April 28, 2015
- The House recently passed H.R. 4383 which would cap the budget of the Consumer Financial Protection Bureau and mandate creation of a Small Business Advisory Board, this is essentially a budget cut despite the fact that The CFPB receives its funding as transfers from the Federal Reserve and is not part of the congressional appropriations process.
- The Department of Housing and Urban Development has announced changes to the Distressed Asset Stabilization Program, DASP will now require a loan servicer to wait 1 year before commencing disclosure proceedings. The changes will also include strict compliance requirements and harsher penalties for non-compliance by servicers.
April 27, 2015
The Urban Justice Center’s Community Development Project has issued a report, The Burden of Fees: How Affordable Housing is Made Unaffordable. The introduction reads,
Tenants in New York City’s poorest neighborhoods are under attack. Despite the existence of laws such as rent stabilization to protect tenants from high rents, landlords are creating new ways to push rent stabilized tenants out of their homes. One such tactic is the use of non-rent fees, a confusing and often times unwarranted set of charges that are added to a monthly rent statement . . .. These include fees on appliances (air conditioner, washing machine, dryer, and dishwasher), legal fees, damage fees, Major Capital Improvement (MCI) rent increases and other miscellaneous fees. Often these fees appear on a tenant’s rent bill without any explanation. If a tenant fails to pay, even if they are unaware of why the fee was imposed, they are sent letters that make them feel that they are being harassed and are threatened with eviction by the landlord. Most tenants have a right to object to many of these fees, and landlords are legally prohibited from taking tenants to Housing Court solely for non-payment of additional fees. But many tenants don’t know their rights about the fees and often pay them when they shouldn’t. For low-income and working class tenants who struggle each month to pay rent, these fees add up and make their housing costs unaffordable. While some of the fees are legal, many of them are not, and the consistency and pattern of the way the fees are being charged and collected suggests that some landlords are intentionally increasing tenants’ rent burdens to push out long- term, rent stabilized tenants.
This problem is proliferating in the Bronx, where New Settlement’s Community Action for Safe Apartments (CASA) works to improve living conditions and maintain affordable housing. This is particularly apparent in buildings owned by Chestnut Holdings, a company that is fast becoming one of the biggest landlords of rent stabilized buildings in the Bronx.
* * *
All survey respondents live in rent stabilized buildings owned by Chestnut Holdings. In total, the coalition collected 172 surveys from 23 buildings, representing 13% of the number of apartments in those buildings. The research sample accounts for 4% of all the apartments that Chestnut Holdings owns, and 28% of the buildings. Researchers also collected rent bills and other supplemental materials (including letters to and from landlords, housing court decisions, and more) from 196 Chestnut Holdings tenants. Coalition members chose to focus on these buildings because they are rent stabilized and located in the neighborhoods where each organization is actively working. Data in this report comes from surveys, recent rent bills collected from Chestnut Holdings’ tenants and interviews with tenants.
Overall, we found that the problem of non-rent fees is serious and widespread in the Bronx. 81% of the tenants we surveyed had been charged some sort of fee. From the rent bills we reviewed for this report, the average tenant had $671.13 in non-rent fees on their most recent rent bill. (1-2)
This document is obviously an advocacy document and not a piece of objective scholarship. Moreover, its methodology may not be rigorous enough to allow us to extrapolate much from its findings. That being said, the survey responses themselves reveal a serious problem: alleged average non-rent fees of nearly $700 for each survey respondent seems very, very high, even if we limit the findings to the respondents themselves.
In the 1970s, predatory landlords hired bruisers with bats and pit bulls to frighten tenants into leaving their homes. In the 2000s, a new generation of predatory landlords used abusive court filings to achieve the same purpose. There is a very real risk that high non-rent fees represent a new tactic for predatory landlords to drive out rent-regulated tenants with under-market rents. To the extent that non-rent fees represent a new tactic to harass tenants, government regulators should actively seek to end it and punish those who employ it.
- Quicken Loans Inc. filed a complaint against the Justice Department and the U.S. Department of Housing and Urban Development claiming that they tried to get Quicken to make false admissions during a settlement. The Government in turn sued Quicken under the False Claims Act for improper underwriting of mortgages and benefitting under the Federal Housing Administration insurance payouts.
- The United States Supreme Court denied cert to the U.S. Department of Housing and Urban Development, which argued that using contracts rather than grants to fund Section 8 public housing projects would impair the program.
- The Second Circuit Court of Appeals revived suit against Citigroup. The claims, which alleged that Citigroup tricked a Korean bank into taking $25 million in toxic collateralized debt obligations, were dismissed in the New York District Court in March 2013.
- Federal court requires RBS Securities to hand over which specific loans it is going to re-underwrite to National Credit Union Administration after allegedly causing the failure of at least two credit unions by misleading investors over hundreds of millions of dollars in mortgage-backed securities.
- Bank of America asks Second Circuit to vacate a $1.3 billion fine after jury found BofA had defrauded Fannie Mae and Freddie Mac using its “High-Speed Swim Lane” program.
April 24, 2015
The Urban Institute has posted a Housing Finance Policy Center Brief, The GSEs’ Shrinking Role in the Multifamily Market. It opens,
Though the two government-sponsored enterprises (GSEs)—Fannie Mae and Freddie Mac—are best known for their dominant role in the single-family mortgage market, they have also been major providers of multifamily housing financing for more than 25 years. Their role in the multifamily market, however, has declined substantially since the housing crisis and has reverted to more normalized levels. In addition, even as the GSEs continue to meet or exceed their multifamily affordable housing goals, their financing for certain underserved segments of the market has fallen steeply in recent years.
Given recent declines, policymakers and regulators should consider maintaining or increasing the GSEs’ footprint in the multifamily market, especially in underserved segments. The scorecard cap increases and exemptions recently employed by the Federal Housing Finance Agency (FHFA) to slow the decline in GSE multifamily volume have been somewhat effective, but they may not be enough to prevent the GSEs’ role from shrinking further. (1)
The policy brief’s main takeaway is that “policymakers and regulators should consider maintaining or increasing GSEs’ role in the multifamily market.” (8) I was struck by the fact that this policy brief pretty much took for granted that it is good for the GSEs to have such a big (and increasing) role in the multifamily market:
Though the multifamily market continues to remain strong and private financing is readily available today, it is also poised to grow significantly because of rising property prices and higher future demand. This raises the question of whether the GSEs should continue to shrink their multifamily footprint even further below the level of early 2000s, a period of relatively stable housing market. (8)
Government intervention in markets is usually called for when there is a market failure. The policy brief indicates the opposite — “private financing is readily available today.” The brief does argue that financing “backed by pure private capital is likely to be concentrated within the more profitable mid-to-high end of the market.” (9) That does not indicate that there is a market failure, just that borrowing costs should be cheaper for such projects. If the federal government is going to effectively subsidize a functioning credit market through the GSEs, it should make sure that it is getting something concrete in return, like affordable housing. Just supporting a credit market generally because it tends to support affordable housing is an inefficient way to achieve public goods like affordable housing. It also is a recipe for special interest capture and a future housing finance crisis. To the extent that this private credit market can function on its own, the government should limit its role to safety and soundness regulation and affordable housing creation.
- The Federal Housing Finance Agency (FHFA) released its results to the Fannie Mae and Freddie Mac Guarantee Fee Review. Following the release, the FHFA announced that the fees would remain the same with modest adjustments.
- HUD released the 2009-2011 National Rental Dynamics Reports, which tracks changes in rental housing affordability.
- Enterprise Community Partners and the National Low Income Housing Coalition and 45 other affordable housing advocates signed a letter to the appropriations committees of the house and senate urging them to pride at least $1.2 billion for the HOME Investment Partnerships Program (HOME). a block grant that provides states and localities critical resources to help them respond to affordable housing challenges.
- A recent study by the National Association of Realtors finds that formerly distressed homeowners with restored credit are re-entering the housing market, nearly a million of these former owners have likely already purchased a home again, and an additional 1.5 million are likely to become eligible and purchase over the next five years, representing an additional source of buyer demand for the housing market.
- National Association of Realtors also released it’s March Realtor Confidence Index which finds gains in home sales and prices but noted concern over lender delays and tight inventory, especially for affordable units.