NHC Open House Blog

States and servicers settle mortgage claims

noreply@blogger.com (National Housing Conference) — Thu, 09 Feb 2012 15:51:00 +0000

by Ethan Handelman, National Housing Conference

State attorneys-general, federal officials, and five major mortgage servicers today announced a $25 billion settlement that will provide relief in various forms to struggling borrowers and those who have already lost their homes. Details had yet to be released as of this writing, but in broad sketch the deal includes:

Principal reductions for underwater borrowers
Interest rate reductions on existing loans
New servicing requirements to prevent further abuses, including a single-point-of-contact requirement
Payments to borrowers who lost their homes to foreclosure
Funds for housing counseling and neighborhood stabilization

The implications of the historic settlement reach beyond the immediate financial provisions and much-needed relief for those wronged. Among the many positives of a final settlement are:

Safer process for borrowers. If the servicing requirements meet expectations, families should have renewed confidence in the process of getting a mortgage to buy or refinance a home. Part of renewing confidence in housing markets must be overcoming the distrust and uncertainty created by the mortgage crisis.
Clarity for lenders. Lenders have been very cautious in the aftermath of the bubble, making credit hard to get. The long-term uncertainty around servicing obligations, the bill for past actions, and the scope of future claims made it harder for lenders to take needed actions to prevent further foreclosures and lend more. Resolving that uncertainty should pave the way for foreclosure prevention measures beyond those in the settlement itself.
Confidence for housing markets. The greater certainty for all participants in housing markets provided by this settlement will help restore those very markets. Ultimately, we need more activity in housing markets to break the cycle of uncertainty and disinvestment that is slowing not only housing but the overall economy.
Relief for news readers. We no longer need to hear that a “settlement is imminent”!

For more details, see coverage in the Washington Post, New York Times, and the announcement on C-SPAN. Official details on the settlement are available at nationalmortgagesettlement.com.

Ethan Handelman enters the digital boxing ring

noreply@blogger.com (National Housing Conference) — Tue, 07 Feb 2012 18:58:00 +0000

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

Our own Ethan Handelman is fighting for help for homeowners struggling in the wake of the burst housing bubble. His is one of several perspectives in the U.S. News and World Report's Debate Club, Should the government help homeowners with underwater mortgages?

Debate Club allows readers to choose the winning side. Ethan, Asst. Sec. Raphael Bostic at HUD and Peter Tatian at Urban Institute argue yes, while the Cato Institute's Mark Calabria and George Mason University's Anthony Sanders argue against the government helping underwater homeowners. You can help everyone see why it’s important to act now for housing by voting for perspectives you share and taking points away from those you deem less sound.

The implication: vote early and often. Voting closes tomorrow.

Vote for housing (and Ethan) now

House votes to abolish guaranteed funding for transit, could threaten housing funds

noreply@blogger.com (National Housing Conference) — Sat, 04 Feb 2012 06:25:00 +0000

The U.S. House of Representatives Ways & Means Committee today terminated the guaranteed trust fund revenue for transit and gave it to the highway program. This dedicated funding stream established during the Reagan Administration comes from an excise tax on gasoline. Under this new provision, the burden for funding mass transit would fall entirely on the annual appropriations process, meaning lower funding and much more uncertainty for public transit.

This directly threatens housing. HUD and the Department of Transportation fall under the same appropriations subcommittee, which means their programs compete directly for funds. Putting greater pressure on the transportation side could significantly reduce funds available for housing. Not to mention, mass transit serves many residents of affordable housing as their only connection to jobs, schools, and other community services.

NHC united with others in housing and transportation to oppose this provision contained in HR 3684. We'll continue to advocate as the bill moves to the House floor and interacts with the Senate transportation bill (which does not contain the damaging provision). Join NHC at its Annual Budget Forum Feb. 24 to hear more about the connections between transportation and housing funding.

Obama’s housing plan, piece by piece

noreply@blogger.com (National Housing Conference) — Thu, 02 Feb 2012 20:24:00 +0000

by Ethan Handelman, National Housing Conference

President Obama’s announcement of his housing plan was welcome, but it includes more pieces than brief news coverage necessarily notices. Secretary Donovan provided much helpful detail in his remarks, and the fact sheet is a good reference. If you’re looking for a place to start, here’s a quick guide to the parts of the plan and what they might mean for communities and households across the country.

The Obama Administration's Housing Proposals – Topics

Refinancing plan	Homeowner Bill of Rights	Pilot REO property sale
Forbearance	Lending abuse task force	Rebuilding neighborhoods

Refinancing Plan

Homeowners with underwater loans have had trouble refinancing—not surprising, since it’s hard to get a lender to make a loan larger than the value of the house. The Home Affordable Refinance Program (HARP) has addressed some of the problem for loans owned or guaranteed by Fannie Mae and Freddie Mac, parts of it are still rolling out. The Federal Housing Administration (FHA) has a program for refinancing its own loans. But that leaves a large section of the market still without any good option for refinancing.

So, the President has proposed allowing FHA to refinance underwater loans, using a streamlined process to help homeowners lower their payments and avoid foreclosure. It’s a heavy lift, however, as it would a) cost money, proposed funding from a tax on banks, b) add underwater loans to the FHA portfolio, albeit in a separate insurance fund, and c) require legislation (particularly difficult to get in an election year).

Homeowner Bill of Rights

Despite the name evocative of 1791, this is a set of mortgage servicing standards aimed at correcting problems highlighted by the recent mortgage crisis. The announcement included only the broadest strokes here, and various parts of the government and mortgage industry have been working on these issues of disclosure, conflict of interest, and fair treatment for many years. Expect concrete details to emerge only when a settlement of the state attorneys-general lawsuit comes out, and watch the new Consumer Financial Protection Bureau for implementation details, especially around disclosure.

Pilot Sale of REO

Among Fannie Mae, Freddie Mac, and FHA, the government owns over 83,000 homes from foreclosures, with potentially hundreds of thousands more to come. Sales of these through traditional listings have been steady but slow, even with the help of the important First Look program. The longer these homes sit vacant, the more neighborhoods suffer and the slower the recovery in housing markets.

Back in August of 2011, the Federal Housing Finance Agency (FHFA) and HUD began with a Request for Information as they tried to design a way to move these REO properties more quickly into use, such as through selling groups of properties to investors who would then rent them out. Many groups, including NHC’s Foreclosure Prevention and Neighborhood Stabilization Task Force, offered perspectives, notably on how to make sure the disposition program protected vulnerable communities and created greener and more affordable housing. FHFA has finally begun pre-qualifying investors, who have to show they can responsibly acquire and manage properties. Expect this program to emerge gradually over the year, starting with a pilot in one or two metro areas, with ongoing engagement by stakeholders to refine the program design.

Forbearance for the Unemployed

Giving unemployed borrowers hurt by the recession time to get back on their feet helps avoid foreclosures—it’s a good move for lenders, communities, and households. The President’s statement is more an observation that private lenders have followed the example set by Fannie Mae and Freddie Mac in extending forbearance to 12 months (up from 3 months) rather than an new policy announcement.

Task Force to investigate mortgage abuses

The new task force brings together federal and state officials, “responsible for investigating misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities” in the words of the fact sheet. Although the task force has issued subpoenas, little else has been released about its plans or how that intersects with existing investigations. Once the seemingly ever-imminent settlement between state attorneys-general and major servicers is finally behind us, there may be more clarity. Watch for more.

Rebuilding neighborhoods and preserving affordable housing

Foreclosures are still damaging communities across the country, but the Neighborhood Stabilization Program (NSP) has proven that targeted action can halt and repair that damage. By renovating homes, helping former owners remain as renters, eliminating blight, and other innovative solutions, communities have done much to find solutions to the foreclosure crisis. The President’s proposal for Project Rebuild would expand on the work of NSP, providing more resources on a broader range of activities—help that communities very much need. The President is also proposing $1 billion for the National Housing Trust Fund, to preserve essential rental housing for extremely low income households.

It’s exactly what’s needed, but these steps do require federal funds and legislative action, which can be difficult to muster in an election year with fiscal constraints. That said, the benefits should be visible regardless of one’s partisan affiliation. Project Rebuild in particular would sustain and expand efforts to preserve neighborhoods and essential affordable housing, building on the proven NSP program. It’s an investment we ought to make.

National Housing Conference responds to housing announcements

noreply@blogger.com (National Housing Conference) — Wed, 01 Feb 2012 20:39:00 +0000

by the National Housing Conference

Statement from Ethan Handelman, Vice President for Policy and Advocacy

“President Obama’s announcement today reinforces what we all know—we need coordinated action at many levels to restore housing markets, help struggling households, and support a broader economic recovery. That action must, by necessity, be bipartisan and cooperative. We urge Congress to take up these proposals in a spirit of bipartisanship and the Administration to move swiftly to implement the elements that it can do on its own.”

“More, however, is needed. Secretary Donovan, in his remarks today, referred to the mounting evidence that principal reduction will help restore housing markets, helping not only individual households but all of the institutions that depend on housing. The proposals announced today are a step in the right direction. More can be done, using shared appreciation mortgages, structured short sales, and other proven means to reduce outstanding debt, while improving returns to lenders and preventing painful and destabilizing foreclosures. If leaders of both parties come together now, they can take concrete steps to prevent foreclosures, stabilize neighborhoods, and secure safe, decent, and affordable housing for all in America.”

White House proposes new refinancing plan

noreply@blogger.com (National Housing Conference) — Wed, 01 Feb 2012 14:33:00 +0000

by Ethan Handelman, National Housing Conference

This morning, President Obama announces a new refinancing plan to help homeowners lower their monthly payments. Early reports in the Wall Street Journal and AP say the program is aimed at privately held mortgages that could be refinanced with new loans from the Federal Housing Administration (FHA). In effect, this would broaden the Home Affordable Refinance Program (HARP) changes made last year to cover more than just Fannie Mae and Freddie Mac loans.

The new plan would require Congressional action—a tall order in an election year, especially if it has a budgetary cost. And it would demand even more of FHA, which has handled an already unprecedented volume of loans as other lenders have retreated during the housing crisis.

That said, it’s the kind of action we need. Over 22% of home loans, nearly 11 millions, are underwater. A refinancing program to help lower payments could help prevent foreclosures, keeping families in their homes and protecting neighborhoods from blight. Refinancing alone isn’t enough—we also need principal reduction for those that refinancing can’t help—but it’s a great step in the right direction.

Mark Zandi of Moody's on the need for a government backstop to mortgage finance

noreply@blogger.com (National Housing Conference) — Mon, 30 Jan 2012 14:23:00 +0000

by Ethan Handelman, National Housing Conference

The housing bubble came from a “mortgage securitization machine [that] was fundamentally broken,” writes Mark Zandi in the Washington Post. He gives us a brief, cogent explanation of how private lenders and, to a lesser extent, regulators deserve most of the blame for the mortgage bubble, and shows that Fannie Mae and Freddie Mac simply were late to the party rather than the prime movers.

Getting recent history right is crucial to future plans. As we spend perhaps the next few years sorting out how to make mortgage finance work:

effectively—to serve all of the responsible borrowers who need mortgage, and
safely—to avoid another bailout,

we should make sure we preserve the essential government backstop and regulatory functions that keeping the mortgage system operating at all now and will keep it functioning effectively in the future.

FTA recognizes need to coordinate transit investments and affordable housing policy

noreply@blogger.com (National Housing Conference) — Thu, 26 Jan 2012 20:02:00 +0000

by Ethan Handelman, National Housing Conference

This week, NHC loses a gifted and hardworking policy associate, Clare Duncan. Clare isn’t moving too far away in her new job at Stewards of Affordable Housing for the Future, and as her new organization is both an NHC member and extremely active in the affordable housing world, we'll get to see plenty of her. Still, we'll be sad to see her go.

Clare did leave us with a parting gift, though. During the last week of Clare's tenure, we learned of the success of a major effort that she, others at NHC/CHP and the broader housing community have worked very hard on over the past two years to strengthen the coordination of housing and transportation policy.

Yesterday, the Federal Transit Administration (FTA) published a proposed rule for the New Starts / Small Starts programs that funds new transit lines and major extensions of existing lines. This includes subway, commuter rail, light rail, bus rapid transit, etc. The proposed rule reflects input on an Advanced Notice of Proposed Rulemaking issued in June 2010 asking for feedback on how to improve the New Starts / Small Starts program. Through the housing and transportation working group, NHC worked to develop comments on the advanced notice and jointly submitted comments with Enterprise Community Partners and Habitat for Humanity International. The comment letter was accompanied by visits to the Department of Transportation and HUD to discuss the issue, as well as a subsequent regulatory response that Clare prepared together with Enterprise. Many other NHC members and other organizations also contributed to the cause, submitting their own comments on the importance of coordinating housing and transportation policy in the New Starts process.

In yesterday's announcement, FTA accepted the basic premise advanced in the NHC/Enterprise/Habitat comment and by the housing community more broadly that the New Starts allocation process should be modified to create incentives to preserve existing affordable housing near planned transit stations and to ensure that a share of newly developed housing in those areas is affordable to low- and moderate-income families. FTA also agreed with the argument that the locations of publicly supported affordable housing should be considered in planning the routing for new transit lines.

This represents a major shift in federal policy that if ultimately adopted and implemented appropriately could have a major lasting impact in ensuring that families of all incomes can afford to live near newly developed transit stations. We are proud of the role that NHC and CHP played in advancing this issue and congratulate all of the organizations in the housing and transportation communities that worked together to achieve this outcome.

A proposed rule is just that—proposed. There's much to be done to consolidate this victory and ensure that the final rule adopts the proposed policy and the final guidance implements in robustly and effectively. Among other steps, we plan to reach out to the transportation community to strengthen our mutual understanding of the issues we both face and the benefits of collaboration. In the meantime, we’re pleased to announce the progress to date and look forward to working with everyone on next steps.

If you’re interested, take a look at the proposed regulations. If you search for the word "housing," and skim those passages, you'll catch the general tenor.

Please join the conversation in the comments section below and let us know what you think about this rule and how you think we can continue to strengthen housing and transportation policy.

The State of Housing

noreply@blogger.com (National Housing Conference) — Wed, 25 Jan 2012 14:22:00 +0000

by Ethan Handelman, National Housing Conference

In last night’s State of the Union address, President Obama paid specific attention to the housing crisis and its economic cost to the country. He called for “smart regulations” to ensure responsible behavior by all participants in housing and mortgage markets. And he called for a mass refinancing plan, which could help many existing homeowners if implemented correctly. We eagerly await details and hope for thoughtful, nonpartisan attention to housing.

The speech underscores the critical need for federal action to support housing, and through housing, a broader economic recovery. As the Fed’s recent paper and statements made clear, weakness in housing markets is preventing job creation, new investment, and economic growth. Meanwhile, millions in America, from working families to the poorest of the poor, cannot find affordable housing. Disruptions created by foreclosures and neighborhood disruption are making the problem worse, not better. And, as the Center for Housing Policy’s research shows, declining home prices have not solved America's housing affordability problems as the number of working families paying more than half their income for housing continues to grow.

NHC applauds the renewed attention to mortgage relief and effective regulation, but we know that more is needed. Housing isn’t an issue for one party or one region of the country—it’s a challenge that all in America are facing, one that demands effective, nonpartisan policy response. We need to:

provide effective alternatives to foreclosure that minimize the disruptions to households and neighborhoods
clear the inventory of vacant homes using rental conversion and others means in ways that stabilize housing markets and protect neighborhoods
ensure that credit is broadly available to responsible borrowers
renew federal support for housing programs that create affordable homeownership and rental opportunities for low-income households while strengthening communities

Federal action is essential, and we will only achieve the needed action by coming together around proven solutions that provide decent, safe, and affordable housing for all in America.

New study shows high downpayment requirement would exclude many for little benefit

noreply@blogger.com (National Housing Conference) — Fri, 20 Jan 2012 15:20:00 +0000

by Ethan Handelman, National Housing Conference

Setting a high downpayment or other requirements for mortgage loans would do far less to reduce defaults than it would to exclude borrowers with low incomes or from communities of color from homeownership, according to a new report from the Center for Responsible Lending and the Center for Community Capital at the University of North Carolina. The research findings focus specifically on the proposed rule for qualified residential mortgages (QRM) which implements parts of the Dodd-Frank financial reform law. Since the proposed rule came out, NHC and many others in the housing community have united around this very issue—that federal regulation should not set a 20% downpayment as a threshold for mortgage lending (see, for instance, NHC’s comment letter and past blog posts).

What’s new in this study?

Directly addresses the tradeoff between reducing defaults and restricting access to credit. Proposed restrictions based on loan-to-value ratio (LTV), debt-to-income ratio (DTI), and credit score exclude a lot of borrowers to achieve very small reductions in the default rate. The study’s concept of benefit ratio provides a new way of evaluating the appropriate level, if any, of LTV requirement. For instance, the study shows that an LTV restriction of 97% (comparable to a 3% downpayment) provides more benefits in reducing default while excluding fewer borrowers than a 90% or 80% LTV.
Relies on new data. The data set for the study includes data from loan servicers and from investor pools, which means the study could analyze more subprime and Alt-A mortgages (the more problematic loans, in other words). Data released with the proposed rule, in contrast, came from the GSEs and therefore skewed away from subprime loans.
Starts from a baseline of product type restrictions. QRM is a layer of regulation on top of qualified mortgages (QM), which exclude many problem loan types such as negative amortization or exploding adjustable rate mortgages. The study therefore looks at the incremental change that QRM would make on top of the QM restrictions. Not surprisingly, QM alone goes very far to reduce defaults.

Regulators have yet to release a revised proposal. They and others should take a hard look at this new study before moving forward on QRM.

Where families go after foreclosure

noreply@blogger.com (National Housing Conference) — Wed, 18 Jan 2012 20:00:00 +0000

by Laura Williams, Center for Housing Policy

One of the most interesting questions about foreclosures is about what happens afterwards. Does the house sit vacant? Do criminals steal the copper pipes? Is the yard kept up? Does crime increase in the neighborhood? Does the home become a rental property? What happens to the family?

The Center will be hosting a webinar on that last question next week (register here!), and in advance I wanted to bring up a couple of additional studies that have tried to find out what happens to families after a foreclosure. In the first, from October of last year, Federal Reserve Board and Urban Institute researchers found that families’ credit scores are very slow to recover after a foreclosure, driven in part by other delinquent payments on cars and credit cards following the loss of their home. This problem has gotten worse in the current economic turmoil. This is not good news, as a low credit score can make it more difficult to access credit in the future, and even make securing an apartment more difficult.

But the other study, also from the Federal Reserve Board, found that while a foreclosure does raise the probability of moving, most families don’t end up in lower-quality neighborhoods or more crowded conditions. This seems like a pretty good thing. Their findings support the notion that only about half of foreclosures are actually completed, so while the owners’ credit scores take a hit, a loan modification or other work-out allows the family to stay in their home. For those who do move, most seem to end up in rental housing, but in similar neighborhoods. Only a small number move in with older adults (presumably parents) and even fewer with other families.

The study from the Urban Institute that we’ll be discussing examines how foreclosures impact children and schools. We know that unplanned moves can negatively impact education; this report takes that finding a step further to compare families’ neighborhoods and school before and after a foreclosure to assess the impact of losing a home on children.

In some ways, these three studies are all somewhat unsatisfying. We cannot know definitively what trade-offs families are making to stay in a neighborhood, make up for poor credit or to keep their children in school. That being said, all three of these are windows into the impact foreclosures are having on people and give us insight on what policies and practices can improve the current situation. At the end of the day, that’s what’s most important.

NHC, U.S. Green Building Council and 14 partners release recommendations to Obama Administration for executive action to accelerate “greening” and improve sustainability in buildings

noreply@blogger.com (National Housing Conference) — Wed, 18 Jan 2012 15:12:00 +0000

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

Along with 14 partners, NHC and the U.S. Green Building Council today announced the release of a report that recommends nearly three-dozen executive actions across 23 agency programs where the Obama Administration can drive the economic and environmental benefits of green building without new legislation.

The report, Better Buildings though Executive Action: Leveraging Existing Authorities to Promote Energy Efficiency and Sustainability in Multifamily and Commercial Buildings, builds on a 2010 report that identified nearly 100 legal authority opportunities across 30 existing federal programs worth over $72 billion to improve energy efficiency in U.S. building stock.

“The report identifies a host of actions that federal agencies can take to make housing greener in ways that create jobs, save money, protect the environment, and make homes healthier,” said Ethan Handelman, NHC Vice President for Policy and Advocacy. “This about good governance, not partisanship—putting into action the decisions already made by legislators.”

To download the full report, visit nhc.org.

On Thursday, Jan. 26, NHC and U.S. Green Building Council will also host a forum on greening the existing stock of single-family homes at USGBC offices in Washington. For more information, see the event listing on nhc.org.

Irony in the Washington Post

noreply@blogger.com (National Housing Conference) — Tue, 17 Jan 2012 14:40:00 +0000

by Ethan Handelman, National Housing Conference

This weekend’s Washington Post juxtaposed two pieces with, I suspect, unintentional irony:

Debbie Cenziper asserted that DC housing officials had authorized homeownership assistance at unsustainable levels, resulting in foreclosures, and she implied that HUD officials had not overseen the program sufficiently.
Courtland Milloy opined that inclusionary zoning restrictions, which induce developers to create affordable housing as a part of market-rate housing development, are over-regulated because public agencies have to verify that affordable homes are not being rented for profit and that the public funds which provide equity to the homeowners are used properly.

So, is it that we aren’t watching use of affordable housing funds carefully enough, or are we overregulating? One can certainly argue with the specifics of the pieces, and I’m sure others will. But the irony of them appearing together in the Post is hard to miss.

Sadly, neither piece deals with the reality that human enterprises are imperfect, both because of frequent human errors of judgment and infrequent human errors of conscience. Small and large businesses have to double-check their employees and government agencies have to double-check their counterparties. Double-checking adds cost and some loss of efficiency, and we’re continually adjusting to find the right balance between trust and verification. I’d rather see that nuance in reporting on affordable housing than the painful irony we found this weekend.

Preparing for major shifts in demand

noreply@blogger.com (National Housing Conference) — Fri, 13 Jan 2012 19:57:00 +0000

by Jeffrey Lubell, Center for Housing Policy

This post originally appeared on the Bipartisan Policy Center's Housing Expert Blog in response to the question, "what are the most pressing issues in housing policy today?" posed to several guest experts. View the full forum here.

The punch line of my response is that the most pressing issues of housing policy today are not necessarily the most pressing issues of the medium- or long-term future. We have an obligation to work to resolve today’s pressing issues. But it’s critical that we start thinking now about how to meet tomorrow’s challenges. Waiting will only drive up costs and reduce options.

In the short-term, the foreclosure crisis and related challenges of neighborhood stabilization, large REO inventories, and underwater homeowners all loom large as critical issues to address. The housing finance system is struggling, restricting the availability of credit—a problem policymakers are threatening to worsen by raising down payment standards despite good evidence from a UNC study showing that low-down payment loans can be made safely to moderate-income families if properly underwritten.

Worst case needs for rental housing are at an all-time high, though the recent increase appears to be due largely to income decreases associated with the struggling economy. When the economy recovers, this statistic will recover somewhat as well, but there will remain a sizable structural gap between the wages of low- and moderate-income families and the cost of both rental housing and homeownership in many markets. If we want children to grow up in stable homes and the elderly and people with a disability to live independent lives, we will need to address this critical affordability challenge. Of course, it hasn’t helped that chronic underfunding has led to a major backlog of capital needs in public housing.

If today’s problems are a struggling economy and high foreclosures, tomorrow’s problem is one of growth. With the U.S. population set to expand by 40 percent by 2050, we will need to substantially increase the supply of housing to meet new demand. Rising populations of older adults and younger adults without children will increase demand for housing near transit, job centers, and in village and town centers, driving up the costs of living in these location-efficient areas. There is a real danger that low- and moderate-income families could be pushed out of these neighborhoods and forced to relocate to more peripheral areas where housing costs are low but transportation costs are high, reducing the diversity and vibrancy of our cities; contributing to increases in energy use, greenhouse gas emissions, and infrastructure expenses; and exacerbating disparities in wealth.

The sharp increases in both the overall number of older adults and the number of frail elderly will lead to major shifts in demand for housing and require more effective approaches for linking housing and services. Without fresh thinking on how to meet this challenge, there is a risk both that quality of life will decline for older adults and that older adults absorb all or nearly all of available affordable housing resources, shrinking the resources available to help bring stable, affordable housing to families with children.

A little rain on the foreclosure-data parade

noreply@blogger.com (National Housing Conference) — Thu, 12 Jan 2012 17:36:00 +0000

by Laura Williams, Center for Housing Policy

It’s been making the rounds this morning that foreclosures have dropped to their lowest levels since 2007. Unfortunately, as RealtyTrac points out, this is not so much a sign that the housing crisis is getting better but instead that the foreclosure process is simply dysfunctional.

Problems first unearthed en masse in 2010, such as improper filings and “robo-signing”, continue to cause huge delays in the foreclosure pipeline; the national average time for the process increased to 348 days – nearly one year – from start to finish. In New York and Florida, foreclosures took almost three years to complete. While losing a home to foreclosure is a terrible thing for a family, a long period of uncertainty about their home’s stability is also bad (as we documented in “Should I Stay or Should I Go?”).

As the Federal Reserve noted in a recent white paper, clearing the inventory of foreclosed, vacant, and underwater homes is a key step towards housing and broader economic recovery. Years of effort have shown some promising solutions that should be scaled up: foreclosure alternatives such as loan modifications, shared appreciation mortgages, rent-back programs, and structured short sales are some. Better oversight and management of the foreclosure process could certainly help, too. That will take bipartisan, forward-looking focus on housing and a real commitment from private sector participants.

Fannie Mae CEO to step down

noreply@blogger.com (National Housing Conference) — Wed, 11 Jan 2012 16:27:00 +0000

by Sarah Jawaid, National Housing Conference

Fannie Mae head Michael Williams submitted his resignation Jan. 10. Williams has been with the GSE since 1991 and took over as chief executive in 2009, at the height of the housing crisis and when the company was put into conservatorship by the government. He will stay on as CEO until the company’s board finds a successor.

"I decided the time is right to turn over the reins to a new leader," Williams said in the statement. "As I told our employees today, I am extremely proud of what we have achieved together, and I am confident that they will continue to make a positive difference.”

Federal Housing Finance Agency Acting Director Ed DeMarco said in a statement that he was “grateful for Mr. Williams’ steadfast dedication to ensuring Fannie Mae meets its public mission of providing stability, liquidity, and affordability to housing finance while both leading his company and working with government officials to that end.

This comes after the GSEs and their chief regulator FHFA got heat from Congress on executive salary compensation late last year. Before a congressional hearing, Freddie Mac chief executive Charles E. "Ed" Haldeman, Jr. 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. Halderman had submitted his resignation last Oct. saying he would step down sometime this year. Read more from earlier on NHC's Open House blog.

Congress’ tapping of G-fee drains vitality from Fannie’s & Freddie’s bond ratings

noreply@blogger.com (National Housing Conference) — Tue, 10 Jan 2012 14:52:00 +0000

by Ethan Handelman, National Housing Conference

Remember a few weeks ago when Congress decided that a 10-year increase in the guarantee fee on Fannie Mae and Freddie Mac mortgage-backed securities was the way to pay for an extension of the payroll tax cut? Those who know housing knew, and said, it was a bad idea (for an entertaining and sharp-edged expression of this, see my colleague David A. Smith’s excellent blog post). Now it’s becoming even clearer.

Rating agencies are now more likely to downgrade the credit ratings of Fannie Mae’s and Freddie Mac’s bond, according to Bank of America analyst Ralph Axel, cited in Businessweek. If ratings on bonds drop, Fannie and Freddie may well have to offer higher interest rates to attract investors, which would translate into higher mortgage rates for homebuyers.

In other words, tapping the g-fee isn’t free money. But we all knew that, right?

Fed urges REO to rental among other steps on housing

noreply@blogger.com (National Housing Conference) — Fri, 06 Jan 2012 21:19:00 +0000

by Ethan Handelman and Sarah Jawaid, National Housing Conference

The Federal Reserve submitted a 26-page letter to Congress on January 4 recommending action on real estate owned, or REO, properties nationwide owned by Fannie Mae, Freddie Mac, FHA, and various lenders comprising around “one-fourth of the 2 million vacant homes for sale in the second quarter of 2011.” This paper is a notable move for the Fed in several ways, because it:

Points to weak housing markets as an impediment to economic recovery
Highlights the need for greater housing affordability and stability of tenure amidst unemployment and foreclosures
Signals possible action by the Fed to clarify banks regulatory obligations if renting REO property
Identifies conversion of REO homes to rental use as a needed step, which requires action by others—Congress, FHFA, the GSEs, FHA, and private lenders
Provides useful discussion of other steps to revive housing markets, including principal reductions, broader refinancing efforts, targeted interventions and rental options for underwater homeowners, and improvements to mortgage servicing.

Federal Reserve Chairman Ben Bernanke wrote REO conversion can help “redeploy the existing stock of houses in a more efficient way.” It would address rising demand for rental units, low demand for owner-occupied properties, and banks hesitance to provide borrowers access to credit. The paper also highlights the inefficiencies and disruptive consequences of foreclosures in the form of economic harm of vacant properties to a community “beyond the personal suffering and dislocation” of a family. Renting these properties could help move the housing market to a more stable footing.

The Fed’s attention to REO properties builds on efforts already in motion by FHFA and HUD, which requested information in August of last year on ways to best handle the REO portfolio of Fannie Mae, Freddie Mac, and FHA. The agencies were inundated with over 4,000 responses from various housing industry leaders and are currently sifting through the proposals, including one from NHC’s Foreclosure Response and Neighborhood Stabilization Task Force.

The Fed’s paper observes some of the key investment challenges for REO conversion, but necessarily goes into little detail on the basic real estate difficulties of operating a portfolio of single-family rentals, including maintenance, oversight, geographic dispersion, and tenant responsibilities. It acknowledges a potential role for nonprofits as experienced rental managers, but does not directly address the need to provide seller financing or other support to allow nonprofits and other mission entities to bid competitively with purely economic investors.

The paper’s basic conclusion is unsurprising, but nonetheless worth highlighting. We are facing “a correction of the unsound underwriting practices that emerged over the past decade, but also a more substantial shift in lenders’ and the GSEs’ willingness to bear risk…the challenge for policymakers is to find ways to help reconcile the existing size and mix of the housing stock and the current environment for housing finance… Absent any policies to help bridge this gap, the adjustment process will take longer and incur more deadweight losses, pushing house prices lower and thereby prolonging the downward pressure on the wealth of current homeowners and the resultant drag on the economy at large.”

Translated out of economist-speak: We put too much debt on too few housing assets, and adjusting will hurt. But it will hurt a lot less if we make policy choices now rather than let foreclosures be the only means for reducing the debt.

DOJ reaches historic settlement with Countrywide

noreply@blogger.com (National Housing Conference) — Wed, 21 Dec 2011 21:34:00 +0000

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

noreply@blogger.com (National Housing Conference) — Wed, 21 Dec 2011 14:30:00 +0000

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.

GSEs followed the private market into subprime

noreply@blogger.com (National Housing Conference) — Tue, 20 Dec 2011 20:12:00 +0000

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.

Condo fees: A rising AMI lifts all household budgets

noreply@blogger.com (National Housing Conference) — Fri, 16 Dec 2011 18:00:00 +0000

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.

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

noreply@blogger.com (National Housing Conference) — Thu, 15 Dec 2011 20:55:00 +0000

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

noreply@blogger.com (National Housing Conference) — Thu, 15 Dec 2011 18:48:00 +0000

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

noreply@blogger.com (National Housing Conference) — Thu, 15 Dec 2011 13:00:00 +0000

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 Salary.com. 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.