While much has been written and said in the last two weeks on the fifth anniversary of the passing of Dodd-Frank into law, HUD is celebrating an anniversary of its own on Tuesday.
July 28 marks exactly one year since former San Antonio mayor Julián Castro was sworn in as HUD secretary, succeeding Shaun Donovan. In addition to celebrating Castro's one-year anniversary as HUD secretary, HUD will commemorate the 50th anniversary of its founding on September 9.
During his first year as the nation's top housing official, Castro has made several policy changes with the intent of increasing opportunity for more Americans to obtain affordable, sustainable housing. Several of those changes are outlined in an announcement from HUD on Monday titled "Year of Progress: Delivering on the Promise of Opportunity."
"We recognize housing as a platform for Americans who are striving to improve their lives and break the cycle of poverty for the next generation," HUD stated in the release. "As needs for our services have increased, HUD will continue to invest in initiatives that have demonstrated outcomes in helping the people we serve."
One of the major changes Castro enacted occurred just one week into the new calendar year. On January 8, Castro announced that the Federal Housing Administration (FHA) would be lowering the annual premiums for first-time buyers by half a percentage point, down to 0.85 percent. The Agency estimates the move will save more than two million borrowers an average of about $900 annually on mortgage premiums and will allow about 250,000 new homebuyers to enter the market during that time.
"I applaud FHA's initiative to lower the mortgage insurance premium by 50 bps," said Laurie Goodman, center director of the Housing Finance Policy Center at the Urban Institute. "This was a courageous move, as the MMI Fund had not reached its 2 percent minimum."
Indeed, the MMI fund stood at 0.41 percent last November, less than a quarter of the 2 percent required by law, which caused the lowering of the annual premiums to draw some criticism.
"Since FHA's financial future is still uncertain, now is not the time to reduce premiums. It has nowhere near the level of reserves to withstand even a minor recession," Edward Pinto, co-director and chief risk officer of the American Enterprise Institute's International Center on Housing Risk, told DS News in a recent interview. "Given FHA's current high risk practices, it would be imprudent to not stay the course; it should not lower premiums."
Another step HUD took toward providing Americans with access to affordable housing was the Affirmatively Furthering Fair Housing (AFFH) rule, which was announced on July 8. This rule creates a streamlined fair housing planning process that helps communities analyze their choices for fair housing and establish goals and priorities to address barriers to fair housing. The rule was widely praised as a way to help the 1968 Fair Housing Act meet its obligation to help state and local governments improve their housing policies and achieve more meaningful outcomes that allow all Americans to live where they want to.
"The Affirmatively Furthering Fair Housing provision of the Fair Housing Act was intended to help remedy years of government-supported segregation and inequality, not by forcing diversity, but by empowering and encouraging states and localities to partner with the federal government to address the effects of these harmful policies," House Financial Services Committee Ranking Member Maxine Waters (D-California) said.
Other HUD achievements in the last year include funding rental assistance vouchers for 2.4 million low-income households, providing an opportunity for families who are seeking to become homeowners; investing $250 million through the Choice Neighborhoods Program to transform high poverty areas; and investing $4 million to expand the HUD-Veterans Affairs Supportive Housing (HUD-VASH) Program to help approximately 650 Native Americans who are currently homeless or at risk of being homeless.
Still, there is more work for HUD and FHA to do as Castro approaches his second year as HUD secretary, particularly in the area of relaxing the standards on loan level certifications for lenders.
"The FHA needs to focus more on access to credit by giving lenders the comfort they need to eliminate their overlays," Goodman said. "This means changing the loan level certifications lenders sign. FHA currently requires lenders to certify that the information it has provided to FHA is true, complete, and accurate. This has resulted in FHA seeking indemnification for small, inadvertent errors and has served as a basis for the False Claims Act, under which lenders are liable for treble damages."