WASHINGTON, D.C. – (RealEstateRama) — Representative Ed Royce (R-CA) questioned U.S. Department of Housing and Urban Development Secretary Ben Carson on federal housing reforms including his legislation, H.R. 3556, the Taxpayer Protections and Market Access for Mortgage Finance Act during a House Financial Services Committee Hearing.
“Mr. Secretary, at the outset I want to invite you to my district, especially out to San Bernardino, California, where the Housing Authority is working on a ‘Moving to Work’ program. It’s an agency that’s been up and running for some time there and it’s running very effectively. They have had a number of self-sufficiency programs including home ownership programs with term limits and work requirements.We would love to have you see this first-hand if you could. I wanted to extend that invitation.
“I was wondering if you could talk a little more about what the Department is doing to advance MTW as it’s called, the ‘Moving to Work’ program and other sustainable best practices which lift people out of their situations and onto economic independence,” said Rep. Royce.
“Thank you for that question. The ‘Moving to Work’ initiative really aims to provide various municipalities with the ability to be flexible, recognizing that they were probably the people who best knew what their needs were. This allows for a significant amount of innovation. The first 39 districts that benefited from this have produced some pretty good results. This has resulted in us extending the program to another 100 communities over the next seven years. I’m hopeful that we will be able to go far beyond that and I look forward to working with you on ways to expand that program. We are looking for everything that is highly effective. Some of the programs that have been talked about here this morning have had some components that are highly effective. We are going to make sure that we learn from those things and continue to push those things. There may be different mechanisms to do it but we are not going to abandon those things. That would be foolishness,” replied Secretary Carson.
“Two other questions, one is the Department is reviewing its policy to allow PACE (Property-Assessed Clean Energy) lien on FHA financed loans. As you know the defaults on these loans are on the rise. I was going to ask if you would comment on when you might make a decision on whether to withdraw the current Mortgagee Letter or clarify how the FHA will treat these PACE loans,” asked Rep. Royce.
“Well you know obviously it’s a serious issue when you put in the first lien position somebody other than the major lender,” answered Secretary Carson.
“It’s very concerning for us,” responded Rep. Royce.
“It’s very concerning for me too. We are taking that into consideration and we will have a decision on that soon,” answered Secretary Carson.
“And one last question. As you know Mr. Secretary, GSE’s have engaged in significant credit sharing transactions. This shields American taxpayers to some extent. Rep. Gwen Moore (D-WI) and I have a bill to get them to do even more in terms of that approach. I’ve been told that the FHA may have the authority to do similar risk sharing transactions, or at least purchase co-insurance to reduce the risk to the public. I think this could be a very constructive means to reduce taxpayer exposure. Would you support legislation, or regulatory clarification of FHA’s existing authority to explore credit risk sharing,” asked Rep. Royce.
“We have already engaged in some discussions on that and are continuing those discussions. I’m very much looking forward to having an FHA Commissioner but I agree with you that it’s an area ripe for discussion and movement,” answered Secretary Carson.
Watch Rep. Royce’s full line of questions HERE.
The Taxpayer Protections and Market Access for Mortgage Finance Act directs the Federal Housing Finance Agency (FHFA) Director to establish guidelines requiring Fannie Mae and Freddie Mac (the GSEs) to engage in significant, increasing, and varied credit risk transfer (CRT) with an emphasis on front-end transactions when mortgages are originated. The GSEs would be required to set and publish guarantee fees, including loan level price adjustments (LLPAs), to reflect the reduced credit risk resulting from new CRT transactions. Both authors of the legislation are senior members of the House Financial Services Committee. Full text of the bill can be viewed HERE.
The Protecting Americans from Credit Entanglements Act, or PACE Act, amends the Truth in Lending Act, to ensure that PACE lenders are subject to the same basic disclosure requirements that apply to traditional lenders, including providing to consumers the annual percentage rate, a schedule of payments, and the total cost of the loan. Homeowners will also be notified that they will be taking a lien on their home. The full text of H.R. 1958 can be found HERE.