Child Homelessness on the rise

One of the biggest deterrents to economic mobility, in addition to a lack of wealth or opportunity, is the lack of stability for children, a safe and consistent place to call home. Recent studies and surveys have shown that homelessness has increased tremendously for grade school age children, as well as college students. According to a recent study done by The National Center for Family Homelessness, one in thirty US children are homeless. The study shows that these adverse circumstances greatly affect communities of color, further increasing the vicious cycle of poverty. The study released back in November detailed an increase in child homelessness in 31 states and the District of Columbia. Nearly 2.5 million children were considered homeless in 2013, which was an 8% increase from 2012. And based on current projections 2014 won’t fare any better.

One of the main factors contributing to this increase in homelessness is the lack of affordable housing. In California, the state reported more than 500,000 homeless children, while only having 11,316 housing units for those homeless families; only Alabama and Mississippi ranked worse. Dr. Carmela Decandia, director of the center, states that “child homelessness has reached epidemic proportions in America,” and “living in shelters, neighbors’ basements, cars, campgrounds and worse – homeless children are the most invisible and neglected individuals in our society.”

The study showed that the largest population facing these circumstances was households headed by single Black or Hispanic women, a group that has suffered the worst from the recession, as well as other factors such as debt and institutional racism, which in turn has resulted in economic segregation.

As the District decides what it will do to continue combatting its homeless crisis, remembering the children who are suffering due to the lack of affordable housing is vital. Housing provides a sense of community, safety, and even pride. Housing is one of the cornerstones for strong communities and upward mobility, something every child deserves.

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What is Behind the Lending Disparities?

Last week’s blog revealed significant disparities by race and income in the District of Columbia but left the reader largely guessing about what caused the disparities. This week’s edition analyzes the reasons for denial of loan applications and concludes that while differences in mortgage readiness and creditworthiness explains some of the differences, these factors do not account for all of the disparities. Far from it.

In addition to loans and denials by race and income, the Home Mortgage Disclosure Act data has information on the reasons for denial. In the chart below, the reasons include debt-to-income ratio (DTI), credit history (credit), insufficient cash (which probably means not enough cash for down payment and closing costs), and unverifiable information and incomplete application (added together and called bad apps in the chart). The percentages in the chart do not equal 100 because a few reasons for denial such as employment history, “other,” and denial of mortgage insurance occurred infrequently and/or were not significantly different by race or income. DTI, credit, and insufficient cash were added together and called “not mortgage ready” in the chart because these are applicant attributes that result in loan denial and are distinct from collateral issues or defects in the property that result in loan denial.

reasons for denial conventional loans

 

The chart reveals that African-Americans and Hispanics have a higher percentage of applicant attributes disqualifying them from loan approvals than whites. For example, 17 percent, 11.8 percent, and 8.2 percent of African-Americans, Hispanics, and whites respectively, were denied loans because of credit history during 2013 in the District of Columbia. Likewise, DTI was a barrier for 30.9 percent of African-Americans compared to 18.7 percent of whites. When considering DTI, credit history, and insufficient cash together in the category called not mortgage ready, 55.3 percent, 41.2 percent, and 32 percent of African-Americans, Hispanics, and whites, respectively, were denied loans because they were not mortgage ready. Conversely, the percentage of denials due to collateral and bad applications were higher for whites than African-Americans and Hispanics.

By income, the most dramatic differences were between low-income applicants and their more affluent counterparts. About sixty two percent of low-income applicants were not mortgage ready compared with 37 percent, 34 percent, and 33 percent of moderate-income, middle-income, and upper-income applicants, respectively. Forty two percent of low-income applicants were denied because of DTI which was about twice as much in percentage terms as other income categories. Interestingly, the same portion (14 percent) of low-income and upper-income applicants were denied due to credit history.

For sake of comparison, the reasons for denial for FHA loans are displayed below. FHA lending exhibited narrower racial and income disparities. And sure enough, about the same percentage of white and African-American applicants were deemed not mortgage ready by lenders as shown in the chart below.

reasons for denial FHA loans

 

After this review, it might be tempting to conclude that differences in mortgage readiness explains lending disparities, particularly in conventional home mortgage lending. However, the following exercise assuming that mortgage readiness was about equal for whites and African-Americans reveals some other factors at play as well. Let us assume that instead of 17.3 percent of African-American applicants being denied for conventional loans, that just 5.7 percent were denied which is the same denial rate for whites. Instead of receiving 363 conventional home purchase loans, African-Americans would have received 433 conventional loans. While this is a considerable improvement, the percentage of conventional loans issued to African-Americans would have inched up only from 8.8 percent to 10.5 percent. And remember, African-Americans were about 47 percent of the households in the District of Columbia. The big gap that remains between the percentage of loans and the percentage of households can be accounted for by a considerable extent by the low percentage of applications submitted by African-Americans. Just 11 percent of the applications submitted for conventional loans were from African-Americans in the District of Columbia during 2013.

Why is there such a low percentage of applications submitted by African-Americans? We don’t know for sure. Was it because they were unfamiliar with lenders or intimidated to a greater extent than whites? While there are surveys of small business owners concerning “fear” or unfamiliarity for reasons of not applying for loans, I have not seen a comparable survey regarding applying for home loans. Another possibility is that lenders (banks and mortgage companies) are less accessible and are not located in as great an extent in African-American communities than predominantly white communities.

Surely, credit and homebuyer counseling can reduce the reasons for denial for home loans and get more minorities and low-income applicants approved for loans. As someone who works at a nonprofit housing organization that both develops units and provides counseling, I am in favor of significantly expanding the availability of counseling. The time might be ripe for better counseled borrowers to take advantage of some recent relaxation in credit standards. But is the location of bank branches and loan offices as much or a greater factor driving disparities in access to mortgage loans? This is the subject of an upcoming blog post.

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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Home Mortgage Lending Disparities is a Clarion Wake up Call to Work Together

The Home Mortgage Disclosure Act (HMDA) data shows glaring credit needs and gaps but also opportunities for stakeholders to constructively close the gaps in the District of Columbia. For communities, reducing disparities in lending represents opportunities to increase wealth building and economic development. For lenders, reducing disparities are opportunities to increase profitable and safe and sound lending.

As discussed in previous columns, the Consumer Financial Protection Bureau (CFPB) is required to enhance the data to include more information on the financial characteristics of applicants and loan terms and conditions. The explanatory power of analysis will increase further and we will be able to say more in future columns in coming years.

During 2013, the most recent year for which HMDA data is available, disparities were the widest for African-Americans and low- and moderate-income applicants in conventional home purchase lending.[1] While representing 46.9 percent of the city’s households, African-Americans received a mere 8.8 percent of the conventional home purchase loans issued in the District of Columbia. Similarly, low- and moderate-income borrowers constituted 59 percent of the borrowers in the District but received only 22 percent of the conventional loans during 2013. In contrast, as the chart immediately below shows, whites and middle- and upper-income borrowers received a considerably higher percentage of loans than their percentage of households in the city.

conventional loans by race and income in DC 2013

Such wide disparities by race and income should be used to stimulate more discussion than finger pointing. In a contentious environment, advocates will sometimes yell racism and lenders

will become defensive and dismissive, saying these disparities are due to differences in creditworthiness and lack of down payments. In a more productive discussion, the stakeholders will sit down and try to further probe to what extent these differences are due to lack of marketing in underserved communities, creditworthiness, and other factors. Innovative marketing approaches and programs such as low down payment loans and alternative methods of considering creditworthiness have been developed to narrow these types of gaps in the past. Hopefully, the wide disparities in the District’s data will prompt stakeholders to devise methods for narrowing the disparities. Why, for example, are the disparities much less for Hispanics than African-Americans? Figuring out this puzzle may narrow some of the gaps for African-Americans.

Denial rate analysis in the table immediately below sheds some more light on the disparities. African-Americans applicants were denied 17 percent of the time while white applicants experienced a denial rate of 5.7 percent in the District of Columbia during 2013. Dividing the rate for African-Americans by the white rate reveals that African-Americans were denied 3 times as often as whites. Likewise, low- and moderate-income borrowers were denied 2.3 times as often as middle- and upper-income borrowers. Hispanics had a disparity ratio lower than African-Americans and low- and moderate-income borrowers.

Some questions immediately arise by the disparities in denial rates: were African-Americans the least qualified followed by low- and moderate-income borrowers while Hispanics were better qualified and therefore experienced denial rates similar to whites? Or is there foul play here in that the differences in creditworthiness are not as great as the denial rate disparities suggest? Better data including data on creditworthiness that the CFPB is to provide in future years should help answer these questions. But also candid discussions among stakeholders should help. Lenders should be asked to frankly discuss what differences they see in African-American, Hispanic, and low- and moderate-income applicants compared to each other and their more advantaged counterparts.

Conventional Home Purchase Denial Rates
Rate Disparity Ratio
African-Americans

17.3%

                         3.0
Hispanics

7.4%

                         1.3
Whites

5.7%

                         1.0
Low- and Moderate-Income

12.9%

                         2.3
Middle- and Upper-Income

5.6%

                         1.0

The picture becomes a little clearer when considering Federal Housing Administration (FHA) home purchase lending. A lender assumes the loss when a borrower defaults on a conventional loan, but the federal government assumes the loss when a borrower defaults on a FHA loan. An FHA loan is therefore more expensive for the borrower in terms of paying for insurance to protect the federal government against default.

What is immediately apparent in the table below is that the disparities are wiped out in some cases and vastly narrowed in other cases. African-Americans received 58 percent of the FHA loans issued in the District during 2013 while constituting 46.9 percent of the households. For Hispanics, the percentage of loans and households were virtually identical while for low- and moderate-income borrowers, the percentage of loans was lower than the percentage of households but the disparity was vastly reduced compared to the conventional lending.

FHA lending allows lower down payments generally than conventional lending which may explain the reduction in some of the disparities. While this is encouraging, it must also be remembered that FHA lending is more expensive for borrowers than conventional lending, and we ultimately want more progress on reducing disparities in conventional lending. Also, conventional loan volume (5,240 loans) is much higher than FHA loan volume (691 loans) in the District, meaning that focusing on reducing disparities in conventional lending is more effective in yielding more loans to underserved populations.

FHA loans by race and income DC 2013 23423

FHA underwriting generally permit lower credit scores than conventional underwriting guidelines. This is likely reflected in the denial rates which is higher for all groups but markedly higher for whites whom had a denial rate of 5.7 percent in conventional lending versus a rate of 12.3 percent in FHA lending (see table below). A similar phenomenon occurred in the case of middle- and upper-income applicants. This shows that not all whites nor middle- and upper-income applicants have good credit either. More counseling and education can be beneficial for them as well. Higher denial rates for all groups resulted in lower racial and income denial rate disparities for FHA than conventional loan applicants.

 

FHA Home Purchase Denial Rates
Rate Disparity Ratio
African-Americans

19.5%

                         1.6
Hispanics

23.5%

                         1.9
Whites

12.3%

                         1.0
Low- and Moderate-Income

18.5%

                         1.5
Middle- and Upper-Income

12.7%

                         1.0

HMDA analysis can be maddening. Why are the disparities in the case of conventional lending so high? Is financial education and preparation so poor as to render African-Americans and low- and moderate-income applicants helpless in the lending marketplace? Or are lenders engaging in redlining and other bad behaviors? But before throwing in the towel, comparing the results of conventional lending to FHA lending shows that reducing disparities is possible and that perhaps some of the lessons and practices in FHA lending can be applied in a safe and sound way to conventional lending. The only way to find out is for the stakeholders to bite their tongues, refrain from intemperate rhetoric, roll up their sleeves, and work with each other to improve equity and efficiency in the lending marketplace. By shining a spotlight on disparities and credit gaps, HMDA is a clarion call saying it is time to redouble efforts and work together.

 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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Cheaper To House

Human beings lie, obfuscate and misrepresent, but numbers do not. According to a recent survey, numbers show that it is cheaper to house homeless individuals than leave them on the street. At the beginning of each year, the Department of Housing and Urban Development (HUD) requires a very thorough survey of each city’s homeless population, in which HUD recruits volunteers to go out and count the homeless. This survey is critical in developing sound policies to combat homelessness.

A supporting survey, The May Central Florida Commission on Homelessness indicated that their region spends $31,000 a year per homeless person on just the salaries of law-enforcement officers to arrest and transport the homeless. This doesn’t even begin to take into the account the cost of jail stays, emergency room visits and hospitalization for medical and psychiatric issues. In comparison, it would cost about $10,000 to provide a homeless person with a home and a caseworker to supervise their needs.

While these numbers are based on a survey done in Florida, studies done all over the country show similar findings: a real strategy to help the homeless is far more cost effective than trying to sweep the problem under the rug. These studies show that while more financial resources are helpful, strategic efforts are the foundational tool in combating this problem.

As the District continues to navigate its way through its affordability crisis, tough choices in resource distribution will need to be made. We are anxious to see what this year’s budget brings as far as creative resource distribution and strategies – we will keep you posted!

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Over-investing in Homeownership?

 

The columns criticizing the nation’s emphasis on homeownership continue. Last week, Charles Lane, an opinion writer for the Washington Post, wrote a piece called “The Diminishing Returns of Today’s Homeownership Polices”.

He was prompted by a depressing statistic that the homeownership rate is 64 percent in 2014, the same rate as in 1994, despite twenty years of bipartisan efforts to boost homeownership rates.

Mr. Lane directly attacks low-down payment lending programs, stating, “In truth, the low-down-payment loans many people were encouraged to take during the boom were not much different from leases, in economic terms. They were wealth-building tools only in the speculative sense that, yes, you could convert a tiny equity stake into massive gains — if housing prices never ceased rising.” He continues that encouraging low income people to invest so much in housing is “in violation of the first principle of investing, which is to diversify risk.”  Mr. Lane concludes that the nation should basically dispense with homeownership programs and embrace market policies, “especially shorter-term mortgage products that require large down payments and share the risk of interest-rate volatility between borrowers and lenders.” A regime such as this would essentially wipe out the counseling and low down payment programs that Manna has successfully employed for thirty years.

A recent academic paper discredits Mr. Lane’s thesis by suggesting that lending to modest income people was not one of the principal causes of the crisis. The paper states mortgage growth during the crisis was not characterized by “unsustainable credit flowing disproportionately to poor people.” Indeed, predatory lenders were not primarily targeting the poor but minority communities. When I was at the National Community Reinvestment Coalition, I authored a series of reports over three years called “Income is no Shield against Racial Disparities in Lending.”Other academics had similar findings: risky lenders were not so stupid that they targeted the poor with unaffordable loans, but they were abusive enough to focus on working and middle-income minority communities.
The solution is not to diminish efforts to expand homeownership to modest income people. Rather, the solution should be to prohibit dangerous lending that does not consider borrowers’ abilities to repay and to increase enforcement of the fair lending laws against targeting minority communities with abusive loans. Last week’s column described important provisions in the Dodd-Frank Consumer Protection and Wall Street Reform Act that are designed to curb abusive lending.
Recently, Manna had a reunion of homeowners living in units rehabilitated and developed over Manna’s 33 year history. We asked homeowners to videotape their testimonials that effectively rebut positions such as Mr. Lane’s. One homeowner is an African-American single mother who raised four children. She said that Manna’s program required hard work. A participate in the Manna’s Homebuyer’s Club (HBC) could not miss a single session and the HBC counselors helped her get a loan. She continues “Signing that piece of paper (the deed), getting the keys, being a single parent, and going from rental to owning a home was amazing.” She hopes to pay off the mortgage this year and feels that she is fortunate to have weathered the recession without selling or “going under.” Her experience lets her children “see what is possible.”
Another female client said that the HBC club made her “Comfortable with process. It was so smooth that it seemed like it didn’t even happen.” She was familiar with loan officers who had come to HBC meetings. “The biggest purchase in life was not even scary. The best day of my life was when I got the keys. Best feeling to wake up in next day in my own house. My son and I had a foundation…best feeling in the world. It gave me a purpose. No place like home.” A number of homeowners stated that the monthly mortgage is less expensive than rent. Well…there goes Mr. Lane’s theory of piling on risk. If the monthly mortgage is less expensive, then how can homeownership entail great risk, unless values come tumbling down? In the District, that has not happened. Two homeowners talked about how the location was advantageous. An African-American male said he was so grateful that the “Safeway, bank, post office, and cleaners” are within walking distance of his home. An older adult echoed those sentiments saying that the location was key since she had limited mobility. She concludes by saying that her home is “safe, secure, architecturally sound, and beautiful so Washington can continue to be our diverse nation’s capital.” The modest income homeownership programs’ contribution to safe, convenient, and integrated communities cannot be over-estimated.
A young man said he was born in Washington DC but did not think he could own a home here. He was so grateful that “Manna made an arduous process easy.” Another former renter stated that Manna helped the tenants buy the building. While she thought the process would take one year, it took three but she was so glad she stuck with the process.
And finally, two homeowners concluded that they have been homeowners for more than 15 years. They raised their children in their homes, and this was the greatest experience ever.
After a crisis caused by inadequate regulation of the financial industry, national statistics like the homeownership rate in 2014 plunging to 1994 levels may make some pundits conclude that the homeownership push is not worth it. However, this perspective is not informed by local variations in economic conditions or experience with careful homeownership programs for modest income people. All Mr. Lane had to do was come to the Manna homeowner reunion.Before he pens his next opinion piece, I would hope he would at least watch this video. I think he will change his mind.

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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The District’s Shared Struggle

rafael-vinoly-432-park-avenue-new-york-designboom03

 

New York City Mayor Bill De Blasio, in his second year as mayor, is taking ambitious steps towards making the city more affordable. His vision is a more inclusive city, neighborhoods from Manhattan to Harlem, making them more dense and affordable. Stigma has been attached with increased development because it has historically been associated with gentrification and raising housing prices, but De Blasio looks to change that. In his second State of the City address, he referenced the city’s post-World War II housing boom that focused on large projects geared towards middle and working class residents and laid out of series of steps to deal with New York’s current reality and market.

Step one utilizes a set of tools in the mayor’s arsenal: he proposes the re-zoning of key neighborhoods all across the city allowing for larger buildings, along with new affordable unit requirements and new protections for current tenants.

Step two in his plan focuses on increasing the overall stock of housing in the city. He calls for the construction of 160,000 new market-rate apartment units over the next decade in hopes of stabilizing the city’s massive demand, something that could possibly hurt or help his cause greatly. History, has shown that unless this increase in supply is targeted towards a city’s most in need the increase in stock does very little to combat the affordability crisis. When development in a area is below the national average and of those new developments, the majority are geared towards higher income residents the problem can become much worse.

All of these issues would also be paired with a massive outreach and education effort. The administration feels that engaging the community about tensions surrounding changing neighborhoods is key, as well as providing them the tools and education to advocate for themselves.

Additionally, the administration will invest $36 million into legal services for tenants in those hot new neighborhoods. Those funds could potentially cover the legal cost of nearly 14,000 cases in housing court. While Mayor De Blasio’s plan is ambitious, there are still many things that need to be worked out like whether the city will increase affordable unit set-aside requirements for developers, which are currently 20% of a development’s units, as well as the qualifications for affordable units, like the range of qualifying income levels for each neighborhood being rezoned, which can be changed by city planners,

In the District we share a somewhat similar reality as New York City, though with less demand for market-rate units and less space to work with. Like the Big Apple, we are a city with an increasing population, but a dwindling housing stock that matches demand and is affordable to its residents. In order to address the burgeoning homeless and lack of affordable housing crisis, new ideas and strategies must be developed. In addition to making current programs more robust, a renewed commitment must be made to the city’s most at-risk residents.

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Here we Again? Investors Getting Interested in Risky Loans Again – Will this Lead to Another Crisis?

Last week, an article in Bloomberg reported that hedge funds and other private sector investors are renewing their interest in higher interest rate loans to borrowers with tarnished credit. A legitimate concern is whether the Wild-Wild West of abusive lending will recur again and that the lessons of the financial crisis were not learned.

To which I reply. Let’s hope not! The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 implemented legal safeguards against abusive lending and established a new agency, the Consumer Financial Protection Bureau (CFPB), to protect consumers and prohibit risky lending practices.

First some background before reviewing the new Dodd-Frank rules. You may recall the term “liar loans” in which lenders did not document borrowers’ income. These loans often contained additional layers of abuse and risky practices such as “teaser” interest rates that would rapidly adjust upwards after a few years, careless underwriting that did not consider borrowers’ ability to repay, and prepayment penalties that made it too expensive to refinance.

Wall Street went on a feeding frenzy. Most of the lenders making risky loans were not federally-supervised banks but unregulated mortgage companies that depended on Wall Street to buy loans they made. According to the Bloomberg article, during the peak of risky lending from 2005 to 2007, more than $2 trillion of securities backed by the riskiest mortgages were issued. Losses on these loans were over 30 percent and the CFPB estimates that $7 trillion in household wealth was lost as a result.

Now comes along investors willing to invest in loans to borrowers with tarnished credit. The Bloomberg article reports that the investor, Angel Oak, is willing to invest in loans to borrowers with credit scores as low as 500. Credit scores typically range from 300 to 850, with scores below 680 considered tarnished or subprime. The interest rates on the Angel Oak loans are as high as 8 percent while the market rate now is under 4 percent.

Before we conclude that the cycle is repeating itself with investors snapping up bad loans, let us consider the new Qualified Mortgage (QM) rules recently implemented by the CFPB. To qualify as a QM loan enjoying protections from most lawsuits, a loan must not exhibit risky features such as monthly payments that only cover the interest and not the outstanding principal. In addition, the loan must have prudent safeguards such as limits on fees and borrower debt and must include an analysis of a borrower’s ability to repay. The great majority of loans in the marketplace are expected to be QM loans.

Investors can still buy non-QM loans from lenders. A good number of the loans reviewed in the Bloomberg article could be non-QM loans. However, if an investor wants to purchase non-QM loans, the investor must retain at least a 5 percent stake in the loans as required by the Qualified Residential Mortgage (QRM) rules that complement the QM rules. The investors described in the Bloomberg article were taking a 20 to 30 percent stake in the loans.
In other words, as required by Dodd-Frank, the investors in the non-QM loans to borrowers with imperfect credit were taking a significant financial risk themselves and are exposed to more legal liability. They are likely to be more careful than the investors during the Wild West years. Moreover, the predicted annual volumes of these loans of $5 billion is a tiny fraction of the Wild West years. The non-prime market will likely re-establish itself over the next several years but hopefully will be safer for all concerned.

Yet, as a staff person in a nonprofit housing development and counseling agency, I still remain wary. Charging higher interest rates to borrowers with imperfect credit means lenders are charging higher interest rates to borrowers less likely to be able to deal with adverse financial events like sudden home repairs or loss of jobs. Wouldn’t it be better to provide counseling to the borrowers, fix their credit, build their savings, make them stronger financially, and then given them a prime loan at the going interest rate? Wouldn’t it be better for America if we had a much larger nonprofit counseling sector qualifying borrowers for prime loans and a relatively small non-prime or subprime sector? In the crisis years, we had a behemoth of a subprime sector that swallowed many borrowers who could have been counseled by nonprofits and received responsible loans.
In addition to the Dodd-Frank rules, we must work harder at making a much larger housing counseling infrastructure in this country. We must find a dedicated funding source for this sector that provides sufficient funding. As concerned citizens and advocates, we will continue to make the case for an alternative to the subprime sector in order to effectively serve financially vulnerable but hard-working Americans achieve their dream of homeownership.

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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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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