The Senate voted 89-10 to pass the 21st Century ROAD to Housing Act on March 12. The bipartisan housing bill has received strong support from the financial services industry, although some trade advocates expressed concerns over revisions concerning limits on investments in single-family homes and a provision meant to curb appraisal bias.
The legislation passed by the Senate is a revised version of H.R. 6644, “The Housing for the 21st Century Act,” which the House passed on Feb. 9 by a 390-9 margin.
The text of the bill consists of several sections that are substantially similar to those included in other housing bills, whereas other sections are notably different or absent.
The legislation is divided into six titles addressing housing supply, federal housing programs and banking regulations. Several provisions are directly relevant to mortgage lenders and the broader housing finance system.
Mortgage industry comments, concerns
Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit issued a statement noting that, despite his organization’s general appreciation for lawmakers’ bipartisan efforts to improve housing policies, mortgage bankers have some concerns about the legislation.
“While the bill that passed today includes many positive provisions to boost housing supply, streamline federal housing programs, expand access to small-dollar mortgage lending, advance manufactured and modular housing and improve the efficiency of our nation’s housing finance system, MBA and its members have concerns with several parts of the bill,” he said.
Broeksmit also highlighted MBA’s concerns about restrictions on institutional investment in single-family housing.
“The restrictions on institutional investment in single-family housing would further limit financing for build-for- and built-to-rent housing communities, while the Federal Housing Administration multifamily section would reduce loan limits and constrain capital for new rental housing development,” he added.
Section summary
Title I of the bill addresses housing supply and development, proposing federal guidance on land-use policies and best practices. It also would establish a grant program for home-building pattern books intended to standardize and accelerate development. This portion of the bill also proposes streamlining certain environmental review processes and directs the Government Accountability Office to study workforce housing.
Title II would revise several federal housing programs, including the HOME Investment Partnerships program, the Community Development Block Grant program, the Section 504 rural housing repair program and the Housing Choice Voucher program. It also establishes a new competitive grant program supporting planning and implementation of affordable housing projects.
Title III would increase the cap on bank investments from 15 percent to 20 percent as a means of encouraging banks to make more “public welfare investments.” It would also revise the definition of manufactured homes and establish a specific definition for small-dollar mortgages.
Title IV includes provisions affecting mortgage origination and housing program eligibility. It would require a disclosure on the Uniform Residential Loan Application (Freddie Mac Form 65 or Fannie Mae Form 1003) informing applicants about eligibility requirements for loans administered by the U.S. Department of Veterans Affairs loans and exclude veterans disability compensation from income calculations for certain housing programs.
Title VI includes banking regulatory provisions affecting deposits, supervisory requirements and the Federal Reserve banks’ surplus funds.
Reconsideration of Value Process
Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey submitted a letter to the Senate, asking lawmakers to reconsider a section that was not in similar bills supported by ICBA and could prove burdensome for community banks.
Sec. 705 of the 21st Century ROAD to Housing Act would codify the reconsideration of value (ROV) process for property appraisals into the Truth and Lending Act (TILA).
“We certainly agree that consumers should have a fair and transparent mechanism to address potential appraisal inaccuracies or bias. However, as drafted, Sec. 705 could unintentionally impose operational and compliance burdens on small lenders that keep many of their mortgage loans in portfolio, further exacerbating their ability to compete against larger lenders,” she wrote. “Broadly speaking, this provision would amend TILA and force lenders to develop and apply additional, highly prescriptive, ROV processes to loans held in portfolio. Many of these loans are non-conforming and specifically tailored and underwritten to meet the unique needs of borrowers in rural areas.”
Romero Rainey concluded the letter by requesting that lawmakers remove Sec. 705 from the legislation or, at a minimum, work with stakeholders to refine the ROV provision to ensure that it achieves its intended purpose without imposing disproportionate burdens on community banks.
“We believe this can be achieved by targeting the requirements to loans sold to Fannie Mae, Freddie Mac or mortgage loans insured or guaranteed by the federal government,” she wrote. “This approach would help community banks continue to offer tailored loans to their customers without mandating prescriptive operational ROV requirements.”
The legislation has had strong bipartisan support, including from Senate Banking Committee Chairman Tim Scott (R-S.C.) and Ranking Member Elizabeth Warren (D-Mass.) who both championed its provisions meant to boost housing supply and make homes more affordable.
“Not only is this bill about cutting regulatory red tape, lowering costs and expanding housing supply while generating no new spending, but it’s about making sure people like the single mom who raised me in North Charleston, S.C., have even greater access to economic opportunity and the American dream of homeownership,” Scott said in a statement.
“The package includes the vast majority of the Senate’s unanimously supported ROAD to Housing Act, incorporates bipartisan housing ideas from the House, and takes a good first step to rein in corporate landlords that are squeezing families out of homeownership,” Warren said in a statement. “Congress should pass this package and continue working on further legislation to combat our nation’s housing crisis.”
What’s next
Given the provisions added by the Senate, the updated bill will have to go back to the House for approval before it can be sent to the president’s desk to be signed into law.