Taking Away the “Straw” that Builds Lives and Neighborhoods

Guest post by Jim Dickerson, Founder and Chair of Manna, Inc.

On Monday, July 8th, the Washington Post published a story by Ylan Q. Mui entitled, “For Black Americans, Financial Damage from Subprime Implosion is Likely to Last.”   What the article did not say explicitly, but implied, was that a crime was committed against Mrs. Ida Mae Whitley and her family and that of many thousands of other minority and lower/modest income borrowers like her by unscrupulous, predatory lenders, brokers and others on Wall Street who, evidently legally, swindled Ms. Whitley out of the equity in her home and good credit—her one ticket out of low income/wealth status. They also are responsible for targeting and wiping out 50% of black home equity and wealth in this country. All these lending and real estate predator/crooks need to do is file for bankruptcy, as Ms. Whitley’s  lender did, walk away and start a new company to find new ways to legally beat more vulnerable people and groups like Ms. Whitley and future generations out of their money. These crooks names were not even published in the article! We publish sexual predators’ names, why not financial, real estate and lending predators’ names living in our midst and preying on the vulnerable?

Rather, what we do is blame the victims, which is occurring now by policymakers, pundits, lenders and many in the public. How convenient. And what is the solution? To punish this income group even more, by making it even harder, almost impossible, for them to get loans, repair credit and by severely limiting the equity they can build up on their new homes with very discriminatory, unjust and predatory resale restrictions that trap them in low income/low wealth status such as is the case now in DC and promoted by “enlightened” Government and private policy groups.  It’s reminiscent of what Pharaoh did to the Hebrew slaves in Egypt when he forced them to, “Make bricks without straw, because they are lazy.” (Exodus 5: 7-8)

As of last week, another major mortgage lending bank officially ended their programs that support community and mortgage lending business for lower income people and the communities they live in, leaving no major mortgage lending bank operating any programs for third party originations in low and moderate income neighborhoods. The banks themselves have not opened mortgage operations or dedicated staff to these neighborhoods, and shutting down broker originations shuts down lending. Now what we have are lawsuits that force banks to pay paltry sums of money in comparison to their earnings and amounts in reserve, rather than forcing long term, institutional commitment to making good long term, low interest loans to very qualified, counseled and credit worthy buyers over years to come as the Community Reinvestment Act was designed to do, but is being ignored now.  The vacuum of lending in lower income areas asks these markets to recover and build back up without any straw for the building.

We and other successful producers of affordable for sale homes know what works. In 30 years Manna has sold over 1,000 homes to lower income, very low down payment 1st time home buyers in the District of Columbia with less than a 2% foreclosure rate among them. In the last 8 years, through the worst recession and foreclosure melt down since the depression, Manna has a 0% foreclosure rate among our buyers! What works is:  1) Quality homebuyer training and counseling, 2) Down payment assistance such as DC’s highly successful HPAP program. 3) Good 30 year fixed rate mortgages and 4) Accessibility to credible ongoing counseling when problems arise. It’s not rocket science. Now is the best time for lower and modest income people to purchase a home. Prices and interest rates are at their lowest in many years. In the District, one can own a home cheaper that renting in many neighborhoods. There are many qualified, excellently counseled and trained, credit worthy lower income people eager to move up the economic ladder, improve their neighborhoods, and reverse falling home prices due to foreclosures. They are our ticket to a better more equitable society. Now is not the time to make it impossible for them to do so.

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A Million Dollar Wasteland or Better Servicing?

Below is a testimony given by an HPAP recipient at last week’s Homeownership Roundtable at City Council:

I a homeowner in Ward 1 and a grateful recipient of a HPAP loan.

A few months ago, I read an article in the Washington Post about the high level of defaults with HPAP. Like many who read it, I was shocked and thought how awful it was that such a good program was being smeared by some bad apples.

Unfortunately, and unbeknownst to me, I was one of these bad apples. The month before our fifth year anniversary of our HPAP loan, when we were scheduled to begin payments toward the loan, we received notification by e-mail from Ameriprise Community Services.

We made our first payment on time and immediately scheduled monthly automatic deductions.  At the same time, we decided to begin the process to refinance. It wasn’t until our agent pulled our credit report that we discovered that Ameriprise Community Services had notified the credit agencies six months prior to when we supposed to begin payments and indicated to them that we were delinquent in our payments, thus negatively affecting our credit score.  We contacted their collections department, explaining their error, and they sent a letter to the credit agencies, copying us, telling them to remove those false delinquencies from our credit report. By then, we were already part of the statistics mentioned in the article and now I question the accuracy of the HPAP repayment process.  It was the servicer who had it wrong, not me and with a 2% foreclosure rate in the HPAP history, I think not the overwhelming majority of those recipients as well.

HPAP was fundamental for me to make the decision and have the possibility to buy a roof for my family.  A better, more transparent process is needed, not a demonization of the program and the families who need it.

by Pablo

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Homeownership Roundtable – June 21, 2012!

Please join us at the Homeownership Roundtable at City Council on June 21, 2012 at 10am! You will hear practitioners and owners speak about the importance of homeownership for low and moderate income folks in the City, and how to make various homeownership tools and resources more effective, more impactful on the City’s economy, and more available to residents willing to put in the work to become homeowners. If you would like to testify, you can contact Councilmember Michael Brown’s office at the phone number or email below.

Council of the District of Columbia

Committee on Housing and Workforce Development

Notice of Public Roundtable

1350 Pennsylvania Ave., NW, Washington, D.C. 20004

COUNCILMEMBER MICHAEL A. BROWN, CHAIRPERSON

COMMITTEE ON HOUSING AND WORFORCE DEVELOPMENT

ANNOUNCES A PUBLIC ROUNDTABLE ON

National Homeownership Month

Councilmember Michael A. Brown, Chairperson of the Committee on Housing and Workforce Development, announces a public roundtable on National Homeownership Month.  The public roundtable will be held on Monday, June 18, 2012, at 2:00 p.m., in Room 123 of the John A. Wilson Building, 1350 Pennsylvania Ave., NW, Washington, D.C. 20004.

Thursday, June 21, 2012 – 10:00 a.m.

Room 123, John A. Wilson Building

1350 Pennsylvania Ave., NW

Washington, D.C. 20004

Those who wish to testify should contact Carol Sadler at (202) 724-8198 or csadler@dccouncil.us, and provide your name, organizational affiliation, and title of organization by 5:00 p.m. on Tuesday, June 20, 2012.  Witnesses should bring 20 copies of their written testimony to the roundtable.  The Committee allows each individual 3 minutes to provide oral testimony in order to permit each witness an opportunity to be heard.  Additional written statements are encouraged and will be made part of the official record. The official record will close ten days following the conclusion of the roundtable.

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The Practice of Theory

A commenter on a popular local blog about affordable housing pointed out that sometimes reality isn’t always convenient for theories, even sound ones. Policymakers have long touted the various benefits that can be gained from innovative policies. Inclusionary Zoning and public land agreements provide for a set-aside of affordable units in developments across the District. However, these arrangements are not always as beneficial as conjectured. For example, in the past decade, during the boom years of real estate, the District implemented partnerships with private developers that included a certain percentage of affordable for-sale units in luxury condominium developments. While this might have seemed to be a great way to integrate low and moderate income individuals and families, the reality has been less than spectacular. ADU buyers at these developments have experienced escalating condo fees -many of them at 100% more than what they were initially paying at the time of purchase.

Further compounding this problem is the resale process. Because of the restrictive covenants, ADU owners must abide by a resale formula. The formula limits appreciation and requires the ADU owner to resell these units to a buyer within the same income category and at a price that is affordable to this purchaser. The problem with this is that because of the escalating condo fees, the formula will not allow any appreciation to the original ADU owner. So, this ADU owner, who purchased a home and assumed all of the typical risks of homeownership, gets none of the reward. The end result is that this ADU owner is now in worse financial shape upon resale than before they purchased a unit, and from factors that have nothing to do with the market. How does this move people up the socio-economic ladder? How does this solve the District’s problem of the ever-widening wealth disparity?

A post today in the City Paper’s Housing Complex contemplates why the only two condo units produced through the District’s Inclusionary Zoning policy have not yet sold. Blame is attributed to difficult lending guidelines, another unforeseen issue that further pokes holes in sound theories Blogger W Jordan ends a comment by stating “in theory [the author] is not wrong, but we don’t live in theoretical neighborhoods”. A very apt observation and something that City officials and policymakers should take notice of.

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The Fallacy of the Fallout

During a recent lunch with a friend and the inevitable discussion about affordable housing in the District, he mentioned that the District has done too much already for affordable housing and that it was poor policies that resulted in the mortgage meltdown and the financial crisis that ensued. My policy wonk hat turned, I countered by citing hard data about the history of restrictive covenants, redlining, and the inner-workings of the subprime industry. He seemed genuinely surprised by this and it registered to me that many people, even very smart people like my friend, simply did not know the truth. A few sensational headlines that trade ill-researched positions seem to be all you need to convince the masses.

A very informative video of the history of restrictive practices in housing can be found here: http://hatdc.org/?p=599.

As for the subprime meltdown, while fishing through dozens of articles has illuminated much for me, the most impactful piece I’ve found is a demographic study done by Maurice Jourdain-Earl, the founder of a company called ComplianceTech. The full report can be found here: http://www.mortgagebankers.org/files/Conferences/2008/RegulatoryComplianceConference08/RC08SEPT24HMDAMauriceJordain.pdf

What’s interesting is for starters the majority of Subprime borrowers were not low income household, but rather middle and upper income white households. Many of these borrowers were not first-time buyers either. The overwhelming majority of subprime borrowing occurred when existing homeowners pulled out home equity through refinancing. Equity stripping became the practice that fueled the subprime boom and is directly attributable as the reason why so many families are “under water” on their mortgages today.

Even though the majority of borrowers were middle and upper-income White households, the most unfortunate part was that Black and other minority households were disproportionately targeted for these toxic products, even in instances where they would qualify for “good” loans.

This study is really important because it not only proves that low and moderate-income Minority households were not to blame for the crisis, but also in figuring out a realistic solution for the existing problem.

According to Maurice Jourdain-Earl:

The problem with portraying the foreclosure crisis as a minority and low-income problem is that it affects how solutions will be approached. If, on one hand, it is believed that subprime rate loans were predominately made to marginal segments of society (Black, Hispanic or low-income) housing policymakers may approach solutions with bias assumptions about minorities and minority qualifications (low education, bad credit, and low-paying jobs, etc.). Thus, there may a tendency to write-off the subprime lending debacle as a type of affirmative action gone bad. On the other hand, if it is believed that the foreclosure crisis affects broader and more demographically diverse segments of society then a more politically responsible approach is likely, thereby changing the tone, climate and context of how solutions are crafted.

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DCʼs Home Purchase Assistance Program (HPAP)

What is it?

HPAP, the Districtʼs homegrown downpayment assistance program, provides up to
$44,000 for first-time, low and moderate income home buyers. Downpayment
assistance is critical for low and moderate income DC residents as saving enough for a
downpayment, especially in DCʼs expensive housing market, is one of the largest
impediments becoming a homeowner.
In addition to the financial assistance, HPAP recipients also receive intensive financial
and home buyers education, preparing them for the responsibilities and challenges of
homeownership.
HPAP acts as a second mortgage. Recipients begin paying it down starting in year six
of owning their home and make monthly payments over a 40 year period, thus making
the payments affordable. Some recipients pay back their HPAP loan much quicker.

What it provides

HPAP has helped 13,000 DC residents move out of systems of dependency and
ongoing subsidy, and currently generates $2 million in repayment every year. Even
through the housing crisis, HPAP recipients have only a 2% foreclosure rate.
Homeownership offers a way for prepared families to build wealth through the equity in
their home, helps reduce crime in neighborhoods, and improves childrenʼs educational
performance.
At a time when it is cheaper to own than rent in the DC and with historically low interest
rates, the DC government should be increasing HPAP rather than letting it dwindle (see
the chart below). Providing homeownership opportunities to low and moderate income
people also allows room for other DC residents to benefit from other essential affordable
housing programs – creating a dynamic continuum of housing that moves people out of
poverty.

See a recent article about the program and budget cuts at http://greatergreaterwashington.org/post/14648/cuts-threaten-successful-homeownership-program/

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Testifying at City Council!

Future affordable homeowners and HPAP recipients give testimony at City Council.

Yesterday, the DC City Council Committee on Housing & Workforce Development held its annual budget hearing for fiscal year 2013. As affordable housing for District residents remains distant from Mayor Gray’s vision for the city, cuts were made to two essential city housing programs: the Home Purchase Assistance Program (HPAP) totaling $5 million and the Housing Production Trust Fund (HPTF) totaling $20 million (for more information, see http://housingforallblog.org/2012/03/so-what-happened-in-the-mayors-budget/).

Along with numerous housing advocates and non-profits, 19 past and future recipients of HPAP loans, along with Manna, Inc. staff, submitted testimony before the Committee Chairman and At-Large City Councilman Michael Brown to the positive effect that homeownership purchased through HPAP has had on their lives.

Bernice Joseph, a mother of 4 and homeowner in Ward 2 since 2002 said, “Without this program I do not know where I would be. But I do know I would not be in my neighborhood, the one that is so dear to my heart, the one where I put down roots, the one where I have lived for the past 21 years… Without the stable price of my mortgage, I would not be able to afford to go back to school; I definitely could not afford my classes if I had to pay market-rate rent.”

Robert Cooke, a recent homeowner in Ward 5 said, “My story, and the story of some of the members on this very Council, is only possible with the HPAP. HPAP is one of the best investments that the City makes. It just doesn’t make sense that the Mayor is cutting back on this program, while there is an ongoing housing crisis in this city. I will pay back my HPAP assistance so others can become homeowners, too, and I will contribute to the City through property taxes. Where else would this be possible for a person on disability?”

Finally, Willamena Samuels, homeowner in Ward 2 and Director of Manna’s Homebuyers Club said, “HPAP has helped to break the cycle of poverty and allowed families to build wealth and live the American dream of homeownership. Although I own a home in DC and have no thoughts of moving, it pains me to think that the future of the District of Columbia would be one that doesn’t give people opportunities to stay in the city they grew up in and love. If you cut HPAP funds, you limit homeownership to only the very rich.”

After the council hearing many testifiers, concerned residents and housing advocates held a rally in support of full restoration to the housing budget. Ralliers heard from affordable practitioners, advocates and recipients alike, including Jubilee Housing affordable renter Brian Adams, Coalition for Non-Profit Housing and Economic Development organizer Elizabeth Falcon, and Manna affordable homeowner Robert Cooke. Together their words testified to the fact that DC residents need a diverse continuum of affordable housing to move low-income residents up and out of poverty and full funding from the city government to make that possible.

Though the testimony heard before the council and at the rally has been stirringly emotional and persuasive, the fight to restore HPAP and HPTF funding is far from finished. And though those at the rally also heard support for affordable housing needs from Councilmembers Michael Brown, Yvette Alexander, Jim Graham, and Marion Barry, full budget restoration can only happen with majority support from the council.

The hearing and rally are over. It is now up to all housing advocates to continue the fight and steadfastly plead to their Councilmembers for full restoration and funding to these vital housing programs. There is only a short time remaining for action before the Committee of the Whole will cast its final vote on the Mayor’s budget. Go forth and act on this issue today.

For more about the rally and excerpts from speeches given visit the Coalition for Non-Profit Housing and Economic Development website at:
http://housingforallblog.org/2012/04/residents-rally-stop-making-affordable-housing-programs-disappear/

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Almost every American receives a subsidy in some form or owes some benefit from one.

Housing subsidies were especially instrumental in creating the white middle class after the Second World War. American soldiers returning from war were welcomed home with generous aid from the GI Bill of Rights, guaranteeing access to education and housing.

But these guarantees were meant almost exclusively for the benefit of whites. Preexisting federally sanctioned racist FHA and bank lending practices excluded almost all minorities from benefiting from these housing subsidies. By favoring whites, they created artificial and racially sterile white suburban communities. For an upwardly mobile minority homebuyer trying to integrate into these neighborhoods, it was a common experience to be greeted with racist housing practices including redlining and blockbusting or discrimination by neighborhood NIMBY organizations. Together these practices preserved or worsened residential segregation and impeded minority resident homeownership. As owning a home means the ability to accumulate equity and build a financially sound future for oneself, not having this ability to accumulate wealth hinders one’s socioeconomic wellbeing. It also detrimentally affects minority communities by concentrating poverty in segregated neighborhoods, resulting in a resounding cycle of urban decay, structural dilapidation and lack of interest in community wellbeing and development.

Even though today these racist lending practices have been outlawed by the Fair Housing Act of 1968, this law alone could not and has not corrected the legacy of decades of neglect and the segregated concentration of poverty. Direct corrective measures are needed, particularly subsidies for first-time minority homebuyers. If this seems unfair or the favoring of some over others, one needs to remember the dual history of the housing market: subsidizing whites and divesting minorities. One half of the story created the middle class and the other minority segregation and exclusion. Taking action today by subsidizing minority homebuyers is not an unfair handout; it is the reification of an equality of opportunity long withheld to some while being long enjoyed by most.

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Don’t treat America’s homeless as criminals

Braving America without a home has always been hard. Now it’s becoming a crime. A recent survey of 234 cities by the National Law Center on Homelessness and Poverty found that on nearly every front, municipalities are cracking down on the homeless: 24% prohibit begging, 22% prohibit loitering and 16% say it’s illegal to sleep in public places.

Full Article here: http://www.usatoday.com/news/opinion/forum/story/2012-02-14/homelessness-poverty-criminalize/53094736/1

Peculiar Problem in the District as well, where homelessness is up 20%:  http://www.washingtoncitypaper.com/blogs/citydesk/2012/02/22/homeless-families-up-20-percent/

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Official Affordable Condo Legislation!

Wonderful news Advocates!  We have a draft of the proposed legislation to assist distressed ADU owners.  The key components of the bill are:

 (a) DHCD may grant a hardship waiver to resale restrictions for homeowners residing in Affordable Housing Units financed in whole or in part by DHCD.  If granted, the homeowner may rent the unit at market rate or sell the unit subject to the restrictions.   In order to qualify, the Owner must meet one or more of the criteria below:

                                (1) The Owner’s employer is temporarily sending the Owner to a work place a great distance from the Owner’s home;

                                (2) The Owner is called to military service;

                                (3) The Owner can prove an excessive annual condominium fee increase of 25% or more; or

                                (4) Any other compelling reason warranting a hardship waiver under the Director’s discretion.

 The draft will be introduced on Tuesday and a public hearing will be scheduled within the coming weeks.  We will need your support to make this bill a reality and will need your assistance to make Council visits.   However, we will need to revise the dates of the Council visits that were scheduled for the week of February 27th.  Please spread the word to other ADU owners.  We are one step closer to revising these onerously restrictive policies.  Thank you all and we’ll be in contact as soon as we know the hearing date.

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