CFPB Issues Two Final Rules Related to QM Loans

On December 10, the Consumer Financial Protection Bureau (CFPB) issued two final rules, effective immediately, related to qualified mortgage (QM) loans, those deemed by lenders as stable loans based on the lender’s determination of the borrower’s ability to repay their mortgage before the loan is issued. The first rule, the General QM Final Rule, removes a requirement that the borrower’s debt-to-income ratio (DTI) be no more that 43 percent, replacing it with a limit that is based on the loan’s pricing as an indicator of a borrower’s ability to repay their loan. The second rule creates a new category for QMs, Seasoned QMs, that applies to mortgages held in loan portfolio and have met certain performance requirements over a 36-month seasoning period, providing lenders with a safe harbor from Ability-to-Repay (ATR) liability at the end of the 36-month seasoning period if the loan satisfies specific requirements. According to the CFPB, these new rules will support a “smooth and orderly transition” away from the Qualified Mortgage (QM) Patch—which exempts certain mortgage loans eligible for purchase or guarantee by Fannie Mae and Freddie Mac (GSEs) from the 43 percent DTI requirement and is set to expire on July 1, 2021. It is estimated that approximately one-third of all GSE-backed loans exceed the 43 percent DTI threshold.

There has been some industry opposition to the CFPB rules. Commenting on the release of the two QM rules, the National Consumer Law Center issued a statement, arguing that these changes would protect lenders from legal liability and provide more avenues for new loans that are neither safe nor affordable, which would hurt lower-income Black families who have historically been the target of predatory loans.

Supreme Court Hears an Argument on FHFA’s Structure

On December 9, the Supreme Court heard a case, Collins v. Mnuchin, that challenges the constitutionality of the Federal Housing Finance Agency’s (FHFA’s) structure and calls for voiding an agreement between the agency and the U.S. Department of the Treasury (Treasury) over generated revenue by Fannie Mae and Freddie Mac (the Government-Sponsored Enterprises, or GSEs). The GSEs  have been under the FHFA conservatorship since 2008.

The plaintiffs argued that the FHFA’s structure is unconstitutional, stating that the President cannot remove the FHFA director ahead of their term’s expiration unless it is “for cause.” The plaintiffs also called for voiding an agreement between the FHFA and Treasury stipulating that Treasury would provide up to $100 billion in funding for the GSEs in exchange for compensation that included stock, or dividends tied to the GSEs’ net worth via a 2012 amendment and priority over the other shareholders in reclaiming their investments. An analysis from the American Banker notes that while it is unclear when the Supreme Court will issue a ruling for Collins v. Mnuchin, the general expectation is the Court would hand down its decision before summer 2021.

HUD Extends HOME Covid-19 Waivers

Late yesterday, the House and Senate passed a $1.4 trillion spending deal for fiscal year 2021 (FY21) with $900 billion of coronavirus relief and a set of tax proposals attached to the package. The Senate also approved a seven-day extension of the short-term Continuing Resolution (CR) funding the federal government, which was set to expire at midnight. The President will need to sign the package into law before the new CR expires in order to avoid a government shutdown.

Between the dozen annual appropriations bills, the coronavirus aid, and the tax extenders, the package has many of Enterprise’s top policy priorities, including: $25 billion in rental assistance; an extension of the eviction moratorium; the strengthening of the Low-Income Housing Tax Credit, specifically a permanent, minimum 4 percent Housing Credit rate; an extension and expansion of the New Markets Tax Credit; and funding for critical affordable housing programs in FY21 such as the HOME Investment Partnership program, the Community Development Block Grant program, the Section 4 Capacity Building Program, and the Community Development Financial Institutions Fund, as well as for critical rural housing programs through USDA.

Enterprise applauds Congress for providing this much-needed assistance to the more than 30 million Americans who are currently at risk of losing their homes and the nearly eight million Americans that have fallen into poverty over the past five months. This year-end package will provide vital federal resources to families and businesses to help them weather the storm of this crisis. We also especially thank our bipartisan Congressional champions who have tirelessly advocated for our affordable housing priorities.   

For more information, view a blog post by Enterprise’s Senior Director of Public Policy Sarah Brundage, and Policy Analysts Krista D’Alessandro and Alexander Williams.
 
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HUD Extends HOME Covid-19 Waivers

On December 4, HUD published two new memoranda that provide guidance, statutory suspensions, and regulatory waivers for Participating Jurisdictions (PJs) of the HOME Investment Partnership Program (HOME) impacted by the spread of Covid-19. These memoranda are an update of HUD’s previous memoranda from April.

The first updated memo extends and adjusts certain regulatory waivers and statutory suspensions through September 30, 2021, which were originally detailed in HUD’s first April memo, Availability of Waivers and Suspension of the HOME Program Requirements in Response to COVID-19 Pandemic. HUD also included two new regulatory waivers regarding the maximum per-unit subsidy limit and the income documentation requirement for owners of HOME projects in their sixth year of the affordability period. The second updated memo edits and extends all statutory suspensions and regulatory waivers also through September 30, 2021. These suspensions and waivers were originally detailed in HUD’s second memo released in April, Suspensions and Waivers to Facilitated Use of HOME-Assisted TBRA for Emergency and Short0term Assistance in Response to the Covid-19 Pandemic. The memo also revises HUD’s waivers for: eligible TBRA costs and maximum TBRA subsidy; tenant protections; housing quality standards; annual inspection of units occupied by recipients of HOME TBRA; and income determination.

If a PJ is interested in implementing the HOME statutory suspensions and waivers, they must notify the Community Planning and Development Division in its local HUD Field office and identify which suspensions and waivers they plan to use.

Congress Passes Year-End Appropriations and Coronavirus Relief Legislation Including Critical Affordable Housing Provisions

Late yesterday, the House and Senate passed a $1.4 trillion spending deal for fiscal year 2021 (FY21) with $900 billion of coronavirus relief and a set of tax proposals attached to the package. The Senate also approved a seven-day extension of the short-term Continuing Resolution (CR) funding the federal government, which was set to expire at midnight. The President will need to sign the package into law before the new CR expires in order to avoid a government shutdown.

Between the dozen annual appropriations bills, the coronavirus aid, and the tax extenders, the package has many of Enterprise’s top policy priorities, including: $25 billion in rental assistance; an extension of the eviction moratorium; the strengthening of the Low-Income Housing Tax Credit, specifically a permanent, minimum 4 percent Housing Credit rate; an extension and expansion of the New Markets Tax Credit; and funding for critical affordable housing programs in FY21 such as the HOME Investment Partnership program, the Community Development Block Grant program, the Section 4 Capacity Building Program, and the Community Development Financial Institutions Fund, as well as for critical rural housing programs through USDA.

Enterprise applauds Congress for providing this much-needed assistance to the more than 30 million Americans who are currently at risk of losing their homes and the nearly eight million Americans that have fallen into poverty over the past five months. This year-end package will provide vital federal resources to families and businesses to help them weather the storm of this crisis. We also especially thank our bipartisan Congressional champions who have tirelessly advocated for our affordable housing priorities.   

For more information, view a blog post by Enterprise’s Senior Director of Public Policy Sarah Brundage, and Policy Analysts Krista D’Alessandro and Alexander Williams.

Longer-term solutions to help recover and build resilience

Stabilizing renters—which, in turn, supports landlords and rental properties—is critical. But policymakers can leverage this opportunity to implement long-term solutions that reduce the number of renters at risk and ensure the housing market is better equipped for another unexpected crisis.

“A lot of the action so far has been short term. It could all terminate in several months even though we could still be in the midst of a recession,” said Douglas Rice, senior policy analyst at the Center on Budget and Policy Priorities. “We’re facing a cliff several months down the pike that needs to be addressed.”

“If we’re not taking care of folks on both ends, we’ll fail. There needs to be balance, because the future is shared.”

Monique King-Viehland, director of state and local housing policy at the Urban Institute
To offer more long-term relief, federal policymakers can designate housing as an entitlement and fully fund universal rental assistance to help all low-income renters at risk.

State and local policymakers can supplement those federal efforts by implementing a more modest form of rental assistance, possibly through a no-interest loan or through the ESG, for people who may not experience as severe an income loss but who are still burdened by their housing costs.

“There are going to be crises after this. Ultimately, we’re going to have to stand up something permanent,” said Mike Koprowski, national campaign director at the National Low Income Housing Coalition.

Policymakers at all levels of government can also ensure that, when development ramps up again, affordable housing production is prioritized. Aaron Gornstein, president and CEO of Preservation of Affordable Housing, said an increase in subsidies like those through the Low Income Housing Tax Credit and the HOME Investment Partnerships program could help encourage investors to focus on affordable housing construction and help meet the growing demand for affordable units.

“Once we get through this initial crisis, the need for affordable housing is going to be even greater,” Gornstein said. “There may be new opportunities to preserve and produce more affordable housing with additional resources and greater public attention. This will not only help to provide safe, healthy, and affordable homes for those who need them, but it can provide a powerful stimulus to our economy, which is likely to be in a recession.”

ACTION Campaign Year in Review and Monthly Call, January 8 at 2 PM EST

Join the ACTION Campaign Monthly Call

The ACTION Campaign monthly call will be held on Friday, January 8 at 2:00 PM EST.

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  • Phone number: 929-205-6099
  • Meeting ID: 193 634 880
  • Password: 256387

ACTION Campaign: A Year in Review

ACTION Covid-19 Response | ACTION mobilized quickly with our partners in the early days of the pandemic to compile key Housing Credit priorities for Covid-19 relief, both legislative and regulatory. ACTION created a Covid-19 Updates and Resources page on our website and engaged existing and new partners in our Covid-19 relief advocacy.

ACTION Congressional Outreach | Whereas in the past ACTION would have engaged with Congressional offices both on the Hill and in districts nationwide, last year our advocacy went virtual. With the help our members and partners, ACTION engaged nearly 300 Congressional offices in the form of virtual meetings, phone calls, and email correspondence.

Letters to Congress | ACTION’s members and partners, our Congressional champions, and Mayors across the country called on Congressional leadership to include ACTION’s Housing Credit priorities for Covid-19 relief in any response legislation through letters.

  • In April, lead Affordable Housing Credit Improvement Act (AHCIA) House cosponsors, Representatives Suzan DelBene (D-WA), Kenny Marchant (R-TX), Don Beyer (D-VA), and Jackie Walorski (R-IN), sent a letter to House Congressional leadership.
  • In May, 2,354 ACTION members sent a letter to Congressional leadership.
  • In June, nearly 70 mayors signed on to a letter circulated by ACTION on behalf of Mayor Jenny A. Durkan of Seattle to Congressional leadership, highlighting the Housing Credit’s nationwide support among local leaders in the face of Covid-19.
  • In July, 103 Representatives signed on to a bipartisan letter led by AHCIA co-leads, Representatives Suzan DelBene (D-WA-01) and Jackie Walorski (R-IN-02), to House leadership.
  • In December, the ACTION Campaign Steering Committee sent a letter to Congressional leadership.

AHCIA Cosponsorship Milestones | In the 116th Congress, the AHCIA gained more bipartisan support than ever before. In March, the AHCIA reached an impressive milestone, with more than half of the House cosponsoring the legislation. Since then, cosponsorship continued to grow in both chambers, and the AHCIA totaled 233 House cosponsors (including 69 percent of Ways and Means Committee Members) and 41 Senate cosponsors (including 50 percent of Senate Finance Committee Members) in the 116th Congress. ACTION will aim to build on this bipartisan support in the new Congress.

ACTION Membership Growth | ACTION remains the largest coalition of Housing Credit advocates across the country, with nearly 2,400 national, state, and local organizations and businesses signed on to the coalition. Last year, our coalition continued to grow, gaining 59 new members. In December 2020, we welcomed the following businesses and organizations:

  • TransEquity Development, Arizona
  • HousingLOUISIANA, Louisiana
  • Minnesota Coalition for the Homeless, Minnesota
  • New York State Tenants and Neighbors Information Service, New York
  • Oregon Housing Alliance, Oregon
  • City of Lancaster, Pennsylvania
  • Microsoft, National
  • Sheridan Consulting, National

The ACTION Campaign’s grassroots membership is its strength, as it allows us to demonstrate to members of Congress the widespread and growing support for the Housing Credit across the country. Heading into the 117th Congress, we are stronger than ever. Please help us continue to grow by inviting your affordable housing partners who are not yet members to join ACTION.

New & Updated ACTION Resources | ACTION created and updated a number of Housing Credit advocacy resources in addition to the materials on our Covid-19 Updates and Resources page. These included:

ACTION Looks Forward to Advancing Housing Credit Priorities Under Biden Administration

This December, ACTION sent a memo to the Biden-Harris transition agency review teams at the Treasury, HUD, and the Department of Agriculture. The memo includes opportunities to increase the supply of affordable housing through the Housing Credit and how the new administration can use its regulatory authority to advance some of ACTION’s priorities. In early 2020 the Biden-Harris team released its housing plan, which calls for an additional $10 billion in investment for the Housing Credit program and notes Biden’s plan to “ensure that urban, suburban, and rural areas all benefit from the credit.” ACTION looks forward to working with the Biden-Harris administration transition teams to strengthen and expand the Housing Credit.

President-Elect Joe Biden formally nominated Janet Yellen as Treasury Secretary and Representative Marcia Fudge (D-OH-11) as HUD Secretary. Representative Fudge cosponsored the AHCIA in both the 115th and 116th Congress. ACTION also looks forward to working with both cabinet secretaries if confirmed.

The Biden administration’s appointment for the head of the Office of the Comptroller of the Currency (OCC), who has yet to be named, has important implications for the Housing Credit. The OCC is one of the three banking regulators charged with overseeing Community Reinvestment Act (CRA) compliance, and 85 percent of annual Housing Credit equity investment is CRA-driven. It is likely that the OCC will be the only one of the three regulators to be appointed a new head, as the heads of the other two banking regulators – the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve (Fed) – still have remining time in their term limits.

Though the OCC published a final rule to modernize the CRA in June of 2020 – without the sign-on of the FDIC or the Fed – it is likely that the OCC’s final rule could be repealed or significantly modified by Biden’s new Comptroller of the Currency once appointed. The Fed issued its own advance notice of proposed rulemaking (ANPR) in October in an effort to modernize the CRA. It is possible that the three banking regulators will work together from this proposed rule towards one, final CRA rule in 2021. Comments on the Fed’s ANPR are due on February 16.

Policy solutions to help everyone in the rental housing ecosystem

Acting quickly is critical to stabilizing the entire housing ecosystem. Many tenants couldn’t pay rent on April 1, and they will likely struggle to come up with rent payments for the next several months as the pandemic’s effects continue to grow.

“I hope help is deployed to provide immediate response,” said Hal Ferris, founding principal at Spectrum Development in Seattle. “Overreaction is better than cautious and slow reaction.”

Even though the CARES Act didn’t include funding dedicated solely for rental assistance, state and local governments can use the act’s flexible funding to stabilize renters. And in future federal legislation, lawmakers can ensure all renters in need can stay in their homes throughout the crisis and beyond by offering additional emergency rental funds and ensuring that the resources can provide ongoing assistance.

“State and local governments are going to have to figure out, now that we know what the federal government is going to do, where the gaps still lie. And based on that, what are the things state and local governments can do, and what advocacy at the federal level is still needed to fill those gaps?” King-Viehland said.

“The Future Is Shared”: Why Supporting Renters during COVID-19 Is Critical for Housing Market Stability

Steve Thomas has operated as a small landlord on the South Side of Chicago for 25 years. Most of his tenants are single mothers living paycheck to paycheck and working low-wage jobs. With employers across the country implementing massive layoffs during the COVID-19 pandemic, most tenants who lose their jobs don’t have enough savings to cover next month’s rent, let alone the next several months’.

“I really don’t know where that leaves us, but I know it leaves us vulnerable,” Thomas said. “It leaves us all vulnerable.”

“If you start getting nothing but institutional owners in these predominantly low-income neighborhoods, it’s going to be problematic.”

Steve Thomas, operations director of 5T Management
Thomas is worried about the future of his 18-person company, 5T Management, as well as the future of his tenants if his business shutters and a new investor unfamiliar with the area takes over his buildings. “If you start getting nothing but institutional owners in these predominantly low-income neighborhoods, it’s going to be problematic,” he said. “People who have money sitting on the sidelines could come in, buy deals, and force out the ma and pa landlords. You’d end up with a lot of fraud and a lot of people living in unsafe, unsanitary environments.”

The pandemic has spotlighted gaps in the housing safety net that left renters at risk long before this crisis and that will worsen as more people lose their jobs and face unexpected costs. But when tenants can’t pay their rents, they aren’t the only ones facing financial instability. Most landlords, especially smaller owners, operate on tight margins and can’t sustain a massive drop-off in rent payments for long. They could risk defaulting on their mortgages, missing insurance payments, or failing to pay city taxes—which, in turn, could destabilize the broader community.

That’s why policy solutions at the federal, state, and local levels need to keep the entire housing ecosystem in mind: when tenants can pay rent, landlords can maintain their rental properties, pay their underlying mortgage, and keep housing opportunities open for current and future renters.

“It’s all interconnected in a circle of life,” said Monique King-Viehland, director of state and local housing policy at the Urban Institute. “To address the crisis from an equitable framework, we need to recognize that interconnectivity and implement policy and practice around that.”

Renters, landlords, and affordable housing are at risk
Renters were already struggling to make ends meet before the pandemic. In 2018, nearly half (20.8 million) of all US renters paid more than 30 percent of their income on housing costs, and a quarter of all renters (11 million) paid more than half their income on housing.

Renters are less financially stable than homeowners, with lower incomes and more income volatility. They’re also less prepared to deal with a sudden emergency or income loss like the one many Americans are facing now; in 2018, one-fifth of renters reported that they didn’t have $400 to cover unexpected costs. And low-income renters are more likely to lose their jobs during the pandemic because many work for service industry businesses that are furloughing workers.

The US Department of Housing and Urban Development offers rental assistance, such as vouchers and public housing, to help ease people’s housing cost burden. But those programs have been chronically underfunded, and as of 2016, only one in five renters who qualified for and needed housing assistance received it.

With a record number of people filing for unemployment amid the pandemic, the number of renters who need help meeting their basic needs is likely to skyrocket. And without financial assistance, these renters face the risk of homelessness or overcrowding in the homes of family or friends—situations that carry severe health risks during a pandemic. These risks are even greater for people of color, as Black and Latinx people are more likely to be renters and to work in the service sector.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed by Congress in late March, included funding (which some groups say isn’t enough) to ensure the nearly five million households who already received housing assistance before the pandemic continue to receive that assistance and that the amount the government pays toward their rent increases if they lose their jobs.

But the CARES Act doesn’t offer housing assistance designated specifically for the remaining 18 million low-income renter households who already qualify and need assistance but don’t receive it, nor does it cover the growing number of renters who will suddenly need help as businesses shed jobs. The act’s one-time $1,200 check can help in the short term, but there’s no clear end date for this pandemic. Without additional money coming in, that amount won’t cover a few months’ rent for most people, even for the renters who live in the 50 percent of unsubsidized rental units in the US that cost less than $1,000 a month.

“We’re concerned about our whole portfolio of properties. You never think about that as a possibility. You think about a fire in one building, and you have insurance for that. But not for this.”

Nina Janopaul, president and CEO of the nonprofit Arlington Partnership for Affordable Housing
The CARES Act does include an eviction moratorium for some renters (federal agencies are protecting a much larger share of homeowners from foreclosure), and many cities and states are enacting their own moratoria to fill gaps in eviction protections for renters. But eviction moratoria aren’t enough. Eventually they end, and renters could find themselves on the hook for multiple months’ rent. Given renters’ economic precariousness before the pandemic, many may not have enough savings to pay back all that rent to their landlords.

Because the situation is changing so rapidly and the economic effects of COVID-19 are expanding every day, the share of tenants who won’t be able to pay their rents in the coming months isn’t yet clear. But many property owners trying to communicate with their tenants to find out how the pandemic is affecting them are bracing for massive losses in rent for the foreseeable future.

Not all landlords are large organizations with huge operating reserves. Nearly half of all rental units are owned by individual investors, often known as “mom and pop” landlords. Most building owners, especially landlords who offer affordable units, have narrow profit margins. Thomas said that, after all expenses are taken into account (except capital expenditures), he makes around $100 profit per unit each month.

“There’s a perception that property owners are flush with cash,” said Eiran Feldman, president of First InSite Realty in Chicago. “At the end of the day, there are a lot of small operators, a lot of family businesses, and this is their livelihood. They also do it with a lot of care and passion, and they’re under tremendous stress and tremendous responsibilities. This industry is very fragile.”

Nearly half of all rental units are owned by individual investors, often known as “mom and pop” landlords.
When those smaller landlords with less operating reserves don’t have steady rent payments coming in, they could face the risk of not being able to repair or improve their properties and missing utility payments or property taxes—which could result in their units being taken away from current or future renters.

Before the pandemic, the US was already facing a severe shortage of affordable housing. If the nonprofit and for-profit owners who currently operate affordable housing lose this ongoing revenue source, the country could risk losing some of the few affordable housing options it does have. And there’s no guarantee the investors who buy those properties would keep their units affordable or maintain them at the same quality.

Nina Janopaul, president and CEO of the nonprofit Arlington Partnership for Affordable Housing, said owners, especially affordable housing operators, are facing an unprecedented threat. “We’re concerned about our whole portfolio of properties. You never think about that as a possibility,” she said. “You think about a fire in one building, and you have insurance for that. But not for this.”

INDUSTRY GETS RELIEF

The Consolidated Appropriations Act of 2021, signed into law on Sunday, encompasses $900 billion in coronavirus relief and $1.4 trillion in government spending. The legislation includes several measures that benefit apartment firms, including $3.5 billion for Community Development Block Grants, $1.35 billion for the HOME Investment Partnership Program and $13.5 billion for Project-Based Rental Assistance, according to a statement last week by the National Multifamily Housing Council (NMHC).

The package also provides $25 billion to the Treasury Department for a new Emergency Rental Assistance program, along with various measures expected to shore up household finances, including $300 in federal unemployment assistance through March 14 and direct payments of $600 to individuals earning up to $75,000 per year and married couples earning up to $150,000 per year.

Many Americans continue to struggle with rent payments as the economic damage triggered by the coronavirus persists. The U.S. unemployment rate dropped to 6.7 percent in November but remains elevated compared the February rate of 3.5 percent before the onset of the pandemic.

NMHC found that 89.8 percent of households made a full or partial rent payment by December 20, based on a survey of 11.5 million professionally managed apartment units across the country. That figure was down by 3.4 percentage points, or 392,952 households, compared to the share who paid rent through December 20, 2019.

Last Chance to Register for OHFA Required Fair Housing Training at the OK Housing Conference

Must register by end of year…

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Fair Housing Training Requirements Per 2021 QAP

Must register for conference by December 31, 2020

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The Oklahoma Housing Conference is scheduled for May 24, 25 & 26, 2021, at the Reed Conference Center in Midwest City, Oklahoma.

Per the 2021 QAP, Fair Housing training verification is now required at carryover for Round 1 2021 only. If you are planning to complete the Fair Housing training at the conference to meet this OHFA requirement for Round 1 Applicants, you must be registered for the conference (and choose the Fair Housing Training you need) no later than December 31, 2020. No exceptions.

Requirements: The developer, the architectural firm, and the general contractor will each be required to have one representative complete training in Fair Housing Accessibility, Design, and Construction prior to application. The training must be a minimum of four (4) hours in length. The individual representing the developer and the general contractor can be the same person.

The proposed Management Company for any application for 2021 will also be required to have two individuals complete training on ADA and Fair Housing training from the management perspective prior to the application submission.

The Fair Housing Trainings for both Developers & Property Managers held at the Oklahoma Housing Conference will meet OHFA requirements and will be acceptable for two (2) years from the date the training was completed. For a list of OHFA guidelines/rules, Click Here.

Documentation Requirement:Proof of attendance at the Fair Housing training held during the Oklahoma Housing Conference is required to be eligible for credit. Documentation will be given to each registrant who attends either or both Fair Housing Trainings at the conference. Acceptable documentation will also be provided to OHFA by the office of the Oklahoma Coalition for Affordable Housing.

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Register Now for the 2021 OK Housing Conference
Please note: If your company is a sponsor of the conference, please email ocah if you have not received an email with registration information regarding your allotted complimentary admission tickets for the conference.
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