Thursday, January 31, 2013

Creating change calls for head, heart and hands

by Marice Fernando, National Housing Conference

One of the best pieces of advice I ever received was at COOL Conference in 2006. (COOL Conference, now called IMPACT is a community service and civic engagement conference for college students.) The speaker, Wayne Meisel, who was president of the Bonner Foundation at the time, shared a story about a student. The student described how humbling and gratifying he found volunteering at soup kitchens and homeless shelters to be. He told Wayne that, in the future, he wanted his children to have the same experience.

Wayne then described his response to the student: if he really wanted to make a difference, he should work toward a society that did not have a need for soup kitchens or homeless shelters. In other words—it’s great that you want to help, but if you really want to make a difference, work to make a change in the system instead of letting status quo continue.

“Head, Heart and Hands” was the signature motto of my alma mater, Berry College. Our hearts go out to those in need, and we often feel compelled to help them by sharing our time and resources with community service organizations. Our time and resources are both needed and appreciated by those we help and we should definitely continue this practice. However, changing the status quo, as Wayne inspired me and other students to do that day, also requires using our minds to create better housing policy.

Creating policies that make safe, decent and affordable housing accessible to everyone in the United States is essential to preventing poverty, instability and homelessness. This is why I see the work of National Housing Conference and its members, as well as the Center for Housing Policy, as crucial. The depth and breadth of issues that hinder access to affordable housing make changing the system a daunting task. Through their work, NHC’s individual members each tackle a piece of the affordable housing puzzle. When these members come together through NHC, their efforts are both strengthened and coordinated—the pieces of the puzzle come together in an effort to change the system, one issue at a time.

Friday, January 25, 2013

How a simple accounting change can attract more capital to affordable housing

by Ronald Diner, Raymond James Tax Credit Funds, Inc.

NHC invites guest blog posters to write on important housing topics.  The views expressed by guest posters do not necessarily reflect those of NHC or its members.


Ron Diner
As those of us in the housing world know well, the Housing Credit is the primary federal program that develops and preserves affordable rental housing. Existing accounting rules are keeping this incredible resource from being used to its fullest potential. Currently, companies must report the costs of Housing Credit investments pre-tax while the benefits for their Housing Credit investments are reported on the tax line. This results in reduced pre-tax earnings with the benefits reported after tax, and is proving problematic for many investors.

There is a quick and simple way to fix the problem, attract new capital and create new investment in affordable housing: move the cost and benefits to the same side of the tax line.

Many Housing Credit stakeholders are hoping for feedback soon from the Federal Accounting Standards Board (FASB) to a white paper developed as part of an effort to win approval for allowing public companies to change the method of accounting for Housing Credit investments on their financial statements. The white paper was commissioned by an informal 20-member task force, led by Raymond James Tax Credit Funds, Inc., and comprised of syndicators, investors, and others. The paper was prepared by Novogradac & Company LLP and Reznick Group (now CohnReznick). The paper was presented to the FASB in the last few months, and the Emerging Industry Task Force (EITF) now has it included as part of their March 14 meeting. The EITF was designed to minimize the need for the FASB to spend time and effort addressing narrow implementation, application, or other emerging issues that can be analyzed within existing generally accepted accounting principles (GAAP).

Stakeholders favor a change by the FASB to its current rules to allow public companies to report the costs of and benefits from their Housing Credit investments in the same part of the financial statements—either both above the pre-tax line, or both on the tax line.

In connection with the EITF meeting, the task force, working with the Financial Services Roundtable, plans to provide the EITF members with a he letter that would encourage the Financial Accounting Standards Board to change the accounting practices governing the Credit in a way that will help better attract investment. You can help by signing onto the letter. Click here to read the sign-on letter.

If you agree to add your organization’s name to the letter, please email your approval by February 11 to me at ron.diner@raymondjames.com.

Ronald Diner is Executive Chairman at Raymond James Tax Credit Funds, based in St. Petersburg, Florida. Raymond James has been sponsoring affordable housing since 1969, and has raised more than $4 billion in equity for more than 1,300 properties across the country since the inception of the Tax Credit program in 1986.

Thursday, January 24, 2013

Moving Forward: New approaches to tackling perennial challenges - signs of progress at HUD

by Jeffrey Lubell, Center for Housing Policy

When I travel, I'm often asked about "what's really going on" in Washington, D.C. It's a natural question, but also kind of a funny one, since it seems to presume that the mere fact of working or living in D.C. gives you special insight into what's going on in The Halls of Power. It's almost as if the whole city were in mystical communion, specially attuned to the harmonic frequencies coming out of Congress and the White House . . . (They are atonal, as you might expect . . . )

My response is usually the same. I don't have any special insight into the "fiscal cliff" or the use of filibusters. But I have been paying particular attention to what's going on in the housing arena, and here I can say that I've seen some important steps being taken "inside" the Administration that represent real progress in modernizing the approach that the federal government takes to tackling the nation's housing challenges

I'm thinking of three developments in particular: the rise of interagency partnerships, the implementation of a robust research agenda and expansion of technical assistance / capacity building efforts.

Some brief thoughts on each of these three items:


HUD Secretary Shaun Donovan and VA Secretary Eric K.
Shinseki are working together to tackle veteran homelessness.
Photo courtesy Dept. of Veterans Affairs
1. Rise of Interagency Partnerships. Efforts to bridge the silos of the different federal agencies have been around since before the dawn of recorded history (or thereabouts). But often they take the form of passing the hat around and asking each agency to chip in something on a common topic so that you end up with a really wonderful (or at least lengthy) cross-cutting report that explains how each agency will be contributing toward a common goal. When done in this manner, there's no real sustained interaction or shared endeavor -- no new way of doing business that makes it easier for local grantees to accomplish shared goals.

There have been exceptions of course -- for example, the Interagency Council on Homelessness has long played an important role in coordinating the work of the many agencies involved in combating homelessness. But this may be the exception that proves the rule as it literally took an Act of Congress to create it, and it has full-time staff to help facilitate its work.

In the last few years, multiple interagency partnerships have sprung up that involve sustained interaction leading to joint activities. For example, HUD and the Department of Veterans Affairs are working together to help end homelessness among veterans, primarily through the HUD-VASH program; HUD is working with the Department of Transportation and the Environmental Protection Agency to develop new approaches to promoting sustainable and equitable communities; and HUD is working with the Department of Health and Human Services to improve the coordination of health and housing policies to help older adults and people with disabilities live independently.

2. Robust Research Agenda. I have long believed that better data on the performance of current programs and prospective program reforms are essential for breaking through the inertia of existing policies and vested interests to encourage the development of new program models that more effectively and efficiently address the nation's housing challenges. In recent years, HUD has launched a number of larger research projects directed at improving our understanding of what works. Among other things, these include evaluations of pre-purchase homeownership counseling, new approaches to helping homeless families, and HUD's Family Self-Sufficiency and Choice Neighborhoods programs.

These and other projects have been made possible through an increase in research funding provided by HUD's Transformation Initiative and renewed authority to work collaboratively with philanthropic foundations to fund larger projects. I hope to explore this topic in greater depth once HUD releases its forthcoming Research Roadmap. Stay tuned.

3. Technical Assistance / Capacity Building. These terms are subject to many interpretations, ranging from a very narrow construction -- training on the basic rules and regulations -- to a more expansive one that involves facilitating peer-to-peer learning and providing strategic consulting services to help communities develop more effective policies. A third activity -- training on how to effectively administer programs -- falls somewhere in the middle of this spectrum.

For the most part, HUD's new initiatives -- including Choice Neighborhoods, the Sustainable Communities Initiative, and Strong Cities, Strong Communities -- have all been accompanied by technical assistance / capacity building services that fall on the more robust end of this spectrum. This is good news, as there is much to be gained from the facilitation of cross-site learning, the harvesting and dissemination of knowledge about what works (and what doesn't work), and the essential feedback this process provides into how federal programs can be strengthened.

It remains to be seen to what extent this new approach to technical assistance becomes embedded within each of HUD's mainstream programs, but HUD's One CPD TA initiative holds promise as a platform for doing so, and the development of HUD's new eCon Planning Suite reflects an understanding that local communities can benefit from improved access to good data.

* * *

As the Administration's second term gets underway, it will be important to chart its progress in institutionalizing these functions so that they become a part of day-to-day operations and thus persist beyond the end of the current Administration. But for the time being, let's start by acknowledging these steps for what they are—a good start toward the important goal of helping local communities use HUD programs more effectively to address our nation's housing challenges.

Friday, January 18, 2013

New national servicing standards outline stronger borrower protections

by Sarah Jawaid, National Housing Conference

The Consumer Financial Protection Bureau released Thursday a final rule to regulate mortgage servicers, and implement consumer protections from the Dodd-Frank law. Many of the changes mirror standards developed for the national mortgage settlement. The new standards include (also see CFPB’s helpful summary):

  • Limitations on dual-tracking of loss mitigation and foreclosure proceedings
  • Early outreach to borrowers if delinquent on a payment
  • Prompt notification of foreclosure alternatives
  • Timelines for servicers to meet when contacting and responding to borrowers
  • Single application for loss mitigation with prompt and fair review
  • No foreclosure sale until all loss mitigation options are exhausted
  • No foreclosure sale if a loss mitigation agreement is in place
  • Rules for force-placed insurance
  • Specific explanation to borrowers for denial of a loss mitigation application

“For many borrowers, dealing with mortgage servicers has meant unwelcome surprises and constantly getting the runaround. In too many cases, it has led to unnecessary foreclosures,” said CFPB Director Richard Cordray in the statement announcing the rules. “Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes.” Full text and summary of the rule is available on the CFPB web site.

Thursday, January 17, 2013

New report finds no evidence to discredit CRA in subprime housing boom—again

by Sarah Jawaid, National Housing Conference

A new report from the UNC Center for Community Capital shows an overwhelming body of research demonstrating that CRA encourages safe, affordable lending. This refutes claims in an National Bureau of Economic Research working paper about the Community Reinvestment Act’s effect on subprime lending during the boom. The UNC report notes that CRA has come under attack before and the claims against it debunked by researchers and industry experts time and time again. The authors conclude, “Rather than trying to place blame where none exists, we argue that the focus of the debate should be on how CRA can be modernized and improved to better reflect the current financial services landscape and meet the continuing credit needs of America’s communities.”

The UNC report was authored by Carolina Reid, assistant professor in the Department of City and Regional Planning at UC Berkeley along with:

  • Mark A. Willis, resident research fellow, NYU Furman Center for Real Estate and Urban Policy (and NHC board member)
  • Ellen Seidman, former director, Office of Thrift Supervision
  • Lei Ding, assistant professor, Department of Urban Studies and Planning, Wayne State University
  • Josh Silver, vice president of research and policy, National Community Reinvestment Coalition
  • Janneke Ratcliffe, executive director, UNC Center for Community Capital, University of North Carolina at Chapel Hill

Read the report, “Debunking the CRA Myth—Again”.

Friday, January 11, 2013

In the storm’s aftermath, what are we rebuilding?

by Robert Hickey, Center for Housing Policy

“This is a song I wrote for my adopted hometown, Asbury Park. Over the past decade […] the town has had a renaissance and has come back. And if you go there in the summer now, the beaches are filled with people, and the boardwalk is lined with local businesses, and there’s all kinds of people there—rich people, poor people, brown people, black people, white people, all on the boardwalk at night. So it was painful to see it damaged[…]from the recent storm, and to see our Jersey Shore damaged, because the Jersey Shore has always been a special place—it’s been inclusive. [....] If you’re a retired policeman or a retired fireman, you can have a cottage by the sea in Point Pleasant or Manasquan or Lavallette. And that’s been a principal part of the characteristic of the Jersey shore. I’m sure there will be a lot of difficult conversations when the rebuilding comes around, but I pray that that characteristic remains […] it’s what makes it special.”

—Bruce Springsteen, 12/12/12 Benefit Concert for Sandy Relief (watch on YouTube)

Springsteen performing at the
Benefit Concert for Sandy Relief
Like many of you, I made sure to catch the amazing spectacle that was the Benefit Concert for Sandy Relief back on 12/12/12. What struck me most, amidst all the celebrity appearances and superhuman performances from 70-year-old rockers, was Bruce Springsteen’s introduction to his song “My City of Ruins.”

Like others, Bruce shared his heartbreak in seeing the Jersey Shore damaged by Hurricane Sandy. But he also raised an issue I’d yet to hear mentioned: the important choice that towns like Asbury Park face as they decide how to rebuild. Will the town and the rest of the Jersey Shore re-emerge as a place where people of various backgrounds are still welcome and can afford to live? Or (as Bruce implies), will rebuilding bring an exclusivity that causes the Shore’s unique qualities to be lost?

This same question could be asked in communities across the country right now, as towns and cities emerge from a different type of storm. After one of the greatest housing market plunges in the past 120 years, the nation is starting to build homes again. Last October, there were more new housing starts than at any time since July 2008. Among those areas of renewed growth are newly popular urban neighborhoods that are being revitalized after decades of disinvestment. As many of our nation’s cities get back on their feet, they face a similar choice as the Jersey shore: will they transition from one form of economic segregation to another, or will they take advantage of this opportunity to create and preserve opportunities for rich and poor alike?

The Center for Housing Policy has written extensively about resources available to local towns and cities for fostering and preserving inclusivity. Our toolbox at Housingpolicy.org is a good place to learn more. One tool that continues to show promise is inclusionary housing, which, when done well, extends housing opportunities to households of various income levels by bringing private developers into a partnership with local government to ensure that new housing developments include a share of below-market-rate homes. In the next two months, the Center will be putting out two new reports on inclusionary housing that revisit this policy’s potential to create inclusive communities in the post-recession era. We look forward to adding to the discussion that the Boss has so appropriately rekindled.

Thursday, January 10, 2013

New qualified mortgage rule sets standards for ability to pay

by Ethan Handelman, National Housing Conference

Today the Consumer Financial Protection Bureau (CFPB) released its final qualified mortgage (QM) rule, a long-awaited implementation of the Dodd-Frank financial regulation law that sets standards for mortgage lending. The simple summary: QM requires lenders to only make loans that they expect borrowers to repay and to verify that ability to repay. Codifying that into laws and rules requires setting standards for mortgages and the legal liability of lenders. The final rule strikes a careful balance between the needs of lenders and consumers.

From NHC’s perspective, important features of QM are:

  • Eliminating bad loan products. QM eliminates exploding adjustable rate mortgages, no-documentation loans, too-high fees, and other excesses of the housing bubble. These product standards are the single most important part of the rule for protecting consumers and ensuring responsible mortgage lending. 
  • Requiring documentation and verification. The rules requires lenders to document and verify borrowers’ ability to pay loans, not just initially but over the life of the loan. Guidelines include a 43% debt-to-income standard but no downpayment requirement. 
  • Setting legal standards. This was a sticking point for many stakeholders concerned about the rule. CFPB tried to balance lenders’ desire for clear standards and protection from liability with consumers’ desire for protection and means to redress unfair lending. The rule creates a safe harbor for lenders making prime loans that meet QM standards and a rebuttable presumption for higher-priced loans. The longer a borrower has made timely payments, the harder it will be to rebut the QM presumption. 
  • Proposing to accommodate specialized lending by credit unions, state agencies, and community banks. The final rule has an additional proposed component for a special category of QM loans that include downpayment assistance, first-time homebuyer loans, and loans targeted to low- and moderate-income families.

The most common theme I’ve seen in reactions from the industry is that market reactions will tell. If we see an uptick in lending that reaches beyond just wealthy borrowers with pristine credit to low- and moderate-income borrowers, that will be a powerful signal that the rule struck a good balance. Comments from the Mortgage Bankers Association and the National Community Reinvestment Coalition in Housing Wire are representative reactions, with the necessary caveats on some specific points. CFPB Director Richard Cordray’s speech announcing the new rule is worth a read for an accessible summary of the rule and the thought behind it. You can also see the full text of the rule from CFPB (when it becomes available), and a helpful summary from the Mortgage Bankers Associations.

Issuance of QM sets the stage for the qualified residential mortgage (QRM) rule, which may include minimum downpayment requirements and other restrictions with potentially far-reaching implications for access to safe and affordable mortgages. See NHC’s comment letter on the proposed rule.

Wednesday, January 9, 2013

Jeffrey Lubell parses what the New Starts rules mean for housing and transportation

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

U.S. News & World Report today published the second monthly column from Center for Housing Policy Executive Director Jeffrey Lubell on how new federal rules for the New Starts Program from the Department of Transportation actually help promote housing affordability as the nation develops new and better transit options. Lubell also points out the advocacy work NHC and other stakeholders undertook to ensure consideration for affordable housing in the rulemaking.

See Lubell's newest column on The Home Front blog at usnews.com now and learn more about the importance of the new rules and why housing and transportation policy must be aligned to grow vibrant, sustainable communities.

Wednesday, January 2, 2013

Housing provisions in the fiscal cliff deal

by Ethan Handelman, National Housing Conference

The down-to-the-wire bargaining produced a deal to avert the fiscal cliff, at least temporarily. Like Wile E. Coyote, we took a few steps over empty space without falling. Fortunately, Congress acted before we plummeted to the canyon below. Spending cuts, or sequestration, have been postponed to March 1 to roughly coincide with the end of the current continuing resolution. The agreement on taxes, however, produced several important actions for housing. The American Taxpayer Relief Act (also known as HR 8):
  • Extends the Mortgage Debt Relief Act through 2013, which enables mortgage modifications for troubled home loans without triggering taxes on forgiven debt. This is an essential tool for resolving the mortgage debt overhang that still weighs on the economy and helping struggling homeowners. This provision will likely need further extension, as there are still many mortgage modifications to be done.
  • In effect extends for one year the fixed 9% credit percentage for the Low Income Housing Tax Credit. This was previously scheduled to expire in 2013 because the provision affected properties placed in service through 2013. By changing the language to affect LIHTC allocations made in 2013, Congress allowed the fixed credit percentage to apply to the current pipeline of Housing Credit multifamily properties. The A.C.T.I.O.N. Coalition, of which NHC is a member, had been seeking a permanent change, but the one-year extension is certainly a positive outcome.
  • Extends the New Markets Tax Credit, an important tool for community development that often works closely with housing investments. 
  • Makes mortgage insurance premiums tax deductible once again, a provision that expired in 2011. Premiums are fully deductible for households with incomes below $100,000, and deductibility declines on a sliding scale for higher incomes. See additional discussion at Housing Wire.
What doesn’t it do? It doesn’t address the debt ceiling, which Treasury announced on Monday that we have hit, officially, although it can delay the need for increase for a few weeks. And it only delayed the across-the-board spending cuts until March, which leaves very little time to avert deep cuts in housing assistance and other essential parts of the social safety net.