Housing Briefs - May 4, 2009

State Updates

House Passes FY 10 Budget; Adopts Amendments to Maintain MRVP, Other Critical Programs

On May 1st, the House of Representatives adopted its FY 2010 budget, which included amendments to preserve several critical affordable housing programs.

The Massachusetts Rental Voucher Program (MRVP) was increased by $17 million from the House Ways and Means Committee budget to $35.8 million, the amount necessary to prevent revoking vouchers from households served. Public Housing Operating Subsidy funding was increased by $4.9 million to $71.3 million. The House also adopted an amendment to restore funding for foreclosure prevention and first time homebuyer counseling, and an amendment to facilitate a transfer of capital funding to maintain the Get the Lead Out lead paint abatement program.

The MRVP amendment was filed by Rep. Kevin Honan (D-Brighton), Rep. Frank Smizik (D-Brookline) and Rep. Sean Garballey (D-Arlington). The Public Housing Amendment was filed by Rep. Smizik. The foreclosure counseling amendment was filed by Rep. Antonio Cabral (D-New Bedford), Rep. William Lantigua (D-Lawrence) and Rep. Kevin Honan. Rep. Stephen DiNatale (D-Fitchburg) filed the Get the Lead Out Amendment.

Due to a serious decline in revenues, the House took a difficult but appreciated vote to increase the Sales Tax to provide funding for housing, core services, and local aid.

CHAPA thanks these housing champions, House leadership, and the numerous legislators and advocates that helped ensure that households were not placed at risk of homelessness due to a cut to MRVP. CHAPA respectfully requests that the Senate include the House funding amounts for affordable housing programs and provides the necessary revenue necessary to do so when it releases its budget on May 13th or May 14th. The Senate budget debate will begin May 18th.

Critical State House Hearings Scheduled on Affordable Housing Issues

The Joint Committee on Housing will hear testimony on several key issues in the coming weeks. Tomorrow, May 5th, the Committee will hold a hearing at 10:30 a.m. in the State House Room A-1 on several bills related to the preservation of expiring use affordable housing, including the S. 666 and H. 3573 which are supported by CHAPA.

On May 19th, it will hear testimony on several bills related to increasing stability in neighborhoods impacted by foreclosures, including H. 3571 which is supported by CHAPA. The hearing will also be in Room A-1 at 10:30 a.m.

On May 26th, the Joint Committee on Municipalities and Regional Government will hear testimony on the Land Use Partnership Act and the Community Planning Act II. CHAPA supports the Land Use Partnership Act and continues to work with the Zoning Taskforce and the Committee to ensure the legislation advances housing and planning goals.

Affordable Housing Development Competition Winners Announced

Awards for the Ninth Annual Affordable Housing Development Competition were announced at an event on April 28 at Goulston & Storrs. The competition was co-sponsored by CHAPA, Federal Home Loan Bank of Boston, Boston Society of Architects, and Kevin P. Martin & Associates.

The first place award was presented to the student team working on Chinatown Crossing with the Asian Community Development Corporation. The second and third place teams worked on St. Polycarp Village – Phase II with the Somerville Community Corporation, and Uptown on Dudley with the Madison Park Development Corporation, respectively. An honorable mention was presented to the team that worked on the South Village at Chelmsford with the Chelmsford Housing Authority and the Women’s Institute for Housing and Economic Development.

All six submissions proposed creative responses to specific development challenges, and CHAPA congratulates all the students involved for their efforts.

Asset Development Commission Progress Report Released

The Massachusetts Asset Development Commission, chaired by Senator Jamie Eldridge and Undersecretary Tina Brooks, released a progress report to suggest ways to increase assets of Massachusetts residents across a range of incomes. The report includes recommendations to preserve expiring use affordable housing and to protect tenants in foreclosed properties that are in good standing. The Commission will continue to explore other asset development opportunities, including focusing on “cliff-effect” issues.

New Housing Permits Hit Unprecedented Low in Massachusetts

New Census Bureau data indicates building permits in the first quarter of 2009 in Massachusetts totaled 1,810 units (including 433 in March), down 8% from the first quarter 2008 total (1,967), putting the state on track for its lowest level of housing production in decades. Over half (53%) of the units permitted this year have been in multifamily buildings. National totals were down 49% across the same period.

First Quarter Massachusetts Home Prices, Sales Volume Down 18% compared to 2008

On April 29, Banker and Tradesman reported that the median sales price for single family homes in Massachusetts sold between January and March fell to $253,500, down 18.2% from the same period in 2008 ($310,000). Total sales fell by 10.9% (6,160 statewide). The median single family home price for March was $255,000, down 16.1% from March 2008 ($304.000), and March sales volume was down 7.4% from a year earlier.

The median sale price for a condominium in the first quarter fell to $220,100, down 16.9% from a year ago ($264,900) and the March median price of $229,000 was down 15.2% from a year earlier. Sales volume fell by 27% in the first quarter.

17,000 Affordable Units at Risk in Massachusetts as Mortgages Mature

A new study sponsored by the Center for Social Policy at UMass Boston has found that close to 17,000 units in 130 federally- and state-financed developments are at risk of losing their affordability by 2015 as their 40-year mortgages reach final maturity, including over 3,000 units by 2010. The study, written by Emily Achtenberg, describes how state legislation can help preserve this valuable resource.

Mel King Institute for Community Development Launched

MACDC and LISC are launching the Mel King Institute on Wednesday, May 20 5:00 - 7:00 p.m. at the Casa de la Cultura/Center for Latino Arts at 85 West Newton Street, South End (formerly known as the Jorge Hernandez Cultural Center).

The Institute is a collaboration of MACDC, LISC, and many other private, public, and non-profit partners, created to advance the skills, knowledge, and leadership needed to continue and expand the vision of community building. The event will honor Mel King for his inspiration in founding this Institute, and for his lifetime of developing the funding, infrastructure, and policy that underlies all of our work. For information about becoming a member of the Founding Committee and sponsoring the event or buying tickets, please go to www.macdc.org.

Federal Updates

HUD Releases Tax Credit Assistance Program (TCAP) Guidance

Today, HUD released a Notice (CPD-09-03) on use of the $2.25 billion in HOME gap-filler funds provided under the stimulus bill to assist tax credit projects. Funds have been allocated to State housing credit agencies on a formula basis. Massachusetts will receive $59.6 million.

TCAP can be used to assist projects that received or will receive a low income housing tax credit (LIHTC) award between October 1, 2006 and September 30, 2009 and need additional funds, including projects that received 4% credits with bond financing. The notice allows States to define “award of LIHTCs” and allows it to be as early as the date of public notice of the funding decision; States must use the same definition for all projects when determining eligibility for TCAP funds. Projects that can be completed by February 16, 2012 must receive priority. HOME regulations do not apply to TCAP funds. Projects will be subject to prevailing wage requirements, though the Notice indicates that it may be possible to make the application prospective in the case of developments already under construction.

States that wish to accept some or all of their TCAP funds must submit applications to HUD within 30 days of this notice (June 3). They must describe how they will select projects and “redistribute funds to more deserving projects” from projects not in compliance with deadlines established in the written agreement between the grantee and project owners. They must post these criteria online and accept public comments for at least five days. Once HUD determines that the application is complete, it will sign a grant agreement with the State agency.

The notice requires States to distribute their TCAP funds competitively and in accordance with their existing QAP. Other than completion by February 2012, the Notice gives States discretion in establishing selection criteria (e.g. could be based on readiness to go). States can decide whether to provide the funds as a grant or loan (loan repayments during the 3-year grant period will be treated as program income). States must commit at least 75% of their TCAP funds by February 16, 2010. HUD indicated that it expects to issue further guidance on the program at http://www.hud.gov/recovery/tax-credit.cfm.

HUD and Treasury will hold a webinar on the new TCAP and Exchange guidance on May 6.

Treasury Department Issues Guidance on the LIHTC Exchange Program

Today, the Treasury Department also issued guidance on the Tax Credit Exchange Program (“Section 1602”), including the Terms and Conditions and application form state credit agencies must use. State agencies may begin submitting applications for grants this month and can submit subsequent applications through 2010. Massachusetts is eligible to receive $50.8 million in grant funds based on unused credit for calendar 2008 but this figure is likely to rise once information on returned and unused credits becomes available. All funds must be disbursed to subawardees by December 31, 2010.

Housing agencies must establish a process for determining that subawardees have made a good faith effort to obtain investment commitments for tax credits in lieu of the subaward. State agencies must develop recapture requirements and recapture amounts will be treated as a debt payable to the U.S. Treasury and enforceable by “all available means against any assets of the recipient entity.”

HUD and Treasury will hold a webinar on the new TCAP and Exchange guidance on May 6.

HUD Announces Neighborhood Stabilization Program II (NSP2) Application Process

On May 4, HUD announced its imminent release of a NOFA for $2 billion in competitive grant funding under the NSP program (applications due July 17) and a separate NOFA for $50 million in grants to technical assistance providers (applications due June 8th). Links to the documents will be posted on HUD’s website.

House Expected to Vote on Anti-Predatory Lending Bill This Week

On April 30, the House Financial Services Committee approved the Mortgage Reform and Anti-Predatory Lending Act of 2009 (H.R. 1728). The bill amends the Truth in Lending Act to curb abusive mortgage practices of recent years and provides funding for legal services and counseling as well as protections for renters in foreclosed properties.

The bill requires the licensing and registration of all mortgage originators. It also requires lenders to ensure borrowers can repay their loans and to ensure that refinancings provide a net tangible benefit to the borrower. It prohibits rewarding loan originators for steering borrowers to more costly mortgages. It limits prepayment penalties for standard mortgages and prohibits them for non-traditional mortgages (negative amortization loans, balloon loans, etc.) It requires lenders to retain at least a 5% interest in the credit risk of securitized mortgages (but gives Federal banking agencies the authority to approve exceptions).

Some analysts have criticized some of the provisions related to consumer remedies because borrowers not yet in foreclosure will not be given direct access to the lender. Others have expressed concern that unclear “pre-emption” language (Section 208) may reduce protections for borrowers in states with stronger laws.

Renter protections (Section 220) would apply to all foreclosures after the date of enactment and requires a minimum 90-day eviction notice to all “bona fide” renters when homes go into foreclosure and, unless the property is sold to a buyer who intends to occupy the unit, allows tenants to remain for the term of the lease. Section 8 voucher holders must be allowed to stay for the term of their lease.

The bill also creates an Office of Housing Counseling within HUD and authorizes an appropriation of $45 million a year for FY2009 through FY2012 for its operations and counseling grants. It additionally requires HUD to establish a grant program for foreclosure legal assistance and authorizes $35 million a year for this purpose for FY2009 through FY2012.

Congress Agrees on FY2010 Budget Resolution

On April 29, the House and Senate approved a $3.4 trillion budget resolution for FY2010, with no Republican support. The resolution (S. Con. Res. 13) provides $10 billion less for discretionary spending than the President requested. It authorizes spending for the National Housing Trust as long as “deficit neutral” funding sources can be found and includes Senate language allowing possible expansion of rental assistance programs if deficit neutral. The President’s budget proposal, expected out this week, will reportedly include $1 billion for the National Housing Trust and identify a funding source and provide full funding for Public Housing Operating Subsidies.

Administration Modifies Foreclosure Program

On April 28, the Obama administration announced two initiatives to enhance its foreclosure prevention programs. The Second Lien program will help the approximately 50% of at-risk loans with second liens, which often present barriers to loan modifications and is designed to encourage reduction or elimination of these liens.

Servicers who agree to participate must automatically reduce or extinguish second liens following pre-set guidelines (reducing interest rate to 1-2% for set periods of time) when a first mortgage goes through the Home Affordable Modification Program (HAMP). In exchange, the government, using TARP funds, will share in the cost of the reduction.

The second initiative will require servicers reviewing HAMP loan modification applications to determine whether the borrower is eligible to obtain a permanent loan refinance (with a principal write-down) under the FHA Hope for Homeowners (H4H) program instead and if so, offer this option. They must also offer the H4H option to households currently in the 3 month trial loan modification period. Servicers/lenders will receive incentive payments under either approach. This initiative will start once modifications to HFH are enacted by Congress (see below).

Senate Defeats Mortgage “Cramdown” Legislation

As reported in the New York Times, Senate efforts to pass legislation to permit bankruptcy judges to modify mortgages in foreclosure failed on April 30 as efforts to attach an amendment to S.896 (the Helping Families Save Their Homes Act of 2009) were defeated 45-51 in the face of banking industry opposition. 12 Democrats voted against the amendment, including Arlen Specter.

The House companion bill (H.R. 1106) approved on March 5 includes judicial modification but observers do not expect that provision to survive conference. Other provisions in both bills reduce Hope for Homeowners (H4H) premiums and permanently raise the FDIC account insurance limit.

Draft Section 8 Reform Bill (SEVRA) Released

The House Financial Services Committee released a draft bill to modernize the Section 8 program on April 28. The Center on Budget Policy and Priorities has published a summary of the key provisions and how they compare to current law and the 2007 bill. Among other things, the bill would allow housing agencies to set rents below 90% of FMR for project-based vouchers assigned to units funded from the National Housing Trust. It also would authorize funds for 150,000 new vouchers.

Climate Change Bill Markup Delayed; Advocates Urge Funding for Assisted Housing

The House Committee on Energy and Commerce held hearings in late April on their draft “climate change” bill (the American Clean Energy Security Act of 2009), but postponed the markup originally scheduled to begin on April 27.

Introduced by Representatives Edward Markey (D-MA) and Henry Waxman (D-CA), the draft bill would require utilities to increase their use of renewable energy sources, encourage clean coal and clean fuel technologies, promote energy efficiency in transportation, utilities and housing, and curb carbon emissions through a cap and trade system (see draft bill summary).

CHAPA issued a letter to Congressman Markey urging the Committee to include language that would reserve a small portion of revenues raised by the bill to fund energy efficiency in public and assisted housing.

President Nominates HUD Assistant Secretary for Community Planning and Development

On April 17, President Obama named Mercedes Marquez as his nominee for Assistant Secretary for Community Planning and Development (CPD) at HUD. Ms. Marquez is currently General Manager of the City of Los Angeles Housing Department and has extensive housing experience in both the private and public sector, including positions as Senior Counsel and General Counsel at HUD in the Clinton administration.

Senate Committee Approves Several HUD Nominees, Delays Vote on FHA Commissioner

On April 28, the Senate Committee on Banking, Housing and Urban Affairs voted to approve four nominees for HUD positions. They include Ronald Sims as Deputy Secretary, Helen Kanovsky as General Counsel, John Trasviña as Assistant Secretary for Fair Housing and Equal Opportunity, and Peter Kovar as Assistant Secretary for Congressional and Intergovernmental Affairs. The full Senate vote is expected shortly. The Committee postponed a vote on David Stevens for FHA Commissioner due to questions over a lawsuit against his company.

FHFA Proposes Lower Affordable Housing Goals for GSEs in 2009

On May 1, the Federal Housing Finance Agency (FHFA) published a notice of a proposed rule in the Federal Register that would lower the 2009 affordable housing goals for Fannie Mae and Freddie Mac relative to 2008 in light of market conditions. In a press release summarizing the proposed 2009 goals, FHFA noted that they are similar to those in effect in 2004-2006, except that loan modifications consistent with the administration’s new foreclosure prevention initiative would also count.

OCC Publishes Tips to Avoid Mortgage Modification and Foreclosure Avoidance Scams

On April 21, the Office of the Comptroller of the Currency issued a consumer booklet to help consumers to protect themselves from scams related to mortgage modifications and foreclosure avoidance. The booklet outlines warning signs of fraud and lists legitimate sources of assistance.