Housing Briefs - March 18, 2010

State Updates

Housing Committee Advances Foreclosure Relief Legislation

The Joint Committee on Housing favorably advanced An Act Relative to Stabilizing Neighborhoods, S. 1379 and H. 3571. The foreclosure relief bill accomplishes the following:

1) Creates a new mediation process for lenders and homeowners to find an acceptable loan modification. The mediation program would be voluntary, but lenders that do not participate will have to wait 150 days to foreclose on the property.

2) Provides eviction protections to tenants in foreclosed properties who are in good standing and continue to pay rent.

3) Requires counseling in order to receive a reverse mortgage.

4) Creates an abandoned and foreclosed property registry to track distressed properties. The House bill creates a local option for a registry with the local building inspector while the Senate bill would create a second state registry to be housed at the Attorney General’s Office. The Division of Banks already maintains a foreclosure database.

5) Creates a local option for municipalities to exclude nonprofits from property taxes during the term that the nonprofit rehabilitates a foreclosed home.

6) Criminalizes mortgage fraud.

S. 1379 now moves to the Senate Committee on Ways and Means and H. 3571 now moves to the House Committee on Ways and Means for each branch to deliberate. CHAPA would like to thank the Chairs and members of the Housing Committee for advancing this and other pieces of critical legislation.

Housing Committee Advances Public Housing Legislation, CPA Bill, and Other CHAPA Priorities

The House Committee on Ways and Means is currently reviewing the Public Housing Innovation Act, originally filed by Rep. Jeffrey Sanchez and Sen. Harriette Chandler and reported favorably by the Housing Committee on February 23.

H. 4544 would provide public housing authorities with a tool to maximize resources available for rehabilitation of public housing, reduce and streamline regulatory and statutory requirements for public housing authorities, and encourage innovative designs to secure the long-term preservation of this precious public resource.

Last week, the Housing Committee also advanced S. 634 filed by Senator Jamie Eldridge. The bill clarifies allowable Community Preservation Act-funded housing uses and is now before the Senate Committee on Ways and Means.

The Committee also recently advanced H. 1220, An Act Relative to Energy Efficiency in Affordable Housing. H. 1220 is now before the House Committee on Ways and Means.

The Housing Committee filed for an extension order on the Statutory Housing Covenants legislation, S. 635. The Municipalities and Regional Government Committee filed for an extension order on zoning reform legislation and the Judiciary Committee filed for an extension order on a host of legislation related to foreclosures. These Committees will continue to examine these issues.

CHAPA Advocates for State Low Income Housing Tax Credit Improvements in Jobs Proposal

CHAPA recently submitted testimony to the Joint Committee on Economic Development and Emerging Technologies in favor of making four improvements to the State Low Income Housing Tax Credit as part of an economic stimulus proposal currently under consideration.

Last November, the legislature made a minor change to the tax credit which created 531 construction-related jobs and 437 units of housing. The remaining portions of the CHAPA state low income housing tax credit proposal would continue that progress and create additional jobs and housing by making the credit more efficient and more attractive to investors.

Community Preservation Act Estimates Released for Fall 2010; Coalition Continues to Push Legislation to Continue CPA Success

The Department of Revenue released a projection of the 2010 state Community Preservation Act match to what municipalities raise locally for CPA purposes. DOR estimates the first round state CPA distribution will be between 31% and 32% in October 2010. To date, CPA is responsible for over 3,100 affordable housing units in 142 municipalities. A low state CPA match provides fewer resources for housing and endangers the probability of a significant number of localities participating in the CPA program.

CHAPA is part of a broad coalition of organizations currently advocating for S. 90, which was filed by Senator Cynthia Creem and Rep. Stephen Kulik. If enacted, the bill would increase the CPA match, clarify the CPA statute text, and encourage additional cities to participate in the program. The bill is currently before the House Committee on Ways and Means after being reported out favorably by the Community Development and Small Business Committee.

Pioneer Institute Launches Middle Cities Information Tool

The Pioneer Institute recently released a database of information on key metrics in 14 “middle cities” in Massachusetts. The MassCityStats project is part of a broader initiative to promote effective management, services, and community development in these critical regional hubs.

Dept. of Housing and Community Development Gateway Plus Reports Completed

In November, 2008, DHCD awarded grants to 18 “Gateway” Cities to assist in identifying opportunities to increase diversity of housing options, expand economic opportunities, foster and strengthen civic engagement, and promote neighborhood stability.

DHCD has recently completed a Gateway Cities Plus Action Grant Report identifying key findings and recommendations across the 18 cities based on the 18 month initiative. Several projects identified in the individual plans are underway utilizing existing state and federal resources. CHAPA, MACDC, and other partners have advocated for neighborhood planning and implementation funding dedicated to Gateway Cities. We are pleased to see these action-oriented neighborhood plans and look forward to continuing to implement the action steps.

Significant Foreclosure Decision in U.S. Bank v. Ibanez Possibly Headed to Massachusetts Supreme Judicial Court

Litigants in the U.S. Bank v. Ibanez case have requested that the Supreme Judicial Court take the case on direct appeal to resolve significant Massachusetts foreclosure process issues quickly.

The 2009 decision from Land Court Judge Keith Long potentially invalidated thousands of foreclosures by finding that foreclosures were invalid when the lender failed to hold documentation of ownership at the time of foreclosure. The case has contributed to a delay in foreclosures completed and also created difficulties for some buyers of foreclosed properties to get title insurance.

Dept. of Housing and Community Development (DHCD) Solicits Input on Commonwealth’s Moving to Work Plan

DHCD will hold a public hearing on its FY 2011 Moving to Work plan on March 26 in Boston and March 29 in Springfield. Please click here to learn more.

Initiative Petition to Repeal Chapter 40B Currently Before the Legislature; Vote to Protect or Repeal Comprehensive Permit Law Still Expected on the November Ballot

The legislature is currently reviewing the initiative petition to repeal Chapter 40B filed by John Belskis of Arlington and supported by the Slow Growth Initiative.

As part of the ballot initiative process, the proposal received a bill number, H. 4455, and was assigned to the Housing Committee. The legislature has until May 5th to act on the proposal and can adopt the initiative (in which case it would go to the Governor for his signature), reject it, or take no action. The legislature has historically avoided action on ballot initiatives. If they reject the initiative or take no action, the repeal proponents have to gather an additional 11,099 signatures between May 5th and July 7th .

A campaign to protect Ch. 40B is well underway and has begun to emphasize the benefits and track record of the state’s affordable housing zoning law across the Commonwealth. Tripp Jones is the Campaign Chair, Ellen Feingold is the Treasurer, and CHAPA is one of over 160 organizations signed on as supporters of the effort to protect the Commonwealth’s 40 year-old affordable housing law. To learn more or to donate to the campaign to protect affordable housing, please visit: www.protectaffordablehousing.org or send your contact information to info@protectaffordablehousing.org.

In other 40B news, the Joint Committee on Housing has filed for extension orders and continues to review three bills that relate to the comprehensive permit law: H. 1192, S. 657 and S. 656. Several other bills related to 40B were placed in a study order.

Federal Updates

House Committee Releases Draft Preservation Bill

The House Financial Services Committee, under the leadership of Congressman Barney Frank, introduced a comprehensive federal housing preservation bill this week and will hold a hearing on the bill on March 24. A draft version of the bill, circulated last week, along with a summary of the draft bill, is available online.

Among other things, the bill:

• Provides grants and loans to for-profit and non-profit housing sponsors to help recapitalize and/or transfer the property to a preservation purchaser.
• Establishes a voluntary Preservation Exchange Program to encourage owners to sell properties to purchasers who will keep the housing affordable.
• Establishes a federal first right of refusal that provides HUD with an opportunity to purchase a property from an owner who wishes to sell their property. Significantly, the bill does not require an owner to sell their property or prevent them from obtaining fair market value. This provision is similar to the recently enacted Massachusetts law.
• Allows owners to request project-based assistance in lieu of enhanced vouchers, which serves to help preserve the long-term affordability of the project, assist with capital for rehabilitation, and ensure that tenants are not displaced.
• Allows owners to receive budget based rent increases, thus ensuring that the properties are adequately maintained and encouraging owners to renew Section 8 contracts.

Dodd Introduces Senate Financial Regulatory Reform Bill

On March 14, Senator Christopher Dodd, chair of the Senate Banking Committee, introduced a bill to overhaul the financial regulatory system. Both a summary and the full text of the 1330+ page bill (The Restoring American Financial Stability Act of 2010) are available on the Committee’s website.

The Committee has scheduled an executive session to mark up the bill on March 22 (to be webcast live). The Chairman’s proposal differs from the House-passed bill in many ways. In comparison to the House bill, the Senate proposal for a consumer financial agency is more limited, creating “bureau” within the Federal Reserve, rather than a free-standing agency, setting more limits on its enforcement powers and exempting more types of businesses and products from its oversight (including manufactured homes).

Bill to Extend LIHTC Exchange Program Advances

On March 10, the full Senate approved a tax-extender bill (American Workers, State, and Business Relief Act, HR 4213) that includes a provision to extend the Low Income Housing Tax Credit Exchange program for 9% credits for another year, so it can be used for 2010 allocations. The House is expected to approve that provision in conference.

Despite efforts by housing advocacy groups, the Senate bill did not authorize an exchange program for 4% credits. However, the House Ways and Means Committee has included a 4% program in the March 15 discussion draft of a “small business and infrastructure jobs tax bill.” Mark-up began on March 17.

As described in the Committee summary, the bill would allow owners of tax-exempt bond-financed buildings, placed in service after date of enactment and prior to December 31, 2010, to elect to receive a direct payment in lieu of the 4% tax credits. The amount of the direct payment would be equal to eighty-five percent (85%) of the present value of the low-income housing tax credits that would otherwise have been awarded with respect to such buildings.

The 4% exchange, if enacted, would have a major impact on housing and jobs in Massachusetts. Throughout the Commonwealth, 16-17 approved projects have been unable to attract investors and another 13 projects have investors but have not yet closed due to funding gaps related to low credit prices. These 30 or so projects have total development costs of well over $700 million and would preserve or build over 3,600 units. Action Now continues to advocate for additional proposals to improve LIHTC, including a five-year carryback and broadening the base of investors.

HUD Appoints New Regional Director for New England

On February 22, HUD Secretary Shaun Donovan announced the appointment of Richard Walega to serve as the Regional Director for New England. Walega has worked in senior positions at the New Bedford Housing Authority since 1993, most recently as its Executive Director, and has extensive experience with housing modernization and finance. CHAPA and the New England Housing Network look forward to working with Mr. Walega as he begins this important job.

New GSE Affordable Housing Goals Proposed

On February 17, the Federal Housing Finance Agency announced a proposed new rule for setting affordable housing goals for Fannie Mae and Freddie Mac for 2010 and 2011. Comments are due by April 12. At the same time, FHFA announced that it will issue a proposed rule for the Federal Home Loan Bank Affordable Housing Program (AHP) shortly, as well as one on the “duty of serve” of government sponsored enterprises (GSEs).

As required by the Housing and Economic Reform Act (HERA) of 2008, this year marks the first year the goals will be set by FHFA, rather than HUD, and will target slightly lower income groups. The proposed goals are simpler than in recent years and include the following:

• For single family (1-4 units), goals are set as a percentage of total GSE loans purchased of a given type. They require the GSEs to either meet goal proposed under the rule (the benchmark) or match the performance of the overall market (if lower). For example, the goal for single family purchase mortgages for low income borrowers is 27% of all GSE single family purchase mortgages. If it turns out that in the overall market, low income borrower mortgages are only 25% of all purchase mortgage originations, the GSE must at least meet that 25% standard. If the overall market share is higher (e.g. 30%), the GSEs still only have to meet the 27% benchmark.
• For multifamily, goals are set as specific numbers of units to be financed and are essentially equal to each GSE’s 2009 activity level, rather than the much higher numbers produced in before the market crisis (see the Federal Register Notice).

In addition, the agencies will be required to track their purchases of mortgages on low income small multifamily properties (5-50 units), though no purchase goal is being established.

GSE Reform Proposals on Hold

Restructuring plans for Fannie Mae and Freddie Mac remain uncertain. On February 24, Treasury Secretary Geithner told the House Budget Committee that the Administration does not plan to submit a full legislative proposal for restructuring the agencies until next year, though it might lay out some “broad principles” later this year. Nevertheless, the House Financial Services Committee has scheduled a hearing on the future of housing finance on March 23.

HUD/Treasury Report Updates Loan Modification Activity under HAMP

On March 12, the Treasury Department and HUD issued a report on loan modifications and servicer performance under the Home Affordable Modification Program (HAMP). The report covers activity through February 2010. Currently, 1 million households have active trial or permanent loan modifications (including almost 23,000 in Massachusetts), representing 29% of the 3.3 million households with loans serviced by participating servicers that are 60+ days delinquent. Of the almost 1.1 million households who have participated to date:

• about 169,000 households have active permanent loan modifications,
• another 91,700 have been offered permanent modifications,
• another 843,000+ have active trial modifications, and
• about 90,000 have had their trial (88,663) or permanent modification (1,499) canceled.

Many economists believe the program’s reach is limited by the fact that it does not offer principal reductions. HUD and Treasury report the median reduction in monthly payments has been $518. Analysts note, however, that even with housing costs brought down to 31% of income, most participants are still financially stretched, with a median income of $32,400 and a median total debt to income ratio of 60%.

Households unable to obtain or sustain a HAMP modification will have yet another option starting April 5, when the new HAMP Foreclosure Alternatives Program (HAFA) goes into effect. HAFA will provide financial incentives to encourage borrowers and servicers to avoid foreclosures by using a short sale or deed-in-lieu of foreclosure.

HUD to Allow Waivers of Project-Based Section 8 Renewal Rules Pending New Regulations

On February 22, HUD’s Office of Multifamily Housing Programs issued a memo announcing plans to revise Section 8 regulations and part of the Section 8 renewal guide. The memo also announced that until those changes are finalized, HUD offices and contract administrators can request regulatory waivers (for projects that have not yet closed) on a case by case basis from HUD Headquarters.

The memo outlines the types of waiver requests HUD will consider to preserve affordable housing. These include allowing nonprofit owners to receive distributions on initial equity contributions, requiring certain properties to have a minimum REAC score of 30, and allowing market rents above the use-restricted rent for tax credit units if the former are higher.

Recent Research

Study Examines Fiscal Health of Massachusetts CDCs

A new study by the Massachusetts Association of Community Development Corporations (MACDC) and LISC examines how the financial health of CDCs has declined between 2003 and 2008, especially since the downturn in the housing market and tightening of capital. It recommends a number of changes in the way CDCs operate and finance their real estate activities to equip them to survive real estate cycles and continue to fulfill their missions.

New Study Examines Suburban Planning Challenges

The Joint Center for Housing Studies and the Rappaport Institute recently published a case study that examines how local attitudes toward growth and land use rules have changed since the early 1950s. “Wrestling with Growth in Acton, Massachusetts” describes the varied concerns the lead to opposition to growth and their impact on land use rules and development costs.

HUD Reports to Congress on the Root Causes of the Foreclosure Crisis

As required by the Housing and Recovery Act of 2008 (HERA), HUD recently submitted a report to Congress on the root causes of the foreclosure crisis and policy recommendations to address them. The study notes that the role of various factors (risky lending, fraud, a run up in housing prices, economic downturn) varied by geography, with subprime lending and a big run up in housing prices playing a larger role in the “sand states” (AZ, FL, CA, NV) and long-term economic weakness playing a larger role in the industrial Midwest. It recommends tighter regulatory oversight of lenders and investors and stronger consumer protections.

Events

CHAPA Breakfast Forum – “Housing for Families and Individuals Experiencing or At-Risk of Homelessness,” Monday, April 12, 9:30 a.m., MassHousing, One Beacon Street - 29th Floor, Boston.

Partners in Innovation: Preserving Affordable Rental Housing through Energy Conservation, Wednesday, April 14, 9:00 a.m.-5:00 p.m., Boston. Interested in best practices for “green” preservation? Plan to attend the Boston forum to explore the connection between affordable rental preservation and energy conservation goals. Learn more: http://www.nhc.org/index/partners-in-innovation-boston

The Rising Tide: The Rapid Aging of Boston’s and America’s Homeless--

Policy Implications and Solutions (Sponsored by by Hearth, Inc). Tuesday, April 27, 8:30 a.m. to 10:30 a.m., The Boston Foundation, 75 Arlington Street, Boston. Hear from experts on housing, elderly issues and homelessness about the growing crisis of homelessness in older adults, its policy implications, and models that represent proven, cost effective solutions. RSVP to Annie Garmey at agarmey@hearth-home.org.