Six Trends That Show Latino Homeownership is Important to the Housing Market and the Economy

By Agatha So, Policy Analyst, Economic Policy Project, NCLR

Headlines about the nation’s housing market have focused on the low homeownership rate, currently stalled at 63%, compared to a high in 2001 of more than 73%. Yet, little attention has been paid to the impact of the low Hispanic homeownership rate on America’s ongoing economic recovery, and in turn, the future of the nation’s housing market.

Overlooking this impact is a huge oversight, given that the majority of new households formed in the next two decades will be made up by homeowners of color. In fact, Latinos are expected to account for 40% of those new households. At the end of 2016, the Hispanic homeownership rate increased to 47%, but remained much lower than the peak of 50% nearly 10 years ago. With significant household growth on the horizon, creditworthy Latinos need access to homeownership to ensure that the opportunity to build wealth is available to all Americans in the decades to come.

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Why Isn’t the Federal Housing Finance Agency Doing More to Help Keep People in Their Homes?

By Nancy Wilberg Ricks, Senior Policy Strategist, NCLR

Years after the economic crisis, when financial institutions profited by steering unsuspecting families into risky and expensive home loans, corporations are once again playing the housing market for profit while a majority of low- and middle-income families continue to see the values of their homes flounder.

A recent PBS Newshour piece (video below) reinforced what we have long known: many homeowners could remain underwater—owing substantially more on their mortgage than their home is worth—for a lifetime. In particular, the PBS story highlighted how large states like California and Florida, areas with large Latino populations, continue to experience trouble in the housing market. These ongoing issues are detrimental to the national economy and eliminate homeowners’ ability to pass their single greatest asset—their home—on to the next generation.

Principal reduction Newshour piece

More than five million homeowners in the United States are paying much more in monthly mortgage payments than their homes are worth. Some homeowners owe anywhere from $60,000 to $150,000 beyond the current value of their house. They are barred from refinancing and are stretched thin in a market where the recovery has been uneven for low- and moderate-income families. Many end up losing their home or remain beholden to a mortgage that far exceeds any return they’ll see on investment.

The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, has the power to permit reasonable and safe principal reductions to help families keep their homes and prevent lenders from taking a substantial hit. While FHFA’s own study indicates that this is a proven win-win, FHFA refuses to make a change. Even more troubling is that families are now losing their homes only to see them bundled and sold to investors at or even below the cost of a reasonably adjusted mortgage. In response to this practice, community organizations rallied earlier this week to discuss this issue with FHFA Director Mel Watt. In addition, many nonprofits, including Hogar Hispano, Inc, a subsidiary of NCLR, run programs that purchase distressed assets from lenders and sell them back to home-ready families at market rate.

Moving from a community of dedicated homeowners to a conglomerate of faceless investors alters the makeup of once-thriving neighborhoods. To truly stabilize the housing market, the FHFA should exercise every option they have to reverse this practice, keep families in their homes, and stabilize communities across the country.

Congress Wants You to Believe Dodd-Frank is the Problem. Don’t Fall For It.

By Nancy Wilberg Ricks, Senior Policy Strategist, NCLR

At a the National Journal event this week,  experts discussed the state of sustainable homeownership, housing finance reform, and potential solutions to systemic problems in housing. Reforming Fannie and Freddie is of critical importance to the Latino community, who will comprise half of the housing market by 2020—but we wonder why the National Journal is leading the discussion and Congress isn’t. These topics should be the central focus in Washington when it comes to improving the housing market. Instead, Congress is trumpeting this misinformed notion that Dodd-Frank is the cause of all our problems.

Dodd-Frank was the comprehensive legislation that was passed to prevent total economic collapse seven years ago. It stopped the bleeding and helped lay the foundation for a better economic system for consumers and honest dealers. To build on its successes, we must now direct our attention to how the secondary housing market is managed. That is, how do Fannie Mae and Freddie Mac, and thus taxpayers, avoid being left with all the liability and none of the benefits should another crisis rear its head?

Congress has attempted to take on housing finance reform in several iterations only to be stymied by gridlock. We know there is a way. In its joint report with the Center for American Progress, Making the Mortgage Market Safe for America’s Families, NCLR outlined a research-based roadmap to a broad, accessible, and affordable housing market. For example, there is a dire need for a fully funded Market Access Fund (MAF) to promote broader access to mortgage credit and to foster new and safe mortgage products as a way of increasing access. The MAF would also fully fund the National Housing Trust Fund (NHTF)—a state block grant program administered by the Department of Housing and Urban Development, designed to increase and preserve the supply of rental housing for very and extremely low-income families. We finally saw advances in this department late last year when the FHFA announced plans to fund both the NHTF and the Capital Magnet Fund. This is just the beginning, though.

Along with adequate funding, a new housing finance system needs a robust regulatory mechanism to monitor for safety and soundness, consumer protection, and access and affordability. While national experts grasp the importance of an improved housing finance reform system, Congress continues to use Dodd-Frank as a scapegoat. They are wasting time and taxpayer dollars, while never getting to the real issue at hand.

Why Does Mel Watt Continue to Waver on Homeowner Relief?

By Nancy Wilberg Ricks, Senior Policy and Communications Strategist, NCLR

HousingDiscrimination_blogpic_newMore than five million homeowners in the United States are paying much more for their homes than they are worth. Ironically, one of those homeowners is Sylvia Alvarez, who heads the Housing & Education Alliance, a leading housing counseling agency in Tampa, Fla., and an NCLR Affiliate. Alvarez and her dedicated staff have helped many families escape unsustainable mortgages.

Alvarez is an ideal candidate for principal reduction, but she cannot get help because her mortgage is owned by Fannie Mae. Most of the largest banks have granted some families principal write-downs, understanding that reducing the principal on a home for a struggling homeowner is a win-win. Families stay in their homes, continue to pay their mortgages, and stabilize the economy.

After the housing crisis, many experts knew that the solution to a healthier housing market was large-scale principal reduction, and the best place to start was with the Federal Housing Finance Agency (FHFA), which manages Fannie Mae and Freddie Mac. Consumer advocates fought very hard to ensure that FHFA had a strong leader and advocate for homeowners.

That’s why NCLR and our allies rallied for Mel Watt, a former U.S. representative and housing proponent, to be appointed as director of FHFA. We fought for Watt so he could fight for homeowners like Alvarez who need relief now. In 2013 we won the fight, and Watt was confirmed as the leader of the most powerful housing entity in the business.

Two years later, we still wait for progress. During the first year of his leadership at FHFA, Watt wanted to study the issue. Research points to obvious benefits of helping homeowners keep their homes, and even the 2013 Congressional Budget Office reported that a principal reduction plan could assist 1.2 million borrowers and save Fannie Mae and Freddie Mac $2.8 billion.

Yet Watt wavered.

Mel Watt

Mel Watt

Now, eight years since the height of the crisis, Watt and FHFA refuse to implement principal reduction. Families pay mortgage dollars that far exceed the value of their homes, and many cannot keep up. In the meantime, banks and investors are pushing out homeowners and acquiring properties at pennies on the dollar. This devastates communities. Turning long-seasoned homeowner neighborhoods into rental communities might not seem bad, but studies indicate that homeownership translates into stability and greater investment in one’s own neighborhood.

When will FHFA and Mr. Watt finally give households the relief they need? Principal reduction remains the solution. It would finally restore homes to their true value. It would also help families hold on to the largest investment most will ever make.

Latino Families Benefit from Strong Leadership at FHFA

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FHFA Director Mel Watt

Over the past year, the Federal Housing Finance Agency (FHFA) has taken significant steps to improve America’s housing market for struggling homeowners, prospective homebuyers, and those suffering from foreclosure. Yesterday, FHFA Director Mel Watt testified before the House Financial Services Committee to highlight how the agency’s actions have helped homeowners since his confirmation about a year ago.

Just last month, NCLR applauded Director Watt’s decision to fund two essential affordable housing programs: the National Housing Trust Fund and the Capital Magnet Fund. In the wake of a housing crisis that cost more than one million Latino families their homes due to foreclosure, our nation is in desperate need of increased affordable housing stock. Funded with just one-twentieth of a percentage point of Fannie Mae and Freddie Mac’s business purchases, at least $400 million is expected to become available for these programs annually.

In addition, the FHFA’s actions in promoting the Home Affordable Refinance Program has allowed thousands of qualified underwater homeowners—who owe more on their mortgages than their homes are currently worth—to refinance their mortgages, enabling savings on mortgage payments and preventing needless foreclosure.

Access to affordable mortgage credit continues to be a real barrier to homeownership; in response, the FHFA has recently introduced mortgage products with 3 percent down payments. These products are an important step in helping Latino families whose savings were wiped out by the financial crisis enter the home purchase market. By expanding mortgage eligibility to a greater section of prospective buyers, the FHFA is working to ensure all demographics are fairly served by our housing system. Low down payment products will be offset by proven housing counseling, private mortgage insurance, and other compensating measures of creditworthiness.

While the FHFA has taken great strides in improving the housing sector for families, the agency can still do more to improve mortgage access for the Latino community. We encourage the FHFA to strengthen its commitment to all Americans by issuing a strong duty to serve rule, requiring Fannie Mae and Freddie Mac to fulfill their statutory responsibility to serve all creditworthy borrowers. The FHFA should also continue to promote housing counseling in new ways, and should move beyond traditional FICO scores and toward alternative scoring options such as Vantage and FICO-9.

To truly make a difference in the lives of America’s millions of underwater borrowers, the FHFA should also direct Fannie Mae and Freddie Mac to implement principal reduction, adjusting mortgages to what underwater borrowers’ homes are currently worth.

As Director Watt approaches his one-year anniversary at the FHFA, the agency is on track to continue making a difference in the lives of American homeowners, prospective homebuyers, and renters. We urge Director Watt to continue the FHFA’s efforts to make housing more affordable and to take new and significant action to expand mortgage access to serve all creditworthy borrowers.

Watch the entire hearing below: