January 26, 2012

Submitted by Admin Chapa on Thu, 01/26/2012 - 17:17

State Updates

Governor Patrick Releases FY2013 Budget Proposal

On Wednesday, January 25th, the Patrick-Murray Administration released its FY2013 Budget proposal.  The Governor proposes to increase FY2013 funding for several of CHAPA’s top priorities, including:

Other CHAPA priorities, including the Housing Consumer Education Centers (HCECs), Alternative Housing Voucher Program (AHVP), DOB Foreclosure Prevention Counseling Grants, and the Mass. Access Housing Registry, are level-funded. 

The Emergency Assistance program would see a $18 million reduction in spending from FY’12 appropriated funding, and eligibility would be available to four categories of Massachusetts families facing homelessness that are under 115% of area median income: 1) victims of domestic violence, 2) victims of fire or natural disaster, 3) families that face no-fault eviction due to job or income loss, foreclosure, or documented medical issues, and 4) families that are doubled up and the Department of Children and Families certifies that there is a threat to health and safety.  There continues to be presumptive eligibility while families assemble the documents they need to prove eligibility.  In addition, families would be barred from staying in shelters for longer than eight months under the proposal, with good cause exceptions for a disability.  The average length of stay for the past two years has been approximately six months. 

Compared to the status quo, the proposed EA eligibility changes will restrict access to shelter for some families.  However, taking into account the resources that would be targeted to families at-risk of homelessness in FY’13 under House Two, the general approach represents a reasonable balance until the Commonwealth’s budget situation improves.  Some of these decisions will be painful, but they may be necessary in a time of fiscal challenges and overwhelming need.  We are soliciting input on how to refine the language to ensure that families that absolutely need shelter can access it, but overall EA design is consistent with a Housing First philosophy that prioritizes housing.

The budget also includes $1,000,000 to continue the ICHH Regional Networks to End Homelessness.

Overall, the Governor’s FY13 budget proposal makes a real commitment to provide extremely low income residents with housing assistance through a robust continuum of programs.  We commend the Governor for his leadership in helping the most vulnerable households secure decent housing.  The release of House Two is the first stage in the process, followed by Ways and Means Committee hearings and the House Ways and Means budget release in April.  We plan to work with our partners in the Legislature, Administration, and across the housing and homelessness community to refine proposals where necessary, and advocate for sufficient funding for affordable housing and homelessness prevention during this time of unprecedented demand. 

Following 2011 Steps to Address Local Housing Authority Management Compensation and Oversight, Governor Patrick Proposes Additional Reforms

The Governor has proposed several reforms to local housing authority governance and authority oversight.  In addition, the Governor filed a supplemental budget that eliminates LHA board member compensation.  He also issued an Executive Order that creates a commission on public housing sustainability and reform, which will make recommendations within 60 days.

Massachusetts House and Senate Approve Supplemental Budget, Support $21 million for LIHEAP Fuel Assistance

Last week, the state legislature gave initial approval to a supplemental budget that included $21 million for heating assistance to help low income families and seniors that face the difficult choice between paying for heat or rent this winter.  This action is in response to the $50 million reduction in Fuel Assistance available in Massachusetts after Congress scaled back LIHEAP in FY2012.  CHAPA appreciates the legislature’s leadership on this issue, and the strong advocacy of Massachusetts Association for Community Action (MASSCAP) and Mass Home Care. 

The supplemental budget also includes technical language that will allow DHCD to make changes to HomeBase administrative policies that benefit clients without waiting 60 days.  The legislation has been engrossed but not enacted, and the two branches are working to resolve various amendments unrelated to housing or fuel assistance.

DHCD Announces Winter Funding Round for Affordable Rental Development

DHCD has released its 2012 winter Notice of Funding Availability (NOFA).  Due to severe funding constraints, DHCD has indicated that the winter 2012 competition will be restricted to applications previously submitted to DHCD and each sponsor is limited to two applications.  DHCD has once again made it clear that “consistency with the Commonwealth Sustainable Development Principles is a threshold requirement for all projects.” continuing the Administration’s commitment to smart growth.  The deadline for submitting applications is Friday, February 10th. 

DHCD Posts Draft 2012 QAP for Public Comment

The Massachusetts Department of Housing and Community Development (DHCD) posted its draft Qualified Allocation Plan (QAP) for calendar year 2012 earlier this month and held a hearing for public comment on January 24. 

The draft allocates 50% of the new allocation (estimated at $14,662,185) to production projects, 30% to preservation and 20% to HOPE VI projects.  Most ($13.87 million) of the new allocation has been pre-committed through reservation letters.  Reflecting the improvement in tax credit prices, DHCD will assume an 85 cent raise for tax credit dollar available for development costs when underwriting 9% credit projects.  The draft also notes that because applications in recent rounds have exceeded the federal 9% tax credit amounts available by almost 4:1, DHCD may amend the QAP before the anticipated second funding round (September or October) to impose stricter threshold requirements for applicants related to readiness to proceed and department priorities and to impose new caps on state tax credit awards. 

CHAPA Works to Inform State Leaders of Impacts of Federal HUD Cuts

Since April, 2011, the federal Department of Housing and Urban Development (HUD) budget has been cut by over 13%, including 9% cuts imposed last November.  These cuts will have a serious negative impact on Massachusetts.  CHAPA is working to notify state leaders of the challenges we will face as federal support to create affordable housing and promote community developments is scaled back. 

House Committee Advances MassWorks Infrastructure Legislation

The House Committee on Bonding, Capital Expenditures and State Assets has favorably reported legislation filed by the Patrick-Murray Administration to formalize the MassWorks Infrastructure Program.  CHAPA supports the legislation, now numbered H. 3863 and applauds Chairman Cabral and the Bonding Committee for advancing the bill.

House Leaders Contemplating Comprehensive Economic Development Legislation

Speaker Robert DeLeo has indicated that the House is exploring a comprehensive economic development bill, and CHAPA is advocating for housing to be a key component of the bill.  We are particularly interested in four possible provisions:

  • Funding to enable local nonprofits and small businesses to acquire and rehabilitate foreclosed properties in order to create affordable housing.  All of the federal Neighborhood Stabilization Program funding has been committed and we do not anticipate additional resources from Congress.  Without investment from the Commonwealth, many of these properties will sit vacant and bring down property values, leading to a host of challenges for communities.
  • Creating a clear and equitable path for innocent third party purchasers of foreclosed properties to establish clear title to the property.
  • Including the Community Development Partnership Act as part of the bill to enhance investments necessary for community development corporations to plan and implement Main Street community development initiatives.
  • Continuing the Permit Extension Act for locally-approved developments that haven’t been able to secure financing due to continued global economic challenges.

CHAPA Requests Endorsements of Welcome Home Campaign

CHAPA, together with its coalition partners, will be launching a new campaign to support local housing initiatives.  Welcome Home Massachusetts has three components:  a statewide messaging and media initiative, a forthcoming website for communities featuring strategies for building local support, and technical assistance to targeted communities – all designed to increase the number of affordable housing units in the Commonwealth.  For a detailed description, please click here.

To date, we have 350 Welcome Home Massachusetts endorsers representing a broad base of individuals and organizations in housing, civic, business, municipal, service provider and faith based communities.  If you would like to endorse Welcome Home Massachusetts, follow our progress, lend your ideas and receive updated communications about the campaign, please send an email with your name, your organization (optional), your email address and the community in which you live, to cmarine@chapa.org.

Critical Supreme Judicial Court Decision Pending; Result Could Have Broad Implications on Real Estate Market

Within the next several weeks, the Supreme Judicial Court is expected to decide the Eaton vs. Fannie Mae case that could have a broad impact on foreclosed property acquisition and the real estate market as a whole.  The plaintiff in the case has argued that the servicer must possess both the note and the mortgage in order to complete a valid foreclosure.  The note and mortgage are typically separated during securitization, which means that the vast majority of financial institutions that have conducted Massachusetts foreclosures did not possess both the mortgage and note at the time of the foreclosure.  If the SJC requires the unification of mortgage and note to foreclose, and applies that retroactively, housing and legal experts fear tremendous fallout from unclear titles. 

Administration and Finance (A&F) Releases First in the Nation Request for Proposals on Social Innovation Contracts; Files Legislation to Formalize Initiative

On January 18th, A&F issued Requests for Response (RFRs) as a next step in pursuing social innovation financing contracts. Funding for the Commonwealth’s program would be paid from budgetary resources, but only if the programs work to deliver better social outcomes and savings to the state budget. Chronic homelessness is one of the areas the Administration has requested responses from providers and intermediaries and the supplemental budget filed by the Governor would formally authorize the initiative.  Proposals are due in March.  For information on social innovation bonds or pay-for-success contracts please contact Abby Dosoretz at A&F at social.innovation@state.ma.us

Massachusetts 2011 Building Permit Activity at Historic Low

According to recent Census Bureau estimates, building permits were issued for a total of 6,387 units in Massachusetts in the first 11 months of 2011, meaning the annual total is likely to be the lowest or second lowest recorded in the 52 years that the Bureau has been publishing this data (started in 1960).  Currently, 2009 holds the record for lowest permits, with 2010 in second place.  The 2011 year-to-date figure is 20% below the 2010 total (8,003) for the same period, but 4% above 2009 eleven month total (6,147).  The number of single family homes permitted in 2011 through November (4,142) was down 18% compared to the 2010 total for the same period, while the number of multi-family units permitted (1,965) was down 21%. 

Federal Updates

HUD Issues Proposed HOME Regulation Revisions

On December 16, HUD published a proposed rule for comment revising the current HOME program regulation in the Federal Register.  The proposed revisions to the current 98-page rule - the first substantive revision in 15 years - updates many program provisions, adds new administrative requirements and implements changes required by the FY2012 Appropriations Act.  HUD has published an overview and section by section analysis of the proposed changes and the National Low Income Housing Coalition (NLIHC) has also posted a detailed summary of the proposed changes.  A HUD webinar on January 24, available online, provided an opportunity for interested parties to ask questions. 

During the webinar, HUD staff noted that while the FY2012 Appropriations Act requirements apply only to activities funded with FY2012 funds, the proposed rule would make some of those requirements permanent (e.g. the requirement to convert HOME ownership units unsold after six months to HOME rental units would apply to pre-2012 units as well as future units).  HUD will issue guidance on the FY2012 requirements in March and expects to issue the final rule for effect in the fall. 

Changes of note include stricter funding commitment and spending deadlines, a new deadline for initial lease-up of HOME rental units (18 months), a revised definition of Community Housing Development Organizations (CHDOs) that will require them to have paid staff with development experience to qualify for set-aside funds, and a requirement that all homebuyers receive housing counseling (details to be established under a separate rule).  The proposed rule also authorizes participating jurisdictions (PJs) to charge reasonable monitoring and compliance fees to owners to help offset higher administrative costs.  Comments on the proposed rule are due no later than February 14.

Final FY2012 HOME and CDBG Allocations Published

On January 17, HUD published the official FY2012 Community Development Block Grant and HOME formula grant allocations for states and localities.  The Massachusetts final statewide total CDBG allocation is $88.97 million, down 9.4% from FY2011 and the final statewide HOME allocation is $25.133 million, down 41% from FY2011. 

Because the decreases reflect both cuts in the federal budget and the use of updated Census data in the formulas used to calculate state and local allocations, some grantees received cuts that were higher or lower than the statewide average.  DHCD’s HOME allocation, for example, received a 46% cut. 

Making Home Affordable Program Offers Expansion of Unemployment Forbearance

Under the Making Home Affordable Program, HUD has expanded unemployment forbearance.  The program enables households where one or more people are unemployed to postpone all or a portion of their mortgage payments up to 12 months.  The length of the forbearance depends on the Servicer and GSE insuring the mortgage. For FHA loans, 12 months of forbearance is allowed, 6 months of forbearance is allowed for Fannie Mae loans, and 3 months for Freddie Mac. 

To access the program, homeowners must contact their servicer or should work with a housing counselor.  For more information, visit: https://www.hmpadmin.com/portal/programs/up.jsp.

CBPP Reports Sequestration Will Require a 9% Cut in Discretionary Spending in 2013

The Center on Budget and Policy Priorities (CBPP) has published a report explaining the details of the required across-the-board funding cuts (sequestration) enacted as part of the 2011 Budget Control Act and how sequestration will affect federal funding levels for defense and non-defense programs starting in January 2013. 

It reports that sequestration will require a 9.1% cut for non-defense, discretionary programs - including all HUD programs - implemented through across-the-board, proportional reductions in the new funding provided for each discretionary program in the appropriations bills for federal fiscal year 2013.  Slightly smaller reductions (ranging from 7.4% in 2014 to 5.5% in 2021) will be required in the following eight years. 

House Financial Services Committee Issues Revised Draft Section 8 Reform Bill, Renamed AHSSIA

The Center on Budget and Policy Priorities (CBPP) reports that on January 13, majority staff of the House Financial Services Committee circulated a revised draft Section 8 reform bill - formerly called the Section 8 Savings Act (SESA) and now called the Affordable Housing and Self-Sufficiency Improvement Act (AHSSIA). 

In addition to Section 8 reforms, the bill includes language that would allow non-troubled public housing agencies to blend their Operating and Capital Fund assistance and use it for any purpose.  CBPP reports that while next steps are not yet clear, there are reports that it may be marked up by the full Financial Services Committee sometime in February. 

CBPP has published a one page summary and section by section summary and an initial analysis of the bill on its SESA website.  Overall, it concludes that AHSSIA includes significant improvements over the last draft of SESA with the potential for important program savings.  Positive changes include language to strengthen the Family Self-Sufficiency (FSS program).  It notes, however, the AHSSIA also includes some new “highly problematic” provisions.  One is language that would allow unlimited expansion of HUD’s Moving-to-Work demonstration program, which if adopted has the potential to effectively convert public housing and Section 8 into a block grant and subject both to the risk of deep funding cuts in the future.  A second would require HUD to set a national minimum rent of $69.45 in 2012 (with annual adjustments indexed to inflation) and give HUD and housing agencies the option to set even higher minimums. 

GSE and FHA Mortgage Guarantee Fees Increased to Fund Payroll Tax Cut Extension

In December, Congress voted to fund the two-month extension of the payroll tax cut extension (P.L. 112-78) with a ten-year increase in the single-family (1-4) mortgage guarantee fees (g-fees) charged by Fannie Mae and Freddie Mac to lenders for securitizing loans and in Federal Housing Administration (FHA) fees. 

The new law requires the GSEs to raise fees “to appropriately reflect the risk of loss, as well as the cost of capital allocated to similar assets held by other fully private regulated financial institutions, but … not be less than an average increase of 10 basis points for each origination year or book year above the average fees imposed in 2011 for such guarantees.”  (Fannie Mae's g-fees for new business averaged 29 basis points in the first nine months of 2011).  The FHA must also raise premiums by 10 basis points (0.1 percent of the outstanding mortgage) over the next two years.  The Congressional Budget Office estimated that the fee increase will generate $37.5 billion between 2012 and 2021.

Many have criticized the unprecedented decision to use mortgage fees to pay general government expenses, pointing out it is unrelated to any housing policy goal and that additional fee revenue will go directly to the Treasury.  A letter from the Mortgage Bankers Association to Senator Harry Reid argued that g-fees should “continue to be used solely for the purpose of minimizing the loss exposure of the GSEs, investors and tax payers.”  Bloomberg News notes that the requirement that the higher fees be used to pay the government until October 2021 will complicate future efforts to wind down the GSEs. 

The Federal Housing Finance Administration announced in late December that it will implement the 10 basis point increase at the GSEs effective April 1 and is studying whether additional increases will be needed to comply with the law.  Analysts believe the initial increase will not hurt housing demand given the current record low interest rates but that this may change if future g-fee increases are required.

New Markets Tax Credit Extension Legislation Filed

The federal New Markets Tax Credit (NMTC) expired on December 31, 2011, as extension legislation has yet to move forward.  Created to stimulate investment in low income urban neighborhoods and rural communities, the program enables Community Development Entities (CDEs), including Community Development Financial Institutions (CDFIs), to raise funds for residential, commercial and industrial projects.  It does this by providing a 39% federal tax credit (5-6% of investment amount each year for seven years) to investors who make a qualified equity investment in a CDE.  CDEs compete nationally for allocations of credit authority and New England states, including Massachusetts, have had above average success in winning allocations, with Massachusetts ranking 4th nationally in total allocations through 2008 and along with Maine and Rhode Island ranking in the top 5 states nationally in per-capita credit awards. 

The program is very popular, with requests for allocations far exceeding the available authority by a ratio of 7:1 in the 2011 round.  A total of $33 billion in credit authority has been authorized since the credit was first authorized, with the most recent extension authorizing $3.5 billion in annual credit authority for 2010 and 2011. 

Senators Olympia Snowe (R-ME) and Jay Rockefeller (D-WV) filed a bill (S.996) in May to extend the credit by 5 years (through 2016) with a $5 billion annual credit allocation and Representatives Richard Neal of Springfield and Jim Gerlach (R-PA) filed a companion House bill (H.R. 2655). 

White House Rental Policy Working Group Recommends Steps to Align Federal Housing Policies

The federal interagency Rental Policy Working Group was established in early 2010 by the Domestic Policy Council to improve the coordination of federal rental housing policy among HUD, Treasury and the Department of Agriculture (RHS) and reduce costs and paperwork burdens for property owners, developers and state and local governments. 

After meeting with stakeholders in July to discuss draft recommendations, it issued a report on December 31 recommending specific steps the federal agencies could take with regard to ten program elements: inspections, income reporting and definitions, financial reporting, energy efficiency requirements, appraisals, market studies, subsidy layer reviews, capital needs assessments, data sharing on owner defaults and fair housing enforcement.  

In addition to specific recommendations on how to align each program element, the report discusses current implementation efforts and challenges.  A summary of the recommendations is available on HUD’s federal rental alignment website and HUD has also posted a matrix summarizing implementation costs and associated savings and benefits in each area.  Pilot programs are underway now in several states to test the inspection and subsidy layering review recommendations.

GSE and Housing Finance Reform Unlikely to Advance Soon

Despite a number of Congressional hearings and white papers and the filing of many bills (see summary on CHAPA’s website), observers believe that decisions on the future of Fannie Mae and Freddie Mac and what role the federal government should play in housing finance going forward are unlikely to substantively advance until after the November election. 

Recent Research

MAPC Releases State of Equity Report

A new report released by the Metropolitan Area Planning Council paints a stark picture of the state of equity in Metro Boston.  According to the report, “incomes are distributed less equitably in Met Boston than in 85% of the metro areas in the US” and over 60% of the poorest household are living in unaffordable housing.

Urban Institute Finds Foreclosure Mitigation Counseling Provides Substantial Benefits

A December 2011 study by the Urban Institute evaluating the impact of National Foreclosure Mitigation Counseling program on homeowners counseled in 2008 and 2009 found that counseled homeowners fared better than non-counseled homeowners in a number of ways. 

The study found that counseled owners were more likely to receive a modification and that those who did received larger payment reductions (a difference of $176/month on average) than did non-counseled homeowners with modifications.  They also found that counseled homeowners were 67% less likely to re-default on a modification than non-counseled owners, primarily because of the counseling assistance rather than because of the lower payment. 

Study Finds Qualified Mortgage (QM) Standards May Eliminate Need for Strict QRM Definition

The Center for Community Capital at the University of North Carolina issued a study this month estimating the impact on defaults and access to mortgage credit if the definition of a “Qualified Residential Mortgage” (QRM) is more restrictive than the definition of a Qualified Mortgage (QM).  The definition of QRM, with strict underwriting standards, including a minimum downpayment requirement of 20%, became a topic of national debate in 2011 when a proposed rule on Risk Retention requirements for private mortgage securitizers was issued for comment.  Final rules on the definition of QM and QRM have yet to be issued. 

The UNC study found that the proposed QM definition (in a separate proposed rule requiring lender to assess a borrower’s ability-to-repay) was sufficient to control risky lending.  It also found that while a very strict definition of QRM might reduce foreclosures slightly that benefit might not outweigh the cost to households of reduced access to credit, and might disproportionate hurt creditworthy low-income borrower and minority borrowers.

Announcement

CHAPA congratulates Aaron Gornstein for his appointment as the new Undersecretary of the Department of Housing and Community Development.  Aaron is one of the strongest and most effective advocates for low and moderate income households and communities. 

CHAPA’s Deputy Director Karen Wiener will assume the role of Interim Executive Director beginning on January 30th.  A job description for the Executive Director position is available here with a deadline of Friday, February 3rd. 

We all at CHAPA wish Aaron the very best.

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