Housing Briefs - March 16, 2011

State Updates

House Ways and Means Budget Set for Release in Four Weeks; Advocates Continue to Make the Case for Affordable Housing Programs

Affordable housing advocates have been busy walking the halls of the State House, sponsoring lobby days, holding meetings, and making phone calls to advocate for adequate funding for the state’s affordable housing programs.

With the exception of the two major homeless shelter programs, Commonwealth affordable housing programs have been cut 18% in the last three years and 43% since 1991. At the same time, costs to other services that go up when homelessness increases have risen exponentially. For example, school departments meeting their federal requirement to transport homeless children to their original school system spent $9.2 million in the 2008-2009 school year on transportation for homeless children.

In the last two fiscal years, some of the demand for housing assistance was temporarily filled with ARRA stimulus funds. However, the stimulus funds have been expended and won’t be available in FY2012. Without adequate funding for state programs, many more families, seniors and persons with disabilities will suffer from housing instability and homelessness in FY2012.

Housing advocates should contact their state legislators to advocate for adequate funding for affordable housing in the FY2012 state budget.

CHAPA and Partners Outline Suggested Improvements to Family Homelessness Reform Proposal

The Patrick-Murray Administration has proposed significant changes to the Commonwealth’s approach to addressing family homelessness. Under the Governor’s House 1 budget proposal, families that are homeless with a head of household over 21 years old would receive time-limited transitional housing assistance and stabilization services instead of shelter.

CHAPA supports the Administration’s proposal to create a new transitional housing assistance tool to serve as an alternative to homeless shelters and motels. Working with several partner organizations, we have proposed several suggestions to the House 1 language to provide clarity and ensure the program functions effectively. These include:

1) Raising the maximum yearly housing assistance a family may receive under the program to reflect market conditions;
2) Clarifying that each family will receive reliable and effective supportive services;
3) Structuring the program eligibility to avoid disincentives to families raising income whenever possible;
4) Ensuring that families without a roof over their heads are sheltered until they find an apartment using the new program; and
5) Adding language that prevents families that have followed their housing stabilization plans or have a disability from being denied access to shelter due to unsuccessful participation in the new program.

We are encouraged by the discussions we’ve had with the Administration and Legislature regarding the new approach. We are hopeful that the program will be adopted by the Legislature and will include these suggested changes. However, we will continue to advocate for resources to increase the production and preservation of affordable housing for families and individuals with extremely low incomes, and reliable support services for people that need them.

CHAPA State Legislative Priorities Assigned to Committees

CHAPA’s 2011-2012 legislative priorities have been assigned to Beacon Hill legislative committees.

An Act Relative to Public Housing Innovations, An Act Relative to Community Housing and Services, An Act Promoting Local Housing Initiatives for Economically Diverse Households, the Senate version of An Act Promoting Accessible Housing for People with Disabilities and the House version of An Act Relative to Affordable Housing Energy Efficiency have been assigned to the Housing Committee.

The House version of An Act Relative to Sustaining Community Preservation has been assigned to the Committee on Revenue. The Senate bill is before the Committee on Community Development and Small Business.

The House version of An Act Promoting Accessible Housing for People with Disabilities is before the Committee on Public Safety.

The Senate version of An Act Relative to Affordable Housing Energy Efficiency (House Bill 369 and Senate Bill 1653) is before the Committee on Telecommunications, Utilities and Energy.

The Comprehensive Land Use Reform and Partnership Act and An Act Prohibiting Discrimination in Affordable Housing Permitting have both been assigned to the Committee on Municipalities and Regional Government.

Legislative hearings have not been scheduled for these priorities, although we expect the pace of legislative hearings to pick up in the coming weeks. Please check http://www.chapa.org/?q=state_legislative for more information as hearings are scheduled.

Massachusetts Architectural Access Board Proposes New Regulations; Board Yet to Address Housing Accessibility Issues

The MAAB, the state entity responsible for promulgating a specialized building code to provide accessibility for persons with disabilities in construction design, has proposed regulatory changes to 521 CMR – the state accessible building code regulations. CHAPA has advocated for changes to 521 CMR to: 1) raise state housing accessibility requirements to levels that meet or exceed federal fair housing requirements; and 2) make the Massachusetts Architectural Access Board code structure consistent with the rest of the state building code. These two changes would increase accessible housing opportunities available to persons with disabilities and reduce confusion and costs related to noncompliance with accessibility requirements.

The proposed changes to 521 CMR that MAAB has released to date do not satisfactorily address these issues, but the MAAB has stated that they will propose changes to the regulations in multiple stages during 2011. We remain hopeful that MAAB will propose changes to 521 CMR to improve accessibility, enhance consistency, and reduce confusion in housing development and redevelopment and have filed An Act Promoting Accessible Housing for People with Disabilities to help accomplish this goal.

Advocacy Groups and Patrick Administration Settle Lawsuit On Emergency Assistance Funds

Last month, the Massachusetts Law Reform Institute and the Massachusetts Coalition for the Homeless settled a lawsuit with DHCD over the manner in which assistance to homeless families through the Emergency Assistance program (EA) is administered.

The settlement agreement clarifies that a family receiving so-called flex funds – short-term housing assistance under EA - will be subject to uniform rules and if they comply, will be eligible for extended assistance if they cannot afford their apartments when their subsidies end. Affordability will be determined by whether the family must pay more than 35 % of their income for rent and utilities. The settlement creates certainty around what will happen to homeless families utilizing the EA Flex Funds program that have exhausted the initial 12-month period of assistance allowed under the program.

Massachusetts Receives Major Grant to Support Community First Initiatives

Massachusetts will receive a $110 million federal Money Follows the Person Grant over the next five years to enhance the ability of seniors and persons with disabilities to live in community settings or in their own homes. The state will use the funds to help 2,200 Medicaid-eligible individuals living in institutions to transition to community-based housing with services and supports. The Commonwealth’s Medicaid Office will administer the grant.

CHAPA is advocating for an action plan to define the specific roles and responsibilities of the relevant housing and human services agencies in promoting supportive housing. We have called for the action plan to create a process to build an additional 1,000 units of affordable housing with reliable supportive services over the next three years. This grant provides a welcome opportunity to facilitate a coordinated application for developers and service providers to work together to expand housing opportunities with supportive services.

DHCD Releases Draft FY2012 Moving to Work Plan

DHCD’s Housing Choice Voucher portfolio, which includes over 18,800 tenant-based Section 8 rental vouchers, is enrolled in the Moving to Work program. Moving to Work affords DHCD the opportunity to test innovative program design to achieve administrative efficiencies, promote self-sufficiency and increase housing choices.

DHCD has published its DRAFT FY 2012 Moving to Work Plan and is soliciting comments on the plan until April 6, 2011. There will also be two public hearings for the Department to receive input: March 24th at HAP Housing, 322 Main Street in Springfield and March 25th at DHCD, 100 Cambridge Street in Boston.

Division of Banks Releases Summary of Funding Activities for Foreclosure Prevention

Last year, 19 nonprofit agencies helped 6,174 homeowners with foreclosure prevention and homeowner counseling assistance paid for through the licensure of mortgage loan originators, according to the Massachusetts Division of Banks (DOB). 40% of clients served are still in active counseling, 29% are waiting for loan modifications, 8% have received modifications and 12% were not able to be assisted. CHAPA is advocating for the DOB foreclosure prevention and homeowner counseling grant program to continue in FY 2012 to help homeowners navigate the difficult path to securing a loan modification or achieving another successful outcome. Home losses continue to batter neighborhoods across the state and counseling has proven necessary to mitigate foreclosures.

FY2011 CPA Funding Match Estimate Announced

On March 9, the Department of Revenue announced that the estimated first round State match in October 2011 under the Community Preservation Act will be 25%, down from 27% in 2010.

Federal Updates

HUD FY2011 Budget Remains Unsettled

House efforts to pass a FY2011 budget that would deeply cut non-defense spending have failed to win Senate approval to date. The current continuing resolution expires March 18 and funds most HUD programs at FY2010 funding levels. The only cuts to date have been to CDBG-funded earmarks.

On March 15, the House approved a sixth continuing resolution to cover the next three weeks (until April 8). As detailed in the Committee’s summary, the CR (H.J. Res. 48) affects only one HUD program (Brownfields), zeroing it out. That cut is consistent with the Administration’s FY2011 budget request, which also did not fund the program.

Emergency Homeowners’ Loan Program Scheduled to Launch in Spring

On March 4, 2011, HUD published the Notice and Interim Rule for the Emergency Homeowners’ Loan Program (EHLP). EHLP provides emergency mortgage relief to homeowners who are unemployed or underemployed and at risk of foreclosure and who meet the program requirements. Originally established by statute in 1975, EHLP was reauthorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act. $1 billion in funding is available for this program with approximately $6 million set-aside for Massachusetts.

Eligible homeowners must have had a drop in income of at least 15% resulting from involuntary unemployment or underemployment due to adverse economic conditions and/or a medical emergency. The homeowner total household income must be equal to or less than 120 percent of the Area Median Income (AMI) previous to loss of income. The homeowner must also be at least 3 months delinquent on mortgage payments and have received notification of their lender's/servicer's intention to foreclose.

EHLP offers a declining balance, deferred payment "bridge loan" (non-recourse, subordinate loan with zero interest) for up to $50,000 to assist eligible homeowners with: (1) payments of arrearages, including delinquent taxes and insurance, and (2) up to 24 months of monthly payments on their mortgage principal, interest, mortgage insurance premiums, taxes, and hazard insurance.

Homeowners applying for the EHLP Loan will do so through a HUD-approved housing counselor. The program is expected to be launched in Massachusetts sometime in May.

Click here for the HUD Interim Rule (March 4, 2011).

Administration Issues GSE Reform Policy Paper

On February 11, HUD and the Treasury Department issued their long-awaited plan for reforming the three Government-Sponsored Enterprises (GSEs) – Fannie Mae, Freddie Mac and the Federal Home Loan Banks. The plan does not recommend a specific approach, but instead discusses the short and longer term goals of reform and outlines three possible approaches. As summarized by HUD and Treasury, the goal of reform is to increase the role of private capital in mortgage markets, reduce risk, eliminate or limit government guarantees, and establish mechanisms to finance affordable housing.

The three options include (1) limiting government insurance to FHA and other targeted programs, (2) operating the same limited program but allowing some form of broader government guarantee as a backstop in times of financial stress when private capital is not available; and (3) allow government insurance for private mortgages that meet certain government standards, funded by catastrophic risk insurance fee. The agencies acknowledge that all of these approaches are likely to raise mortgage costs and some could limit the availability of 30 year fixed rate mortgages. Congress has begun hearings on the proposal.

DOE Notice Prioritizes Weatherization of Multifamily Properties

The Department of Energy (DOE) issued a program notice (11-4) in late December clarifying that multifamily properties, as high residential energy users, are one of the groups that must receive high priority for Weatherization funds when state and local grantees develop their allocation plans. It states that this applies to funds provided under ARRA as well as regular appropriations and that DOE will look for compliance with this principle as it reviews future state plans and will look unfavorably on plans that expressly exclude multifamily properties. It notes that DOE and HUD have implemented procedures to make it easier to ensure that multifamily properties, including HUD-assisted properties, meet income eligibility requirements and the notice provides links to technical assistance materials.

Consumer Financial Protection Bureau (CFPB) Website Launched

The recently created Consumer Financial Protection Bureau, established under the Dodd-Frank Wall Street reform legislation of 2010 as an independent bureau within the Federal Reserve, launched its website at http://www.consumerfinance.gov/ last month. It also has a facebook page. Information on the Bureau’s start-up can be found in testimony Elizabeth Warren provided to the House Financial Services Committee at a hearing on March 16. Most of the agency’s new authority begins July 1.

State/Federal Officials Seek Settlement to Improve Loan Modification Process

Attorneys general from all 50 states, along with representatives from the Justice Department, HUD, CFPB and the Federal Trade Commission have been working on a settlement agreement with the five largest mortgage servicers that would require them to improve the loan modification process. The negotiations are in response to the recent scandals, including robo-signing, that led federal bank regulators to issue draft cease and desist orders against 14 servicers in late February.

On March 4th, the state and federal officials issued a draft “term sheet” (27 pages) that outlined the proposed reforms. As summarized by American Banker, the draft would require servicers to offer a modification when it will result in a greater net present value (NPV) than foreclosure, with servicer calculation models subject to CFPB review. Servicers would be required to consider principal reduction in some negative equity cases. In addition, they could not proceed with foreclosure while in discussions over a loan modification, would have to greatly improve their procedures for tracking paperwork, and their fees would be restricted and public.

The extent to which these reforms gain traction remains to be seen. They have already become a subject of debate in Congressional hearings, with concerns that the cost will be high and lead to servicer consolidation and charges that the settlement would effectively set new requirements outside the normal regulatory route. In addition, some of the 50 attorneys general have not formally signed on to the draft terms.

House Proposes Ending Four Foreclosure Assistance Programs

Last week, the House approved two bills to terminate two programs to help homeowners avert foreclosure: the FHA Refinance Program (H.R. 830) and soon-to-roll-out Emergency Homeowner Loan Program (H.R. 836). The House Financial Services Committee also approved bills to rescind the third round of funding for the Neighborhood Stabilization Program (NSP3) (H.R. 861) and to terminate the HAMP loan modification program (H.R. 839). The President has indicated he will veto the bills if they reach his desk.

• The FHA Refinance program helps owners with non-FHA-insured mortgages who are not behind on their loan but owe more than their home is worth. It lets them refinance into a lower FHA-insured mortgage if the current lender agrees to write down the loan balance by at least 10%. The new loan must result in a first loan to value ratio of no more than 97.75% and a total LTV including second mortgages of no more than 115%. $8 billion in TARP funds have been set aside as a loan loss reserve. The program began in September 2010 and as of January had received 182 applications and closed 40 loans.
• The $1 billion HUD Emergency Homeowners Loan Program (EHLP), by contrast, targets homeowners (in 32 states, including Massachusetts) who are at least 90 days delinquent as a result of unemployment or reduction in income. EHLP offers emergency mortgage relief of up to $50,000 to pay arrears and the unaffordable portion of future payments for up to 12-24 months (owners’ payments would be reduced to 31% of monthly gross income). Massachusetts is currently slated to receive $61 million to help state residents.
• The HAMP program (Home Affordable Modification Program) provides payments to lenders who voluntarily agree to provide loan modifications to delinquent or struggling homeowners. The modification must temporarily reduce the owner’s first mortgage payments to no more than 31% of income. Approved applicants receive a trial modification and if they can sustain it and program eligibility is established, the trial will be converted to a permanent modification. Currently, about 540,000 households nationwide have permanent loan modifications and about 145,000 more have trial modifications (about 13,500 and 3,500 respectively in Massachusetts).
• NSP is a program that provides funds to public agencies and non-profits to stabilize neighborhoods hard hit by foreclosures, through the acquisition, rehab, resale and/or management of foreclosed, vacant and/or abandoned properties. The House bill would rescind all unobligated funds out of the $1 billion appropriated in 2010 under the Dodd-Frank bill for a third funding round (NSP3). Massachusetts received $7.4 million in NSP funds ($5 million for DHCD, and 1.2 million each for Springfield and for Worcester County). The House Committee report accompanying the bill indicates all $1 billion is expected to be obligated by March 31.

Recent Research

MHP Analysis Finds Share of Foreclosures Outside Gateway Cities Continues to Rise

The Massachusetts Housing Partnership (MHP) reports in its February Foreclosure Monitor, that the “gradual shift in foreclosure activity away from urban areas into rural and suburban communities” that it first reported in November is continuing, with much of the rise in suburban and rural rates occurring in Worcester County.

The distressed property rates (properties with at least one petition filing) per 1,000 as of January 1, 2011 fell by 25% or more compared to a year earlier for many of the most distressed cities, and the share of distressed properties outside the gateway cities and Boston rose from 51% in the third quarter of 2010 to 52% in the last quarter.

Federal Reserve Study Reviews Housing Policy and Poverty in Springfield

The Federal Reserve Bank of Boston published a paper this month examining factors that contribute to the concentration of poverty in downtown areas, with Springfield as a case study. It finds that the need for access to public transportation is a key factor, and that federal policies encouraging discrimination and suburbanization also played a role. It concludes that “[w]hile mistakes were made in Springfield, it is hard to see housing policies as the root cause of Springfield’s problems.”

HUD Reports 20% Increase in “Worst Case” Housing Needs

HUD issued its 2009 Report on Worse Case Housing Needs last month and reported a 20% increase since 2007 in the number of extremely low income and very low income unassisted renter households with severe housing problems (paid more than half their monthly incomes for rent, lived in severely substandard conditions, or both). It reported similar growth in the number of homeowners with worst case needs. It attributed the increase in renter needs to three factors:

• declines in renter incomes (accounts for an estimated 35% of the increase),
• lack of growth in rental assistance programs as the number of very low income renters grew (accounts for an estimated 19% of the increase), and
• rising rents and declining vacancies (accounts for about 41% of the increase).

Overall, the number of renter households with worst case needs has grown by 42% since 2001. HUD reported that 7.1 million very low income unassisted renter households and 7.0 million such owner households have severe problems. Among the renters, extremely low income households continued to have the highest incidence of severe problems (77%), compared to 33% of those with incomes of 30-50% AMI and 9.5% of those earning 51-80% of AMI. They also account for two-thirds of all low and moderate unassisted renters with severe housing problems.

UI Examines Ways to Better Link Subsidized Housing Residents with Support Services

A recent Urban Institute report (Connecting Residents of Subsidized Housing with Mainstream Supportive Services: Challenges and Recommendations) has identified a number of non-statutory steps HUD could take to improve access to mainstream supportive services (self sufficiency, services to sustain independence) for residents of subsidized housing. It notes that effective service delivery requires close coordination with human services agencies and that HUD policy changes can make this coordination easier. The author notes that the mainstream services report focuses on seniors and families and does not fully address the more specialized needs of some residents (e.g. formerly homeless households or persons with severe mental illness or physical disabilities).

HUD Issues Evaluation of Family Self-Sufficiency Program

On March 11, HUD issued a “prospective study” of its Family Self-Sufficiency program. The study describes the characteristics of participants in 100 FSS programs and also describes the outcomes for 181 participants followed over a four year period. At the end of four years, 27% had graduated from the program, 37% had left without graduating and 39% were still enrolled. The study found that graduates had higher incomes both before they enrolled and after they graduated, compared to other participants, and had an average escrow account of almost $5,300 when they graduated.

HUD plans to follow up with two additional studies in 2011- one looking at outcomes for participants who were still enrolled at the end of the prospective study and one using random assignment to determine whether the benefits participants experience are due to the program or to participant characteristics.