Thursday, October 30, 2008

Guest Blogger Barbara Sard: Tucked Away in the Foreclosure Bill

The foreclosure legislation signed into law this summer (H.R. 3221) is best known for its provisions aimed at stabilizing the home ownership market – and for the landmark creation of an Affordable Housing Trust Fund.

But tucked away in the bill were some important improvements in existing rental housing programs for lower-income Americans.

, 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.

Barbara Sard is the director of housing policy for the Center on Budget and Policy Priorities. The housing work of the Center is focused primarily on the intersection of housing and welfare reform at the national, state and local levels. Sard's work focuses on low-income housing policy, including the housing voucher program and admission to subsidized housing.

Wednesday, October 29, 2008

Shared Equity Homeownership As Useful Tool for the Neighborhood Stabilization Process

In the wake of the mortgage crisis, many are looking to shared equity homeownership as a way to stabilize neighborhoods and rebuild the ladder to sustainable homeownership for low- and moderate-income families.

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

Bailout Bill May Rescue Detroit's Big Three Automakers

Recent statistics show that sales for Detroit's big three automakers - Ford, General Motors and Chrysler - are down by double-digit percentages. As these companies continue to struggle, policymakers from the Michigan Congressional delegation are pressuring the federal government to aid automakers using funds from the bailout plan.

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"

Treasury spokeswoman Jennifer Zuccarelli.
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.

Read more here.

Monday, October 27, 2008

Bailout Bill May Expand to Cover Wide Range of Industries

The $700 billion bailout bill may soon be expanding to include a wider variety of industries, as insurers, automakers and American subsidiaries of foreign banks claim that they too need financial support as a result the credit squeeze and dire state of the economy.

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

New Resources Available For Neighborhood Stabilization Efforts

The Foreclosure Response team – formed by the Center for Housing Policy, the Local Initiatives Support Corporation (LISC), Knowledgeplex, and the Urban Institute – has come together to provide resources for neighborhood stabilization and foreclosure prevention efforts in communities, the first installment of which can be viewed here on

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.

FDIC Chairwoman Encourages Loan Modifications

Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, testified before the Senate Committee on Banking, Housing and Urban Affairs urging policymakers that "we need to act and we need to act quickly and we need to act dramatically."

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

Homeowners "Under Water" As They Owe More Than Their House is Worth

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.

Past Chairman Testifies before House Committee

Former Federal Reserve Chairman, Alan Greenspan, will testify today as a witness panelist before the House Committee on Oversight and Government Regulation in a hearing investigating the "Role of Federal Regulators in the Financial Crisis."

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.

"This American Life" Outlines Cause of Foreclosure Crisis

This American Life, a program featured on Chicago Public Radio, recently did a show in conjunction with NPR News that outlined the reasons for the foreclosure crisis. In this episode, entitled "The Giant Pool of Money," hosts Alex Blumberg and Adam Davidson explain what caused the foreclosure crisis, how it relates to Wall Street and how it will affect the U.S. in the coming years.

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

Bernanke Supports Potential Economic Stimulus Plan

Ben Bernanke, chairman of the Federal Reserve, endorsed plans for a second economic stimulus package, during his testimony in a House Budget Committee Hearing yesterday morning. It has been predicted that such legislation will be worked out by Congress during the upcoming lame duck session and will include provisions for infrastructure repair, unemployment insurance, additional funding for food stamps, and a potential tax rebate plan.

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.

Fannie and Freddie's Regulator Suggests U.S. Backs Their Debt

James Lockhart, director of the Federal Housing Finance Agency (FHFA), attended the Mortgage Bankers Association conference in San Francisco yesterday. During the conference, Lockhart tried to shore up confidence in Fannie and Freddie despite turmoil in the debt markets by assuring attendees that the government has effectively guaranteed Fannie and Freddie's debt. In another interview, he expressed that "The U.S. government will be behind them short, medium and long term."

Read more here.

Monday, October 20, 2008

Deficit in the Federal Budget Rises

With the U.S. government planning to spend $250 billion for the economic rescue plan and potentially using another $150 billion, as reported online by CNN Politics, in a second economic stimulus package, the deficit in the federal budget is increasing rapidly. The New York Times reports on this crucial matter.

Sunday, October 19, 2008

Analysts Examine Possible Consequences of Economic Rescue Package

In the Sunday news edition of the Washington Post, an article outlines possible implications of the economic rescue plan designed and executed by Congress and the current Administration. Although most economists and policy makers agree that interest rates must come down in order to restore stability to the housing market, the authors of this article point out that recent data shows that interest rates are actually rising under the current economic relief package. While the housing market has the potential to improve in time, the authors also provide a list of possible alternatives to the economic rescue package that might help restore the U.S. economy.

Friday, October 17, 2008

House Speaker Nancy Pelosi and Others Discuss Measures to Revive Economy

With lawmakers fearing a worsening recession, House Speaker Nancy Pelosi (D., Calif.) held an "economic summit" Monday, bringing together many influential economists to convince lawmakers that a "massive spending package is needed to forestall economic disaster." This stimulus package, which would be Congress’ second stimulus plan created in the past year, could amount to as much as $300 billion and would likely include new government spending in areas such as road and bridge construction, aid to cash-strapped state governments and extra funds for food stamps and unemployment insurance. These provisions are similar to a bill that passed in the House but died in the Senate in September, despite the combined efforts of Senate Majority Leader Harry Reid (D-NV) and Senate Appropriations Committee Chairman Robert Byrd (D-WV).

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.

Administration, Congress Defend Recent Actions

President Bush held a brief press conference earlier this morning at the U.S. Chamber of Commerce in support of the administration's recent decision to inject approximately $250 billion into both large and small banks to stabilize the economy. This decision, though not surprising, is a result of the recent passage of the Emergency Economic Stabilization Act (EESA), passed by Congress and signed into public law by the president on October 3rd, which gave the U.S. Department of Treasury authority to use up to $700 billion to purchase distressed assets and restore liquidity to the financial market.

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

The opportunity: create workforce housing by turning condos into apartments. While the principal purpose of the Troubled Assets Recovery Program (TARP) contained within the Emergency Economic Stabilization Act (EESA, more commonly known as 'Paulson's legislation' or inaccurately called the 'bailout') is providing certainty and liquidity to large banks and through them the broad US economy, TARP also creates a legitimate 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

Guest Blogger: John MclIwain Provides Insight as Presidential Candidates Outline Housing Platforms

The economic plans of presidential candidates, Barack Obama and John McCain, are compared in today's New York Times. Although the article suggests that neither proposal provides a definite solution to the United States' current economic troubles, each plan attempts to focus on action rather than "short-term budget discipline." Both campaigns released their economic plans in light of the third and final presidential debate, which will occur tonight in Hempstead, New York.

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.

A Review of McCain’s Housing Resurgence Plan

Senator John McCain’s campaign has just released a new plan intended to help the faltering U.S. economy. Called the Pension and Family Security Plan, it “builds on the American Homeownership Resurgence Plan (the “Resurgence Plan”) that he announced last week. Today’s announcement notes that

“There are 3.1 million homeowners in America who are delinquent or in default in their first mortgage.

“There are 11.8 million underwater first mortgages in the United States. An underwater mortgage occurs when a homeowner owes more money than the market value of a home.”

The Resurgence Plan is an effort to resolve this unprecedented level of mortgage delinquencies in the U.S.

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 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 U.S. government's conservatorship of Fannie Mae and Freddie Mac…” to purchase mortgages.

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 U.S. economy in time. For example, it should:

    • 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.

Stock Market Continues to Improve

The New York Times reports that the stock market is up for the second day in a row after global intervention this past weekend and the announcement that the U.S. Government plans to inject $250 billion into the largest banks by purchasing equity stakes in an effort to encourage banks to resume lending practices.

As evidenced in an article in the Wall Street Journal, the Dow rose by a record-breaking 936 points yesterday, boosting morale and confidence in both the U.S. and international financial markets.

U.S. Government Will Buy Stakes in Large Banks

In an effort to calm turmoil in the U.S. financial market, President Bush announced an elaborate plan this morning to have the government buy equity shares in the largest banks, including: Bank of America Corp., Wells Fargo & Co., Citigroup Inc., J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley, Bank of New York Mellon, and State Street Corp.. The purchases, which could amount to $250 billion, will come from the $700 billion available to the U.S. Department of Treasury thanks to the Emergency Economic Stabilization Act (EESA). President Bush also mentioned that the Federal Deposit Insurance Corporation (FDIC) will "temporarily guarantee" new debt issued by insured banks and the Federal Reserve will begin a new initiative and become a "buyer of last resort" for commercial paper. These measures will only be used as short term solutions to hopefully stabilize the U.S. financial market by spurring economic growth.

Read more in an article by the Wall Street Journal.

Friday, October 10, 2008

Guest Blogger John McIlwain: It’s All About Workforce Housing – Neighborhood Stabilization

Well, almost all, anyway. The subprime and Atl-A mortgage crisis is about workforce housing - the families in default or foreclosed on, as well as the families with underwater home values less than their mortgages, are virtually all members of the moderate income workforce with incomes below that needed for housing near jobs, services and transportation. Most of their incomes fall below120% of the area median incomes except in higher cost areas such as California.

Why this is so is easy to answer. These are the households that were priced out of neighborhoods around job centers and transportation nodes. Instead they had to “drive ‘til they qualified,” heading out to the “more affordable” outer suburbs. There, with the help of sub-prime and Alt-A mortgage products – “No-Doc” loans, “Liar Loans,” no down-payment loans, flexible payment loans, etc. – they bought new homes in newly built subdivisions, precisely the subdivisions now hardest hit by foreclosures.

By moving to these outer edge communities, workforce families fell into two traps. The first, of course, was the mortgages they were encouraged to use to buy homes they never thought they could afford; these have become poisonous as resets and higher rates force hundreds of thousands of families into default and foreclosure. The second trap was equally cruel – the cost of gas jumped after the families moved far away from their jobs, making the long commutes cost them as much as the houses they had just purchased. And other costs jumped as well; homeowner’s insurance rates and taxes rose (see the new report by the Center for Housing Policy called “Stretched Thin, The Impact of Rising Housing Expenses on America’s Owners and Renters” ) along with food, healthcare and so on. The result: the highest rates of defaults and foreclosures since the Depression.

What help is there for these families? So far there is the voluntary HOPE Now program and FHA’s new HOPE for Homeowners program for refinancing mortgages, also voluntary on the part of banks. In addition, Fannie Mae and Freddie Mac are presumably authorizing modifications on mortgages they own, more now that they are in conservatorship. There is also the $8.7 Bank of America deal with Jerry Brown and other state Attorneys General to modify mortgages made by Countrywide. And finally there is John McCain’s proposal for the federal government to buy all defaulted mortgages which may or may not be workable or adopted. Despite all these efforts and ideas, however, it is far from clear how many struggling homeowners actually will be helped.

What about the communities being wasted by the foreclosure virus? So far there is only HUD’s new $4 billion Neighborhood Stabilization Program authorized by the Housing and Economic Recovery Act (HERA) passed this past summer. HUD has moved quickly and already allocated the funds to states and localities around the country, including both central cities and outer suburbs. Good as this program may be, it is but a drop in the bucket compared with the need.

But how these HUD funds should be used in outer edge suburbs is a fundamental question. Along with vacant homes left by foreclosures have come falling home prices, rising crime, and neighboring families struggling to pay mortgages (many of which are underwater) while prices for gas, food, taxes, etc. continue to rise. Is it fair to take foreclosed homes and rent or sell them to lower income families who will face the same dilemma – pay the mortgage or pay for gas to drive back to jobs? Isolating low and moderate income families on the outer edges of metro areas will only push them further into poverty and create new ghettos (further lowering home prices and pushing yet more families to default on their mortgages). In fact the economic sustainability of many of these outer ring communities is now in question; entirely new thinking will be needed to give them and their residents hope for a sustainable future.

In short, the national workforce housing crisis has now become both larger and more complex. It has become yet harder to solve even as home prices fall around the country, a move that was supposed to make homes affordable again for the workforce.

FHFA Issues Statement About Capital Classifications for Fannie & Freddie

The Federal Housing Finance Agency (FHFA) declared Fannie Mae and Freddie Mac as “undercapitalized” Thursday, despite reports in June from both entities that stated they had maintained more capital than required. However, FHFA expressed concerns that much of this capital was comprised of “intangible assets,” and the regulator suspended capital classifications – which would determine how the two mortgage giants should manage their assets – yesterday. FHFA issued a statement that said it will continue to “closely monitor” Fannie and Freddie’s capital levels, but also specified that any minimum capital requirements “will not be binding during the conservatorship.”

Wells Fargo Seals Deal with Wachovia

The New York Times reports that Citigroup has abandoned its legal battle with Wells Fargo over their potential merger with Wachovia. According to the article, Citigroup grew apprehensive over the amount of bad assets it would accumulate from merging with Wachovia and walked away from the deal yesterday. As a result, Wells Fargo will combine with Wachovia and be worth an estimated $1.42 trillion in assets.

Thursday, October 9, 2008

NHC Executive Committee Member Presents on the Future Role of GSEs and the Housing Finance System

In this in-depth presentation, "Whither the GSEs: What's Next and What's After That?," Shekar Narasimhan, managing partner for Beekman Advisors and member of the executive committee of the National Housing Conference, provides insight on the ongoing economic crisis and theorizes on the future role of Fannie Mae and Freddie Mac. Narasimhan emphasizes that GSEs should maintain affordable housing programs, enhance opportunities to restructure and modify loans in order to help homeowners avoid foreclosure, and keep liquidity in the economic system, among other provisions, to ensure future economic stability. While stability is vital, Narasimhan reminds us that the future decisions made by the incoming administration could lead to the reconstruction of the housing finance system in order to prevent future financial collapse. These changes, although imminent, are difficult to predict and force many -- including Narasimhan -- to question what realistically will result from the current economic crisis.

Wednesday, October 8, 2008

Center for Housing Policy: Americans “Stretched Thin” by Rising Housing Expenses – And Not Just Mortgage Payments

Mortgage payments aren’t the only reason why many Americans are feeling financially drained. A new study entitled Stretched Thin from the Center for Housing Policy, the research affiliate of the National Housing Conference, found that large increases in a wide-variety of housing expenses like utilities, property taxes, property insurance and maintenance are having a negative impact on all households – homeowners and renters, new and longtime homeowners, and households with and without mortgages.

The study also found that all the major categories of housing expenses increased faster than incomes from 1996 to 2006. Mortgage payments increased 46 percent, utilities 43 percent, property taxes 66 percent, and property insurance 83 percent. In comparison, homeowner incomes increased by only 36 percent over the same period.

Policy recommendations provided in the study, and focused on curbing these rising expenses, include developing a more systematic approach to making buildings more energy-efficient, as well as the need to produce more affordable housing near transit and jobs.

Read more here.

Patience Wears as Stock Market Continues to Fall

The Washington Post reports that the stock market continues to dwindle, causing both anxiety and indecision among investors. Secretary of the U.S. Department of Treasury Henry Paulson attempted to calm concerns today in a press statement he released earlier this afternoon, urging his audience to be patient. Despite current economic distress, Secretary Paulson appears confident that the United States will find eventual relief, especially with the recent passage of the Economic Rescue Package that was signed into law late last week. Concerns among investors rose after Federal Reserve Chairman Ben Bernanke announced an emergency rate cut of half percent in order to address growing economic slump in both the U.S. and global financial markets.

Second Presidential Debate Takes the Stage

The New York Times provides an archived webcast and transcript of last night's presidential debate, which was the only debate formatted to a "Town Hall" setting. The content of the debate centered around financial concerns voiced by many individuals across the nation, given the current economic crisis.

Tuesday, October 7, 2008

Bank of America To Aid Countrywide Customers In Restructuring Mortgages

According to an article in today’s Washington Post, Bank of America could participate in the largest settlement in predatory lending history by reworking the terms of nearly 400,000 distressed mortgages to settle lawsuits pending against Countrywide Financial. Before it was hit by the subprime crisis and bought by Bank of America, Countrywide was the nation’s largest mortgage lender.

In an effort to aid homeowners, Bank of America would suspend foreclosure proceedings against Countrywide customers who qualify. These borrowers would be eligible for the restructuring of their mortgages, possibly lowering the interest or principal on their mortgages significantly.

Sunday, October 5, 2008

Citi: Wells Fargo Blocked from Buying Wachovia

According to the Associated Press, Citigroup says a NY judge has temporarily agreed to block Wells Fargo from acquiring Wachovia.

Following up on this post, Citigroup and Wells Fargo have declared a "cease-fire" until Wednesday afternoon over their competing bid for Wachovia.

Friday, October 3, 2008

President Bush Signs Bailout Bill

According to an article in the Wall Street Journal, President Bush signed H.R. 1424 into public law shortly after the House passed the measure this afternoon. This legislation grants the U.S. Department of Treasury $700 billion in funding alongside $152 billion in tax breaks and tools for federal regulators to use in hopes to calm financial turmoil in the U.S. economy.

Read President Bush's press statement about the passage of H.R. 1424.

House Passes Economic Recovery Package

In a stunning turn around from last Monday, the House of Representatives approved H.R. 1424, more widely known as the Bailout Bill, this afternoon. According to an article from Time magazine online, the House voted 263-171 in favor of the measure and sent the legislation to the Administration for President Bush to sign into law.

Pelosi Statement on Upcoming Vote on Economic Rescue Plan, H.R. 1424.

Read a summary of the Economic Rescue Plan released by Speaker of the House Nancy Pelosi's office and see how this bill addresses issues on Main Street here.

Speaker Pelosi released the following press statement on October 1st in regards to the upcoming House vote on the Economic Rescue Plan/Tax Extender Package, H.R. 1424, which is scheduled to take place later today.

Visit Speaker Pelosi's website to learn recently updated information on H.R. 1424.

Wells Fargo Merges with Wachovia

The New York Times reports that just four days after Citigroup Inc. announced it's intention to purchase Wachovia with help from the Federal Deposit Insurance Corporation (FDIC), Wells Fargo released early this morning that it plans to buy Wachovia without government assistance. The all-stock merger is estimated to cost $15.1 billion and will make Wells Fargo a powerful retail banking network.

Thursday, October 2, 2008

HUD Begins HOPE for Homeowners Program

The U.S. Department of Housing and Urban Development released information on the new HOPE for Homeowners program yesterday. Under this program, eligible homeowners facing foreclosure are provided an opportunity to refinance their mortgage if they can afford a loan insured by the Federal Housing Administration (FHA). HOPE for Homeowners plans to run until September, 2011.

Access information about the HOPE for Homeowners program here.

Read an article published earlier today by the Washington Post about this program.

Wednesday, October 1, 2008

Senate Passes Bailout Bill

An article in the Washington Post reports that the Senate passed plans for an economic recovery package, voting 74-25 in support of the measure, late this evening.  The House is scheduled to vote on Friday after defeating a previous version of the legislation Monday afternoon.  

Interactive Timeline Chronicles Change in Market During Crisis

MSNBC has created an easy-to-follow, interactive timeline with graphs - from March 2007 up until now - highlighting the major events of the financial crisis. Beginning with remarks from Sen. Chris Dodd, chairman of the Banking Finance Committee, the timeline maps out changes in the stock market, the unemployment rate, crude oil prices and gas prices during each event.

Suggested Alternative to Congress' Bailout Plan Raises Opinion

A recent OpEd in the Washington Post introduces an alternative to the $700 billion economic rescue package being voted on this week by Congress, suggesting that the U.S. government buys delinquent mortgages to curb home foreclosures and restore stability to the economy. The article, titled the "Trickle Up Bailout," argues that by refinancing home mortgages through the Federal Housing Administration (FHA), with help from government sponsored enterprises Fannie Mae and Freddie Mac, homeowners will experience immediate relief first--rather than powerful financial institutions.

Summary of HUD Neighborhood Stabilization Program Regs

Following up on a previous post, the Citizens' Housing and Planning Association has prepared a summary for the Notice HUD issued Monday, which outlines the procedures of the new Neighborhood Stabilization Program (NSP) for abandoned and foreclosed properties under the Housing and Economic Recovery Act of 2008.

View the summary here.

Senate Bailout Bill Language Released

Read the most updated version of the Bailout Bill, H.R. 1424, which will be voted on in the Senate later today.

Check Out Newly Released HUD Program Regulations

The passage of H.R. 3221, "Housing and Economic Recovery Act of 2008" into Public Law 110-289 awarded the U.S. Department of Housing and Urban Development (HUD) $3.92 billion dollars in neighborhood stabilization funds for communities to purchase foreclosed homes.

HUD released the distribution formula for the Neighborhood Stabilization Program Grants last Friday, September 26. Visit this link to learn vital information on the Neighborhood Stabilization Program Grants and to access the funding distribution.

On Monday, September 29 HUD released this Notice titled "Allocations, Application Procedures, Regulatory Waivers Granted to and Alternative Requirements for Emergency Assistance for Redevelopment of Abandoned and Foreclosed Homes Grantees under the 'Housing and Economic Recovery Act of 2008.'" These are the final regs. There was no comment period due to the tight timeline. A summary is forthcoming.

HUD must release regulations for Hope for Homeowners later today. Until then check out this Fact Sheet: "FHA to Provide Additional Mortgage Assistance to Struggling Homeowners" to learn more about the program.

Attend HUD's Summit on Housing: Partnering for Responsibility here in Washington, DC on October 7 and 8. Registration is required.