Remaining Hurdles Dampen Positive Changes to the Housing Market
Posted by Janis Bowdler on February 7, 2012
Over the past month, the Obama administration has achieved several Home for Good victories for homeowners and consumers. Among them was the bold move Obama made to appoint the director of the Consumer Financial Protection Bureau to defend consumers from abusive financial services and scams. NCLR commends the president for making this recess appointment particularly at a time when noxious politics fly in the face of strong policy. Obama also advanced provisions that will help unemployed homeowners remain in their homes for up to 12 months while they secure a new job; this is a vast improvement from previous three- and six-month time frames allotted. Finally, the administration announced the creation of a new working group that will investigate and take on offenders and abusers of the housing crisis.
Each of these incremental changes rebuilds a better financial future for those struggling to make ends meet; however, the president has been slow to offer a reform strategy for Fannie Mae and Freddie Mac. While the administration made a significant move to break open the yet untouchable loans in Fannie and Freddie—they tripled incentives for granting homeowners principal reductions—there remains a fly in the ointment. The adoption of principal reductions for Fannie and Freddie lies in the hands of Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA). DeMarco has refused to write down these mortgages. Since placed in his temporary FHFA position, he has become known for his narrow view of Fannie and Freddie’s role in aiding the recovery of our housing market. The added incentives remove one of the arguments he has made against principal reduction.
Principal writedowns have proven to be one of the most effective methods of helping underwater families hold onto their homes and preserve our neighborhoods. When compared with the holding costs and the loss of selling a home for pennies on the dollar at a sheriff sale, it is not difficult to see that principal reduction is a win for investors, neighborhoods, and families. The new incentives for principal reduction are not wholesale solutions; they are promising course corrections that can rebuild the housing market. If DeMarco does not seize this new opportunity to help families, the White House must relieve DeMarco of his position and permanently appoint a new director.
Photo of Edward DeMarco courtesy of FHFA.
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Interpreting Segregation
Posted by Philip Tegeler on February 6, 2012
The Poverty & Race Research Action Council has received a number of inquiries on the widely publicized report from the Manhattan Institute, "The End of the Segregated Century," that looks at declining levels of racial segregation in American cities and metro areas over the last century.
Putting aside methodological concerns, the data reported in the study is not new or surprising to those of us who work in cities. Yes, all-white city neighborhoods are increasing rare, as are monolithic African American neighborhoods, and middle class families of color have far more choices that they did 40 years ago, in spite of continuing housing market discrimination. These are positive developments. But it does not mean that segregation has gone away—in fact in some disturbing ways it has intensified, particularly when one examines the confluence of racial and economic segregation. For a more detailed look, we recommend the excellent commentary by Rolf Pendall of the Urban Institute, "Racial Segregation: It's Not History." Pendall, citing research funded by the Joint Center for Political and Economic Studies and PRRAC, concludes that "we've scarcely begun a serious fight against the concentrated poverty that remains the most toxic legacy of American apartheid."
Also worth reading is the Urban Institute's "report card" on black-white and Latino-white opportunity gaps in the 100 biggest metros nationwide, which reveals the human consequences of geographic segregation from opportunity. We should definitely celebrate progress when we see it, but it is important to recognize that addressing the continuing effects of metropolitan segregation and concentrated poverty is a long term struggle that won't be achieved by wishful interpretations of census data.
Editor's note: This post originally was originally published by PRRAC. For additional reading, see Tegeler's spring 2011 article in Shelterforce on assessing neighborhood affordability based on the Center for Neighborhood Technology's Housing + Transportation Index. Then read CNT's Scott Berstein's counterpoint.
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Sh*t NY Slumlords Say
Posted by Matthew Brian Hersh on February 4, 2012
The folks at the SurRealEstate blog (the organizing and policy department of the Urban Homesteading Assistance Board) poked some fun at slumlords using the Sh*t My ____ Says" meme:
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New York AG Sues Banks Over MERS
Posted by Matthew Brian Hersh on February 3, 2012
New York Attorney General Eric Schneiderman has sued Bank of America, Wells Fargo, and JPMorgan Chase over the banks' use of the mortgage database MERS, resulting in widespread "deceptive and fraudulant" foreclosure filings in the state and in federal courts, according to a statement released today:
Employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as "MERS certifying officers," have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have.
The alleged practice is "harming homeowners and undermining the integrity of the judicial foreclosure process," the statement continues.
While not directly related, this suit comes at the heels of President Obama's State of the Union announcement of a foreclosure task force that Schneiderman will co-chair.
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Less Pasture, More Concrete in Rural Future?
Posted by David Holtzman on February 2, 2012
"From concrete to pasture."
That's how one might characterize my relocation a couple years ago from Boston to Central Virginia. Boston is a place where a carefully landscaped pocket park nestled amid multi-family dwellings and shops represents the height of civilization. In rural Virginia, by contrast, a squat ranch house set amid a woodlot and rolling hay fields is paradise on Earth. I went from an environment in an advanced stage of hyper-development, in a physical sense, to one where improved property seems inconsequential relative to the starkness or beauty of the land.
But rural Virginia is changing. In the last decade the population of the county where I live grew by 30 percent as residential subdivisions popped up in former fields and fast food and retail giants roosted near the interstate exits. In some ways, the economy here remains tied to the land, with forestry employing many, and some small farms raising livestock and fowl in significant numbers. More and more, though, the consensus among political and business leaders is that we must move away from a land-based economy toward something that looks decidedly different. The race is on with neighboring counties, other regions and other states to capture manufacturing, service and industrial businesses to set up shop. To woo these companies, which require large amounts of land, counties struggle to come up with money to provide basic infrastructure including broadband Internet access and water and sewer connections. Water and sewer service also makes it possible for developers to build clusters of multifamily neighborhoods.
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White House Announces Refi Aid
Posted by Matthew Brian Hersh on February 1, 2012
President Obama announced today a move that could allow millions of homeowners—including underwater homeowners— a chance to refinance their mortgages into lower-interest federally insured loans, saving an average borrower in the area of $3,000 a year. According to a report in the Wall Street Journal, the program would extend to roughly one-third of all mortgages that "aren't backed by federal entities and instead are owned by banks or were bundled by private firms that sold them off to investors as mortgage-backed securities." The FHA would guarantee the new loan.
The Journal goes on to report that program eligibiliy requires homeowners to be current on their last six mortgage payments and have no more than one deliquency in the last six months. President Obama first made reference of this plan in his State of the Union address last month where he also announced a special foreclosure investigative task force to look into abusive lending and packaging of risky mortgages.
The White House has also since tripled the incentive for lenders to conduct princpal writedowns through HAMP.
The administration's efforts to unilaterally prod the housing market come as a report by NPR and ProPublica raises new concerns about how Freddie Mac keeps liquidity in the mortgage market and how it attracts investors to buy mortgage backed securities. Those practices, the article says, could preclude homeowners from refinancing their mortgages at lower rates by bringing in investors for higher-interest loans at a time when mortgage rates were falling to new lows. This, the article concludes, puts the mortgage giant at odds with the homeowner.
Treasury has announced that it would look into the practices outlined in the report since the story broke, but the report's implication that Freddie "bet" against the homeowner has been met with the assertion that these practices are not really nefarious and are also pretty commonplace. Quoted in DSNews.com, Celia Chen, a senior director at Moody’s Analytics said there is a known conflict, but, as indicated in the NPR/ProPublica piece, "employees who make investment decisions are 'walled off' from those who decide the rules for homeowners.
Chen did speak to the larger conern that when Fannie and Freddie are neither fully public nor fully private, saying "they serve neither interest well," and adding that "Congress needs to chart a course for the agencies’ future, and the sooner the better."
David Stevens, the former FHA comissioner who now heads up the Mortgage Bankers Association, echoed Chen's sentiment in a blog post, even adding that the availability of the 30-year fixed-rate mortgage product depends on practices like Freddie's:
While many investors may want to buy only government guaranteed bonds such as Treasuries, GNMA, of Freddie/Fannie MBS, most do not want to lock up their funds into a long term investment for 30 years. This “structuring” keeps money flowing into mortgages but, more importantly, keeps 30 year fixed rate mortgage product avaliable for consumers to buy homes.
Photo by woodleywonderworks via Creative Commons
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Attorneys General: It’s Time to Close the Deal
Posted by Janis Bowdler on January 30, 2012
Last week President Obama followed up on a promise made in his State of the Union Address by creating a new working group to aggressively investigate the abuses that triggered the housing crisis. We know that President Obama means business because he chose New York Attorney General Eric Schneiderman—a champion for taxpayers and homeowners—to lead this unit focused specifically on lending fraud and mortgage abuses. True accountability is necessary to restore the public’s faith in our national housing system. With Schneiderman and his team in place, the time has come for state AGs to bring their ongoing negotiations with mortgage servicers over the robosigning scandal to a successful conclusion.
The 18 months since the robosigning scandal first broke have not been kind to Hispanic homeowners or the housing market in general. Latinos have lost 66 percent of their wealth thanks to the foreclosure crisis; this will leave lasting effects on their retirement and ability to finance their children’s education. Home values have dropped by as much as a third since 2006 and more than 10 million families owe more than their home is worth. Most of the federal efforts to stave off foreclosures have come up short, largely because participation was voluntary for banks and servicers. A strong settlement is critical for those homeowners who sought relief, played by the rules, but still fell through the cracks of servicer bureaucracy.
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HAMP Modification to Include Principal Writedowns
Posted by Matthew Brian Hersh on January 30, 2012
The Home Affordable Modification Program will make further attempts to extend relief to struggling homeowners, the administration announced last week, by tripling the incentive for banks to conduct principal writedowns as well as offering those incentives to Fannie and Freddie—should FHFA allow the GSEs to partake in the program.
FHFA will not allow Fannie and Freddie to engage in any HAMP-related princpal forgiveness program at this point, with the agency's Acting Director Edward DeMarco citing a preference for principal forbearance. That assertion was called into question by HUD Secretary Shaun Donovan in a conference call when he placed an emphasis on rebuilding equity: "Lowering payments isn't enough." FHFA will reportedly take HAMP's latest incentives into consideration.
The move comes as HAMP, while having helped roughly 900,000 homeowners achieve permanent loan mods, has fallen far short of its stated goal at its 2009 launch of modifying three to four million loans by now. A post on HUD's blog, however, places HAMP at the center of public and private modifcation efforts, helping to "set the industry standard for successful modifications and have helped prompt private lenders to modify an additional 2.6 million mortgages." The article states that more than 4.6 million Americans have received mortgage aid since HAMP's launch.
Other changes to HAMP include expanding the program's eligilibility for tenant-occupied properties.
But do these moves come too late? Banks have not been as eager to take part in HAMP as the administration had hoped. Ira Rheingold, executive director of the National Association of Consumer Advocates questioned the efficacy of so-called HAMP 2.0 in the Huffington Post:
"The fact is, the banks have done a terrible job complying with the program. Today, we're seeing the same problems as three years ago—they lose people's documents, they wrongly push people into foreclosure. And the Treasury Department hasn't held them accountable for their failures. So even if you expand the incentives, until you make the banks comply, we're going to see these problems."
See a full list of HAMP changes here.
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Why Leadership Pays
Posted by Michael Hickey on January 27, 2012
In previous blog posts (Why Evaluation Stinks), I’ve discussed how the fragmented nature of the nonprofit sector makes it very difficult to impose top-down, comprehensive evaluative frameworks. The primary problem is that even if you have two nonprofit organizations, each working with similar clients and conducting similar programs, the mix of supports from philanthropy, contracts and earned revenues will be such that the way they achieve their results will be unique. The nonprofit sector, operating as it does on the margins of the market economy, is forced to pull together resources higgledy-piggledy, and this mix varies so substantially for each nonprofit (and indeed for each year of its operations), that you really can’t draw comparisons easily between two otherwise similar service activities.
In short, our twinkling field of a thousand lights are all very different.
There is, however, an upside to this. Each organization cuts its own path to achieving its mission, providing us with a diversity of models and strategies. Some succeed by focusing on a specific, artisanal niche where they excel, while others grow through horizontal or vertical expansion. But there’s one thing that all successful organizations have in common: they exhibit strong leadership. And when I say leadership, what I mean is that the manager or managers of the organization are considered trustworthy, intelligent, passionate and capable. They may also be considered tyrannical, obtuse, plodding, or distraught, but in their own way they get the job done and they get it done well.
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Gallup: U.S. Wants Government to Help Fix the Housing Market
Posted by Matthew Brian Hersh on January 27, 2012
Even though some in the House chamber winced at the president's mention of a mortgage investigative unit during the State of the Union, a new poll released today shows that Americans actually support the government's role in fixing the housing market.
The Gallup Poll, based on telephone interviews conducted between January 5 and 8 and again on January 14 and 15, indicates that 58 percent "prefer that the government act to prevent foreclosures, whereas 34 percent prefer the housing market resolve its problems on its own." It will be interesting to see how these numbers change considering the poll was conducted prior to the State of the Union address, which was well-received.
National Housing Institute
