Friday, August 29, 2014

RAD isn’t as radical as it sounds

By Ethan Handelman, National Housing Conference

The name of HUD’s Rental Assistance Demonstration (RAD) has a phonological connection to “radical,” but it’s far from it in practice.  Mostly, it’s trying proven techniques for financing and renovating older affordable housing and applying them to public housing properties that all agree need attention.  It’s still a pilot program, and rightly so, but over time I expect it will prove to be the future direction for fixing up long-neglected public housing.  

Recent coverage of RAD by the American Prospect highlights the concerns of some tenant organizations advocates who worry that changes to the financing and ownership structure of public housing may affect tenants’ rights and property operations over the long term.  These concerns come in part from a complicated history around affordable housing marred by too-abrupt property conversions, explosive politics, poorly planned demolitions and redevelopment and enough bad actions to create distrust on all sides.  I expect that implementation of the program will calm many of these fears as residents see property improvements and a continued commitment to maintaining affordable housing properties in these communities.

The American Prospect article missed a few points on the potential benefits of RAD bringing private capital to public housing:

1.   Public housing authorities (PHAs) can continue to own and operate the properties after they go through RAD.  RAD allows a private developer to come in, but it does not require it.  PHAs with the capacity to do the financing transaction and continue operating the property can do so, and many are.  Depending on the specifics of the transaction, a technical sale of the real estate may be necessary, but even then, it can be to a new entity controlled by the PHA.

2.   There are proven benefits to having private capital in affordable housing.  The default rate for Low Income Housing Tax Credit properties is well below 1 percent (even during the financial crisis), in large part because you have an investor, often a syndicator, and a lender all focused on the success of the property.  That level of oversight and asset management is far more than public-sector bureaucracy has ever provided with past programs like public housing, Section 202, Section 236, Section 221d3 and the like.

3.   HUD's Section 236 mortgages were 40 years with a prepayment option at 20 years.  The article misstates this as 30-year mortgages.  This is a minor factual point, but it’s a reminder that past approaches to creating affordable rental properties aimed at very long term commitments without providing an effective source of capital to renovate properties over time.  Indeed, that’s why NHC has been researching lifecycle underwriting as a way to think constructively about the long-term sustainability of affordable housing.

In short, RAD isn’t radical.  The Low Income Housing Tax Credit program has relied on private capital for more than 25 years, and it is a singularly successful affordable housing tool, and RAD builds on that success and the lessons learned.  NHC has been working with lenders, PHAs, developers and HUD to iron out key program details that affect the permanent mortgage debt for these properties.  As the pilot moves forward, let’s watch it closely and make sure we get it right without letting our fears get in the way.

Thursday, August 21, 2014

Bank of America settles with DOJ over mortgage lending case

By Rebekah King, National Housing Conference

On Thursday, Aug. 21, Bank of America and the U.S. Department of Justice (DOJ) reached a $16.65 billion settlement.  The settlement resolves federal and state claims against Bank of America and its affiliates, Countrywide Financial and Merrill Lynch, regarding their mortgage lending and securitization activities.  This is the largest civil settlement ever reached between the U.S. government and a single company, and it includes $7 billion in funding for homeowner relief, community development and affordable rental housing activities that families and communities across the country will welcome. 

The settlement has two parts:  $9.65 billion will go toward settling legal claims with federal and state governments, and $7 billion to consumer relief.   There are specific provisions around affordable rental housing and tax relief for borrowers that are of particular note.

Federal and state government: The $9.65 billion includes a $5.02 billion fine under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).   The remainder, approximately $4.6 billion, will go to settle federal claims related to Bank of America’s origination and sale of mortgages, to settle claims with the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC) and to settle claims with six states: California, Delaware, New York, Kentucky, Maryland, and Illinois.

Consumer relief: The $7 billion in consumer relief will be a mix of cash payments and credit for eligible activities.  The eligible activities for homeowners in distress include first lien principal forgiveness, forgiveness of forbearance, forbearance, extinguishment of second liens and forgiveness of junior liens.  Bank of America will also receive credit for low to moderate income lending that supports homeownership. Community reinvestment and neighborhood stabilization activities are eligible under the settlement and include funding for demolition/property remediation of abandoned residential properties; mortgages or REO properties that Bank of America donates to local governments or nonprofits; funding to capitalize Community Development Financial Institutions (CDFIs), land banks and community development funds; donations to Interest on Lawyers’ Trust Account (IOLTA) organizations (which provide funds to legal aid organizations); and funding to HUD approved housing counseling agencies.

Rental housing: Bank of America can receive credit, as part of its consumer relief agreement, for financing affordable rental housing.  Its support must be to properties for low-income households (equivalent to Low Income Housing Tax Credit standards) and that meet additional income and unit size criteria to ensure low income families benefit from the rental housing.  A possible indicator of how these requirements will play out are the specifications that are part of Citigroup’s recently announced program under its settlement. 

Borrower tax relief: Additionally, as explained in the DOJ briefing this morning, Bank of America will provide $490 million plus the $7 billion in consumer relief to support tax relief for borrowers who receive loan modifications or principal forgiveness.   Bank of America will provide these funds unless Congress passes an extension of the Mortgage Debt Relief Act (something NHC and many others have repeatedly called for).

Bank of America must reach minimum credit levels in the six states that are part of the settlement so its efforts may be targeted to California, Delaware, Kentucky, New York, Maryland, and Illinois.  According to the settlement statement, Bank of America has a deadline of Aug.31, 2018, to meet all of its obligations. 

As with other mortgage settlements, the parties involved have not explained the particular distribution of relief amounts among federal agencies, state governments, community benefits and consumer relief.  And while these financial amounts are notable because of their size, it is unclear how much of the consumer relief and community benefits will be new activity on the part of Bank of America and how much recognizes current or planned business activities.  Settlement payments, excluding the $5 billion FIRREA fine, are also tax deductible for the bank.  We are hopeful that more details will emerge from the settlement monitor and the parties involved.

Details aside, as Associate Attorney General Tony West stated in the DOJ briefing Thursday morning, this is one of the largest financial relief packages ever reached, and $7 billion in funding for homeowner relief, community development, and affordable rental housing activities will have significant positive impacts on communities across the country.

Thursday, August 7, 2014

Impacts of CFPB proposed rule on HMDA reporting

by Rebekah King, National Housing Conference

The Consumer Financial Protection Bureau (CFPB) has released a proposed rule that would expand Home Mortgage Disclosure Act (HMDA) reporting requirements. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) requires CFPB to expand HMDA’s dataset to include more detailed information about mortgage lending.

Why does mortgage data matter? In summary, the proposed rule would greatly expand our understanding of what is happening in the mortgage market.  Up until now, HMDA has provided a limited (but still useful) view of mortgage lending. Although the final content of the rule is still being determined, as proposed, the HMDA data under the new rule would allow CFPB to see loan pricing and distribution in new and varied ways as well as gain an understanding of how reforms are impacting the mortgage market, like the Ability-to-Repay and Qualified Residential Mortgage rules. The expanded data collection could give everyone greater knowledge about actual loan costs and better information about applicants seeking mortgage financing. In short, we’ll know more about the effects of policy changes and whether more or different actions are needed.

What’s HMDA? It’s a 1975 law that requires lenders to report on home loans for which they receive applications, originate or purchase. Current data points include loan volume by loan type (purchase, refinance, improvement, non-occupant, geography, gender, race, ethnicity and income); they also include minimal pricing information and information on applications denied, withdrawn, incomplete and reasons for denial. 

What’s new in this proposal? New collected information will include total points, fees and rate spreads; duration of teaser rates, prepayment penalties and non-amortizing features; unique identifiers for the loan and loan officer; property value and improved property location data; and borrower age and credit score information. CFPB is also considering including other data points, in addition to the new requirements of Dodd-Frank. These potential data points include a borrower’s debt-to-income (DTI) ratio, more information on reasons for application denials, qualified mortgage status, combined loan to value ratio, automatic underwriting systems results and when a property is deed restricted for affordable housing. 

What’s covered? Essentially any dwelling secured loan would be reported on, and unsecured home improvement loans would no longer be included. 

Who reports and how? In addition to enhanced reporting, the proposed rule would standardize the reporting threshold for depository and non-depository lenders. Institutions making more than 25 closed-end loans or reverse mortgages in a year would have to report on those loans, but entities with fewer than 25 loans would not have to report. If depository institutions are below the minimum asset threshold, they would also continue to be exempt. The rule would align data requirements with industry standards, specifically the standards endorsed by Mortgage Industry Standards Maintenance Organization (MISMO), expressly to meet Fannie Mae and Freddie Mac data needs. This change is designed to make it easier for lenders to report required data points, but may impose an additional burden on smaller lenders and community banks that do not sell loans to GSEs. Lenders and financial institutions have also expressed concern about data security as well as privacy of borrower data. The CFPB is not planning to publicly disclose the new data points at this time.

Frequency of reporting? Financial institutions are still required to report annually under the proposed rule, but institutions with more than 75,000 reported transactions would be required to submit data quarterly; this change would have impacted 28 institutions in 2012.

What should I do? The number of potential new requirements is significant and NHC encourages its members to comment on this proposed rule so that the final rule accurately reflects practical realities of mortgage lending, while improving our knowledge of trends in the housing market. The proposed rule is available for comment until October 22, 2014.

Tuesday, August 5, 2014

No sleep ‘til Solutions

by Chris Estes, National Housing Conference

Congress has left town for August recess without making much progress on appropriations or other major legislation. We expect a continuing resolution to keep program funding at current levels through the November election. At that point, election outcomes will dictate how much progress can be made on legislation.

This does not mean, however, that Washington or NHC will be inactive this month. We are working to finalize all of the details of Solutions 2014, the National Conference on State and Local Housing Policy, and have many exciting workshops scheduled that make this a can’t-miss event for the affordable housing community. Please take a look at the agenda on our website to see all that is offered.

As with last year’s event in Atlanta, we will offer four main workshop tracks, plus a track of bonus sessions and a track of roundtable discussions for experienced practitioners. Ethan writes about our Restoring Neighborhoods track below, but I wanted to note the workshops focusing on both reinvestment and gentrification strategies in Ohio, Georgia and California, and on how two cities have used HUD’s Rental Assistance Demonstration to revitalize their public housing stock.

Again this year, NHC is partnering with the Innovative Housing Institute on the Inclusive Communities track. Inclusive Communities will feature workshops on how Boston, Chicago and Seattle have been leaders in the active production of affordable housing in high opportunity areas, how localities have included or preserved affordable housing within walking distance of transit stations and how cities like New York and San Francisco have used upzoning to increase affordability requirements.

Our Housing Intersections track builds on last year’s research-focused offering and seeks to make practical connections among the many ways housing supports outcomes in health, education and economic opportunity. This track will feature workshops that look at how housing demands differ between baby boomers and millennials and how localities can attract, serve and retain different age groups over their lifespans; how Arizona has developed a Health Community Collaborative among the housing, community development and health sectors; and the mechanics of housing and education collaborations in San Francisco to improve outcomes for low-income children.

One area NHC specializes in is best practices in communicating about affordable housing. Our Housing Communications track again this year will focus on the most promising strategies and latest research in promotion, education and advocacy on affordability issues. This includes workshops specifically targeted to affordable housing developers (especially those with limited communication staff); the science behind effective messaging for more affordable, inclusive communities, and an opportunity to hear from journalists and communicators about the new media landscape and what it means for our work.

As a lead-in to Solutions, NHC is offering a number of webinars on a variety of topics throughout the fall. Coming up on August 12, NHC’s Amy Clark, with Janet Byrd and Matt Kinshella of Neighborhood Partnerships, will explain how science-based communications techniques can be beneficial and how you can incorporate the tools in your work. See below for more information.

We expect Solutions 2014 to be the only national event that brings together such a wide range of regional, state and local practitioners working on affordable housing issues. If you are interested in being a sponsor at this unique event, please visit the sponsor page on our website for more information.

As always, thank you for being a member of NHC!

Monday, August 4, 2014

Making the connection between research and practice

Developing solutions through research
by Lisa Sturtevant, Ph.D., National Housing Conference

As NHC’s research division, the Center for Housing Policy increases awareness of housing needs and identifies promising solutions to housing challenges through timely and accessible research. Being able to connect research to practice to support local housing policy development is one thing that differentiates the Center’s work from others’. When we analyze data, synthesize research findings, evaluate best practices or describe housing innovations, we try to keep our audience in mind, whether it be local advocates, housing finance agencies, or local housing planners, and develop materials that will be most useful to them.

We recently completed a large project that highlights our commitment to conducting rigorous research that has concrete applications and can be accessed by practitioners in a variety of ways. In partnership with the National Community Land Trust Network and the Lincoln Institute of Land Policy, the Center just completed a six-month project assessing the prospects for inclusionary housing programs to ensure lasting affordability. Inclusionary housing policies are local land use policies that link approvals for market-rate housing to the creation of affordable homes for low- and moderate-income households. The ability to not only produce affordable homes, but also to ensure their long-term affordability, is critical for meeting the housing needs of the families and individuals that inclusionary housing programs aim to serve. Even as inclusionary housing programs have become more prevalent, there has been a lack of information on successful strategies for facilitating lasting affordability, and this work has filled an important gap.

The new research and best practices that resulted from this project are published as a working paper by the Lincoln Institute. The report includes case studies of 20 programs that have taken different strategies for developing and maintaining their inclusionary housing units and is a great resource for housing planners and advocates.

But we wanted to make sure that our work reached those who may not have the time or inclination to read the entire 100+ page report and who may want more than the executive summary. With the CLT Network, we held an interactive webinar where we discussed the research and the results, and responded to questions from viewers. We’ve developed a national database of more than 500 inclusionary housing programs (available soon!) that can be used to identify local programs. And we just completed a two-page resource guide (also available soon!) designed to help those who are new to inclusionary housing find out more.

We’re always looking for new ways to share research and best practices with the housing community. We’d love to hear suggestions for how you would like to hear about our research. What formats are most helpful when you are doing your work? Do you prefer short research briefs? Webinars? Online, interactive tools? If you have ideas, I would love to hear about them and hope you’ll send me an email ( With input from our members and others in the housing community, we are better able to continue making the connection between research and practice.    

How NHC members are shaping Solutions 2014

What we're building
by Ethan Handelman, National Housing Conference 

Policy work isn’t just about knocking on the doors of members of Congress. Indeed, with Congress out all this month and campaigning when the recess ends, it’s clear we need to focus elsewhere. NHC members are rolling up their sleeves to develop new ideas about housing policy that can work at the state, local and (when the time is right) federal levels. In part, they’re doing so in preparation for our Solutions 2014 conference coming up this November in Oakland.

This year’s conference has sessions created and shaped by NHC members. Some were topics I knew were essential to our mission but that members presented in new and interesting ways. Some topics were welcome surprises to me. They are critical issues for affordable housing but ones not immediately apparent to me sitting at my desk in D.C. Just two examples from my Restoring Neighborhoods track:

  • Julia Ryan and Mona Mangat at Local Initiatives Support Corporation (LISC) have built a workshop around public safety and affordable housing. In places like Milwaukee and Providence, LISC has been helping to create a community safety model that encourages collaboration among residents, business owners, community development groups, police officers, prosecutors and others to reduce crime in a sustained way. Personally and anecdotally, I know how much the perception of crime levels and safety matters for where people choose to live. It’s rare, however, to see sustained policy attention to the issue in connection with affordable housing. I’m looking forward to hearing from housers and public safety officials about how they came to work together.
  • Breann Gala from the Metropolitan Planning Council in Chicago crafted a workshop on how single-family rentals are changing neighborhoods and how housing policy needs to adapt in response. NHC has been working on this issue for some time through our National Foreclosure Prevention and Neighborhood Stabilization Task Force. I’m glad to see this session bringing perspectives from the nonprofit sector (Rob Grossinger of Enterprise Community Partners), the for-profit sector (Colin Wiel of Waypoint Homes), and the research community (Alan Mallach of the Center for Community Progress).

There are lots more examples of creative, though-provoking sessions put together by NHC members and partners. I’m grateful for all of the work so many of you have done to help Solutions 2014 succeed, and I hope many of you can join us in Oakland this November. Learn more about the Restoring Neighborhoods track and other Solutions 2014 workshops here

Friday, August 1, 2014

Baltimore Housing celebrates preservation of affordable senior housing

News from NHC's family of members
by Radiah Shabazz, National Housing Conference

Last month NHC member Baltimore Housing celebrated the preservation of Memorial Apartments, a housing development for seniors in the city’s Bolton Hill neighborhood. The complex is designed to enhance the living experience of seniors 65 and older and foster independence and the ability to age in place.

Construction on the apartments will preserve 266 state-of-the-art affordable units for seniors. The building will be updated with central heating and cooling, solar hot water systems, elevators and windows. A multipurpose room will also be added, along with a library and computer lab, fitness center, community gardens and a catering kitchen.

“The new Memorial Apartments will greatly improve the existing character of Bolton Hill and provide new opportunities that enable seniors to live an active and productive lifestyle,” Baltimore Housing Commissioner Paul Graziano said in a press release. “The energy that it will bring to the greater community will serve as a catalyst for developing a thriving mixed-income neighborhood that all residents can enjoy.”

Rehabilitation of Memorial Apartments will afford hundreds of older adults the opportunity to age in the comfort of their own homes without being pushed into nursing homes and other assisted living facilities. In March we published Aging in Every Place, a report which shows how supportive service programs increase the ability of seniors to age outside of institutional settings, when services are provided on-site or are available nearby in the community.   

Construction of the new Memorial Apartments is expected to be completed in just under two years.