June 9, 2015
Tuesday’s Regulatory & Legislative Round-Up
- The Consumer Financial Protection Bureau issued a consumer advisory in the first regulatory action prompted by the results of its reverse mortgage report entitled A Closer Look at Reverse Mortgages. Advertisements often lead retirees to believe that reverse loan offers are part of a government program, do not involve interest and fees and fail to mention or prominently display important details regarding these terms.
- The U.S. Department of Housing and Urban Development (HUD) is seeking comment regarding an expansion of the housing options for Housing Choice Voucher Families. In many regions the rental subsidy is not sufficient to allow renters to live in lower poverty neighborhoods.
- HUD also launched a new website for training housing counseling agencies, with an eye toward improving customer service and counseling skills.
June 9, 2015 | Permalink | No Comments
June 8, 2015
Housing, Out of Reach
The National Low Income Housing Coalition has released Out of Reach 2015: Low Wages & HIgh Rents Lock Renters Out. The Introduction reads,
Since its founding in 1974 by federal housing policy expert, Cushing Dolbeare, NLIHC has used data to document America’s housing affordability crisis. As part of her original analysis, Cushing observed a fundamental mismatch between the wages people earn and the price of decent housing, what we now call Out of Reach. Today, housing is still out of reach for far too many, and the gap between what people earn and the price of decent housing continues to grow.
The 2015 Housing Wage is $19.35 for a two-bedroom unit, and $15.50 for a one-bedroom unit. The Housing Wage for a two-bedroom unit is more than 2.5 times the federal minimum wage, and $4 more than the estimated average wage of $15.16 earned by renters nationwide. The Housing Wage is an estimate of the full time hourly wage that a household must earn to afford a decent apartment at HUD’s estimated Fair Market Rent (FMR), while spending no more than 30% of income on housing costs. The data in Out of Reach illustrate the gap between wages and rents across the country. In 13 states and D.C. the 2015 Housing Wage is more than $20 per hour.
Many renters earn far less than the Housing Wage in their community and struggle to find an affordable place to live. This edition of Out of Reach highlights some of the economic challenges facing low income renters, including lagging wages, inconsistent job growth, and the rising cost of living. Undoubtedly, the lack of affordable housing remains the overarching problem for low income households, a problem made worse by these economic challenges.
Expanding and preserving the supply of quality, affordable housing is essential to any strategy to end homelessness, poverty, and economic inequality. As our nation’s policymakers seek ways of overcoming these societal ills, access to affordable housing must be a cornerstone of any proposal. (1, emphasis removed)
Some of the particular findings are disturbing. For instance, “There is no state in the U.S. where a minimum wage worker working full time can afford a one-bedroom apartment at the fair market rent.” (1) This state of affairs reflects many trends, including the fact that the minimum wage has not kept pace with inflation and is worth less today than it was a few decades ago. It is worth unpacking this finding a bit.
The report defines “affordability” as costing “no more than 30% of a household’s gross income” for rent and utilities. (2) It defines “Fair Market Rent” as “the 40th percentile of gross rents for typical, non-substandard rental units.” (2) In some ways, this report overstates the affordability crisis because minimum wage workers may be able to afford housing that falls below the 40th percentile of gross rents. Perhaps a better measure would have been to determine how many units are available to the minimum wage workers in that jurisdiction. That being said, the report does document how “rents remain out of reach for many renters.” (2) For instance, 75% of extremely low income renters spend more than 50% of their income on housing costs . . ..” (5)
Income and wealth inequality have reached extreme proportions in America today. This report highlights how this is playing out in the context of the housing market. (I would also note, however, that the report does not account for how restrictive land use policies keep the supply of new housing from growing many communities, but that may just be a subject for another report.)
June 8, 2015 | Permalink | No Comments
Monday’s Adjudication Roundup
- The United States Supreme Court held that Chapter 7 debtors cannot get rid of junior liens on underwater home loans under the bankruptcy code.
June 8, 2015 | Permalink | No Comments
June 5, 2015
Dealing with Debt Collectors
I was quoted by CreditCardGuide.com in Know Your Rights with Debt Collectors. It reads, in part,
Regardless of how deep your financial troubles go, you are protected by state and federal law when it comes to how debt collectors can treat you.
First off, you should understand who the people are behind the debt collection notices and phone calls. “A debt collector is defined as someone who is not the original creditor,” explains David Reiss, professor of law and research director of the Center for Urban Business Entrepreneurship at Brooklyn Law School, who also writes the REFinBlog. And, he says, what might start out as a legitimate debt collector contacting you on behalf of a creditor, can change over time since debt collection companies often sell their lists to other companies. Unfortunately, your contact information might end up with a fly-by-night operation that resorts to shady practices, such as trying to frighten you with threats and bullying.
* * *
Consider this your peek into the debt collection rulebook so that you can arm yourself against abusive tactics:
What debt collectors cannot do
- Call you under a false identity. “That means they cannot say they are an attorney if they are not, or say they are from the sheriff’s office if they are not,” says Reiss.
- Discuss your debt with your employer, family members (other than your spouse), neighbors or publish your name on a list of people who owe money. “They can call a third party and leave a message for you, but they can’t disclose the details of your debt,” says Tayne. Generally, they can only discuss your debt with you, your spouse and your attorney.
- Call you at ridiculous hours, such as before 8 a.m. or past 9 p.m. They also cannot call you repeatedly in a single day.
- Be abusive, threatening or vulgar. In other words, says Tayne, they cannot bully you by calling you a deadbeat or loser for not making payments, and they should never curse at you.
- Make false threats that they will seize your property, drain your bank accounts or arrest you, says Reiss.
What debt collectors can do
- Contact you in person, by mail, by phone or by fax between the hours of 8 a.m. and 9 p.m. However, they can’t contact you at work if they are told you can’t get calls there. Also, if you write to them to stop calling you, they must comply, although they might respond by suing you, so think carefully before sending that letter.
- Sue you in court. If they do, you’ll have to appear, and it’s in your best interest to hire an attorney. Ideally, you want to work something out before getting to this stage, says Reiss, because court and attorney costs can pile up.
- Report you to the credit agencies. “Debt collectors can report your default to the credit bureaus,” says Reiss. This negative item will remain on your report for seven years, and your credit score will take a hit.
What you can do
If you think debt collectors are crossing the line, you do have options for recourse, says Reiss. “First, build up a paper record as this can help you later on.” That includes taking notes on every conversation you have, with dates, times and who you spoke to.
You could also try sending a cease-and-desist letter, or asking a lawyer to do so on your behalf, says Reiss. “They may be afraid and back off if a lawyer is involved,” he says.
Tayne finds that such letters aren’t always effective for more hostile debt collectors. “If they’re really out of line, file a lawsuit in small claims court,” she says.
You should also report shady collectors to your state attorney general’s office as well as the Consumer Financial Protection Bureau, say Reiss and Tayne.
If you do end up making a payment to a debt collector, request documentation that states your debt is paid, and then be sure that the payment is reflected on your credit reports within 90 days. You can get your credit reports for free at AnnualCreditReport.com.
Ideally, you don’t ever want to be in a situation in which debt collectors are tasked with contacting you, and incentivized to do whatever it takes to get you to pay them. But if you do end up in that situation, knowing your rights is your best defense. Says Reiss, “Debt collectors do not want consumers to invoke their rights under the FDCPA because the act can severely limit what they can do.”
June 5, 2015 | Permalink | No Comments
Friday’s Government Reports Roundup
- United States Government Accountability Office releases report: “Collateral Requirements Discourage Some Community Development Financial Institutions from Seeking Membership”.
- The National Low Income Housing Coalition (NLIHC) released its Out of Reach 2015 report, in which it asserts that low wages and high rents are preventing people from living in many different areas of the country. It states that the most expensive city to live in is San Francisco, where a worker would need to make $40/hour to afford a decent two-bedroom apartment.
- The Federal Reserve released its Report on the Economic Well-Being of U.S. Households in 2014, which reveals how adult-consumers feel they are doing financially. Though in a number of categories adults’ beliefs on how they are doing went up beneficially, half of all renters that wanted to purchase a home could not afford the down payment and 31% were unable to qualify for a mortgage.
June 5, 2015 | Permalink | No Comments
June 4, 2015
Be Careful What You Wish For GSEs
Jim Parrott and Mark Zandi have released a report, Privatizing Fannie and Freddie: Be Careful What You Ask For. The authors go through a very useful exercise in which they break down the cost of reprivatizing. The report opens,
Few are happy with the current housing finance system that has Fannie Mae and Freddie Mac in conservatorship and taxpayers backing most of the nation’s residential mortgage loans. Yet legislative efforts to replace the system have largely faltered, raising concern that we may not have the political will or competence to replace it any time soon.
This has created an opening for those who contend that we should not replace the system at all, but simply recapitalize the government-sponsored enterprises and release them from conservatorship. Fannie and Freddie were remarkably profitable prior to the financial crisis, after all, and have been consistently in the black recently. Why embark on the laborious, risky and now stalled process of fundamental reform when we can simply return to a model that we know can provide steady access to affordable, long-term fixed-rate lending?
While we both have serious concerns with the wisdom of releasing the duopoly back into the market, we thought it useful to set those concerns aside for the moment to explore the economics of the move. The discussion often takes for granted that this path would take us back to the world precrisis, but economic conditions and the regulatory environment have changed in ways that would significantly affect how Fannie and Freddie would function as reprivatized institutions. (2)
Parrott and Zandi conclude that
The debate over whether to recapitalize and release the GSEs into the private market is often framed as a choice of whether or not to return to a prior period in lending. For all its shortcomings, the argument goes, at least we know what to expect in the cost and availability of mortgage credit. But this is a misconception. In releasing the GSEs into the private market again, we would release them into a very different regulatory and economic environment, and they would respond, not surprisingly, by charging very different mortgage rates. (4)
I really have no argument with Parrott and Zandi’s paper, but I would note that their conclusions don’t differ so much from the pre-crisis academic papers that attempted to quantify the increase in mortgage rates that would result from privatizing the two companies — fifty basis points, give or take (see, for example, The GSE Implicit Subsidy and Value of Government Ambiguity).
I value Parrott and Zandi’s paper because it reminds us to keep pushing forward with real housing finance reform even though Congress has not yet made any progress on that front.
June 4, 2015 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Round-Up
- National Association of Realtors reports April Pending home sales, up 1.3% – the strongest in 9 years.
- A joint study by the NYU Furman Center and Capital One Renting in America’s Largest Cities: National Affordable Rental Housing Landscape reveals a trend in all 11 of the largest metro areas in the U.S., which the study focused on, of rent increases outpacing inflation, tending to not keep up with the increase in number of renters and an increase in severely rent burdened low income renters.
- Zillow’s recent research concludes that the rent affordability crisis leads to lower homeownership rates because renters cannot afford to save for a downpayment in high rent metros like Los Angeles.
June 4, 2015 | Permalink | No Comments
