More Communities Receive Assistance from HUD

Even as we ring in the new year, many communities are still struggling with the ways in which foreclosed properties are affecting their neighborhoods. Now more than ever, these communities are relying on funds from the Department of Housing and Urban Development's (HUD) Neighborhood Stabilization Program (NSP), which was approved under the Housing and Economic Recovery Act of 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.

HUD Decides to Cut FHA Secure Program

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.  

HUD released news of the program's termination in Mortgagee Letter 2008-41 on Friday, December 19.  

New HUD Leadership Provides Promise for Change

A recent article in the Washington Independent outlines potential leadership for the Department of Housing and Urban Development (HUD) in the upcoming Obama administration.  While Shaun Donovan has already been named Secretary-designate for HUD, other significant positions within the department have not yet been filled.   

Experts Refute Argument that CRA Was Primary Driver of Foreclosure Crisis

Federal Deposit Insurance Corporation Chairman Sheila Bair spoke last Wednesday, December 17 at the New America Foundation in Washington, DC. In addition to outlining the FDIC’s recommended approach to loan modifications, she addressed the Community Reinvestment Act (CRA) and its purported links to the foreclosure and credit crises. Some have argued that the 31-year-old CRA is one of the chief causes of the financial and housing debacles – for example, please see this recent opinion editorial published by The New York Times.

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 University of North Carolina’s Center for Community Capital presented the results of an ongoing study on the performance of the Community Advantage Program, a secondary market program for CRA loans to low- and moderate-income homebuyers operated by Self-Help in North Carolina. The study compared the performance of fixed-rate loans sold into the Community Advantage Program to the performance of subprime loans to buyers with similar demographic and financial characteristics. Most of the loans in the Community Advantage Program pool were originated by retail lending institutions motivated by CRA obligations.

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

(http://www.ntic-us.org/index2.php?option=com_content&do_pdf=1&id=172)

CRA is Not to Blame for the Mortgage Meltdown by the Center for Responsible Lending

(http://www.responsiblelending.org/pdfs/cra-not-to-blame-for-crisis.pdf)

Defending the CRA by David M. Abromowitz and Cathy Minehan, Center for American Progress

(http://www.americanprogress.org/issues/2008/11/defending_cra.html)

It’s Still Not CRA by Ellen Seidman, New America Foundation

(http://www.newamerica.net/blog/asset-building/2008/its-still-not-cra-7222)

Statement from National Civil Rights, Consumer, Community Development and Housing Groups Regarding Attacks on the Community Reinvestment Act (CRA)

(http://www.ncrc.org/index.php?option=com_content&task=view&id=359&Itemid=75)

The Community Reinvestment Act: A Welcome Anomaly in the Foreclosure Crisis by Traiger & Hinckley LLP, 2008.

(http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf)

Addendum: (http://www.traigerlaw.com/publications/addendum_to_traiger_hinckley_llp_cra_foreclosure_study_1-14-08.pdf)

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.

Guest Blogger: Douglas Moritz on the Reinvention of HUD

The plan to reshape HUD has to:

• 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.

HUD Celebrates the Holidays with New Hope

An article in today's Washington Post praises the Department of Housing and Urban Development (HUD) for having a close-knit vibe and positive attitude shared among department employees, which were both showcased at their holiday party held yesterday. Although HUD has received some criticism in recent days given the current collapse of the housing market and ongoing economic crisis, this article suggests that the government agency shows a lot of promise for the future.

HUD Leadership Voices Frustration with Hope For Homeowners Program

Today's edition of the Washington Post features an article about the "Hope for Homeowners" loan modification program created last summer under H.R. 3221, the "Housing and Economic Recovery Act." This program was written to assist up to 400,000 homeowners facing default by placing eligible borrowers into new, sustainable loans that are backed by the Federal Housing Administration (FHA).

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.

Obama Reveals HUD Cabinet Pick in Weekly Address

Check out this video of last weekend's Democratic Radio Address, which features President-elect Obama's announcement of Shaun Donovan as HUD Secretary-designate.

NHC Applauds President-Elect Obama's Selection of Shaun Donovan for HUD Secretary

Today NHC released a statement applauding President-Elect Obama's selection of Shaun Donovan to head the U.S. Department of Housing and Urban Development. Given the current economic crisis and collapse of the housing financial market, Donovan holds an extremely important position in the incoming Administration.

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.

President-Elect Obama Chooses Shaun Donovan as HUD Secretary

This weekend, President-Elect Barack Obama announced that he has chosen Shaun Donovan to lead the U.S. Department of Housing and Urban Development. Donovan, an NHC Trustee, is currently commissioner of the New York City Department of Housing Preservation and Development.

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.

Guest Blogger Jeffrey Lubell: Strengthen and Expand the Mandate of the Nation's Housing Agency

America faces multiple pressing housing challenges, including: a dramatic increase in home foreclosures; rising numbers of elderly with specialized housing needs; increasing numbers of teachers, nurses, firefighters and other working families who cannot afford to live where they work; and emergency relocation needs related to hurricanes and other disasters. As the recent spike in oil prices revealed, the energy-inefficiency of many homes and/or their remote locations – far from job centers and public transit stops – leave many families vulnerable to energy price shocks. And it is at least in part families’ search for low-cost housing that drives them to buy or rent homes in far-flung locations, increasing the number and length of necessary car trips, which in turn increase energy consumption, greenhouse gas emissions, traffic congestion and the consumption of open space.

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.

New Credit Suisse Report Projects Large Increase in Foreclosures Over Next Four Years

Released on December 4, a new Credit Suisse report forecasts that 8.1 million mortgages - or 16 percent of all mortgages - will be in foreclosure over the next four years. This differs largely from the agency's April forecast, which predicted an increase of 6.5 million foreclosures, or 13 percent of all mortgages, over the next four years.

Read the full report here.

Guest Bloggers: Carol Lamberg and Anne H. Lindgren on a Transparent Approach to Permanently Affordable Housing

Transparency is the gold standard of the day. In any public or private venture, the ordinary citizen is supposed to be able to understand what the issue is, who’s in charge, what the cost will be, and who is paying. This standard is rarely met, but almost nowhere is it less apparent than in housing programs. Not since the New Deal, with the 1937 legislation establishing public housing, have our political leaders been willing to confront directly the actual cost of developing and maintaining 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.

Topping the Nation's Holiday Wish List: Relief for Homeowners

Tom Toles' Take on the Economic and Housing Crisis

Guest Blogger Lawrence Simons: The Reinvention of HUD

When we get around to discussing the future of the U.S. Department of Housing and Urban Development (HUD), I believe it is an opportunity to restore the importance of housing to its historic role as being of vital importance to the economic well being of the country. The federal government has limited its role in housing to only helping the low- and moderate-income groups. In essence, it forgot that its housing policy helped to shape our overall economic policy. When I was the Federal Housing Administration Commissioner, I served on the economic policy council with the Secretary of Treasury, the head of the Office of Management and Budget, the Chairman of the Economic Advisors and the Presidents Domestic Policy Advisor. HUD has been relegated to such a limited role that it did not play the lead role in housing during Katrina and that Treasury has now usurped its policy role during the current crises.

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.

Local Las Vegas News Team Investigates Neighborhood Stabilization Action Plans

In this brief video, a local Las Vegas news group called "City Scene" reports on the city's Neighborhood Stabilization Program Action Proposal. City officials from Las Vegas are featured outlining these plans, which were due to the Department on Housing and Urban Development yesterday.

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.