State Updates
Building Blocks Coalition Makes Case for Housing Program's Positive Economic Impact
The Building Blocks Coalition, which consists of several Massachusetts housing and homelessness advocacy organizations, submitted a letter to Governor Patrick outlining the positive impact housing programs have on the economy. Because of the tremendous economic impact and the disproportionate impact an economic downturn has on low and moderate income households, the Coalition has requested that 9C cuts to housing programs be minimized to the greatest extent possible.
Under Ch. 29, Section 9C of the Mass. General Laws, the Governor has the authority to reduce Executive branch spending from authorized budget amounts if revenues are insufficient to meet expenditures. We expect the
Governor and Secretary Kirwan to make the difficult decisions regarding which programs will be cut under Section 9C very soon.
Question 1 Income Tax Repeal Opponents Release New Information on Effects of Proposal
As the November election draws closer, opponents of a ballot measure that would repeal the income tax have been very active in informing voters of the enormous impacts of the repeal.
The Massachusetts Taxpayers Foundation released a report assessing the impact of repeal on state programs and on the taxpayers themselves. The report outlines the depth of cuts that would decimate government functions. In addition, it highlights the fact that the income tax repeal would provide significantly less "savings" to the majority of the Commonwealth's taxpayers than it would to a small percentage of high income earners.
Proponents of Question 1 assert that "the average taxpayer" would save $3,700 annually if the income tax is repealed. However, when incomes are analyzed more closely, the 65% of the Commonwealth's residents that make $50,000/year or less would "save" an average of $850 while the 14% of the Commonwealth's residents that make in excess of $100,000/year would see the vast majority of dollars that would have otherwise supported state and local services.
In addition, a new tool is available on VoteNoQuestion1.com to assess what the impact would be on your municipality. For example, the City of Boston would lose over $157 million in school funding alone.
CHAPA strongly opposes repealing the income tax due to its disproportionate impact on low and moderate income households and is concerned by recent polls that show nearly 40% of voters support repeal. Please feel free to forward this email, the No on Question 1 toolkit or the Mass. Taxpayers Foundation Report to inform colleagues, friends, and family about the potential impacts of income tax repeal.
Advocates Anticipate Capital Budget Release
Housing advocates continue to wait for the release of the FY09 Capital budget with great anticipation. The Capital budget determines the amount and purposes for which the state borrows funds for capital investment priorities that have been legislatively authorized and is entirely separate from the operating budget. The overall bond cap is scheduled to be increased from $1.5 billion to $1.625 billion. Housing organizations have advocated for a substantial portion of the increase to go to affordable housing and community development in order to address current housing-related economic challenges.
Rising Numbers of Homeless Families Placed in Hotels and Motels
On October 6, the Boston Globe reported rising family homelessness and full shelter use has forced the State to dramatically increase its use of hotel and motel placements. As of September 29, it reported that 574 families were living in hotels and motels, up from 27 a year ago and up from 467 less than a month earlier. Hotel/motel placement costs average $85 dollars a day ($2550 a month)and force many families to change school systems. Hotel/motel use last approached this level in August 2003 when it peaked at 599 families. At that time, the State adopted a number of strategies then to eliminate hotel/motel placements, including providing one-time payments of $6,000 per family to providers to help move over 200 families from the emergency system to vacant apartments for one year.
DHCD Fall Funding Round for Rental Projects Deadline Approaching
DHCD will hold an information session on the fall funding round for rental projects on Tuesday, October 14th at 3:00 p.m. at DHCD, Second floor conference rooms 2B & 2C, 100 Cambridge Street in Boston.
The deadline for submitting funding applications to the Fall 2008 rental round will be Thursday, October 30, 2008. At this time, DHCD's available resources during the fall round include: Low Income Housing Tax Credits (federal and state), HOME, Housing Stabilization Fund, Capital Improvement and Preservation Fund, Housing Innovations Fund, Facilities Consolidation Fund, Community Based Housing, Commercial Area Transit Node Housing Program and, for some projects, Section 8 project-based assistance. In addition, Affordable Housing Trust Funds will be available.
If you are planning to attend the information session, please email Matt Seadale at matthew.seadale@state.ma.us and indicate which session you will attend. If you have any questions, call Matt at 617-573-1317.
DHCD Accepting Comments on Emergency Regulations for Capital Programs
The Department of Housing and Community Development (DHCD) recently published emergency regulations, effective September 18, amending the existing regulations for five bond-funded programs (CIPF, HIF, FCF, HSF and CBH) and adding a new regulation (for the Commercial Area Transit Node Housing Program). These changes were made to reflect the language of the 2008 Housing Bond Bill. DHCD will accept public comments through Monday, November 10. Information on how to submit comments as well as the new regulations are available at DHCD's website (click on Notice of Proposed Regulations).
State Receives $202 Million Increase in 2008 Tax Exempt Bond Authority for Housing
On October 6, the IRS issued guidance (Notice 2008-79) on the use of new tax-exempt bond authority authorized under the Housing and Economic Recovery Act of 2008 (HERA) enacted in late July. HERA raised the aggregate private activity tax-exempt bond cap for 2008 by $11 billion, with all of the increase reserved for rental and ownership housing activities. Unused authority can be carried forward through 2010. Massachusetts' share of the increase is $201,956,503.
HERA also made refinancing of subprime mortgages for borrowers facing hardship an eligible tax-exempt bond activity, authorized re-cycling of tax-exempt bonds to finance rental housing, and authorized the Federal Home Loan Banks to guarantee tax-exempt bonds issued between July 30, 2008 and the end of 2010. The notice spells out the deadlines for issuing the bonds using the new authority provided by HERA, tracking and other requirements. It also provides some flexibility in coordinating the use of the increase with the general volume cap.
Attorney General Files Housing Discrimination Suit Related to 55 Plus Age Restriction
Attorney General Martha Coakley's office announced on October 2 that it has filed a housing discrimination and consumer protection lawsuit against the owner of a manufactured home community (Swift's Beach) in Wareham. The lawsuit asserts that Swifts Beach is not a lawfully converted 55+ community (the State denied its request to impose an age restriction in late 2007) and that the community violated discrimination laws by preventing a homeowner from selling his manufactured home to prospective buyers under the age of 55 and violated consumer protection law by trying to impose the unauthorized age limit on park occupants.
Federal Updates
Bailout Bill Requires Treasury to Protect Renters and Encourage Foreclosure Prevention
Title I of the "Emergency Economic Stabilization Act of 2008" (EESA) – H.R. 1424 – signed into law on October 3, creates a new Troubled Assets Recovery Program (TARP) under which the Treasury Department can purchase residential and commercial mortgages, mortgage backed securities and other mortgage-related assets originated or issued before March 14, 2008, and other assets as needed. It includes several foreclosure assistance and renter protection provisions, though it is unclear if and how most of these will translate into action.
The bill requires the Treasury Department, in connection with the mortgages and related assets it acquires, to develop a plan to "maximize" assistance to homeowners and to encourage servicers to undertake loan modifications that both recognize owners' operating costs and protect tenants with leases and/or rent subsidies. It also requires other federal agencies that own mortgages (e.g. FDIC, FHFA, FHA) to take similar steps, ideally developing a coordinated plan to prevent foreclosures and encourage modifications. In addition, it modifies the new FHA HOPE for Homeowners program, expanding homeowner eligibility and allowing upfront payments to subordinate lienholders to facilitate loan modifications.
It also creates a Congressional Oversight Panel that, among other things, must review the financial regulatory system and recommend improvements by January 20, 2009 and requires to Treasury Department to do the same by April 30, 2009.
A longer summary of these provisions is on CHAPA's website and a summary of the full bill is on the House Financial Services Committee website.
HUD Issues Neighborhood Stabilization Program Notice
On September 29, 2008, HUD released a Notice outlining procedures for its new Neighborhood Stabilization Program (NSP) for foreclosed or abandoned properties, effective immediately. The notice also lists all allocations by state and locality nationwide. In Massachusetts, four cities (Boston, Brockton, Springfield, and Worcester) will receive direct allocations and the State will receive $43.6 million to assist them and other areas of highest need (based on foreclosure, delinquency, subprime lending rates and other factors).
The notice requires formula grantees to submit an application to HUD by December 1, 2008 outlining how they will distribute and use funds and meet income targeting and other requirements. It allows grantees (e.g. cities and the State) to submit a single combined application, if they choose, and encourages localities to consider allocating some of their funds to their State administrator to carry out programs more efficiently or to contract with other jurisdictions or nonprofit or other entities to administer some or all of their grant. Grantees must provide a 15 day public comment period before submitting the application. HUD has an NSP website with links to the application and a guide to eligible activities and a second with indicators of need for NSP aid by state, entitlement community and census tract.
Funds can be only be used for activities related to acquisition, rehabilitation and resale or redevelopment or demolition of abandoned (vacant for at least 90 days) or foreclosed (tax- or mortgage-) properties. All assistance must benefit persons or areas with incomes not exceeding 120% of AMI and 25% of spending must benefit households at or below 50% of AMI and ensure continuing affordability for at least 5-20 years.
NSP funds can only be used to purchase properties if the price is at least 5% below appraised value. Grantees will have 18 months (from the date of receipt of funds) to fully obligate all funds and 48 months from initial receipt to spent out all funds. Click here for a more detailed summary of the Notice.
FHA "Hope for Homeowners" Refinancing Program Launched
HUD's new HOPE for Homeowners Program, under which the Federal Housing Administration (FHA) will insure refinance mortgages for borrowers who are having difficulty making their payments, began on October 1, 2008 and will end September 30, 2011. HUD has created a HOPE for Homeowners website with information for both borrowers and lenders.
The program is available only to owner-occupants of one-unit properties who can afford a new loan and will offer 30-year fixed rate mortgages. If borrowers are unable to refinance the entire amount due, banks will have to write down the existing mortgage to 90 percent of the new appraised value of the home. To be eligible, the property must be the borrowers primary residence (they can't have an ownership interest in any other residential property, such as second homes and their existing mortgage has to have been originated on or before January 1, 2008, and they must have made at least six payments. In addition, they must be unable to pay their existing mortgage without help (as of March 2008, their total monthly mortgage payments due must be more than 31 percent of their gross monthly income).
FY2009 Continuing Resolution Temporarily Solves Project-Based Section 8 Problem
The President signed a Continuing Resolution (H.R. 2638) on September 30 to finance government operations through March 6, 2009. The resolution continues most HUD programs at their current level, but provides a temporary fix for Project-Based Section 8 program funding problems by requiring HUD to renew contracts in a timely manner. It also provides a funding increase for the fuel assistance program (LIHEAP).
IRS Issues Guidance on Tax Credit for First Time Homebuyers
The IRS issued guidance on September 16 on the tax credit for first-time homebuyers that was approved by Congress in July. The credit is equal to 10% of the purchase price, up to a maximum credit for $7,500 for taxpayers with a modified adjusted gross income below $75,000 ($150,000 for married couples filing jointly). A smaller credit is available for buyers with incomes of up to $95,000 ($170,000 for married joint filers). It applies only to purchase made between April 9, 2008 and June 30, 2009 and must be repaid in annual, no-interest installments over the next 15 years.
Final FY2009 Fair Market Rents (FMRs) Published
HUD published the final FY2009 FMRs in the Federal Register on September 29th. The final FMRs for Massachusetts are the same as HUD published in its draft notice this summer and became effective on October 1.
In most areas of the state, the FY2009 FMRs are 3-4% higher than the FY2008 FMRs. However, FMRs declined in several of the largest FMR areas. The decrease was small (0.6%) in the Boston-Cambridge-Quincy metro area and steeper (4.5%) in the Worcester and Eastern Worcester county areas. FMRs in the Providence-Fall River area fell by 6.3%, as HUD determined that region no longer needed a special higher FMR (50th percentile rent) to promote poverty deconcentration. HUD noted, however, that it will review the area's eligibility annually and could re-instate the 50th percentile standard as early as FY2010.
Bank of America Announces Foreclosure Prevention Program for Countrywide Customers
On October 6, the Bank of America (BOA) announced that it had settled predatory lending lawsuits filed against Countrywide Financial Corporation with 11 state Attorneys General (BOA acquired Countrywide in July). Under the settlement, BOA agreed to systematically modify troubled mortgages through interest rate and principal reductions for nearly 400,000 Countrywide customers. Countrywide is expected to begin outreach to eligible borrowers by December 1.
The program is intended to achieve affordable and sustainable mortgage payments for borrowers who financed their homes with subprime loans or pay option adjustable rate mortgages serviced by Countrywide
and originated prior to December 31, 2007. It will attempt to limit first year payments under the modification program to 34% of the borrower's income, with "limited step-rate interest rate adjustments." Modification options will also include refinancing under the new FHA Hope for Homeowners program. Currently, the agreement covers 11 states (Arizona, California, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Texas, and Washington) but BOA indicated a willingness to extend it to
other states.
Recent Research
Foreclosure Prevention Working Group Finds Servicers Making Fewer Loan Modifications
On September 29, the multi-state Foreclosure Prevention Working Group issued its third report on the foreclosure prevention actions of 13 of the nation's largest servicers of subprime loans. The Group, made up of state attorneys general and state banking regulators from 11 states including Massachusetts, has been tracking servicer performance since October 2007. The new report looks at performance from February through May 2008. In a press release summarizing their findings, they reported while some servicers had improved their performance, overall the number of loans on track for a modification had precipitously declined, with the percentage of seriously delinquent (60 days+) homeowners not on track for any loss mitigation outcome – including short sale – reaching 78% in May, up from 72% in January.
They also found that servicers were modifying fewer loans than in the prior four month period, while dramatically increasing their use of short sales. They also estimated that 20% of the loan modifications made in the past year were delinquent as of May, noting that many loan modifications to date have not reduced borrower payments.
New Study Finds Housing Costs, Including Utilities, Have Outpaced Incomes since 1996
On October 8, the Center for Housing Policy released a new study, Stretched Thin, that examines trends in total housing costs relative to median household incomes from 1996-2006. Using Consumer Expenditure Survey data and other sources, the study found that nationwide both homeowners and renters are paying a rising percentage of their income for housing-related expenses, including utilities, property taxes, property insurance.
Overall, it found that most major costs rose faster than incomes. While median incomes for homeowners rose 36% nationwide between 1996 and 2006, for example, mortgage costs rose 46%, utilities 43%, taxes 66% and insurance 83%. Renters experienced a similar squeeze, as contract rents rose by 51% while median incomes rose by 31%. The authors note that rising utility costs, and especially rising heating fuel costs, are expected to exacerbate this trend.
