State Updates
Conference Committee Begins Work to Finalize FY '09 State Budget
The Budget Conference Committee has met for the first time to iron out differences between the House and Senate versions of the FY'09 budget. Chairman DeLeo, Representative St. Fleur, Representative deMacedo, Chairman Panagiotakos, Senator Brewer and Senator Knapik are the conferees charged with resolving budget differences.
With its partners in the Building Blocks Coalition, CHAPA requested $67 million for Public Housing Operating Subsidies, $33 million for MRVP, $5.5 million for RAFT, $1.85 million for Housing Consumer Education Centers and $5 million for the Affordable Housing Trust Fund within the Bay State Competitiveness Investment Fund. The Conference Committee is expected to advance its recommendations for a final budget by the end of the month.
Governor Patrick Signs $1.275 Billion Housing Bond Bill
On May 29th, Governor Patrick signed the Housing Bond Bill into law as Ch. 119 of the Acts of 2008. The Governor signed the legislation at the Brian J. Honan Apartments in Allston with many legislators, residents, and advocates in attendance. CHAPA commends the Governor, Secretary O'Connell and Undersecretary Brooks for their leadership and advocacy in advancing this land mark legislation. At the signing, CHAPA's executive director Aaron Gornstein also thanked Chairman Honan, Chairwoman Tucker, Speaker DiMasi and Senate President Murray for making affordable housing a high priority for this legislative session.
CHAPA's advocacy focus now shifts towards the Capital Budget process currently underway at the Executive Office of Administration and Finance (A&F). DHCD received $150 million in FY'08 capital budget allocation, plus an additional $20 million from Mass Housing for the Affordable Housing Trust Fund. CHAPA and the Building Blocks Coalition have requested at least $200 million for FY '09, which would utilize the additional authorization granted through the housing bond bill and meet additional affordable housing production and preservation needs. Without an increase by A&F, much of the authorization will go unused at a time when foreclosures and rental housing needs have created additional challenges for the Commonwealth.
Massachusetts Single Family Home Prices Down 12%, Condo Prices Down 1.8%
On May 27, The Warren Group reported that the median price of a single family home fell to $305,000 in April 2008, down 12% from a year earlier and that the number of homes sold in April was also 12% lower than in April 2007. Year-to-date sales (January to April) are down 22.8% from 2007. The median price for a condominium fell only 1.8% (to $270,000) compared to a year earlier ($274,950), though total sales were down 22% from a year earlier and are down 29% year-to-date, compared to 2007 January-April sales.
The report noted that the single family price drops, which started in March 2006, are larger than those experienced in the early 1990s recession, which lasted four years, and may help end the slump sooner.
State Supreme Judicial Court Issues Decisions on Three 40B Cases
The State Supreme Judicial Court (SJC) issued decisions on two 40B cases affecting 40B developments in Hingham and Wrentham on May 27 and a decision involving a Woburn development on June 10. The court ruled against the towns of Hingham and Wrentham in their challenges to DHCD decisions on the types of units that count toward a town's 10% threshold. It upheld the city of Woburn in its appeal of a Housing Appeals Committee (HAC) decision.
In Town of Hingham et al. v. DHCD, the Town asked the Court to overturn a decision that only 25% of the units at a large continuing care retirement community (Linden Ponds) should count on the Subsidized Housing Inventory (SHI). The SJC said reviewing DHCD counting decisions was a matter for the Housing Appeals Committee, not the courts, and the Town's remedy would be to seek review next time a Hingham comprehensive permit case goes to the HAC. It strongly stated that courts cannot get involved in DHCD counting decisions.
In Town of Wrentham et al. v. West Wrentham Village, LLC et al., the SJC said it could not rule on a HAC decision regarding what counts towards a town's 10% affordable housing threshold because the town had not exhausted its administrative remedies. The counting question arose after the Town of Wrentham denied a comprehensive permit application because it believed that the 300 beds at a large DMR facility should count and thus put the town over 10%. When the developer appealed the denial, the HAC ruled that the facility beds don't count and remanded the case back to the ZBA.
Rather than taking up the remand, the town asked for court review of the HAC decision. The SJC ruled that the Town must exhaust its administrative remedies before seeking court review. To do so, the ZBA must issue a decision on the remand. If that decision then goes back to the HAC and results in a HAC ruling that the Town does not like, it can then appeal the decision in the courts.
In Board of Appeals of Woburn v. Housing Appeals Committee et al., the SJC upheld the Woburn ZBA's appeal of a HAC decision. The case involved the application of developer Archstone-Smith to build a 640 unit rental complex. The ZBA approved the application, but imposed 50 conditions, including a reduction in size to 300 units.
Upon appeal, the HAC ruled that while the reduction did not make the project uneconomic, it was effectively a de facto denial. In denial cases, the HAC decision is based on whether the ZBA decision is consistent with local needs (in the case of communities under 10%, this is determined based on an evaluation of the health, safety, design and environmental concerns). HAC decided that 540 units would be consistent with local needs.
On appeal, the SJC concluded that under current regulations HAC is not authorized to treat project reductions as de facto denials and instead must decide such cases based on whether all the conditions in totality make the project uneconomic. However, both the majority, and Chief Justice Marshall in a concurring opinion, found that DHCD has authority to (and should) issue regulations to address the issue of project size reductions.
Marshall's concurring opinion stated that "our decision…allows a local board unfettered discretion to stymie the construction of an affordable housing project without actually denying it or rendering it uneconomic, and insulates such a board's decision from review by the HAC. The Legislature's goal of overturning exclusionary local practices is thus thwarted." She urged DHCD to develop regulations that define uneconomic and concluded that "in the absence of appropriate regulations, a local board remains free to impede the pace at which affordable housing units – so urgently needed—are constructed... even if a larger project would be entirely consistent with local needs."
Consent Decree Enables 2,000 People with Brain Injuries to Move to Integrated Community Housing
Following a law suit brought by five individuals, the Brain Injury Association of Massachusetts (BIA-MA) and the Stavros Center for Independent Living, approximately 2,000 people with brain injuries will be able to move out of nursing homes and into community-based housing over the coming years. The current shortage of supportive housing has forced these residents to live in nursing home facilities instead of the community at large. According to the consent decree for Hutchinson v. Patrick, which is still subject to court approval, a mix of federal and state funds will be available to provide community housing with the necessary supportive services through two programs: the ABI waiver program and the Community First Demonstration Project.
Community Development and Small Business Committee Advances CPA Legislation
Legislation to create additional flexibility for communities of all incomes to adopt the Community Preservation Act (CPA) and to ensure the state match for CPA remains strong was favorably advanced from the Community Development and Small Business Committee last week.
As of the end FY '07, the Community Preservation Act had created over 1,300 new units of affordable housing and enabled many additional municipalities with less experience with affordable housing to expand their capacity to proactively plan for housing. Currently, 133 municipalities have adopted CPA, but few of these localities are cities with low per capita incomes. The bill aims to address the disparity and build on CPA successes.
The legislation, H. 4820, is now before the House Committee on Ways and Means. CHAPA commends the bill's sponsor, Senator Cynthia Stone Creem, and the Chairs of the Committee, Senator Brian Joyce and Representative Steven Walsh, for their support and leadership on CPA.
Transportation Bond Bill Advances with $20 million for Transit Oriented Development
The House passed the Transportation Bond Bill, H. 4562 on Wednesday, June 11th. Of the $1.3 billion in transportation and infrastructure investments, $20 million was included for the Transit Oriented Development Program. The TOD program is a collaboration between the Executive Office of Transportation and the Department of Housing and Community Development to fund affordable housing and infrastructure projects within ¼ mile of train stations. The Senate is expected to take action on the legislation quickly to provide additional housing and infrastructure funding to support sustainable development.
Senate Finalizes I-Cubed Bill
On June 5th, the Senate finalized the I-Cubed legislation, which provides a funding mechanism for infrastructure. Originally passed last session, the Legislature revisited the issue to add safeguards and increase the funding amount of $250 million in potential bonds. The legislation authorizes the state to provide capital funding for infrastructure through the sale of bonds. Once a project is approved, the state, municipality and developer enter into an agreement to provide real estate tax assessments to pay the debt service. Project developers are then responsible for debt service payments through tax assessments on development parcels that benefit from the improvement.
MassINC Announces Gateway Cities Compact for Community and Economic Development
Mayors from eleven gateway cities throughout the Commonwealth recently signed a compact to work together to improve housing, infrastructure and economic opportunities in these critical economic centers. Signing the compact were Mayors and Chief Executives from Brockton, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Lowell, New Bedford, Pittsfield, Springfield and Worcester. Despite accounting for only 15 percent of the Commonwealth's population, these communities make up 30 percent of those Massachusetts residents living under the poverty line. Together, these municipal leaders have pledged to share best practices and work with the Administration and Legislature to improve prosperity.
Foreclosure Updates
Full Senate Expected to Vote on FHA Refinance/Housing Trust Bill before July 4
The National Low Income Housing Coalition reports that the "Federal Housing Finance Regulatory Reform Act of 2008" bill approved by the Senate Banking Committee on May 20 is expected to come to a vote by the full Senate before the July 4 recess though no date has been set yet.
As detailed in CHAPA's May 23 Housing Briefs, the bill would authorize a new FHA program (HOPE for Homeowners) to insure affordable refinance mortgages for homeowners at risk of foreclosure, similar to the program approved by the House on May 8 (H.R. 3221). It also strengthens oversight of Fannie Mae and Freddie Mac and the Federal Home Loan Banks and requires Fannie and Freddie to contribute annually to a new "Housing Trust Fund". Unlike the House, however, the Senate bill would fund the HOPE program from the GSE contributions to the new Trust Fund.
In addition to these provisions, CHAPA is advocating that any final bill include a housing stabilization fund to acquire foreclosed properties and improvements to the low income housing tax credit program.
Foreclosures Down Dramatically in May as Right to Cure Provision Takes Effect
Banker and Tradesman reported on June 9 that only 390 petitions to foreclose were filed in May in Massachusetts, a drop of 88% from the 3,327 petitions filed in April. Observers attribute the drop off to the state's new "right to cure" law which went into effect on May 1. The law requires lender to give borrowers a "pre-petition" notice of default that explains that the borrower has 90 days to cure the default. While technically the lender could file a petition the day after giving that notice, it is believed that most lenders are choosing to wait 90 days before filing the petition. Some lenders expect petitions will jump in August, once the 90 days are up, while others believe lenders may make more of an effort to resolve the defaults before then.
Gov. Patrick Moves to Strengthen Mortgage CRA Regulations
On May 28, Governor Patrick announced his support and conveyed the importance of one of the key provisions of Chapter 206, the Commonwealth's new foreclosure prevention law, which made Massachusetts the only state in the country to extend its already aggressive CRA type requirements to non-bank mortgage lenders. Under CRA, mortgage lenders' records of helping to meet the mortgage credit needs of the areas within which they do business are evaluated through public examinations and ratings.
The Governor has asked the Division of Banks (DOB), the agency charged with implementing many provision of Chapter 206, to begin evaluating all state licensed mortgage lenders on the basis of the speed and number of loan modifications they complete for delinquent borrowers seeking help. This action would further extend CRA to include this evaluation through proposed regulation and the pace at which all state licensed mortgage lenders address the needs of the borrowers and modify loans will be assessed and made public.
DOB is currently working on the proposed Mortgage CRA regulations and public hearings are expected this summer.
Attorney General Files Lawsuit Against National Mortgage Lender for Deceptive and Discriminatory Lending Practices
On June 3, Attorney General Martha Coakley's Office filed a lawsuit against Option One Mortgage Corp., a subprime lender that originated thousands of loans in Massachusetts, and its parent company, H&R Block, Inc.
The complaint alleges that:
- Option One and H&R Block engaged in unfair and deceptive conduct by selling extremely risky loan products that the companies knew or should have known were destined to fail to Massachusetts consumers.
- The companies discriminated against black and Latino borrowers in Massachusetts by charging them higher points and fees to close their loans than similarly situated white borrowers and by targeting black and Latino consumers with marketing that pushed the sale of predatory loan products.
- Option One and H&R Block's conduct in selling and servicing mortgage loans has significantly contributed to the foreclosure crisis in Massachusetts.
The Attorney General's Office is seeking a Preliminary Injunction to restrict Option One's ability to foreclose on Massachusetts borrowers and anticipates a hearing to be scheduled on the court order in the near future. The Attorney General's Office is seeking civil penalties, restitution and an injunction, which would prohibit Option One and American Home Mortgage, the current servicer of most loans originated by Option One, from selling or transferring any Massachusetts mortgages and from foreclosing on any Massachusetts loan without giving the Attorney General's Office a 90-day opportunity to review the loan transaction and object to the foreclosure.
More information about the lawsuit can be found on the Attorney General's website (www.mass.gov/ag)
Regional Foreclosure Fairs for Homeowners Scheduled for June and July
In an effort to increase the pace of loan modifications and prevent foreclosures, the Patrick administration is planning regional foreclosure fairs to bring together lenders and homeowners for face-to-face meetings at workshops in communities that have been hard- hit by the rise in mortgage foreclosures.
The workshops are planned in Spingfield and Brockton in June, and in Worcester and Lawrence in July. The following lenders have been asked to participate in the workshops: Bank of America, CitiBank, JP Morgan Chase, Countrywide Financial, GMAC Mortgage, Option One, Washington Mutual and Wells Fargo. Representatives from these lenders will conduct individual sessions with homeowners and can approve loan modifications and debt restructuring plans that result in more affordable monthly payments for borrowers.
For more information about the workshops and for other foreclosure resources, visit www.mass.gov/foreclosures.
National Program Proposed to Coordinate Disposition of Foreclosed Properties
Enterprise Community Partners, the Housing Partnership Network, LISC and NeighborWorks America have proposed the establishment of a National Community Stabilization Trust to coordinate the purchase and disposition of REO properties from lenders, loan servicers, investors and GSEs nationwide. The idea for the Trust emerged from discussions with organizations across the country that have been working on neighborhood stabilization strategies to acquire foreclosed properties but have expressed frustration about their inability to get access to properties quickly.
The National Community Stabilization Fund will serve as a national coordinator to access REO properties for neighborhood-based efforts carried out by local organizations. The Trust will lead in negotiations with servicers, investors, and GSEs to acquire REO and distressed loans, while the local organizations will provide targeted disposition of the REOs. Possible pilot cities have been identified as Chicago, Cleveland, Columbus, Dallas, Los Angeles, New York City and Rochester, NY.
New Report Outlines Steps States Can Take to Mitigate the Foreclosure Crisis
A new Brookings Institute report, "Tackling the Mortgage Crisis: 10 Action Steps for State Government", issued in May, finds that state governments can play an important role in mitigating the effects of the current foreclosure crisis on households and neighborhoods and preventing future lending abuses. It points to Massachusetts, Ohio and California as leaders in state-level responses.
It notes that states have important regulatory powers that can make a difference and outlines ten approaches states can take to comprehensively address the current crisis (it also includes cost estimates for many of the recommended steps). These include aiding borrowers at risk of foreclosure by making high quality counseling available, ensuring a fair foreclosure process, and encouraging creditors to pursue loan modifications and other alternatives to foreclosure. Other steps relate to improving creditor management of foreclosed properties, expediting responsible conveyance, and improving oversight of the mortgage brokerage industry.
Federal Reserve Bank of Boston Compares Foreclosure Trends in 1990s and Today
On May 30, the President of the Federal Reserve Bank of Boston, Eric Rosengren, in a speech at the New England Economic Partnership Spring Conference, discussed recent Bank research comparing current foreclosure trends with New England's foreclosure crisis of the early 1990s and the implications of that research for policymakers.
The research on the 1990s foreclosure crises shows that it took several years to work out even after the peak and that there are several key differences between today's foreclosures and those of the 1990s that are likely to complicate the resolution of the current crisis. The earlier foreclosure crisis peaked during hard economic times while today's record levels are occurring in a period of relatively low unemployment and inflation. Today's foreclosures reflect the fact that borrowers have less equity than in the past and tight credit conditions make it difficult for buyers to enter the market; the situation could get worse if the economy weakens.
President Rosengren pointed out that it is also more difficult to work out mortgages today because of the inherent complexity of securitization and because a majority of the later subprime mortgages (including 75% of the mortgages on 2- and 3-family properties) were originated with second loans often securitized in a different pool. This doubles the number of parties involved in considering whether to modify a loan.
In addition, servicers continue to be reluctant to move from a case by case modification review process to a more wholesale approach because it is difficult to predict who will default on a loan. At the same, many servicers have not added the staff needed to process loan modifications quickly enough to avoid foreclosure. Finally, the current crisis has had a bigger impact on two- and three-family properties and the low and moderate income neighborhoods where they are common than did the earlier crisis and will require new strategies to stabilize these neighborhoods.
