Congressional committees debate Basel III proposal

The Senate Banking Committee and House Financial Services Committee held hearings to discuss the Basel III Endgame proposal. The hearings spanned a range of topics, from Basel III to the Community Reinvestment Act, bank failures, and more. Testifying before both hearings were Michael Barr, Vice Chair for Supervision at the Federal Reserve (Fed); Martin Gruenberg, Chairman of the FDIC; Todd Harper, Chairman of the National Credit Union Administration; and Michael Hsu, Acting Comptroller at the Office of the Comptroller of the Currency (OCC). Click here to read their Senate testimonies and here for their House testimonies.

“Overall, the proposal makes our capital system more consistent, more transparent, and more risk sensitive,” Barr said when asked by the Senate why Basel III Endgame was important. “That said, we recognize that the rule may not appropriately capture all risk. We welcome all comments on all aspects of the rule. We’ll take these comments seriously to improve the rule going forward.”

During the hearing, Sen. Bob Menendez (D-N.J.) voiced the affordable housing industry’s concerns. “The United States is facing a housing crisis, and affordable housing advocates I've heard from are concerned that the new capital requirements proposed by your agencies may make the problem worse,” Menendez said. “An analysis from the Urban Institute indicates that banks affected by your proposal account for more than half of all mortgage originations. The Urban Institute's analysis further indicates that the proposal will disproportionately increase costs for Black, Hispanic, and low- and moderate-income borrowers. So, one effect of this proposed rule seems to be in direct conflict with the goal I and many members of this Committee share to close the racial homeownership gap and make housing more affordable for first-time homebuyers, particularly buyers of color.”

The witnesses responded with assurance that they take the industry’s concerns seriously and are open to comment before finalizing the rule. “We are deeply sensitive to this issue,” said Gruenberg. “I am hopeful that we will be able to address this issue in the final rule in a satisfactory way.”

At the House Financial Services Committee hearing, Rep. Gregory Meeks (D-N.Y.) expressed similar concerns about the proposal’s impact on access to mortgage options for first-time, minority, and low- to moderate-income homebuyers. “You know, there's so many individuals, low- and moderate-income families, great credit ratings that just can't afford the 20% downpayment, and to deny them that is to deny them the American dream and the access to create wealth, because for most people, that home is the greatest investment that they will make."

Again, the witnesses acknowledged Meeks’ concerns, with Barr emphasizing the importance of public input in the rule-making process, noting the proposal includes specific questions about that issue to make sure we “get good public comment on how to address that.”

Also, last week, 39 Republican Senators penned a letter to the Fed, FDIC, and OCC asking for them to abandon the proposal entirely. Ranking Member Tim Scott (R-S.C.) led the group, which included every GOP member of the Senate Banking Committee. The letter argued that the proposal lacks sufficient analysis to support its results and worries that the changes will limit access to credit for Americans.

“In fact, we have heard widespread concerns regarding the negative impacts that Basel III could have not only on affordable housing but on mortgage lending writ large, small business lending, and consumer lending. In addition, it would limit the availability of access to credit cards and home equity lines of credit,” the letter reads. “Accordingly, we urge you to withdraw the Basel III Endgame proposal as written and urge the Federal Reserve, the FDIC, and the OCC to operate in a more transparent and justified manner.”

Both hearings also focused on a recent Wall Street Journal exposé alleging widespread sexual harassment and discrimination at the FDIC. Democratic members of the Senate Banking Committee and Republican members of the House Financial Services Committee have separately requested an investigation into the allegations by the Office of the Inspector General. FDIC has hired a law firm to conduct an independent investigation into the allegations.

HUD, HHS unveil health-focused housing efforts

The Biden Administration unveiled a new resource to help take action to address homelessness titled The U.S. Playbook to Address Social Determinants of Health. The Playbook highlights the importance of housing as a key driver of health outcomes and addresses the root causes of health disparities. The U.S. Department of Housing and Urban Development (HUD), which released the Playbook, organized it into three pillars: expand data gathering and sharing, support flexible funding for social needs, and support backbone organizations.

Additionally, the Department of Health and Human Services (HHS) announced a new Medicaid and Children’s Health Insurance Program (CHIP) Health-Related Social Needs (HRSN) Framework. The Framework gives states guidance to structure housing and nutrition need programs for some Medicaid participants in high need populations and will complement existing HUD programs. HUD and HHS are also selecting four states to participate in a federal technical assistance effort to help implement Medicaid housing-related HRSNs in partnership with state and local programs. The state teams will include Medicaid, behavioral health, housing and homeless agencies, and aging and disability agencies to complete a needs assessment and implement coaching and learning opportunities.

“Housing is foundational to health and lifelong success. Today’s Playbook and suite of actions are important steps forward in our efforts to advance health equity,” said HUD Secretary Marcia Fudge. “HUD continues to work with our partners across the Administration and the country to coordinate the housing, health care, and supportive services that enable Americans to thrive. I encourage HUD grantees and partners to utilize the Playbook to inform their work and engagement.”

HUD OIG reports on management challenges

HUD’s Office of Inspector General (OIG) released its annual report outlining the Top Management Challenges for fiscal year 2024. The OIG compiled the report based on oversight findings and consultations with various stakeholders, including NHC. The report acknowledges progress made in addressing previous challenges and introduces new concerns. Notable additions include safeguarding contractor employees, identifying improper payment risks in major programs, and limited progress in assessing and mitigating fraud risk across HUD programs.

The challenges encompass health and safety in HUD-assisted housing, promoting access to affordable housing, mitigating counterparty risks, grants management, disaster recovery oversight, managing fraud risk and improper payments, IT modernization and cybersecurity, human capital management, and procurement effectiveness. The report recognizes HUD’s sustained progress in financial management and removes financial management from the list of top challenges.

“HUD’s programs play a critical role in supporting millions of American households and communities, and these important programs continue to grow each year. This report identifies a number of areas where HUD can continue enhancing oversight of its programs, and it also highlights areas where HUD lacks capacity to adequately address its top challenges. My office remains committed to collaborating with the Department to promote the efficiency and effectiveness of its programs,” said HUD Inspector General Rae Oliver Davis.

FHFA lowers multifamily loan cap for 2024

The Federal Housing Finance Agency (FHFA) announced a $70 billion multifamily loan purchase cap for Fannie Mae and Freddie Mac (the Enterprises) for 2024, a reduction of $5 billion per Enterprise compared to 2023. FHFA intends the caps to ensure that the Enterprises support liquidity in the multifamily housing market without crowding out private capital. Roughly 35% of the U.S. population are multifamily housing renters. In 2022, FHFA set the cap at $78 billion per Enterprise, and a 50% minimum percentage of mission-driven investment.

FHFA will continue to require that at least 50% of the Enterprises’ multifamily businesses be mission-driven, affordable housing in 2024. The announcement notes that FHFA will monitor the market and increase the caps if necessary. The agency also said it will not reduce the caps, even if FHFA determines the size of the 2024 market is smaller than projections. Additionally, for 2023, FHFA will allow loans classified as supporting workforce housing to be exempt from the volume caps. 

HUD streamlines broadband connectivity program in rural areas

HUD Deputy Secretary Adrianne Todman unveiled in Albany, Ga., as part of President Biden’s Investing in Rural America Tour, a streamlined enrollment process for the Affordable Connectivity Program (ACP). ACP aims to enhance broadband access for HUD-assisted families in rural areas. Todman highlighted a new data-sharing agreement with the Federal Communications Commission (FCC), simplifying ACP enrollment for families receiving HUD rental assistance.

The collaboration between HUD and the FCC works to bridge the digital divide, allowing HUD-assisted tenants to access affordable internet more efficiently. ACP, a flagship FCC program, offers discounts on broadband services and connected devices for low-income households. “For too long, the families living in rural America have not felt the benefits of investments in housing and broadband. It is crucial that our rural neighbors also have safe and stable places to call home, with quality, affordable internet,” said HUD Deputy Secretary Adrianne Todman.

All families receiving rental assistance can enroll in the ACP. More information can be found here.

Cooper Housing Institute announces housing voucher study



The Cooper Housing Institute, a private research foundation focused on resolving the affordable housing crisis, announced that it has awarded RAND Corporation (RAND) a grant to analyze the Housing Choice Voucher (HCV) program. RAND will conduct the $400K study with the Terner Center for Housing Innovation at UC Berkeley. The study will focus on the best practices of housing authorities currently administering HCV programs and seek to identify actionable steps for public housing authorities to improve the efficiency and efficacy of the program. The groups anticipate they will publish the report in 2025. NHC has advocated for improvements to the program, most recently in its comment letter to FHFA on multifamily tenant protections.

“It’s been more than 20 years since any similar study has looked at voucher utilization on a national scale,” said Jason Ward, PhD, economist and co-director of the RAND Center on Housing and Homelessness. “The housing market has changed considerably in that time, so this new study should help identify actionable steps local housing authorities can take to improve utilization of scarce voucher resources in today’s challenging housing market.”