Wednesday, December 21, 2011

DOJ reaches historic settlement with Countrywide

 by Sarah Jawaid, National Housing Conference

Today, the Justice Department announced a settlement to resolve claims against Countrywide Financial Corporation and its subsidiaries, now owned by Bank of America. The $335 million settlement, described by Justice as the largest fair housing settlement in U.S. history, compensates 200,000 African American and Latino borrowers from 2004 through 2008 who were subject to discriminatory mortgage lending practices. 

“In this thorough investigation, the Department uncovered a pattern or practice of discrimination involving victims in more than 180 geographic markets across 41 states and the District of Columbia," read a statement from the Justice.  "These discriminatory acts allegedly included widespread violations of the Fair Housing Act and the Equal Credit Opportunity Act, and resulted in African-American and Hispanic borrowers being charged higher rates for mortgage loans—solely because of their race or national origin.”

Read more on Department of Justice website.

New Report Highlights the Benefits of Housing Counseling in Preventing Foreclosures

by Clare Duncan, National Housing Conference

On Monday, the Urban Institute released an evaluation of rounds 1 and 2 of the National Foreclosure Mitigation Counseling (NFMC) Program, which found significant positive effects for homeowners counseled through the program in 2008 and 2009.

The NFMC program began four years ago this December to address the foreclosure crisis by increasing the availability of housing counseling for families facing foreclosure. Grants are also made through the program to fund legal assistance for homeowners and to train counselors. NeighborWorks America was designated by Congress to distribute the funds and six rounds of funding have been awarded through the program to upwards of 1,700 counseling agencies since its beginning. $80 million was awarded to the program in the recent FY12 THUD appropriations bill, which was signed into law in November.

The evaluation, which builds off previous preliminary analyses of the program, was based on 335,000 loans and was designed to answer the following questions about the program:
  • Did the NFMC program help homeowners receive loan modifications with lower monthly payments than homeowners would have otherwise received without counseling?
  • For homeowners that cured (i.e., brought to current) a serious delinquency or foreclosure through a loan modification or some other means, did NFMC counseling help them remain current on their loans longer and more frequently than they would have been without counseling?
  • For borrowers with seriously troubled loans, did NFMC counseling increase their chances of obtaining a cure and then sustaining that cure and avoiding redefault?
  • Did the NFMC program help reduce the number of completed foreclosures?
Overall the evaluation answered “yes” to all four questions, finding significant positive effects for participants. Specifically, homeowners in the program were nearly twice as likely to obtain a mortgage modification as those not counseled through the program. In addition, participants were at least 67 percent more likely to remain current on their mortgage nine months after receiving one. Homeowners also received on average, a mortgage modification that lowered their payments by $176 more per month than homeowners who didn’t work with an NFMC counselor, a savings of close to $2,100 a year.

The evaluation also studied whether the program impact changed after the Home Affordable Modification Program (HAMP) began. The results found that NFMC counseling was just as effective or even more effective in helping homeowners facing foreclosure after HAMP began.

Given waning interest in the foreclosure crisis by policymakers as well as cuts to counseling funding (HUD’s housing counseling program which complements the NFMC program by funding a wider array of counseling services including pre-purchase education and financial literary was zeroed in the FY11 budget and received $45 million in FY12 - only half of what the program received in FY10), it is important that policymakers understand the benefits of housing counseling in keeping struggling homeowners in their homes and neighborhoods stabilized. The Center for Housing Policy released a factsheet earlier this year that highlights additional evidence that housing counseling helps to reduce mortgage delinquency and foreclosure.

To learn more about the program, visit NeighborWorks America’s website or read the evaluation here.

Tuesday, December 20, 2011

GSEs followed the private market into subprime

by Sarah Jawaid, National Housing Conference

In a New York Times column, Joe Nocera offered a concise assessment of Fannie Mae and Freddie Mac as followers, rather than prime movers, in the subprime mortgage crisis. In fact, he makes it clear that the GSEs were hesitant to join the subprime game but eventually caved after continuously losing market share to the private sector in 2005 and 2006. Citing data from David Min of the Center for American Progress, Nocera, observes that Fannie and Freddie’s much lower delinquency rate than the national default rate (5.9% vs. 9.11%) suggests that far less of their portfolio is subprime than critic Peter Wallison has suggested.

Read more at the New York Times.

Friday, December 16, 2011

Condo fees: A rising AMI lifts all household budgets

by Blake Warenik, National Housing Conference and Center for Housing Policy

DCentric, a program on Washington's WAMU 88.5 "created to examine the ways race and class interact in Washington, D.C.," has created some buzz in the local blogosphere with Elahe Izadi's piece on how many low- and moderate-income residents in the District's Affordable Dwelling Unit program (ADU) are being crushed by rising condo fees.

D.C.'s program ensures that some units are held back for occupants who fall within a certain income range and are generally rented or sold below market rate. However, in what would appear to be a glaring omission on the homeownership side, there is no provision made to also restrict condo fees for residents in affordable units. Residents in one such condo building that includes affordable units, Kenyon Square in D.C.'s gentrifying Columbia Heights neighborhood, have seen monthly fees double to more than $400 since 2008.

What does this mean for affordable-unit residents in areas with skyrocketing housing costs? I couldn't put it better than did Sarah Scruggs of Manna, Inc., a local community development organization that creates and preserves affordable housing. She said that market-rate owners may “have a lot of money, and the things they want to do in the building, they have the money for them. But [those things] are very different from what the affordable unit owners want.”

It's helpful to consider that condo fees sometimes cover more than just maintenance, repairs and utilities. Associations often decide to budget for things like fresh flowers in the lobby or a dog park on the roof—touches that may seem like extravagances to residents in affordable units. Scruggs added that the upward pull on condo fees could result in foreclosures, hurting not only owners of affordable units but their market-rate-paying neighbors as well.

The problem of unlimited condo fees in affordable housing is certainly neither new nor confined to D.C. (a writer in San Francisco plumbed the issue in 2007). Some jurisdictions, such as Chapel Hill, N.C., have taken steps to ensure that residents in projects governed by inclusionary zoning laws and other affordable housing statutes are not unduly burdened by the burgeoning condo fees that their higher-income neighbors can more easily afford.

A colleague at the Center for Housing Policy reminded me that, even without taking condo fees into account, housing in the D.C. region is very expensive. In the just-released Paycheck to Paycheck database, Washington was ranked 16 on the list of the nation’s most expensive housing markets, out of 209 surveyed. The income required to qualify for a mortgage on a median-priced home has risen more than 8% since the end of 2009 to a whopping $92,032 annually. And, for those of you keeping score, the market's median home price of $319,000 upon which that salary figure is based does not include condo fees.

It doesn't take much imagination to see how the District Department of Housing and Community Development could put similar rules in place here in Washington. Such a move might serve as a model for housing authorities in expensive markets around the country to make homeownership truly affordable for low- and moderate-income families.

One simple solution might be programs to help increase the awareness of the financial situations many families in the District face, particularly ones in affordable housing units. When condo association members understand the financial situations of their neighbors, they can more prudently budget for the entire community. After all, they all literally live under one roof.

Thursday, December 15, 2011

Garrett’s mortgage finance bill passes subcommittee after heated mark-up

by Sarah Jawaid, National Housing Conference

The Capital Markets subcommittee of House Financial Services marked up the Private Mortgage Market Investment Act, introduced by Rep. Scott Garrett (R-NJ), yesterday. The House panel voted on the proposal late last night and passed it by a 18-15 vote. Members of the committee offered numerous amendments, including changes to the QRM portion of the risk retention rule, deferring action until GSE reform is taken up in earnest, eliminating restrictions on principal reduction, and more. The mark-up comes after Garrett led a second subcommittee hearing on the draft bill Dec. 7 to hear perspectives from industry experts. Read more NHC’s analysis of this hearing.

Highlights from the hearing included: Rep. John Campbell (R-CA) describing the bill as “overly prescriptive” in comparison to the Campbell-Peters proposal; Rep. Waters’(D-CA) strongly opposing the bill’s prohibitions of principal reductions; Rep. Maloney (D-NY) saying that repealing the risk retention rule is because “skin in the game” is necessary; and Rep. Manzullo (R-IL) observing that aspects of proposed law would incentivize foreclosures. Watch the archived video of the hearing here.

Galante’s FHA commissioner nomination moves to full Senate vote

by Sarah Jawaid, National Housing Conference

Acting FHA commissioner Carol Galante was considered for nomination Tuesday as an assistant Housing and Urban Development secretary and head of the FHA. The Senate Committee on Banking, Housing and Urban Affairs voted to approve Galante by a 13-9 vote and send her nomination to a full Senate vote.

Galante’s approval did not come without some critique. “I think we need people now in the administration with a sense of urgency about the need to turn things around, reduce our debt, and to avoid further bailouts,” said Sen. Jim DeMint (R., S.C.). “She does not appear to have that sense of urgency.” Other Republicans were more generally concerned about the Administration’s response to stabilize FHA’s finances and further, the U.S. mortgage market. Sen Bob Corker (R. Tenn.), “voted in favor of Ms. Galante’s nomination but said he might block it on the Senate floor — in an effort to prod officials to produce more detailed plans about how to overhaul the U.S. mortgage market and replace government-controlled mortgage giants Fannie Mae and Freddie Mac.”

For more, read the Wall Street Journal and view archived video of the hearing.

When the affordable choice is no longer affordable

by Laura Williams, Center for Housing Policy

When we talk about housing, and housing affordability, it almost always seems like we’re talking about owning a single-family home (or not, as the case may be). Today, as we release another edition of Paycheck to Paycheck, I’d like to talk about housing affordability for renters.

Renting, slowly but surely, seems to be getting more expensive in many places and, for workers who are not seeing their incomes rise, more unaffordable. We found that even in the most affordable cities, only 85% of the jobs we looked at paid enough for a worker to afford a two-bedroom apartment based on the local Fair Market Rent. Who can’t afford it? Bus drivers, carpenters, janitors, retail sales staff, bank tellers and waiters, among many others. In more expensive cities, as few as 8 percent of jobs pay enough for a two-bedroom unit – that’s 6 out of 74 jobs. (Who can? In Honolulu: only nurses, civil engineers, dental hygienists, programmers, physical therapists and construction managers. The lists in San Francisco and Long Island look similar.)

But that’s not even the whole story. Traditionally, renting is more affordable than owning. With the ongoing foreclosure crisis, however, that’s not necessarily true everywhere. Parts of Florida, in particular, are seeing this phenomenon (though we are, admittedly, not accounting for some of the irregular expenses of ownership such as the costs of repairs and maintenance). But this doesn’t mean stock clerks and bank tellers should or even want to go out and buy a home. Aside from the additional expenses and trouble that go into having to repair your own toilet or call in a contractor when the shingles start going bad on the roof, ownership is rather, well, permanent. (This is particularly true in a down market where ownership tends to be affordable.) In today’s job market, that can be a real hurdle; rental housing gives our workforce mobility (so they can pick up and move to North Dakota for jobs). So renting isn’t only a more affordable choice (most of the time), but also a preferable one.

So we should be concerned that rents seem to be less affordable, and watching to make sure all of our working families can afford to live near where they work. Or afford to move where there is work.

Paycheck to Paycheck looks at housing affordability in over 200 metro areas based on the prevailing wages for 74 occupations. We get our data from the National Association of Home Builders, the National Association of Realtors, HUD and For the past several years, this has been an annual exercise, though this is our second edition for 2011 and, at least for now, we plan to continue it on a bi-annual basis.

Tuesday, December 13, 2011

Moving Forward - Connecting the Dots: Public Health, Smart Growth, and Affordable Housing

by Jeffrey Lubell, Center for Housing Policy

There is growing attention within the public health field to the importance of land use. By encouraging communities to develop in a way that allows individuals to meet many of their daily transportation needs safely and efficiently by walking or biking, and by working to ensure that everyone has access to green space and fresh fruits and vegetables, public health advocates hope to support healthy living styles that will reduce obesity and diabetes.

These kinds of land use changes could benefit everyone, but they’re particularly important for the low-income minority populations that are most likely to experience obesity and be overweight. While land use is not the only cause of rising obesity among these households - and not the only solution - it seems likely that improving walkability and access to fresh fruit and vegetables in low-income neighborhoods will help address this major public health crisis.

For this reason, it’s exciting to see public health advocates backing smart growth land use policies. But without a specific focus on preserving affordable housing in walkable neighborhoods, there is a danger that the objectives of both public health and smart growth will be compromised. In short, it’s likely that success in creating highly desirable walkable communities will lead to rent and homeownership cost increases that price out many low and moderate-income families, forcing them to relocate to less walkable neighborhoods at the periphery of metro areas.

Developers in many cities already report a pent-up demand for compact, walkable, mixed-use neighborhoods oriented around transit stations and town centers. With the population of older and younger adults set to rise dramatically in coming years, and energy prices expected to increase, demand should grow significantly for close-in, location-efficient communities where transportation costs are low and amenities are easily accessed by walking, biking, or public transit.

So here’s the problem. Given the challenges involved in developing housing in already developed areas, it is unlikely that this increase in demand will be matched by an adequate increase in housing supply. As a result, rents and home prices will go up, pushing many low- and moderate-income families out of these walkable communities and into more remote locations. We’re already seeing housing cost increases associated with many public transit investments. As demand for transit-oriented development and other types of walkable neighborhoods increases, we’re likely to see prices rise even further.

The foreclosure crisis has generated a large inventory of unsold homes that should keep home sale prices in check for some time. But, over the long-term, demographic trends are likely to prevail and cause housing cost increases in many desirable, walkable, mixed-use communities. Residents of the Bay Area, New York, Boston, Washington, D.C., and other high-priced communities are already familiar with this problem. In the coming decades, this is likely to spread to other metro areas as well.

Some may wonder why this is a problem. After all, we’ll still have more walkability and reductions in energy use and greenhouse gas emissions. But as the public health advocates will tell you, pushing the people we’re trying to help most out of the communities we’re trying to serve will greatly undermine the public health benefits.

This will also reduce the diversity and vitality of our urban neighborhoods and undermine the benefits of smart growth in two ways. First, it will reduce the share of the region’s population that can be served by compact, walkable communities. Second, it will force states to provide infrastructure to meet the needs of the low- and moderate-income families who have jumped over more expensive compact communities for lower-cost housing at the periphery of metro areas.

These forces won’t play out in the same way or at the same time in every market. Rather, as with the efforts to change urban form itself, they will play out slowly over many years and take time to change.

But it is clear that the overall objectives of both public health and smart growth cannot be met without corresponding efforts to preserve existing affordable housing in location-efficient communities and to ensure that new housing developed in these communities is affordable to families of all incomes.

These affordable housing efforts need to proceed hand in hand with the land use changes themselves, as it would be prohibitively expensive - and logistically very difficult - to wait until after housing prices have risen dramatically.

There are many promising approaches for building affordability into new development around transit and in other location-efficient areas. The question is whether advocates for public health, smart growth, and affordable housing can all join together to work toward their implementation.

* * *

For more information on the connection between land use and public health, visit Public Health Law & Policy. For more information on smart growth, visit Smart Growth America.

Moving Forward is a monthly column about ideas for the future of U.S. housing policy by Jeffrey Lubell, Executive Director of the Center for Housing Policy. The column offers perspectives on the government role in housing and on broader housing market trends likely to shape future housing policy.

Monday, December 12, 2011

HOME is a block grant, remember?

by Ethan Handelman, National Housing Conference

Today’s Washington Post takes another swing at the HOME program, this time focusing on housing developments in North Carolina. The article fundamentally misunderstands the concept of a block grant, in ways that make much of its criticism misplaced. It also fails to set the particular projects analyzed in the context of real estate development, with all the risks and surprises inherent to that activity.

HOME is a block grant—the federal government allocates money to localities (mostly states and cities) who in turn use the funds for particular projects. So, the federal government isn’t overseeing individual projects directly, but rather making sure that the localities (called in ever-mellifluous HUD-speak, “participating jurisdictions”) are using the funds correctly. That’s fundamentally different from a categorical or direct assistance program, where funds flow from the federal government to specific projects.

So, when the Post describes Charlotte housing director Pamela Wideman as ending a failed housing development and repaying HOME funds to HUD, it may be a failure of a particular development, but it’s an example of the HOME program functioning the way it should. HUD made a grant, Charlotte chose a project, the developer pursued it, the project failed to come together, and HUD got repaid.

“But,” says the observant reader, “why did it take ten years?” That’s where the realities of real estate development come in. Housing of any kind, and most especially regulated affordable housing, is difficult and risky to develop. A developer must nearly simultaneously achieve control of an appropriate piece of land, obtain commitments for funding from multiple sources, and convince overlapping local authorities to approve the project. That process can drag out for years even in a normal economy. With the massive disruptions we see in most real estate markets today, the challenge is even worse.

So, should HUD have better data systems so that it can better evaluate and report the results of its HOME grants? Of course. Should HUD monitor each individual project in detail during the development process? Not at all—that’s the job of the localities who make grants to the projects. HUD should be monitoring its grantees, encouraging and empowering them to make decisions that make sense for their local real estate markets and affordable housing needs. That’s the system by which HOME has created over one million affordable housing units and leveraged other funding sources nearly 4 to 1.

Stakeholders gather to discuss reducing lung cancer from Radon in American homes

by Sarah Jawaid, National Housing Conference

Last week, the Environmental Protection Agency and various advocacy groups including the National Housing Conference participated in a meeting to discuss reducing lung cancer from Radon exposure in American homes. Radon causes 21,000 lung cancer deaths every year and is the second largest cause of lung cancer in the United States.

In June 2011, the first-ever U.S. Federal Action Plan, Protecting People and Families from Radon was released by the Environmental Protection Agency. The plan “aims to reduce loss of life due to elevated radon in houses, apartments, child care facilities, schools and offices by mitigating 10 million U.S. homes with elevated radon. The plan represents the commitments of 9 federal agencies to do work already within their authority that can have a measurable impact on healthy.” The U.S. Department of Housing and Urban Development committed to:
  • Demonstrate the importance of radon risk reduction
    • HUD will incorporate radon testing and mitigation into as many agency programs as possible to include public and other assisted housing. 
    • HUD will prepare a plan within the next 18 months to collect radon test results as part of its ongoing inspection protocol of public and assisted housing as the first step in conducting a baseline study of its housing stock. 
    • Department of Energy and HUD will promote radon awareness through their weatherization and healthy homes outreach. 
  • Address finance and incentive issues to drive testing and mitigation 
    • HUD’s Power Saver Loan Program will make radon mitigation an explicitly eligible/allowable expense within the 25% non-energy related set-aside. 
  • Build demand for services from the professional, nationwide industry 
    • HUD’s Healthy Homes Production Program grantees will check for sources of radiation, such as from radon, as required by HUD’s Healthy Homes Rating Tool. Mitigation is required for high radon levels.
To learn more, visit the American Association of Radon Scientists and Technologists or the American Lung Association websites.

Friday, December 9, 2011

House subcommittee hears trade groups’ perspective on government’s role in credit markets

by Sarah Jawaid, National Housing Conference

The House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises held a hearing Dec. 7 on Chairman Garrett’s proposed Private Mortgage Market Investment Act. This was follow-up to an earlier hearing held in October where components of Garrett’s legislation were introduced.

The legislation aims for standardization, certainty, and transparency in private securitizations of mortgages—a laudable goal and one where government regulation creates real value. The legislation raises real concerns, however, by proposing that private securitization entirely replace a government guarantee presence. A government guarantee—explicit, limited, and paid for—provides liquidity in downturns and broad access to mortgage credit, which are essential to creating affordable housing options across the country.

Those who testified included: Mr. Chris Katopis, executive director of the Association of Mortgage Investors; Dr. Mark Calabria, Cato Institute's director of financial regulation studies; Mr. Mark Fleming, chief economist at CoreLogic ; David H. Stevens, president and CEO of Mortgage Bankers Association; Tom Salomone of Real Estate II, Inc. on behalf of the National Association of Realtors® and Dr. William Poole, distinguished scholar in residence at the University of Delaware.

The panelists had differing perspectives on the role of government involvement in credit markets. Poole thought the government should lessen its presence by phasing out the GSEs and decreasing conforming loan limits. He also thought the government’s role should focus on regulation through the Federal Reserve. MBA President Stevens expressed that the “importance of housing, whether owner-occupied or rental, to the nation’s economic and social fabric warrants a federal government role in promoting liquidity and stability in the core mortgage market. “

The focus during the Q&A seemed to be on qualified residential mortgages (see NHC's comment letter on QRM from this summer). Members of Congress asked the panelists to help them understand the implications of requiring sponsors of asset-backed securities to retain at least five percent of the credit risk of the assets and 20% or 10% down payment. Several panelists shared their concerns over the harm this would cause on creditworthy borrowers who would not have access to credit. Legislators also wanted to know how to attract more private label mortgage-backed securities. Fleming wrote in testimony that to encourage private investment, “uniformity of underwriting standards and securitized assets, standardization of securitization processes, and granular, loan-level understanding of the credit risks associated with whole loan portfolios and residential mortgage-backed securitizations” are needed. Listen to the testimony on the House Financial Services website.

New mortgage finance proposal underscores need to get QRM right

by Ethan Handelman, National Housing Conference

Senator Johnny Isakson (R-GA) introduced a proposal for mortgage finance reform that would restructure Fannie Mae and Freddie Mac into a government-run Mortgage Finance Agency that would securitize and guarantee pools of loans. The Agency would be on a 10-year path to privatization—along the way, it would accumulate an insurance fund to back the guarantee.

Most telling, however, is that the legislation would limit Agency’s securities to Qualified Residential Mortgages—a category defined in the Dodd-Frank legislation and subject to much debate this summer. To its credit, the proposal redefines QRM to a minimum 5% downpayment with mortgage insurance, which provides broader access to credit than the highly restrictive 20% standard proposed by regulators. It would better, of course, to allow lower downpayment programs as long as they could demonstrate sufficiently low default rate and satisfactory underwriting parameters (like the Community Advantage Program, which has shown impressive results).

In NHC’s comment letter to regulators on the proposed QRM rule, we observed that the QRM standard could become “an unintended government underwriting standard” that could unintentionally “define the mortgage finance space.” Now, we see new legislation that explicitly sets the QRM as the boundary for access to efficient secondary market financing. This underscores why we need to get QRM right—no downpayment restriction and broad access to affordable mortgages for qualified borrowers. The choices regulators make now will have long-lasting, sometimes unintended, consequences.

Wednesday, December 7, 2011

Bring Workers Home Portland Recap

by Emily Salomon, Center for Housing Policy

Bring Workers Home participants.
Courtesy Erin Berzel Photography
Since 2009, the National Housing Conference has partnered with the National Association of Realtors® to host a series of one-day Bring Workers Home regional forums on workforce housing. On Thursday, December 1, NHC and NAR hosted their ninth and final Bring Workers Home event in this series in Portland, Ore. The event attracted over 90 employers and HR professionals, Realtors®, urban and regional planners, housing and community development leaders, local elected and appointed officials and state HFA representatives from throughout Oregon, Washington, California, Alaska, Utah and Idaho.

The day featured opening remarks from City of Portland Commissioner Nick Fish, who articulated the importance of affordable workforce housing in the Portland area in neighborhoods with access to transit, jobs, schools and other amenities. His comments were followed by three informative and engaging panels that covered topics including why workforce housing matters, lessons from the field, and the importance of partnerships. The panelists provided diverse perspectives of workforce housing including those from state and local government, non-profit and private sector, as well as detailed examples of employer-assisted housing programs.

To learn more about the event and speakers and to access even resources online, click here. Event photos are forthcoming.

Monday, December 5, 2011

Big Week for affordable housing in the Big Apple

by Cynthia Adcock, National Housing Conference and Center for Housing Policy

The white-hot spotlights of New York City are shining on affordable housing, as national and local affordable housing leaders gather to be recognized for their work and commitment to the industry. They will be honored at the New York Housing Conference (NYHC) and the National Housing Conference (NHC) 38th Annual Awards Program, one of the largest gatherings of housing professionals in the nation, which will be held at the Hilton New York in Manhattan this Thursday, Dec. 8.

With more than 1,200 government officials and affordable housing leaders expected, this year's Awards Program will highlight the importance of affordable housing as a means to encouraging economic growth, job creation and recovery. It will also feature several symposiums designed to address some of the most pressing issues currently facing the affordable housing industry.

“This year’s theme of job creation and recovery is important for the entire industry as it really embodies everything about affordable housing-where the industry is going and how important it is to the economic recovery,” said Judy Calogero, CEO of the New York Housing Conference. “Not only are we creating affordable housing for people in need, but we are also creating jobs and enabling people to afford to live near where they work within their salaries.”

“Given the economic environment we face, the affordable housing industry needs to coalesce more than ever before to address the challenges and combine our limited resources,” remarked Dan Nissenbaum, Chairman of the Board of Directors of the National Housing Conference and Managing Director of the Urban Investor Group at Goldman Sachs. “The NYHC and NHC Awards Program is a great platform for convening different interest groups to talk about what’s best for the city, how different programs can work together, and how to develop affordable housing most broadly.” Read more at
You may purchase tickets online through Monday, December 5, at the door on Thursday, or by calling Dan Bianco at (212) 265-6530.

Fannie, Freddie and FHFA take lumps from Congress; DeMarco discusses future plans

by Sarah Jawaid, National Housing Conference

The House Financial Services Committee held a hearing Dec. 1, "Oversight of the Federal Housing Finance Agency." Federal Housing Finance Agency Acting Director Edward DeMarco was asked to appear before the committee after criticism by members of Congress on questionable spending by the GSEs as well as answer questions on the future of GSEs. Freddie Mac CEO Charles Haldeman and Michael Williams, head of Fannie Mae, also testified. Members of Congress from both parties asked pointed questions about spending decisions on executive salary compensation and around $74,000 for dinners during a conference.

Halderman and Williams were asked to justify executive pay anywhere between $2.8 and $3.5 million for their second-highest-paid staff. In response to these questions, Halderman and Williams said the salaries were an appropriate amount for the industry. Ranking member Rep. Michael Capuano (D-Mass.) disagreed, saying: “Do you understand the outrage the American people feel?…It’s impossible to understand why an individual, working for an industry such as yours, has to make that kind of money.”

The legislators showed concern that questionable spending on salaries and dinners are costing taxpayers more money. DeMarco said that post-conservatorship, the GSEs needed to offer competitive salaries to attract strong leaders to take over during a difficult time (see a recent blog post from NHC’s Ethan Handelman to this point). The FHFA Acting Director expressed his commitment to transparency moving forward.

In addition to getting questioned about spending, the committee asked about the future of the GSEs. DeMarco told the committee a comprehensive plan for the GSEs would be available soon. He also said that FHFA is pursing private sector risk-sharing opportunities that will shortly come to fruition. "I believe in the coming year you are going to see actual more executions that follow that approach," DeMarco said. He also said FHFA is looking for ways to quickly sell “blocks” of REO properties to unload assets from Fannie Mae and Freddie Mac. "We are most interested in proposals tailored to the needs and economic conditions of local communities," DeMarco said in his written testimony, adding "we are not trying to develop a single, national program for REO disposition."

Representative Miller (R-CA) added that the “GSEs are still outperforming the private sector…to throw the baby out with the bath water is unreasonable. Let’s go back and look to what they did wrong and how do we fix it. It’s a huge problem. But to say we are not going to deal with them at all is unreasonable.” He then went on to describe his credit facility bill which was introduced at NHC’s policy summit earlier this year.

Listen to the hearing and read written testimony from FHFA and the GSE’s leadership here. Read more on the private capital risk sharing at Market News International.

Friday, December 2, 2011

Connecting the dots for energy retrofit lending

by Clare Duncan, National Housing Conference

There are savings to had in housing by making our houses and apartments more energy efficient and healthier. There are also productive investment and job creation opportunities to be had by financing green retrofits. So why haven't we connected these dots? (Readers of this blog will have seen a related point in Jeff Lubell's recent column).

Partly, it's that lenders have trouble deciding which are the right investments to make--they need certainty in their investments. It's hard to know before the fact whether energy efficient lighting will pay back quickly (it usually does) or whether super-efficient windows will do so (often they won't).

So, it's encouraging that a forthcoming study tackles the issue directly.

Deutsche Bank Americas Foundation and Living Cities are expected to release a report soon that documents the energy savings of multifamily retrofits. The report, conducted by Steven Winter Associates and HR&A Advisors, examined nearly 19,000 affordable housing units in New York City that have undergone energy efficiency retrofits. It finds that these retrofits resulted in 19 percent savings on fuel bills and a 10 percent savings on electricity which translates into $240 in fuel savings and $70 in electrical savings per apartment yearly.

While energy-efficiency retrofits are becoming more common, there is still very little data that shows that these retrofits result in any real savings. This report is one of the first to prove that straightforward fixes such as efficient boilers and compact fluorescent light bulbs provide such savings. The authors also hope that the report will help improve lending practices by convincing lenders to underwrite larger loans based on the projected savings of retrofits; Lenders haven’t been doing this because the lack of available data proving such savings.

Lenders have also expressed concerns that energy audits, which shows opportunities for increased efficiency and savings, aren’t always accurate and overstate potential savings. To combat this concern, the study created a tool for lenders to confirm the accuracy of energy audits. Using the data, they divided the NYC multifamily housing stock into categories based on age, heating system, electrical infrastructure and other factors. Lenders can then apply the study data to building types to determine potential savings and check the veracity of energy audits.

Part of the question of giving lenders certainty in their investments is the realities of real estate lending, which requires income to pay back debt and collateral to secure that debt. To this point, in June, Recap Real Estate Advisors released a related white paper titled Multifamily Utility Usage Data: Issues and Opportunities for Living Cities and the MacArthur Foundation, which was discussed at the Green Affordable Housing Coalition’s Green Retrofit Financing Forum in July. The paper identifies major utility databases in use or development for privately-owned multifamily rental housing (market-rate and affordable) and explores how they interact with simulation models that predict energy usage for multifamily retrofits and national green building standards. It also reinforces the need to build energy retrofits into full property recapitalizations that can provide lender certainty and enough capital to make transactions work.

Thursday, December 1, 2011

Keeping the right rescue crew at the GSEs

by Ethan Handelman, National Housing Conference

Recently, the political spotlight has shone on the compensation of executives at Fannie Mae and Freddie Mac. Fannie Mae’s CEO Michael Williams, Freddie Mac’s CEO Charles "Ed" Haldeman and their regulator, the Federal Housing Finance Agency Acting Director Edward DeMarco are to testify today before the House Financial Services Committee about how the two agencies have managed their expenses since conservatorship began. (See coverage in Housing Wire.)

Some political ire is to be expected, given that the two secondary mortgage market companies are receiving billions in federal bailout funds (combined losses in the first three quarters of 2011 total $22.6 billion). But if what we’re after is effective housing policy and responsible financial management, we should take a collective deep breath and ask ourselves: who are we trying to motivate and how?

Executives who are at Fannie and Freddie now aren’t the leadership who led them into the collapse—indeed, Housing Wire reports that since the current Freddie Mac CEO Haldeman joined the agency in August 2009, “14 of his 18 committee executives have been changed.” Senior leadership has turned over almost entirely at both agencies.

So, many of those who would be affected by pay reductions or caps are people who have stepped in to help right a foundering ship. And the GSEs are a ship that’s very complicated steer through the shoals of disrupted capital markets, severely weakened housing markets, rampant foreclosures, and underwater borrowers. Expertise in those challenges is worth paying for—we don’t want a cut-rate crew.

Wednesday, November 23, 2011

Putting the squeeze on project-based Section 8

by Ethan Handelman, National Housing Conference

Those who have been following the FY 2012 HUD appropriations (see NHC’s coverage) will have seen that the project-based Section 8 account received $9.34 billion rather than the $9.42 billion dollars requested. Beyond that $80 million shortfall, Congress rescinded $200 million from the Housing Certificate Fund, which in the past has in part been used to address shortfalls in the project-based Section 8 account. That leaves a gap for FY 2012, probably of around $180 million, based on the appropriations shortfall plus the portion of rescinded funds that could have been used. Then add an uncertainty factor, since the renewal figure is an estimate that can change based on how many contracts renew, what rent levels are, and how much tenants are able to pay.

So what is HUD doing to address the shortfall? To their credit, they have stood firmly behind the pledge to fully fund all project-based Section 8 contract renewals. That means, however, they have to find the extra money. In a recent memo and in a meeting with NHC and other members of the Preservation Working Group, HUD outlined several painful changes:
  • Redirecting residual receipts. HUD has said it will require certain restricted project funds to be used to pay Section 8 HAP payments rather than remain for project use. Some types of Section 8 contracts have a cap on how much project cash flow can be distributed to the owner each year. Amounts earned above that cap get deposited in a residual receipts account, access to which HUD controls. In the later vintage contracts, so-called “new-reg” contracts, contracts provide HUD with explicit control of these funds. Historically, residual receipts have been kept in reserve to preserve affordability at the property, for instance by funding capital needs shortfalls. Redirecting them to pay rents will quickly deplete the reserves—expect real push-back from owners on this one.
  • Limiting rent increases on exception projects. Most Section 8 rents roughly track market rents, thanks to the renewal process created in the MAHRA Act in the late 1990s. There are some exceptions (called with much originality “Exception Projects”) that can renew at above-market rents with increases based on the operating costs of the property. HUD has said it will limit those projects to formula-based Operating Cost Adjustment Factor increases if rents are already above market. This may create serious challenges for properties with operating costs rising faster than the formula rent increases.
  • Scrutiny of rent comparability studies that exceed a new benchmark. When project-based Section 8 contracts renew, rents can be reset to market levels using a rent comparability study that looks at rents for similar apartments in the non-HUD subsidized market. HUD plans to issue guidance for these renewals requiring extra scrutiny of comparable rents that are more than 110% of the new Small Area Fair Market Rent. Not only is this a new requirement, but it relies on a new standard, the Small Area FMR, which has thus far only been a pilot. While careful underwriting of rents is a generally a good feature, HUD should be careful that the 110% benchmark does not become a de facto cap on rents (a real danger when guidance from HUD headquarters translates into field office practice).
These are understandable reactions to a constrained funding environment. Expect to see push back on some of these policy changes once details are announced, especially if or when they place existing affordable housing properties at risk.

Tuesday, November 22, 2011

Next stop: sustainable development principles in action

by Blake Warenik, National Housing Conference and Center for Housing Policy

Last month, I had the pleasure of taking the Washington Metro's Red Line just a few stops to tour the Rhode Island Row mixed-use development in Northeast D.C. with my colleagues at the National Housing Conference and Center for Housing Policy. At the time of our tour, Rhode Island Row's housing units were in their final stages of construction and have since opened to residents.

Situated adjacent to Rhode Island Avenue Station on the former site of an 800-space commuter parking lot, Rhode Island Row represents a dramatic departure from the bridge-and-tunnel vision of mid-century D.C. toward a sustainable, transit-oriented model that offers residents of all income levels access to housing, jobs and amenities.

Rhode Island Row's project manager, Caroline Kenney of Urban Atlantic Development in Bethesda, Md., was our guide. She and her company worked to ensure that Rhode Island Row serves a mixed-income population, making 20% of the project's 247 housing units affordable to area families at or below 50% of area median income using a combination of Low Income Housing Tax Credits and other sources of HUD multifamily financing.

While that's the main point of interest to those of us in the affordable housing world, Rhode Island Row is a living study in sustainable development. Practitioners and experts in the planning, transportation, environmental and government fields will find a lot to like about this transformation of a regional transit hub into the seed of a vibrant community.

Please watch below and pardon the dust.

Rhode Island Row is managed by NHC Leadership Circle member The Bozzuto Group. Learn more at

Monday, November 21, 2011

FY 2012 THUD Appropriations Signed Into Law

by Clare Duncan, National Housing Conference

Last Friday, President Obama signed the minibus (H.R. 2112), which combines FY2012 Appropriations for Agriculture, Commerce/Justice/Science (CJS) and Transportation/Housing and Urban Development (THUD), into law. The bill provides $128 billion for the included programs, with $55.6 billion for the THUD portion of the package, which is actually an increase of $183 million from FY11 levels. HUD, however, was cut by $3.8 billion relative to FY 2011, for a total of $37.3 billion for 2012. (Note: Approximately $2.6 billion of the cut is offset by receipts from FHA and Ginnie Mae and one-time rescissions. See analysis by the Center on Budget and Policy Priorities.)

The cuts show up in many places (see chart below for details):
  • No funding for the Sustainable Communities Initiative, which has been targeted for elimination in the House.
  • Section 8 tenant-based vouchers receives $18.9 billion, above both the House and Senate version, which the summary describes as “sufficient funding to renew ever individual and family that received assistance through Section 8 tenant-based vouchers”. Veterans Affairs Supportive Housing vouchers would receive $75 million.
  • Project-based Section 8 receives $9.3 billion. Project-based Section 8 contract renewals are fully funded, but doing so requires some one-time accounting actions and ongoing program changes to address the gap between the requested amount and what Congress appropriated. HUD expects to release details of those changes shortly. 
  • HOME receives only $1 billion, a severe cut from FY 2011 levels. The summary reiterates criticism of the program from the House committee report, and the bill includes new oversight requirements for community development program funds, including a requirement that homeownership units unsold after 6 months must be rented and that funds for projects uncompleted after 4 years must be repaid, with a 1 year discretionary extension.
  • CDBG is cut by $192.9 million from FY11 levels, to a total $3.3 billion of which $400 million can be used for eligible disaster recovery activities.
  • Public housing receives $1.85 billion for the capital fund and $3.96 billion for the operating fund, but the operating figure includes $750 million against PHA reserves.
  • Section 202 Housing for the Elderly drops to $375 million from $399 million in FY 2011.
  • In the Agriculture budget, several major housing programs are cut relative to FY 2011, including the Section 502 Single Family Direct Loan Program, Section 515 Rental Housing Direct Loan Program, and Section 521 Rental Assistance Program.
There are a few bright spots, however (taking the liberty of counting level funding as good):
  • Choice Neighborhoods receives $120 million to revitalize distressed communities.
  • Section 811 Housing for the Disabled receives $165 million, a slight increase from FY 2011 though below historical levels for the program.
  • HUD’s housing counseling program, which was zeroed out in FY 2011, receives $45 million, still far below the $87.5 million it received in FY 2010. The NFMC program received $80 million.The Rental Assistance Demonstration program is authorized for conversion of 60,000 units of public housing to project-based Section 8, although without specific funding attached. 
  • Homeless assistance grants receive level funding at $1.9 billion
  • In the Agriculture budget, the Section 502 Single Family Guarantee program is level-funded at $24 billion, and the 538 Rental Housing Guarantee program saw a substantial increase (bringing it closer to historical levels) to $130 million.
Other key provisions in the minibus:
  • Raises FHA’s loan limits back to the levels passed in HERA, a maximum of $729,650. However, the loan limits for Fannie Mae and Freddie Mac are left at their current level of $625,000. Although the FHA increase will be helpful in providing stability in high-cost markets, the differential between FHA and the GSEs (which together are still providing over 90% of new home mortgages) will further drive mortgage origination to the fully-guaranteed FHA channel that is already handling a much greater share of the market than usual.
  • Continuing resolution through December 16 for parts of government for which Congress has not yet passed appropriations bills.
For more information, please visit the House Appropriations Committee website or view the full conference report here.

FY 2012 Budget Chart for Selected HUD and Agriculture Programs (in millions of dollars)

FY11 Enacted
House Subcommittee Bill
Senate Subcommittee Bill
Final Conference Language
Tenant Based Rental Assistance
Project Based Rental Assistance
Public Housing Operating Fund
Public Housing Capital Fund
Homeless Assistance Grants
Section 202 - Elderly
Section 811 - Disabilities
CDBG (formula grants)
Sustainable Communities
Choice Neighborhoods
Housing Counseling
502 Single Family Direct
502 Single Family Guar.
515 Rental Housing Direct
538 Rental Housing Guar.
521 Rental Assistance