Housing Briefs - August 5, 2009
State Updates
Legislature Adds $1 Million to Public Housing and $1 Million to RAFT Following Patrick Budget Vetoes
In its last week before August recess, the Legislature enacted a FY 2010 supplemental budget that included $1 million for the public housing operating subsidy and $1 million for Residential Assistance for Families in Transition (RAFT). The Governor had previously vetoed $2.8 million in public housing funding and $1.94 million for RAFT.
The Legislature refused to override the entire amounts because July revenue collections were between $18 million and $35 million below projections. Instead, they used an unusual legislative vehicle to add $40 million for healthcare for legal immigrants and $40 million to restore parts of other program vetoes, including RAFT and public housing.
The Legislature did not take action on the Governor’s supplemental budget request to make up the deficiency in the Massachusetts Rental Voucher Program.
CHAPA calls on the Governor to sign much-needed funding for RAFT and public housing into law.
Legislature Enacts Legislation to Bring Massachusetts Mortgage Licensure in Line with Federal Requirements
During last week’s pre-recess flurry of activity, the Legislature enacted An Act Adopting the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008, filed by Assistant Majority Leader Ron Mariano and Senator Stephen Buoniconti and championed by Chairman Peter Koutoujian.
Without the bill, the Commonwealth’s ability to license mortgage loan originators would have been preempted and any fees collected from originators would go to HUD. Governor Patrick signed the bill into law on July 31, 2009.
40B Repeal Petition Filed
An Initiative Petition to Repeal Chapter 40B has been filed with the Attorney General. In order to be placed on the November 2, 2010 ballot, the petition must be certified by the Attorney General by September 2 and the proponents must gather 66,593 signatures by late November. In 2007, a similar petition was filed but the proponents failed to secure the requisite signatures to have the question placed on the ballot.
Building Blocks Coalition Advocates for Capital Budget Housing Funds
The Building Blocks Coalition recently submitted a capital budget request to Governor Patrick that highlights the need for affordable housing production, preservation and community development funding in FY 2010.
The FY 2010 capital budget plan is expected to be released this month and may reduce overall bond spending. Despite this reduction, the Coalition noted that funding for affordable housing is critical to the Administration’s recovery plan and long term economic prosperity.
CHAPA and its Building Blocks partners have requested at least $200 million in FY 2010 affordable housing capital funding, including at least $104 million for public housing, $67.5 million in funding for private affordable housing development, $16.5 million for programs that help house persons with disabilities and $5 million for affordable housing preservation.
CHAPA Develops Proposal to Spur State Low Income Housing Tax Credits
In its ten year history, the Massachusetts Low Income Housing Tax credit has produced over 3,500 units of housing, 2/3 of which are affordable to low income families and individuals.
CHAPA members have developed a no-cost proposal to continue the state housing credit’s success by enhancing its marketability to potential investors. While these changes would be particularly beneficial during the economic downturn, they also will help position the Massachusetts Low Income Housing Tax Credit for continued long term success. We anticipate a hearing before the Revenue Committee in the fall. Please contact Sean Caron at Scaron@chapa.org for more information.
DHCD Encourages Housing Authorities to Explore Federalizing State Public Housing
DHCD has issued a memorandum to local housing authorities encouraging them to explore opportunities to convert state public housing to the federal housing program.
The opportunity was created by a provision in the American Recovery and Reinvestment Act that lifts the Faircloth Amendment restriction on acquiring new federal public housing. Units must comply with the HUD Public Housing Uniform Physical Conditions Standard, which will be a major challenge for state public housing units. DHCD does not anticipate a large number of property transfers, but is looking to relieve pressure on state-assisted public housing capital and operating subsidy funding.
The FY 2010 state budget will cut public housing operating subsidies from $66.5 million to $63.5 million and may force units offline without additional appropriation or assistance. In order to apply for federalization, housing authorities must modify their PHA Annual Plan, submit an application to HUD in accordance with 24 CFR 941, and ensure the property meets HUD
quality standards.
Legislature Cuts Chapter 40R Funding
The Legislature overrode the Governor’s veto of an Outside Section that will transfer $7 million from the Smart Growth Housing Trust Fund to the General Fund. This is the first cut to Chapter 40R since its creation five years ago. Chapter 40R advocates, such as the Commonwealth Housing Task Force, strongly oppose the transfer as a deterrent to local 40R adoption. After the $7 million transfer and the Somerset Street surplus state property sale, the 40R Trust fund balance will be approximately $16 million.
DHCD Releases Request for Responses to Homelessness Prevention and Rapid Rehousing Funding
On July 31st, DHCD released a Request for Responses for $17,471,093 in DHCD Homelessness Prevention and Rapid Re-Housing funding to be spent between September, 2010 and September, 2012.
The funding will be dedicated to rapid re-housing placements, diversions and prevention of homelessness, with an emphasis placed on the areas with the largest family shelter caseloads: Boston , Worcester , Brockton , North Shore and Springfield/Holyoke. A bidder’s conference will be held on August 10th, 2009 at DHCD and submissions are due August, 24th, 2009 at 4pm. The RFR is available at www.comm-pass.com.
Massachusetts 2009 Foreclosures Down but Monthly Petitions Approach Historic Highs
On July 22, Banker and Tradesman reported that foreclosure deeds for the first half of 2009 (January through June) totaled 4,747 and petitions filed totaled 13,813. While the January through June foreclosure deeds are down 29% from the same period in 2008 (6,707), the petition filings were up 5.6%.
Auction notices dropped 31% in the first half of 2009, compared to a year earlier.
Overall, June activity increased compared to May 2009, with foreclosure deeds rising 6.7%, petitions rising by 21.7%, and auction notices rising by 8.4%. The 2,835 petitions filed in June is the highest monthly total since April 2008, the month before Massachusetts ’ right to cure law went into effect.
Housing Permit Activity Down 71% from 2005 and Down 46% from 2008
The latest Census Bureau estimates on building permit activity indicate that permits were issued for a total of 3,249 units in Massachusetts for the first half (January-June) of 2009, down 71% from the same period in 2005. This is far fewer units permitted during the same period than in any year since at least 1995. The 2009 year-to-date total was 46% below the 2008 figure for Massachusetts ; nationally, the decline was 47%. Click here for year by year statistics by structure type.
New Website Tracks Stimulus Funding Activity in Massachusetts
The Massachusetts Nonprofit Network (MNN) has created a website to provide comprehensive information on the availability and use of stimulus funds in Massachusetts . It includes links to many different information sources as well as MNN newsletters which track programs, deadlines and activities.
Federal Updates
House Passes HUD Appropriations Bill, Senate Proposal Released
On July 23, the House approved its FY 2010 appropriations bill for Transportation, HUD and Related Agencies (H.R. 3288). It provides $47 billion for HUD (about $700 million more than the Administration requested), provides increases for most programs relative to the FY 2009 budget and includes $150 million to help public housing authorities with Section 8 housing choice voucher shortfalls.
The Senate Appropriations Committee reported out its appropriations bill on July 30, but the full Senate will not take it up until they return from recess in early September. While full details are not yet available, the Senate proposal is reported to provide more funding for HUD than the President’s request but less than the House bill.
Unlike the House, the Senate proposal provides funding ($250 million) for the Choice Neighborhoods Initiative proposed by the Administration to replace HOPE VI. It also provides smaller increases for the Section 202 and 811 programs and for Section 8 project-based renewals than the House. The National Low Income Housing Coalition has posted a budget chart which compares funding levels by program under the House bill with prior year budgets (to be updated when Senate details become available).
National Groups Coalesce on Improvements to the Low Income Housing Tax Credit Program
More than 40 national and state housing organizations have joined forces on a unified legislative proposal to improve the Low Income Housing Tax Credit Program. The three point plan includes: extending the exchange program for another year and modifying it to include 4% housing credits; increasing the housing credit carryback period from one year to five years; and allowing some S Corporations, Limited Liability Corporations, and closely-held C Corporations with at least $10 million in annual gross receipts to invest in the housing credit if they can demonstrate asset management oversight.
CHAPA has been an active participant in the process, which was convened by the Center for American Progress and Living Cities . The groups will be advocating with members of Congress and the Obama Administration with the hopes of implementing the proposal by the end of the year.
For more information, please visit www.rentalhousingaction.org
House Committee on Financial Services Passes SEVRA Bill
On July 23, the House Financial Services Committee approved H.R. 3045 (the Section 8 Voucher Reform Act or SEVRA) by a vote of 41-24, after reaching a compromise on expansion of the Moving to Work (MTW) program. Currently only the introduced version of the bill is available on Thomas.
SEVRA authorizes 150,000 new incremental vouchers, revises many administrative provisions of the housing choice voucher program, and authorizes the use of enhanced project-based vouchers in older HUD assisted private housing (Section 236 and 221(d)3) as use restrictions expire at mortgage maturity.
It also authorizes HUD to allow up to 60 PHAs (including about 30 existing MTW agencies) to participate in the expansion phase, that it calls the Housing Innovation Program (HIP) and 20 in the “lite” version. It gives HUD some limited authority to limit rent changes by HIP agencies if they are too onerous for tenants and does not let agencies set time limits on assistance that are less than five years. Time limits must also be suspended if the area unemployment rate rises above 10%.
The bill also includes two amendments that (1) forbid housing providers from imposing restrictions on guns in public and assisted housing and (2) disqualify households for assistance if any adult member cannot provide a U.S. passport. A detailed description of the administrative reforms proposed in SEVRA can be found here.
House Approves Section 811 Reform Bill
On July 22, the House passed H.R. 1675 (the Frank Melville Supportive Housing Investment Act of 2009) by a vote of 376-51. The bill makes numerous reforms to HUD’s Section 811 Housing for Persons with Disabilities program.
It authorizes a new Section 811 “community integration” demonstration program by providing funds for project-based rental assistance to states to use in projects with other subsidies. It authorizes 2,500 incremental vouchers a year for the first two years (FY 2010 and FY 2011) and 5,000 a year in the next three and increases funding for the existing capital grant and project-based rent subsidy program.
It also increases the initial term for project-based rent subsidies to 30 years (from 20) with funding provided in 5-year increments. It eliminates the Mainstream tenant-based assistance component of the program and shifts renewal funding to the Section 8 voucher program. An identical bill (S.1481) was introduced in the Senate on July 21.
HUD Revises Tax Credit Assistance Program (TCAP) Notice
On July 27, HUD issued a revised notice (CPD-09-03 REV) on the use of TCAP funds – funds state tax credit agencies can award to projects with Low Income Housing Tax Credits(LIHTC) to fill funding gaps.
The revised notice clarifies that all projects which receive TCAP funds must have an allocation of tax credits as well, though it can be reduced from the original award based on market conditions. It also spells out the states’ role in ensuring TCAP grantees comply with program rules and their liability and how program income can be used.
On July 28, HUD also issued new administrative guidance on Davis-Bacon, asset management and funds disbursement. All updates (including the date of the update) can be found on a website maintained by Novograd and Company. Massachusetts has a $59.6 million TCAP award.
Senate Urged to Increase Climate Bill Funds for Assisted Housing Retrofits
A coalition of housing groups working on the preservation of assisted housing (the Preservation Working Group) sent a letter to key Senators on July 27, urging them to increase the share of revenues from the sale of pollution allowances that would go to states to fund energy retrofits in public and assisted housing. The bill passed by the House set the percentage at about 0.05%, which would generate about $65 million a year. The letter urges the Senate to raise the allocation to about $750 million a year (about 1% of allowance sales).
HUD Issues Proposed FY 2010 Fair Market Rents
HUD published its proposed FMRs for FY 2010 in an August 4 Federal Register Notice, which provides less than a 1% increase over FY 2009 FMRs for the Greater Boston area and most of the rest of the State. Exceptions are FMR areas in Central Massachusetts ( Worcester , Fitchburg , etc), which would get a 7.5% increase and Springfield and parts of Franklin County , which would get a 5.5% increase. Comments will be accepted through September 2.
Detailed information on the proposed FMRs by area is posted on HUD’s website. The notice also reported that HUD is considering changing the way it estimates FMRs and will publish a notice “in the future” outlining possible changes and seeking public comment.
Barbara Sard Appointed Senior Advisor for Rental Assistance at HUD
On July 30, HUD Secretary Shaun Donovan announced the appointment of Barbara Sard as his Senior Advisor for Rental Assistance. CHAPA congratulates Barbara on this important appointment and thanks her for all of her advocacy efforts to assist the affordable housing community in Massachusetts and New England over many years.
Treasury Reports on Loan Modifications Under HAMP
On August 4, the Treasury Department issued the first of what it announced will be monthly reports on the extent to which servicers are offering loan modifications to eligible homeowners under the Obama Administration’s Home Affordable Modification Program (HAMP). Future monthly reports will include measures of the quality of the borrower experience. Treasury also announced that it has created a “second look” procedure, asking Freddie Mac as overseer of the HAMP program to review loan modification requests that have been denied.
The report issued yesterday estimates that 2.7 million homeowners were eligible for assistance (60 days plus delinquent) but only 9% (just over 235,000) have received trial modifications as of the end of July. Bank of America and Wells Fargo – which together service loans for over 1.1 million eligible homeowners - started modifications for 4% and 6% of eligible homeowners respectively. J.P. Morgan Chase and Citibank started modifications for 20% and 15% respectively. Treasury also noted the gap between the percentage of estimated eligible owners that were offered trial modifications (15%) and the percentage that accepted them (9%).
In a July 28th meeting with servicers, Treasury and HUD officials pushed them to commit to raise the total number of trial modifications to 500,000 by November 1. However, a Washington Post article the same day noted that researchers and industry observers have concluded that servicers have many reasons to limit the number of loans they will modify and expect that even if the 500,000 goal is reached, it will not stop most foreclosures.
HUD Announces Loan Modification Program for FHA-Insured Mortgages
On July 30, HUD announced a new loan modification program for homeowners with FHA-insured mortgages that have become unaffordable.
The modification program allows borrowers who do not qualify for other FHA loss mitigation programs to permanently reduce their monthly payments by deferring some of the principal through an interest-free subordinate loan that will not be due until the first mortgage is paid off.
Under this “partial claim” approach, HUD will buy down the loan by up to 30% of the unpaid balance to bring the loan current. Servicers will receive an incentive fee for each loan they modify. The program will become available on August 15. Program details are available on HUD’s website (mortgagee letter 09-23).
Recent Research
Federal Reserve Study Explains Lender Resistance to Loan Modifications
A new study by economists at the Federal Reserve Bank of Boston , “Why Don’t Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures, and Securitization” sheds light on economic reasons lenders resist offering loan modification to delinquent borrowers.
It found that only about 3% of seriously delinquent (60 days+) borrowers were offered modifications in 2007-2008 (before the current Administration began its HAMP program) and attributes this in part to the difficulty of determining what borrowers are among the 30% that “self-cure” on their own and the difficulty of determining which borrowers if offered a concessionary modification would not quickly redefault (30-45% within six month), leaving lenders with assets that have lost even more value in the interim.