Housing Briefs - January 16, 2009

State Updates

CHAPA Secures Sponsors for 2009-2010 Legislative Priorities

CHAPA has filed 10 pieces of legislation to alleviate housing instability caused by the foreclosure crisis, economic downturn, and continued lack of housing affordability for many Commonwealth residents. Each bill has been developed in partnership with a wide range of housing and community development organizations and coalitions.

The text of each bill and fact sheets will be posted on our web site on Thursday, January 22nd. We encourage CHAPA members to help secure cosponsors for these priorites by contacting their legislators and requesting them to sign up as a cosponsor with the lead sponsor of each bill by February 4th, 2009.

CHAPA wishes to thank Representative Honan, Representative Walsh, Representative Sanchez, Representative Peisch, Representative Kulik, Senator Tucker, Senator Chandler, Senator Jehlen, Senator Eldridge and Senator Creem for their support in sponsoring the CHAPA legislative package for 2009-2010.

Governor Patrick Announces Reorganization of State Government to Move Emergency Shelters to the Department of Housing and Community Development

The Governor has announced plans to file an Article 87 reorganization of state government to move the individual and family shelter delivery systems from the Department of Transitional Assistance (DTA) to DHCD. The proposed reorganization is intended to promote a “housing first” strategy to end homelessness through greater access to permanent housing resources. In addition, the Governor plans to move Long Term Care for Elders from the Executive Office of Elder Affairs to the Executive Office of Health and Human Services.

CHAPA has noted that regardless of the government location of shelters, the major barrier to ending homelessness is still the lack of affordable housing opportunities and resources for extremely low income households, including capital dollars for new housing, project-based and tenant based rental assistance, and supportive services.

Legislature Grants Governor Authority to Make Additional Budget Cuts

On January 14th, the Legislature granted the Governor additional authority to cut the FY 2009 budget by extending his Chapter 29 Section 9C authority to the ability to reduce local aid appropriations. The Governor is authorized to cut nearly $600 million in local aid as part of his plan to close a budget gap of approximately $1.4 billion. The next round of budget cuts necessary due to the economic downturn is expected to be announced by Jan. 28th, when House One, the Governor’s FY 2010 budget proposal, is released.

Unpaid Municipal Fines Legislation on Governor Patrick’s Desk

On January 14th, the Legislature enacted H. 4883, legislation that would give municipalities additional authority to enforce unpaid municipal fines for violations of local sanitary codes and other local ordinances. The legislation would assist cities and towns struggling with enforcing unpaid fines imposed on dilapidated foreclosed properties, but it also includes controversial measures related to fines on property owners for failure to remove snow and ice.

Department of Environmental Protection Releases New Stormwater Regulations

The DEP Recently proposed regulations that would establish a statewide permit program to control the discharge of stormwater runoff from new and existing privately-owned developments. The proposed regulations would require private owners of land containing five or more acres of impervious surfaces, or two or more acres within the Charles River Watershed to: (1) apply for and obtain coverage under a general permit; (2) implement nonstructural best management practices (BMPs) for managing stormwater; (3) install low impact development (LID) techniques and structural stormwater BMPs at sites undergoing development or redevelopment; and (4) submit annual compliance certifications to the Department.

The DEP has extended the comment period for the proposed regulations until March 9th and is holding several public hearings the week of January 20th.

HUD Approves State Neighborhood Stabilization Plan

On January 14, HUD notified the State that it has approved its plan to use $43 million in new HUD funds to assist neighborhoods hit hard by foreclosures.

Division of Banks Releases Foreclosure Database to the General Public

The Division of Banks (DOB) has made its online database of foreclosure notices available to the general public. The database has been assembled pursuant to Ch. 206 of the Acts of 2007, the 2007 foreclosure prevention legislation. It is part of the Patrick Administration’s multifaceted approach to addressing the foreclosure crisis.

Governor FY 2010 Budget Proposal in Final Stages of Development

The Governor’s FY 2010 Budget is in its final stages of preparation and is due to be released on January 28th, 2009. To learn more about CHAPA’s FY 2010 budget priorities, click here.

Massachusetts Foreclosures Up 64% through November, Foreclosure Petitions Down

On December 31, Banker and Tradesman reported the total number of foreclosure deeds recorded in 2008 through November had reached 11,486, up 64% from 6,970 recorded in January-November 2007. The increase in foreclosure deeds compared to a year ago appears to have slowed somewhat.

While foreclosure deed recordings in the first half of the year were more than 100% above the 2007 pace, the 880 foreclosure deeds recorded in November were just 38% over the November 2007 total. Foreclosure petition filings also appear to have slowed. A total of 20,179 petitions were filed through November, 25% fewer than were filed during the same period in 2007 (26,848) and November filings (1,335) were down 51% compared to November 2007 (2721).

2009 Affordable Housing Development Competition Begins

The Federal Home Loan Bank of Boston, Citizens’ Housing and Planning Association (CHAPA), the Boston Society of Architects and Kevin P. Martin and Associates have announced the ninth Greater Boston Affordable Housing Development Competition.

Four to six teams of students from Boston-area colleges and universities will work with housing development organizations to help find creative solutions to the challenge of developing affordable housing. The Competition will run from Februrary through April 2009. Interested developers are encouraged to log onto www.fhlbboston.com/compete or contact Karen Wiener at kwiener@chapa.org for more information.

Federal Updates

House Releases $825 Billion Economic Recovery Bill

On January 15, the House released an 18 page summary of its $825 billion proposal (the American Recovery and Reinvestment Act of 2009) to provide $275 billion in tax cuts and $550 billion in new spending. Current expectations are that a final package will be approved by Congress by mid-February. The House Appropriations Committee introduced a bill to authorize the spending items (click here for the Committee report and bill text). Details on the tax elements will become available once the Ways and Means Committee introduces a bill (expected shortly). Chairman Rangel released a summary of anticipated provisions, including removal of the repayment requirement for the $7,500 first time homebuyer credit approved last year and grant funds for the low income housing tax credit program, which is being developed by the Financial Services Committee.

The Appropriations bill requires that new formula grant funding be allocated within 30 days and new discretionary grants within 90 days of bill enactment (120 days if a new program). It also provides that 5% of each new appropriation be used for oversight. It provides $16.3 billion in new funds for housing programs including:

• $5 billion for the public housing capital fund ($4 billion to be distributed using the 2008 formula), with emphasis of projects that can award contracts within 120 days and priority to be given to rehabilitating vacant units; the bill authorizes HUD to waive some requirements to facilitate timely spending (not fair housing, labor or environmental standards).

• $4.19 billion in additional funds for the Neighborhood Stabilization Program (NSP), of which at least $3.44 billion shall be allocated competitively to states, units of local government and nonprofit entities or consortia of nonprofit entities, based on grantee capacity, leveraging potential, targeted impact of foreclosure prevention, and any other criteria established by the HUD secretary. Funds can only be spent on activities related to foreclosed properties. The other $750,000 shall be awarded to nonprofits (or consortia of nonprofits) so they can provide “community stabilization assistance.” The bill also includes protections for renters in properties acquired with these funds, including at least a 90 day notice to quit.

• $2.5 billion for energy retrofits for developments with project-based Section 8 or Section 202 project-based rental assistance.

• $1.5 billion for the Emergency Shelter Grant (ESG) program. Funds shall be distributed by formula and can be used for a range of homelessness prevention activities beyond those conventionally allowed under ESG, including short- or medium-term rental assistance, housing relocation and stabilization, outreach to owners, resolution of security or utility deposits, utility payments, legal services and credit repair.

• $1 billion in Community Development Block Grant (CDBG) funds, to be distributed using the 2008 formula, with priority to projects that can be awarded within 120 days. HUD will not require an action plan amendment and, as with public housing, can waive other requirements.

• $1.5 billion for HOME, to be distributed using the 2008 formula, with priority going to projects that can award contracts within 120 days and HUD authority to waive requirements as above.

• $10 million for the Self-Help Opportunity Program (SHOP).

• $500 million for Native American Housing Block Grants.

• $100 million for Lead Hazard Reduction.

The bill requires states to certify maintenance of effort (that they will continue to use state funds to pay for eligible projects for which state funding had been planned through 9/30/2010). States and localities will also be required to submit periodic reports on their use of funds and the economic impacts.

Senate Approves Second Release of TARP Funds

The Senate voted yesterday (52-42) to approve the President’s request to release the second $350 billion in TARP funds, after receiving reassurances from the incoming Obama administration that it will require strict accountability for use of the funds and will devote $50-$100 billion to actions to address the foreclosure problem. These reassurances were provided in two letters. Congressman Barney Frank filed legislation last week to require accountability and to require the Treasury Department to develop a plan to address foreclosures by March 15 and reserve $40-$100 billion for this purpose.

New HUD Secretary Nominee Wins Praise, Pledges Action at Senate Confirmation Hearing

The Senate Banking Committee held a hearing on January 13 on the confirmation of President-elect Obama’s nominee for HUD Secretary, Shaun Donovan. According to the New York Times and The Hill, Donovan was received very favorably and the committee is expected to vote in favor of the nomination shortly. Nominations then go to the full Senate for a final vote.

Committee members urged Donovan to make sure HUD gets involved in key economic policy decisions. Senator Robert Menendez of New Jersey said that HUD “has been sitting at the kids’ table, and it is time for that to change” and former HUD Secretary Mel Martinez urged Donovan to get “a seat at the main table – insist on it.”

Donovan testified that addressing the foreclosure crisis would be his top priority and that the Obama administration will offer a “bold and comprehensive plan” to address it, including loan modifications and changes in bankruptcy law. He will also be involved in the use of TARP funds and overseeing Fannie Mae and Freddie Mac. Donovan noted that three other items will be a high priority for him: resolving the budgetary issues affecting renewal of expiring Section 8 contracts (both tenant- and project-based), increasing FHA capacity, and restoring HUD’s research capacity. He also spoke of the importance of supporting rental housing in federal policy. Click here for links to a video of the full hearing and Donovan’s statement.

HUD Terminates FHA Secure Refinancing Program

Late last month, HUD issued a formal letter confirming that it was terminating the FHASecure program and would accept no new applications on or after December 31.

The program, first introduced in August 2007, was created to allow subprime borrowers with adjustable rate mortgages to refinance into fixed loan loans. Even after it was expanded to serve borrowers with fixed rate and prime mortgages, it never was widely used, in part because it was limited to borrowers who still had equity in their homes and had few missed payments. Congress created the Hope For Homeowners program this summer to offer a less restrictive refinancing option.

Support Building for Bankruptcy Court Modification of Home Mortgages

The incoming Obama Administration has indicated that bankruptcy reform will be part of its plan to address foreclosures, most recently in a letter from Lawrence Summers to Congress on January 12. In addition, Citigroup agreed on January 9, in exchange for federal financial assistance under TARP, to end its opposition to legislation allowing bankruptcy judges to modify mortgages for borrowers in or at-risk of foreclosure as long as these powers do not apply to mortgages made going forward. The concept also received support from the Attorneys General of 22 states, including Massachusetts, in a joint letter sent to both the House and Senate on January 6.



Recent Research

Study Details Role of Subprime Lending in High Rates of Multi-family Foreclosures

The Federal Reserve Bank of Boston released a new study this month, “Subprime Mortgages, Foreclosures and Urban Neighborhoods”, analyzing the impact of subprime mortgage lending on urban neighborhoods in Massachusetts, with a focus on 2-4 unit properties. Overall, it finds that subprime lending accounted for almost all of the growth in minority homeownership rates in these neighborhoods. It also reports high rates of foreclosure on sales closed in 2005 or later, especially for 2-4 unit properties. It notes that 2-4 unit properties accounted for 50% of all foreclosures in 2007, while comprising only 10% of the state’s housing stock.

The study finds that lenders resist wholesale loan modification programs (reducing principal to below current appraised value) because it doesn’t make sense financially portfolio-wide. That is, it would benefit more owners who don’t need assistance (“underwater” but likely to continue to pay their mortgage) than owners who do need help and could benefit.

The study finds, however, that a broad approach is likely to make financial sense when targeted to 2-4 unit properties in urban minority neighborhoods, because such a high percentage have subprime loans and are at risk of foreclosure. Noting that many of those owners may not be able to sustain a mortgage, even if reduced to current appraised value, it suggests the best strategy for lenders may be to combine principal reduction with a transfer to a new buyer, such as a community organization, who is able to make the reduced payments.

White Paper Urges States to Revise Its Use of Low Income Housing Tax Credits

Recap Advisors issued a white paper this month - commissioned by the Massachusetts Housing Partnership (MHP) - on the current state of the market for low income housing tax credits, likely near-term trends and steps it believes states should take to help projects move forward and prevent the loss of state credit allocations. It noted that 31 of the 39 Massachusetts projects approved for 9% credits in the past year have not been able to find investors yet.

Based on a survey of state and national trends, Recap concluded that state allocating agencies need to modify their underwriting based on the high level of risk aversion in the market today, the resultant drop in credit prices, and the much smaller pool of investors (it estimates that available equity is down by more than 40% with the withdrawal of Fannie Mae and Freddie Mac). It urges states to allocate their credits to projects most likely to find investors (projects with uncomplicated financing and strong developers), to consider giving priority to projects that line up credit investors in advance, and dropping threshold requirements that add costs.

Housing Production and Metro Area Employment Growth

A new report sponsored by the Massachusetts Housing Partnership has found that housing production is a key driver in metro area employment growth (click here for summary and full report). The other two factors are a region’s success in attracting new residents and the extent of manufacturing employment.

Opportunity Mapping in Massachusetts

The Kirwan Institute for the Study of Race and Ethnicity released a new study this week on the “Geography of Opportunity” in Massachusetts. The study, commissioned by the Massachusetts Law Reform Institute, identified areas in Massachusetts that provide high or low access to opportunities for a good life (good schools, jobs and neighborhoods) and explores ways to increase opportunities for those who live in low opportunity areas.

The study scored every census tract in the state in terms of the types of opportunities they provide their residents, based on recent school system data and data from the 2000 Census on economic opportunity (incomes, proximity to jobs) and neighborhood and housing quality. It then ranked these tracts into five quintiles, from very-high to very-low- opportunity.

The report found more than 90% of African American and Latino households lived in low- and very low-opportunity neighborhoods, a much higher percentage than their counterparts in other states, along with over 55% of Asian households. By contrast, only 31% of white, non-Hispanic households lived in low opportunity neighborhoods.

The study also found that this disproportion was true at all income levels (90% of high income African American households lived in low opportunity neighborhoods, compared to 20% of their white counterparts). It recommends a two-pronged strategy to improve access to opportunity – improving low opportunity neighborhoods while also making it easier to live and/or work in high opportunity areas by improving public transportation systems, expanding regional housing and educational mobility programs, supporting fair housing and developing affordable housing.