Housing Briefs - January 15, 2010

State Updates

HUD Awards $48 Million to Stabilize High Foreclosure Neighborhoods in Massachusetts

On January 14, HUD Secretary Shaun Donovan announced the award of $1.93 billion in awards under round two of the Neighborhood Stabilization Program (NSP2), including $47.9 million for activities in Massachusetts.

Local awards include $21.8 million for a joint program by Massachusetts Housing Investment Corporation, Massachusetts Housing Partnership, and DHCD, $13.6 million to the City of Boston, and $12.5 million to The Community Builders. According to the awards summary, Boston expects to acquire 496 real-estate-owned (REO) properties over the next 3 years. The MHIC/MHP/DHCD award will help support the acquisition and rehabilitation of several hundred foreclosed and abandoned ownership and rental properties in targeted census tracts across the state. The Community Builders will acquire and stabilize multifamily rental housing.

Patrick/Murray Administration Announces Affordable Rental Production and Preservation Awards

26 affordable housing developments in 17 communities will be funded with over $153 million in state and federal assistance for the production and preservation of affordable rental housing. Projects in Gloucester, Ipswich and New Bedford received a total of $22.5 million in American Recovery and Reinvestment Act tax credit exchange funding. Seven of the developments are designed specifically to serve formerly homeless households.

Building Blocks Coalition Advocates for Affordable Housing Budget Priorities

Advocates for affordable housing and homelessness prevention have joined together again this year to speak with one voice in requesting funding for affordable housing priorities in the state’s FY2011 budget.

While the budget situation remains difficult, the Building Blocks Coalition believes that additional cuts to housing and homelessness prevention programs will simply add cost to the Commonwealth’s emergency shelter system, local school transportation budgets, health care for the homeless, and other areas of the budget. Governor Patrick will unveil his budget proposal on Wednesday, January 27th.

CHAPA Focuses on 2010 Legislative Advocacy

CHAPA began 2010 by focusing its state advocacy efforts on legislation to provide homeowners, municipalities, and neighborhoods with additional foreclosure relief tools. In addition, we continue to work with a broad coalition of housing, environmental, and historic preservation organizations to pass legislation that maintains the Community Preservation Act’s success.

We also continue to advocate for changes to the State Low Income Housing Tax Credit to increase the yield from tax credit investments in affordable housing. Legislation to spur innovations in public housing is also a top priority for CHAPA and several legislators. Zoning reform, legislation to coordinate affordable housing and community services, and legislation clarifying the condominium common area laws round out the list of 2010 priorities.

Click here or contact Sean Caron, Director of Public Policy at Scaron@chapa.org to learn more.

Work Begins on Regulations Implementing Affordable Housing Preservation Law

The Commonwealth’s Affordable Housing Preservation Law, Ch. 159 of the Acts of 2009, was signed into law on November 23, 2009. The law provides DHCD with 150 days to promulgate implementation regulations. These regulations will be due on April 22nd.

DHCD is already in the process of assembling the 13-member regulatory advisory committee required by the statute. Members include representatives from the Department of Housing and Community Development; Community Economic Development Assistance Corporation; the Massachusetts Mayors Association; the Massachusetts Municipal Association; CHAPA; the Greater Boston Real Estate Board; the Real Estate Bar Association for Massachusetts; Massachusetts Association of Community Development Corporations; the Massachusetts Legal Assistance Corporation; the Affordable Housing Preservation Initiative of the Local Initiatives Support Corporation; and the Massachusetts Chapter of the National Association of Housing and Redevelopment Officials.

Patrick/Murray Administration Holds Hearing on Private Activity Bond Volume Cap

On January 6th, the Executive Office for Administration and Finance (A&F) presented information and held a hearing on the volume cap for private activity bonds. In 2009, Mass Development, MassHousing and DHCD created or preserved 1,026 units of multifamily housing, 40% higher than the 2008 benchmark. MassHousing enabled 1,107 low and moderate income homebuyers to purchase homes, down 44% from 2008. 110 public housing units were also rehabilitated through DHCD.

Because of additional volume cap authorized in the American Reinvestment and Recovery Act (ARRA), A&F will carry volume cap forward from 2009 and have a total of $986 million in volume cap to distribute in 2010. This will enable the Administration to continue to successfully expand housing opportunities while balancing other demands on volume cap.

CHAPA testified in general support of the current approach to volume cap allocations. We also advocated for continued expansion of volume cap allocation for rental housing and public housing.

$41.9 Million Added to Emergency Assistance Budget to Meet Shelter Funding Shortfall

Governor Patrick has approved an additional $41.9 million in funding for the state emergency assistance line item (7004-0101). The funding was necessary to extend family shelter contracts until the end of the fiscal year and to meet the costs of sheltering homeless families in hotels and motels due to insufficient shelter capacity.

This action brings the FY2010 total to $133.5 million. Due to high homelessness and reductions in critical affordable housing budget priorities, state expenditures for the two shelter line items will exceed spending for all Building Blocks Coalition budget priorities by $67 million, or 60%, in FY2010.

Proposed Cut to Transitional Assistance for Families with Dependent Children Reversed

Governor Patrick has announced that a TAFDC cut impacting over 8,550 low incomes families with a parent that has a disability will not be implemented. This is great news for thousands of families and for housing providers that serve these low income households.

Community Housing and Services Legislation Sent to House Ways and Means Committee

Legislation filed by Rep. Kevin Honan to coordinate affordable housing and community services received a new bill number, H. 4342, after being reported favorably from the Housing Committee. The legislation, a CHAPA priority, calls for an interagency service agreement among the various agencies involved in housing and services to better delineate the roles and process for creating community-based integrated supportive housing. It is currently before the House Committee on Ways and Means.

State Revises Neighborhood Stabilization Program (NSP1) Plan

In mid-December, the Massachusetts Department of Housing and Community Development (DHCD) published proposed amendments to its plan for the use of HUD Neighborhood Stabilization Program funds awarded in 2009 (NSP1).

The changes expand eligible recipients within the 39 NSP1 communities. Funds set aside for use in the 4 cities (Boston, Brockton, Springfield and Worcester) that also received funding directly from HUD can now be used for direct grants to non-profits and to for-profit developers. In addition, all 39 municipalities are now eligible recipients for rental development, demolition and landbanking pilot funds. The amendments also increase demolition funding to reflect current costs and cut funding for landbanking pilots (from $1 million to $100,000).

Massachusetts Building Permit Activity Remains Low

According to U.S. Census Bureau estimates, Massachusetts building permit activity rose in November, compared to November 2008 (with 498 units permitted, up 16% from November 2008). However, year-to-date units permitted (6,147) are still down 30% compared to the same period in 2008 (8,758), with the largest drop in multifamily units (down 52%). However, this drop is less severe than the national average. Nationally, monthly permit activity fell by 7.3% in November compared to a year earlier and year-to-date units permitted have dropped 38.5%, with year to date multifamily units permitted declining by 62%. National figures for December building permit activity will be released on January 20.

Federal Updates

Treasury Increases Financial Support for Fannie Mae and Freddie Mac



On December 24, the Treasury Department announced that it has lifted the cap on its purchase of preferred stock in Fannie Mae and Freddie Mac (currently $200 billion per institution and not yet reached) and will purchase stock as needed over the next three years. The stock purchases are used to offset reductions in net worth and ensure both entities maintain a positive net worth.

It also announced that while it remains committed to the principle that both entities reduce their retained mortgage portfolio, it will use a more flexible measure of current portfolio size and does not expect either entity to need to engage in active selling to meet the reduction goal. It noted that the Administration is reviewing longer term reform options and expects to issue a preliminary report around the time of the release of the President’s FY2011 budget request (February 1).

Bank Regulators Issue Update on Loan Modification Re-default Rates

The Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) released a new Mortgage Metrics report on December 21. The report examines modification activities on the approximately 65% of first-lien residential loans serviced by national banks and federally regulated thrifts. It covers the third quarter of 2009 (June 1-September 30).

The report indicates most borrowers (79%) with seriously delinquent loans (60+ days or in foreclosure) are not participating in loan modifications or payment plans, though this is down from the 86% figure reported three months earlier. It also indicates that only 13% of the quarter’s modifications involved a reduction in principal. While overall re-default rates on loan modifications have been high, they are much lower on the 15% of modifications that involved payment reductions of at least 20% (39% after 12 months) and on modified loans held in the lender’s portfolio (42% after 12 months).

Fair Housing Testing Bill Introduced

Representative Al Green of Texas has introduced a bill (H.R. 476) to increase funding for fair housing activities in three ways. It would authorize $20 million a year for each of the next five years (FY2010-FY2014) for HUD to test housing discrimination nationwide. It would also authorize $5 million a year for a competitive matching grant program (25% local match) for private entities to conduct housing discrimination studies. In addition, it would increase funding for the Fair Housing Initiatives Program (FHIP) to $52 million a year for the next five years (up from $42.5 million in FY2010 and from $26-28 million in recent years). FHIP funds local fair housing groups to carry out education, outreach, research and other activities. A House Financial Services Committee hearing is scheduled for January 20.

HUD Issues New RESPA Booklet for Mortgage Applicants

On January 6, HUD issued a new version of the booklet brokers and lenders are required to give all mortgage applicants within three days of applying for a loan. The booklet explains consumer rights under the Real Estate Settlement Practices Act (RESPA) and provides worksheets to help compare financing options and understand settlement costs.

Court Ruling Threatens California Inclusionary Zoning Ordinances

On October 22, 2009, the California Supreme Court decided not to review a July decision by the Court of Appeals that found that Los Angeles’ inclusionary housing requirement violates a state law that gives developers the right to set initial rents. Analysts report that the lower court decision, Palmer/Sixth Street Properties v. City of Los Angeles, may threaten ordinances in about 170 California jurisdictions but only affects unsubsidized rental developments. Advocates are examining ways to address this through state or local legislation.

Recent Research

New Harvard Study Examines Ways to Revive LIHTC Investor Demand

A new working paper from the Joint Center for Housing Studies at Harvard University provides a detailed analysis of recent disruptions in the market for low income housing tax credits (LIHTC) and the challenges facing developers seeking to sell credits. It points out that the disruption occurred because the largest investors no longer have much income to shelter and that this may not change for some time.

The report finds that the short-term fixes provided by the Tax Credit Exchange Program and TCAP have been effective (less so for 4% projects), but alone cannot return the program to health. It reviews the pros and cons of a number of proposals to increase investor demand, including changing program rules to shorten the time period over which credits are taken, making the credit refundable, creating a secondary market for credits, and extending CRA requirements to more institutions.

Living Cities Assesses Efforts to Help High-Foreclosure Neighborhoods

Living Cities, a consortium of 22 foundations, recently issued a status report on pilot programs to help neighborhoods with significant rates of foreclosure and abandonment in 10 cities nationwide. The report finds that obtaining title to properties continues to take a long time and contributes to property deterioration.

Most groups are limiting their rehab scopes due to funding constraints, the goal of quick reoccupation, and concern to not over-improve the property. Most groups are emphasizing the creation of rental rather than ownership units at least for now (some have lease-to-own programs), especially since many would-be homebuyers cannot get mortgages. Many, including all those in weak market cities, have made demolition part of their strategy. The report includes recommendations on steps needed to address the barriers reported by the pilot programs.

Center for American Progress Issues Paper on the Future of the Mortgage Finance System

The Center for American Progress’ Mortgage Finance Working Group issued a draft discussion paper last month on potential reforms to the residential mortgage finance system, including the financing of multifamily housing. The paper notes that the future of Fannie Mae and Freddie Mac (GSEs) is uncertain, with the Obama administration expected to issue reform proposals in February. It points out, however, that most of the recent turmoil in the mortgage finance system is the result of structural flaws in the private label mortgage securitization market, rather than the GSEs, and calls for reform which addresses the entire secondary market.

It recommends creating “chartered mortgage backed security issuers (CMIs)” to provide financing for “favored mortgages”. CMIs would be backed by an explicit government guarantee (funded through fees on MBS transactions) and subject to a federal regulator. They would also have to meet public policy goals, including providing liquidity and providing financing for affordable rental housing. They would be “monoline,” having no other business beyond issuing government-backed MBS and purchasing certain types of mortgages (including affordable rental housing mortgages) for their portfolio. The paper calls simultaneously for greater regulation of other MBS issuers to create a more level playing field.

HUD Issues Profile of Current Rental Market Trends

A new HUD working paper – U.S. Rental Housing Characteristics: Supply, Vacancy and Affordability – issued this month finds significant variation in rental housing supply and demand by cost and location across the nation. Nationwide, it reports that the number of households paying 50% or more of their income for housing is rising (8.7 million in 2008, up from 8.3 million in 2007 and 6.2 million in 2000). It also found that the number of unassisted rental units affordable to households at or below 60% of area median income (AMI) fell by 1.2 million between 2001 and 2007. It also found that much of the new production of low cost rental housing ($600/month or less) was offset by losses from the existing stock, with two low rent units lost for every three produced between 1995 and 2005. It also found that low income housing tax credit (LIHTC) properties have comprised about 50% of all newly constructed multifamily rental units since 2000.

It reports the national rental vacancy rate rose slightly (10.6 percent as of June 2009, up from 10% a year earlier), due in part to a rise in the number of households doubling up. It found that significant variation in vacancy rates by region, with distressed areas (e.g. Detroit, Florida) at 15-18% and stronger areas in the 4-5% range. Overall vacancy rates in lower cost units (less than $400 or $600 a month) fell to 9.3%. Vacancy rates were much lower in project-based Section 8 developments (4.3%) and LIHTC projects (5.4% nationally, 2.9% in Massachusetts). Federal public housing vacancy rates also fell nationally to 9.5% in 2008.

Study Finds Health Problems Contribute to Almost Half of Foreclosures

A new study indicates health care reforms could help prevent foreclosures. “Get Sick, Get Out: The Medical Causes of Home Mortgage Foreclosures”, found that 49% of homeowners surveyed in four states last year reported that their foreclosure was caused in part by a medical problem, including illness/injury (32%), lost work due to a medical problem (27%), unmanageable medical bills (23%) or caring for ill family members (14%). Further research found 69% of respondents had experienced such problems.