The 21st Century ROAD to Housing Act (“the Act”) became law on July 11, 2026, marking the most significant federal housing-policy package in years. The Act affects public welfare investments, brokered deposit rules, mortgage lending, appraisal practices, community banking initiatives, and digital asset policy. Banks, credit unions, mortgage lenders, and fintech partners should begin evaluating operational and compliance impacts now.
21st Century ROAD to Housing Act: What Changed & Why It Matters
Public Welfare Investment Cap Increased from 15% to 20%
One of the most significant financial-services provisions in the Act increases the public welfare investment cap for national banks and state member banks from 15% to 20%. This change expands the amount of capital eligible institutions may deploy into qualifying public welfare investments, including affordable housing and other community development investments, where otherwise permissible.
The Act increases regulatory investment capacity but does not change the underlying LIHTC rules or tax treatment of tax-credit investments. It does however expand regulatory investment capacity, potentially allowing banks to increase participation in LIHTC funds, direct affordable housing projects, small business development initiatives, and other qualifying community development activities. Before increasing tax-credit investments, banks should evaluate federal and state tax liability capacity to ensure the credits can be utilized efficiently. Unused tax credits generally become carryforwards, which may create deferred tax assets that are subject to regulatory capital limitations or disallowance. Banks should evaluate available capacity under the new 20% limit, projected tax-credit utilization, deferred tax asset implications, investment strategy, and documentation supporting public welfare qualification.
Custodial Deposit Exception from Brokered Deposit Treatment
The Act creates a new limited exception to the brokered deposit rules by amending Section 29 of the Federal Deposit Insurance Act. Under the new provision, certain custodial deposits will not be treated as brokered deposits, provided they meet the statutory definition and do not exceed 20% of the institution’s total liabilities. The provision may be particularly relevant for institutions using custodial, fiduciary, sweep, or deposit-placement arrangements. Qualification is not automatic and remains subject to the Act’s requirements, including the 20% limit.
Institutions should inventory their custodial and fiduciary deposit relationships, identify deposits currently classified as brokered, and assess available capacity under the new 20% limitation. They should also review third-party compensation and contractual arrangements, evaluate any call report or regulatory reporting implications, update deposit classification policies as needed, and maintain documentation supporting eligibility for the exception.
For community banks and banking-as-a-service providers, the change may provide additional funding flexibility. Before reclassifying any deposit relationship, these institutions should conduct a thorough regulatory and compliance review and consider any state and local tax implications associated with changes to deposit composition, classification, or sourcing.
Mortgage Lenders Should Prepare for Multiple Compliance Changes
Fannie Mae and Freddie Mac must update the Uniform Residential Loan Application (URLA) to include a military service question and related VA loan disclosure. Mortgage lenders should prepare for changes to loan origination systems, digital application platforms, disclosures, vendor integrations, staff training, quality control procedures, and compliance monitoring. Institutions undertaking customized software development or digital workflow redesign should also consider whether those costs may qualify for the research tax credit, particularly when the work extends beyond internal-use software.
FHA disclosures must also include information about VA-guaranteed loans, allowing eligible borrowers to better compare financing options. FHA lenders should review disclosure forms, policies, and training materials and be prepared to implement updates once guidance is issued.
The CFPB, in consultation with HUD and FHFA, will study how Regulation Z ability-to-repay requirements affect small-dollar mortgage lending. While no immediate rule changes are required, the review signals increased federal attention on barriers to small-balance mortgage origination. Institutions involved in rural, manufactured housing, affordable housing, or community development lending should closely monitor future regulatory developments.
Appraisal Modernization & Reconsideration of Value
Several appraisal-related changes warrant attention from lenders, appraisal management companies, and compliance teams. FHA appraisers will be subject to enhanced qualification requirements, including applicable state licensing or certification standards, USPAP competency requirements, and FHA-specific education. As a result, lenders should review appraiser eligibility criteria, vendor management practices, appraisal panel oversight, and supporting documentation requirements.
The law also clarifies that state-certified appraisers may use trainees when performing appraisals, provided the certified appraiser remains responsible for the appraisal and valuation. While this may help ease appraisal capacity constraints, lenders and appraisal management companies should ensure appropriate supervisory, review, and documentation controls remain in place.
USDA, VA, FHA, and FHFA must establish consumer-initiated reconsideration of value (ROV) procedures for federally backed mortgage loans secured by a borrower’s principal residence. Financial institutions should evaluate whether existing policies adequately address intake, review, escalation, documentation, vendor oversight, training, and quality control. For most lenders, a consistent enterprise-wide ROV process will likely be more effective than handling appraisal disputes on a case-by-case basis.
De Novo Institutions, CDFIs, MDIs & Rural Banking
Federal banking and credit union regulators are directed to work with state regulators and industry stakeholders to identify ways to support the formation of new financial institutions, particularly rural institutions, community development financial institutions (CDFIs), and minority depository institutions (MDIs). The law also requires a study of initiatives that could encourage new insured depository institutions while balancing safety and soundness, competition, and access to financial services in underserved communities.
While the Act does not change existing chartering or deposit insurance requirements, it signals continued congressional interest in expanding access to banking services and reducing barriers to new institution formation. If future initiatives support CDFI growth, they could also indirectly expand participation in the New Markets Tax Credit program. De novo organizers, community banks, CDFIs, MDIs, rural financial institutions, investors, and other stakeholders should monitor future regulatory developments and opportunities to engage with regulators during the implementation process.
Credit Union Considerations
Although several provisions are directed at banks, credit unions should also evaluate their mortgage lending operations, including loan forms, disclosures, appraisal practices, fair lending controls, training, and quality-control procedures. Credit unions involved in affordable housing and community development activities may also see indirect effects as the Act’s housing initiatives are implemented.
Manufactured & Modular Housing Finance
Several provisions are intended to support manufactured and modular housing, potentially creating opportunities for lenders serving markets with housing affordability challenges. The legislation expands the federal framework for manufactured housing and directs FHA to evaluate barriers to modular housing financing.
These changes could affect collateral requirements, loan product design, appraisal practices, title and perfection standards, insurance considerations, construction lending processes, secondary market eligibility, and relationships with manufacturers and dealers. Financial institutions should monitor implementation by HUD, FHA, and other agencies before making significant changes to underwriting standards, lending programs, or risk-management practices.
Central Bank Digital Currency Prohibition
The Act generally prohibits the Federal Reserve from issuing a retail central bank digital currency (CBDC) without additional congressional authorization. The restriction remains in effect through December 31, 2030. While it does not affect existing payment systems or digital asset activities, it provides additional clarity regarding the Federal Reserve’s authority to issue a retail CBDC.
Key Takeaways for Financial Institutions
Financial institutions should view the 21st Century ROAD to Housing Act as an implementation project, with key priorities being:
- Reassess public welfare investment capacity. National banks and state member banks should evaluate opportunities created by the increase in the public welfare investment cap from 15% to 20%, while also modeling tax liability capacity, expected credit utilization, carryforward risk, and regulatory capital treatment of any related deferred tax assets.
- Review custodial deposit relationships. Eligible institutions should determine whether existing deposits may qualify for the new limited exception from brokered deposit treatment and should consider whether changes in deposit mix or sourcing could affect state bank tax apportionment.
- Prepare for mortgage and appraisal-related compliance changes. Lenders should begin planning for updates to loan applications, disclosures, systems, training, appraisal oversight, quality-control processes, and reconsideration of value (ROV) procedures, while documenting potential research tax credit opportunities where applicable.
- Monitor community banking and housing initiatives. Community banks, CDFIs, MDIs, rural institutions, and housing lenders should watch for regulatory developments affecting de novo institution formation, community development programs, manufactured housing, modular housing finance, and related investment opportunities.
- Evaluate digital asset strategy. Banks, credit unions, fintech companies, and payment providers should consider the Act’s CBDC restrictions when evaluating long-term payments and digital asset initiatives.
While many provisions require further agency guidance, financial institutions should begin evaluating the operational, compliance, lending, treasury, tax, legal, and risk-management implications now. Early planning will position institutions to respond efficiently as implementation details emerge. The Bonadio Group is here to help.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
