Trump Administration Seeks to Change Rules on Bank Lending to the Poor

Posted on January 12, 2018 in Uncategorized | Add Your Voice

Trump Administration Seeks to Change Rules on Bank Lending to the Poor
The Trump administration plans to unveil a major revision to decades-old banking rules that mandate lending to poor borrowers.

Changes to the regulations of the Community Reinvestment Act — a law first enacted in 1977 — could potentially transform the way banks make billions of dollars in loans, investments and donations to poorer customers. In all, they could make it easier for banks to meet certain lending requirements and lower penalties for compliance problems.

Community groups that support the law fear that any rollback could mean poorer people over time would have less access to loans and banking services. In recent years, for example, some lenders have focused on serving more affluent customers. The CRA, though, generally has prevented banks from focusing only on the wealthy.

Some of the government’s changes have already gone into effect. In early 2018, the Treasury Department is planning to unveil broader recommendations to revamp the government’s enforcement of the CRA, according to a Treasury spokeswoman.

The law was originally passed to stop “redlining” — a practice where banks wouldn’t lend money in certain poor neighborhoods, often hurting black and minority residents. In recent years, though, it has become a source of conflict between community groups that want the rules to be enforced more strongly and bankers who argue the rules around CRA haven’t kept up with technological changes and penalize activity that isn’t directly tied to the act.

“I agree that the CRA has become more of a box-checking exercise rather than a genuine approach for serving more lower-income communities. CRA regulations and enforcement protocols warrant revisiting and modernization.  For example, in the era of online banking, the number of bank branches and their locations are irrelevant,” says Collingwood Group Chair Tim Rood. “Due caution, however, must be given to avoiding any measures that limit access to credit for first-time homebuyers or hinder investment in multifamily housing development or rehabilitation.”

read more: WSJ

Bipartisan Group of Lawmakers Offers Ideas for Infrastructure Plan
The congressional Problem Solvers Caucus on Wednesday released a bipartisan report detailing policy suggestions for a future infrastructure plan.

The report, released by the caucus’s Infrastructure Working Group, proposes solutions on how to modernize U.S. infrastructure while maintaining environmental protections and bolstering the national security.

“Unfortunately, due to years of underinvestment and deferred maintenance, America is no longer keeping pace and continues to fall behind other countries,” the report says. “By some estimates, the funding gap may be as high as $2 trillion by 2025 across all sectors of American infrastructure.”

Among the suggestions in the report is creating “a rural liaison” for various federal agencies to help those areas seek funding. It also suggests that projects financed by the federal government should take a “Buy America” approach to make sure U.S. goods like steel and iron are used.

“America was a great country because we did great and big things,” Rep. Elizabeth Esty, D-Conn., a co-author of the report, said during its unveiling.

Esty, a member of the House Transportation and Infrastructure Committee, pointed to the recent water main break at New York’s John F. Kennedy airport that caused flooding in the facility and delayed flights as an example of the country’s crumbling infrastructure.

read more: The Hill

Entry-Level Home Price Boom Could Prove Unsustainable
The American Enterprise Institute’s (AEI) International Center on Housing Risk has released a new installment of its National Housing Market Index (NHMI), examining the state of the market in the second half of 2017 and where it’s likely to go in 2018. Chief among the findings: the national home purchase market continued its boom in Q3 2017, with sales transactions up 6.2 percent year-over-year. This was the 12th consecutive quarter showing an increase in sales transactions, and that’s in spite of a nationwide increase in house prices.

The NHMI report states that “looser lending, lower mortgage rates, and a decline in international buyers has tilted the home purchase market over the last three years from cash sales towards institutional financed sales. Other financed sales have remained stable as a share of the overall market.”

For 2018, the NHMI forecasts single-family home supplies to continue tightening after hitting record lows in November 2017. The report cites the National Association of Realtors, which announced in December 2017 that remaining inventory of existing homes for sale hit a record low of 3.4 months in November 2017, eclipsing the prior record of 3.5 months reached in both January 2005 and January 2017. The NHMI report reads, “Expect new lows to be recorded for December 2017 and January 2018. January is projected to come in at around 3 months.”

The NHMI forecasts home prices to continue accelerating, and predicts year-over-year increases of 6.25-6.75 percent, up from 6-6.5 percent in 2017. “The substantial reduction in the utilization of the mortgage interest deduction and commensurate reduction in subsidies, will somewhat reduce upward pressure on home prices,” states the report. “Without the tax act, the prediction for 2018 home price increase would have been even higher: 6.75 percent to 7.25 percent.”

The AEI index also predicts that the barrier for entry for first-time buyers will be even higher in 2018. Year-over-year gains for the bottom third of homes are forecast to come in at 10.5-11 percent for 2018. “The Agency First-Time Buyer Mortgage Share Index in September set a new series high, coming in at 57.6 percent, up from 56.9 percent a year ago and from 55.1 percent four years ago,” reads the report. “We expect this index to increase modestly in 2018.”

read more: MReport

Home Equity Hits Record High, and Here’s How Homeowners are Spending It
Homeowners are racking up record amounts of home equity, thanks to fast-rising values in today’s competitive housing market. No surprise, more people are now starting to tap that cash. What are they spending it on? Mostly making their homes even more valuable.

Renovation spending is soaring, and 80 percent of borrowers taking out home-equity lines of credit say they would consider using that money to renovate, according to a survey released in December by TD Bank.

“We’re not only seeing more requests for proposals, but more committed projects from homeowners,” said Steve Cunningham, a remodeler from Williamsburg, Virginia, in a report from the National Association of Home Builders. “In addition to regular updates and repairs, there’s been an uptick in more ambitious large remodel requests.”

Remodeling spending topped $152 billion in 2017, and renovations for owner-occupied single-family homes will increase 4.9 percent in 2018 over 2017, according to the NAHB. That does not include remodeling done by investors looking to flip or rent properties, both of which are increasing as well.

“Below-normal rates of home building are creating an aging housing stock,” said Paul Emrath, vice president of survey and housing policy research at the NAHB. “Factors inhibiting stronger growth include the ongoing labor shortage and rising material prices.”

An older housing stock, combined with not enough new homes being built, means more people will choose to renovate.

read more: CNBC

There Are More $5 Million-Plus Houses on the Market Than Ever Before
Once hallmarks of luxury, million-dollar homes are becoming the norm in some housing markets across the country.

In some cities and coastal areas, it might actually be more difficult to find a home that’s not listed for $1 million or more. Since 2012 the share of million-dollar homes in the U.S. has increased from 1.6% to 3%, according to a report released Wednesday by real-estate website Trulia.

• Across the 100 largest metropolitan areas nationwide, 4.3% of homes listed for sale are now valued at $1 million or more. That figure is four times higher than back in 2002.

• In San Francisco, two-thirds of homes for sale are in the $1 million-plus range, up from roughly 22% in 2012.

• And in nearby Oakland, nearly one in four homes is now worth over $1 million. Six years ago, only 5% of homes exceeded that mark.

And Great Gatsby-style mega-mansions are also on the rise. Last August, real-estate website Zillow reported that nationwide the number of ZIP codes where at least 10% of the homes were worth seven figures or more rose by 346 between 2014 and 2017.

read more: Marketwatch

The Voice of Housing will not publish on Jan. 15 in observance of Martin Luther King Jr. Day. We will resume publication on Jan. 17.

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