The need for disaster-resistant housing becomes tragically clear

by Janet Viveiros, Center for Housing Policy

A home in Union Beach, N.J., destroyed by
Hurricane Sandy. Credit: iStockphoto

In light of the deaths and destruction caused by the tornado in Moore, Okla., yesterday, as well as the tornadoes in Texas and Oklahoma this past week, the need to build disaster-resistant housing is clear. As the disturbing images of damage caused by the tornadoes remind us, many households across the country are very vulnerable to natural disasters. In addition to offering assistance to the victims of these tornadoes, moving forward we must also look at how we can reduce this loss of life and widespread devastation in the future.

I recently attended the Build It Better Leadership Forum which brought together leaders of various industries to discuss how we can “build it better” to improve the safety and resiliency of buildings and communities in the face of hurricanes like Hurricane Sandy. While the focus of the forum was on hurricane risks, the lessons about the importance of sound construction techniques and disaster preparedness are applicable to any natural disaster. One major challenge mentioned several times during the forum was how to effectively educate and make resources available to help homeowners and property owners improve the safety of homes before disaster strikes.

Several organizations and states are actively looking at ways to improve home safety through better construction of new houses, and retrofits of older houses. The Federal Alliance for Safe Homes (FLASH) is a no-profit consumer advocate for disaster resistant housing. The organization provides information to consumers and builders about ways to construct or retrofit homes to better withstand various natural disasters. This includes detailed designs and estimated costs of safe rooms which offer greater protection to families and individuals sheltering in their home during a tornado or storm with high winds.

Improving the safety and resiliency of a home is a concern for all households. However, low- and moderate-income households have fewer resources available to invest in disaster resistance retrofit projects for their homes. Low-income individuals are often the least able to prepare for and respond to the damaging impacts of natural disasters. It is important that state and local governments, as well as local non-profits, examine ways to make disaster retrofit projects affordable to low- and moderate-income households.

One state that has taken the lead in this area is South Carolina. The South Carolina Safe Home program offers grants and matching funds to low- and moderate-income homeowners in coastal counties to complete retrofits on their homes to mitigate damage from severe storms like hurricanes. The mitigation measures also make homeowners eligible for discounts on homeowner insurance policies. These incentives are just one way to help low- and moderate-income households to make their homes safer. All states and local governments should examine the risks that their communities face, as well as the special needs of vulnerable populations and low- and moderate-income households, and then develop strategies to help all households prepare before a disaster.

My thoughts are with all those impacted by the tornadoes this week.

House panel pushes FHA on reverse mortgages, multifamily consolidation and more

by Ethan Handelman

The Housing and Insurance Subcommittee of House Financial Services examined three Deputy Assistant Secretaries from FHA’s Reverse Mortgage, Multifamily Housing, and Healthcare Programs on May 16. Members had sharp questions for the witnesses who were pushed to defend agency decisions and identify corrective measures in the face of a possible FHA draw on the Treasury. Participating members were Neugebauer (Chair, R-TX), Luetkemeyer (Vice Chair, R-MO), Capuano (Ranking, D-MA), Royce (R-CA), Cleaver (D-MO), Clay (D-MO), Beatty (D-OH), Himes (D-CT), Fitzpatrick (R-PA), Heck (D-WA), Sherman (D-CA), and Ellison (D-MN).

Reverse mortgages

Charles Coulter, Deputy Assistant Secretary for Single-Family Housing faced sharp questions from Rep. Neugebauer on the capital shortfall identified in FHA’s actuarial report and the substantial role of the reverse mortgage program in losses thus and to come. Coulter emphasized the importance of the reverse mortgage option for seniors facing financial hardship, particularly now that private capital sources have fled and FHA is the only option in the market. Coulter identified steps taken already to reduce up-front draws and improve loss mitigation efforts but focused attention on the Congressional action needed to empower FHA to take further needed steps, particularly around underwriting non-borrowing spouses. Reps. Heck and Fitzpatrick noted that their proposed bipartisan bill would provide FHA the need authority to get the program on track. Reps. Royce and Luetkemeyer both pressed Coulter to address local-level proposals to seize mortgages by eminent domain and then refinance through FHA, asking him to mirror the GSE refusal to accept such loans. Coulter shared their concern and offered a formal written response rather than an off-the-cuff policy decision. Rep. Capuano raised further questions about whether separate accounting treatment for the reverse mortgage program would bring clarity and whether the agency could restrict private originators from using actors and game-show hosts as spokespeople on late-night television ads (Rep. Capuano had noticed the ads during his evening viewing).

Multifamily

Marie Head, Deputy Assistant Secretary for Multifamily Housing, presented HUD’s proposal to consolidate its multifamily operations. She, too, faced tough questioning on that and other fronts. Representatives Sherman, Clay, Cleaver, and Ellison each raised concerns about loss of trained staff, local relationships, and valuable asset management capability as a result of consolidation. Rep. Neugebauer pushed for an explanation of FHA’s role in the multifamily market, whether it had expanded beyond its mission, and whether it had focused too much on properties outside its existing portfolio, particularly with refinancing. DAS Head clarified that less than 10 percent of the refinancing came from the GSE portfolio, that the rough breakdown of loans is 25 percent rural, 50 percent suburban, and 25 percent urban, and that 40 percent of the overall business now is refinancing. She also emphasized the need for additional commitment authority so that FHA Multifamily could continue operating through the balance of the year.

Health care

Roger Miller, Deputy Assistant Secretary for Healthcare Programs, faced fewer questions overall from his testimony on FHA’s financing of hospitals, nursing homes, and assisted living facilities. Rep. Neugebauer explored whether some of FHA’s loans to hospitals consumed a disproportionate share of commitment authority, noting in particular New York Presbyterian Hospital. Miller explained how the loan relationship began in the 1980s when the hospital was struggling and evolved over time as the hospital improved and merged to its current form. He also noted their $81 million commitment to indigent care.

See written testimony and archived webcast on the hearing page.

Senate hearing shows government guarantee necessary, explores options for private capital bearing mortgage risk

by Ethan Handelman, National Housing Conference

The Senate Banking Committee’s Subcommittee on Securities, Insurance, and Investment heard testimony on Tuesday from a range of experts on mortgage finance. Senators in attendance, all with thoughtful questions, were Jon Tester (Chair, D-MT), Johanns (Ranking, R-NE), Jack Reed (D-RI), Mark Warner (D-VA), Elizabeth Warren (D-MA), and Bob Corker (R-TN). The title of the hearing “Returning Private Capital to Mortgage Markets: A Fundamental for Housing Finance Reform” accurately represents the theme of the questions and testimony, which focused on different mechanisms for causing private capital to bear risk ahead of government.

The witnesses largely agreed that in the short term, a continued government guarantee role was necessary to enable mortgage markets to function and that change should come gradually. Although several witnesses suggested that eventually government backing could be removed entirely, Mark Willis observed that at some point the cost in reduced access and affordability might not be worth further reduction of the government’s role.

Senator Warren encapsulated the discussion by observing that all the witnesses favored a layering of risk with private capital ahead of an explicit government guarantee paid for by a fee. The witnesses vary in their recommendations for getting the pricing of the guarantee right and the mechanisms for layering risk, and each has concerns about the incentives and loss-bearing capacity of the entities bearing risk.

Senators explored several structures for risk-layering, including an A-piece/B-piece structure similar to the Freddie Mac K-series, credit-linked notes, and an insurance-based model, with Senators Corker and Warner particularly interested in the A/B structure. Questions also raised issues of how and when mortgage limits should come down, what we should look for as FHFA causes Fannie Mae and Freddie Mac to test risk-sharing structures, and whether requiring private capital first limits government’s ability to step in when private capital flees.

The hearing closed on an optimistic note, as Senator Warren raised the possibility of data-tagging as a new source of much better information on loan performance that could inform future regulation.

List of witnesses with links to testimony plus archived webcast:

• Dr. Mark A. Willis [view testimony]
  Resident Research Fellow
  Furman Center for Real Estate and Urban Policy, New York University
• Mr. Andrew Davidson [view testimony]
  President
  Andrew Davidson & Co. Inc.
• The Honorable Phillip L. Swagel [view testimony]
  Professor of International Economic Policy
  University of Maryland School of Public Policy
• Dr. Robert Van Order [view testimony]
  Chairperson
  Department of Finance and Professor of Finance and Economics, George Washington University School of Business

Permanent Supportive Housing Helps Struggling Veterans Recover

by Maya Brennan, Center for Housing Policy

Permanent supportive housing helps chronically homeless veterans make headway toward recovery. While some veterans become homeless due to a temporary economic setback, veterans who are chronically homeless typically have more substantial challenges to overcome. As we've noted before on this blog, ongoing support can help veterans recover from traumatic brain injury, substance use disorders, military sexual trauma, and other similarly serious impediments.

Veterans homelessness is an important national issue, but it is also personal to me. Through my volunteer activities outside of NHC, I have built friendships with homeless veterans struggling through recovery.

NHC’s new Veterans Permanent Supportive Housing guide highlights strong programs that provide a combination of services and affordable housing for the men and women who have served our nation but now need our nation’s help in return. The examples show that three key elements are essential for success:

1. property-based rental assistance to allow rents to be affordable for extremely-low income veterans,
2. little or no hard debt so that properties’ rent revenue can support operating costs rather than mortgage payments, and
3. dedicated supportive services funding to ensure the ongoing availability of the services that residents need.

Silver Star Apartments in Battle Creek, MI

Places like Silver Star Apartments in Michigan, Hope Manor in Chicago, New Directions in Los Angeles, and American Legion Apartments in rural Connecticut all exist because of programs like HOME, project-based HUD-VASH and Housing Choice Vouchers, Low-Income Housing Tax Credits, Enhanced Use Leases of VA land, and other federal sources. State and local governments also provide important assistance through administration of federal funding programs as well as state and local grants, tax credits, soft loans, and land donations.

We need to keep and strengthen the programs that work. See the guide for our six key recommendations.

Our nation’s most disadvantaged veterans need our help. Let’s answer the call.

(This blog post is dedicated to Charlie, a Michigan native, homeless veteran, and fantastic human being who we lost too soon.)

More than a quarter of working renter households spends more than half of income on housing

by Janet Viveiros, Center for Housing Policy

The Center's new Housing Landscape 2013 report, which I co-authored with my colleague Maya Brennan, is out today. It finds that severe housing cost burdens among working renter households rose for the third consecutive year due primarily to falling incomes and rising rental housing costs. Nationally, working renters saw their housing costs rise by 6 percent from 2008 to 2011, while their household incomes fell more than 3 percent. Renters are stretched so thin by growing housing costs that many face impossible choices.

While severe housing cost burdens stayed relatively stable for working homeowners between 2008 and 2011, working homeowners have not avoided the effects of falling incomes. In fact, while housing costs among homeowners fell some 3 percent over the study period, household incomes among these homeowners fell even more than they did for renters, down more than 4 percent over the three-year span. Roughly one in five working homeowners experienced severe housing affordability challenges throughout this period – despite falling home prices and mortgage interest rates.

Between 2008 and 2011, the rates of severe housing cost among working households increased in 24 states and 18 major metropolitan areas. Only 1 state and 2 metropolitan areas saw decreases in severe housing cost burden rates during this time were few.

For many more detailed results, find the full report at www.nhc.org/landscape.

Rep. Mel Watt nominated for top FHFA post

by Ethan Handelman, National Housing Conference

Yesterday, President Obama nominated Representative Mel Watt to lead the Federal Housing Finance Agency (FHFA), the agency which oversees Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The current FHFA Acting Director, Ed DeMarco, has served in an acting capacity since 2009.

President Obama congratulates Rep. Watt
at the nomination announcement.

Representative Watt, a Democrat, currently represents North Carolina’s 12th district. He serves on the House Financial Services Committee, including the Subcommittee on Capital Markets and Government Sponsored Enterprises and the Subcommittee on Financial Institutions and Consumer Credit, which has responsibility for much housing policy.

The post of FHFA Director requires Senate confirmation, and it is unclear whether Rep. Watt will clear that hurdle. At a recent Senate hearing on mortgage finance reform, Sen. Corker expressed disapproval of a possible nomination of Rep. Watt in reaction to circulating rumors. Statements in favor of confirmation are already appearing, and the President endorsed Rep. Watt strongly at the nomination announcement.

Pre-purchase counseling reduces mortgage delinquency, no matter how it’s delivered

by Maya Brennan, Center for Housing Policy

New research from Freddie Mac suggests that pre-purchase counseling may be even more effective at reducing mortgage delinquency than previously thought. And the delivery method? It doesn’t seem to matter.

According to the new study, pre-purchase counseling reduces 90-day mortgage delinquency rates by 29 percent. The findings relate to low- and moderate-income, first-time homeowners with Freddie Mac mortgages originated between 2000 and 2008. Prior research on mortgages originated in the 1990s found a 19-percent reduction in 90-day delinquency rates.

While the housing field has long recognized the effectiveness of pre-purchase counseling, the evidence had largely suggested that more personal, in-person instruction was better. This study calls that into question. The results were nearly the same whether the counseling was delivered in a classroom, via home study, or even on the phone or online.

This is a stunning change from the state of knowledge previously.

In the earlier study of mortgages originated in the 1990s, the reduction in delinquency rates was largest for individual counseling, followed by classroom, and then home study. Phone and online counseling had no significant effect at that point.

Rural borrowers? People with inflexible schedules? It may be time for you to exhale. It looks like we’ve gotten a lot better at developing effective ways to deliver counseling remotely. (See new online counseling efforts by the Housing Partnership Network and Freddie Mac.)

And how does housing counseling get funded? No single source dominates, but federal budget watchers take note: This highly cost-effective tool for preventing mortgage delinquency gets more than a third of its funds from HUD housing counseling funds, CDBG, HOME, and other federal sources. And these sources have been cut or are well below historical levels.

If you are just such a federal budget watcher and a housing-minded professional to boot, we encourage you to attend this Friday's Annual Budget Forum, where a panel of experts from HUD, PHAs, and nonprofits will discuss the impacts of the President's FY 2014 budget proposals on these and many other important housing programs. You'll also hear from me about the latest data on housing affordability for working households. Register online (and free) here.