State Updates
DHCD Accepting Comments on HUD Neighborhood Stabilization Program Plan
DHCD announced last week that it has extended the deadline for accepting comments on its draft plan for using $43 million in HUD Neighborhood Stabilization Program (NSP) grant funds. DHCD held a public hearing on its draft plan on November 6 and will be accepting comments until November 19.
Grant funds can only be used to address the problems of vacant and foreclosed properties and must be targeted to areas of highest need within the state. CHAPA submitted comments on November 10. Information on other state and local action plans and foreclosure data by zip code is also available online from the National Housing Conference. HUD has also posted questions and answers about NSP on its website, including guidance on state plans.
Governor Signs Supplemental Budget to Address Budget Shortfall
On October 30, the Legislature passed a supplemental budget, H. 5132, which advances many of the Governor's legislative proposals to close the $1.4 billion budget shortfall. However, the legislation does not include the Governor's proposal to tax telecommunications poles and wires. The Governor recently signed the legislation in part. Massachusetts Budget and Policy Center has released a brief which examines the plan and tracks the current budget struggles.
Election Day Brings Many New Faces to Beacon Hill
On November 4th, six out of forty State Senate seats changed hands and fifteen new Representatives were elected to the House of Representatives.
Sonia Chang-Diaz (2nd Suffolk), Ken Donnelly (4th Middlesex), Jamie Eldridge (Middlesex & Worcester), Jennifer Flanagan (Worcester & Middlesex), Thomas Kennedy (2nd Bristol & Plymouth) and Michael Moore (2nd Worcester) were each elected to the Senate.
James Arciero (Westford), Brian Ashe (Longmeadow), Jennifer Benson (Lunenburg), Bill Bowles (Attleboro), Michael Brady (Brockton), James Cantwell (Marshfield), James Dwyer (Woburn), Carolyn Dykema (Holliston) Ann-Margaret Ferrante (Gloucester), Danielle Gregoire (Marlborough), Jonathan Hecht (Watertown), Kate Hogan (Stow), Jason Lewis (Winchester), Timothy Madden (Nantucket), and Dennis Rosa (Leominster) were all elected to the House of Representatives for the first time.
CHAPA congratulates these newly elected officials and wishes them luck as they begin this new endeavor.
Community Preservation Act Adopted in Seven Municipalities
On November 4th, seven municipalities adopted the Community Preservation Act, including Gloucester (1% CPA surcharge), Northfield (3% CPA surcharge), Royalston (3% CPA surcharge), Shutesbury (1.5% CPA surcharge), Swansea (1.5% CPA surcharge), West Springfield (1% CPA surcharge) and Whately (3% CPA surcharge). This brings the Commonwealth's total to 140 municipalities. The only unsuccessful CPA ballot measure was put forth in Amherst, where the attempt to raise the local surcharge from 1.5% to 3% failed.
State Legislators Form Gateway Cities Caucus
Legislators from gateway cities across the Commonwealth have banded together to form a Gateway Cities Caucus. CHAPA, MACDC, the Smart Growth Alliance, and many other organizations have focused on strategies to revive small cities, including targeted infrastructure investments, flexibility in affordable housing deed restrictions for weak market cities, and neighborhood planning grants. Legislators are now exploring additional legislative solutions to rehabilitating these economic engines.
The Caucus is conducting an informal listening tour and has visited Springfield, Pittsfield, and Brockton. The Caucus will meet in Fitchburg on December 3rd and New Bedford on December 10th. CHAPA will post more information on these meetings when it is available and is optimistic about the ability of the new Caucus to focus attention and resources towards this important issue.
The Interagency Council on Housing and Homelessness Begins Review of Regional Network Responses
On October 30th, the Interagency Council on Housing and Homelessness (ICHH) received eight regional network applications for approximately $8 million in funds to begin to eliminate homelessness. The following regions submitted applications: Boston convened by the City of Boston Department of Neighborhood Development; Cape Cod and Islands convened by Housing Assistance Corporation, Inc.; Merrimac Valley convened by Community Teamwork, Inc.; Metro Boston convened by Metropolitan Boston Housing Partnership; North Shore co-convened by North Shore Community Action Programs and the Lynn Housing Authority and Neighborhood Development; South Shore convened by United Way of Greater Plymouth County; Western Mass. convened Pioneer Valley Planning Commission; and Worcester County convened by the City of Worcester.
The Council is currently reviewing the proposals and is expected to select recipients at the end of this month. Contracts are expected be finalized by January.
Federal Updates
Advocates Urge Congress to Address Housing and Environmental Issues in Stimulus Bill
The National Low Income Housing Coalition (NLIHC) and other housing organizations have begun urging Congress to include housing measures in economic stimulus legislation this month. Among other things, various groups are recommending foreclosure assistance, including $200 million for relocation and temporary housing assistance for renters in foreclosed properties and legislation to provide them with greater lease protections, including a 90 day notice to leave requirement. They also recommend providing additional funding for housing programs, including $5 billion for public housing capital funds; $10 billion in Community Development Block Grant (CDBG) funds, $3-4 billion to preserve existing affordable housing and $1 billion in HOME funds for energy efficiency.
To address the current gap in affordable housing production resources due to falling low income housing tax credit (LIHTC) prices, they also recommend temporarily making these credits a refundable credit to reducing the risk of return for investors who may currently have no taxable income and allowing investors to carry the credit forward.
HUD Issues Final Real Estate Settlement Procedures (RESPA) Reform Rule
After years of effort, HUD issued a final rule reforming the Real Estate Settlement Practices Act (RESPA) this week. The new 341-page rule, announced on November 12, will go into effect in two months. However, use of the new simplified forms that are the heart of the rule will be optional until January 1, 2010.
The rule is intended to give loan applicants a clear picture of a lender's proposed loan costs and terms upfront and make it easier to shop around for loans and compare costs. HUD estimates that the new rule will save the average customer over $600 in loan costs as a result of this comparison shopping. However, it also notes that it has no authority to penalize lenders and originators who fail to provide the required cost estimates or who provide incorrect estimates and that legislation will be needed to give it enforcement powers.
The rule requires all loan originators to give applicants an easily-understood "Good Faith Estimate" using a standardized form that clearly states loan terms, closing costs, prepayment penalties, fees etc. and the bottom line total settlement charge. Applicants must be given this estimate within three days of submitting all loan application materials. The rule also revises the HUD-1 Settlement Statement forms to make it easier for borrowers to see if and how the final charges differ from the earlier estimate.
Federal Regulators Urge Lenders to Expand Loan Modifications to Avert Foreclosures
On November 12, the Federal Reserve, the FDIC, the Office of Thrift Supervision and the Comptroller of the Currency issued an Interagency Statement on Meeting the Needs of Creditworthy Borrowers that urged financial institutions to take steps to meet the economic needs of the nation. It called for them to expand lending and avoid excessively tightening credit. It also urged all lenders and servicers to adopt "systematic, proactive and streamlined" loan modification protocols that would result in sustainable mortgages over the maturity of the loans. It urged them to make modification decisions based on the likely net present value of the loan and to apply this analysis to loans already in foreclosure as well as those currently under review. It also called on banks to adequately fund and staff their servicing and loss mitigation operations.
The House Financial Services Committee also held a hearing on November 12 on lender and servicer practices regarding loan modifications.
Citigroup and Fannie Mae/Freddie Mac Announce New Loan Modification Initiatives
On November 12, Citigroup and Fannie Mae/Freddie Mac independently announced new initiatives to help borrowers avert foreclosure. Many analysts, including FDIC chair Sheila Bair, immediately criticized these initiatives as too limited in scope because they do not apply to loans these institutions service rather than own. They also criticized the Fannie Mae and Freddie Mac definition of affordable loan payments as too high (38% of income), noting that the FDIC sets the standard to as low as 31% of income, and too short term (the proposed loan modifications would only be for 5 years).
Under the initiative announced by Federal Housing Finance Administrator James Lockhart, Fannie Mae and Freddie Mac will begin offering a streamlined loan modification program on December 15 for mortgages they own or guarantee but only for borrowers who are at least 90 days delinquent. The agencies will use a "fast track process" to modify loans in ways that will reduce payment levels on first mortgage loans to 38% of income (e.g. through interest rate reductions, term extensions and/or principal reductions). While these portfolio loans represent only 20% of all serious delinquencies, FHFA hopes servicers of the securitized mortgages that make up 60% of seriously delinquent mortgages will adopt this model as well.
Citi announced a streamlined loan modification program as well. Like the GSE initiative, the Citi program is limited to mortgages that Citi holds, though it reports it is also trying to get investor approval to modify the 5 million loans it services. However, in addition to assisting delinquent borrowers, it plans to "preemptively" reach out to about 500,000 homeowners who are current on their mortgages but may require loan modifications to maintain that status.
Fannie Mae Expands Homebuyer Education/Counseling Requirements
On October 28, the Fannie Mae announced changes in its homebuyer counseling education requirements for loan applications dated on or after January 1, 2009. The changes require that counseling be provided by an independent third party and meet the National Industry Standards for Homebuyer Education and Counseling. They also extend the requirement for pre-purchase counseling to (1) all borrowers relying solely on non-traditional credit, regardless of buyer status or loan program, and (2) to first-time homebuyers of one-unit properties seeking My Community mortgages (purchasers of 2-4 unit properties are already subject to the requirement).
National, State and Local Groups Urge New Policy Framework for Public Housing
In June 2008, the Council of Large Public Housing Authorities (CLPHA) invited national public interest groups, housing authorities, tenant groups, housing advocates, academics and government experts, including former HUD Secretary Cisneros, to develop recommendations for the next administration on public housing policy. The result was a proposed policy framework entitled The Future of Public Policy which was released last week and endorsed by over 30 organizations and individuals.
The framework calls for a major capital investment in public housing to eliminate much of the current capital backlog over ten years, integrating green building technologies and the need for service-enriched senior housing options in that effort. It recommends "sufficient and timely access" to mixed finance tools and conversion of some developments to other housing subsidy models that provide reliable funding such as project-based vouchers. It also calls for predictable operating subsidies to provide a sound financial footing and institutional reform to increase the accountability of HUD, PHAs and residents.
