MReport October 2020

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TH E M R EP O RT | 61 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT How CFPB Can Increase Access to Homeownership Some housing advocates say a new rule makes homebuying easier for minority borrowers, but that it could go further. T he Consumer Financial Protection Bureau (CFPB) has proposed transi- tioning from a debit-to- income-centric qualified mortgage (QM) to a price-based form instead. The upshot: Meaningfully expand- ing access to credit for those two groups while maintaining a lid on defaults, according to a new brief, "The CFPB's Proposed QM Rule Will Responsibly Ease Credit Avail- ability; Data show it can go further, published by the Urban Institute's Housing Finance Policy Center." However, a flaw in the ointment: The proposed rule centers on the inadequacy of the proposed price caps for safe harbor and qualified mortgages, they also noted, explain- ing that there should be an increase in both to put credit within easier reach. The CFPB should—at the very least—establish an automatic, annual re-evaluation of rate spreads and adjustments to the caps to keep the market functioning smoothly at all times, Urban Institute recom- mended. A new focus on Opportunity Zones reportedly took place during a special event in Charleston, South Carolina, that brought together lenders and federal officials in discussions of investment and credit access opportunities. The event brought together ap- proximately 50 bankers, developers, and community advocates from across the mid-Atlantic region. Featured presentations during the event included an overview of Opportunity Zone projects already underway in the region and insight on the potential for additional initiatives that could involve smaller community- and minority-owned banks serving the area. Acting Comptroller of the Currency for the Office of the Comptroller of the Currency (OCC) Brian Brooks highlighted how participating lenders would be able to receive credit under his agency's new Community Reinvestment Act (CRA) rule. "Today, bankers, community de- velopers, and advocates got together to explore how to green-light proj- ects that increase access to capital to meet local housing and community reinvestment needs," Brooks said. "By combining incentives associ- ated with Opportunity Zones and credit under the OCC's new CRA rule, we have a powerful force for supporting underserved areas and creating sustainable change for communities in South Carolina and across the nation." Meantime, in April, analysis by the Urban Institute says the COVID-19 health crisis is beginning to "constrict the mortgage credit box" similar to what happened during the period following the Great Recession from 2010 to 2013. "In the wake of the 2007–09 Great Recession, it was hard for people with less-than-perfect credit to secure a mortgage. This stood in stark contrast to the years leading up to the financial crisis when it was too easy to secure a mortgage," the report said. However, in response to the Great Recession, restrictions and risks through regulations caused lenders to become wary of lending to borrowers with "anything less than pristine credit." The report adds that for the past six years, Fannie Mae and Freddie Mac, along with the Federal Housing Administration, have made strides in expanding the credit box to borrowers. Waters Calls for Examination of Disparate Impact Rule Waters said, "Disparate impact claims have been critical to holding industry and private actors accountable for the discriminatory impacts of their policies and practices." F ollowing HUD's an- nouncement of the Department's final rule on the disparate impact standard under the Fair Hous- ing Act, House Financial Services Committee Chairwoman Maxine Waters (D-California) has called on President Trump and HUD Secretary Dr. Benjamin Carson to reconsider. Suggesting that the new rule could make it more difficult to prove cases of housing discrimi- nation, Waters said in a statement, "Disparate impact claims have been critical to holding industry and private actors accountable for the discriminatory impacts of their policies and practices." Secretary Carson announced the Department's final rule on the disparate impact standard on September 10. "The disparate impact stan- dard allows victims of housing discrimination to seek justice in the courts by putting a stop to practices that appear neutral on their face, but that have the impact of discriminating against protected classes of people," Waters explained. "Disparate impact claims have been critical to holding industry and private actors accountable for the discriminatory impacts of their policies and practices. … The new rule shifts the burden of proof from the perpetrators of discrimi- nation onto the victim, making it significantly more difficult for victims of housing discrimination to prevail in court and ultimately making it easier for discriminatory policies and practices to plague our housing markets." In its public issuance of the "Final Rule" HUD stated that the change "establishes a uniform standard for determining when a housing policy or practice with a discriminatory effect violates the Fair Housing Act and provides greater clarity of the law for indi- viduals, litigants, regulators, and industry professionals." Carson discussed the change back in July, when it first was recommended. "After reviewing thousands of comments on the proposed chang- es to the Affirmatively Furthering Fair Housing (AFFH) regulation, we found it to be unworkable and ultimately a waste of time for localities to comply with, too often resulting in funds being steered away from communities that need them most," he said. Carson said the Trump admin- istration has established programs such as Opportunity Zones that "are driving billions of dollars of capital into underserved commu- nities where affordable housing exists, but opportunity does not." Carson stated at the time that "programs like this shift the burden away from communities so they are not forced to comply with complicated regulations that require hundreds of pages of reporting and instead allow com- munities to focus more of their time working with Opportunity Zone partners to revitalize their communities so upward mobil- ity, improved housing, and home ownership is within reach for more people," he said. "Washington has no business dictating what is best to meet your local community's unique needs," Carson added.

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