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HAC Comments on Community Investment Focus on Capacity Building and Capital Access

Several federal government agencies recently formed an Interagency Community Investment Committee (ICIC), focused on the operations and execution of federal programs that facilitate the flow of capital and the provision of financial resources into historically underserved communities, including communities of color, rural communities, and Tribal nations. The ICIC requested public input on ways the agencies can promote economic conditions and systems that reduce racial disparities and produce stronger economic outcomes for all communities. According to the request for comment, responses may be used to inform ICIC’s future actions to improve the operations and delivery of federal community investment programs through stronger federal collaboration. The committee is composed of representatives from the Department of the Treasury, Small Business Administration, Department of Commerce, Department of Transportation, Department of Housing and Urban Development, and Department of Agriculture.

Key Takeaways

  1. Support capacity building for local organizations embedded in their communities.
  2. Provide equitable access to capital for rural America.
  3. Address rural needs, particularly in persistent poverty areas, directly.
  4. Accelerate interagency coordination and sharing of best practices.
  5. Improve data and information accuracy and availability.

Read HAC’s comments, submitted on December 19, 2022. Other comments are posted here.

HAC Comments on Community Investment Focus on Capacity Building and Capital Access
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HAC Submits Comments on Colonia Census Tract Definition

HAC submitted comments in response to the October 5, 2022 Notice of Proposed Rulemaking (NPRM) on the Enterprise Duty to Serve Underserved Markets Amendments published by the Federal Housing Finance Agency (FHFA). HAC has conducted significant research on housing finance, including numerous aspects of Fannie Mae’s and Freddie Mac’s statutory Duty to Serve Underserved Markets. The regulatory change under consideration, in fact, is based on HAC research for Fannie Mae. Thus HAC is well positioned to comment on this proposal.

HAC generally supports FHFA’s proposed definition and use of “colonia census tracts” to target efforts by Fannie Mae and Freddie Mac (the Enterprises) to meet the credit needs of these high-poverty rural areas. As the NPRM explains, the colonia census tract model is based on Colonias Investment Areas, a concept developed by HAC for use by Fannie Mae in meeting its Duty to Serve the colonias.1HAC’s research makes clear that using census tracts containing colonias as a basis for identifying and evaluating colonias activities would not only provide clarity, but would also meet the goals of the Duty to Serve statute and regulations.

Key Takeaways

  1. Census tracts are the best available geography for a revised colonia definition, as HAC’s research has demonstrated, and HAC supports FHFA’s proposal to base its definition on tracts.
  2. Focusing activities in the places FHFA identifies as colonias census tracts would meet the goals of the Duty to Serve requirement.
  3. Alternative definitions have proven to be too broad or too difficult to use.
  4. HAC recommends providing greater weight to Duty to Serveactivities incolonia census tracts in rural areas than to those in urban or suburban places, because rural tractshave greater needs.
  5. The colonias census tract database should be updated more often than every ten years if interim changes warrant.

To learn more about HAC’s full recommendations, read our full comment letter.

HAC Final Comments on the Colonias Definition
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HAC Submits Comments on Proposed Duty to Serve Modifications

The Federal Housing Finance Agency (FHFA) requested comments on Fannie Mae and Freddie Mac’s (the Enterprises) proposed modifications to their Duty to Serve 2022 Underserved Markets Plans. If implemented robustly, Duty to Serve has the potential to improve the lives of people living in the most underserved communities. HAC’s comments highlighted two proposed modifications:

Key Takeaways

  1. USDA Section 515 preservation is critical to the Duty to Serve mission. Freddie Mac’s proposal to remove the Section 515 purchases from their Plan should be rejected.
  2. Equity investments in CDFIs are the single most impactful action that the FHFA could currently take to improve Duty to Serve outcomes. Fannie Mae’s proposal to add equity investments in Native CDFIs to their plan is a step in the direction of better serving Indian Country. For more suggestions on how the Enterprises could better serve Indian Country, see HAC’s comments from the July 2022 Native American Housing Listening Session.

Read HAC’s full comments.

HAC Duty to Serve Plan Modification Comments

HAC also signed on to a letter from the Underserved Mortgage Markets Coalition with a longer set of comments on the proposed modifications.

All the comments received by the FHFA can be viewed here.

 

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HAC Submits Comments on the Greenhouse Gas Reduction Fund

HAC submitted comments in response to the October 21, 2022 Notice of Proposed Rulemaking on the Greenhouse Gas Reduction Fund (GHGRF) published by the Environmental Protection Agency (EPA). GHGRF is a new program created by the Inflation Reduction Act and will be administered by EPA. This first-of-its-kind program will provide $27 billion in competitive grants to mobilize financing and leverage private capital for clean energy and climate projects that reduce greenhouse gas emissions, with an emphasis on projects that benefit low-income and disadvantaged communities. A wide range of activities, including those related to housing, could qualify for GHGRF.

GHGRF funds are divided into three pools. There are $7 billion for competitive grants to enable low-income and disadvantaged communities to deploy or benefit from zero-emission technologies, including distributed technologies on residential rooftops. Nearly $12 billion will be used for competitive grants to eligible entities to provide financial and technical assistance to projects that reduce or avoid greenhouse gas emissions. Another $8 billion is for competitive grants to eligible entities to provide financial and technical assistance to projects that reduce or avoid greenhouse gas emissions in low-income and disadvantaged communities.

HAC’s comments focused on four main points.

Key Takeaways

  1. Leverage the extensive existing network of CDFIs to ensure rapid, equitable, and widespread investment.
  2. Address the unique needs of rural and persistent poverty communities.
  3. Recognize the key role of housing assistance in meeting GHGRF’s goals.
  4. Include equity principles in all elements of the GHGRF program design.

To learn more about HAC’s full recommendations, read our full comment letter.

GGRFCommentHACFinal

 

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HAC’s Research Director Testifies on Persistent Poverty on Capitol Hill

On Tuesday, November 15, 2022 at 10:00 am EST the Subcommittee on Housing, Community Development and Insurance convened a hybrid hearing entitled, “Persistent Poverty in America: Addressing Chronic Disinvestment in Colonias, the Southern Black Belt, and the U.S. Territories.” Lance George, HAC’s Director of Research and Information, provided testimony during the hearing.

Watch the Hearing

For more information on Persistent Poverty, read The Persistence of Poverty in Rural America.

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HAC Submits Community Reinvestment Act Comments

 

The Community Reinvestment Act is essential to communities across the nation. Through CRA, financial services have been made available to many places that might otherwise be overlooked. In spring 2022 the three federal agencies that regulate banks and other lenders – the Office of the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corporation – jointly issued a proposed new CRA rule. This proposal, and the many efforts which will follow, are critically important to ensure not only that current CRA-related activities and investments continue but that they expand to reach populations and communities for which access to affordable finance is still elusive.

This is especially important in rural communities across the country as many are considered high credit need areas. CRA modernization will help incentivize more lending in these areas and increase community development activities. As rural communities continue to change, the CRA must adjust as well to reflect modern lending practices. The proposed rule has the potential to further increase lending in high need rural areas, but HAC has a number of recommendations to optimize CRA’s impact.

HAC believes a final rule could further increase CRA’s impact on underserved rural communities if it:

  1. includes activities in rural communities as an additional impact factor, informed by the most precise, density-based definitions already used by policymakers and the research community;
  2. ensures uniform treatment of all CDFIs and supports the most transformative CDFI activities in underserved rural communities;
  3. modifies the definition of affordable housing to enable housing providers to respond effectively to the unique income demographics and constraints on government capacity of rural communities;
  4. clarifies how consequential the impact factors can be for a bank’s community development test performance and overall rating; and
  5. prevents banks with a substantial number of rural assessment areas from “gaming” the NPR’s performance benchmarks under the retail lending test.

To learn more about HAC’s full recommendations, read our full comment letter.

Other comments submitted to OCC are posted online and can be reviewed here.

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HAC Concerned about Buy America Requirements

HAC Comments to USDA, July 2022

On July 29, the Housing Assistance Council (HAC) submitted comments to the U.S. Department of Agriculture (USDA), which proposed to establish waivers from Buy America requirements for purchases of de minimis, small grants, and minor components of infrastructure projects.

Key Takeaways

  • Housing and community facilities should not be considered public infrastructure under the Build America, Buy America Act.
  • If housing and community facilities are considered public infrastructure, it would be in the public interest to waive the Buy America preference for USDA’s programs to finance these construction projects so that scarce funds and staff resources can be devoted to addressing the current housing crisis.
  • Waivers for purchases of de minimis, small grants, and minor components of infrastructure projects would also be in the public interest.

HAC Comments to HUD, July 2022

HAC expressed concern about the impact of “Buy America” requirements on affordable housing in comments it submitted to the U.S. Department of Housing and Urban Development (HUD) on July 15, 2022.

Key Takeaways

  • Buy America preferences should not apply to assisted housing. HUD’s priority should be to address the affordable housing crisis. Furthermore, the law defines infrastructure as projects that benefit the general public, while assisted housing is available to only a subset of the general population.
  • HUD should not apply Buy America preferences to owner-occupied housing because the Office of Management and Budget has specifically stated that private homes are not considered to be infrastructure.
  • HUD should not apply Buy America preferences when HUD assistance is used for infrastructure that is built solely to support affordable housing, as is the case with the Self-Help Homeownership Opportunity Program (SHOP).
  • HUD should not apply Buy America preferences to housing that receives less than $250,000 in federal funding, to developments with fewer than eight units, or to situations when HUD funding covers only a small portion of the per unit development cost.
  • HUD should issue expedited waivers for materials that experience price spikes.
  • HUD should provide guidance to help reduce administrative burdens on entities that receive HUD funding.

Build America, Buy America

HUD, the U.S. Department of Agriculture (USDA), and other federal agencies are subject to a “Build America, Buy America” (BABA) requirement in the Infrastructure Investment and Jobs Act of 2021, which mandates that iron, steel, manufactured products, and construction materials used in infrastructure projects be American made. The provision applies to most federally funded infrastructure projects; it is not limited to projects funded through the 2021 Act.

Any preferences for American-made products that were in effect before the Infrastructure Act passed remain in place.

Federal agencies were required to publish initial lists showing which of their programs could be subject to the Buy America preference. The Office of Management and Budget issued guidance for federal agencies regarding compliance and set up a website to track agency requests for waivers.

HUD Implementation

On June 1, HUD requested public comment to help implement BABA for its programs. It asked questions such as what HUD-financed projects might fall under exemptions from the preference, how materials are currently sourced, and more. It also asked what HUD programs might be considered to fund infrastructure in addition to those on its initial list, which includes HOME, the Community Development Block Grant program, and SHOP.

The deadline for comments was later extended to July 15.

HUD has moved to waive the buy America requirement while the department works on implementing it. HUD announced it was providing two waivers, both effective on May 14 (the statutory deadline for implementation) unless it issued a later announcement changing the date. HUD’s general waiver is effective for six months. Its waiver for Tribal recipients of HUD funds lasts for one year.

USDA Implementation

USDA did not include any of its Rural Development agency’s housing or community facilities programs on its initial list of infrastructure programs, which focuses instead on utilities and broadband programs. In a recent request to OMB, however, RD did include housing and CF along with others on a list of programs it intends to evaluate under the new law.

USDA Rural Development, like HUD, hopes to delay the requirements’ effectiveness temporarily. It asked OMB to approve a waiver that would last six months after the date of approval.

Treasury Implementation

The Treasury Department’s list of programs that may be subject to BABA’s requirements does not include any Community Development Financial Institution Fund programs. It does include the Homeowner Assistance Fund, a program intended to help homeowners impacted by the coronavirus pandemic, and the Coronavirus State and Local Fiscal Recovery Funds programs, which help state, local, and Tribal governments and can be used for housing.

 

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HAC’s Comments on Duty to Serve for Native American Communities

The FHFA requested comments on Fannie Mae and Freddie Mac’s Duty to Serve plans for Native American communities. Dave Castillo, CEO of Native Community Capital and a HAC Board Member, provided oral comments, accompanied by longer written comments, on behalf of HAC. Housing finance in Native American communities has been a stunning example of both racial and geographic inequity at both the policy and private market levels for decades. If implemented robustly, Duty to Serve has the potential to improve the lives of people living in the most underserved communities. HAC has several improvements that we think should be made to best serve Native communities’ need:

Key Takeaways

  • Allow GSE Equity Investments for Native CDFIs

    Equity investments would allow CDFIs serving Native communities to strengthen their capital structures, leverage additional debt capital, and, as a result, increase lending and investing in their communities.

  • Increase purchase goals for mortgages on Native lands

    Fannie Mae has no set goal and Freddie Mac’s is very modest. Increasing these would show the Enterprises’ commitments to Native housing and help Native communities house more people adequately.

  • Establish Native lending teams

    These teams would focus on Native communities and help ensure that these communities are treated equitably and with cultural competency.

  • Create Native-tailored mortgage products

    Tribal lands have unique property ownership structures and creating loan structures that can meet Native communities’ specific needs would help increase investments and economic growth.

  • Increase LIHTC investment in Native communities

    Despite how successful LIHTC has been in many communities, rural and Native communities have not been able to benefit equitably from these tax credits. The Duty to Serve plans have goals to invest in rural communities but adding goals for Native communities specifically would ensure that they are served as well.

Policy News from Congress

Over 300 Organizations Express Support for SHOP and RCB Programs

With the help of our network of organizations working across the country in rural areas, more than 300 organizations signed on to support increased funding for SHOP and the Rural Capacity Building (RCB) programs at HUD. HAC has helped almost 10,000 rural families achieve homeownership using the SHOP program, and has provided thousands of hours of customized technical assistance to more than 750 local organizations using the RCB program. Check out the letter below to learn more. Thanks to Habitat for Humanity, Community Frameworks, and Tierra del Sol for their partnership on this effort!

FY23 SHOP and RCB Organizational Sign-on Letter
Policy News from the Administration

HAC’s Recommendations to the CFPB on HMDA Rule Assessment

HAC submitted comments in response to the Consumer Financial Protection Bureau’s (CFPB) Request for Information regarding the Home Mortgage Disclosure Act (HMDA) Rule Assessment. HAC and our rural stakeholders have relied on HMDA data for decades to improve our understanding of rural mortgage markets. The CFPB will use these stakeholder comments to help better evaluate the effectiveness of these changes in meeting the purposes and objectives of Title X of the Dodd-Frank Act.

Key takeaways:

  • Reporting Threshold

    HAC strongly urges the CFPB to return to the 25-origination reporting threshold, for closed-end loans, as opposed to the new 100-origination threshold, in order to more accurately capture rural markets that are disproportionately served by small financial institutions.

  • Reliability Index

    HAC Recommends that the CFPB resource and publish a HMDA “Reliability Index.” While not a fix for overly limited reporting thresholds, the development of an indicator would be helpful for the CFPB, data users, and consumers.

  • Additional Data

    HAC applauds increased HMDA data reporting, but additional data and reporting are still needed. While the new housing data points – specifically those on manufactured housing – enhance the HMDA data usefulness, more data could improve an understanding of certain underserved markets. This is particularly true when it comes to tribal lands and specific loan programs.

  • Data Browser

    HAC applauds CFPB’s HMDA data browser, which offers improved access to HMDA data over previous interfaces.