The Home Affordable Modification Program (HAMP) will end at the end of December 2016. The Mortgage Bankers Association (MBA) has proposed a product that would target reducing the household's monthly mortgage payment, by extending the loan term to forty years. Significantly, unlike HAMP, the MBA model would not be based on household income. This is an important reversal from HAMP, because in households where there has been a significant loss of income, the targeted reduction in the monthly mortgage payment may not produce an affordable payment. Additionally, the forty year term extension makes it difficult for the homeowner to rebuild their equity in their home. The Empire Justice Center (EJC), National Council of La Raza (NCLR), and the National Housing Resource Center (NHRC) collected loan information from households who had received HAMP modifications. EJC then analyzed the loan information to compare the modification that was received under HAMP with the modification that would be available under the MBA proposal. You can read the summary of the analysis here, but here are some of the key findings: Targeting the modification to a reduction of the monthly mortgage payment is most beneficial to higher-income households, who are most likely so see a reduction of 20 percent of more, while moderate-income households are more likely to see a reduction of less than 20 percent; Including interest rate reduction as an element of any modification package is critical to ensuring affordable payments, particularly for lower-income homeowners—but this will not be a modification tool available under the MBA proposal; More flexible alternatives to the 480-month term extension are needed for homeowners with significant equity in their homes.
Earlier this month, the National Housing Resource Center sent a letter to members of Congress asking for support for federal housing counseling funding. The letter was signed by more than 360 agencies from nearly every state and the District of Columbia and you can read it here. The letter asked members of Congress to support funding the HUD Housing Counseling Assistance program at $60 M and the National Foreclosure Mitigation Counseling program at $40 M. Sixty million dollars for Housing Counseling Assistance would represent a slight increase over both the current funding level and President Obama's request to Congress ($47 M). Forty million dollars for the NFMC program would keep the program funded at its current level and would be an increase of $40 M over the President's request. At a time when foreclosure continues to be a major issue in many communities, and in which many are seeking to enter the housing market as the recovery takes hold in other communities, there is a critical need for adequate federal funding for housing counseling and we believe an increase in the federal appropriations is strongly warranted. Furthermore, the roughly 45 percent cut in federal funding in President Obama's budget request but do tremendous harm to the ability of housing counseling agencies to meet the needs of people all around the country. Many thanks to all who signed on to the letter.
President Obama's proposed budget will contain a new proposal to “include a $15 million mobility counseling pilot to help families that receive housing assistance through the Department of Housing and Urban Development move to, and stay in, safer neighborhoods with stronger schools and better access to jobs. These investments will be distributed to about 10 regional housing program sites with participating Public Housing Authorities and/or private nonprofits over a three-year period.” The president’s proposed program may be modeled on existing programs in several areas around the country. This will need to make it through Congress, but has the potential to provide opportunities for agencies working with lower income clients receiving Housing Choice Vouchers.
How did programs impacting housing counseling do in the Fiscal Year 2016 federal budget this year? $40 million for NFMC, the National Foreclosure Mitigation Counseling funding (down from $50 million last year). NFMC was zeroed out in the Senate and the House had funded it at $42 million, so we ended up very close to the highest number we could have hoped for and avoided having the program completely defunded. A lot of work from many groups went into preserving this badly needed foreclosure counseling funding. Hats off especially to the many groups working on this, including housing counseling groups in Maine, South Florida, Cleveland, northeastern Missouri, and Fresno, the Community Action Committee of the Lehigh Valley, HomeFree USA, National Council of La Raza, Homeownership Preservation Foundation, and the Coalition of HUD Intermediaries. $47 million for HUD Housing Counseling (same as last year’s funding). This was not a surprise since both the House and Senate had funded at this level, but still good news not to lose funding. HAWK prohibition. Language prohibiting funding from being used for HUD’s HAWK pilot is still included in the bill. HAWK provided reduced mortgage insurance payments for FHA homebuyers who received housing counseling from HUD approved housing counseling agencies. We worked on lifting the prohibition late in the process this year and will start work on this earlier. Hardest Hit Funds. Two billion dollars in unspent Making Home Affordable funds will be reassigned to the state Hardest Hit Funds. The funds will be distributed based on population and on how quickly the state spent their original Hardest Hit Funds. Depending on state priorities, these funds can go to principal reduction programs, blight, and other programs. We have our work [...]
Here is the summary of how the new budget will impact housing counseling: $40 million for NFMC, the National Foreclosure Mitigation Counseling funding (down from $50 million last year). As you know, NFMC had been zeroed out in the Senate and the House had funded it at $42 million, so we ended up very close to the highest number we could have hoped for and avoided having the program completely defunded. A lot of work from many groups went into preserving this badly needed foreclosure counseling funding. Hats off especially to the many groups working on this, including housing counseling groups in Maine, South Florida, Cleveland, northeastern Missouri, and Fresno, Community Action Committee of the Lehigh Valley, HomeFree USA, National Council of La Raza, Homeownership Preservation Foundation, and the Coalition of HUD Intermediaries. $47 million for HUD Housing Counseling (same as last year’s funding). This was not a surprise since both the House and Senate had funded at this level, but still good news not to lose funding. HAWK prohibition. Language prohibiting funding from being used for HUD’s HAWK pilot is still included in the bill. HAWK provided reduced mortgage insurance payments for FHA homebuyers who received housing counseling from HUD approved housing counseling agencies. We worked on lifting the prohibition late in the process this year and will start work on this earlier. Hardest Hit Funds. Two billion dollars in unspent Making Home Affordable funds will be reassigned to the state Hardest Hit Funds. The funds will be distributed based on population and on how quickly the state spent their original Hardest Hit Funds. Depending on state priorities, these funds can go to principal reduction programs, blight, and other programs. One of our strongest [...]
Along with their recently announced HomeReady mortgage program, Fannie Mae also provided a major policy change regarding housing counseling. Fannie Mae will only accept housing counseling provided by HUD-approved housing counseling agencies. This valuable development will mean that the “housing counseling” provided by interested parties in the transaction, most commonly mortgage insurers, will no longer be accepted for Fannie Mae products. Many of us have pressed this issue with their regulator, the Federal Housing Finance Agency, and with Fannie Mae. The perfunctory services provided by for-profit providers were typically delivered after the sales agreement and the mortgage application were signed by the consumer—which meant the major financial decisions had already been made. Next up: Freddie Mac, what are you going to do?
This past February, Julia Gordon from the Center for American Progress was called to testify as an expert witness before the House Financial Services Committee's Housing and Insurance Subcommittee. There were many positive things said about counseling, most notably this quote from Julia: It remains a mystery to me why the entire mortgage industry is not focused like a laser on trying to get housing counseling to every person who’s going to buy a house. This is an incredibly complex transaction that is more money than most consumers will ever spend on anything else in their lifetime and we expect them to just go out in the marketplace to do this for themselves. That just doesn’t make sense when for really, just a very small amount of money, we could significantly increase the success rates of mortgages and do a better job of working with servicers when mortgages get into trouble for some reason, due to a life event.
The Problem with Fannie’s and Freddie’s New 97 Percent LTV Products Last December, Fannie Mae (Fannie) and Freddie Mac (Freddie), announced they would begin purchasing mortgage loans made to borrowers with as little as three percent down. This is an important and generally positive development that will provide a badly needed expansion of credit to well-qualified homebuyers, particularly those who could afford a home but could not or would not take on the additional costs associated with an FHA loan. In a statement endorsing these new loan products, Director Mel Watt of the Federal Housing Finance Agency (FHFA), which regulates Fannie and Freddie, pointed to housing counseling as one of the features that are designed to ensure the safety and soundness of these loans, because housing counseling “improves borrower loan performance.” While research has repeatedly demonstrated that loans made to borrowers who have participated in pre-purchase counseling perform better than loans made to comparable borrowers who have not, the unfortunate reality is that the Fannie and Freddie 97-percent LTV loans do not actually require housing counseling, at least not the counseling that has been studied and shown to improve loan performance. Rather than requiring homeownership counseling, the Freddie product merely requires homebuyer education. The critical distinction is that whereas homebuyer education offers a generic, one-size-fits-all approach, homebuyer counseling works closely with the prospective homebuyers and provides guidance that based on each client’s unique circumstances (e.g., savings, credit score, income). While homebuyer education is undoubtedly valuable, it lacks both the depth and personalization of counseling and has been found to be less effective. For its regular Fannie Mae mortgage product, Fannie has no counseling or education requirement for its 97 to 95 percent LTV applicants. For [...]
NHRC Proposals to Integrate Housing Counseling and Expand Access to Mortgage Credit Last week, the comment period closed for two federal regulations that will impact access to affordable mortgage credit for low- and moderate-income borrowers and the National Housing Resource Center (NHRC) submitted comments that encouraged the agencies to act to expand access to responsible, sustainable mortgage credit. But in line with our mission to integrate housing counseling into the regulatory process, NHRC also made proposals with a housing counseling twist. The Federal Housing Finance Agency (FHFA) solicited public comments in response to its proposed Housing Goals for 2015-17. The Housing Goals set targets for Fannie Mae and Freddie Mac to purchase single family home purchase and refinance mortgages made to low- and very low-income borrowers, as well as for multifamily units that are affordable to low-income renters. NHRC proposed that Fannie Mae and Freddie Mac get extra credit for mortgages on two-to-four unit homes where 1) the home is owner occupied, 2) the owner received housing counseling and 3) the counseling included a landlord counseling component. The extra credit is a 1.25 credit for every mortgage. This extra credit will encourage lenders to guide more people to counseling and encourage owner occupied two-to-four unit lending. Income from the rental units will make the houses more affordable to low- and moderate-income buyers and the counseling will help owners succeed. NHRC also submitted comments last week to the Consumer Financial Protection Bureau (CFPB) in response to proposed changes to the Home Mortgage Disclosure Act (HMDA), which requires financial institutions to publicly report loan and applicant data in order to help determine whether those institutions are meeting the housing needs of their communities in a nondiscriminatory way. [...]
All Eyes on November: Control of the Senate up for Grabs in Mid-Term Elections We are just over a month from the Mid-Term Elections that will decide control of Congress and while the Republicans need to pick up at least six seats to take control of the Senate, there is a very real chance they could do so. Republicans are strong favorites to win Senate seats in red states that are currently held by retiring-Democrats (Montana, South Dakota, West Virginia) and there are strong challenges to Democrats who are running for re-election in red or purple states (Alaska, Colorado, Louisiana, Arkansas, North Carolina, New Hampshire). While there are also competitive races for seats that are currently held by Republicans (Iowa and Kansas), the Republicans currently have more paths to a majority than the Democrats, which leads polling guru Nate Silver of fivethirtyeight.com to give the Republicans a 57.9 percent chance of winning the Senate (as of this writing). The Republicans would get to 50 seats if they can hold on to win the relatively close races in which they’re slightly favored (Arkansas, Alaska, Georgia, and Louisiana). That would mean Democrats would need to sweep the remaining six races in which they’re slightly favored or the race is considered a toss-up (Colorado, Iowa, Kansas, Michigan, North Carolina, and New Hampshire). In this scenario, it is expected that Kansas independent Greg Orman, who has said he would caucus with whichever party has the majority, would caucus with the Democrats, creating a 50-50 split and giving Vice President Joe Biden the tie-breaking vote. So, what would a Republican-controlled Senate (along with a still-Republican-controlled House) mean for housing counseling and beyond? We’ll have more to say on this down the [...]
Meeting with HUD Secretary Julian Castro The National Housing Resource Center’s (NHRC) HUD Task Force met with new Secretary of Housing and Urban Development (HUD) Julian Castro to discuss issues facing the non-profit housing counseling community. The meeting, which was attended by Secretary Castro and other senior HUD officials as well as 40 leaders housing counseling leaders from around the country, provided the Secretary the opportunity to learn more about housing counseling, what is happening on the ground around the country, and to hear about ways in which he can support housing counseling through his leadership at HUD. Our team raised key issues that we think the Secretary could lead on, including: 1. Raising the public profile and perception of housing counseling, for example by talking about the value of housing counseling in speeches and visiting HUD-approved housing counseling agencies when travelling; 2. Fighting for additional federal funding for HUD Housing Counseling Assistance; 3. Working for more effective settlements with mortgage servicers; 4. Convening a technology summit between the housing counseling community, government stakeholders, and private sector stakeholders (e.g. funders, lenders, investors, and technology companies) and to improve the counseling community’s technological capacity; 5. Attending the December 11th national Leaders in Housing Counseling meeting in Washington, DC. In his remarks, Secretary Castro highlighted some of his priorities for his (what he stressed would be a relatively brief) time at HUD, which include increasing access to mortgage credit, a renewed focus on connecting public housing to education and job training programs, and making place-based work as effective as possible through multiple government agencies working in conjunction. (For more on Secretary Castor’s plans with respect to access to credit, check out this Washington Post blog post [...]
Does Housing Counseling Work? According to a New Study by the Federal Reserve Bank of Philadelphia, Yes. (And So Does Homebuyer Education.)
Does Housing Counseling Work? According to a New Study by the Federal Reserve Bank of Philadelphia, Yes. (And So Does Homebuyer Education.) This week, the Federal Reserve Bank of Philadelphia released the findings from its long-term study of housing counseling. Like other recent studies, the Philadelphia Fed study confirmed what the housing counseling community has always known: that housing counseling works. Beyond the study’s actual findings, which we’ll get to shortly, the study is important because of some of its design features. First, the study standardized the content and delivery of the education and counseling, which addresses concerns that have been raised by some over a lack of consistency in the content and delivery of counseling in other studies. This was possible because the education and counseling was provided by a single organization, Philadelphia-based Clarifi. Most importantly, though, the study used a randomized design in which participants were randomly assigned either to a control group, which received two hours of homebuyer education, or a treatment group, which received the two hours of homebuyer education as well as one-on-one counseling. This randomized design is important because it avoids the problem of self-selection, which is the idea that the kind of people who seek out counseling may already be more likely to have positive results and which some critics have used to cast doubt on some studies that have found positive impacts from housing counseling. The study compared the control (education only) and treatment (education and counseling) groups before they received the counseling and/or education and again four years later on 3 metrics: change in average credit score, change in total debt balances, and change in delinquent payments. The study also broke out its findings for participants [...]
Update on Federal Housing Counseling Funding Thanks to the many, many housing counseling groups that participated, we have mobilized more effectively this year on federal housing counseling funding than ever before. Here is where we stand currently: –FY 2015 Senate T-HUD Subcommittee •$49 M for HUD Housing Counseling Assistance •$50 M for NFMC –FY 2015 House Full Appropriations Committee •$47 M for HUD Housing Counseling Assistance •$50 M for NFMC The Good News: The Senate increased the HUD Housing Counseling funding from last year’s $45 million to $49 million. Housing Counseling was one of the very few programs to see an increase in the HUD budget and most saw cuts. The House T-HUD subcommittee initially passed a HUD budget with $45 million for HUD Housing Counseling. Working closely with the Community Action Committee of the Lehigh Valley and Rep. Charlie Dent, we were able to get an amendment passed in in the Appropriations Committee raising the amount to $47 million. The Bad News: Last year’s housing counseling allocations were $45 million for HUD Housing Counseling and $67.5 million for the National Foreclosure Mitigation Counseling program (NFMC). This represented a total of $112.5 million for FY 2014. In the current budget, numbers are likely to be $47 to $49 million for HUD Housing Counseling and $50 million for NFMC. This represents a likely total of $97 to $99 million or a net loss of $13.5 to $15.5 million in federal housing counseling funding from last year’s totals. What did we do this year? A sign-on letter to the House and Senate with signatures from 480 groups -- a record turnout. Face to face meetings with House and Senate members Phone meetings with T-HUD House [...]
On Wednesday, May 21, the House Appropriations Committee approved a Transportation, Housing and Urban Development spending bill that would increase funding for HUD Housing Counseling Assistance to $47 M (from $45 M in FY 2014). This was a big victory for the non-profit housing counseling community, as the Republican-controlled House has generally preferred cutting programs in recent years. While the bill that was voted out of the Transportation, Housing and Urban Development (THUD) subcommittee provided level-funding for HUD Housing Counseling, the breakthrough came when Congressman Charlie Dent, a moderate Republican who represents Pennsylvania’s Lehigh Valley, took up the cause of increasing funding for housing counseling. Congressman Dent then worked with the subcommittee Chairman Tom Latham (R-IA) to find room in the budget to offset the increase for housing counseling and the increase was included in the bill that was passed by the full Appropriations Committee. Special recognition goes to Alan Jennings of the Community Action Council of Lehigh Valley, who worked closely with Rep. Dent on this initiative. Unfortunately, the news was not all good. The House bill also cuts funding for the National Foreclosure Mitigation Counseling (NFMC) program to $50 M (from $67.5 M in the FY 2014 budget). On the other hand, this was not a surprise as appropriators have stressed NFMC is meant to be a temporary program and the House funded the program at President Obama’s requested level. Attention now turns to the Senate, where the goal is to win support for funding the HUD Housing Counseling program at President Obama’s requested level of $60 M. Whatever number comes out of the Senate, we expect it will be higher than the House number, meaning it will set the ceiling for the [...]
On Friday, January 17th, President Obama signed into law an appropriations bill that will fund the federal government through September 30, 2014. There was some good news and some less good news for the housing counseling community. Here is a breakdown: Good News: We have a budget! The fact that Democrats and Republicans even agreed on a budget, as opposed to funding the federal government through a series of continuing budget resolutions, is very good news. As we all know too well, short-term, stop-gap funding measures make it extremely difficult for agencies that rely on federal funding to plan appropriately. Now, at least, agencies will be able to plan for the remainder of FY 2014. Another encouraging sign here is that the agreement that was brokered by Rep. Paul Ryan (on behalf of House Republicans) and Sen. Patty Murray (on behalf of Senate Democrats) included an agreement on an overall spending level for FY 2015. As you may recall, the impasse with the FY 2014 budget was that House Republicans and Senate Democrats were more than $100 billion apart on their overall spending number. Now that the two sides are on the same page on that number, it will be much less of a challenge for them to reach an agreement on how to allocate those dollars between programs. In short, there is a much better chance of an on-time budget for FY 2015 than there has been in years. Good News: $45 Million for HUD Housing Counseling Assistance While not great news (we had pushed for $55 million), the allocation of $45 million for HUD Housing Counseling Assistance is a slight increase over FY 2013 (when the $45 million allocation was reduced to around [...]