November 11, 2022

By Monica Hogan, Inside Mortgage Finance

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Although still undecided at press time, partisan control of Congress will be by slim numbers, with implications for the housing-finance industry both in the lame-duck session that starts next week and in the new Congress, which convenes in January.

“Any legislation with a prayer of being signed into law by Biden must be bipartisan,” said Jim Tobin, executive vice president of government affairs for the National Association of Home Builders. “While the next speaker of the House can likely wrangle the 218 votes needed to move legislation, the next Senate majority leader will not have the 60 votes to overcome a filibuster.”

Tobin noted that housing affordability has always been a bipartisan issue, and the housing affordability crisis has become a “top-tier political issue.”

A divided Congress would slow the legislative process in 2023, said Faith Schwartz, CEO of Housing Finance Strategies, “especially as the focus turns to 2024’s presidential election with Senate Dems defending more seats than in 2022.”

She said she expects a more active lame-duck session if the majority party finds consensus on important issues.

President Biden said in a post-election press conference that he doesn’t intend to change his policy agenda, Schwartz noted. “We therefore expect the executive branch to maintain its focus on equitable housing, eradicating bias in the system, broadening credit access to unscoreable borrowers and promoting homeownership through initiatives such as special purpose credit programs,” she said. Given the Congressional divide, she expects Biden will use a regulatory path to pursue those objectives.

Speaking of Federal Housing Finance Agency Director Sandra Thompson, Ginnie Mae President Alanna McCargo, FHA Commissioner Julia Gordon and VA Home Loan Guaranty Service Executive Director John Bell, Schwartz said, “These are qualified executives who will seek solutions. So from that perspective, I am definitely optimistic that they will work closely with the new Congress.”

“The election outcome increases the possibility that Congress could expand affordable housing production in end-of-year legislation by up to 2.5 million units over 10 years,” said Buzz Roberts, CEO of the National Association of Affordable Housing Lenders. “The two most likely moves are to expand low-income housing tax credits for rental apartments and to enact the Neighborhood Homes Investment Act for ownership of homes in distressed communities. Both have broad bipartisan support in the Senate and House.”

In the new Congress, however, passing government spending bills and increasing the debt ceiling will likely be more challenging if, as expected, the Senate and House are held by different parties, said Brian Gardner, chief Washington policy strategist for Stifel Investment Services.

The National Council of State Housing Agencies expects Congress to address fiscal year 2023 appropriations in the post-election session because the continuing resolution that is currently funding the government expires on Dec. 16.

Without 2023 funding, or at least an additional continuing resolution, a government shutdown is likely. Past shutdowns have slowed FHA processing and completely shuttered the USDA program in addition to stopping paychecks to many borrowers, particularly those employed by the federal government.

In terms of the new Congress, the roster for the Senate Banking Committee remains in question. Two committee members, Richard Shelby, R-AL, and current ranking member Pat Toomey, R-PA, are retiring. The election outcome is still unknown for two other members, Raphael Warnock, D-GA, and Catherine Cortez Masto, D-NV.

Tim Scott, R-SC, will likely take the top Republican spot on the committee, NCSHA said. If Republicans are in control of the Senate and Scott becomes chair, NCSHA said, “His priorities are expected to align with his Opportunity Agenda, a series of policy proposals he has outlined to increase working families’ economic mobility. This Congress, Scott has introduced several bipartisan bills to help low- and moderate-income households access the financial system.” The Opportunity Agenda does not address housing issues specifically.

On the House Financial Services Committee, NCSHA said, Maxine Waters, D-CA, and Patrick McHenry, R-NC, are likely to hold their parties’ leadership roles in the next Congress, but their agendas would differ.

“If Waters remains as chair, she could continue her push to secure substantial federal resources for affordable housing and increase homeownership opportunities for persons of color and other underserved populations,” NCSHA said. “She was instrumental in inserting more than $170 billion for housing in the 2021 House-passed version of the Build Back Better Act.”

However, NCSHA said, as ranking member, “McHenry largely opposed these efforts, arguing they would be inflationary and ineffective.”
NCSHA said McHenry hasn’t yet outlined a housing agenda but noted that since he took over as ranking member, he’s “demonstrated a willingness to work with committee Democrats on several issues, suggesting he could potentially develop bipartisan legislation as chair.”

Scott Olson, executive director of Community Home Lenders of America, said he doesn’t think most of his trade group’s members are paying as close attention to who wins seats in the House or Senate as they are to inflation and interest rates.

“The best thing that could come out of Washington for our industry is fiscal and monetary policy to get inflation under control and interest rates down,” he said.