Community Reinvestment Act (CRA) & Future of the Federal Housing Finance Agency

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2 Community Reinvestment Act (CRA) & Future of the Federal Housing Finance Agency MODERATOR Peter Lawrence Novogradac & Company PANELISTS Michael Gaber WNC Tony Alfieri RBC Capital Markets

3 Agenda CRA Regulatory Reform The Future of Federal Housing Finance Agency

4 CRA Regulatory Reform

5 Approximately 85% of the annual investment in the LIHTC is from CRA-motivated banks. Note: 2017 LIHTC equity market was an estimated $13 billion.

6 CRA Regulatory Agencies OCC Oversees all commercial banks (most LIHTC investors) Fed Regulates bank holding companies and all the state charter banks that are members of the federal reserve system. FDIC Regulates all other statechartered banks that are not regulated by the Federal Reserve.

7 Joseph Otting Comptroller of the Currency Jerome Powell Chair of the Federal Reserve Jelena McWilliams Chair of FDIC Randal Quarles Vice Chair for Supervision Lael Brainard Chair of the Committee on Consumer and Community Affairs

8 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

9 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.

10 AHTCC Comment Letter Submitted November 19, Revising Regulations to a Metric based Framework. 2. Redefining Communities and Assessment Areas. 3. Expanding CRA Qualifying Activities 4. Record Keeping and Reporting

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12 Potential CRA Timeline April 3 Memo from Treasury November 19 When comments were due Regulators reviewing public comments Talking amongst themselves on how to put together proposed rule reform First half of 2019 Potentially regulators will issue a proposed rule rewriting the regulations Second half of

13 Potential CRA Timeline April 3 Memo from Treasury November 19 When comments were due Regulators reviewing public comments Talking amongst themselves on how to put together proposed rule reform First half of 2019 Potentially regulators will issue a proposed rule rewriting the regulations Second half of

14 Potential CRA Timeline Mid Public hearing on proposed regulations 2021 Regulations may be in effect 60-day public comment period Potentially regulators will issue a final rule rewriting the regulations

15 Future of Federal Housing Finance Agency

16 Mel Watt Director of the Federal Housing Finance Agency Term expires on Jan. 6, 2019 POTENTIAL REPLACEMENTS:? Mark Calabria Chief Economist for VP Pence Michael Bright EVP and COO of Ginnie Mae Craig Phillips Counselor to the Secretary U.S. Dept. of the Treasury

17 REGULATES REGULATES Almost $140 billion in multifamily MBS new business Able to invest up to $500 million in annual LIHTC equity $300 million themselves $200 million with FHFA approval Housing Trust Fund and Capital Magnet Fund Federal Home Loans Banks Affordable Housing Program (AHP): Between : Banks awarded approximately $5.8 billion in AHP subsidies to assist the financing of More than 865,000 affordable homes Final regulation reforming Affordable Housing Program released 11/20

18 Housing Trust Fund and Capital Magnet Fund

19 Housing Trust Fund and Capital Magnet Fund Allocations 2019 is Preliminary Novogradac Estimate $300,000,000 $250,000,000 $219,168,374 $266,775,403 $262,000,000 Housing Trust Fund $200,000,000 $173,591,160 $150,000,000 $100,000,000 $91,472,163 $120,043,656 $142,000,000 $141,000,000 Capital Magnet Fund $50,000,000 $

20 Housing Trust Fund Update: Top 20 State Allocations of % Change % Change California New York Texas Florida Illinois Pennsylvania New Jersey Ohio Michigan North Carolina $23,228,115 $14,790,240 $8,858,738 $7,658,948 $7,163,487 $5,863,425 $5,599,220 $5,511,230 $4,851,072 $4,433,361 $36,616,277 $22,171,681 $12,279,085 $10,442,914 $9,812,230 $7,759,948 $7,726,903 $6,971,712 $6,004,558 $5,874, % +50% +39% +36% +37% +32% +38% +27% +24% +32% Massachusetts Georgia Washington Virginia Wisconsin Arizona Missouri Indiana Tennessee Oregon $4,604,660 $4,427,950 $4,129,304 $3,821,341 $3,481,414 $3,317,255 $3,357,775 $3,367,317 $3,160,279 $3,143,231 $5,720,333 $5,705,499 $5,197,313 $4,672,562 $4,117,505 $3,997,777 $3,970,270 $3,937,462 $3,688,511 $3,654, % +29% +26% +22% +18% +21% +18% +17% +17% +16% % Change Nevada $3,000,000 $3,000,000 0%

21 Questions? MODERATOR Peter Lawrence Novogradac & Company PANELISTS Michael Gaber WNC Tony Alfieri RBC Capital Markets