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HUD outlines plan for reducing the racial homeownership gap
On April 14, HUD released its first ever Equity Action Plan (the Plan) to address procurement and resources for the agency’s Office of Fair Housing and Equal Opportunity in coordination with President Biden’s 2021 Executive Order 13985 on “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.” Among other things, the Plan requests funding increases to process, investigate, and resolve fair housing complaints and “to improve capacity to pursue Secretary-initiated investigations and compliance reviews” that do not necessarily stem from public complaints. The Plan also outlines HUD’s approach to reducing the racial homeownership gap, including future rulemakings to implement the Fair Housing Act’s mandate to Affirmatively Further Fair Housing (covered by InfoBytes here) as well as other actions to promote equity. HUD also plans to engage in a range of actions in partnership with federal and non-federal organization to maximize homeownership for creditworthy first-time homebuyers and preserve homeownership for existing homeowners. This includes (i) “improving the efficiency of the [Federal Housing Administration] program by leveraging technologies and removing perceived bias of the program so individuals, lenders, and others can use it more with first time, lower income home buyers”; (ii) increasing outreach to non-traditional lenders; and (iii) considering ways “to increase the availability of small-dollar mortgage loans by addressing the financial and operational barriers limiting origination of these loans.” HUD intends to continue to monitor data on borrowers to determine statistical changes in Black and Hispanic households that access FHA-insured loans and the rest of the mortgage market, and will track FHA lending activity in underserved markets.
HUD proposes 40-year term for loan modifications
On April 1, HUD published a proposed rule in the Federal Register to increase the maximum term limit allowable on loan modifications for FHA-insured mortgages from 360 to 480 months. According to the proposed rule, the update would allow mortgagees to provide a 40-year loan modification option to borrowers who may not qualify for loss mitigation options and is intended to help borrowers experiencing a financial hardship, including those impacted by the Covid-19 pandemic, obtain affordable monthly payments. The proposed rule noted that “[i]ncreasing the maximum term limit to 480 months would allow mortgagees to further reduce the borrower’s monthly payment as the outstanding balance would be spread over a longer time frame, providing more borrowers with FHA-insured mortgages the ability to retain their homes after default.” Additionally, the proposal would align FHA with Fannie Mae and Freddie Mac, “which both currently provide a 40-year loan modification option.” Comments are due by May 31.
HUD offers disaster relief for homeowners in Puerto Rico
On March 29, HUD announced disaster assistance for certain areas in Puerto Rico impacted by a severe storm, flooding, and landslides from February 4 to February 6. The disaster assistance follows President Biden’s major disaster declarations on March 29. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies.
PAVE task force delivers plan on appraisal bias
On March 23, HUD delivered the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) Action Plan to President Biden. Created in June 2021 to address racial bias in home lending and appraisals and establish actions to root out inequity, PAVE Task Force members include HUD Secretary Marcia L. Fudge and White House Domestic Policy Advisor Susan Rice, the U.S. Attorney General, the Secretaries of Agriculture, Labor, and Veterans Affairs, the Comptroller of the Currency, the Chairmen of the Federal Reserve Board, FDIC, NCUA, Directors of the CFPB and FHFA, and the Executive Director of the Appraisal Subcommittee of the FFIEC.
According to the announcement, the Action Plan to Advance Property Appraisal and Valuation Equity (the Plan) will represent “the most wide-ranging set of reforms ever put forward to advance equity in the home appraisal process.” According to the Task Force’s executive summary, “[o]n average, homes in majority-Black neighborhoods are valued at less than half of those in neighborhoods with few or no Black residents.” The summary also reports that the impact of undervaluation on homebuyers, sellers, and communities can sometimes result in higher down payments for home buyers, often causing sales to fall through, while low valuations in a refinance transaction can reduce the cash-out available and sometimes affect the refinance interest rate and mortgage insurance premiums paid by the homeowner. The Task Force further notes that since the Fair Housing Act was passed more than 50 years ago, “the racial wealth gap is wider than ever: in 2021, the Black homeownership rate reached only 44 percent, while the white homeownership rate reached 74 percent.”
The Plan will focus primarily on actions to substantially reduce racial bias in home appraisals, as well as steps federal agencies can “take using their existing authorities to enhance oversight and accountability of the appraisal industry and empower homeowners and homebuyers to take action when they receive a valuation that is lower than expected.” Among other things, the Plan states that Task Force members will exercise broad oversight and compliance authority to strengthen “guardrails against unlawful discrimination in all stages of residential valuation.” Agencies will also issue guidance on FHA and ECOA’s application to the appraisal industry and update appraisal-specific policies to “ensure that appraisers or regulated institutions’ use of appraisals are directly included in supervisory [FHA] and ECOA compliance requirements, and are considered in every review of relevant existing and future policies and guidance.” Relevant agencies have also committed to addressing potential bias in the use of technology-based valuation tools through a rulemaking related to automated valuation models (AVMs), including the addition of a nondiscrimination quality control standard in the proposed rule. In consultation with Congress, Task Force members will also pursue legislation to modernize the governance structure of the appraisal industry.
In the coming months, the Task Force will assess: (i) the “expanded use of alternatives to traditional appraisals as a means of reducing the prevalence and impact of appraisal bias”; (ii) the use of “range-of-value estimates instead of point estimates as a means of reducing the impact of racial or ethnic bias in appraisals”; (iii) the “potential use of alternatives and modifications to the sales comparison approach that may yield more accurate and equitable home valuation”; and (iv) “public sharing of a subset of historical appraisal data to foster development of unbiased valuation methods.”
CFPB Director Rohit Chopra stated that the Bureau will take an active leadership role in the Appraisal Subcommittee and will work “to implement a dormant authority in federal law to ensure that algorithmic valuations are fair and accurate.”
Acting Comptroller of the Currency Michael J. Hsu also announced that the OCC plans to enhance its supervisory methods for identifying discrimination in property valuations and will take steps to ensure consumers are aware of their rights regarding appraisals. The agency also intends to “support research that may lead to new ways to address the undervaluation of housing in communities of color caused by decades of discrimination.”
Additionally, acting FDIC Chairman Martin J. Gruenberg noted that the agency is committed to taking several concrete actions, including collaborating with Task Force members to exercise authorities “to support a more equitable state appraisal certification and licensing system.”
HUD announces disaster relief for homeowners in several states
On March 16, HUD announced disaster assistance for certain areas in Virginia and Tennessee (see here and here) impacted by severe winter storms. The disaster assistance follows President Biden’s major disaster declarations on March 11. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
On March 18, HUD announced disaster assistance for certain areas in Maine impacted by a severe storm and flooding. The disaster assistance follows President Biden’s major disaster declarations on March 15. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
Biden signs $1.5 trillion omnibus package
On March 15, President Biden signed H.R. 2471 the “Consolidated Appropriations Act, 2022” (Act) into law. According to House Appropriations Committee Chair Rosa DeLauro’s press release, the Act is an omnibus spending measure that provides $1.5 trillion in discretionary resources across the 12 fiscal year 2022 appropriations bills. Among other things, the Act includes the “Cyber Incident Reporting for Critical Infrastructure Act of 2022,” which establishes requirements for reporting ransomware incidents on critical infrastructure to the DHS Cybersecurity and Infrastructure Security Agency (CISA). Specifically, Division Y Section 2242, establishes that companies must report incidents to CISA 72 hours after the covered entity reasonably believes that a cyber incident has occurred, or within 24 hours if a ransomware payment has occurred. If a company fails to meet the reporting requirements, the Act permits the cyber security director to “obtain information about the cyber incident or ransom payment by engaging the covered entity directly to request information about the cyber incident or ransom payment, and if the Director is unable to obtain information through such engagement, by issuing a subpoena to the covered entity, pursuant to subsection (c), to gather information sufficient to determine whether a covered cyber incident or ransom payment has occurred.” The Act also establishes that if CISA determines that the incident requires regulatory enforcement action or criminal prosecution, such information may be provided to the Attorney General or the appropriate regulator, who may utilize such information for a regulatory enforcement action or criminal prosecution. Within 24 months, CISA is directed to publish a notice of proposed rulemaking (NPRM) in the Federal Register to implement the Act, followed by the issuance of a final rule within 18 months of the NPRM. The final rule will outline the criteria of reporting and provide the effective dates for the reporting requirements. The Act also directs CISA to carry out an outreach and education campaign to inform covered entities about the rule’s requirements. Though the bill establishes that a court shall dismiss a cause of action against a person or entity for submitting a report, the liability protections “shall only apply to or affect litigation that is solely based on the submission of a covered cyber incident report or ransom payment report to the [Sector Risk Management] Agency.”
The Act also includes the “Adjustable Interest Rate (LIBOR) Act,” which establishes “a clear and uniform process, on a nationwide basis, for replacing LIBOR in existing contracts the terms of which do not provide for the use of a clearly defined or practicable replacement benchmark rate, without affecting the ability of parties to use any appropriate benchmark rate in new contracts,” among other things. Additionally, the Act includes rental assistance programs and climate restoration grants, which, according to a statement by HUD Secretary Marcia L. Fudge, “provides funding to improve the energy efficiency of housing and increase resilience to climate impacts.”
Waters sends letter to HUD and others regarding appraisal bias
On February 22, Chairwoman of the House Financial Services Committee Maxine Waters (D-CA) sent a letter to HUD Secretary Marcia Fudge, the Appraisal Subcommittee, the Appraisal Foundation, and the Appraisal Institute regarding appraisal bias and discrimination. The letter, among other things, urged federal regulators and the Appraisal Institute to investigate appraiser misconduct and the possibility of illegal discrimination and highlighted “longstanding racial inequities plaguing America’s home valuation system, particularly in Black-majority communities and other communities of color,” according to the press release. In the letter, Waters noted that during her time with the House Financial Services Committee, the committee has “paid special attention to the racial inequities that continue to plague America’s home valuation system, including through home appraisals, despite the passage of anti-discrimination laws.” She further pointed to “qualitative research” from the National Fair Housing Alliance to shed light on “the ways in which individual appraisers and the appraisal profession help perpetuate systemic and overt racism, highlighting statements made by appraisers as well as policies and practices that continue to be upheld by an appraisal profession that is 97% White.” The letter also provided excerpts from an appraiser’s email as an example of discriminatory practices, in which Waters asserted, “shines a spotlight on the racist stereotypes and harmful lines of thinking prevalent in an industry which systematically devalues the homes of Black people and other people of color.” Waters noted that she will be drafting legislation “to address systemic appraisal discrimination,” recommended that the recipients of her letter conduct pertinent investigations, and urged them to respond to her letter accordingly. Waters also disclosed that the House Financial Services Committee “will convene hearings, advance legislation, and continue working with stakeholders to end housing discrimination and hold the appraisal industry fully accountable.”
HUD announces Nebraska and Iowa disaster relief
On February 24, HUD announced disaster assistance for certain areas in Nebraska and Iowa impacted by severe storms, straight-line winds, and tornadoes on December 15, 2021. This follows President Biden’s major disaster declaration for certain counties on February 23. The disaster relief includes providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” Additionally, HUD’s Section 203(k) loan program will allow individuals who have lost homes to finance the purchase of a house, or refinance an existing house and the costs of repair, through a single mortgage. The program will also allow homeowners with damaged property to finance the rehabilitation of existing single-family homes. Flexibility measures for state and local governments, public housing authorities, tribes, and tribally designated house entities are also addressed.
FTC provides 2021 ECOA summary to CFPB
On February 23, the FTC announced it recently provided the CFPB with its annual summary of activities related to ECOA enforcement, focusing specifically on the Commission’s activities with respect to Regulation B. The summary discussed, among other things, the following FTC enforcement, research, and policy development initiatives:
- The FTC filed a joint amicus curiae brief with the CFPB, DOJ, and Federal Reserve Board in the U.S. Court of Appeals for the Seventh Circuit last December asserting that the term “applicant,” as used in ECOA and its implementing rule, Regulation B, includes both those currently seeking credit as well as persons who have sought and have received credit (i.e., current borrowers). (Covered by InfoBytes here.)
- Last October, the FTC released a staff report, Serving Communities of Color, that discusses the Commission’s enforcement and outreach efforts related to the impact of fraud on majority Black and Latino communities. One of the studies examined disparities related to payment methods received from consumers who live in communities of color compared to consumers who live in majority White communities. (Covered by InfoBytes here.)
- The FTC’s Military Task Force continued to work on military consumer protection issues, including military consumers’ “rights to various types of notifications as applicants for credit, including for adverse action, and information about the anti-discrimination provisions, in the ECOA and Regulation B.”
- The FTC continued to participate in the Interagency Task Force on Fair Lending, along with the CFPB, DOJ, HUD, and federal banking regulatory agencies. The Commission also continued its participation in the Interagency Fair Lending Methodologies Working Group to “coordinate and share information on analytical methodologies used in enforcement of and supervision for compliance with fair lending laws, including the ECOA, among others.”
The summary also highlighted FTC ECOA enforcement actions, business and consumer education efforts on fair lending issues, as well as blog posts discussing discrimination and potential bias affecting protected classes and the risks of using artificial intelligence in automated decision-making.
HUD announces Hawaii and Kansas disaster relief
On February 16, HUD announced disaster assistance for certain areas in Hawaii impacted by severe storms, flooding, and landslides. The disaster assistance supplements state and local recovery efforts in specific counties, and provides foreclosure relief and other assistance to affected homeowners following President Biden’s major disaster declaration on February 15. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows individuals who have lost homes to finance the purchase of a house or refinance an existing house along with the costs of repair through a single mortgage. The program also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. Furthermore, HUD is allowing applications for administrative flexibility and waivers for community planning and development grantees and public housing authorities.
On February 18, HUD announced disaster assistance for certain areas in Kansas impacted by severe storms and straight-line winds. The disaster assistance supplements state and local recovery efforts in specific counties, and provides foreclosure relief and other assistance to affected homeowners following President Biden’s major disaster declaration on February 17. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows individuals who have lost homes to finance the purchase of a house or refinance an existing house along with the costs of repair through a single mortgage. The program also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. Furthermore, HUD is allowing applications for administrative flexibility and waivers for community planning and development grantees and public housing authorities.