Community Reinvestment Act (CRA) & Future of the Federal Housing Finance Agency MODERATOR PANELISTS Peter Lawrence Michael Gaber Tony Alfieri Novogradac & Company LLP WNC RBC Capital Markets @NovocoPolicy Agenda CRA Regulatory Reform The Future of Federal Housing Finance Agency CRA Regulatory Reform Approximately of the annual investment in the LIHTC is from CRA-motivated 85% banks. Note: 2017 LIHTC equity market was an estimated $13 billion. CRA Regulatory Agencies OCC Fed FDIC Oversees all Regulates bank holding Regulates all other state- commercial banks companies and all the chartered banks that are (most LIHTC investors) state charter banks that not regulated by the are members of the Federal Reserve. federal reserve system. Joseph Otting Jerome Powell Jelena McWilliams Comptroller of the Currency Chair of the Federal Reserve Chair of FDIC Randal Quarles Lael Brainard Vice Chair for Supervision Chair of the Committee on Consumer and Community Affairs Treasury’s CRA Regulatory Reform Recommendations April 3 Treasury memo to all three bank regulatory agencies: Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and Federal Reserve • Assessment Areas: Expand CRA examination scope to LMI communities outside of traditional Assessment Areas—should improve LIHTC equity pricing in 2nd and 3rd tier markets • Examination Clarity & Consistency: Establish clearer CRA standards for credit, less subjective evaluation determinations, and greater consistency and predictability across all three regulators • Examination Process: Standardize CRA exam schedules among regulators and improve timeliness of evaluations and ratings • Other: Disparate treatment of debt and equity, impact of capital review on CRA investments, and treatment of nonbanks in CRA requirements OCC CRA Advance Notice of Proposed Rulemaking • On August 28, the office of the Comptroller of the Currency released an Advanced Notice of proposed Rulemaking “seeking comment on the best ways to modernize the regulatory framework implementing the Community Reinvestment Act (CRA).” • The ANPR specifically asks for comment on a number of questions regarding improvements to the CRA regulations related to: • Increasing lending and services to people and in areas that need it most, including in LMI areas; • clarifying and expanding the types of activities eligible for CRA consideration; • revisiting how assessment areas are defined and used; • establishing metric-based thresholds for CRA ratings; • making bank CRA performance more transparent; • improving the timeliness of regulatory decisions related to CRA; and • reducing the cost and burden related to evaluating performance under the CRA • Comments were due November 19. AHTCC Comment Letter Submitted November 19, 2018 1. Revising Regulations to a Metric based Framework. 2. Redefining Communities and Assessment Areas. 3. Expanding CRA Qualifying Activities 4. Record Keeping and Reporting Potential CRA Timeline April 3 November 19 Memo from Treasury When comments were due • Regulators reviewing public comments • Potentially • Talking amongst regulators will themselves on how to put issue a proposed together proposed rule rule rewriting the reform regulations First half of 2019 Second half of 2019 2018 2019 Potential CRA Timeline April 3 November 19 Memo from Treasury When comments were due • Regulators reviewing public comments • Potentially • Talking amongst regulators will themselves on how to put issue a proposed together proposed rule rule rewriting the reform regulations First half of 2019 Second half of 2019 20202018 20212019 Potential CRA Timeline Mid- 2020 2021 Public hearing on Regulations may be proposed in effect regulations Potentially regulators will issue 60-day public a final rule rewriting the comment period regulations 2020 2021 Future of Federal Housing Finance Agency Mel Watt Director of the Federal Housing Finance Agency Term expires on Jan. 6, 2019 POTENTIAL REPLACEMENTS: ? Mark Calabria Michael Bright Craig Phillips Chief Economist for EVP and COO of Counselor to the Secretary VP Pence Ginnie Mae U.S. Dept. of the Treasury REGULATES REGULATES Federal Home Loans Banks • Almost $140 billion in multifamily MBS new business • Affordable Housing Program (AHP): • Able to invest up to $500 million in annual LIHTC equity • Between 1990-2017: • $300 million themselves • Banks awarded approximately $5.8 • $200 million with FHFA approval billion in AHP subsidies to assist the • Housing Trust Fund and Capital Magnet Fund financing of • More than 865,000 affordable homes • Final regulation reforming Affordable Housing Program released 11/20 Housing Trust Fund and Capital Magnet Fund Housing Trust Fund and Capital Magnet Fund Allocations 2019 is Preliminary Novogradac Estimate $300,000,000 $266,775,403 $262,000,000 Housing $250,000,000 $219,168,374 Trust Fund $200,000,000 $173,591,160 $150,000,000 $142,000,000 $141,000,000 $120,043,656 Capital Magnet $91,472,163 $100,000,000 Fund $50,000,000 $0 2016 2017 2018 2019 Housing Trust Fund Update: Top 20 State Allocations of 2018 2017 2018 % Change 2017 2018 % Change California $23,228,115 $36,616,277 +58% Massachusetts $4,604,660 $5,720,333 +24% New York $14,790,240 $22,171,681 +50% Georgia $4,427,950 $5,705,499 +29% Texas $8,858,738 $12,279,085 +39% Washington $4,129,304 $5,197,313 +26% Florida $7,658,948 $10,442,914 +36% Virginia $3,821,341 $4,672,562 +22% Illinois $7,163,487 $9,812,230 +37% Wisconsin $3,481,414 $4,117,505 +18% Pennsylvania $5,863,425 $7,759,948 +32% Arizona $3,317,255 $3,997,777 +21% New Jersey $5,599,220 $7,726,903 +38% Missouri $3,357,775 $3,970,270 +18% Ohio $5,511,230 $6,971,712 +27% Indiana $3,367,317 $3,937,462 +17% Michigan $4,851,072 $6,004,558 +24% Tennessee $3,160,279 $3,688,511 +17% North Carolina $4,433,361 $5,874,191 +32% Oregon $3,143,231 $3,654,189 +16% 2017 2018 % Change Nevada $3,000,000 $3,000,000 0% Questions? MODERATOR PANELISTS Peter Lawrence Michael Gaber Tony Alfieri Novogradac & Company LLP WNC RBC Capital Markets @NovocoPolicy.