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40 FEDERAL BANKING AGENCIES ADDRESS 'TOO BIG TO FAIL' Recently, the federal banking agencies, including the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency proposed a rule to "limit the interconnectedness of large banking organizations and reduce the impact from failure of the largest banking organizations." e FDIC stated that the proposal would complement other measures the banking agencies have taken to limit interconnectedness among large banking organizations. According to the FDIC, global systemically important bank holding companies (GSIB) are the largest and most complex banking organizations and are required to issue debt with certain features under the Board's "total loss-absorbing capacity" (TLAC) rule. at debt would be used to recapitalize the holding company during bankruptcy or resolution if it were to fail. To discourage GSIBs and "advanced approaches" banking organizations from purchasing large amounts of TLAC debt, the proposal would require such banking organizations to hold additional capital against substantial holdings of TLAC debt. is would reduce interconnectedness between large banking organizations and, if a GSIB were to fail, reduce the impact on the financial system from that failure. While the federal banking agencies' plan is to protect from the economic impact of failing banks, how are homeowners being protected? A week earlier, e Senate Banking, Housing, and Urban Affairs Committee met to discuss the committee's Chairman Sen. Mike Crapo's housing finance reform outline. During his opening statement, Crapo said that his outline set out a "blueprint for a permanent, sustainable new housing finance system." Under the outline, he said that the new housing finance reforms would protect taxpayers by reducing the systemic, too-big- to-fail risk posed by the current duopoly of mortgage guarantors; preserve existing infrastructure in the housing finance system that works well, while significantly increasing the role of private risk-bearing capital; establish several new layers of protection between mortgage credit risk and taxpayers; ensure a level playing field for originators of all sizes and types, while also locking in uniform, responsible underwriting standards; and promote broad accessibility to mortgage credit, including in underserved markets. RURAL AMERICA'S AFFORDABLE HOUSING PROBLEM e Financial Services Committee (FSC) Subcommittee on Housing, Community Development, and Insurance held a hearing recently titled, "e Affordable Housing Crisis in Rural America: Assessing the Federal Response." Witnesses included Gideon Anders, Senior Staff Attorney, National Housing Law Project; Stan Keasling, President, National Rural Housing Coalition; David Lipsetz, CEO, Housing Assistance Council; Andres Saavedra, Senior Program Officer, Rural Local Initiatives Support Corporation; and Tanya Eastwood, President, Council for Affordable and Rural Housing. According to a memorandum released by the FSC, rural areas are set apart from urban areas due to several distinct features. For example, rural areas tend to have comparatively high homeownership rates; however, the committee noted that the quality and value of housing is comparatively lower than other areas of the country. "Changes in the rural economy have negatively affected the job markets in many rural areas, contributing to higher poverty rates and severe housing affordability issues," the memo noted. "e aging housing stock in rural areas has also resulted in higher rates of residents living in moderately or severely substandard housing that may, for example, lack basic plumbing, and pose a risk to the health and safety of residents. Moreover, racial minorities in rural areas are three times more likely to live in substandard housing, putting them among the worst-housed demographic group in the entire nation." Witnesses proposed solutions to issues faced by rural homeowners. For example, in his statement, Gideon Anders proposed an amendment to the USDA Rural Development (RD) single-family direct loan program. Under Section 505(a) of the Housing Act of 1949, RD is authorized to extend a moratorium on payments to homeowner borrowers whenever the borrower is unable to continue to make mortgage payments for reasons beyond the borrower's control without unduly impairing his or her standard of living," Anders noted. "In cases of extreme hardship, RD is also authorized to forgive interest accrued on the loan during the moratorium period in order to facilitate the borrower's capacity to resume making mortgage payment." He added, "Borrowers who face hardship, such as the loss of a job or a medical emergency, are frequently unable to resume making regular mortgage payments at the end of a moratorium, let alone make higher mortgage payments."

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