CHAPA Housing Briefs - January 16, 2013
State Updates
Governor Files Legislation to Replace Local Housing Authorities with Six Regional Agencies
On January 10, the Governor announced that he has filed legislation to revamp the governance structure for public housing in Massachusetts. The bill would consolidate 240 local housing authorities into six regional housing authorities (RHAs) starting in July 2014 that would “take over ownership, and fiscal and operational management of all public housing in Massachusetts.” This regionalization is intended to improve the delivery of services to tenants, expand organizational capacity and provide cost efficiencies through the centralization of many functions.
As detailed in the press release announcing the filing, the Governor’s bill would allow communities to retain control over land use and significant redevelopment decisions and require the RHAs to seek local input into their annual plan for capital and operating spending and tenant participation activities. Each RHA would be governed by a board of nine un-paid members appointed by the Governor (six housing professionals, including three nominated by local governments, two tenants and one union representative).
The Massachusetts Association of Housing and Redevelopment Officials (Mass NAHRO) issued a press release the same day expressing its “rejection” of the proposal and intention to file alternative legislation to improve housing authority operations. Copies of the proposed bills are not yet available online.
SJC Upholds Housing Appeals Committee Decisions in Lunenburg and Sunderland
The Massachusetts Supreme Judicial Court (SJC) issued two opinions this month upholding decisions by the Housing Appeals Committee (HAC) to grant comprehensive permits to projects after local zoning boards of appeals denied their applications in 2007 and early 2008. Both opinions - Zoning Board of Appeals of Sunderland vs. Sugarbush Meadow, LLC & another (January 14) and Zoning Board of Appeals of Lunenburg vs. Housing Appeals Committee & another (January 8) are on the SJC slip opinions page.
In both cases, the ZBAs argued that the HAC erred in refusing to count low-cost market rate housing toward the 10% threshold for appeal. The SJC rejected that argument, noting that the comprehensive permit statute and regulations clearly define low and moderate income housing as housing subsidized by the federal or state government and that the definition brings with it a number of requirements that market rate housing does not have to meet, including a long term use restriction, housing quality standards, affirmative marketing and ongoing monitoring. The Sunderland opinion also upheld the authority of the HAC to define the region when examining regional need, to limit its consideration of the fiscal impacts of new development and to decide when a legal fee charged by the ZBA to the developer violates HAC rules.
The Lunenburg opinion also addressed the question of when maintaining consistency with a local master plan is a sufficient local concern to outweigh regional housing needs. The SJC agreed with the HAC that the Lunenburg plan did not outweigh regional needs since it had not yet produced affordable units and furthermore, the proposed project was not inconsistent with the Lunenburg plan and would not undermine it. It also rejected the argument that the HAC decision was invalid due to one of five HAC seats being vacant at the time.
SJC Rules that Banks Must Prove Ownership of Mortgage in Foreclosure Proceedings
In the case of HSBC Bank v Matt, the SJC reversed the Land Court’s decision in favor of the lender allowing foreclosure proceedings to commence. The ruling makes clear that a “contractual right to become the holder” of the mortgage is insufficient under the law to commence foreclosure proceedings. The judge presiding over the case stated that mortgage lenders must “present such evidence as may be necessary and appropriate” to prove they have a legal authority to begin foreclosure proceedings.
Federal Updates
“Fiscal Cliff” Legislation Postpones Sequestration, Extends LIHTC and New Market Tax Credit Provisions
On January 2, the President signed the American Taxpayer Relief Act (P.L. 112-240) into law, under a bipartisan agreement that allowed postponement of the sequestration mandated under the Budget Control Act from January 2 to March 1. As detailed in an article by the National Low Income Housing Coalition, the bill included a number of tax increases to raise revenues and begin to address the long-term deficit. It also slightly lengthened the time developers will have to take advantage of a 2008 provision in HERA that set a minimum credit rate of 9% for Low Income Housing Tax Credit (LIHTC) projects placed in service by 2013. The Act now allows that minimum rate to apply to projects that receive an allocation by the end of 2013, even if not placed in service (see Section 302 of the Act). (Projects that receive binding commitments only will not benefit.) In addition, the Act retroactively extended the New Markets Tax Credit program for two years (2012 and 2013) and authorized allocations of $3.5 billion for each of the two years.
Key changes in Mortgage Servicer Settlement replacing Independent Foreclosure Review
The Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board have reached a settlement with ten major mortgage servicers that would replace the Independent Foreclosure Review (IFR) designed to compensate homeowners damaged by improper foreclosures that occurred in 2009-2010. The new settlement, announced on January 7, 2013, includes $3.3 billion in cash payments and $5.2 billion in non-cash relief such as mortgage modification and forgiveness of deficiency judgments. Fraught with excessive costs and complications, the IFR required case by case reviews and a finding of wrongdoing before an award was made. The new agreement does not require a borrower to apply for relief to be eligible to receive compensation. Borrowers will receive compensation “ranging from hundreds of dollars up to $125,000, depending on the type of possible service error.” For a detailed analysis of the changes under the new settlement agreement, click here.
CFPB Issues Final Rule on “Ability to Repay” (“Qualified Mortgage), Seeks Comments
Last week, the Consumer Financial Protection Bureau (CFPB) issued a final rule effective a year from now (January 10, 2014) under which lenders can only make mortgages after they have documented that the borrower has a “reasonable ability” to repay the loan. These new protections, required by the Dodd-Frank Wall Street Reform Act, apply to all mortgage loans, except some refinances from a non-standard mortgage into a lower cost standard mortgage.
As required by the Act, the final rule protects lenders from borrower litigation by providing a “presumption of compliance”. The presumption is not rebuttable (i.e. a safe harbor) for mortgages that meet certain standards (“qualified mortgages”) and are not higher priced (more than 1.5 points above prime for first liens or 3 points for second liens). In all other cases, the presumption is rebuttable. As detailed in the CFPB summary, qualified mortgages must provide regular, amortizing payments (fixed or adjustable rate). Loans do not quality if they are interest-only or amortize negatively, have balloon payments (with some rural exceptions), a term exceeding 30 years, or points and fees exceeding 3% of the loan amount (can be more for small loans). The rule also bans prepayment penalties except for qualified mortgages and limits the size, term (3 years) and circumstances under which they are allowed.
To meet ability to repay requirements, the rule requires lenders to evaluate 8 factors: 1) current income and assets, 2) current employment status, 3) the monthly payment on the loan, 4) the monthly payment on any simultaneous loan, 5) current debt obligations, 6) alimony and child support, 7) total monthly debt to income ratio or residual income and 8) credit history. While the rule does not require specific underwriting models, it requires a total debt-to-income ratio not exceeding 43% for qualified mortgages. However, it also creates a second, temporary category of qualified mortgages with more flexible underwriting rules (including fees) for loans that meet the general product feature requirements AND the underwriting requirements of purchase, guarantee or insurance programs of the GSEs, HUD, the VA or USDA/RHS. This second category will phase out in seven years at the latest.
CFPB also issued a notice seeking comment on potential changes to this final rule. This “Concurrent Proposal” would modify requirements of the final rule to allow the continuation of “community-focused” lending programs by Housing Finance Agencies (HFAs) and certain non-profits, including Community Development Finance Institutions (CDFIs), HUD Community Housing Development Organizations (CHDOs), programs like MHP’s Soft Second program, and 501c3 nonprofits with small loan programs (<100 loans a year) for households with incomes at or below 80% of AMI. It would also exempt housing stabilization programs, certain GSE and federal refinancing programs, and small portfolio creditors. Comments are due by February 25.
HUD Seeks Comments on Draft Notice for Senior Preservation Rental Assistance Contracts (SPRAC)
On January 8, HUD published a Notice in the Federal Register outlining its proposed process for awarding 20-year rental assistance contracts to old (pre-1974) Section 202 housing developments with currently unassisted tenants at risk of displacement due to mortgage maturation or refinancing. Senior Preservation Rental Assistance Contract (SPRAC) is a new program authorized by the Section 202 Supportive Housing for the Elderly Act of 2010. HUD expects to award $16 million in contracts to assist up to 2,000 of the 18,600 unassisted units in its pre-1974 inventory not covered by Section 8 project-based assistance contracts. Most pre-1974 projects are partially assisted and HUD estimates that an average of 2,000 units per year risk losing affordability. Originally financed with 40- or 50-year mortgages at interest rates of 6% or less, the income eligibility and rent affordability restrictions expire when the mortgages mature. Many have significant capital needs and some owners would like to prepay to finance needed capital repairs, but new debt may require unaffordable rent increases for the tenants without Section 8.
The draft Notice limits eligibility to high occupancy (93%+) projects with REAC scores above 60 that are maturing no sooner than six months after the SPRAC application date. HUD proposes to create two application pools, one for owners who agree to limit future occupancy to very low income (50% of AMI) households, and one for owners who limit future occupancy to 80% of AMI households. Within each pool, applications would be ranked by mortgage maturity date and awards would be made to the first pool until funds are exhausted, with awards to the second pool if funds remain. Within each income group, projects with very low rental vacancy rates would receive priority. Comments are due by March 11.
Recent Research and Reports
CHAPA Housing Search Guide for People with Disabilities in Massachusetts
With input from stakeholders in the housing and disability advocacy communities and support from the Massachusetts Developmental Disabilities Council, CHAPA published the Housing Search Guide for People with Disabilities in 2005. A new, updated version of this guide is now available for consumers and advocates working on behalf of those looking for housing. The guide provides guidance for navigating the housing system in Massachusetts, as well as direct contact information for federal, state, and local resources around housing for people with disabilities.
Upcoming Events
DHCD QAP Hearing, LoftFive50 (Malden Mills), Lawrence – DHCD will hold its second QAP hearing at 10:00 a.m. on January 18th in Lawrence. The first hearing was in Boston on January 11th.
Statewide Housing Foreclosure Counselor Trainings – CHAPA, the Massachusetts Attorney General’s Office, and the Mel King Training Institute will be co-sponsoring two trainings for foreclosure counselors in February. Discussion topics will include an overview of the National Mortgage Settlement and the components of HomeCorps, review of the 2012 Massachusetts Foreclosure legislation and best practices concerning program eligibility, referrals, other logistics, and ongoing goals. The trainings will be held on February 12th from 9:00 a.m. – 12:30 p.m. at the Boston Foundation and on February 28th from 9:00 a.m. – 12:30 p.m. at HAPHousing. More details to follow.