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HUD: FHA Calls on Lenders to Assist Federal Workers and Contractors Impacted by the Federal Government Shutdown

Posted on January 9, 2019January 9, 2019 by Safeguard

Investor Update
January 8, 2019

Source: HUD

WASHINGTON – The Federal Housing Administration (FHA) today called on all approved mortgagees and lenders to be sensitive to the financial hardships experienced by borrowers as a result of the shutdown, including those borrowers subject to furlough, layoff, or a reduction in income related to the shutdown. Read FHA Commissioner Brian Montgomery’s letter to lenders and approved mortgagees.

FHA approved mortgagees and lenders are reminded of their ongoing obligation to offer special forbearance to borrowers experiencing loss of income.

FHA expects all approved mortgagees and lenders to make every effort to communicate with and assist affected borrowers to the greatest extent possible by:

•extending special forbearance plans to borrowers impacted by the shutdown, and

•fully evaluating borrowers for available loss mitigation options to avoid foreclosure whenever possible.

“In accordance with longstanding policy, FHA expects mortgagees to assist borrowers experiencing a loss of income,” said FHA Commissioner Brian Montgomery in a letter to FHA-approved lenders and mortgagees.

FHA is also strongly encouraging all approved mortgagees and lenders to waive late fees for affected borrowers and to suspend credit reporting on borrowers nationwide who have been affected by the shutdown.

VA: Circular 26-19-1: Special Relief Following the Federal Government Shutdown

Posted on January 9, 2019 by Safeguard

Investor Update
January 8, 2019

Source: VA

1. Purpose. This Circular expresses concern about Department of Veterans Affairs (VA) home loan borrowers affected by the Federal Government shutdown, and describes measures mortgagees may employ to provide relief.

2. Direct and Indirect Impact on Borrowers. Directly affected by the Federal Government shutdown are government employees, whether furloughed or otherwise not receiving pay due to the shutdown. Many others have been indirectly affected, including those reliant on income from government employee spending or government-related contracts.

3. Forbearance Request. VA encourages holders of guaranteed loans to extend forbearance to borrowers in distress as a result of the Federal Government shutdown. Careful counseling with borrowers should help determine whether their difficulties are directly or indirectly related to the shutdown, or whether they stem from other sources that must be addressed. The proper use of authorities granted in VA regulations may be of assistance in appropriate cases. For example, Title 38, Code of Federal Regulations (CFR), section 36.4311 allows the reapplication of prepayments to cure or prevent a default. Also, 38 CFR 36.4315 allows the terms of any guaranteed loan to be modified without the prior approval of VA, provided conditions in the regulation are satisfied.

4. Late Charge Waivers. VA believes that many servicers plan to waive late charges on loans where the borrower(s) suffered a loss of income due to the shutdown. VA also encourages all servicers to adopt such a policy for any loans that may have been affected due to the ripple effect of the shutdown as mentioned in paragraph 2.

5. Credit and VA Reporting. In order to avoid damaging credit records of Veteran borrowers, servicers are encouraged to suspend credit bureau reporting on affected loans. VA will not penalize affected servicers for any late default reporting to VA as a result. Please contact the appropriate RLC with any questions.

6. Rescission: This Circular is rescinded January 1, 2020.

By Direction of the Under Secretary for Benefits

Jeffrey F. London
Director, Loan Guaranty Service

Foreclosure Bill Prefiled in Oklahoma

Posted on January 7, 2019March 6, 2019 by Safeguard

Updated 3/6/19: Senate Bill 123 (Mortgages; modifying period of time mortgagor has to cure breach or default. Effective date.) had a second reading and was referred to the Judiciary on February 5, 2019.

Link to bill information

Legislation Update
January 2, 2019

Source: LegiScan (SB 123 information/full text)

AS INTRODUCED

An Act relating to mortgages; amending 46 O.S. 2011, Section 44, which relates to notice of intent to foreclose a mortgage; modifying period of time mortgagor has to cure breach or default; including refinancing within certain time period; requiring waiver of interest accrual during certain time period; and providing an effective date.

Congressman Tim Ryan Spearheads Bipartisan Effort to Eliminate Neighborhood Blight

Posted on January 7, 2019 by Safeguard

Legislation Update
September 18, 2018

Source: Office of United States Representative Tim Ryan

Additional Resource:

U.S. Congress (H.R. 6792 information/full text)

Washington, DC – Congressman Tim Ryan (D-OH) today, along with Congressman David McKinley (R-WV) introduced the Clean Up Our Neighborhoods Act of 2018. This legislation would authorize the Secretary of Housing and Urban Development to make grants to States to eliminate blight by taking down abandoned homes, clearing vacant lots, and assist in distressed neighborhood revitalization.

“There are currently 1.3 million vacant residential properties in America. Many thousands of them in Midwest communities like Youngstown and Akron, Ohio and Detroit and Flint, Michigan. Our ultimate goal must be to completely eliminate blighted structures in America and this bill is a big step in that direction. The economic and social costs of these abandoned buildings and vacant lots cannot be overstated. We know from studies that abandoned properties can cost neighbors tens of thousands of dollars in property value losses. According to FEMA, $777 million in property loss occurs each year from fires started in these structures,” said Congressman Ryan. “Living near vacant homes and lots can also lead to negative public health and social outcomes. Studies show blight can increase criminal activity by creating physical spaces for violence—especially gun violence. Many families and individuals living in these neighborhoods experience lower literacy rates, higher rates of chronic illness, developmental delays, and premature mortality. A nation as wealthy as the United States cannot be content while large sections of our urban centers lay abandoned, endangering the communities around them. My legislation will get to the root of this problem, putting the resources of the US Federal Government on the ground level to make Americans’ lives better.”

“Abandoned buildings and vacant lots are an eyesore to the community and can negatively impact economic development. This bill will provide more resources to empower rural and urban communities alike to mitigate blight, which will improve our neighborhoods and give a boost to revitalization efforts,” said Congressman McKinley.

“We have 54 county land banks in Ohio and the primary reason so many of them came into existence was to deal with blight—the tens of thousands of vacant and abandoned structures that drag down Ohio’s communities. These abandoned structures make our communities less safe, less desirable and have destroyed property values. This bill will give us a badly needed tool that we need to deal with this crippling problem of blight,” Said Jim Rokakis, Vice President of the Western Reserve Land Conservancy

“The proposed blight elimination bill could have a great impact on Trumbull County, where like so many other Ohio communities we have been fighting vacancy and blight issues for years. The Trumbull County Land Bank has been the driver of residential demolition activities since our inception in 2011, and this bill will allow for the much-needed funding to raze the lingering vacant and dilapidated commercial properties plaguing our neighborhoods, while also providing the opportunity to create resident driven public green space projects.” Said Shawn Carvin, Trumbull County Land Bank Director

“This legislation is absolutely critical to continue the work we, and our partners, are doing to strengthen neighborhoods – particularly in communities most vulnerable to the negative effects of abandonment and blight. We appreciate the work that Congressman Ryan has put forth to support local communities. We, like many others, are still facing a crisis that cannot be solved without additional support, and we look forward to supporting any efforts that will help strengthen and rebuild our neighborhoods,” said Patrick L. Bravo, MPA, JD, Executive Director of the Summit County Land Bank

“To date, Mahoning County Land Bank has removed approximately 800 vacant, abandoned, blighted houses in 14 communities, making neighborhoods safer, cleaner and more secure for residents,” said Daniel R. Yemna, Chairman of the Mahoning County Land Bank

“We need to build on this momentum to meet Mahoning County’s remaining residential demolition needs and strategically address abandoned commercial properties, especially those that are detrimental to neighborhood vitality,” said Debora Shaulis, Executive Director of the Mahoning County Land Bank

The bill would direct the Secretary of Housing and Urban Development to make competitive grants to states to eliminate blight and promote neighborhood revitalization. Funding from the award can be used for demolition, clearance and removal of blighted structures, boarding of vacant properties and blighted structures, removal of waste and stabilization activities in connection with providing vacant, green space for the purpose of public access and redevelopment. States must match 15 percent of the amount of the grant.

You can read the full text of the bill here.

New Jersey Bill Aims to Create Foreclosure Buyback Program

Posted on January 7, 2019January 7, 2019 by Safeguard

Legislation Update
December 10, 2018

Source: New Jersey Legislature (S1584 information/full text)

Statement:

The Senate Budget and Appropriations Committee reports favorably Senate Bill No. 1584 (1R), with committee amendments.

As amended, this bill, the “New Jersey Residential Foreclosure Transformation Act,” establishes the “New Jersey Foreclosure Relief Corporation” as a temporary entity within the New Jersey Housing and Mortgage Finance Agency (HMFA) for the purpose of purchasing foreclosed residential properties and dedicating the properties for occupancy as affordable housing. The corporation will cease its operations on December 31, 2022. On that date, any assets, properties, or funds held by the corporation will transfer to the HMFA.

The bill provides for the corporation to be governed by a seven-member board, consisting of the Commissioner of Community Affairs, the Executive Director of the HMFA, the Commissioner of Banking and Insurance, and the State Treasurer and three New Jersey residents, appointed by the Governor, who have relevant backgrounds as described in the bill. The Senate President and the Speaker of the General Assembly will each nominate one member for appointment by the Governor.

The bill requires the corporation to make an annual report of its activities to the Governor and to the Legislature, setting forth a complete operating and financial statement. The corporation’s books and accounts must be audited at least once each year by certified public accountants.

The bill empowers the corporation to purchase eligible foreclosed residential property and mortgage assets to produce affordable housing and dedicate it for those purposes for 30 years. The bill defines “eligible property’ as any residential property that is either owned by a institutional lender as the result of a mortgage foreclosure judgment, or owned by a municipality as the result of a tax foreclosure judgment. The bill directs the corporation to enter into contracts or loans, or both, with no more than two experienced, financially sophisticated, community development financial institutions to enhance the ability of the corporation to fulfill its purpose of producing affordable housing.

The corporation or, if applicable, one of its contractors, will give the municipality in which the property is located, unless the municipality already owns the property as a result of a tax foreclosure judgment, a right of first refusal to purchase the property and dedicate it as affordable housing. The bill allows a municipality to exercise its right to purchase and dedicate eligible property for affordable housing, decline the option to purchase, or decline to exercise the option but, instead, authorize the corporation or its contractors to use monies from the municipality’s affordable housing trust fund to purchase the property.

If a municipality does not exercise its right of first refusal to purchase a property, the corporation may purchase the property and convey it for occupancy as affordable housing subject to a 30-year deed restriction to another public agency, a community development corporation, a developer, or a qualifying household.

If the corporation, its contractors or a municipality purchases an eligible property from monies deposited in a municipality’s affordable housing trust fund, the municipality will receive bonus credits toward any constitutionally-imposed obligation to provide affordable housing as follows: two units of credit for each eligible property sold or conveyed as a for-sale unit or leased as rental housing; two units of credit for each unit of affordable housing dedicated for permanent supportive housing, other than supportive shared living housing; and two units of credit for each new bedroom dedicated in supportive shared living housing. The bill provides that the number of additional units of credit that a municipality can receive under the bill, when combined with any other type of additional units of credit that may be available towards a municipality’s affordable housing obligation, cannot exceed 25 percent of the municipality’s total cumulative new construction affordable housing obligation. The bill specifies that a municipality cannot receive both additional units of credit for producing a unit of affordable housing under this bill, and additional units of credit for that unit under another provision of law.

The bill establishes a mechanism through which a “foreclosure-impacted municipality,” one that has 10 or more foreclosed homes listed on a multiple listing service for at least 60 days, can insulate its affordable housing trust funds from the laws that require the transfer of its trust fund monies to the “New Jersey Affordable Housing Trust Fund.” A foreclosure-impacted municipality can accomplish this by adopting a resolution committing the expenditure of its municipal affordable housing trust fund monies for the production of affordable housing and authorizing the transfer of at least $150,000 of its municipal affordable housing trust fund monies to the corporation for the corporation to use to produce affordable housing.

The bill requires the corporation to use funds transferred from a foreclosure-impacted municipality to produce affordable housing within that municipality. If the corporation is unable to use all of the transferred funds within two years of the date of transfer, the corporation will return the remaining funds to the municipality and the municipality will have at least six months from the date the funds are returned to commit the funds in accordance with other provisions of law. During this period, all municipal trust fund monies designated for the purchase of foreclosed properties will be protected from transfer to the State. A municipality will receive bonus credits, as otherwise provided by the bill, for affordable housing produced by the corporation or by one of its contractors pursuant to this mechanism.

The bill allows the corporation to establish criteria to identify the circumstances when the purchase, sale, lease, or conveyance of market-rate units furthers the purposes of the corporation. The corporation, or its contractors, will be able to purchase, sell, lease, or convey market-rate units in accordance with those criteria without imposing affordability controls upon the property provided the transaction does not violate any other law or requirement.

The bill establishes the “Foreclosure to Affordable Housing Transformation Fund,” to serve as the repository for funds appropriated or made available for the corporation. The HMFA will administer the fund, and is authorized to transfer into the fund any amounts it has that may be used for the production of affordable housing. The bill authorizes HMFA to issue bonds to fund the activities of the corporation. The bill calls for prioritization of the allocation of tax-exempt private activity bonds to allow the corporation to fulfill the bill’s purposes.

The bill provides that in any year in which the proceeds from the additional fee segment of the realty transfer fee exceed $75 million, the first $10 million above the $75 million collected will be transferred into the “Foreclosure to Affordable Housing Transformation Fund” for purposes of producing affordable housing. The bill authorizes the Commissioner of Community Affairs to transfer into the fund certain amounts held for the production of affordable housing, including but not limited to monies deposited in the “New Jersey Affordable Housing Trust Fund.”

The bill requires amounts deposited in the “Foreclosure to Affordable Housing Transformation Fund” that are derived from federal funding sources or are otherwise dedicated to the production of affordable housing be used for the production of affordable housing. The bill allows the corporation to use other funds for the production of affordable housing or market-rate housing, and allows the corporation to use annually up to three percent of fund monies for administrative costs.

COMMITTEE AMENDMENTS:

The committee amended the bill to expand the definition of “eligible property.” As amended, the bill defines “eligible property” as any residential property that is either owned by an institutional lender as the result of a mortgage foreclosure judgment, or owned by a municipality as the result of a tax foreclosure judgment. Previously, the bill defined “eligible property” solely as residential property owned by an institutional lender as the result of a mortgage foreclosure. The amendments also clarify various provisions of the bill to account for this expanded definition of “eligible property.”

The amendments provide that, if the corporation, its contractors or a municipality purchases an eligible property from monies deposited in a municipality’s affordable housing trust fund pursuant to the bill, the municipality will receive two units of credit, instead of one and one-quarter, toward its affordable housing obligation for each new bedroom dedicated in supportive shared living housing. Finally, the amendments clarify that the total number of additional units of credit that a municipality can receive under the bill, when combined with any other type of additional units of credit that may be available towards its affordable housing obligation, cannot exceed 25 percent of the municipality’s total cumulative new construction affordable housing obligation.

FISCAL IMPACT:

The Office of Legislative Services (OLS) estimates that the enactment of the bill would have an indeterminate impact on State and municipal finances associated with the operations of the “New Jersey Foreclosure Relief Corporation” (“corporation”), the transfer of monies thereto, and the purchase and dedication of properties for affordable housing purposes.

Most notably, the New Jersey Housing and Mortgage Finance Agency (“HMFA”) may experience a temporary increase in expenditures associated with the operation of the corporation. These expenditures, which would be supported by the proceeds of bonds issued by the HMFA, also may be offset by monies appropriated by the State, transferred from municipal affordable housing trust funds, or made available from other sources.

Specifically, the bill requires the corporation and the HMFA to enter into a mutually binding funding agreement that would determine the amount of bond proceeds to be raised by the HMFA to support the activities of the corporation. Due to the discretionary nature of this provision, the OLS is unable to predict the amount of debt that would be issued as a result of the bill. The OLS notes that depending on the maturity schedule of the bond issuance, the bill may result in a temporary increase in State expenditures that extends beyond the lifetime of the corporation, as the corporation would expire on December 31, 2022.

The enactment of the bill also may result in the redirection of certain State revenues, which would have been otherwise deposited in the New Jersey Affordable Housing Trust Fund, into the “Foreclosure to Affordable Housing Transformation Fund” and used to support the operations of the corporation.

Most notably, the bill provides that if the annual proceeds from the additional fee segment of the realty transfer fee exceed $75 million, the first $10 million collected above that amount would be used to support the corporation. Unless used to fund other housing-related purposes in the annual appropriations act, the proceeds of the additional fee segment of the realty transfer fee are currently deposited into the New Jersey Affordable Housing Trust Fund. However, given the volatility of realty transfer fee collections, the OLS is unable to determine the amount of realty transfer fee revenues that would be deposited into the “Foreclosure to Affordable Housing Transformation Fund.”

Additionally, the bill permits certain “foreclosure-impacted municipalities” to transfer not less than $150,000 from their municipal affordable housing trust funds to the “Foreclosure to Affordable Housing Transformation Fund,” and thereby protect uncommitted trust fund monies from being forfeited to the New Jersey Affordable Housing Trust Fund. A “foreclosure-impacted municipality” is defined as any municipality that has 10 or more foreclosed homes listed on a multiple listing service for at least 60 days. Under current law, if monies held in a municipal affordable housing trust fund remain uncommitted for longer than four years after the date of collection, the uncommitted balances would be forfeited to the State and deposited in the New Jersey Affordable Housing Trust Fund.

The enactment of the bill could also result in a limited increase in revenue for certain municipalities. Specifically, the bill authorizes the corporation or its contractor to purchase residential properties that are owned by a municipality as a result of a tax foreclosure judgment. The purchase of these municipally-owned properties by the corporation or its contractor would result in a one-time increase in municipal revenues.

The OLS also notes that the enactment of the bill could result in an increase in expenditures for certain municipalities that elect to (1) exercise the right to first refusal and thereby purchase and dedicate foreclosed properties for affordable housing purposes, or (2) finance the purchase of property by the corporation using municipal affordable housing trust fund monies, insofar as those transactions would not have otherwise occurred absent the enactment of the bill.

State Supreme Court Restores Powerful Blight-Fighting Tool

Posted on January 7, 2019January 7, 2019 by Safeguard

Industry Update
September 25, 2018

Source: Plan Philly

Pennsylvania’s Supreme Court has given Philadelphia back its favorite blight-fighting tool. In a Sept. 13 ruling, state justices unanimously reaffirmed the city’s ability to force property owners to maintain the appearances of their vacant buildings, reversing a 2015 lower court ruling.

The case centers on the city’s “Doors and Windows” ordinance, which the Department of Licenses and Inspections began enforcing in 2011 as a means to reduce the number of unkempt, boarded-up buildings in Philadelphia neighborhoods.

The regulation intends to serve as a hedge against creeping neighborhood blight. It requires owners on blocks where 80 percent of buildings are occupied to install operable windows and doors on empty structures, instead of just boarding them up.

To compel action, L&I inspectors prominently place a scarlet sticker on the buildings of noncompliant owners. If that doesn’t provoke changes, they go to a special “blight court” set up under the auspices of the Common Pleas Court where fines are negotiated under the eye of a judge. Those owners who don’t comply could be hit with fines of $300 daily per every window and door that remains boarded or open to the elements.

“This was an intentional tool for stopping the disinvestment spiral,” said Alexander Balloon, director of the Tacony Community Development Corporation, which submitted an amicus brief in support of the city. “It was particularly important in middle neighborhoods where you have one house on a block that gets boarded up and then the next one and the next one.”

Property owners who showed up for blight court had a compliance rate of 75 percent, making for 1,284 properties that were fixed up under the regulation.

When the ordinance was enforced between 2011 and 2015, L&I proactively identified vacant buildings that could be salvaged and whose owners could feasibly comply. When they began taking offending property owners to court, they targeted neighborhoods that suffered clusters of windowless properties but where the market remained strong enough that fines could conceivably act as a deterrent. If a house is only worth $5,000, the logic went, the owner is unlikely to pay fines to keep it.

“Really, the goal isn’t to just put in doors and windows, but to get someone to reoccupy,” said Rebecca Swanson, director of Planning and Analysis for L&I. “That means it’s not going to further deteriorate, it’s not going to become unsafe, we won’t have to demolish it eventually and so we won’t put a hole in the block.”

It’s not only the courts that have scrutinized the city policy. Among researchers, the consensus is that it works. In 2015, The Reinvestment Fund found that census block groups where L&I concentrated their attentions enjoyed dramatic increases in home sale prices.

Epidemiologists and criminologists at University of Pennsylvania’s medical school found the ordinance resulted in a significant decrease in both serious and nuisance crimes within a half mile of buildings where property owners cleaned up their properties.

But despite the enthusiasm of community groups, academic researchers, and the national media, lower courts ruled that the city could not exercise its police powers for what were deemed beautification purposes.

The dispute at the heart of these cases leads back to a vacant industrial block in Kensington. The windows and doors ordinance generally applies only to blocks with a vacancy rate of 20 percent or less, but it also includes a provision that allows L&I commissioners to apply the ordinance in select cases where that threshold isn’t met.

That provision is in place so that if a heavily vacant block borders a stable residential neighborhood, the agency can decide to intervene to keep the contagion from spreading.

That’s what happened with the blocks-long building that once housed the Gretz Brewery on Germantown Avenue and Oxford Street. When L&I took owner Tony Rufo to court, he appealed his numerous windows and doors violations. The judge proved sympathetic to his plight.

“The essential implementation of this ordinance in this case appears to be concerned more with aesthetics and the appearance of occupancy rather than blight, safety and security,” wrote Judge Linda Carpenter, a Common Pleas judge in Philadelphia, in her 2015 decision.

After that ruling, L&I put its enforcement strategy on hold until the appellate courts could hear their case. Under Commissioner Dave Perri, appointed in 2016, the agency has never been able to incorporate the tool into their larger anti-vacancy strategy.

Perri said that with the Supreme Court ruling on its side L&I will redouble efforts to crack down on vacancy. L&I’s data systems have improved greatly in the last three years, he said, allowing the office to more easily track compliance rates and target which owners to take to court. All of the department’s inspectors will be assigned to look for applicable properties within the census tracts they patrol — a citywide strategy only briefly adopted in 2015 before the ordinance was put on hold.

Swanson said her inbox is already overflowing with emails from community members excited about the return of the regulation. When L&I inspectors are in the field enforcing the doors and windows ordinance — placing the agency’s scarlet stickers on the offending pieces of particle board — they are hailed as heroes.

“We had engagement from the community on this more so than anything else,” said Swanson. “The inspector who’s been doing this since the beginning said little old ladies would come out and give him hugs just for putting up a sticker.”

Harvey Spear of the landlord advocacy group the HAPCO said that his members largely support the idea, although he noted that the fines seem “excessive.”

For groups like Balloon’s Tacony Community Development Corporation, the regulation’s return is a blessing, even though Tacony itself doesn’t have as many boarded-up houses today as it did when the ordinance first went into use in the wake of the Great Recession.

But there are still plenty of other neighborhoods that need the help.

“Philadelphia is in a much stronger market position now than we were when this was introduced,” said Balloon. “But we still have lots of vacant buildings. No one wants to live next to a boarded up, unmaintained house that aesthetically steals value from its neighbors.”

The Key to Easing Mortgage Defaults

Posted on January 7, 2019 by Safeguard

Industry Update
October 18, 2018

Source: DS News

Short-term liquidity is a key factor in driving mortgage default, according to a research by the JPMorgan Chase Institute. The research, titled, Falling Behind: Bank Data on the Role of Income and Savings in Mortgage Default, measured the impact of a mortgage payment and principal reduction on default and consumption.

It revealed that a 10 percent mortgage payment reduction decreased default rates by 22 percent. However, for borrowers who remained underwater, a reduction in the principal amount had no effect on default or consumption.

The research which was conducted by Diana Farrell, President & CEO, Kanav Bhagat, Director of Financial Markets Research, and Chen Zhao, VP, Financial Markets Research, at JPMorgan Chase Institute also found that defaults were mostly correlated to a drop in a homeowner’s income.

The findings also revealed that for borrowers who defaulted on their mortgage, did so regardless of their level of home equity, while recovering from mortgage default was associated with recovering from a negative income shock; homeowners who experienced deeper and longer duration drops in income became increasingly delinquent.

“Deeper and longer duration negative income shocks were associated with increasing delinquency, whereas to the extent their income recovered quickly, homeowners promptly resumed making their mortgage payments,” the researchers said. “Homeowners with savings used their financial buffer to delay mortgage default following a negative income shock.”

The researchers found that default rates for homeowners with small financial buffers were higher regardless of income level or payment burden and recommended that building and maintaining a financial buffer may be a more effective tool to help borrowers avoid default than meeting total debt-to-income (DTI) standards at origination.

Based on these findings, the research drew implications for policy along three dimensions—default prevention, helping homeowners facing a negative income shock, and mortgage design.

The researchers said that establishing and maintaining a financial buffer was an important component for avoiding default in the face of a negative income shock even for higher-income homeowners. The default rate for borrowers with less than the one mortgage payment equivalent held in reserve (2.54 percent) was seven times higher than the default rate for borrowers with at least four mortgage payments in reserve (0.36 percent).

“The public and private sector should consider ways to provide new borrowers with an incentive to build and maintain a reserve fund associated with their mortgage that could be drawn down in the face of a negative income shock to avoid default,” the researchers recommended.

To help homeowners facing a negative income shock the research recommended early intervention and that mortgage modification programs aimed at reducing default rates should “focus on providing homeowners who are struggling to make their monthly mortgage payments with material payment reduction, regardless of their previous income level or home equity.”

“Our analysis has implications for housing policymakers as they consider the trade-offs between fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs),” the researchers said while making their third recommendation on mortgage design. “The connection between negative income shocks and default suggests that ARMs, which automatically adjust their interest rates and mortgage payments in accordance with the Federal Reserve’s interest rate target range, can serve as a way to help stabilize the economy during the recession.”

To read the full report, click here.

Approved Ohio Bill Amends Provisions for Mortgage Servicer Registration

Posted on January 7, 2019January 7, 2019 by Safeguard

Legislation Update
December 19, 2018

Source: The Ohio Legislature

Additional Resource:

HB 489 (full text)

Summary:

An Act

To amend sections 1101.05, 1109.20, 1121.10, 1125.23, 1181.08, 1322.01, 1322.07, 1322.09, 1322.12, 1322.34, 1322.40, 1322.50, 1733.01, 1733.04, 1733.041, 1733.05, 1733.13, 1733.14, 1733.16, 1733.19, 1733.22, 1733.24, 1733.32, 1733.329, and 1733.39, to enact sections 103.31, 1121.101, 1121.61, 1349.72, 1733.051, 1733.152, 1733.328, 1733.441, and 1733.53, and to repeal section 1733.26 of the Revised Code to revise the laws governing credit unions, to provide some regulatory relief to state banks and credit unions, to provide for data analytics to be conducted on publicly available information regarding banks, credit unions, and consumer finance companies, to require registration of mortgage loan servicers, and to require a specified notice be given to a debtor for certain debt collection.

The Hidden Costs of Vacant Properties

Posted on January 4, 2019 by Safeguard

Industry Update
December 21, 2018

Source: Hot Air

The St. Louis Post Dispatch published an interesting story today titled “Tipping Point: Thousands of vacant buildings take heavy toll on St. Louis police, firefighters.” The point of the story, which is part of a series, is to focus on something that most people probably don’t spend a lot of time thinking about. The author makes a convincing case that the costs associated with vacant buildings are significant:

Fire and police officials say it’s hard to know exactly how much the buildings where no one lives or works are costing taxpayers. But they can point to some statistics.

They know, for example, that vacant buildings account for more than 40 percent of the fires they have to fight each year…

Police officers, too, could perform more community outreach if they didn’t have to spend time on structures that serve as a nexus for criminal activity.

A Post-Dispatch analysis of St. Louis police data shows that about a third of all calls for service within the past year were within 150 feet of a property identified as vacant by the city…

In addition to responding to calls for service, the police department also devotes six police officers — one for each district — and Sgt. John McLaughlin to the Problem Properties Unit, which coordinates with other city divisions to deal with buildings — some vacant — where criminal activity is chronic…

“Criminals use these places to hide their guns and drugs,” says McLaughlin, the sergeant assigned to the Problem Properties Unit.

A St. Louis Chief Investigator says fires often destroy evidence of what started them and even when the evidence of arson can be found, that doesn’t necessarily point them to the person responsible.

Police work to seal up vacant properties at a cost of about $800,000 per year, but the Post Dispatch notes that it’s common for police to be called out to buildings that have already been boarded up, sometimes more than once. In a video that’s including in the report, police officers say the most common thing to find inside are human waste and drug needles. They occasionally find homeless people inside who are looking to escape the cold and when they do they usually try to find them some alternative shelter.

Today’s article is part of a series on the topic. In a previous article published in September, the city estimated the cost of vacant buildings as $66 million per year:

When Shadiah Thomas steps out the front door of her duplex in the 3900 block of Labadie Avenue, she sees crumbling homes all around her.

To her right are five vacant buildings, including one frequented by drug users and two gutted by fire. To her left, next to an empty lot, is a two-family brick building that’s been empty for at least three years. Across the street, facing her, are more vacants.

“It’s depressing here,” she says…

In a city of just over 300,000 people now — a big drop from its postwar high of 856,000 — there are about 25,000 abandoned properties, according to a city estimate. More than 7,000 of those are vacant buildings, including about 4,000 that have been condemned…

A growing sense of urgency appears to have gripped City Hall, where the Krewson administration is working closely with a coalition of nonprofit and community development groups on the vacancy problem.

Krewson’s office estimates vacant properties cost the city as much as $66 million last year. Vacant lots need mowing and tree removal. They foster illegal dumping and use up police time because of the crime they attract. Over the last two years, city firefighters have responded to more than 500 fires at vacant properties, Krewson’s office says.

Of course, not every city in the U.S. is facing this problem but there are others that are. This graphic was produced by the Lincoln Institute of Land Policy based on government data and published earlier this year at Curbed.

As you can see, St. Louis is in the middle of that graph and other cities have comparable or even bigger problems. In every case, the vacant properties are a potential magnet for crime and a drain on already tight resources.

Savannah Embracing Eminent Domain to Redevelop West Savannah Properties

Posted on January 4, 2019 by Ashley Shepherd