Wednesday, November 26, 2008

$800 Billion Plan Tries to Make Mortgages and Loans More Affordable, Hopes to Loosen Credit Lines

The government announced yesterday a new plan that would invest nearly $800 billion to make home mortgages, car loans and credit lines more accessible to Americans. This plan would hopefully boost spending by lowering interest rates.

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

FHA Relaxes Program Rules for Homeowners

On November 19, the Federal Housing Administration (FHA) took a huge step forward to aid troubled borrowers, relaxing program rules for homeowners who wish to qualify for relief under FHA’s Hope for Homeowners program – which was launched October 1 as part of the Housing and Economic Recovery Act of 2008. The changes, which will take effect in the next few weeks, should make it easier for borrowers to refinance into more affordable fixed-rate, government-backed mortgages. To be eligible for the program, borrowers must prove that they cannot afford their current loan, that they have made at least six payments on it and that they have not intentionally missed a payment, among other requirements.

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

Congressman Frank Responds to Task Force Endorsement of FDIC Proposal

Congressman Barney Frank (D-MA), chairman of the House Committee on Financial Services, agreed with a press statement released last week by the NHC-led Foreclosure Prevention and Neighborhood Stabilization Task Force.

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

At a time where all housing news seems to be bad news, David M. Abromowitz, a senior fellow at the Center for American Progress and guest blogger for “Open House,” says otherwise.

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

Earlier today, the National Foreclosure Prevention and Neighborhood Stabilization Task Force responded to the FDIC's wholesale approach to loan modifications for families facing foreclosure. You can read the statement below, or download the PDF here.

“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, 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:

CDFI Coalition
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

States and Localities Publicize NSP Action Plan Proposals

Last Friday, November 15, state and local governments eligible to receive additional funding from the Neighborhood Stabilization Program were required to make their action plan proposals available for public comment. Across the nation, town hall meetings and forums are being held to open discussion on each jurisdiction's proposal.

These state and local plans are also available here through the Foreclosure Response project on

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

"Out Loud" Podcast Focuses on Neighborhood Stabilization

The Center for Housing Policy, NHC's research affiliate, produces a monthly Podcast series called Out Loud, which plays tribute to noteworthy housing policies that take place at both state and local levels.

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

The Power of Blogging in Explaining the Financial Crisis

With new news about the financial crisis breaking daily – and oftentimes even hourly – MIT management professor and former director of research at the International Monetary Fund, Simon Johnson, along with his friends Peter Boone and James Kwak, determined there was a need to create a new blog focused on “what happened to the economy and what we can do about it.”

The blog, called “Baseline Scenario,” was launched in September and also accompanies Johnson’s two-month-long Global Crisis lecture series – a noncredit course at MIT open to anyone interested in discussing developing economic events.

“There's a big thirst for listening to accessible discussions,” said Johnson.

The professor also noted that the idea behind the series was to get “[students] to get enthused” by posting on the blog.

“There are no stupid questions,” Johnson added. “Even I’m confused about some things – but the point is to get students engaged.”

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.

FDIC Announces New Plan to Prevent Foreclosure

The Federal Deposit Insurance Corporation (FDIC) presented a new loan modification program yesterday that would assist homeowners facing foreclosure. The proposal, which will be publicized later today, is aimed to assist borrowers who are at least two months behind in their mortgage payments.

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

New Streamlined Modification Program Targets Delinquent Homeowners

On November 11, Federal Housing Finance Agency (FHFA) Chairman Jim Lockhart announced a new program entitled the "Streamlined Modification Program, " which hopes to curb foreclosure by simplifying the process that determines whether homeowners are eligible to receive new loans.

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

Guest Blogger Frank S. Alexander: When Supply Exceeds Demand

Through most of our history the supply of land, and of housing in particular, has been just short of demand – with a constant stimulus for new construction yet pressure on prices widening affordability gaps. Communities throughout the country are now facing the reverse situation – the supply of properties suddenly exceeds the demand and fear seems to be the most common currency. In the face of fear perhaps the best response is to take a deep breath and learn from those who have faced this situation before.

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

Deadline For NSP Action Plans Just Three Weeks Away

States and localities across the nation have until November 15 to publicize how they plan to use grants provided to them under the U.S. Department of Housing and Urban Development's Neighborhood Stabilization Program (NSP), which is authorized under Title III of the Housing and Economic Recovery Act of 2008, H.R. 3221. You can find the draft action plans for each state here on as they become available.

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 for more information.

Friday, November 7, 2008

House Speaker Pelosi Pushes For Quick Action on Tax Stimulus Plan

While some in Congress are cautious to push for a tax stimulus package before President-elect Barack Obama takes office, House Speaker Nancy Pelosi advocated otherwise yesterday, calling for a two-stage effort to boost the U.S. economy. The first part of this plan would include a $60 billion-to-$100 billion stimulus package this month, which would then be followed by a companion measure early next year that would include a "permanent tax cut."

"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

President-Elect Faces New Economic Challenges

While yesterday’s headlines celebrated Obama’s history-making presidential win, those of today point towards the challenging obstacles the new president-elect will face the moment he takes office.

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

Barack Obama Becomes Nation's 44th President

Last night, Democratic Presidential Candidate Barack Obama (D-Ill.) was elected as the 44th President of the United States, earning 349 Electoral Votes at this point in time. Paying homage to the state of Illinois, Obama delivered his acceptance speech to a crowd of more than 225,000 supporters in Chicago's Grant Park. The video of the speech is provided below.

Additionally, you can view the transcript of his speech here.

Tuesday, November 4, 2008

California Congresswoman Fights for More NSP Funding

The state of California is set to receive $145 million under the Department of Housing and Urban Development’s (HUD) Neighborhood Stabilization program, a provision of H.R. 3221, the "Housing and Economic Recovery Act of 2008." This act was signed by the Bush Administration and became Public Law 110-289 on July 30.

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.