Housing Briefs - February 16, 2012

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February 16, 2012

State Updates

49 States and Federal Government Agree to Settlement with Nation’s Five Largest Mortgage Servicers over Foreclosure Practices

A settlement agreement between HUD, the Department of Justice, 49 states, and Bank of America, Wells Fargo, JP Morgan Chase, Citi and Ally Financial (formerly GMAC) will provide $25 billion in relief to borrowers for harms related to unlawful foreclosures.  According to Attorney General Martha Coakley, Massachusetts’ share is approximately $318 million.  Massachusetts will receive:

  • An estimated $224 million in loan modifications and other direct relief for homeowners,
  • Approximately $14.6 million in cash payments to borrowers that were subject to servicer abuse and lost their homes,
  • Loan refinancing for underwater borrowers totaling approximately $32.7 million, and
  • $46.6 million for programs to prevent foreclosures and address foreclosure-related blight.

Additional details regarding this relief will be unveiled in the coming months.  In addition, Attorney General Coakley continues to seek relief from the five largest lenders through litigation her office filed in December, 2011 for allegations that these lenders initiated foreclosures without holding the actual mortgages (“Ibanez” issues) and for abuses utilizing the Mortgage Electronic Registration System (MERS).  

CHAPA Continues to Focus on Foreclosed Property Acquisition and Neighborhood Stabilization; Seeks State Funding to Enable Partners to Continue Work

CHAPA recently released a Progress Report detailing the successes of the Massachusetts Foreclosed Properties Initiative.  Through this program, 127 properties—comprised of 217 single-family homes, apartments and townhomes—have been purchased in the most distressed neighborhoods within the state’s Neighborhood Stabilization Program (NSP) communities.  The Initiative transforms foreclosed properties, which are negatively impacting neighborhoods and are often magnets for vandalism and crime, into well-maintained, affordable homes for low- and moderate-income families.  A key feature of this program is the five-day “first-look” period, which provides CHAPA’s qualified purchasers with access to the properties prior to being listed on the market. 

Overall, CHAPA estimates that NSP funds have purchased and rehabilitated more than 1,323 units throughout Massachusetts at an efficient cost of $62,000 in NSP funding per unit.   Unfortunately, all of the state’s NSP funds have been obligated.

Housing advocates and local leaders are seeking state funding through an FY’12 supplemental budget appropriation or an economic development proposal appropriation to continue this work, and will also seek funding from legal settlements with foreclosing lenders.  Click here to learn more about this advocacy request.

CHAPA Encourages Members to Contact State Representatives to Advocate for Adequate Affordable Housing Investment 

Governor Patrick has proposed several notable increases in affordable housing and homelessness prevention programs in his FY’13 budget proposal, including a $10 million increase in MRVP, $8.5 million more for RAFT, a $4 million increase in Public Housing support, $400,000 more for the Tenancy Preservation Program, an additional $1 million for Home and Healthy for Good, $1 million for the regional networks to end homelessness, and an additional $900,000 to convert shelter beds for homeless individuals to supportive housing.

CHAPA is asking our members to contact their Massachusetts State Representative to support state affordable housing programs by sharing a simple message:

“Please support affordable housing and homelessness prevention in the FY 2013 budget.  Key increases in MRVP, public housing, RAFT and many other programs will create or preserve affordable housing for thousands of struggling households that shouldn’t be forced to choose between paying the rent or mortgage, and affording the cost of healthcare, transportation, food, and other basic needs.”

The time to act is now.  There are over 208,000 Massachusetts households with low incomes that are paying more than half of their income towards rental costs today.  The Massachusetts House of Representatives FY’13 budget will be released and debated in April, followed by the State Senate budget debate in May and a final FY’13 budget approved by Governor Patrick by the start of the next fiscal year in July.

2011 Historically Low Year for Residential Building

According to recently released United States Census data, homebuilders, developers and contractors sought 20% fewer residential building permits in 2011 than in 2010.  The 7,260 homes that were permitted to begin construction in 2011 represents the lowest level since the Census began recording the data in 1960.  A look at residential building permit data in the last two periods of major economic distress is illustrative of how difficult 2011 conditions were for single and multifamily home construction.  There were 17,034 residential building permits issued in 2001 and 12,672 permits issued in 1991.    

State Auditor Suzanne Bump Documents Cost of Transporting Homeless Students

On February 7, State Auditor Suzanne Bump released results of a statewide survey conducted by her office, which revealed that, among multiple other public costs associated with family homelessness, the cost of transporting homeless students displaced from their home communities to their original school district was significant.  Auditor Bump documented $11.3 million in FY’12 school transportation costs for homeless students, adding yet one more compelling reason to provide housing assistance to families at-risk of homelessness to avoid displacement and related costs. 

Ch. 40R Smart Growth Housing Trust Fund Dangerously Close to Empty

Over the coming months, 40R density bonus payments are likely due to Belmont, Beverly, Brockton, Lawrence, Lowell, Natick, Pittsfield and Reading.  There is approximately $1.4 million in the Smart Growth Housing trust Fund today, which means the 40R program is expected to exhaust trust fund resources by the summer of 2012.  CHAPA is working with the Massachusetts Smart Growth Alliance and Commonwealth Housing Taskforce to identify ways to ensure payments owed to cities and towns can be paid when due, and funding is available for new communities considering adoption.

Welcome Home Massachusetts Endorsed by over 350 Individuals and Organizations

The Welcome Home Massachusetts campaign, developed to support local housing initiatives, is seeking endorsers for the launch of its website this spring.  The campaign has three components:  a statewide messaging and media initiative, a new website for communities featuring strategies for building local support, and technical assistance to targeted communities - all designed to increase the number of affordable housing units in the Commonwealth.  For a detailed description, click here.

To date, we have 350 Welcome Home Massachusetts endorsers.  If you would like to endorse Welcome Home Massachusetts and receive updated communications about the campaign, please send an email with your name, your organization (optional), your email address and the community in which you live to cmarine@chapa.org.

Federal Updates

Administration Released FY’13 Budget Request for HUD

The President’s FY’13 budget proposal for HUD, released on February 13, calls for $44.8 billion in gross budget authority for FY’13, 3.5% more than in FY’12, and proposes several program innovations.  However, it also includes two controversial cost-saving measures for rental assistance and public housing.  HUD Secretary Shaun Donovan provided context for the proposed budget in a webcast on February 13.  The President’s request budget is only the first step in a long process and most observers do not expect Congress to finalize budget bills until after the November election.  In addition, the Budget Control Act with its sequestration requirement for FY’14 adds additional uncertainty. 

HUD’s proposed $1.5 billion increase in gross budget authority is predicated on the assumption that Congress will allow HUD to claim increased FHA revenues as an offset.  HUD proposes to use the increased budget authority to:

  • increase funding for homelessness assistance grants by 17% ($330 million), and
  • to partially restore funding for programs cut severely in recent years, including:
    • Section 8 administrative fees ($225 million increase),
    • the public housing operating fund ($562 million increase),
    • the public housing capital fund ($195 million increase),
    • Section 202 ($100 million increase)
    • Sustainable Communities ($100 million increase), and
    • Housing Counseling ($10 million increase). 

The proposal level funds CDBG and HOME formula grants, rather than restoring funds cut in FY’12 (by 12% and 38% respectively).  It also cuts funding for Section 811 by 9%.  See the National Low Income Housing Coalition budget chart for details.

The proposed spending increases rely on two controversial proposals to reduce rental assistance spending:  (1) a $75 minimum rent for all households with rental assistance or living in public housing and (2) “short-funding” of project-based rental assistance contracts. See CHAPA’s fact sheet for details.

President Releases New Housing Plan

On February 1st, President Obama unveiled a series of new steps to reduce home foreclosures, bolster the housing market, and help struggling households preserve their housing.  The President proposed several items that require Congressional approval including a new refinancing plan for families who don’t currently qualify for HARP, funding for the National Housing Trust Fund, and funding for Project Rebuild to continue activities similar to NSP.  House Republican opposition to these proposals will make progress difficult to achieve.  In addition, the President has proposed some steps that do not require Congressional action, including a pilot sale of REO properties under the control of Fannie Mae, Freddie Mac, and FHA to transition these properties to rental housing, and a taskforce on lending abuse.  

CHAPA Submits Comments on Proposed HOME Rule

CHAPA worked with representatives from a number of HOME participating jurisdictions to develop and submit joint comments on HUD’s proposed revisions to the HOME regulation.  The comments were submitted to HUD on February 14.  Among other things, they ask HUD to revise several provisions that would permanently extend new program requirements that were added by Congress in the FY2012 appropriation bill and that currently apply to FY2012-funded activities only. 

Among other things, the comment letter asks HUD to make the deadline for mandatory conversion of unsold HOME units to rental 12-18 months (rather than 6 months), to revise the redefinition of Community Housing Development Organization (CHDO) to allow CHDOs without paid development staff to qualify in some circumstances, to lengthen the period allowed for pre-development costs, and to allow participating jurisdictions to use inspections and financial reviews by other lenders to meet review requirements.

House Financial Services Subcommittee Passes Discussion Draft of Section 8 Reform Bill (AHSSIA)

On February 7, the House Financial Services Subcommittee approved the discussion draft of the Affordable Housing and Self-Sufficiency Improvement Act (AHSSIA), which includes reforms to the Section 8 program as well as to other federal housing programs. The bill is scheduled for consideration by the full Committee on February 28.

During the Subcommittee mark-up, there were several amendments proposed to the most controversial elements of the bill, including the provisions to allow unlimited expansion of HUD’s Moving-to-Work program, and to set a national minimum rent of $69.45 in 2012 (with annual adjustments indexed to inflation), while giving HUD and housing agencies the option to set even higher minimums. These amendments were withdrawn during the mark-up, and the bill passed in the form in which it was proposed. Subcommittee Chairman Judy Biggert (R-IL) said that the issues raised in these amendments would be taken up again during the full Committee consideration, and that there would be work done in these areas before that time.

The Center on Budget and Policy Priorities has published an analysis of the bill on its website. Overall, the Center concludes that AHSSIA includes significant improvements over the last draft of voucher legislation, with the potential for important program savings. Positive changes include language to strengthen the Family Self-Sufficiency (FSS program), streamlined rent calculation rules, improvements to the inspection process, and a stable reserve policy.

EPA Soliciting Comments on New Publication: Creating Equitable, Healthy, and Sustainable Communities

As part of the Obama Administration’s continued efforts to break down silos and promote smart growth, EPA is soliciting comments from a broad group of stakeholders on a new publication outlining Strategies for Advancing Smart Growth, Environmental Justice, and Equitable Development.  Comments are due March 1, 2012.

FHA Announces Accelerated Financing Pilot in Boston for Tax Credit Projects

Last week, the Federal Housing Administration announced the start of a new pilot program to accelerate FHA’s approval process for insurance for multifamily rental properties being acquired or rehabilitated with 9% or 4% federal low income housing tax credits.  It will operate in four cities: Boston, Chicago, Detroit, and Los Angeles.  As detailed in the program notice (H 2012-1), the program will be limited to relatively low hard construction costs (no more than $40,000 per unit).  The program is intended to make it easier to use FHA insurance and meet tax credit deadlines and is designed to serve three types of projects:

  • acquisition and/or refinance and moderate rehabilitation of properties (with tenants in place) where at least 90% of the units are supported by a project-based rental assistance contract
  • permanent financing of new or substantially rehabilitated projects that are complete and have reached stable occupancy, and
  • permanent financing and moderate rehabilitation of tax-credit projects being re-syndicated.

Recent Research

NLIHC Study Finds Supply of Affordable Housing Shrinking

A new study by the National Low Income Housing Coalition (NLIHC), Housing Spotlight: The Shrinking Supply of Affordable Housing, has found the number of extremely low income (ELI) renter households grew by almost 200,000 nationwide, while the number of rental units affordable to these households at 30% of income fell by more than 200,000 units.  In 2010, nationwide, the number of ELI households outnumbered the number of available units at rents they could afford by a margin of more than 3 to 1 (in 2005-2007, there were 30 affordable units available for every 100 ELI renter households, down from 35 units). In Massachusetts, the figure was 42 units per 100 ELI renter households, down from 49 in 2005-2007.