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.

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

490px-Melvinwatt

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:

Relief for Latino Families, FHFA to Fund Essential Affordable Housing Programs

Family in front of homeThis week, the Federal Housing Finance Agency (FHFA) announced plans to fund two essential affordable housing programs—the National Housing Trust Fund (NHTF) and the Capital Magnet Fund.

At NCLR, we’ve long urged the FHFA to fund these programs, which would begin to correct the dire shortage of affordable housing in this country.

Nearly a year of inaction after his swearing in, we’re pleased to see FHFA Director Mel Watt take a stand for struggling families by directing FHFA to fund the much-needed affordable housing programs. To be funded from less than one-twentieth of a percentage point of Fannie Mae and Freddie Mac’s business purchases, the funds are expected to total between $400 and $500 million annually, amounting to a boon for low-income Latino families.

Created during the height of the housing crisis in 2008 and designed to increase the affordable housing supply at a time when families were rapidly losing their homes, the critical programs remained unfunded after Fannie Mae and Freddie Mac were placed under conservatorship in 2008.

Photo: Jeffrey Turner

Photo: Jeffrey Turner

Since the programs’ creation more than five years ago, America’s affordable housing stock for extremely low-income households has sharply declined.

With the freeing up of funds for the NHTF and the Capital Magnet Fund, this trend could soon be reversed as the programs’ provisions take effect in every U.S. state and the District of Columbia.

With full funding, the overwhelming majority of NHTF money will go toward the construction of affordable rental housing stock for extremely low-income individuals. This will greatly benefit Latino families who are struggling to get by, making 30 percent or less of the federal poverty income level.

Sold Home For Sale Sign in Front of New HouseA fully capitalized Capital Magnet Fund would also direct its funds toward the affordable housing work of registered community development financial institutions (CDFI) across America. These qualifying nonprofit organizations would be able to compete for grants to fund low-income housing developments and other projects designed to stabilize low-income communities, including workforce development, day care, and health care centers.

In deciding to direct funds toward the National Housing Trust Fund and the Capital Magnet Fund, Director Mel Watt and the FHFA have taken a powerful step toward mitigating the shortage of affordable housing in America. This is essential for the estimated 1.3 million Latinos having lost their homes between 2009 and 2012.

This holiday season, the FHFA announcement will help prevent homelessness and give Latino families the gift of basic housing security.

At Confirmation Hearing, Castro Supports GSE Overhaul and Wins Bipartisan Support

Photo: Wikipedia

Photo: Wikipedia

Last week, Mayor Julián Castro of San Antonio faced the Senate Banking Committee for his confirmation hearing as nominee to head the U.S. Department of Housing and Urban Development. Overall, the hearing went fairly smoothly, with Castro receiving support from committee Republicans Bob Corker of Tennessee and John Cornyn of Texas, who introduced him.

For the benefit of homeowners, renters, and all Americans, confirming Julian Castro as Secretary of Housing and Urban Development is the best opportunity to ensure a sustainable housing system and a housing finance overhaul that serves all communities.

A three-term mayor of America’s seventh-largest city, boasting a majority-Latino population, Julián Castro presided over San Antonio’s successful urban revitalization. As he succeeded in San Antonio, we believe he can succeed in the Obama Cabinet.

While NCLR has expressed strong support for Castro’s nomination, adding another highly qualified Latino to the Obama Cabinet, no matter who the new secretary is we urge that person to focus on ensuring real, affordable access to housing credit for communities of color in any housing finance overhaul.

Fortunately, there is strong reason to believe that such goals are consistent with Castro’s positions. Though the hearing did not delve into specifics, Castro highlighted support for major housing finance changes.

Currently, control of the two government-sponsored enterprises is placed under the Federal Housing Finance Agency, but this temporary system is unsustainable. The Senate Banking Committee recently passed the Johnson-Crapo proposal, which would overhaul the current system, replacing Fannie Mae and Freddie Mac with private capital backed by government guarantee.

Unfortunately, the current version of this bill passed in committee doesn’t do nearly enough for the Latino community, effectively cutting off unacceptable numbers of people of color and underserved communities from access to affordable mortgage credit. A newly confirmed Secretary of Housing and Urban Development could persuade the Senate to change that while also impacting access and affordability through improvements at the Federal Housing Administration. We hope that, if successfully confirmed, Julián Castro will make sustainable housing finance reform a top priority.