April 7, 2015
Tuesday’s Regulatory & Legislative Round-Up
- The Department of Housing and Urban Development Recently Released an Evaluation of the Neighborhood Stabilization Program (NSP) which finds that NSP was too modestly funded to consistently arrest the declines in property values or achieve the impacts that were hoped for.
April 7, 2015 | Permalink | No Comments
April 6, 2015
Housing and Transportation Affordability Index
The Center for Neighborhood Technology has a Housing and Transportation Affordability Index which
provides a more comprehensive way of thinking about the true affordability of place. It presents housing and transportation data as maps, charts and statistics for 917 metropolitan and micropolitan areas—covering 94% of the US population. Costs can be seen from the regional down to the neighborhood level.
The recent focus on combined housing and transportation costs is very useful when planning affordable housing policies as total housing and transportation costs provide a better guide to housing cost burden than housing costs alone.
The Housing and Transportation Affordability Index
shows that transportation costs vary between and within regions depending on neighborhood characteristics:
- People who live in location-efficient neighborhoods—compact, mixed-use, and with convenient access to jobs, services, transit and amenities—tend to have lower transportation costs.
- People who live in location-inefficient places—less dense areas that require automobiles for most trips—are more likely to have higher transportation costs.
The traditional measure of affordability recommends that housing cost no more than 30% of household income. Under this view, a little over half (55%) of US neighborhoods are considered “affordable” for the typical household. However, that benchmark fails to take into account transportation costs, which are typically a household’s second-largest expenditure. The H+T Index offers an expanded view of affordability, one that combines housing and transportation costs and sets the benchmark at no more than 45% of household income.
When transportation costs are factored into the equation, the number of affordable neighborhoods drops to 26%, resulting in a net loss of 59,768 neighborhoods that Americans can truly afford. The key finding from the H+T Index is that household transportation costs are highly correlated with urban environment characteristics, when controlling for household characteristics.
A lot of housing policy rests on the definition of affordability, whether it is that housing cost should be no more than 30% of household income or that housing and transportation costs should be no more than 45% of household income. It would be useful for researchers to take a fresh look at those benchmarks to ensure that they make sense in today’s economy.
April 6, 2015 | Permalink | No Comments
Monday’s Adjudication Roundup
- HSBC facing suit for breaching its duties as trustee for 271 residential mortgage-backed securities trusts.
- The US Supreme Court considered whether debtors should have an absolute right to appeal denial of proposed bankruptcy plan after three circuit courts have found that debtors can automatically can appeal, while in other jurisdictions, the bankruptcy judge must permit the appeal.
- BNP Paribas Mortgage Corp. suit from 2009 regarding Bank of America’s mishandling of hundreds of millions of dollars of mortgage-backed notes issued by Taylor Bean & Whitaker Mortgage Corp. finally settles.
April 6, 2015 | Permalink | No Comments
April 3, 2015
Seismic Shift in Lending?
Researchers at the American Enterprise Institute’s International Center on Housing Risk have posted a study that shows a “seismic shift in lending away from large banks to nonbanks.” (1) The key takeaways are
- The dramatic decline in agency market share for large banks continued unabated in February, offset by an equally dramatic increase in the nonbank share.
- Since November 2012, the large bank share has dropped from 61% to 33%, a move of 28 points, including a 1.2 point drop in February, a dramatic decline that has been met point-for-point by a 27 point increase in the nonbank share from 24% to 51%. Large nonbanks and other nonbanks have participated equally in the increase, accounting for 14 points and 13 points respectively.
- Large banks have reduced the riskiness of their agency mortgage originations over the past few years. Nonbanks, in contrast, have shifted toward riskier loans as they have increased their market share.
- Loans originated through the retail channel are less risky than loans originated through the broker and correspondent channels. This is true both for large banks and for nonbanks. But retail channel loans from nonbanks are substantially riskier than such loans from large banks.
- The bottom line is that large banks attempting to regain market share would have to move well out the risk curve. (1)
While these findings are presented as negative developments, it is unclear to me that they are. Market share among big players in the mortgage market does vary dramatically over time. Given the new regulatory environment imposed by Dodd Frank, it is not surprising that the industry would readjust in some ways and that specialized nonbanks might increase market share once the financial crisis subsided. It is also unclear that moving out the risk curve is bad in today’s environment. Today’s lenders are quite conservative compared to the pre-crisis ones and there is good reason to think that lenders could safely loosen their underwriting somewhat. This is not to say, of course, that they should return to the bad old days. Just that there are more creditworthy borrowers out there.
April 3, 2015 | Permalink | No Comments
Friday’s Government Reports
- Fannie Mae’s Housing Forecast for March Predicts Steady Growth for 2nd Quarter of 2015 Through Year End
- Office of the Comptroller of the Currency’s Mortgage Metrics Report Shows a Decline in Foreclosure Rates for the 4th Quarter of 2014
- U.S. Department of Housing and Urban Development and Census Bureau Release New Home Sales Data For February 2015 Which Were Significantly Above Projected Estimates
April 3, 2015 | Permalink | No Comments
April 2, 2015
Housing Affordability for Moderate-Income Households
The Center for Housing Policy’s most recent issue of Housing Landscape gives its Annual Look at The Housing Affordability Challenges of America’s Working Households. The Center finds that
Overall, 15.2 percent of all U.S. households (17.6 million households) were severely housing cost burdened in 2013. Renters face the biggest affordability challenges. In 2013, 24.3 percent of all renter households were severely burdened compared to 10.0 percent of all owner households. (1, footnote omitted)
The Center summarizes “the severe housing cost burdens of low- and moderate-income working households.” (1) Unsurprisingly. these households face
significantly greater affordability challenges than the overall population. In 2013,21.2 percent of working households were severely cost burdened (9.6 million households).Twenty-five percent of working renters and 17.1 percent of working homeowners paid more than half of their incomes for housing that year. (1)
The report notes some modest good news:
Since 2010,the overall share of working households with a severe housing cost burden has fallen.This modest decline is the result of a complex combination of factors, including the shift of some higher-income households from homeownership into rental housing. An insufficient supply of rental housing and sustained increases in rents have led to millions of working households having to pay too much for housing or live far from their jobs, in substandard housing,or in poor-quality neighborhoods. (1)
Federal and local housing policy has not yet come to grips with the fact low- and moderate-income households have been paying a significant portion of their income in housing costs year after year. Household have to make difficult trade-offs among cost, distance from employment, housing quality and neighborhood quality.
The Center notes that more can be done to support affordable housing at the federal and state levels, but it is not clear to me that there are any politically feasible policy responses that can make a serious dent in the affordability of housing for working households.
April 2, 2015 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Round-Up
- Federal Reserve Bank of Boston’s Study, The Color of Wealth in Boston Finds, Disparities In Wealth Across Asset Classes and that Non-Whites Are Significantly Less Likely to Own a Home and Hold Mortgage More Debt When they Do
- The NYU Furman Center Recently Released a White Paper, Responding to Changing Households: Regulatory Challenges for Micro Units and Accessory Dwelling Units and a Research Brief, Compact Units: Demand and Challenges Which Assess the Demand for and Affordable Housing Implications in Addition to the Regulatory Challenges of Such Developments
April 2, 2015 | Permalink | No Comments
