Tuesday, December 30, 2008
On Monday, HUD approved requests for federal assistance for both Florida and Colorado.
Three Florida communities that have been hit particularly hard by the foreclosure crisis - Hillsborough County, Cape Coral and Fort Myers - will receive $28 million dollars in total from the federal housing agency.
According to RealtyTrac, the Cape Coral-Fort Myers area had the highest number of foreclosure-related filings in November, with one in every 59 housing units filing.
Additionally, HUD has approved Colorado's request for $34 million in NSP funds. Among the areas hardest-hit by foreclosures, the cities of Denver, Colorado Springs, Aurora and metro Denver’s Adams County have separately applied for a total of $19 million in HUD foreclosure-relief funds.
Monday, December 29, 2008
A recent article published on HousingWire.com reveals that the Department of Housing and Urban Development (HUD) has decided to cut the FHA Secure troubled borrower refinancing program as of December 31, 2008. This decision results from the program's inability to address the widening scope of borrowers who are facing foreclosure and in need of modifying their home mortgages.
Sunday, December 28, 2008
Tuesday, December 23, 2008
Chairman Bair made it clear that in her view these claims have no merit. “I think we can agree that a complex interplay of risky behaviors by lenders, borrowers and investors led to the current financial storm,” she said. “To be sure, there’s plenty of blame to go around. However, I want to give you my verdict on CRA – it is not guilty.” She further pointed out that only about one in four subprime loans were originated by the banks covered under the CRA during the heyday of these risky mortgage products from 2004 to 2006.
An editorial in The New York Times reflected this point of view, noting that it made little sense to blame a 31-year old act for comparatively recent problems and that the regulations promoted under the act “actually impose restraints on the riskiest kinds of subprime lending.”
Following Chairman Bair’s speech, Roberto Quercia and a team of researchers from the
The findings showed that the loans in the Community Advantage Program pool had significantly lower default rates than the subprime loans, and even than Federal Housing Administration loans and adjustable-rate mortgages in the prime market. These findings suggest that the current financial crisis is rooted in the widespread use of poorly-underwritten loans with risky features, rather than the act of lending to low- and moderate-income families.
Multiple other reports and statements have echoed the benefits of the CRA and provided evidence that it has not been a major factor in the foreclosure and credit crises. These include:
CRA Not Responsible for Subprime Lending Abuses by Comptroller of the Currency, Administrator of National Banks
CRA is Not to Blame for the Mortgage Meltdown by the Center for Responsible Lending
Defending the CRA by David M. Abromowitz and Cathy Minehan, Center for American Progress
It’s Still Not CRA by Ellen Seidman, New America Foundation
Statement from National Civil Rights, Consumer, Community Development and Housing Groups Regarding Attacks on the Community Reinvestment Act (CRA)
The Community Reinvestment Act: A Welcome Anomaly in the Foreclosure Crisis by Traiger & Hinckley LLP, 2008.
Video, audio and PowerPoint files for Chairman Bair’s speech and the Center for Community Capital’s presentation are available on New America Foundation’s Web site.
Monday, December 22, 2008
• Link national housing tools to state & local housing tools;
• Insure HUD has a passion for preservation; and
• Recognize that the risk management of the system for raising residential capital has to be heavily regulated. Thus, the oversight and regulation of the delivery system for residential capital has to be removed from HUD.
Until the 2008 mortgage meltdown, we never understood the role that housing has in the overall economy. As a result, we have avoided creating a national housing policy because it was both too hard and overridden by local market conditions and political interests. Demand is a local issue but supply has to be the national priority. We have learned that, as it is with utility power, it is too risky not to have government insuring uninterrupted ‘power’ to the housing market.
(a) Create a policy for housing the next generation. Markets move faster than government, and policy is needed to stay ahead of supply issues. The national housing policy has to articulate a balanced approach, elevating rental housing as a more viable option. It should declare that shelter is an entitlement, that housing capital has to be regulated, and that tax policies need to support supply. The preamble of this policy should provide guidance for a residential capital system.
(b) Improve and update the national tool box for lowering the cost of housing for the nation, 80% of whom cannot afford full market cost of shelter. Along with setting the standards and managing the risks of housing affordability and quality, designing the most powerful and relevant set of tools are HUD’s primary functions.
(c) Expand the primary reach of HUD. Create a network of regional linkages between HUD and State and local housing agencies.
(d) Remove anything to do with capital formation and management of its risks from HUD to permit its focus on creation of relevant tools and risk management.
(e) Create the federal housing finance bank. Bundle together the entities in the business of residential capital creation and all forms of insuring the instruments for raising capital. Move them into a bank and regulate like heck. The nation’s economic health is at stake, and it can contaminate the world.
Only then can we make decisions about the relevance of the government entities that are key to delivering capital to the residential industry, i.e. the Federal Housing Administration, Fannie, Freddie, and the Federal Home Loan Bank.
Douglas Moritz is a Principal at JMB Preservation Advisors, a consulting firm in Rockville, Maryland.
Thursday, December 18, 2008
Wednesday, December 17, 2008
H4H became effective October 1 and has only collected 312 applications to date. Many policymakers argue that the program's strict eligibility guidelines and a lack of participation among mortgage lenders prevent more struggling homeowners from receiving aid.
HUD leadership, including current Secretary Steven Preston and FHA Commissioner Brian Montgomery have shouldered a large extent of the blame attached to H4H's inability to reach a wider scope of homeowners facing foreclosure. However, both Preston and Montgomery have recently defended themselves publicly, stating that frustration with the program's lack of success has been misdirected.
Monday, December 15, 2008
To read more about this announcement and Secretary-Designate Donovan, check out this article in the Los Angeles Times, which provides an interesting biography on Donovan and discusses his experience working with multifamily housing.
USA Today also published an article about Donovan that includes a quote from NHC President and CEO Conrad Egan.
Sunday, December 14, 2008
Please see this detailed story from The Associated Press about Secretary-designate Donovan and the announcement, which includes a quote from NHC President and CEO Conrad Egan.
It is important to note that the current topic for expert posts on "Open House" is "Strategies for Strengthening the Effectiveness of the U.S. Department of Housing and Urban Development."
Guest bloggers that have already contributed posts below on this topic include: Jeffrey Lubell, executive director of NHC research affiliate the Center for Housing Policy; NHC Executive Committee Member Carol Lamberg, executive director of Settlement Housing Fund; Anne Lindgren, chair of the Lantern Group, and former executive committee member for NHC and Settlement Housing Fund (joint post with Carol Lamberg); and NHC Trustee Larry Simons, former Federal Housing Administration commissioner.
Thursday, December 11, 2008
Despite the critical need for an effective and coordinated response to these housing issues, they routinely fall between the cracks of the jurisdictions of the different federal agencies. The U.S. Department of Housing and Urban Development administers a great number of important and effective housing assistance programs that merit continued and expanded support. But its mission, mandate, and funding all need to be expanded to cover the full range of pressing housing issues facing the nation.
Yes, by all means, let’s preserve and strengthen our existing stock of public and assisted housing and expand the number of families benefiting from housing vouchers. But ultimately, the base of support for these programs will be much stronger if the agency charged with administering them is seen as a key part of the solution to the critical housing challenges facing a broad cross-section of America.
Jeffrey Lubell is executive director of NHC's research affiliate the Center for Housing Policy, which specializes in developing solutions through research.
Monday, December 8, 2008
Read the full report here.
Guest Bloggers: Carol Lamberg and Anne H. Lindgren on a Transparent Approach to Permanently Affordable Housing
Political reality simply gets in the way of good housing policy. Politicians from high cost areas are reluctant to admit how much it costs to finance, build and maintain modest housing. Government agencies impose unrealistic cost limits that are popular politically, but they do not work, especially when enacted in statutes that are hard to amend. The result has been a consistent effort to mask the true costs by providing a maze of shallow subsidies, soft second loans and tax incentives. Motivated developers, with an army of lawyers and accountants, have learned how to navigate this maze. The typical development pro-forma now easily includes as many as six sources of capital. Often 40% of the funds pay for non-construction costs. The process of putting the deals together is time consuming and ultimately more costly than necessary, although nobody really knows by how much.
The maze, often called creative financing or leveraging, has other inherent problems. The various programs have different requirements, the subsidy terms don’t match the financing terms, and the affordable housing projects are often left in jeopardy.
So let’s forget about realism and at least start out by advocating simpler, transparent, permanently-affordable housing programs. There are examples of success to be replicated.
Federal Housing Administration (FHA) insurance with project-based Section 8 programs worked well until attacked by the Reagan administration as a budget breaker. The attackers used deceptive calculations and cited a few failed projects to end the program. The Reagan math, actually invented in prior administrations, involved adding up the entire twenty years of a subsidy contract and crying “shame”, with claims of sticker shock. When the Section 8 contracts expired, many owners converted to market-rate housing. Others marked “to-market” a program conjured up by the Clinton administration.
A new administration should let good regional administrators set realistic cost guidelines, with reasonable incentives. Tax incentives, especially when “as of right,” have proven an effective way to encourage production. Families should pay twenty-five percent of gross income or thirty percent of income net of taxes as rent. If they do not pay, they should face eviction. A maintenance budget should be prescribed for local operating costs, and whatever is left from rental income should be available to pay debt service on a mortgage. With workable FHA insurance and contractual rent subsidies, banks could start lending again.
There are many variations on the theme. Britain and the Netherlands have funded very large nonprofit organizations that have taken over public housing and created new schemes to satisfy “customers.” Sweden has no income limits for public housing, which is very well maintained. The families who cannot afford the rent receive housing allowances. Singapore lets families buy their high rise apartments with twenty percent of their retirement savings, and after five years in residence, can sell the apartments on the open market.
Whatever the budget predicament, affordable housing is still an excellent stimulus, with a great multiplier effect to boost the economy. Young people, poor people and middle income families still cannot find decent housing within their means in many cities. In areas with a glut, rent allowances could make vacant units affordable. In areas with low or no vacancies and high costs, we still need new, government-supported housing. And we know that families who feel safe in their housing become more productive citizens.
We would like to avoid complex creative financing and build permanently affordable housing that would become a source of pride for America, as opposed to a maze of financial subterfuges that takes thousands of accountants to unravel.
Carol Lamberg is the executive director for the Settlement Housing Fund and co-chair of the New York Housing Conference. She also serves on the executive committee as the regional affiliate representative for the National Housing Conference.
Anne H. Lindgren currently serves as vice president of the Michaels Development Company. Ms. Lindgren is chair of the Lantern Group and has served on the executive committees for the Settlement Housing Fund and National Housing Conference.
Friday, December 5, 2008
Thursday, December 4, 2008
Wednesday, December 3, 2008
This problem will have to be rectified by a top down approach. The incoming HUD Secretary should be a person of major stature, preferably with extensive housing experience.That person should be made part of the economic policy team. I realize that morale is low at HUD now, but strong leadership can turn it around. A strong leader will attract others to fill the key positions if there is the realization that housing once again has been recognized as having an important role in our federal government.
Lawrence B. Simons is the former Federal Housing Administration commissioner, an NHC Board of Trustees member and a Life Trustee of NHC.
Tuesday, December 2, 2008
The Neighborhood Stabilization Program provides grants to communities laden with high foreclosure rates and was authorized under Title III of H.R. 3221, the "Housing and Economic Recovery Act of 2008." Las Vegas, Nevada currently has the highest foreclosure rate in the nation and is eligible to receive approximately $14 million in Neighborhood Stabilization funds .
Read more about the high rate of home foreclosures in Las Vegas here.
Wednesday, November 26, 2008
This new proposal requires the Federal Reserve to spend up to $500 billion to buy securities backed by mortgages that were guaranteed by government sponsored enterprises Fannie Mae and Freddie Mac. The Federal Reserve will also buy up to $100 billion of Fannie Mae and Freddie Mac's debt in order to expand their lending lines.
Meanwhile, the Federal Reserve and United States Treasury Department will also utilize a $200 billion program for a Term Asset Backed Securities Loan Facility that will lend against securities backed by car loans, student loans, credit card lending and small business loans that were backed by the Small Business Administration. The Treasury will provide $20 billion in credit protection to the Federal Reserve in connection to this program.
United States Secretary of the Treasury, Henry Paulson, released a press statement yesterday announcing the program.
The Washington Post reports on this crucial matter here.
Tuesday, November 25, 2008
To date, the Hope for Homeowners program has only received 111 applications from distressed homeowners – far less than the 13,000 people the program was intended to help. Steven C. Preston, secretary of housing and urban development, stated in speech last Wednesday that the new rules are intended to encourage more homeowners to apply for aid.
Read more here.
Monday, November 24, 2008
The statement was drafted in response to Sheila Bair's recent Federal Deposit Insurance Corporation (FDIC) proposal for a loan modification program that appropriately recognizes the widening scope of foreclosures occurring across the United States.
Congressman Frank, "moved" by the task force's statement, quickly drafted a letter to Treasury Secretary Henry Paulson urging the use of Troubled Assets Relief Program (TARP) funds in order to stem foreclosures.
Read Congressman Frank's letter here.
Thursday, November 20, 2008
Abromowitz Highlights Success of Agencies and Programs That Have Helped Low- to Moderate-Income Homeowners
Today, the Baltimore Sun published an opinion editorial by Abromowitz, in which he notes that little attention has been paid – both during the presidential campaign and otherwise – to solutions that have enabled families with average or below-average incomes to afford a home or rent a decent apartment. These solutions are what Abromowitz calls "Homeownership Done Right."
Abromowitz highlights several notable agencies and programs that have helped low- to moderate-income families across the country afford their homes, contributing to decreased incidences of default among this group. He cites the Massachusetts Affordable Housing Alliance and Self Help in North Carolina as two agencies who have been successful in aiding these homeowners.
Additionally, Abromowitz emphasizes the success of community land trusts in more than 100 working-class neighborhoods across the country – which report a less than 1 perfect foreclosure rate. He also notes the importance of pre-purchase homeownership education and fixed-rate loans to help low- to moderate-income families get into and keep their homes, resulting in decreased incidences of default.
Read the full article here.
Wednesday, November 19, 2008
National Foreclosure Prevention and Neighborhood Stabilization Task Force Responds to FDIC's Loan Mods for Families Facing Foreclosure
“We applaud the Federal Deposit Insurance Corporation (FDIC) for introducing its Loss Sharing Proposal to Promote Affordable Loan Modifications. This is the most significant proposal to date to modify loans on a wholesale basis – a critical step toward a solution that is in proportion to the enormous scope of the problem. FDIC estimates its proposal could help prevent as many as 1.5 million foreclosures in 2009 – more than five times the estimated impact of the plan announced last week by the Federal Housing Finance Agency (FHFA). Without bold action, the foreclosure crisis will worsen, dampening prospects for an economic recovery.
FHFA and its partners should also be commended for recognizing the need for mass loan modifications. However, the chief problem with their plan is its limited scope.
According to Mark Zandi, chief economist for Moody's Economy.com, 1.6 million Americans will lose their homes in 2008 either in a foreclosure or distressed sale. Another 1.9 million are projected to lose their homes in 2009. RealtyTrac estimates that 765 thousand foreclosure filings were made on U.S. properties in the third quarter of 2008 alone – up three percent from the second quarter and 71 percent from the same period last year. In addition, the Center for Responsible Lending calculates that over 40 million homes will lose value due to proximity to foreclosures.
Unfortunately, foreclosure mitigation efforts to date have not been as successful as anticipated. Credit Suisse estimates that 45 percent of loan modifications done in fall 2007 have already gone back into default. By making the payments affordable to each family based on their income, on a long-term basis, the FDIC plan has a much better chance of success.
We encourage leaders in the Administration, House and Senate to work with the FDIC to implement their proposal, or a plan of similarly wide impact, as soon as possible. Assistance for renters who are impacted by foreclosures should also be integrated into any plan. A wholesale approach to loan modifications that provides incentives for servicers and investors to agree to the modifications, while ensuring that homeowners can afford their modified mortgages, will help shift the tide for families, communities and our nation as a whole.”
The following members of the National Foreclosure Prevention and Neighborhood Stabilization Task Force have signed on to the above statement:
Center for American Progress Action Fund
Center for Responsible Lending
Citizens' Housing and Planning Association
Consumer Federation of America
Enterprise Community Partners
Housing Partnership Network
Mercy Housing Inc.
National Alliance of Community Economic Development Associations
National Community Land Trust Network
National Council of La Raza
National Housing Conference
National Low Income Housing Coalition
National NeighborWorks Association
National Policy and Advocacy Council on Homelessness
NCB Capital Impact
Wisconsin Partnership for Housing Development, Inc.
Tuesday, November 18, 2008
These state and local plans are also available here through the Foreclosure Response project on HousingPolicy.org.
State and local governments have experienced difficulty in forming concrete action plans as they scramble to meet program deadlines. Moreover, each jurisdiction must create a plan that addresses their communities needs in order to make the greatest impact amidst the ongoing foreclosure crisis.
The Detroit Free Press reports that areas such as Detroit, MI are eager to use this funding to purchase foreclosed properties as well as to remove blighted and vacant houses. In Detroit, nearly 45,000 homes are abandoned and sit vacant.
Finalized versions of these proposals must be submitted in final form to the Department on Housing and Urban Development (HUD) by December 1st. The Neighborhood Stabilization Program was created under H.R. 3221, the "Housing and Economic Recovery Act of 2008."
Monday, November 17, 2008
This month's Podcast discusses topics on neighborhood stabilization and features Danilo Pelletiere, research director at the National Low Income Housing Coalition, a DC-based non profit that is dedicated to solving America's affordable housing crisis.
During the Podcast, Mr. Pelletiere reminds us that the foreclosure crisis is not only affecting homeowners, but also single-family and multifamily properties occupied by renters.
To learn more, listen here.
Friday, November 14, 2008
In addition to his students, the blog - which is now available on our "Blogroll" - is written for anyone interested in the topic, serving as a valuable resource for all individuals who want to participate in the conversation about the economic crisis.
Read more here.
Under this program, eligible homeowners would receive a loan modification that requires them to spend no more than 31% of their monthly income on housing expenses. Meanwhile, participating lenders are guaranteed that if the borrower falls behind on their payments post-modification, the federal government will cover up to half of the new losses, in most cases.
This FDIC plan has received praise from many lawmakers including Senate Banking, Housing and Urban Affairs Committee Chairman, Christopher Dodd (D-CT), who supported the proposal yesterday in a Full Committee Hearing. Those who support this plan believe it will endorse sustainable loan modifications and reach a wide realm of troubled homeowners at this critical time. The FDIC believes this program will be able to assist 2.2 million individuals with loan modifications and prevent 1.5 million foreclosures.
Meanwhile, opponents to this proposal do not wish to use part of the $700 billion given to the United States Department of Treasury from the Emergency Economic Stabilization Act (EESA) to fund this program. The FDIC estimates that if enacted, this program could cost the federal government $24.4 billion.
Earlier today, Interim Assistant Secretary for Financial Stability Neel Kashkari submitted written testimony for a hearing with the House Subcommittee on Domestic Policy, which suggested that Treasury Secretary Paulson has taken this plan under consideration.
Read more here.
Wednesday, November 12, 2008
The program will provide assistance through a variety of methods. Options include renegotiating mortgage payment loans to equal 38% of the homeowner's annual income, extending loan terms from 30 years to 40, reducing interest rates or delaying payments on the principal of the loan. The Streamlined Modification Program will take effect December 15, 2008.
In order to qualify for the program, borrowers must have a mortgage that is owned or guaranteed by Fannie Mae/Freddie Mac, presently occupy the home, be 90 days delinquent on their current mortgage payment, demonstrate financial hardship, have not declared bankruptcy and owe more than 90% of what the home is currently worth.
Although this new measure intends to keep homeowners in their homes by using an effective loan modification process that provides individuals with more affordable loans, it has also raised many eyebrows from federal leadership, policy makers and affordable housing advocates alike.
While the program is modeled after a similar loan modification measure taken by the Federal Deposit Insurance Corporation (FDIC) at IndyMac, FDIC Chairwoman Sheila Bair has publicly criticized the Streamlined Modification Program for focusing so narrowly on government sponsored enterprises Fannie Mae and Freddie Mac. Bair also questions the overall implementation of the program and currently advocates for a program that addresses foreclosure prevention through loan modification at a much larger scope.
The FDIC, alongside leadership in the Treasury Department and the Federal Reserve encouraged the federal government to aid "creditworthy borrowers" in a press release today.
Read more here.
Monday, November 10, 2008
The industrial cities of the rust belt and the core inner cities of many metropolitan areas have for decades now faced growing inventories of properties left vacant and abandoned. Unlike most other assets in our market economy, property is by definition unique – no two tracts of property are identical and it's value is always fixed in location. The consequence of this is that the costs of abandonment are never confined to the property itself, and instead spread to adjoining properties and neighborhoods like a contagion. Local governments see revenues decline and costs increase as more and more owners turn away from their properties.
When supply exceeds demand one possibility is to reduce supply by “banking” it. Over the past twenty-five years public land bank authorities have begun to acquire and control excess supplies of vacant, abandoned and tax delinquent properties. The most successful of these is in Genesee County (Flint), Michigan where the land bank moves quickly to acquire a thousand properties a year – demolishing some, stabilizing others, and, when possible, returning properties to the open market with a keen eye toward affordable housing. The Neighborhood Stabilization Grants (HR 3221) provide for the first time a key federal role in local government land banking of surplus properties. When supply exceeds demand in the property markets, the properties need to be converted from liabilities to assets and land banking can be a bridge to stable affordable housing.
Read more of Frank S. Alexander's work on land banking here.
Frank S. Alexander is a Law Professor at Emory University School of Law.
Sunday, November 9, 2008
State and local governments must submit these action plan proposals to HUD by December 1st, leaving little time for revisions to be made.The $3.92 billion program is designed to help communities where home values have fallen because of foreclosed and abandoned houses. While this program could potentially revitalize neighborhoods across America, state and local governments need to act quickly in order to meet their approaching deadlines.
The Washington Post recently detailed the potential use of these funds in Virginia, Maryland, the District and other hard-hit localities. While jurisdictions in Washington, DC will receive $22 million in NSP relief, these jurisdictions face difficult decisions on how to use the funds. Officials are considering whether to buy properties and resell or rent them to low-income residents, or help people hoping to buy the houses. Jurisdictions could also buy blocks of abandoned properties, demolish the homes and then hold onto the land until housing markets improve.
Because these decisions are so timely, the Center for Housing Policy, KnowledgePlex, the Local Initiatives Support Coalition and the Urban Institute have created the Foreclosure Response project to help states and localities determine how to use these funds. Visit HousingPolicy.org for more information.
Friday, November 7, 2008
"The economy needs something sooner" than next year, Rep. Pelosi said, stating that any measure enacted in a lame-duck session of Congress this month would serve as a down payment on additional stimulus enacted later.
Read more here.
Thursday, November 6, 2008
In addition to his promise to aid homeowners facing foreclosure, there has been buzz about the passage of another economic stimulus plan – one that may come sooner, rather than later.
Before the election, Congressional Democrats had discussed a lame-duck session to take up a bill that would inject $150 billion to $200 billion into the economy. If Obama indicates that he would favor a preinauguration special session, Congress could act this month on legislation of this nature.
Obama aides say the lame-duck session could pump as much as $60 billion into the economy in immediate relief in the form of additional outlays for food stamps, extended unemployment benefits and subsidies to the states to minimize their spending cuts.
However, there are risks that would come with this lame-duck session. Many question whether or not the Democrats should risk a Bush veto in a lame-duck session, instead of waiting for Obama to take office so that a more complete recovery package has a better chance of implementation.
Read more about the economic challenges facing Obama here.
Wednesday, November 5, 2008
Additionally, you can view the transcript of his speech here.
Tuesday, November 4, 2008
The Neighborhood Stabilization program provides state and local governments with grants that can be used to acquire and develop foreclosed properties. In doing so, HUD hopes to prevent further decline in home values and reduce neighborhood blight. Eligible grantees must publicize action plan proposals by November 15 that they will then submit to HUD by December 1 in order to receive this funding.
U.S. Representative Barbara Lee (CA-09) acted as a large supporter for the Neighborhood Stabilization Program and worked diligently to include the $4 billion dollar program in H.R. 3221. In Congresswoman Lee's district, Oakland alone will potentially receive $8.2 million for foreclosure mitigation efforts.
On October 16, Congresswoman Lee released a public letter urging State Governor Arnold Schwarzenegger to direct a greater portion of funding to communities in her district, such as Oakland, CA, that have been hit hardest by the foreclosure crisis. Under the Neighborhood Stabilization program, state governments can choose to appropriate additional emergency assistance to areas that have been most severely impacted by the foreclosure crisis in their action plan proposal.
Read more here.
Thursday, October 30, 2008
But tucked away in the bill were some important improvements in existing rental housing programs for lower-income Americans.
First, the bill includes a series of reforms that will make it easier for housing agencies and developers to use “project-based” vouchers to provide affordable rental opportunities in mixed-income settings. (Using these "project-based" vouchers, agencies are currently allowed to tie up to 20 percent of their housing vouchers to particular buildings sites.) Second, the bill expands access for voucher holders to properties funded by HOME or the Low Income Housing Tax Credit, while protecting families against extra out-of-pocket costs for such rentals. Third, the bill increases the amount of Low Income Housing Tax Credits that will be available this year and next. It also contains the first-ever requirement that data be collected on characteristics of the residents of tax credit properties. Knowing more about the age, race, income, disability status and family composition of this group will help inform public policy decisions for years to come.Sometimes big bills provide the opportunity for modest changes that have languished on the legislative to-do list for months or even years. This was definitely one of those times.
Go here for a fuller description of these provisions.
Wednesday, October 29, 2008
In concert with this, NCB Capital Impact recently issued a report called "Preserving Affordability of NSP Funded Foreclosed Properties" on how to use shared equity homeownership strategies as part of the Neighborhood Stabilization process.
Read the report here.
Tuesday, October 28, 2008
As early as last week the delegation, headed by Rep. John D. Dingell (D), asked Treasury Secretary Paulson and Federal Reserve Chairman Bernanke to use their "broad regulatory authority" to "promote liquidity in the U.S. auto industry."
Treasury Department officials said yesterday that automakers are eligible for aid under a broad interpretation of the law that authorized the $700 billion financial rescue.
"The law grants the secretary broad authority to purchase troubled assets that he deems important to improving financial stability"This matter continues to be disputed as other organizations, including insurance corporations and American subsidiaries of foreign banks, request support from the U.S. Treasury Department as well.
Treasury spokeswoman Jennifer Zuccarelli.
Read more here.
Monday, October 27, 2008
The Financial Services Roundtable wrote Treasury officials Friday requesting that the plan to buy $250 billion in bank stock include insurers, automakers, securities dealers and U.S. subsidiaries of foreign companies, including banks.
The Emergency Economic Stabilization Act allows Paulson to invest in any financial institution - including insurance companies. However, when the Treasury drafted rules for spending the first $250 billion to recapitalize banks, the program was limited to banks and bank holding companies. Treasury officials would have to redraft the rules for the program or create a new one in order to buy stock in insurance companies.
Read more here.
Friday, October 24, 2008
These purpose of these resources is to aid states and localities engaged in an expedited process to determine how to allocate nearly $4 billion the federal government is providing to help stabilize the communities that have been hardest hit by the mortgage foreclosure crisis.
Decisions about how to use these funds, distributed by the U.S. Department of Housing and Urban Development through the Neighborhood Stabilization Program (NSP), must be made quickly: Initial Action Plans are due by December 1, 2008, and all money must be obligated for use on a specific project within 18 months of receipt.
To help states and communities make informed decisions about how to allocate and spend these funds, the Local Initiatives Support Corporation (LISC) has developed a dataset with foreclosure "needs scores" for CDBG-jurisdictions within each state. These scores incorporate measures of subprime lending, foreclosures, delinquency, and vacancies to help state and local officials quickly assess the relative needs of different jurisdictions for neighborhood stabilization funding within each state and allocate funds accordingly.
This resource represents the first release from the Foreclosure Response project, and the team plans to release additional materials that can help communities with the process of developing foreclosure prevention and neighborhood stabilization programs. A full set of resources, including a policy guide, interactive discussion forum, and customizable data reports, will be released in the first part of 2009.
The full committee held a hearing yesterday morning to investigate "Turmoil in the U.S. Credit Markets: Examining Recent Regulatory Responses." Bair testified alongside Neel Kashkari, interim assistant secretary for financial stability and assistant secretary for international affairs, U.S. Department of the Treasury; Brian Montgomery, federal housing commissioner and assistant secretary at the Department of Housing and Urban Development (HUD); James Lockhart, chairman of the Federal Housing Finance Agency; and Elizabeth Duke, governor of the Federal Reserve System.
Witness panelists, including Bair, discussed the creation of a plan for standardized loan modification practices to be used by mortgage servicing firms that would provide eligible loans with a partial federal guarantee. This plan would hopefully protect homeowners from foreclosure, which has become an urgent problem as a new study reveals the rate of foreclosure filings have increased 71 percent in the past year.
The creation of programs that encourage loan modifications have become highly debated in light of current economic turmoil. The Department on Housing and Urban Development initiated a program called Hope for Homeowners on October 1 that supports loan modifications with government guarantees, but the program will take time to implement before providing tangible relief to eligible communities.
Read more about yesterday's hearing and the loan modification debate in this article published by the New York Times.
Thursday, October 23, 2008
A recent Reuters article chronicles a problem many homeowners are now facing, as they find themselves “under water” – owing more on their mortgages than their homes are worth. In fact, nearly one in six U.S. homeowners are finding themselves dealing with negative equity home values, which could further threaten the U.S. economy with a new wave of foreclosures and bankruptcies. New data from Moody’s says that approximately 12 million homeowners owe more than their house is worth.
Read more here.
This hearing is part of a five-part series scheduled by Committee Chairman Henry Waxman (D-CA) in light of the current economic crisis. It is highly unusual for committees to hold hearings this late in the year because of the hectic election season.
The hour-long version of this episode can be found here.
Alternatively, NPR featured a 12-minute companion piece about the topic on its show All Things Considered, which you can listen to here.
In the same vein, a recent Opinion Editorial in the New York Times highlights the debate over who is to blame for the foreclosure crisis.
Tuesday, October 21, 2008
Chairman Bernanke recommended that Congress should not only use this potential legislative measure to boost consumer spending, but also to increase accessibility to credit lines. In doing so, Bernanke believes a second stimulus plan will promote job creation and economic growth.
Today's edition of the Washington Post reports on this crucial matter.
Read more here.
Monday, October 20, 2008
Sunday, October 19, 2008
Friday, October 17, 2008
No final decisions have been made on details of the package or changes to the congressional schedule, but Pelosi said lawmakers will hold public hearings on a variety of spending proposals during the next few weeks to assemble a package that could be put to a vote soon after the election on Nov. 4. The Senate is already reconvening the week of Nov. 17; several Democratic leaders in the House are now considering reconvening the week of Nov. 17 to discuss this and other issues.
According to President Bush, "these are decisive measures aimed at the heart of our financial challenges. And they're big enough and bold enough to work. And the American people can be confident that they will."
This press conference followed an earlier press release submitted by Senator Christopher Dodd (D-CT), chairman of the U.S. Senate Banking, Housing, and Urban Affairs Committee, who also supports the U.S. Treasury's decision to utilize EESA.
Thursday, October 16, 2008
Guest Blogger David Smith: Using the Troubled Assets Recovery Program as an Opportunity to create Workforce Housing
· For people above the LIHTC income limits and below first-time homeownership.
· By converting unsold single-families or condos into apartments at stipulated rent levels.
It was precisely this group of people most victimized by subprime excesses, so restoring them to a secure rental tenure, in workforce housing, would not only address a portfolio problem, it might give them back some measure of social justice.
1. Over-levered markets can turn into properly priced workforce housing. Many of the markets that have large overhangs of unsold condos or neighborhoods struggling with delinquent subprime borrowers are those in greatest need of workforce housing, a need that will not abate.
2. Last time around, the affordability chance was missed. Ironically – or perhaps it's not ironic at all – once before we had the opportunity to capture good conventional properties cheaply for affordable housing, after the S&L debacle, in the Resolution Trust Corporation (RTC) affordability program. But we missed our chance.
3. Government should embrace an affordability objective. Not only is this good long-term government policy (it's much cheaper to buy them now than build them three years hence), it's also sound recovery economics, as rapid execution to an occupied workforce rental tenancy could help stabilize many markets.
4. Affordability proponents must act quickly. We can seize the opportunity if those who seek affordability can come together quickly, and bring both financial and intellectual resources to tackle the restructuring and repositioning required.
For more, see Recap Update 58
Tuesday, October 14, 2008
John McIlwain, chairman at the Center for Housing Policy and senior resident fellow at the Urban Land Institute, analyzes McCain's "Housing Resurgence Plan" in his most recent blog entry.
Senator John McCain’s campaign has just released a new plan intended to help the faltering
“There are 3.1 million homeowners in
“There are 11.8 million underwater first mortgages in the
The Resurgence Plan is an effort to resolve this unprecedented level of mortgage delinquencies in the
While not the first plan to deal with mortgage defaults, it could be the most comprehensive and is worth a close look although important details have yet to be set out. Other plans now in place include the following:
- The voluntary HOPE Now program where lenders voluntarily agree to modify mortgages in default was set up in July, 2007. It recently announced that it has helped 2.3 million homeowners avoid foreclosure.
- Fannie Mae and Freddie Mac, now under government conservatorship, are authorizing modifications on mortgages they own.
- FHA’s new HOPE for Homeowners program, authorized this summer by the Housing and Economic Recover Act (HELA), also voluntary on the part of banks, is just now going into operation.
- Recently, the Bank of America agreed to a $8.7 billion deal with Jerry Brown and other state Attorneys General to modify mortgages in default made by Countrywide.
- Finally, the Treasury received authority in the Emergency Economic Stabilization Act (“EESA”) to modify mortgages it acquires; it is now in the process of developing rules for how this will be done.
The basics of the Resurgence Plan appear simple:
“The McCain Resurgence Plan would purchase mortgages directly from homeowners and mortgage servicers, and replace them with manageable, fixed-rate mortgages that will keep families in their homes. …
“The McCain resurgence plan would be available to mortgage holders that:
· Live in the home (primary residence only)
· Can prove their creditworthiness at the time of the original loan (no falsifications and provided a down payment).
“The new mortgage would be an FHA-guaranteed fixed-rate mortgage at terms manageable for the homeowner.”
Simple and straightforward as this is, there are still questions that need to be resolved, some of which are as follows:
- Are refinance loans to be excluded? Is the requirement that homeowners have made a down payment at the time the loans were originally made intended to exclude refinances?
- Who would be the sellers? Saying that the federal government “…would purchase mortgages directly from homeowners and mortgage servicers…” is presumably an error as neither owns mortgages. The mortgages in question are in fact held either by a financial institution (e.g., a bank, an insurance company, a pension plan, or even Fannie Mae and Freddie Mac), or by a trust established to back an issue of mortgage-backed securities (“MBSs”). Thus the government would have to buy the mortgages from them, not the homeowners. The Plan is silent on whether lenders would be required to sell mortgages (mandatory participation would be unlike the other plans); if participation in the plan is to be voluntary, the willingness of lenders to participate would depend largely on the price to be paid by the government.
Alternatively, the plan may contemplate not the purchase of mortgages from a bank or trust, but instead working directly with homeowners. For instance, the government might directly offer qualified homeowners sufficient funds to enable them to fully pre-pay their existing mortgages (including the amount of any pre-payment penalties). This would be the same as buying loans at par, i.e., 100 cents on the dollar.
- At what price would mortgages be purchased? Assuming mortgages are to be purchased, the issue of price is important to the cost of the program to the taxpayer and to the willingness of lenders to participate, assuming the program is voluntary. The Plan says only that the Secretary of the Treasury would be instructed to use “…the authorities provided in the stabilization bill, the recent housing bill, and the
government's conservatorship of Fannie Mae and Freddie Mac…” to purchase mortgages. U.S.
Generally, EESA (“the stabilization bill”) requires the Secretary to purchase mortgages for no more than “the underlying value of the asset.” Under FHA’s HOPE for Homeowners program, authorized by HELA (“the recent housing bill”) “…lenders will be encouraged to write-down the outstanding mortgage principal balances to 90 percent of the new value of the property.” On the other hand, the FHFA presumably could instruct Fannie Mae and Freddie Mac to purchase defaulted mortgages at par.
Thus the Resurgence Plan either is quite similar to existing plans in that it proposes to invite lenders and other holders of mortgages to voluntarily sell mortgages for some negotiated price reflecting the value of the loan, or it is quite different in that participation in the program would be mandatory on the part of lenders, and/or the price the government would pay would be above the loans current value (which might require additional legislative authority).
If the Resurgence Plan proposes to pay above current value, lenders would avoid or significantly reduce their losses. This raises the issue of moral hazard, namely, should taxpayer funds be used to spare banks and holders of MBSs economic loss on bad investments they made and would this encourage future loose lending by banks and others.
- Who are eligible homeowners? The information on the plan says eligible homeowners are those who live in the home and who, when they originally took out the loan, had good credit and made a down payment. Oddly, the Resurgence Plan is silent on whether the loan must be in default. In fact, the example used in the release on October 14th makes no mention of the loan being in default, perhaps suggesting that underwater loans need not be:
“How The Program Works:
“An American buys a house that is his or her primary residence for $250,000 with a conservative, 20 percent downpayment ($50,000 down).
“His or her community property values fall by 30 percent, leaving him or her with a home worth $175,000 and a mortgage still worth $200,000.
“Under the McCain Plan, their mortgage would be retired, and they would receive a new, FHA guaranteed, 30-year fixed mortgage, at a low interest rate that reflects historical norms and the current market value of his home.”
This raises certain questions.
- Should all homeowners in default be bailed out, regardless of why they took out a mortgage they can no longer afford (loss of a job, a bad bet on the housing markets, speculation, or being flim flamed by an unscrupulous mortgage broker)?
- Would the plan cover only mortgages currently in default? If so, millions of homeowners with future loan defaults would not be protected. If not, and future loans in default would be eligible, would the plan encourage homeowners to default in the future?
- If the plan intends to cover homeowners whose loans are not in default but whose loans are now (or in the future become) underwater, is that fair to neighbors whose homes also lost value but who took out smaller loans that are not underwater?
- Would the plan be good for the homeowners and the economy? The Resurgence Plan would, like the other plans currently in place, help homeowners avoid foreclosure. If the idea is for the Plan to pay lenders and others more than the current loan value, then it might be of great benefit to financial institutions and other holders of MBSs around the world. Recognizing that it would take years to complete as the eligibility of each homeowner and the amount of their new FHA mortgage would have to be determined, the Resurgence Plan nevertheless could have a substantial, positive impact on the
economy in time. For example, it should: U.S.
- Along with the other plans, help foreclosures that are one of the major drags on home values, especially in neighborhoods with high foreclosure rates;
- Support the capital base of banks holding these mortgages in portfolio, and
- Support the value of the MBSs and their derivatives (a stated goal of the plan) and avoid further write-downs by banks, hedge funds, and other holders of MBSs around the world.
So is the McCain plan a bold step forward, and if so, one in the right direction? The answers to these questions will have to await further details from the campaign. Based on information released to date, it could be anything from an extraordinary and politically controversial proposal to a repackaging of current plans. Given its potential, it’s important for enough details to be released soon so it can be assessed fairly.