements for past due rent to position residents for
stability and circumvent an unaffordable balloon payment after the
eviction moratorium expires. In July 2020, HUD provided PHAs
with an ‘‘Eviction Prevention and Stability Toolkit.’’ The Toolkit
promotes housing stability by offering several resources from exist-
ing HUD guidance and innovative practices from PHAs. For exam-
ple, the Toolkit includes a PHA brochure that recommends PHAs
adopt policies for retroactive interim reexaminations, conduct direct
outreach to households behind on rent, and review policies on min-
imum rent and financial hardship exemptions. In addition, the
Toolkit also centralizes HUD’s current guidance on repayment
agreements and provides three sample repayment agreements from
PHAs. The Toolkit also includes a tenant brochure with weblinks
and/or phone numbers to key benefits to ensure families are set-
up for success. (e.g., weblinks to TANF, SNAP, unemployment serv-
ices, economic impact payments, free tax preparation, childcare for
essential workers, immediate jobs available during COVID–19, and
non-Federal emergency assistance for rent, utilities, and other
basic necessities.)
Additionally, HUD has effectuated several statutory and regu-
latory waivers through the broad CARES Act waiver authority
which will support PHAs in expeditiously processing requests for
interim recertifications of income. These include waivers of third-
party verifications of income, delays in routine annual recertifi-
cations of income, expedited adoption of administrative policies,
and other administrative waivers to allow PHAs to focus efforts on
those families hardest hit by the pandemic.
Q.7. Does HUD have enough funds to cover all vouchers for fami-
lies currently in Housing Choice Voucher program? If not, how
much additional funding is required?
A.7. When comparing current available funding to actual and esti-
mated expenses for the CY, HUD may have enough money to cover
all leased and issued vouchers for the remainder of the year, thus
avoiding any potential terminations of vouchers for families due to
insufficient funding. However, this premise is based solely on Janu-
ary to June 2020 financial systems data projected through 12/31/
2020. This data is constantly evolving based on local conditions
such as the state of PHA Operations, timeframes for processing in-
terim income decreases that tenants experience and PHA policies
on admission, recertifications and rent/occupancy issues.
63
HUD will award $400 million in CARES Act Supplemental HAP
funding to PHAs (including Moving to Work (MTW) PHAs) that ex-
perienced a significant increase in PUC due to extraordinary cir-
cumstances in CY 2020; or to shortfall PHAs that, despite taking
reasonable cost savings measures, would otherwise be required to
terminate rental assistance for families as a result of insufficient
funding for either the Mainstream Program and/or HCV Program.
HUD will continue to closely monitor the data associated with esti-
mating HAP need and will provide updates as needed.
Q.8. Since the start of the COVID–19 crisis, how many families is
HUD serving through the Housing Choice Voucher program? Has
HUD seen an increase, decrease, or continuity in the number of
families it serves through the program?
A.8. On March 1, the HCV program (both MTWs and non-MTWs)
was serving 2.273 million families. In April, the program was serv-
ing 2.278 million families. With data to date, the HCV program is
serving 5,000 more families than at the start of the COVID–19 na-
tional emergency. May numbers made available in mid-July
showed that the HCV program held steady and continued to serve
2.278 million families.
CARES Act Implementation and Access to Credit
Q.9. Secretary Carson, even though mortgage interest rates are at
historic lows, it’s still too difficult for consumers to access credit to
purchase or refinance their home. Obviously many factors con-
tribute to this, but I’m concerned that the way FHA implemented
the CARES Act forbearance provisions may have exacerbated this
situation.
For example, FHA last week released guidance on loans for
which the borrower experiences a COVID–19-related hardship
shortly after closing and enters forbearance. While these loans are
now largely eligible for FHA insurance, FHA will hold the lender
liable for a large share of the losses if the borrower can’t resume
payments.
Likewise, Director Calabria, your agency belatedly allowed the
GSEs to purchase loans that enter forbearance soon after closing,
but only with steep price discounts. This may create a disincentive
for banks to provide loans to any borrowers who may need CARES
Act forbearance and may be perpetuating problems borrower are
facing in accessing credit. It seems like the rational response for
lenders is to turn away borrowers with a higher risk of going into
forbearance, like people that work in restaurants or other busi-
nesses hurt by COVID, or borrowers with lower FICO scores.
Can you both explain how you are evaluating the impact of these
policies on access to credit?
A.9. FHA issued a policy on June 4, 2020, that provided FHA in-
surance eligibility for single-family mortgages that went into for-
bearance after closing but before receiving an FHA insurance en-
dorsement. The intention of this policy was to assure the residen-
tial real estate market that FHA insurance would be available for
these mortgages. FHA believes the policy effectively manages risks
to FHA’s Mutual Mortgage Insurance Fund. Because the Depart-
ment has provided this clarity, lenders may continue to offer FHA
64
financing using prudent lending practices, without the need for
credit overlays that would restrict the ability of traditional FHA
borrowers to obtain mortgage financing.
Under FHA’s June 4, 2020, policy, lenders must indemnify FHA
against the loss of up to 20 percent of the original mortgage
amount for up to two years. This aligns the public and private in-
centives associated with these loans appropriately. While FHA cur-
rently estimates that the number of mortgages that it will endorse
under the new policy will be small, the partial indemnification re-
quirement ensures that the risks associated with these loans are
not borne entirely by the American taxpayer. This policy also elimi-
nates any private incentive to place borrowers affected by the
COVID–19 National Emergency into mortgages that they are fi-
nancially unable to sustain.
FHA will track the loans insured under this policy and carefully
monitor the market to ensure this policy is effective.
Q.10. Can you share the overall projected losses for FHA and
FHFA from buying loans that go into forbearance postclosing?
A.10. On a preliminary basis and based on current loss mitigation
policies, FHA expects 40 to 50 percent of FHA-insured single-family
mortgages receiving COVID–19 forbearance to default. Overall pro-
jected losses for these mortgages are expected to be between 40 to
50 percent of the defaulted loan’s unpaid principal balance, result-
ing in approximately a 20 percent overall loss rate. Actual default
and loss rates will depend on many variables, including unemploy-
ment and home price trends and potential changes to loss mitiga-
tion policies.
MOU
Q.11. In a speech earlier this year, Director Calabria mentioned a
Memo of Understanding (MOU) was in development between
FHFA and HUD. Secretary Carson and Director Calabria, can you
provide details on what you expect to be included in this MOU? Ad-
ditionally, please provide a timeline of when Congress can expect
the MOU to be released.
A.11. The revised MOU between the Federal Housing Finance
Agency (FHFA) and HUD is intended to replace an existing MOU
between HUD, through FHA, and FHFA regarding the sharing of
information that was executed on January 21, 2010. The revised
MOU continues to provide for the sharing of data, which will be
used to further the respective supervisory, regulatory, and other
lawful responsibilities of the agencies, which now specifically in-
cludes Ginnie Mae as an additional participating component of
HUD.
Additionally, consistent with the terms of the MOU, data may be
shared to facilitate the development and implementation of the
housing reform plans contained in the Presidential Memorandum
dated March 27, 2019, including the ‘‘Housing Finance Reform
Plan’’ issued by HUD, dated September 2019. The MOU provides
for protections for the use and retention of all shared information.
The MOU also identifies the applicable authorities for each agency
to enter into and share information. There is not a timeline for
completion at this time.
65
RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER
FROM BENJAMIN S. CARSON
Q.1. Rented Homes and Apartments—Secretary Carson, during the
hearing I asked you about what is being done for renters and for
property owners. You responded that you thought the paycheck
protection program was working and sufficient for these busi-
nesses.
Can you please expand on how the Paycheck Protection Program
is helping these folks who own the homes and apartments with
mortgages that are being rented out and but are not receiving rent
due to the crisis?
A.1. While the program has now terminated, the Small Business
Administration is in the best position to respond to questions about
PPP terms and conditions.
Q.2. Affordable Housing—I have been concerned about the avail-
ability and affordability of housing particularly in rural America
since long before this crisis, as I discussed the last time you were
both before this Committee. This crisis is only going to make those
problems worse. Congress needs to work to address this afford-
ability and availability crisis in America.
What are you doing to make sure that the resources your agen-
cies have are making it to rural America and other underserved
areas?
A.2. HUD is dedicated to ensuring that rural and underserved
areas can make use of HUD programs to address affordability.
FHA insurance programs are available without geographic limits
and are utilized to facilitate more affordable debt for single-family,
multifamily, and healthcare facility lending in underserved commu-
nities.
HUD plans to announce $10 million in grant awards for the Self-
Help Ownership Program next month to support home ownership.
HUD published its NOFA on June 18, 2020, and is currently re-
viewing applications.
In addition, manufactured housing is an important affordable
home-ownership solution, including in rural and underserved
areas. HUD’s Office of Manufactured Housing Programs has been
proactively addressing COVID–19 issues impacting the manufac-
tured housing industry. Several policy waivers have been put in
place to allow home installations to continue to occur, despite sup-
ply chain issues and social distancing measures. These measures,
in addition to the successful continuation of administering all as-
pects of the Federal manufactured housing program during this pe-
riod of crisis, are vital in support of the housing needs within rural
America and other underserved areas.
Housing Programs in Indian Country
Q.3. During a Senate Committee on Indian Affairs oversight hear-
ing in October, I asked Assistant Secretary Kurtz about the Section
184 Indian Home Loan Guarantee Program and HUD’s work to up-
date the Section 184 regulations. What’s the status of these pro-
posed regulations?
A.3. HUD is still actively working on developing a proposed rule
for publication and public comment. HUD conducted 18 tribal
66
consultation sessions and considered all tribal feedback received at
these sessions when developing the rule. The current COVID–19
National Emergency has delayed rulemaking efforts as the Depart-
ment has been working tirelessly to provide emergency funding to
Tribal communities under the CARES Act, and help Tribes ensure
the health and safety of families. Despite this delay, HUD is still
planning on issuing the rule early next year and looks forward to
receiving additional feedback from Tribes, borrowers, lenders, and
the general public.
Q.4. During the same hearing I asked the Department to look at
ways to better partner with Native CDFIs on Section 184 lending.
Has HUD increased outreach to Native CDFIs?
A.4. HUD has been working to increase outreach to Native CDFIs
to promote the Section 184 Indian Home Loan Guarantee program
and to encourage their participation in the program. Since the
hearing, HUD staff met with the CDFI Fund to explore ways to
conduct additional outreach and agreed to collaborate on future
technical assistance targeting Native CDFIs.
Additionally, in November of 2019, HUD actively participated in
the Native CDFI Network’s 2019 Policy Summit to promote the
program to CDFIs in attendance. To date, there are at least four
Native CDFIs that are actively participating in the program, and
HUD will continue to encourage Native CDFIs to participate in the
program and provide critical capital to Native American borrowers.
Q.5. As you know, the biggest obstacle to home ownership facing
many low- to moderate-income and minority families is not month-
ly payment, but rather down payment. As a result, downpayment
assistance provided by national, State and local government down-
payment assistance organizations can be critical to providing a
pathway to home ownership, particularly for minority and low- to
moderate-income borrowers.
HUD announced that it intends to proceed with a rulemaking to
limit downpayment assistance (DPA) programs offered by Govern-
ment entities and, in particular, DPA programs that operate na-
tionally, such as those offered by a number of Native American
tribes. If promulgated as HUD has indicated, HUD’s proposed rule
would prevent these Native American housing finance agencies,
which currently assist many low- to moderate-income and minority
home buyers across the country from operating nationally. I have
a number of concerns with HUD’s initiative and will look forward
to continuing a dialogue on this issue so that we can move forward
on a well-informed and sensible housing policy that responsibly
serves all Americans.
A.5. HUD looks forward to this continued dialogue.
Q.6. HUD’s policy to limit tribal organizations to serving only en-
rolled members of their respective tribes is a very significant de-
parture from the U.S. Government’s 86-year policy of self-deter-
mination and self-governance. HUD’s policy initiative as currently
drafted would prevent Native American tribes from being able to
operate businesses off of their respective reservations or to limit
their products and services to only enrolled members. I have sig-
nificant concerns that this initiative would set a terrible precedent
67
and has been alarming to Native American tribal organizations.
Why are HUD and the Trump administration advocating a policy
that could prevent Native American tribes from being able to sus-
tain themselves?
A.6. The Administration is not advocating a policy that could pre-
vent Native American tribes from being able to sustain themselves.
HUD plans to engage in rulemaking to fully implement the amend-
ments made by the Housing and Economic Recovery Act of 2008
(HERA), which prohibit any portion of a borrower’s downpayment
from being provided by an entity that financially benefits from the
transaction.
While HERA’s prohibition on assistance from the seller is explicit
in the statute, there are still questions as to the scope of the prohi-
bition when the downpayment assistance is provided by Govern-
ment entities that may benefit financially from the transaction. Be-
cause FHA has an obligation to ensure its programs are operating
in full compliance with the law, FHA is pursuing rulemaking to de-
fine the circumstances in which governmental entities providing
downpayment assistance are deriving a financial benefit from the
transaction.
Q.7. The Administration and HUD’s own requirements mandate
that HUD engage in meaningful, face-to-face consultation before
HUD begins to work on a rule that would impact Native American
tribes. However, even before we were faced with the current Pan-
demic, HUD was moving towards rulemaking, without fulfilling its
mandated tribal consultation requirements. It is my understanding
that a number of tribal organizations have submitted comments
and sent letters to HUD on this issue. Why has HUD failed to en-
gage in meaningful tribal consultation?
A.7. HUD’s policy is to consult with tribal organizations early in
the rulemaking process on matters that have tribal implications.
On February 14, 2020, HUD issued a notice of Tribal Consultation
on HUD’s proposed rule regarding mortgage insurance for trans-
actions involving downpayment assistance, with a comment period
of 30 days. As further stated in that notice, if a proposed rule is
published in the Federal Register, tribes will have another oppor-
tunity to comment through the public comment process.
Q.8. HUD’s upcoming rulemaking could set a very significant
precedent by turning back the U.S. Government’s 86-year policy of
self-determination and self-governance towards Native American
tribes if the department moves forward with this rule. Do you com-
mit to engaging in a meaningful tribal consultation process before
even working on a proposed rule? By engaging in meaningful tribal
consultation, HUD would then be able to get a better under-
standing of these programs.
A.8. See answer to Question 7 above.
Q.9. It appears to me that HUD has taken the position that the
FHA-insured loans being assisted by Government entities, particu-
larly ‘‘national’’ Government entities, providing downpayment as-
sistance are a risk to the FHA Mutual Mortgage Insurance Fund
without sufficient, or any, data. I have significant concerns with
HUD taking action without sufficient data or consultation to
68
inform the process. Please provide an explanation as to why it be-
lieves that national lenders operating national programs are riskier
than those that only operate in a narrow geographic area? And
please provide an explanation as to why HUD believes low- to mod-
erate-income and minority borrowers pose a greater risk than bor-
rowers who are receiving downpayment assistance from their fami-
lies or other sources? What is HUD’s rational for concern over
these two factors?
A.9. FHA-insured purchase mortgages with downpayment assist-
ance (DPA) tend to perform worse than those purchase mortgages
without DPA. As discussed in the 2019 Annual Report to Congress
on the Financial Status of the FHA Mutual Mortgage Insurance
Fund (Annual Report to Congress):
• Early Payment Defaults (EPDs) for FHA-insured single-family
mortgages with downpayment assistance are over 60 percent
higher than for mortgages without downpayment assistance
sources of funds over the last 2 fiscal years (See FHA Annual
Report to Congress, Exhibit I–18 and Table B–18.)
• Seriously delinquencies (SDQs) for FHA-insured single-family
mortgages with downpayment assistance are between 50 per-
cent and 60 percent higher than for mortgages without down-
payment assistance. (See FHA Annual Report to Congress, Ex-
hibit I–19 and Table B–19.)
• Serious delinquency rates tend to increase as mortgages age.
Seasoned mortgages with downpayment assistance from gov-
ernmental entities are associated with the highest serious de-
linquency rates (See FHA Annual Report to Congress Exhibit
I–19 and Table B–19.)
While HUD recognizes the importance of providing downpayment
assistance for many FHA borrowers, FHA also has a statutory obli-
gation to insure mortgages that meet the National Housing Act’s
requirements for the borrower’s minimum cash investment, includ-
ing its explicit prohibition on downpayment assistance from certain
sources.
Q.10. Because I am not alone in the concern that HUD does not
have the granular level of data it needs to make informed decisions
on this issue, in last year’s congressional appropriations process,
my colleagues and I added report language to the appropriations
bill, which recommended that HUD begin to collect a more granu-
lar level of pricing and default performance data for each national,
State, and local housing finance agency. Since 2000, this granular
level of data has been collected for each nonprofit providing down-
payment assistance to borrowers, and it would be valuable to both
HUD and Congress for that the same type of data be collected for
each Government entity. The language that we included in our Re-
port was supported both the industry and the consumer advocacy
community. However, despite Congress’ recommendation that HUD
begin to collect this data, which is very easy to do because the sys-
tems are already programmed to do so, HUD has failed to do so.
Why? When will HUD begin collecting this data?
A.10. FHA has documented that purchase mortgages with down-
payment assistance (DPA) tend to perform worse than purchase
69
mortgages without DPA in its Annual Report to Congress on the Fi-
nancial Status of the FHA Mutual Mortgage Insurance Fund for
Fiscal Year 2019. This report is available at https://www.hud.gov/
sites/dfiles/Housing/documents/2019FHAAnnualReportMMI
Fund.pdf.
Q.11. Will you make this data public? This would provide the addi-
tional benefit of analysis performed by the broader housing commu-
nity, including the housing industry, think tanks, and consumer
advocate organizations.
A.11. See answer to Question 10 above.
Q.12. Will you commit to collecting, analyzing and making public
this data before you proceed on any DPA rulemaking? Doing so
would ensure that HUD would be able to make informed policy de-
cisions on this issue.
A.12. See answer to Question 10 above.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
FROM BENJAMIN S. CARSON
Q.1. When will HUD release the $50 million in Section 202 Hous-
ing for the Elderly program funding provided by the CARES Act?
A.1. In responding to this unprecedented national emergency,
HUD’s Office of Multifamily Housing has attempted to balance the
known financial impacts from COVID–19 with the significant un-
certainty about both potential future impacts and the possibility of
additional congressionally appropriated emergency funding. HUD
has met with many stakeholders to learn about the impacts they
are facing and is carefully monitoring the impact on residents in
HUD-assisted properties.
HUD obligated a portion of the Section 202 CARES Act supple-
mental funds in July for processing contract renewals as well as
funding shortfalls. In addition, HUD issued Housing Notice 2020–
08 on July 23 to provide guidance to sponsors/owners of properties
receiving HUD project-based assistance (including Section 202, Sec-
tion 811 and Section 8) on accessing additional supplemental funds
to provide assistance for project level COVID–19 expenses to pre-
vent, prepare for, or respond to, COVID–19. HUD is currently proc-
essing an initial round of COVID–19 supplemental payment re-
quests received from project owners in August and anticipates most
of these requests will be paid by October 1.
Q.2. When will HUD release the remaining $200 million in Section
8 Project-Based Rental Assistance funding provided by the CARES
Act?
A.2. On July 23, HUD issued Housing Notice 2020–08 to provide
guidance to owners on requesting CARES Act funds to address
COVID-related expenses at properties with rental assistance in the
project-based Section 8, Section 202, and Section 811 programs. To-
gether with CARES Act funds allocated to properties to offset re-
ductions in tenant incomes related to the pandemic, this is ex-
pected to fully utilize CARES Act funds for the multifamily port-
folio.
70
Q.3. HUD does not require radon testing or mitigation in public
housing units, despite indoor radon being the leading cause of lung
cancer among nonsmokers. HUD is tasked, under law, with devel-
oping policy ‘‘for dealing with radon contamination . . . to ensure
that occupants of [public housing] are not exposed to hazardous
levels of radon’’ to meet the statutory national goal of having ‘‘air
within buildings in the United States . . . as free of radon as the
ambient air outside of buildings.’’ At the hearing, regarding radon
in public housing, you stated, ‘‘We’ve also changed the inspection
protocol so that it will be a part of the inspection.’’
When did HUD update the Real Estate Assessment Center
standards to include radon inspections or mitigation? How, specifi-
cally, is radon testing/mitigation scored in the updated inspection
protocol?
A.3. All HUD-assisted public housing must conform to HUD’s Uni-
form Physical Condition Standards (UPCSRIN) in 24 CFR part 5,
subpart G. It is through these regulations that HUD has defined
‘‘decent, safe, sanitary and in good repair.’’ These regulations do
not explicitly require testing for, or mitigation of, radon; nonethe-
less, PHAs’ responsibility to maintain safe housing extends to the
mitigation of radon when it is detected. Compliance with UPCS is
confirmed through physical inspections performed by HUD’s Real
Estate Assessment Center (REAC). Physical inspections typically
occur every 1–3 years and include a visual assessment of unit con-
ditions, hazards and certain documentation. REAC inspectors do
not perform any environmental testing. However, to provide addi-
tional assurance that HUD-assisted housing properties are testing
for and remediating radon in accordance with Federal laws, regula-
tions and contract provisions during FY2020, HUD has worked
with the Office of Management and Budget and incorporated this
objective into the Single Audit Act compliance testing process.
HUD has also included a requirement in the Uniform Guidance
compliance supplement requiring PHA’s auditors’ test for this com-
pliance objective. When noncompliance is identified, HUD will fol-
low-up with the PHA to bring that agency into compliance.
Q.4. Does HUD have any subsequent plans to require or support
radon testing or mitigation in public housing?
A.4. In FY21, REAC will continue its proactive approach of devel-
oping effective protocols directed at environmental hazards. REAC
plans are to initiate the development of a quality control protocol
for radon. To fully implement this service requires the funds be
made available to ensure the REAC staff can obtain the appro-
priate training, certifications, and the purchase of required testing
equipment and supplies. Once obtained, a demonstration/feasibility
study will be conducted, which will assist in the development of a
streamlined radon protocol intended as a means for HUD/REAC to
conduct oversight inspections to ensure that HUD-assisted prop-
erties and their contractors are actively and correctly addressing
the applicable laws and regulations concerning radon. Upon suc-
cessful development of a streamlined radon oversight protocol, it is
REAC’s intention to propose the implementation of this oversight
inspection as a new REAC service in FY22.
71
Q.5. Do you support requiring Federal radon testing in public hous-
ing units?
A.5. REAC will continue to coordinate with other offices and de-
partments to develop information and guidance on radon for PHAs
to provide important background information on the issue as well
as guidance on radon testing and mitigation using the most current
consensus standards. Also, HUD supports radon testing as part of
its future environmental testing to be performed by REAC, but ad-
ditional information from the FY21 Budget request for OLHCHH
for the radon testing and mitigation demonstration will be helpful
to inform efforts.
Q.6. HUD has expressed its intention to proceed with a rulemaking
to limit downpayment assistance, including downpayment assist-
ance offered by nationally operated Government entities, such as
those programs offered by Native American tribal nations. Have
you considered the impact of this potential rulemaking on self-gov-
ernance and self-determination for tribal nations? Will HUD at-
tempt to engage in meaningful tribal consultation before pro-
ceeding with any such rulemaking?
A.6. HUD’s policy is to consult with tribal organizations early in
the rulemaking process on matters that have tribal implications.
On February 14, 2020, HUD issued a notice of Tribal Consultation
on HUD’s proposed rule regarding mortgage insurance for trans-
actions involving downpayment assistance, with a comment period
of 30 days. As further stated in that notice, if a proposed rule is
published in the Federal Register, tribes will have another oppor-
tunity to comment through the public comment process.
Q.7. In 2016, HUD found that ‘‘transgender and gender noncon-
forming persons continue to experience significant violence, harass-
ment, and discrimination in attempting to access programs, bene-
fits, services, and accommodations’’ and reported that ‘‘transgender
persons are often discriminatorily excluded from shelters or face
dangerous conditions in the shelters that correspond to their sex
assigned at birth.’’ Do you support the rights of transgender indi-
viduals to seek public shelter consistent with their gender identity?
A.7. HUD expects shelter providers to follow all applicable laws re-
lated to discrimination.
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR VAN HOLLEN FROM BENJAMIN S. CARSON
Q.1. Secretary Carson, the FY2019 Appropriations Bill [PL. 116–
94] authorized the Housing Mobility Pilot Program. Can you please
provide a status update on the program? What additional resources
can Congress provide to encourage this program’s success?
A.1. On July 15, HUD published the Housing Choice Voucher Mo-
bility Demonstration implementation notice in the Federal Register.
PHAs have until October 13, 2020, to submit an application for
participating in the demonstration. The implementation notice in-
corporates both the FY2019 funding as well as funds appropriated
in the FY2020 bill for the demonstration. HUD anticipates making
between 5–10 awards by the end of 2020.
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Income Recertification
Q.2. How many HUD tenants have requested an income recertifi-
cation? How many tenants does HUD estimate will ask for such re-
certification during the crisis?
A.2. For the public housing program, PHAs have reported to HUD
143,412 interim recertifications for the third FY quarter (April—
June). For context, this is not significantly different than the first
and second FFY quarters which reported interim recertifications of
142,915 and 141,071, respectively. Collectively, since the beginning
of the FFY, total tenant payments (TTP) within the public housing
program have dropped from about $313 million for the first quarter
to about $300 million in the third quarter, reflecting that families
within the public housing program have experienced a 4 percent
drop in TTP.
HUD is not able to project a total number of recertifications dur-
ing the pandemic because it is unclear when the pandemic will end,
and the number of recertifications are impacted by actions taken
by Congress and States to provide additional benefits to families.
Within the same time period, the HCV program received 378,000
income recertifications. The below chart offers a comparison of
month-over-month since 2017.
For the project-based Section 8. 202 and 811 programs, annual
and interim recertifications increased dramatically after the start
of the pandemic. The monthly total numbers and cumulative totals
are reflected in the table below. HUD is not able to estimate a total
number of recertifications during the pandemic because it is un-
clear when the pandemic will end, and the number of recertifi-
73
cations are impacted by actions by Congress and States to provide
additional benefits to families.
Q.3. Has HUD proactively reached out to families to inform them
of their right to request an interim recertification and, if so, what
specific actions has HUD taken?
A.3. PHAs administer the PH and HCV programs and are the pri-
mary communicator with the families participating in these pro-
grams. HUD has encouraged PHAs to reach out to families to re-
mind them of their obligation to inform the PHAs should they ex-
perience a decrease in income. The right to request an interim in-
come reexamination in the event of a decrease is a fundamental
component of the programs and families are informed of this upon
entry to the program and income is also verified during the annual
reexamination process.
HUD has also strongly encouraged PHAs to utilize their CARES
Act PH and HCV funds, along with regular appropriated eligible
funding to purchase or upgrade technology that would enable a
PHA to conduct its processes virtually and reduce any delays in
acting on these requests.
Similar to the Office of Public Housing, Multifamily housing does
not have direct communications with subsidized renters and relies
on other means to broadly reach them. To that end Multifamily
Housing issued COVID–19 guidance for residents, https://
www.hud.gov/sites/dfiles/Housing/documents/MF-Tenant-Con-
cerns-COVID-19-Brochure.pdf, and COVID–19 guidance for land-
lords https://www.hud.gov/sites/dfiles/Housing/documents/Ten-
ant-Brochure-Final.pdf, to all Multifamily stakeholders, subsidized
tenant stakeholder groups, and owner/management agent groups.
74
These brochures are also on Multifamily Housing’s webpage under
Asset Management COVID–19 Guidance. Additionally, Multifamily
has extensive COVID–19 related Q&As on the HUD website re-
lated to the recertification and interim recertification processes, in-
cluding relaxing documentation submission and in person meeting
requirements. The brochures and Q&As remind tenants of their
ability to have their income recertified when they experience an in-
come loss and instruct landlords to inform and work with tenants
on recertifications.
Q.4. Would HUD consider instructing PHAs and owners to inter-
pret a nonpayment of rent as a request for an interim recertifi-
cation?
A.4. No. HUD regulations require families to request an interim re-
certification when they have lost income. Although some residents
may not be aware of the availability of interim reporting require-
ments for income decreases, there could be other factors involved
for nonpayment of rent. Thus, in July 2020, HUD provided PHAs
with a brochure in the ‘‘Eviction Prevention and Stability Toolkit’’
that encourages PHAs to conduct direct outreach to households be-
hind on rent to determine the cause of nonpayment. PHAs were ad-
vised to review their records, and coordinate with HCV owners, to
determine how many, and which families are behind on rent. From
there, PHAs were encouraged to coordinate with staff that are most
connected to residents in order to engage in direct outreach to fam-
ilies with past due balances to have immediate and ongoing con-
versation with the families in order to prevent eviction.
The PHA brochure also informed PHAs that some households
may not be aware of the availability of interim reporting require-
ments if their income decreases and to consider reviewing their pol-
icy on retroactive interim recertifications. In addition, some house-
holds may have mistakenly believed that they did not need to pay
rent during the moratorium or they chose not to pay rent. Direct
outreach would help clarify uncertainties and ensure that families
continue being housed. Several other best practices specific to di-
rect outreach were included in the PHA brochure, as well as infor-
mation on key partners and resources that could be made available
to the PHA and/or tenant.
Multifamily Housing requirements also require residents to re-
quest an interim recertification when there has been a loss of in-
come. It should be noted that the Offices of Multifamily Housing
and Public Housing have consistently attempted to align their pol-
icy guidance on these issues to ensure programmatic consistency
and reduce administrative burden on our program participants and
staff.
Q.5. Throughout the duration of the pandemic would HUD agree
to cease all of its regulatory guidance that permits the denial or
delay of prompt interim recertifications?
A.5. HUD has strongly encouraged PHAs to review and potentially
revise their interim reexamination policies to allow for retroactive
adjustments in response to the COVID–19 pandemic. Given that
PHAs are facing operational concerns due to COVID–19 and are
facing increasing requests for interim reinstatement, HUD is reluc-
tant to proscribe additional deadlines on the processing of interim
75
recertifications. Nevertheless, HUD encourages PHAs to make in-
terim recertifications retroactive to the date of income loss, and to
provide for flexible repayment agreements to ensure families are
not burdened with untenable rent payments. Ultimately, however,
PHAs have discretion for the timing of interim recertifications, and
the terms of repayment agreements.
The Office of Multifamily Housing has encouraged landlords to
work with tenants on interim recertifications and, as previously
mentioned, has issued Q&As to allow for interim recertifications
and recertifications without direct contact and submission of paper
documentation. Multifamily Housing interim recertifications can be
processed retroactively when extenuating circumstances may cause
delays in reporting loss of income, so the Office sees no need to
cease its current guidance.
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM BENJAMIN S. CARSON
Q.1. Will the Department of Housing and Urban Development re-
scind the disparate impact rule and the Affirmatively Furthering
Fair Housing rule, both of which are opposed by fair housing lead-
ers, attorneys general, and members of the Senate?
A.1. On September 3, 2020, HUD issued on its website the ‘‘HUD’s
Implementation of the Fair Housing Act’s Disparate Impact Stand-
ard’’ final rule (FR–6111–F–03)(RIN: 2529–AA98). See https://
www.hud.gov/program-offices/general-counsel/OtherOpinions (the
rule is pending publication in the Federal Register). The final rule
amends HUD’s 2013 disparate impact standard regulation to better
reflect the Supreme Court’s 2015 ruling in Texas Department of
Housing and Community Affairs v. Inclusive Communities Project,
Inc. and to provide clarification regarding the application of the
standard to State laws governing the business of insurance. This
Final Rule also establishes a uniform standard for determining
when a housing policy or practice with a discriminatory effect vio-
lates the Fair Housing Act and provides greater clarity of the law
for individuals, litigants, regulators, and industry professionals.
HUD is planning to withdraw the ‘‘Affirmatively Furthering Fair
Housing’’ final rule (FR–6123–P–02)(RIN: 2577–AA97). The with-
drawal of RIN 2577–AA97 will be reflected on HUD’s Fall 2020
Semiannual agenda. On August 7, 2020, HUD issued the ‘‘Pre-
serving Community and Neighborhood Choice’’ (PCNC) final rule
which became effective on September 8, 2020. https://
www.federalregister.gov/documents/2020/08/07/2020-16320/pre-
serving-community-and-neighborhood-choice. The PCNC final rule
repealed the 2015 AFFH rule and its related accretions. The new
rule returns to the original understanding of what the AFFH cer-
tification was for the first 11 years of its existence: AFFH certifi-
cations will be deemed sufficient provided grantees took affirmative
steps to further fair housing policy during the relevant period.
Q.2. Do you see it as HUD’s responsibility to eliminate discrimina-
tion in housing, reduce racial and income segregation, and provide
housing that enable children to attend good schools and parents to
have access to jobs and services?
76
A.2. HUD is concerned about any policy or practice that limits
housing choice on a basis prohibited by the Fair Housing Act and
other applicable civil rights authorities. The Fair Housing Act is
administered by HUD and prohibits discrimination in the sale,
rental and financing of most housing in the United States because
of race, color, religion, sex, national origin, disability, or familial
status. Significantly, HUD improved its complaint processing time
from FY18 to FY19 by 16 percent and in FY19 HUD obtained over
$12 million in compensation for victims of housing discrimination.
In addition to HUD’s important day-to-day complaint processing,
HUD has also tackled significant national issues like discrimina-
tory online advertising practices by major advertisers such as
Facebook and Google to ensure people are not being denied housing
opportunities on a prohibited basis.
Q.3. Do you think racial segregation erodes the economic well-being
of families of color by limiting them to neighborhoods with high
levels of poverty?
A.3. HUD is concerned about any policy or practice that limits
housing choice on a basis prohibited by the Fair Housing Act and
continues to vigorously enforce this law. However, the greater force
in housing segregation is poverty—people not having the financial
means to live where they want to live, closer to jobs and better
schools. Segregation today is rarely caused by overt discriminatory
policies. It is caused by a lack of housing choice and regulatory bar-
riers that limit the availability of affordable housing.
To promote greater housing choice and economic opportunity, the
Trump administration has signed into law programs like Oppor-
tunity Zones that are driving billions of dollars of capital into un-
derserved communities where affordable housing may exist, but op-
portunity currently does not. The White House Council on Elimi-
nating Regulatory Barriers to Affordable Housing, chaired by Sec-
retary Carson, is also examining ways to increase housing supply
by removing the multitude of overly burdensome regulatory bar-
riers that artificially raise the cost of housing development.
Q.4. Do you think it is HUD’s responsibility to identify segregation
and promote integration?
A.4. The Fair Housing Act prohibits discrimination and HUD en-
forces this important law. HUD is concerned about any policy or
practice that limits housing choice on a basis prohibited by the Fair
Housing Act and other civil rights authorities. HUD will do every-
thing possible to address these issues wherever they arise.
Q.5. Do you believe that the racial segregation that we see in our
communities is a result of policy—not choice—but Federal, State,
and local policies that invested in white communities and
disinvested in Black communities?
A.5. The Fair Housing Act prohibits discrimination and HUD en-
forces this important law. HUD is concerned about any policy or
practice that limits housing choice on a basis prohibited by the Fair
Housing Act and other civil rights authorities. HUD will do every-
thing possible to address these issues wherever they arise.
77
Q.6. What has HUD done to ensure that the 5 million households
assisted by HUD benefited from the $1,200 relief payments and the
expanded Unemployment Insurance?
A.6. To ensure families receive maximum benefit from the ex-
panded unemployment benefits and $1,200 Economic Impact Pay-
ments, HUD, using its existing statutory authorities, has excluded
these payments from the calculation of income in its rental assist-
ance and community development programs, thus preventing ten-
ant rent payments from increasing. Additionally, HUD released the
2020 Economic Impact Payments Toolkit as a guide for HUD grant-
ees to reach all eligible Americans who may not have received the
Economic Impact Payments.
Q.7. Nationwide, there are 47 million rental units. According to the
Urban Institute, more than 17 million of them will need help pay-
ing rent due to job loss. How much does HUD estimate it would
cost to keep all eligible low-income renters housed for 6 months?
A.7. Unemployment benefits and the Paycheck Protection Program
have helped many renters make rent payments. Prior to the pan-
demic, 7.72 million Very Low-Income (VLI) renters had worst-case
housing needs, primarily paying more than half their income for
rent, and about 10 percent were 30 days or more behind on their
rents. Increased unemployment could make this problem worse.
However, the amount of additional rental assistance needed is
highly dependent on (i) unemployment benefit amounts, (ii) the
speed of economic recovery, and (iii) schools employing remote
learning. On this last point, many VLI renters are household heads
with children who could have more difficulty returning to work if
children are at home. This, in turn, could impact their ability to
pay rent. Because there is a good deal of uncertainty on these three
points, HUD cannot provide an estimated amount of funding need-
ed for rental assistance.
HUD looks forward to continued conversations with Congress on
the right mix of benefits to prevent evictions and homelessness.
Q.8. The Urban Institute estimates it would cost approximately
$96 billion to assist an estimated 17.6 million renter households
needing rental assistance due to the economic impacts of COVID–
19 for 6 months. Do you agree with their estimate of funds needed
for the 17 million families to facing eviction?
A.8. HUD is unable to provide an estimated cost at this time.
Q.9. What is HUD’s plan to avoid evictions of 17 million families
due to the COVID–19 depression?
A.9. Earlier this month, the Administration issued its Executive
order (EO) to temporarily HALT evictions during the COVID–19
pandemic. American renters who meet certain conditions cannot be
evicted if they have exhausted their best efforts to pay rent, and
are likely to become homeless as a result.
HUD has also strongly encouraged PHAs and owners to enter
into repayment agreements for past due rent to position residents
for stability and circumvent an unaffordable balloon payment after
the eviction moratorium expired.
In July 2020, HUD provided PHAs with an ‘‘Eviction Prevention
and Stability Toolkit,’’ https://www.hud.gov/programloffices/
78
publiclindianlhousing/covidl19lresources. The Toolkit pro-
motes housing stability by offering several resources from existing
HUD guidance and innovative practices from PHAs. For example,
the Toolkit includes a PHA brochure that recommends PHAs adopt
policies for retroactive interim reexaminations, conduct direct out-
reach to households behind on rent, and review policies on min-
imum rent and financial hardship exemptions. In addition, the
Toolkit also centralizes HUD’s current guidance on repayment
agreements and provides three sample repayment agreements from
PHAs. The Toolkit also includes a tenant brochure with weblinks
and/or phone numbers to key benefits to ensure families are set-
up for success, e.g., weblinks to TANF, SNAP, unemployment serv-
ices, economic impact payments, free tax preparation, childcare for
essential workers, immediate jobs available during COVID–19, and
non-Federal emergency assistance for rent, utilities and other basic
necessities. HUD also published a Multifamily Tenant Brochure to
inform and address rent payment concerns of tenants living in mul-
tifamily properties.
For FHA-insured multifamily properties where the owner is re-
ceiving forbearance mortgage payment relief, tenants cannot be
evicted solely for nonpayment of rent for the duration of the for-
bearance period. HUD issued guidance on July 1 for owners of
these properties, including a new online brochure for owners to
share with tenants.
Additionally, HUD has effectuated several statutory and regu-
latory waivers through the broad CARES Act waiver authority that
will support PHAs in expeditiously processing requests for interim
recertifications of income. These include waivers of third-party
verifications of income, delays in routine annual recertifications of
income, expedited adoption of administrative policies, and other ad-
ministrative waivers to allow PHAs to focus efforts on those fami-
lies hardest hit by the pandemic.
Q.10. How many vouchers will HUD request to help families who
have lost family members to the pandemic or had jobs that will not
return quickly?
A.10. Under current Housing Choice Vouchers (HCV) program
rules, PHAs can set preferences for families based on community
needs. PHAs could provide a preference for recently unemployed
families or for families that have experienced other financial hard-
ships due to COVID–19.
Q.11. If the Emergency Rental Assistance Act which provides rent-
al assistance funds were to pass, would HUD be able to qualify and
assist families with rental assistance quickly? Why or why not?
What resources will HUD need to distribute rental assistance
funds quickly?
A.11. HUD does not perform client eligibility determinations.
Qualifying families for assistance would be determined by the
grantee (e.g., State and local entities) administering the funding.
Q.12. How quickly could HUD certify landlords to participate in
voucher programs?
A.12. Landlord eligibility is determined at the PHA level and not
at HUD. PHAs have the discretion to adopt screening policies and
79
eligibility criteria that govern landlord participation. As such, the
amount of time to determine eligibility of an owner will differ at
each PHA.
Q.13. In Nevada, we have seen a dramatic increase in demand for
housing since the outbreak of the pandemic. The funds Congress
provided for Veterans housing vouchers—VASH—have been very
helpful. Would you support additional vouchers in the next congres-
sional relief package, so that these men and women can transition
into a permanent housing solution without delay?
A.13. The FY2020 Appropriations bill provided an additional $40
million for HUD–VASH, and a PIH notice for PHAs to self-identify
their interest in receiving additional HUD–VASH vouchers was re-
leased on July 8, 2020. The HUD–VASH FY20 Registration of In-
terest Notice details the availability of additional HUD–VASH
vouchers in 2020 that HUD will be awarding this year.
Statistics on HUD–VASH in Nevada:
• There are 3 PHAs currently administering 1,834 total HUD–
VASH vouchers. Of those, 1,464 were leased as of April. That
is an overall utilization rate of 80 percent.
Leasing breakout by PHA:
Q.14. Will HUD work closely with eviction courts to keep families
safely housed? If so, how?
A.14. HUD encourages PHAs and owners to provide residents with
frequent and accurate information and to take steps to keep as
many residents stably housed as possible. As part of this effort,
HUD encourages PHA leadership and multifamily owners to en-
sure that residents and staff across the agency are aware of new
policies and procedures. PHA staff are encouraged to also review
their records, and coordinate with owners, to determine which
households are behind on rent and determine the cause of non-
payment. In tandem with this effort, PHAs can identify the range
of options and resources available to promote housing stability.
Q.15. In light of the need for stable and affordable housing for ev-
eryone in our country to avoid spreading COVID–19, will you with-
draw HUD’s rule that would prohibit any ineligible family member
from living in a unit in which one or more eligible members are re-
ceiving assistance?
A.15. HUD remains committed to serving the American people
through its ordinary operations. Suspending all rulemaking would
be inconsistent with this work.
Q.16. Are DACA recipients eligible for FHA-insured loans?
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A.16. See answer to Question 18 below.
Q.17. If not, HUD previously permitted DACA recipients to obtain
FHA-insured loans as a matter of practice. What changed in HUD’s
interpretation of the law?
A.17. See answer to Question 18 below.
Q.18. If DACA recipients are not able to receive FHA-insured
loans, why did HUD not offer the opportunity for public input or
communicate this information to approved lenders or Congress?
A.18. These questions incorrectly state that DACA recipients were
previously eligible to obtain FHA-insured mortgages and that there
was a change in policy. Both statements are incorrect. DACA re-
cipients were ineligible for FHA-insured loans during the Obama
administration, and HUD has not implemented any policy changes
during the Trump administration, either formal or informal, with
respect to FHA eligibility requirements for DACA recipients.
DACA recipients are not eligible for FHA-insured mortgages.
This policy predates the creation of DACA by at least nine years.
Since at least 2003, FHA has maintained published policy that
non-U.S. citizens without lawful residency ‘‘are not eligible for
FHA-insured loans.’’ This same policy was incorporated into FHA’s
Single-Family Housing Policy Handbook in September 2015—under
the previous Administration—and clearly states that ‘‘[n]on-U.S.
citizens without lawful residency in the United States are not eligi-
ble for FHA-insured mortgages.’’
Q.19. In light of the current pandemic, will HUD cancel the 2020
Continuum of Care NOFA and provide funding based on the pre-
vious year’s allocation?
A.19. HUD is currently evaluating the most effective way to allo-
cate FY2020 CoC funding so it can be used to assist grantees re-
spond to COVID–19.
Q.20. I am concerned by how long it took to get CARES Act Emer-
gency Solutions Grants funding out into the field—when, in much
of the country, it was needed in March. Could you explain why it
took so long for HUD to get these funds out?
A.20. HUD’s Emergency Solutions Grants (ESG) funds were fully
allocated within 90 days of enactment and are now available to be
disbursed to grantees. All ESG grantees are, and have been, en-
couraged to submit substantial amendments and action plans to
their local HUD field office at their earliest convenience in order
to have their grant agreements signed, at which point they can
begin accessing funds.
Q.21. Last month, the HUD Office of Inspector General published
another report on its review of 30 FHA servicers’ website. The re-
port found that servicers’ websites provided incomplete, incon-
sistent, dated, and unclear guidance to borrowers related to their
forbearance options under the CARES Act. Servicers should not
provide misleading information that lump sum payments at the
end of the forbearance period are expected. How will you ensure
that servicers provide clear and fair guidance on forbearance to
homeowners?
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A.21. None of FHA’s Single-Family loss mitigation home retention
options require a lump-sum payment at the end of a forbearance
period. FHA published Mortgagee Letter 2020–06 on April 1, 2020,
which provided servicers of FHA-insured mortgages with a specific
COVID–19 loss mitigation option intended to assist FHA-insured
borrowers with their forborne payments.
FHA has taken extensive steps to ensure servicers are fairly and
correctly applying loss mitigation guidance, including forbearances
under the CARES Act. For instance, HUD presented a live webinar
on April 8, 2020, open to all FHA servicers, covering all new
COVID–19 National Emergency policy contained in Mortgagee Let-
ter 2020–06. To date, FHA has also held three additional live
webinars, open to all FHA servicers, to ensure that servicers pro-
vide clear and fair guidance on the application of CARES Act for-
bearance and other loss mitigation policies. More than 2,300 indi-
viduals attended these sessions. Additional tools for servicers are
also available, including a resource page on HUD.gov that includes
interagency fact sheets for both servicers and borrowers detailing
the key requirements for forbearance under the CARES Act.
To ensure homeowners and renters have the most up-to-date and
accurate housing assistance information during the COVID–19 Na-
tional Emergency, HUD is a partner in an interagency mortgage
and housing assistance website in conjunction with the Federal
Housing Finance Agency, Consumer Financial Protection Bureau,
and Departments of Veterans Affairs and Agriculture, available at
https://www.cfpb.gov/housing.
Q.22. How will you ensure any lender seeking payment on the
FHA guarantee has provided documentation on its compliance with
loss mitigation requirements?
A.22. FHA ensures compliance with its requirements in connection
with FHA insurance claim payments through a post claim audit
process. Additionally, FHA conducts quality assurance reviews to
ensure servicers are operating under FHA guidelines when admin-
istering the loss mitigation program.
Q.23. Will you ensure FHA conducts oversight of servicers with ap-
propriate sampling and review of companies and borrowers?
A.23. Such oversight is part of FHA’s standard operational prac-
tices. FHA ensures compliance with its requirements in connection
with FHA insurance claim payments through a post claim audit
process. Additionally, FHA conducts quality assurance reviews to
ensure servicers are operating under FHA guidelines when admin-
istering their loss mitigation programs.
Q.24. Will you ensure FHA establishes a robust complaint and ap-
peals process for borrowers who believe they have been subject to
unfair treatment related to noncompliance with FHA’s servicing re-
quirements, including its loss mitigation requirements?
A.24. Yes. FHA has a vested interest in preventing foreclosures
and helping delinquent borrowers remain in their homes. Bor-
rowers may contact the FHA Resource Center for assistance with
questions regarding loss mitigation. Furthermore, HUD is a part-
ner with the Federal Housing Finance Agency, Consumer Financial
Protection Bureau, and Departments of Veterans Affairs and Agri-
82
culture on a COVID–19 consumer resources website that includes
prominent links for consumers to file complaints if they believe
they are being unfairly treated. The website can be found at
https://www.cfpb.gov/housing.
Q.25. Will you report annually to Congress regarding the types and
volume of complaints received from borrowers who allege the rules
for loss mitigation were not followed?
A.25. FHA will respond to congressional information requests, as
legally appropriate.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SMITH
FROM BENJAMIN S. CARSON
Fire Sprinklers in Public Housing
Q.1. Secretary Carson, late last year, five Minnesotans were killed
in a tragic fire in the Cedar-Riverside neighborhood of Minneapolis.
The fire ravaged a 25-story apartment tower managed by HUD
through the Minneapolis Public Housing Authority.
The building in Minneapolis, like so many other public housing
high-rises, was built long before 1992, when the Federal law re-
quiring sprinkler systems in new multifamily public housing prop-
erties was passed. Because this apartment complex is exempt from
the sprinkler requirement, MPHA would have to divert funding
from other maintenance needs in order to voluntarily install an
automatic sprinkler system.
Unfortunately, this is easier said than done. Prior to the fire,
Minneapolis Public Housing Authority reported $152 million in im-
mediate capital needs, including $69 million that it required for
mechanical systems—which includes plumbing and fire safety
needs.
Minneapolis, like other public housing authorities, has limited
funding available to address these deferred maintenance needs. In
December, I wrote to you about this issue and asked you why your
Department continues to propose ‘‘zeroing out’’ the Public Housing
Capital Fund—the primary source of maintenance and construction
funding for public housing authorities.
In your response, you identified the nationwide backlog of main-
tenance needs but did not commit to supporting increased appro-
priations in the Capital Fund or for fire sprinkler installations spe-
cifically.
Secretary Carson, can you commit to supporting increases in the
Public Housing Capital Fund so that local public housing authori-
ties can do the work necessary to make these buildings safe for the
families that live there?
A.1. HUD shares the understanding that fire sprinkler systems are
an essential element of fire safety. Public Housing has an esti-
mated capital needs backlog of approximately $26 billion, and Cap-
ital Fund grants alone are not sufficient to address the significant
needs in the portfolio. Given fiscal constraints, HUD recognizes the
need for State and local governments to share a greater role in the
provision of affordable housing. The Administration encourages
PHAs to work with State and local governments to supplement the
83
Federal appropriation with non-Federal funding to address addi-
tional public housing needs.
Q.2. Are you aware of the number of public housing high rises that
do not have fire sprinkler systems installed?
A.2. HUD provides oversight of PHAs that manage and operate
Public Housing programs. PHAs are required to comply with Fed-
eral laws and HUD regulations as well as State and local laws. In
this case, Federal law exempts multifamily properties with housing
assistance constructed prior to October 26, 1992, from the require-
ment to install fire sprinkler systems. However, this law does not
limit the authority of a State to implement or enforce laws or
standards to establish requirements for fire prevention and control.
Furthermore, HUD’s regulations related to physical condition
standards and inspection requirements under 24 CFR §5.703(c) re-
quire a building’s fire protection system to be free of health and
safety hazards, operable, and in good repair.
In order to conduct a ‘‘complete assessment,’’ HUD anticipates
that a formal research study would have to be undertaken which
would involve additional planning and a resource commitment but
would provide the most reliable information on this issue. HUD
does not currently have sufficient information to provide the num-
ber of units that currently lack a sprinkler system.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM MARK A. CALABRIA
Q.1. In your testimony you stated that Fannie Mae and Freddie
Mac’s default option is to add forborne payments to the end of the
loan. However, Fannie Mae’s Lender Letter states that a borrower
must be evaluated for a workout option, starting with the payment
deferral option you referenced, ‘‘[i]f the servicer determines that the
borrower is unable to resolve the delinquency through a reinstate-
ment and cannot afford a repayment plan.’’1 Similarly, Freddie
Mac’s Bulletin requires a servicer to verify that a borrower ‘‘[i]s un-
able to afford a repayment plan or full reinstatement of the Mort-
gage.’’2 These guides appear to make payment deferral the third
step in the Enterprises’ loss mitigation waterfalls—behind rein-
statement and repayment plans—and it is unclear how servicers
will determine that borrowers are unable to afford reinstatement
or a repayment plan. Further, recently released servicer incentive
payments show that repayment plans and payment deferral each
offer servicers a $500 incentive, making them financially equal for
servicers even if they are not for borrowers.
Does FHFA interpret payment deferral to be the third step in the
loss mitigation waterfall for borrowers experiencing a hardship due
to COVID–19? If so, how are servicers to determine whether a bor-
rower is or is not able to make a reinstatement payment or com-
plete a repayment plan? If not, why do the Enterprises’ guides in-
clude references to reinstatement and repayment plans in the eval-
uation criteria for payment deferral?
1 LL–2020–07.
2 Bulletin 2020–15.
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A.1. Recognizing that most homeowners will not be able to repay
their COVID–19 forbearance in a lump sum after the forbearance
period ends, the Federal Housing Finance Agency (FHFA) estab-
lished the payment deferral option, which adds the homeowners’
missed payments to the end of their mortgage. Servicers are in-
structed to evaluate borrowers for the appropriate loss mitigation
option at the end of the forbearance period. This evaluation should
take place in a conversation between the homeowner and the
servicer with a goal of figuring out the best option for the home-
owner upon exiting forbearance. Additionally, choosing which op-
tion is best will entirely depend on the homeowner’s circumstances
at the time, chief among them is whether the homeowner can af-
ford the same payment in effect before the forbearance.
Servicers are instructed to follow a ‘‘waterfall’’ of options that
proceed in the following order:
1. Reinstatement (lump sum payment)
2. Repayment (payment above the regular mortgage payment
until the homeowner is caught up)
3. Payment deferral (adding the payments to the end of the
mortgage), or
4. Flex Mod (extending the term of the loan and/or lowering the
interest rate until the payment becomes affordable to the bor-
rower).
While less likely to be utilized, the first two options should be
available to homeowners who are willing and have the financial
means to use them. It is important to emphasize, as FHFA has
done since the start of the COVID forbearance programs, that
homeowners do not have to repay a forbearance in a lump sum un-
less they choose to do so.
Fair Lending Analysis Capital Rule
Q.2. Did FHFA’s Office of Fair Lending Oversight or any other of-
fice within FHFA conduct a fair lending review of the capital rule
FHFA released on May 20, 2020? If so, please provide the results
of that analysis. If not, why not?
A.2. FHFA’s reproposed Regulatory Capital Framework Rule for
Fannie Mae and Freddie Mac (the Enterprises) is based on the
same structure as the prior proposal that was issued in July 2018.
For the July 2018 proposed rule, the Agency completed a fair lend-
ing analysis on certain risk multipliers and that analysis led to
changes incorporated into the May 2020 proposed capital rule. In
general, there were limited changes from the first proposal and
those changes were mission driven. As with the process followed by
former FHFA Director Mel Watt with the 2018 proposal, the FHFA
analysis of fair lending is used to address any needed changes in
a rule and those changes are affected prior to finalization and pub-
lication of the rule.
Q.3. Please provide FHFA’s analysis of the affect FHFA’s capital
rule proposal, issued on May 20, 2020, would have on mortgage
costs for single-family mortgage borrowers. Please provide any
analysis by income, FICO score, downpayment amount, debt-to-in-
come ratio, or product features that FHFA may have done, as well
85
as any breakdown of changes that result from adjustments to up-
front and ongoing guarantee fee costs. Please also provide any as-
sumptions that FHFA made in this calculations.
A.3. In developing the reproposed Enterprise Regulatory Capital
Framework Rule, the Agency undertook its normal review of fac-
tors that could be affected by a change in capital standards and
will look to public comments received as important to the adoption
of a final rule. Throughout the rulemaking process, FHFA remains
bound to the statutory requirements of Congress in the Housing
and Economic Recovery Act of 2008 (HERA), as specified in Section
1110 of HERA.
I share the observation of then-Chair of the Federal Reserve,
Janet Yellen, as voiced before this Committee in 2016:
We are putting our rules very often in situations where
Congress has decided there is a safety and soundness issue
they want us to address by imposing safeguards in a par-
ticular area, and our job is to figure out how to do that
where Congress has already judged that the benefits are
worthwhile.3
The decision to impose a risk-based capital standard on Fannie
Mae and Freddie Mac was a decision made by Congress in 2008.
Accordingly, Congress has already judged the benefits of such a
rule as exceeding any potential costs.
I would also agree with those on this Committee who have stated
that cost-benefit analysis can help resist any type of regulatory
change. The enhancements in the reproposal ensure each Enter-
prise’s safety and soundness and its ability to fulfill its statutory
mission across the economic cycle, particularly during periods of fi-
nancial stress. The reproposal is also a critical step toward respon-
sibly ending the conservatorships, as directed by Congress.
Despite comment period procedures, your Committee should com-
municate with FHFA on any data or other matters related to the
rulemaking that would be helpful to our adoption and implementa-
tion of the rule. We will examine the information you provide to
make an informed decision.
Q.4. In response to a question from Senator Tester, you stated that
FHFA had not seen any evidence of whether properties where land-
lords were moving forward with evictions had loans backed by
Fannie Mae or Freddie Mac. The ProPublica story Senator Tester
referenced in his question, published in April, cited eviction filings
made since the CARES Act passed at least two Fannie Mae fi-
nanced properties. Subsequent reporting has indicated that at least
some of these eviction filings were reversed, which suggests that
the evictions did not comply with either the CARES Act or State
or local law.4 Last week, I wrote to you regarding concerns I’d re-
ceived about evictions taking place in additional properties with
Fannie Mae- and Freddie Mac-backed loans. It is my under-
standing that the concerns referenced in my letter were also sub-
mitted directly to FHFA.
3 https://www.govinfo.gov/content/pkg/CHRG-114shrg99726/pdf/CHRG-114shrg99726.pdf.
4 https://www.propublica.org/article/despite-federal-ban-landlords-are-still-moving-to-evict-
people-during-the-pandemic
86
Director Calabria, in light of court records indicating that prop-
erty owners with enterprise-backed loans are continuing to file for
eviction, what is FHFA doing to ensure that enterprise borrowers
are complying with Federal law? Does FHFA need additional au-
thority to ensure compliance with Section 4023 or Section 4024 of
the CARES Act?
A.4. FHFA has worked closely with the Enterprises to review and
address any new evictions on multifamily properties with mort-
gages backed by Fannie Mae and Freddie Mac. When we learn of
a situation like this, the Enterprise will contact the servicer of the
loan, who will contact the borrower/landlord to assess the situation.
FHFA has been made aware of approximately 250 cases wherein
an improper eviction appeared to occur and, after review with the
servicer and Enterprise, we determined that very few of these were
evictions for nonpayment of rent (some of them filed just before the
CARES Act was enacted). Those evictions were withdrawn by the
landlord. It should be noted that evictions unrelated to COVID–19
may proceed. These include health violations, noise rules, conduct
of illegal activities, and requests from State authorities.
The CARES Act did not give FHFA the authority to directly deal
with landlords on this, and the Agency is not the appropriate en-
forcement organization since eviction processes are driven by State
and local courts. Neither FHFA nor the Enterprises have contrac-
tual authority over, or a relationship to, tenants. FHFA and the
Enterprises also have little ability to penalize a landlord. However,
landlords should be complying with all laws and regulations, in-
cluding the CARES Act moratorium on evicting a tenant for non-
payment of rent. If a landlord has been found in violation of law
and has not corrected the situation, their forbearance agreement
may be canceled and/or their mortgage may be accelerated.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
FROM MARK A. CALABRIA
Q.1. Do you think the recently proposed Enterprise Capital Rule
will reduce the GSEs’ footprint in the market, and—if so—what is
FHFA doing to ensure that replacement lending is available, either
on bank balance sheets or through PLS?
A.1. My goal for the proposed capital rule is to ensure that the En-
terprises have a sufficient level of high-quality capital they need to
survive a downturn while fulfilling their countercyclical mission,
balancing the need to preserve affordability in the mortgage mar-
ket. Ensuring that the Enterprises are appropriately capitalized to
their risk helps to ensure that they can continue to fulfill their mis-
sion to support home ownership and affordable rental housing. The
objective of the rule is not to drive a particular market share.
Q.2. For multifamily housing, initial analysis suggests the repro-
posal requires approximately 67 percent more total capital than the
2018 proposal which could result in an increased cost to multi-
family mortgages of up to 39 basis points.
What analysis has FHFA done on the impact of this cost increase
on affordable and workforce Multifamily development activity?
87
A.2. FHFA’s newly proposed capital rule is based on the 2018 pro-
posal with some simplifications and refinements. This framework
captures the unique nature of each Enterprise’s multifamily busi-
ness and its particular risk drivers, and sets exposure-specific cred-
it risk capital requirements that are generally similar to those in
the 2018 proposal. The two main risk characteristics are debt serv-
ice coverage ratio and mark-to-market loan-to-value ratio. By focus-
ing on the risks of the Enterprises’ multifamily portfolios with a
greater level of refinement than an equivalent bank capital re-
quirement, each Enterprise will have sufficient capital to continue
its affordable housing mission.
Q.3. How will the increase in mortgage costs from Fannie and
Freddie increase housing costs in secondary and tertiary markets
where Fannie and Freddie are often the primary source of lending?
A.3. The proposed capital rule does not mandate an increase in
mortgage costs. That said, FHFA has received comments that ad-
dress a range of potential effects of capital rule changes, and they
are currently under review. FHFA will consider the information
provided through comments in moving to a final rule.
Q.4. What analysis has FHFA performed regarding the ability of
private capital to fill funding gaps, especially in the secondary and
tertiary markets?
A.4. FHFA monitors the effects of the Enterprises’ current prac-
tices and standards on secondary and tertiary markets and will
continue to do so. The comments provided on the proposed capital
rule on the impact across the range of market participants will be
considered.
Q.5. What analysis did FHFA perform to determine the updated
multifamily capital risk weighting should be effectively double that
of single family (51 percent vs. 26 percent)?
A.5. When adjusted for the quality of the portfolios and credit risk
transfer, the multifamily risk weighting under the new proposed
rule is only 30 percent. This compares to bank capital requirements
for multifamily of 50 percent. Our analysis included in the pro-
posed rule shows that, compared to the 2018 proposal, the esti-
mated amount of capital dedicated to multifamily under the new
rule has increased by less than $1 billion (from $16.9 billion to
$17.8 billion) on $655 billion of multifamily assets.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
FROM MARK A. CALABRIA
Q.1. In the wake of the COVID–19 crisis, several States have pro-
posed laws or Executive orders that would include some form of
mortgage foreclosure moratorium and forbearance and loan modi-
fication requirements.
These bills would impose differing standards that would force
lenders and servicers to follow a patchwork of State and potentially
local regulation based on the location of the property making it im-
possible for lenders to employ a consistent national approach to
aiding their customers financially impacted by the pandemic.
88
If this State-by-State trend continues, could the resultant patch-
work of laws and requirements make it more difficult for home
buyers to obtain the credit that they need?
A.1. Yes, that is a possibility. While States have a role in fore-
closures and evictions, the efforts of FHFA, the Enterprises and
Enterprise servicers are frustrated at times by hurriedly enacted
and conflicting State laws and Executive orders. Where such laws
or orders provide differing dates, differing requirements or new li-
abilities, it becomes difficult for Federal programs to operate in a
seamless fashion. These laws may impose more obligations or, in
some instances, fewer. Simply put, the comprehensive Federal pro-
grams should not face added uncertainty and confusion in assisting
homeowners and tenants. Some States have acted to exclude ‘‘fed-
erally related’’ mortgages from their actions, which avoids this
problem.
Q.2. In your view, should we be steering the States away from try-
ing to impose these laws?
A.2. While States have a role in foreclosures and evictions, the ef-
forts of FHFA, the Enterprises and Enterprise servicers are frus-
trated at times by hurriedly enacted and conflicting State laws and
Executive orders. Where such laws or orders provide differing
dates, differing requirements or new liabilities, it becomes difficult
for Federal programs to operate in a seamless fashion. These laws
may provide more obligations or, in some instances, fewer. Simply
put, the comprehensive Federal programs should not face added
uncertainty and confusion in assisting homeowners and tenants.
Some States have acted to exclude ‘‘federally related’’ mortgages
from their actions, which avoids this problem.
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR MENENDEZ FROM MARK A. CALABRIA
CARES Act Implementation and Access to Credit
Q.1. Secretary Carson, even though mortgage interest rates are at
historic lows, it’s still too difficult for consumers to access credit to
purchase or refinance their home. Obviously many factors con-
tribute to this, but I’m concerned that the way FHA implemented
the CARES Act forbearance provisions may have exacerbated this
situation.
For example, FHA last week released guidance on loans for
which the borrower experiences a COVID–19-related hardship
shortly after closing and enters forbearance. While these loans are
now largely eligible for FHA insurance, FHA will hold the lender
liable for a large share of the losses if the borrower can’t resume
payments.
Likewise, Director Calabria, your agency belatedly allowed the
GSEs to purchase loans that enter forbearance soon after closing,
but only with steep price discounts. This may create a disincentive
for banks to provide loans to any borrowers who may need CARES
Act forbearance and may be perpetuating problems borrower are
facing in accessing credit. It seems like the rational response for
lenders is to turn away borrowers with a higher risk of going into
89
forbearance, like people that work in restaurants or other busi-
nesses hurt by COVID, or borrowers with lower FICO scores.
Can you both explain how you are evaluating the impact of these
policies on access to credit?
A.1. To keep the mortgage market working for current and future
borrowers, and to help originators continue lending, FHFA enabled
the Enterprises to purchase certain single-family mortgages in for-
bearance that meet their other underwriting criteria. On April 22,
2020, FHFA announced that the Enterprises would be able to pur-
chase loans that went into forbearance after closing. This was a
new flexibility that had not been an option before. Prior to this an-
nouncement, lenders would not have been able to deliver those
loans to the Enterprises. By definition, this action provided addi-
tional liquidity to the mortgage market that would have otherwise
been absent.
Deliveries of these loans to the Enterprises remained low.
Through mid-September, about 5,900 loans in forbearance were de-
livered at a time the industry was experiencing a record number
of originations. Based on the Enterprises’ second quarter acquisi-
tions of purchase mortgages in 2019 and 2020, loan risk factors
such as average credit scores, debt-to-income (DTI), and loan-to-
value (LTV) ratios have changed only slightly this year compared
to last. Refinance acquisitions in the second quarter had higher
credit scores, lower DTIs, and lower LTVs.
Because the additional charge was applied only to the lender,
and after closing, individual borrowers were not charged higher
fees on their mortgage.
There were no ‘‘steep price discounts’’ applied to these loans.
There was simply a pricing change that reflected the decline in the
value of said loans. The Enterprises have offered to purchase such
loans at prices far higher than that found in the remainder of the
mortgage market. News reports indicate that such loans sold in the
private market have faced a pricing decline of as much as 25 per-
cent.
Q.2. Can you share the overall projected losses for FHA and FHFA
from buying loans that go into forbearance postclosing?
A.2. Prior to our April 22, 2020, announcement, lenders were un-
able to deliver loans that entered forbearance after closing but be-
fore delivery, therefore there is no historical information available.
FHFA approved the Enterprises purchasing these loans with ap-
propriate pricing adjustments to reflect the additional risk of the
loan. While lenders and mortgage borrowers could not have antici-
pated the pandemic emergency, the Enterprises have a responsi-
bility to purchase loans that are made responsibly and are sustain-
able. The actions taken by the Enterprises during the pandemic to
protect renters and borrowers are conservatively projected to cost
the Enterprises at least $6 billion and could be higher depending
on the path of the economic recovery.
Those expenses are expected to at least include:
• $4 billion in loan losses due to projected forbearance defaults;
• $1 billion in foreclosure moratorium losses; and
90
• $1 billion in servicer compensation and other forbearance ex-
penses.
FHFA has a statutory responsibility to ensure safety and sound-
ness at the Enterprises through prudential regulation. The Enter-
prises’ Congressional Charters require expenses to be recovered via
income, allowing the Enterprises to continue helping those most in
need during the pandemic.
MOU
Q.3. In a speech earlier this year, Director Calabria mentioned a
Memo of Understanding (MOU) was in development between
FHFA and HUD. Secretary Carson and Director Calabria, can you
provide details on what you expect to be included in this MOU? Ad-
ditionally, please provide a timeline of when Congress can expect
the MOU to be released.
A.3. The MOU with HUD remains under discussion and would up-
date a decade old document. The updated MOU would clarify infor-
mation sharing between FHFA and FHA and Ginnie Mae. For ex-
ample, the MOU would facilitate communication on servicer eligi-
bility and liquidity issues.
Credit Risk Transfer
Q.4. Previously, FHFA issued guidance for Credit Risk Transfer
(CRT) market following the increase in forbearance requests in the
aftermath of Hurricane Harvey. Now that 4.73 million home-
owners—or 8.9 percent of all mortgages—are in mortgage forbear-
ance plans as a result of the coronavirus pandemic, does the FHFA
plan to issue similar guidance to the CRT market?
A.4. No. The Federal Housing Finance Agency will not direct the
Enterprises to override the plain language of the prospectus. This
decision is founded in legal constructs as well as the agency’s du-
ties as regulator and conservator, detailed in the Housing and Eco-
nomic Recovery Act of 2008.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER
FROM MARK A. CALABRIA
Q.1. I have been concerned about the availability and affordability
of housing particularly in rural America since long before this cri-
sis, as I discussed the last time you were both before this Com-
mittee. This crisis is only going to make those problems worse.
Congress needs to work to address this affordability and avail-
ability crisis in America.
What are you doing to make sure that the resources your agen-
cies have are making it to rural America and other underserved
areas?
A.1. I share those concerns, particularly as someone who grew up
in rural America. The housing problems facing rural America are
distinctly different from those facing urban and suburban commu-
nities. While FHFA is not a grant-making agency, and hence does
not directly have resources to commit to rural, or other, areas, the
entities under our jurisdiction, Fannie Mae, Freddie Mac and the
Federal Home Loan Banks are addressing underserved markets,
91
specifically including the rural housing market, is through the
Duty to Serve Program. This program requires the Enterprises to
facilitate a secondary market for mortgages on housing for very
low-, low-, and moderate-income families in: manufactured housing,
affordable housing preservation, and rural housing markets.
When the Enterprises began limited re-entry into the Low-In-
come Housing Tax Credit equity market in 2017, FHFA’s approval
included an annual cap of $500 million in equity per Enterprise.
Within this funding cap, all investments above $300 million in a
given year are required to be in Duty to Serve-defined rural areas
or must support particular types of transactions that have dif-
ficulty attracting investment. Duty to Serve credit is provided for
Enterprise LIHTC equity investments in rural areas due to the
lower share of LIHTCs invested in rural areas and the less advan-
tageous pricing that LIHTCs in rural areas may command. We now
have 2 full years of Duty to Serve performance, 2018 and 2019.
FHFA expects to use the planning process conducted by the En-
terprises when developing their next 3-year plan for the Affordable
Housing Goals and the Duty to Serve program to ensure that there
is improvement in providing housing opportunities in these dif-
ficult-to-serve areas.
Among the accomplishments the Enterprises reported from their
2 full years of Duty to Serve performance in 2018 and 2019 were:
Rural Housing Market
• Both Enterprises re-entered the LIHTC equity market in 2018.
Fannie Mae committed $118 million in LIHTC equity to rural
areas in 2018 and $196.2 million in 2019, much in high-needs
rural regions such as Middle Appalachia and Mississippi Delta.
• Freddie Mac committed $72.8 million in LIHTC equity in rural
areas in 2018 and $111.9 million in 2019, also with much com-
mitted in high needs rural regions.
• Both Enterprises exceeded the 2018 targets in their plans for
loan purchases in high-needs rural regions.
• In 2019, Fannie Mae invested in 98 rural LIHTC projects, in-
cluding 4,263 units affordable to households earning 60 per-
cent of the area median income or below, which is about 98
percent of the total units in those rural projects. This more
than doubles their transactions compared to 2018.
• Fannie Mae committed significant resources to establishing its
Initiative for Native American Home Ownership.
Manufactured Housing Market:
• The Enterprises have increased Duty to Serve-eligible manu-
factured housing unit loan purchases by a combined 39 percent
from 2016 to 2019.
• Both Enterprises made extensive efforts in rolling out new
products that support manufactured housing that looks like
site-built housing.
• Both Enterprises have also conducted extensive research and
evaluation of manufactured housing titled as chattel.
92
• Both Enterprises have created new products and purchased
substantial loans that provide for tenant pad lease protections.
Affordable Housing Preservation Market:
• Both Enterprises supported preserving and renovating dis-
tressed public housing units by purchasing loans on properties
participating in HUD’s Rental Assistance Demonstration Pro-
gram.
• Freddie Mac increased its support for financing small multi-
family buildings, including through small financial institutions.
These products have not commonly been successful in sec-
ondary market execution.
• Fannie Mae has increased its support for loans that fund pur-
chasing or rehabilitating distressed properties.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
FROM MARK A. CALABRIA
Q.1. At the hearing you stated you are considering extending the
June 30 eviction and foreclosure moratorium ‘‘if necessary.’’
What information are you using to make a determination about
extending the moratorium?
A.1. On August 27, 2020, FHFA extended the single-family eviction
and foreclosure moratorium until at least December 31, 2020, and
it may be extended again. FHFA has been closely monitoring un-
employment rates, delinquencies, forbearance rates, as well as stay
at home orders and national and State emergency orders in effect
due to the coronavirus. We do not want to put anyone out of their
home during a pandemic. We also try to coordinate with other Fed-
eral agencies, including HUD, VA, and USDA. Consistent with the
CFPB Servicing Rules, foreclosure proceedings are paused while
borrowers are actively pursuing loss mitigation.
Q.2. Based on that information, what specifically would lead you
to extend, or not extend, the moratorium?
A.2. On August 27, 2020, FHFA extended the eviction and fore-
closure moratorium until at least December 31, 2020, and it may
be extended again. As I mentioned during the June 9th hearing,
FHFA has the authority to extend the eviction and foreclosure mor-
atorium for single-family Enterprise loans, and we will be moni-
toring the markets and other developments closely to make those
decisions. Our goal in this extension is to help keep people in their
homes during the pandemic by minimizing the numbers of fore-
closures and evictions.
Q.3. If you are modeling unemployment as part of your decision-
making, what levels of unemployment are you testing your model
at?
A.3. FHFA monitors the official unemployment rate published by
the Bureau of Labor and Statistics (U–3), as well as the measure
of total unemployed, plus all marginally attached workers, plus
total employed part time for economic reasons as a percent of the
civilian labor force plus all marginally attached workers (U–6).
93
Q.4. In making your decision, are you modeling or considering the
impact of millions of Americans losing access to the additional $600
in unemployment benefits after July 31, 2020?
A.4. Yes, such enters into FHFA’s consideration. Both the extended
unemployment benefits and the stimulus checks certainly helped
homeowners pay their bills. Because of the CARES Act forbearance
programs implemented at the Enterprises and the solutions for
borrowers as they exit forbearance, at this time we do not foresee
an immediate wave of new foreclosures, although there were
200,000 foreclosures in process pre-COVID–19 that are also on
hold.
Q.5. In making your decision, are you considering the results of the
most recent U.S. Census Bureau Household Pulse Survey regard-
ing renter and owner confidence to make next month’s housing
payments?
A.5. Yes, our analysis of the unemployment data indicates that
renters have been particularly affected by this crisis. At this time
the forbearance rate for Enterprise single-family loans has sta-
bilized and public data from the National Multifamily Housing
Council Rent Payment Tracker show that more than 86 percent of
renters paid their rent as of mid-September 2020. The most recent
U.S. Census Bureau Household Pulse Survey (Week 1) is consistent
with this information, with about 88 percent of renters and percent
of homeowners having confidence in their ability to make next
month’s payment. We will continue to monitor these statistics.
Q.6. The latest U.S. Census Bureau Household Pulse Survey con-
tains a concerning warning about ending the eviction and fore-
closure moratoriums prematurely. The data shows that 9 percent
of U.S. homeowners and 30 percent of renters have no or little con-
fidence they can make their next month’s housing payment. This
concern is particularly pronounced for Black and Hispanic or
Latino Americans. Fifteen percent of Black homeowners and more
than 43 percent of Black renters have no or little confidence they
can make their next month’s housing payment. More than 18 per-
cent of Hispanic or Latino homeowners and more than 40 percent
of renters have no or little confidence they can make their next
month’s housing payments.
Is FHFA considering these racial disparities in making a decision
about extending the eviction and foreclosure moratorium?
A.6. FHFA recognizes the broad impact of COVID–19 on various
markets and borrowers and tenants. Actions taken by FHFA and
the Enterprises have helped all borrowers or tenants across all geo-
graphic and demographic segments.
Q.7. How will FHFA ensure that ending either moratorium will not
have a disproportionate negative impact on Black and Hispanic or
Latino renters and homeowners, potentially leading to significant
racial disparities in evictions and foreclosures?
A.7. As I mentioned during the June 9th hearing, FHFA has the
authority to extend the foreclosure and REO eviction moratorium
for single-family Enterprise loans, and we will be monitoring the
markets and other developments closely to make those decisions.
On August 27, 2020, FHFA extended the foreclosure and REO evic-
94
tion moratorium until at least December 31, 2020, and it may be
extended again. There are available solutions for homeowners who
have been negatively affected by COVID–19 or its economic effects,
including the CARES Act forbearance programs implemented at
the Enterprises, and options like payment deferral and flex mod
when the forbearance ends. We encourage homeowners who have
been negatively affected by COVID–19 to reach out to their servicer
for a forbearance if they need one.
FHFA recognizes the broad impact of COVID–19 on various mar-
kets, borrowers, and tenants. Actions taken by FHFA and the En-
terprises have helped all borrowers or tenants across all geographic
and demographic segments.
Q.8. You have stated your plan to deal with distressed servicers is
to turn them into subservicers or transfer their servicing to other
parties, and have said, ‘‘We’ve seen that we can transfer servicing
in a way that’s not too disruptive.’’ Servicers have legal consumer
protection obligations during loan servicing transfers. In 2013 the
CFPB expressed concern about the large number and size of serv-
icing transfers, made loan servicing transfers a focus of its super-
vision activities, and issued guidance for mortgage servicing compa-
nies on their legal obligations to consumers. Have there been any
servicer transfers since March 27, 2020? What is your plan to pro-
tect consumer rights in any servicer transfers?
A.8. We have been monitoring servicer liquidity very closely and it
has remained sufficient throughout this emergency due to servicers
raising capital themselves, Ginnie Mae’s Pass-Through Assistance
Program, and our own decision to limit servicer obligations to 4
months of principal and interest. Because of this, we have not had
to transfer servicing due to distressed servicers, and I am hopeful
that we will not need to do so. That said, it is more costly to service
delinquent loans, including those with a CARES Act forbearance,
and servicing compensation has not changed since before the 2008
crisis.
In an effort to ensure that there is no disruption to borrowers,
FHFA conducts after action reviews for 3 months for large serv-
icing transfers, including review of any delinquencies, complaints
to call centers, and distressed loans. Current Enterprise practice
when loan servicing is transferred, is to exclude from those trans-
fers any loans with loss mitigation such as forbearance still in proc-
ess to minimize the effect on the borrower. We have also estab-
lished a partnership with CFPB that allows us to review com-
plaints against mortgage loan servicers.
The partnership will allow us to better understand the nature of
complaints being filed and identify opportunities for FHFA to work
with the Enterprises to address any policy issues.
Q.9. FHFA recently issued a notice of proposed rulemaking for the
Proposed Enterprise Regulatory Capital Framework.
Please describe how DFAST results informed the development of
the proposal.
A.9. The proposed rule includes a stress capital buffer of 75 basis
points of adjusted total assets. FHFA considered the Enterprises’
comprehensive losses in the DFAST scenario, along with other fac-
95
tors, to inform the calibration of the stress capital buffer in the pro-
posed rule.
Q.10. In response to my QFRs from the September 10, 2019, Bank-
ing Committee on housing reform, I asked whether FHFA has ana-
lyzed the effects of bank-like capital requirements on home prices.
You said that you had not yet done so. Have you conducted this
analysis in conjunction with the proposal?
A.10. In developing the reproposed Enterprise Regulatory Capital
Framework Rule, the Agency undertook its normal review of fac-
tors that may be affected by a change in capital standards and
looks to public comments received as important to the adoption of
a final rule. Throughout, FHFA remains bound to the statutory re-
quirements of Congress and conducted a thoughtful review of the
impact while remaining bound to the statutory requirements in the
Housing and Economic Recovery Act of 2008 (HERA), as specified
in Section 1110.
Similar to what then-Chair of the Federal Reserve Janet Yellen
told this Committee in 2016:
We are putting our rules very often in situations where
Congress has decided there is a safety and soundness issue
they want us to address by imposing safeguards in a par-
ticular area, and our job is to figure out how to do that
where Congress has already judged that the benefits are
worthwhile.
I would also agree with those on this Committee who have stated
that cost-benefit analysis can help resist any type of regulatory
change. The enhancements in the reproposal ensure each Enter-
prise’s safety and soundness and its ability to fulfill its statutory
mission across the economic cycle, in particular during periods of
financial stress. The reproposal is also a critical step toward re-
sponsibly ending the conservatorships, as directed by Congress.
Q.11. In response to my QFRs from the September 10, 2019, Bank-
ing Committee on housing reform, I asked whether FHFA has ana-
lyzed the effects of bank-like capital requirements on low-, mod-
erate-, and middle-income borrowers and first-time home buyers.
You said that you had not yet done so. Have you conducted this
analysis in conjunction with the proposal?
A.11. As I mentioned in response to a prior question, FHFA is con-
tinuing to evaluate data and conduct empirical work on this issue.
FHFA recognizes the broad impact of COVID–19 on various mar-
kets and borrowers and tenants. Actions taken by FHFA and the
Enterprises have helped all borrowers or tenants across all geo-
graphic and demographic segments.
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR VAN HOLLEN FROM MARK A. CALABRIA
Q.1. Director Calabria, can you please provide an analysis of how
the Enterprise Regulatory Capital Framework [RIN–2590–AA95]
will impact housing prices of low- and moderate-income families? If
the price of housing increases as a result of this proposed rule, how
might that impact the housing market? If an analysis has not been
96
conducted, please explain why not, and whether the FHFA plans
to conduct one?
A.1. In developing the reproposed Enterprise Regulatory Capital
Framework Rule, the agency conducted a thoughtful review of the
impact while remaining bound to the statutory requirements from
Congress in HERA.
Similar to what then Chair of the Federal Reserve Janet Yellen
told this Committee in 2016:
We are putting our rules very often in situations where
Congress has decided there is a safety and soundness issue
they want us to address by imposing safeguards in a par-
ticular area, and our job is to figure out how to do that
where Congress has already judged that the benefits are
worthwhile.1
I would also agree with those on this Committee who have stated
that cost-benefit analysis can help resist any type of regulatory
change. The enhancements in the reproposal ensure each Enter-
prise’s safety and soundness and its ability to fulfill its statutory
mission across the economic cycle, in particular during periods of
financial stress. The reproposal is also a critical step toward re-
sponsibly ending the conservatorships, as directed by Congress.
FHFA monitors effects under current Enterprise practices and
standards on all market segments including low- and moderate-in-
come households. In line with statutory requirements, the com-
ments provided on the Proposed Capital Rule will be considered for
analyses provided on the impact across the range of market partici-
pants.
Q.2. The affordable housing goals and the Duty to Serve under-
served markets rule are important to ensure the GSEs are meeting
their chartered public mission. Is FHFA planning to make signifi-
cant changes to the affordable housing goals and the duty to serve
underserved markets rule? What is the agency weighing in rewrit-
ing these rules? Will access to credit, equity, and fair lending be
central components of any new rule?
A.2. On July 17, 2020, FHFA issued a proposed rulemaking for the
affordable housing goals. Because of the uncertainty affecting the
market during the coronavirus emergency, the Agency has pro-
posed continuing with the current housing goals through 2021 and
expects to propose a longer-term rule next year. The Enterprises
are on a 3-year cycle with their Duty to Serve plans, and we will
be working with them to seek public comment on a revised plan for
2021 given the current economic uncertainty.
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM MARK A. CALABRIA
Q.1. How will the FHFA ensure that the servicers and lenders fol-
low your required forbearance plans?
A.1. Each Enterprise has issued guidance to its servicers outlining
the terms of CARES Act forbearance and how to ensure that a
1 https://www.govinfo.gov/content/pkg/CHRG-114shrg99726/pdf/CHRG-114shrg99726.pdf.
97
homeowner’s request for forbearance is handled appropriately. To
avoid confusion, FHFA and the Enterprises have released scripts
that servicers should use to communicate options for both entering
and exiting forbearance.
In addition to the regular review and oversight that each Enter-
prise conducts with its servicers to assess compliance with the En-
terprises’ respective servicing guidelines, FHFA has established a
partnership with CFPB, called the Borrower Protection Program,
that allows us to review complaints filed by homeowners against
mortgage loan servicers. The partnership has allowed us to better
understand the nature of complaints being filed, and identify op-
portunities for FHFA to work with the Enterprises on policy and
communication challenges. Finally, servicers are aware that re-
peated violations for which they do not undertake corrective actions
can lead to alteration of Enterprise business dealings with the
servicer.
Q.2. What information will the FHFA receive from its Borrower
Protection Agreement with the Consumer Financial Protection Bu-
reau?
A.2. FHFA was pleased to announce the Borrower Protection Pro-
gram as a joint initiative with CFPB on April 15, 2020. The pro-
gram was created to enable CFPB and FHFA to share servicing in-
formation in order to protect homeowners seeking assistance dur-
ing the coronavirus national emergency. Under the program, CFPB
has made complaint information available to FHFA via a secure
electronic interface. In return, FHFA has made information avail-
able to CFPB about forbearances, modifications, and other loss
mitigation initiatives undertaken by the Enterprises.
Currently, FHFA has been surveying the types and frequency of
complaints. FHFA has been reviewing particular complaints that
have been made against individual firms identified in the com-
plaint database as well as complaints made in the press, congres-
sional inquiries, or by other means. We have also been conducting
more regular searches for complaints made against a subset of
servicers. The Agency will, as applicable, use what it learns to in-
form its routine interactions with the Enterprises, highlighting op-
portunities for additional follow-up or investigation to ensure that
Enterprise policy is being carried out in accordance with the seller/
servicer guides.
Q.3. How will the FHFA monitor and address disparities in delin-
quency rates amongst servicers to ensure that those borrowers who
are facing a financial hardship and eligible for forbearance can re-
ceive it?
A.3. If FHFA identifies disparate outcomes that it believes Enter-
prise or FHFA policy changes could address, the Agency will work
to address them using all available authority. The Agency does not
have enforcement or examination authorities related to mortgage
servicers.
Q.4. If the FHFA receives information or identifies trends among
mortgage servicers that do not fall within the CFPB’s supervisory
authority, will the FHFA communicate those findings to the appro-
98
priate regulator to ensure compliance with servicing laws and poli-
cies? If not, why not?
A.4. Yes. Prior to the establishment of the Borrower Protection
Program, FHFA lacked a formalized mechanism to refer potential
legal violations to the appropriate regulatory authorities. I am com-
mitted to ensuring that Fannie Mae and Freddie Mac servicers and
originators fully comply with all their legal obligations. FHFA will
not tolerate the Enterprises facilitating bad behavior by their
counterparties. As there was no existing mechanism to address
these issues when I started my term as Director, I thank the Com-
mittee and its Members for their patience as we create such a
mechanism.
Q.5. Will the FHFA and the CFPB publish regular, public updates
on the Borrower Protection Program to share findings and actions?
If not, why not?
A.5. Given that the Borrower Protection Program is quite new, it
is simply too early to know what we will find and if such informa-
tion can be shared publicly. FHFA will look to share whatever find-
ings can be appropriately and legally made public. However, at the
present time, FHFA does not have plans to publish any findings or
actions based on data related to the complaint database, as it is
owned and controlled by CFPB. When any changes or adjustments
are made to a policy based on complaints lodged with CFPB, FHFA
or the Enterprises will make those policy decisions public through
news releases or guide changes.
Q.6. Last year, I, Senator Menendez, and 19 other senators wrote
to you, urging FHFA to keep a language preference question and
housing counseling information on the Uniform Residential Loan
Application. As we continue to work through this crisis, people who
do not speak English as a first language will be among those hard-
est hit. In light of this pandemic, will FHFA rescind its rule and
include the language preference question on the Uniform Residen-
tial Loan Application form?
A.6. No. In August 2019, FHFA directed the Enterprises regarding
changes to the Uniform Residential Loan Application (URLA) and
released them from any previous directives that required adher-
ence to instructions that were inconsistent with FHFA’s authorities
as a conservator. The URLA was transferred back to the Enter-
prises after the design and development phase was completed. As
a result, the Enterprises have transitioned to industry’s implemen-
tation of the URLA form and collection of data that will modernize
the Enterprises’ underwriting systems. The new form and data
collection began testing in March 2020, will become effective in
January 2021, and will become mandatory in March 2021. Further
questions on changes to the URLA should be posed directly to the
Enterprises.
Q.7. How will FHFA ensure servicers provide assistance to bor-
rowers who are not proficient in English?
A.7. FHFA recognizes the importance of homeowners receiving ac-
curate information when they talk to their servicers about forbear-
ance. Therefore, FHFA directed the Enterprises to publish scripts
for servicers to use that walk a borrower through the basics of a
99
COVID–19 forbearance and their options for repayment when the
forbearance is over. In June 2020, FHFA’s Mortgage Translations
clearinghouse was updated to add forbearance servicer scripts and
the revised Mortgage Assistance Application from Fannie Mae and
Freddie Mac in English, Spanish, Chinese, Vietnamese, Korean,
and Tagalog (www.fhfa.gov/MortgageTranslations).
The Enterprises completed their drafting of a COVID–19 Serv-
icing Educational Brochure. The brochure highlights mortgage re-
lief options and other borrower resources for COVID–19 impacted
borrowers. Translation of the brochure into Spanish, Chinese, Viet-
namese, Korean, and Tagalog should be complete by the end of
September 2020.
Q.8. Will you require the inclusion of housing counseling informa-
tion on the Uniform Residential Loan Application?
A.8. No. In August 2019, FHFA instructed the Enterprises regard-
ing changes to the Uniform Residential Loan Application (URLA)
and released them from any previous directives that required ad-
herence to instructions that were inconsistent with FHFA’s au-
thorities as a conservator. The URLA was transferred back to the
Enterprises after the design and development phase had been com-
pleted. As a result, the Enterprises have transitioned to industry’s
implementation of the URLA form and collection of data that will
modernize the Enterprises’ underwriting systems. This will im-
prove overall efficiency. The new form and data began testing in
March 2020, will become effective in January 2021, and will be-
come mandatory in March 2021.
FHFA committed to developing an optional standardized format
and question for use by stakeholders regarding housing counseling
information. This standardized format would enable standardized
data collection for those stakeholders using and collecting such
data.
Q.9. Does the Federal Housing Finance Agency plan to review the
Community Lending Plans of the 11 Federal Home Loan Banks to
ensure they are meeting the needs of cities, towns and Native
American reservations struggling with unemployment and business
closure?
A.9. FHFA currently conducts annual reviews of the 11 Federal
Home Loan Banks’ (FHLBanks) Community Lending Plans to en-
sure that the FHLBanks describe the credit needs and market op-
portunities for targeted community lending in their Districts and
that they describe their strategies to address those identified
needs. The Affordable Housing Program (AHP) final rule published
in November 2018, expanded the scope of those Community Lend-
ing Plans. Beginning in 2021, the FHLBanks will also be required
to identify and assess significant affordable housing needs in their
Districts, and to describe their strategies to address those needs
through the (AHP). FHFA will continue to review the plans. But
the Agency does not currently conduct, nor does it plan in the fu-
ture to conduct, an independent review of the FHLBanks’ identified
credit needs, market opportunities for targeted community lending,
or significant affordable housing needs.
100
Q.10. In that review of Community Lending Plans, will you raise
concerns if you find areas lagging, such as investments for tribes
or Black and Latino neighborhoods hard hit by job loss? In your re-
view, are the Federal Home Loan Banks investing in low-income
minority communities with fewer nonprofit and private developers
or are their investments, specifically in the AHP and CICA pro-
grams, or are they investing in communities with more experienced
nonprofit developers with more private sector partners?
A.10. As noted above, FHFA reviews the FHLBanks’ strategies to
address the credit needs identified in the Community Lending
Plans. In 2021, FHFA will expand its review to include an assess-
ment of the FHLBanks’ strategies to address the significant afford-
able housing needs identified in the Community Lending Plans in
accordance with the 2018 amendments to the AHP regulation.
However, FHFA does not conduct independent analyses of the
FHLBanks’ identified needs.
Q.11. Do you think the Federal Home Loan Banks are responding
adequately to the economic crisis in their States and communities?
A.11. The FHLBanks have responded to this economic crisis by
continuing to be available to meet their members’ liquidity needs.
Because of FHFA’s supervisory emphasis on business resiliency
planning, nearly all FHLBank staff were able to work remotely
during the peak of the crisis while continuing to perform their
usual functions. The FHLBanks have also established special pro-
grams to support members and their communities.
The central function of the FHLBanks is to provide liquidity to
the housing finance market so that potential homeowners can ac-
cess mortgages, thereby providing an important economic support
to members and their communities. The Banks served this role
most notably in the early weeks of the crisis, responding to member
demand and increasing advances by slightly over 30 percent during
March. They continue to serve this role. In line with guidance from
FHFA, the FHLBanks have offered flexibility on pledged collateral
to include loans in forbearance due to COVID–19, have allowed
members to pledge PPP loans, and/or have facilitated subordination
agreements to allow members to pledge loans to their Federal Re-
serve Bank.
In addition, the FHLBanks have responded to the crisis by offer-
ing discounted or zero-cost advances to members, using regulatory
exceptions that allow for pricing below the cost of funds for special
purposes that involve some social benefit, such as providing relief
from a natural disaster. FHFA has also worked with the
FHLBanks to allow them to offer Community Investment Cash Ad-
vance (CICA) program funds to assist the types of entities eligible
for loans under the PPP. Some Banks have also provided grants to
certain community partners or made charitable contributions in
their communities.
Q.12. Please provide information on Federal Home Loan Bank in-
vestments and grants to tribal reservations. Please provide annual
investment by program type—CICA, CIP, AHP, etc.—by year and
by FHLBank over the past 20 years.
A.12. FHFA collects information on AHP awards to projects located
on tribal land (not reservations) and does not collect this informa-
101
tion for CICA or CIP. Because the data is not public, we have sent
this information to your staff under separate cover as confidential
and not intended for public dissemination. The data sent includes
information only for those FHLBanks that have made awards on
tribal lands and does not include AHP awards made to projects
sponsored by tribal or Native entities that are not located on tribal
lands.
Q.13. Did the Federal Home Loan Bank provide the same loan ma-
turity extension for the half-a-million mortgages in their Mortgage
Partnership Program?
A.13. Three FHL Banks currently operate as providers for the ap-
proved mortgage purchase programs:
• Mortgage Partnership Finance (MPF) with the Chicago Bank
as provider and nine Banks holding mortgage loans—Boston,
New York, Pittsburgh, Atlanta, Chicago, Des Moines, Topeka,
Dallas, and San Francisco (currently, Atlanta no longer pur-
chases AMA);
• Mortgage Purchase Program (MPP) at the Cincinnati Bank
and at the Indianapolis Bank.
Though mortgage loans owned by the Banks are not subject to
the requirements of the CARES Act, the MPF and MPP programs
offer forbearance and loss mitigation options for borrowers nega-
tively affected by COVID–19.
The MPF program closely aligns to the CARES Act and allows
for forbearance and forbearance extensions for a period of up to 12
months for a COVID–19 hardship. The first 90-day COVID–19 for-
bearance will be granted without a hardship documentation re-
quirement. Following the initial 90-day forbearance, an MPF
servicer may extend forbearance in separate, shorter incremental
periods, not to exceed 12 months. Forbearance beyond the initial
90-days requires borrower-hardship certification.
• Cincinnati MPP has authorized up to 6 months of forbearance
for COVID–19 hardship. The servicer must make quality right
party contact and receive verbal verification of the hardship for
a borrower to be eligible for forbearance. Forbearance for
longer than 6 months must be approved by the Cincinnati
Bank.
• Indianapolis MPP has authorized an initial 90-days of forbear-
ance for a COVID–19 hardship, but the forbearance can be ex-
tended in 60-day increments up to 210 days. The borrower
must certify they are experiencing a COVID–19 hardship to be
eligible for forbearance. After 210 days of forbearance, the loan
can be sent to the Indianapolis Bank for review and possible
further extension.
The CARES Act does not address options at the end of the for-
bearance period. The Enterprises offer various options at the end
of the forbearance period, including the option to defer payments
to the end of the mortgage term (payment deferral). MPF and MPP
offer repayment options other than full reinstatement (lump sum),
and the MPF program offers an option for payment deferral similar
to the program offered by the Enterprises.
102
• The MPF program’s COVID–19 post-forbearance options in-
clude full reinstatement, repayment plan, COVID–19 payment
deferral plan, and loan modification.
• The Cincinnati MPP program’s COVID–19 post-forbearance op-
tions include full reinstatement, a repayment plan (up to 12
months), and loan modification. Cincinnati MPP servicers must
obtain prior approval for payment plans in excess of 12 months
or for a modification to any terms of the mortgage.
• The Indianapolis MPP program’s COVID–19 post-forbearance
options (reviewed for in the following order) include full rein-
statement, repayment plan, and loan modification.
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ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD
LETTER SUBMITTED BY CUNA
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LETTER SUBMITTED BY NAFCU
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