More Data Needed on Homeownership Counseling

The Consumer Financial Protection Bureau (CFPB) has an opportunity to dramatically increase the amount of data on the availability and effectiveness of homeownership counseling. As discussed previously in this column, the CFPB is required to improve the publicly available data on home lending per the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Manna, of course, is biased about the effectiveness of homeownership counseling. On an annual basis, Manna provides homeownership counseling to about 250 clients, most of whom receive both one-on-one counseling and participate in peer group sessions in our Homebuyer Club chapters. During 2014, 87 clients improved their credit scores, 14 purchased homes, and another 14 are in the final stages of purchasing their homes.
Manna’s biases aside, rigorous research has demonstrated the effectiveness of counseling. In a study assessing the effectiveness of counseling conducted by the NeighborWorks counseling network, clients who had received pre-purchase counseling were one-third less likely to become seriously delinquent on their loans than borrowers who did not receive counseling .In addition, a study conducted by the Federal Reserve Bank of Philadelphia in 2014 found that clients receiving group counseling and one-on-one counseling experienced greater improvements in their credit scores and were less likely to become delinquent on their loans than borrowers who did not receive counseling.

Given these beneficial impacts of counseling, it behooves federal agencies such as the CFPB to improve publicly available data on the extent and effectiveness of counseling. The current research relies on labor intensive surveys that cover only certain localities and time periods. In contrast, the CFPB could require the collection of counseling data on an annual basis, across the country, and as detailed as the census tract level. The idea would be to add data on counseling to HMDA data. HMDA data is collected annually by the Federal government and includes data on lending by demographics of the borrower and characteristics of the loan such as purpose and type. The HMDA data is reported on the census tract level.
Adding data on counseling would be a powerful enhancement to the HMDA. First, it would be possible to know whether counseling was effectively reaching traditionally underserved communities such as neighborhoods east of the Anacostia River. Data would be available on the race, gender, and income of the counseling recipients. Second, Manna agrees with the recommendations of the National Housing Resource Center regarding types of data to report on counseling. It would be desirable to collect data on the extent of counseling (whether it is intensive preparation to qualify for a loan or more along the lines of education sessions) and the mode of counseling (phone, on-line, and in-person).
Combined with other pending improvements to HMDA data, data on counseling would be quite helpful in evaluating counseling. For example, were borrowers receiving counseling less likely to receive loans with abusive terms and conditions? If so, does the likelihood of receiving responsible loans increase with a certain type of counseling (in-person as opposed to on-line)? In the future, HMDA data may also be combined with data on loan performance on a census tract level. We may be able to determine if foreclosure rates are systematically lower in census tracts in which a higher percentage of borrowers received counseling.
How would this data be collected? Nothing is simple in data collection, but the hope is that this would be straightforward. Borrowers could bring counseling certificates to lenders. The certificates could also include a standard form indicating the type and model of counseling.
What is the likelihood that counseling data will be added to the HMDA data? The CFPB did not propose including counseling data in HMDA data. However, Manna and other community-based organizations have suggested that counseling be included in the data. It is expected that the CFPB will be finalizing its proposed enhancements to HMDA data this year. We hope that the CFPB sees the virtue of including some counseling elements in the data. But if not, all hope is not lost. The agency will most likely be periodically considering revisions to the data. Manna will keep pushing, which will increase the likelihood of counseling being added to the data.

Josh Silver is the Development Manager at Manna, Inc. Prior to his time at Manna, Josh served as the vice president of research & policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter

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From Prince to Pauper

PG

 
Once upon a time Prince George’s county in Maryland was one of the wealthiest African American counties in the country, a rare feat indeed, because this was accomplished while becoming blacker. This was all possible because of the rising home prices of the early 2000s. During the housing crisis of 2008 families of all demographics have lost substantial amounts of wealth, but communities of color have lost far more wealth than their white counterparts and have seen a far slower recovery as well.

This leads to the question: Why don’t communities of color have access to the same level of economic security as the rest of the nation? Many families of color had to struggle just to break into the middle-class, hopefully providing a better life for future generations, and have basically watched those efforts vanish overnight. While Prince George’s County remains a beautiful place to live, the area has the highest foreclosure rate of any area in the greater metropolitan area.This happened because of disproportionate predatory lending in the county, which in turn has affected prices rising again and many families being under water. Families are watching their finances stretch to extremely thin margins, which translates into tough decisions like where to send children to school, saving for college, and creating a nest egg for the future, all things that significantly impact the well-being of future generations.

Recent analysis of data provided by the Federal Reserve Survey of Consumer Finances shows that when it comes to wealth derived from homeownership blacks on average only have $31,118 in comparison to $126,064 associated with their white counterparts. The financial crisis of 2008 has essentially wiped out one-third of the wealth African American families built between 2010 and 2013. While majority white areas have almost seen a full recovery in housing value, in communities of color the results have been the complete opposite.
Historically, the tools of economic mobility have always been less accessible for people of color. Post World War II policies put forward by the Federal Housing Administration excluded blacks and many other communities of color from homeownership opportunities that help white families build the majority of their wealth. In the most recent housing crisis, minorities were disproportionately targeted with predatory loans and higher interest rates, actions that have lead the US Department of Justice to sue several large financial institutions. In order for the District, and society as a whole to remain economically and culturally accessible to all, economic mobility, opportunity and justice must be realty, not just a pipe dream. 
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Not In My Backyard

NIMBYism (Not In My Backyard) is a phenomenon that has always been around and has recently taken the District by storm. The phenomenon dictates that communities with a large number of new residents or communities that see a rise in the home values, no longer want affordable housing options of any kind in their neighborhoods – this could even go for folks who have owned in the neighborhood for a while and could not afford the current home prices. Certain groups of individuals may be welcome, such as Fire fighters, Police officers, Teachers and a few other professions. However, many other professions or circumstances are not as welcome.

On average, one thousand new residents move into the District every month. This increase in population, coupled with already high housing cost, has made it increasingly difficult for the lower-income, senior and at-risk District households to find quality affordable housing. Mobility and a transient lifestyle are often cited as the reason for the push in micro-units and luxury apartments, despite the city’s massive demand for affordable.

The prejudices against residents needing affordable housing are often times rooted in racial, ethnic, or economic prejudices, but are usually hidden behind language like “decreasing property values, unwanted and undesirable changes in the character of the community, and increased crime”. Many of these biases and prejudices are due to a lack of education. Affordable housing typically has a negative connotation, and is usually associated with only Public Housing, but this is only one type of affordable housing. Permanent Supportive housing, transitional housing, affordable rentals for income categories going all the way up to 120% of the area median income, and affordable homeownership are all components of the District’s affordable housing landscape, a landscape that many people move along. So, a struggling family in need of stable housing and a young professional looking for an apartment that fits their entry level salary can both be recipients of the city’s affordable housing priorities, and not all types of affordable housing require permanent subsidy, but can be financed in different ways and include subsidies that are paid back.

We all need to have a larger vision of our city’s residents and affordable housing needs and options. One day, it could be you or someone you know…..

Nathan Smith, contributor-Nathan Smith is a Manna board member and dedicated community advocate for affordable housing. Nathan has worked at the Veteran’s Consortium for over 20 years, plays in a couple bands, and is active in his church Shield of Faith Christian Center. 

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Urban Institute Housing Needs Assessment: A Response

In recent days much news had been made about the Urban Institute Report focusing on the District’s housing needs, specifically focusing on the District’s Inclusionary Zoning (IZ) and Affordable Dwelling Unit (ADU) programs.  Manna, Inc. was honored to be one of the 13 organizations interviewed for this report, which was commissioned by the Deputy Mayor of Planning and Economic Development as part of the recommendation of former Mayor Vincent Gray’s comprehensive strategy for addressing the city’s housing needs.

In the report, the Urban Institute makes great recommendations on changes that are needed to make IZ a viable solution for some of the District’s housing needs. Specifically on the homeownership side, many structural issues remain that need to be tackled in order for these programs to be both beneficial for residents, as well as the city. One of the helpful changes the report recommends is simplifying IZ’s lottery system, allowing developers to opt for a marketing plan and IZ owners to use a real estate professional (though the price of a realtor is not added into the maximum resale price). Another great recommendation is requiring an 8 hour education course for these households, ensuring they completely understand the difference between IZ and traditional homeownership. While these recommendations are helpful in order for these programs to get better, more must be done.

Here are some structural changes that can be made and why they’re so important:

1) One of the first issues that should immediately catch the attention of anyone analyzing this report is that ADU owners were not interviewed. With over 608 for-sale ADUs in existence, this is a glaring omission. Though DHCD is attempting to apply IZ guidelines to future ADU units, there is much to be learned from current ADU owners. Issues with the resale process and choices owners are making to not make upgrades and repairs on their properties could have been identified, explored, and helpful recommendations made. These issues will continue to impact the future success of the IZ and ADU programs, and will possibly cost the District and future buyers.

2) The Urban Institute recommends that developers use a par value approach with condo fees in order to mitigate huge burdens affordable owners have been facing. However, this measure does not protect IZ owners from rapid increases. Stronger and more comprehensive measures must be taken to ensure owners are not priced out in the near future, including considering off-site construction to mitigate against large fees that may continue to happen in an expensive building.

3) One other major concern not addressed in this report is the difficulty for individuals in these programs to maintain homeownership in the long-term. This report highlights hypothetical 10 year resale calculations (using an almost impossible formula to explain and follow) and maintains that IZ owners receive a good return on their investment. This analysis, as well as most of the referenced 2010 Urban Institute report, fails to assess if the owner can afford to purchase another home on the market, which is a major omission since most of the units are small and families can easily grow out of them. If the concern is that home prices are rising faster than incomes and people are being locked out of certain neighborhoods where they have access to “transit, jobs and other opportunities,”  then the IZ resale formula is not designed to ensure households will be able to purchase again in the same neighborhood.  This is especially the case for buyers that used HPAP to purchase an IZ or ADU unit and do not have access to another HPAP loan. The program is creating one-time homeowners rather than long-term homeownership opportunities that help families grow. There are other alternatives (link to recapture recycle on our website), and ones that can be tailored to the IZ program.

Manna offers these comments in hopes of creating a program that works for all of the involved stakeholders (buyers/owners, DHCD, developers, realtors, etc.) and prioritizes low-to-moderate income households in maintaining homeownership over the long haul. This is particularly important as 62 IZ ownership units come on-line in the next few years and more ADUs are built and resold. We must look at what’s working and what isn’t, partnering those findings with a focus on maintaining the cultural and economic diversity of the city to really address the District’s housing needs and residents’ ownership needs.

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Positive News for Distressed Homeowners, Bad News for Low-Income Renters

A NeighborWorks survey of housing nonprofit providers provides some guarded optimism for distressed homeowners but bad news for low-income renters. The experience for borrowers facing possible foreclosure has become better when seeking loan modifications. In contrast, the availability of affordable rental housing has worsened.

According to survey respondents, the overall loan modification experience for HAMP (the program with federal subsidies) has become better for 25 percent of the homeowners compared to six months ago, the same for 49 percent of the homeowners and worse for 3 percent (percentages do not add up to 100 because of non-responses). The ability to reduce monthly payments during a loan modification improved for 15 percent of the homeowners, was the same for 52 percent of the owners, and worsened for 5 percent of the owners. Outside of HAMP, the experience with private sector modifications not involving federal subsidies also became better for 15 percent of the homeowners, the same for 53 percent of the homeowners and worse for 5 percent of the homeowners.

In the case of federally subsidized loan modifications, 8 times as many respondents reported better outcomes than worse outcomes while in the case of private sector modifications, 3 times as many respondents reported better outcomes than worse outcomes compared to six months ago. Since the establishment of the HAMP program, the government-subsidized modifications have generally out-performed the private sector modifications in terms of overall experience and reductions in monthly payments. This still remains the case and is not surprising, given the federal subsidies involved. However, in the wake of multi-billion settlements between the government and large lenders regarding abuses in the foreclosure process, it is reasonable to expect the large banks to significantly improve their performance without government subsidies. Overall, the news on the loan modification front is good, but community stakeholders should keep demanding improvements from the large banks and not relent on pressuring them to atone for their wrongdoings.

In contrast to the report on loan modifications, the situation for low-income renters is dire. Only 5 percent of survey respondents said that the availability of affordable rental housing improved, 25 percent said it worsened, and 54 percent said it remained the same. Just as alarming, 15 percent of respondents said displacement of tenants from rental housing has worsened while just 1.5 percent said displacement has lessened. In addition, 34 percent said the availability of public subsidies for rental housing has worsened and just 3 percent say availability is better.

The foreclosure crisis is related to the rental shortage. As more homeowners lose their homes, they become renters, reducing the amount of rental housing available for low-income tenants. In addition, while job growth is increasing, wage growth remains sluggish as many new jobs are in low wage sectors.

The policy prescriptions for the continued squeeze on rental housing should include interventions on the supply and demand side. As tax reform proceeds, Low Income Housing Tax Credits should be preserved and expanded for the production of rental housing. Recent progress in raising the minimum wage should be expanded to more cities and states. Finally, the President’s recent proposal to make two years of community college free for students maintaining a 2.5 grade point average or higher should be viewed as a way to increase the affordability of housing, including rental housing. Affordable housing never receives the resources that are needed. That is way we must relentlessly advocate for multi-faceted policy prescriptions that address the program from all angles – supply and demand side – and hope that more than a few of them gain traction and are implemented.

Josh Silver is the Development Manager at Manna, Inc. Prior to his time at Manna, Josh served as the vice president of research & policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter

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Development For All

Move over industrial lands, green focused residential units are coming to Rhode Island Ave. Douglas Development Corporation, owners of two large industrial spaces on Channing Place NE, are the group behind the Ward 5 development. Two buildings are planned for this site that will total 295 units; both would include green roofs, and interior courtyard and perimeter shrubbery. Douglas met with local ANC and community members about their plans. Kyle Todd, Executive Director of the Rhode Island Avenue NE Main Street said, “The project will bring in some much-needed residential density to the area,” said Todd. “This is exactly what we need in order to attract and support the types of new retail and dining options that current community members have been asking us to bring to the Rhode Island Avenue NE Main Street.” These developments would bring much need redevelopment to an area that has been plagued with blighted and abandoned properties.

In the District of Columbia there are progressive affordable housing requirements, known as Inclusionary Zoning, that require affordable units to be created in any new private development project across the city. This requirement calls for 8-10% of the units in a new development be set aside, so with this development between 20-30 units of affordable to incomes below 80% of the Area Median Income, and potentially at 50% AMI, could be created. While these requirements help add to the city’s housing stock, when it comes to ownership units in market-rate condominiums there are gaps in oversight and policy that greatly affected affordable owners.  These issues include representation on condo boards, increasing common fees, lack of equity access, and cumbersome bureaucratic processes for rental and resale. New proposed regulations for the Inclusionary Zoning program address a few issues, but need to go much further.Manna – Comments on Second Proposed Rulemaking – Chapter 22 IZ – 2014

Requiring developers set aside a percentage of new units for District residents of all income categories is critical to meeting the District’s housing needs, but making sure these policies are comprehensive and strategic are key to ensuring these policies truly give opportunity and affordability to District families, particularly those who need it most.

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Manna’s Roots in S Street Rising: Crack, Murder, and Redemption in D.C.

The title of S Street Rising could have been “Lost and Found in D.C.” Written by Ruben Castenada, this is a gripping tale of individuals and communities finding themselves after being lost to the addictions of alcohol and crack. It is a tale of how hope and faith can revitalize individuals and communities through working together to build social cohesion and affordable housing, a window into Manna, Inc.’s roots and what it is today.

A Gripping Tale

The book chronicles the lives and choices of three characters that eventually meet in the vortex of drugs and violence and become friends while combating these ills. One of the early scenes of the book is how a rising Washington Post reporter, Ruben Castaneda, is covering the famous drug bust of former Mayor Marion Barry. After Barry is arrested, Castaneda’s crack addiction so clouds his judgment that he remains at the hotel and gets high in his hotel room. At around the same time, we meet Manna’s founder and chairman, Jim Dickerson, who came from an alcoholic home and battled his own substance abuse as a young man. Finally, there is Lou Hennessy, the hard-working detective with innovative ideas for combating the drug wars.

Honesty saves and endangers the main characters. The moral courage of Castaneda to tell all is admirable and indeed, it is only when Castaneda is honest with himself that he starts the long and arduous road to recovery. Castaneda realizes his addiction is out of control when he attempts to attend the retirement party of Washington Post legend Ben Bradlee but is sent home by his colleagues because he is wired, sweaty, and feverish from crack. Likewise Dickerson reaches his epiphany and discards his self-destructive youth when he embraces the religion of Jesus Christ and finds mentors who guide him to social ministry. Unlike the first two, honesty almost undoes Hennessy who does not have a political bone in his body and pursues a drug dealer and hack in the Barry Administration. For this, Hennessy is banished to the outskirts of the District’s police department. But Hennessy recoups using his honesty and hard work to excel after his police career as a lawyer and judge.

Community is key to salvation. Castaneda may not have made it to recovery if it were not for the intervention of concerned colleagues at the Washington Post, who instead of firing him, take him to a rehab center. Castaneda also finds solace and support in weekly community meetings of former addicts who help each other stay clean. Hennessy employs community policing in a novel way by assigning detectives to designated neighborhoods so they can establish trust with community residents, leading to tips to solve cases.

Manna’s Roots

Dickerson intentionally plants his church (the New Community Church) in the middle of a drug zone at 6 and S. Street. As he is renovating the empty shell of a row house that is to become his church, Dickerson ventures out to a street corner where the slingers (dealers) are gathered and, in one of his most nervous moments of his life, declares to them that he will not rat them out to the cops and he welcomes them to his church to seek another way to live. But if any of them want him to cover up for them, forget it. Dickerson and the drug kingpin, Baldie, not only establish a truce and mutual respect but also Baldie protects Dickerson’s church and sends his daughters to the church’s Sunday school.

After establishing the New Community Church, Dickerson founds Manna, Inc. to build and rehabilitate housing for low- and moderate-income households and families. The approach is a hand-up, not a hand-out. Just as Castaneda understands that accountability for his life is the only way to reclaim his life, Manna expects the new homeowners to help themselves after getting an initial boost through housing counseling and downpayment assistance. As Dickerson says, “This is not do-gooderism. Accountability is important component of this. By becoming homeowners, they have a stake. They have equity they can use to pay off debts, start a business, go to school, or help kids do the same. They feel they can move up the economic ladder.”

Today, the drug dealers are gone, the church remains, and S. Street is thriving. Manna, Inc. was the catalyst, rehabilitating 300 homes in the Shaw neighborhood encompassing S. Street. The opening of the Metro station in the early 1990s was another engine for economic revitalization and neighborhood stabilization.

Bernice Johnson’s (B.J.) story exemplifies the symbiotic relationship between Manna, Inc. and the community. B.J. starts attending services at New Community Church, Jim hires her as an administrative assistance, and B.J. moves into a rental unit at the historic Whitelaw Hotel that Manna had rehabilitated. Jim encourages B.J. to contemplate homeownership. At first B.J. hesitates but then becomes determined and spends two years as a Homebuyer’s Club member, saving money for a down payment and paying off $5,000 in credit card bills. After moving into Riggs Street NW as a new homeowner with her children, B.J. says, “The first night I slept here, it was so surreal. I stood on the steps and stared at my dining room table. I was afraid it was a beautiful dream and I was about to wake up.”

Years later, a developer offers B.J. and several other Manna homeowners considerable sums of money to move out. Proud of their community and homes, B.J. and other holdouts refuse to sell and the developer’s plan to build luxury apartments ground to a halt. Manna had planted a determined and committed community that was dedicated to preserving Shaw for the long haul.

After picking up S. Street Rising, you will not be able to put it down. It is a scintillating narrative full of sociological gems and insights into urban decay and rebirth. It is a motivational tale of determined individuals and communities.

Policy Needed Today

Yet, it leaves one huge question unanswered. Castaneda did not set out to talk about the forces of gentrification and it would be unfair to criticize the book for not exploring this phenomena. But if you walk around S. Street today, you are struck by how a good amount of Manna, Inc.’s success was due to luck. By the middle to late 1990s, low-to-moderate income households were priced out of Shaw and Manna could not have provided them 300 homes without a lot of public subsidy. It was extremely fortunate that Manna acted when it did in the 1980s and early 1990s to change the lives of 300 homeowners and solidify income and racial integration in this historic neighborhood for years to come. There has been no magic bullet, urban planning or policy, which has successfully eased displacement caused by gentrification. The District has been putting more funding forward for the production of affordable housing in recent years, and exploring how to leverage more in the philanthropic sector. More needs to be done. And there is one federal law, the Community Reinvestment Act (CRA), which has been under-utilized in this effort.

CRA requires banks to serve the credit needs of all communities, including low- and moderate-income communities. Federal agencies rate banks on the extent to which they make responsible loans, investments, and services in low- and moderate-income communities. Banks are also judged on innovative and flexible loan programs. Yet, although CRA examination guidance discusses the virtues of mixed income development, seldom does one encounter CRA exams that review innovative programs for lending to low-to-moderate income homeowners so that they can remain in economically changing neighborhoods. Massachusetts has a version of federal CRA that includes an analysis of banks’ efforts to preserve affordable housing.[1] Further applying the concepts of mixed income development and preservation of affordable housing in federal CRA exams could enable more Shaw miracles to take place. Recently, the District council passed its own responsible banking ordinance, and transparency and strength to community reinvestment.

It takes not only determined individuals and communities but larger forces such as innovative federal and local policy to build a village.

[1] See Massachusetts CRA exam of East Cambridge Bank in 2013 to see how a bank’s effort to preserve affordable housing is assessed, http://www.mass.gov/ocabr/docs/dob/ecmbrdg.pdf

Josh Silver is the Development Manager at Manna, Inc. Prior to his time at Manna, Josh served as the vice president of research & policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter.

 

 

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A New YeAR FOR HOUSING

It’s been a little over a year since I began working at Manna, Inc., a non-profit affordable housing developer that also provides homebuyer education courses and advocacy efforts for a full continuum of affordable housing across the District. Over the past year I’ve been fortunate to receive a crash course in the District’s housing conundrum, a very nasty one at that. There simply isn’t enough housing in the District for its most at-risk residents, whether that is permanent supportive housing, transitional housing, or affordable rental and homeownership units.

In a recent article in the Washington City paper the publication takes a look back at the year in housing for the District, as well as some priorities going forward. One of the largest stories of the year about housing was the issue of rent control and the Museum Square incident. Museum Square is an affordable rental building, housing a large percentage of the city’s Chinese population. Many of the District’s affordable housing developments have expiring contracts that allow the property owners to opt out of their affordable obligations, leaving residents with either no place to go or a sharp increase in their housing cost. While public outrage and pending emergency legislation put an end to the nightmare Museum Square residents were experiencing, the situation shed light on a much bigger issue – the looming expiration of many affordable buildings across the city in the coming years. Another housing theme in 2014 was the District’s homeless crisis. Last winter’s extreme temperatures shed light on the city’s exploding homeless population; studies expect a 16% increase in the amount of homeless families the city will need shelter this winter. Meanwhile, plans have been made to close the city’s largest shelter, DC General, and replace it with a series of smaller shelters.

All this being said, the focus shouldn’t be on the scope of the issue, but the amount of efforts needed to solve these problems. In order to maintain the preservation of cultural and economic diversity in District communities affordable must be the focus. There are many organizations already tackling these issues head on like Habitat for Humanity, Mi Casa, Jubilee Housing and Transitional Housing Corporation, to name a few.  With increased and continued support from the District government, DC can truly become a world class city for all.

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Student Loan Hampering Homeownership

 

Student-Loan-DebtThis fall, NeighborWorks America released the results of its second annual national housing survey, which contains some optimism regarding the desire for homeownership but documents the persistence of significant barriers.

The good news is that despite the financial crisis and the slow recovery from the Great Recession, the great majority of survey respondents (88 percent) have maintained a positive view of homeowership. Furthermore, disenfranchised populations still feel that homeownership is the most important step economically for families. Twenty-six percent of African-Americans and 18 percent of Hispanics regard homeownership as the “most important part of their view of the ‘American Dream’ compared to 8 percent of whites,” according to NeighborWorks.

The largest barriers to homeownership were student loan debt, lack of down payment, and lack of job security. Seventeen percent of survey respondents ranked student loan debt as the largest barrier to homeownership, 14 percent said lack of down payment was the largest barrier, and 11 percent cited lack of job security. The fact that lack of job security was third on the list provides some cautious optimism that wage and job growth has resumed in the wake of the Great Recession.

The student loan debt barrier is significant and has risen to the attention of federal authorities including the Consumer Financial Protection Bureau (CFPB). According to the CFPB, there is currently $1.2 trillion in outstanding student loan debt and about seven million students are in default. The CFPB also reports that lack of information from lenders about how to avoid default is a significant problem for borrowers seeking to avoid default. The CFPB provides a sample letter for borrowers about how to request forbearance and restructuring of loan payments. The agency also provides a safe and secure way to submit a complaint about non-responsive and/or abusive lenders.

Regarding the second major barrier, lack of down payment, we at Manna are here to help! While NeighborWorks survey respondents list lack of down payment as a formidable barrier, about 70 percent of survey respondents were unaware of down payment assistance programs available to hardworking families! Skilled staff at Manna can direct people to down payment and other available assistance through our homebuyer counseling programs and other resources.
Together, let us work to remove barriers and increase homeownership! It is clear that the great majority of Americans still greatly value homeownership, particularly the underserved and disenfranchised populations served by Manna. Increases in homeownership are among the best gifts for underserved neighborhoods during this holiday season; they are gifts that keep giving in terms of providing for future generations and financing school and small business starts.

Josh Silver is the Development Manager at Manna, Inc. Prior to his time at Manna, Josh served as the vice president of research & policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter.

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Plutocracy Talks, Democracy Walks

The highly divided Congress is providing futile ground for plutocracy, a country dominated and effectively ruled by a tiny wealthy elite. The bipartisan budget bill just passed significantly raises the contribution limits to political parties and weakens an important safety and soundness protection against recklessness in the financial industry.

The first harmful provision, the relaxation of campaign limits, is far easier to explain. A donor’s contribution to one of the political parties had been limited to $97,200. Under the bill, the donor can now contribute an incredible $777,600. This only increases the political influence of the rich and powerful, who will now be listened to even more intently when they call members of Congress and ask for a loosening of consumer protections and financial safeguards.

Phone calling brings us to the second harmful provision. Mr. Jamie Dimon, the head of JP Morgan Chase, reportedly called members of Congress urging them to relax an important safeguard in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Section 716 of the Dodd-Frank law requires banks that engage in complex and risky derivatives and swaps activities to place those activities in affiliates that do not have access to federal deposit insurance. This firewall ensures that U.S. taxpayers are not exposed to bailing out banks when derivatives and swaps result in large losses.

But Mr. Dimon and his big bank allies succeeded in getting this push-out of swaps and derivatives to be repealed. In other words, bank affiliates engaging in these activities can now be covered by federal deposit insurance. This is a profit maximizing strategy: the cost of raising funds for these risky and complex activities will be lowered since these activities are now covered by federal deposit insurance.

Simon Johnson, a MIT economist and big bank critic, says that the change would affect a small portion of derivatives and adds that, “I don’t want to make a mountain out of a molehill on this,” but added that “on a forward-looking basis this could become very big”.

The impact of this new rule depends on the riskiness of new swaps instruments invented by the financial industry. One type of swap that made large financial firms insolvent during the financial crisis was called the credit default swap. In particular, the giant financial firm, AIG, provided credit default swaps (CDS) to investors who purchased subprime mortgage-backed securities (as long as borrowers of subprime loans paid their loans on time, investors of mortgage-backed securities got paid). CDS was akin to insurance. In the event that borrowers of subprime loans defaulted en masse, AIG would reimburse the investors.

AIG made a horrendous bet, writing $79 billion of CDS protection. Because subprime loans were poorly underwritten, borrowers defaulted en masse. As the storm clouds were gathering and defaults were mounting, a senior AIG official maintained on an investor call, that “it is hard for us, without being flippant, to even imagine a scenario within any kind of realm or reason that would see us losing $1 in any of these transactions.”

Similarly one of bank regulatory agencies, the now defunct Office of Thrift Supervision (OTS), was just as clueless as some of AIG officials. Former OTS Director John Reich said the OTS was no match for AIG, could not understand AIG’s operations, and the OTS was like “a gnat on an elephant” when it came to controlling AIG.

The rest is history. AIG was so interconnected with the rest of the financial industry that the federal government bailed out AIG to the tune of $182 billion. The choice was a bailout or a depression worse than the Great Recession.

In order to prevent a repeat of the financial crisis, the Dodd-Frank law required new standards and safeguards to avoid the poor underwriting and tricks and traps of abusive subprime loans. In the short to medium term, it is unlikely that a predatory lending industry will use the banks to write CDS like AIG did since abusive loan terms and conditions are now outlawed. However, new tricks and traps can be invented by an industry ravenous for profits. And it is just too risky to place these risky activities in the reach of federal deposit insurance.

Leading the opposition to the budget bill, Senator Elizabeth Warren stated that “A vote for this bill is a vote for future taxpayer bailouts of Wall Street. When the next bailout comes, a lot of people will look back to this vote to see who was responsible.”

Reflecting on the relaxed contribution limits and the repeal of Section 716, Rep. Chris Van Hollen said, “Putting these two things in the same bill illustrates everything that is wrong with the political process right now: a giveaway to the special interests and then providing them with the ability to more easily finance the process.”

The plutocrats are now emboldened in the divisive atmosphere in Capital Hill. Wait until the 11th hour in difficult budget negotiation when there is no time for reflection and public hearings on complex, arcane, but important financial legal and regulatory issues. Then slip in a major change to financial and consumer protection laws. Today it was Section 716. Tomorrow it might be other parts of Dodd-Frank such as the Consumer Financial Protection Bureau.

The plutocrats are resurgent. To prevent them from laughing all the way to the bank while the common folk pay the bill, a re-energized grassroots holding the elected officials accountable is our only hope.

Josh Silver is the Development Manager at Manna, Inc. Prior to his time at Manna, Josh served as the vice president of research & policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter.

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