Housing

New Ideas For Strengthening Federal Rental Assistance

Cecille Isidro — Thu, 14 May 2009 07:05:00 -0400

Learning from the Past

Cecille Isidro — Wed, 01 Apr 2009 11:07:00 -0400

While there is little to celebrate in the current foreclosure disaster, one potential silver lining in the large number of bank-owned properties is the opportunity to turn those properties into community assets. A May 2008 conference hosted by the Furman Center for Real Estate and Urban Policy at New York University and sponsored by the Ford Foundation brought together policy experts and practitioners to share best practices for “Transforming Foreclosed Properties into Community Assets.” Most of the discussion focused on what can be done by partners working together at

A Plan that Could Work for All of Us

Cecille Isidro — Mon, 02 Feb 2009 11:22:00 -0500

On Saturday, Senate Minority Leader Mitch McConnell (R-Ky.) unveiled a plan for helping homeowners to hang on to their homes--and hang on to the value of their homes. It’s a great idea, because it targets economic relief to the middle class in the Heartland, not the upper class in Manhattan and Beverly Hills. It’s a shame, though, that McConnell and the Republicans waited until after the 2008 elections, because this plan was available back in September, when the fiscal meltdown began. With a different response to the meltdown, history might have been a lot different.

In D.C., Opening Doors Even in Tough Times

Cecille Isidro — Sun, 11 Jan 2009 11:27:00 -0500

As foreclosure rates continue to reach record highs here in the Washington region and across the country and the global economy reels, many Americans have begun to question whether expanding homeownership is a wise strategy. While there is plenty of blame to go around for this mess, the goal of expanding homeownership is still an important one and should not be sacrificed.

The Housing Crisis: Main Street Needs Help, Too

Cecille Isidro — Thu, 23 Oct 2008 13:58:00 -0400

Seven hundred billion dollars to bail out the banking and financial industries is a lot of money. But let's not forget where this crisis started: in a failing housing market, the initial domino in the meltdown. The banks are being bailed out - but what about housing?

Too many people today are spending too much of their income on keeping a roof over their heads. Nearly half of Americans are "rent burdened," spending more than 30% of their income on housing. Whether it is high rents or a mortgage, these excessive costs drive people into debt. The problem has been escalating, and examples can be seen in all sectors of the housing market and all areas of the country.

For instance in April of this year, the Chicago Housing Authority opened its waiting list for Section 8 housing vouchers. More than 250,000 people signed up to be in a lottery for the 40,000 open slots. "Winning" a voucher meant its holder will "only" have to pay 30% of their income to rent. By winning this lottery they will have enough leftover money -- barely enough -- to afford food, medicines and other necessities, providing these families with some semblance of security.

Those are the lucky ones. Nearly 20% of families pay 50% of their income to housing costs. Those families have to make painful choices between housing, food and medicines that no one in this land of wealth should have to make. They are one paycheck or medical bill away from losing their home. Tens of thousands of these people could benefit from an expanded rental subsidy program, yet the federal budget for Section 8 housing vouchers is flat.

For homeowners the situation is no better. Adjustable rate mortgages have left many owners either barely or unable to pay escalating mortgages. So far in the first six months of 2008, foreclosures have risen to an all time high. In July of this year, 272,171 properties received a foreclosure filing or a default notice, were warned of a pending auction or were foreclosed on during the month.

Yet during the recent banking bailout, proposals that would have helped homeowners meet their mortgage payments and stay in the homes failed to gather sufficient bipartisan support. As more homeowners go into foreclosure and their homes are boarded up, that unleashes a domino effect where the blighted homes drag down the property values in these neighborhoods, worsening the situation for everyone and further sinking the economy.

But it's not just during the recent banking bailout that the nation's housing needs have been ignored. Looking at federal investment in public housing going back decades, we see that much of public housing is deteriorating and in need of repair. The lack of repairs puts the building's residents at risk, as well as threatens the viability of the building. Yet once again the federal budget for maintenance of public housing is shrinking. It's nothing less than tragic that, as the need for housing is increasing, the real dollar investment has been decreasing.

The national housing crisis calls for a different approach. As Congress and the President seek to ease the crisis, solutions must be found in programs that ensure the affordability and availability of safe and decent housing.

First, we must start with ensuring housing stability, and that will require investment in the existing housing stock. Second, legislation should focus on making sure that the thousands of people facing foreclosure or eviction are able to stay in their homes. Interest rates should be capped to make sure that each family's investment is protected, and this in turn will also help to make sure that the banks don't fail. Barack Obama has proposed a three month moratorium on foreclosures for some homeowners, and that's a good start.

Third, rental subsidies can be increased or rent control can be used to ensure that no one pays more than 30% of their income to rent. Finally, the government can build more affordable housing and make sure that it is well-maintained; part of this task can be accomplished with a sizable increase in the use of nonprofit housing corporations who build "social housing" for people, not for profits.

One of the primary roles of government should be to create conditions so that families can succeed. Rather than saying Wall Street and the banking industry are too big to fail, a better outlook would recognize that Main Street and all the people living in our communities are too many to fail.

It will not matter how much relief the government gives to Wall Street. If housing costs remain too high, Main Street will continue to struggle as more and more people are unable to pay their mortgages or rents.

Jacob Hacker in CQPolitics | 'The Crisis of Choice'

Communications — Sun, 06 Jul 2008 08:25:00 -0400

...Jacob Hacker, a political scientist at the University of California Berkeley and author of “The Great Risk Shift,” said Democratic leaders have been frustrated by several factors since taking the majority of the House and Senate after the 2006 elections: comparatively thin majorities, especially in the Senate; their insistence on adhering to pay-as-you-go budget rules that often require tax increases to support any substantial new spending; and the fact that relief bills such as the housing measure are limited in scope and largely throw money at a problem, instead of solving it.

“If the major issue for middle-class Americans is the loss of overall value in their homes, helping people refinance and stay in their houses won’t fundamentally alter those concerns,” Hacker said. “You probably need to do more and create a new financial structure around housing because it’s so important to middle-class security, say by shoring up unemployment insurance and helping states deal with the effects of downturns...” LINK

High Oil Prices, Plummeting Home Values and the State of Middle Class America

Communications — Wed, 25 Jun 2008 03:15:00 -0400

A New America Event
06/25/2008 - 12:15pm

On June 25, 2008, the New America Foundation brought together Leo Hindery, Managing Director at InterMedia Partners and former senior economic advisor to the John Edwards Campaign, and Tom Gallagher, Senior Managing Director at International Strategy and Investment Group, to discuss the causes behind skyrocketing oil prices and their implications for American middle-class families. An MP3 audio recording can be downloaded below, while video is available at right. Hindery began by laying out research pointing to speculative investment as… more

CA Event: The Subprime/Foreclosure Crisis

Communications — Fri, 30 May 2008 01:00:00 -0400

A New America Event
06/11/2008 - 12:00pm

The U.S. economy has been gripped by a relentless housing crisis for almost two years. A key driver in this crisis has been the many subprime mortgages that involved high rates and fees -- often requiring no down payments -- that were made in the past several years. California is ground zero in the subprime crisis and the resultant spillover effects -- foreclosures, bankruptcies, decreasing property values to name a few. Recognizing that relying on the market alone is unlikely… more

Cracks In the Foundation

Ron Tang — Thu, 24 Apr 2008 07:47:00 -0400

While Hillary Clinton, Barack Obama and John McCain appear anxious to move into the White House, none of them have much to say about housing. Yet rarely a day goes by that the headlines don't mention the current housing crisis and its threat to the financial markets and the economy. This has led to a strange disconnect between the presidential campaigns and national reality.

Subprime lending and the ensuing foreclosures are being blamed for the crisis, but the problems and blame go much deeper. The fact is, our nation does not have a housing plan, and has not had one for years.

The lack of a plan can be seen in the routine underfunding of the US department of housing and urban development (HUD). The 2008 HUDbudget does not have enough money to maintain contracts on its current stock of affordable housing. It is $2bn short and needs to borrow money, which only pushes the problem onto the next administration.

Everyone now knows that too much deregulation and low interest rates contributed to a speculative housing bubble, but what's not being mentioned is that it also widened the mismatch between the nation's housing stock and the public's needs. For example, it caused overproduction of unaffordable condominiums, with the conversion of rental housing into condos displacing thousands of renters, forcing them from their homes. It also pushed up property taxes, pressuring existing homeowners.

Now today, there is a glut of vacant condos even while many families are doubling up or kids are moving back in with their parents. Unsurprisingly, speculative markets turned out to be a lousy way to provide housing security for millions of Americans.

A study by the Joint Centre for Housing Studies showed that housing is becoming increasingly unaffordable. In 2005, 37.3 million households paid more than 30% of their income to housing, and 17 million households paid more than 50%. Many people worried about their housing are working full time. One in five are seniors. Poor people fear they will end up homeless. On any given night there are at least three-quarters of a million people who are homeless, many of them mentally at risk, about half of them children.

Housing is far too important to the health and wellbeing of the nation to be left exclusively to the whims of "the market". Government must play an appropriate role in ensuring that everyone has safe and affordable housing. Presidential candidates asking for our vote should have a plan for how their administration would accomplish that.

To the extent that they have commented on the current crisis, however, their approaches have been the usual scattershot of bold soundbites and sympathy for those hurt. Hillary Clinton has pledged to freeze interest rates on mortgages, and Barack Obama has focused on a bailout for those facing foreclosure. But neither of these proposals addresses the underlying problems, and they don't do anything for renters or the homeless. None of the candidates have offered anything resembling an actual housing plan, like they have for healthcare.

So what would a sound housing policy look like? Here are some of the crucial elements.

First, more rental housing is needed. Rental housing provides homes to many of this nation's low- and moderate-income households, yet currently little new rental housing is being built. The private sector has focused almost exclusively on the home-buyer market, and government activity mostly is producing replacement housing for what they have torn down. Federal, state and local governments should partner with the private sector to increase incentives for building rental housing that is affordable.

Second, affordable housing can be increased by expanding the non-profit housing sector. Non-profit associations, which develop and manage affordable housing as a private, social-oriented business, have been successful in Europe but are barely a blip here. In Europe, it is not uncommon for a non-profit to manage more than 20,000 units, substantially more than most comparable entities in the US. In London, 25-35% of new units are required to be "affordable." All of these help keep the cost of housing down.

Third, any new housing policies must include increased oversight of lending practices. Limits must be placed on the credit industry to prevent exploitative practices. Far too many people have been hurt by a wildly unregulated mortgage market.

Our nation needs a serious and sustained debate about housing policy, yet the presidential candidates have been mostly silent. Promoting one's candidacy as an agent of hope and change is all well and good, but the devil is in the details. The presidential campaign offers a perfect opportunity to put forward a multifaceted national housing plan to counter the tragically flawed housing policy that has left this nation's economy and residents at risk. As American have seen too often over the last eight years, the absence of a plan is an absence of leadership.

Viewpoint: Fed's Mortgage Move is a Good Start

Ron Tang — Fri, 21 Dec 2007 00:00:00 -0500

With foreclosures reaching record levels and predictions for further trouble ahead, the Federal Reserve Board on Tuesday unanimously approved potentially sweeping changes to how mortgages are marketed, made, and serviced, especially in the nonprime market. Will the Fed be able to meet its goal of a "comprehensive set of protections to consumers" when the comments come flying?

The proposed revisions to regulations under the Truth in Lending Act are designed to realign relationships in the mortgage business, so borrower and lender are once again interested in the same result: a good mortgage.

The rules, unlike guidelines bank regulators issued over the last 18 months, would apply to all mortgage lenders and other participants in the process (such as brokers, independent mortgage bankers, and appraisers), not just banks, thrifts, and credit unions. That the Fed has proposed them at all is both an indication of how bad the situation has become and a testament to new leadership at the central bank.

The proposed regulations would, for a new class of "higher-priced mortgage loans" (meant to cover not only subprime but also the some part of the alt-A market), require lenders to lend based on the borrower's ability to pay at a fully indexed, fully amortizing rate, verified by independent third-party documentation. Escrows for taxes and insurance would be required (for at least the first 12 months the loan is outstanding), and prepayment penalties would have to expire at least 60 days before the first payment change.

The proposed regulations also respond, for all loans secured by a primary residence, to abuses in brokerage, appraisals, and servicing. Advertising abuses, such as calling a loan fixed when it's not, would be prohibited. Lenders would be required to provide borrowers with information about payments, finance charges, and interest rate early in the shopping process, and before charging any application fee.

There is plenty of room -- all of which will undoubtedly be taken in the 90-day comment period -- to argue with specifics in the proposal. Is the definition of "higher-priced loan" sufficiently broad, or too broad? Is 60 days enough time to refinance after a prepayment penalty ends, before a rate reset takes place? Do the proposal's safe harbors strike the right balance between providing creditors with a degree of certainty and not undermining the good intentions of the rule?

Randall Kroszner, the Fed governor most responsible for the proposal, said the Fed's goal "to protect borrowers from practices that are unfair or deceptive, but to do so without unintentionally causing responsible lending to shrink or unduly limiting consumer choice" was "challenging to perfectly achieve."

Issuing the final rule after receiving comments will be even harder. Now that the Fed has stepped up with a series of proposals that would affect all lenders, it's time for the good lenders to stop shielding the bad, and recognize that we need some new rules, badly.

As for Congress, if the Fed moves quickly it will beat the timetable for regulatory improvement that's in either the House-passed Mortgage Reform and Anti-Predatory Lending Act (which requires final regulations to be issued 12 months after enactment) or the bill Sen. Chris Dodd introduced Dec. 12 (six months). But the Fed has not eliminated the need for legislation.

There are areas the regulations have not touched, mostly because they are beyond the central bank's authority. These include nationwide licensing, testing and registration of mortgage brokers; liability -- beyond the initial creditor -- for violations of standards; requirements for pre-foreclosure counseling and modification attempts; and bankruptcy law changes to permit judges to modify home mortgage loans that are "underwater."

And the Fed can't provide the money needed for substantial increases in housing counseling, assistance to communities in trouble because of the foreclosure crisis, or even the enforcement of its own proposal by states and the Federal Trade Commission -- all essential if we're to minimize the damage the mortgage crisis still has in store for us. That's the job of Congress and state legislatures.

What the Fed did on Tuesday is a major move in the right direction. But there's still so much more to do.