Safeguard Properties

Rethinking How D.C. Inspects, Taxes Vacant Properties to Address Urban Blight

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Industry Update
December 20, 2015

According to D.C.’s official tally, almost 1,300 properties in the city are vacant or even blighted — and the real number may be much higher. These properties are taxed at a rate six times higher than occupied ones. But unless city inspectors confirm every six months that a property is still vacant, the tax rate goes back down to normal.

That means it’s difficult for D.C.’s four inspectors to investigate new complaints because District law requires them to keep checking current vacant properties to make sure they’re still empty.

But a proposed law would make life easier for the inspectors, and harder for owners who hold onto vacant properties. D.C. Council member Elissa Silverman has introduced that bill, which aims to streamline the city’s vacant-property procedures.

“It basically shifts the burden from the city to keep saying, ‘Yes, it’s still vacant, it’s still vacant, it’s still blighted,’ to the owner to say, ‘Here are the steps that I took that should allow this building to be removed from the vacant and blighted list.'”

Those steps could include showing that the property is leased, or that utilities are turned on — or, for blighted properties, showing they’ve been brought up to code. Silverman says vacant properties can eventually attract drug users and crime.

“It leads to an increase in public-safety concerns,” Silverman says. “It leads to a lack of investment in that area. We want to see these properties put back in use.”

David Sheon, ANC commissioner for a section of north Petworth, has been pushing the city for six months to improve its handling of vacant property. Sheon calls Silverman’s bill a step in the right direction.

“It’s the first piece of a puzzle that has to take place in order to expedite the transfer of property back into use in the neighborhoods,” Sheon says.

But according to Sheon, there’s still a loophole that lets owners of vacant properties hold onto the lower tax rate by getting a construction permit, which buys them another three years. Silverman says she hopes to address that later.

Six other Council members joined Silverman in introducing the bill. She expects a hearing on it in early 2016.

Source: American University Radio

Philadelphia Land Bank Now Open for Business

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Land Bank Update
December 9, 2015

Nearly two years after its creation, the Philadelphia Land Bank is ready to do business.

Mayor Nutter on Wednesday announced the transfer of 150 property deeds owned by the government nonprofit Philadelphia Housing Development Corp. to the Land Bank, a deposit that made the bank able to carry out its mission: assemble vacant properties for development.

And more deposits are on the way. An additional 500 PHDC deeds are expected to be transferred by the end of the year, and on Thursday, City Council is expected to approve the transfer to the bank of 833 city-owned properties.

The Land Bank was created in 2013, after much negotiating between the administration and Council, as an instrument for streamlining the redevelopment of vacant properties.

Currently, the city owns nearly 9,000 vacant parcels, but the deeds are held among three agencies. The Land Bank aims to end that situation by taking custody of the city’s stock of vacant land.

City officials also plan to use the Land Bank to acquire privately held tax-delinquent properties and sell them to responsible buyers.

But there were a few hurdles the city needed to clear in the last two years before the Land Bank could do business, including clearing up the titles of city-owned properties (still an ongoing process) and negotiating agreements with the unions representing workers who are helping with the Land Bank.

“Today marks an important milestone in the city of Philadelphia in our ongoing efforts to take vacant properties and restore them into productive use,” Nutter said Wednesday during a news conference.

The Land Bank was one of the initiatives Nutter campaigned on in 2007.

On Wednesday, he said he could not have done it without the efforts of Councilwoman Maria Quiñones Sánchez, the bank’s leading advocate on Council. He joked that whenever he spoke with her, she found a way to bring up the Land Bank.

“It’s that kind of focus that gets things done,” Nutter added.

The councilwoman joked back that she is “a disrupter.”

Sánchez has signed off on transferring 724 city-owned properties in her district to the bank.

Council President Darrell L. Clarke, who signed off on 48 properties in his district to be transferred, said more batches were coming, but did not elaborate.

Land Bank spokesman Paul Chrystie said more deposits are on the way. Officials estimate 5,500 city-owned properties are eligible to be moved to the bank, he said.

“It is likely that the majority of those will in fact move to the Land Bank, although the timing will be driven by circumstances surrounding each one,” Chrystie said.

It could also depend on councilmanic prerogative.

As the law is written, district Council members can veto land transfers in the section of the city they represent. Many in the development community have criticized this aspect of the Land Bank legislation.

On Wednesday, Mayor-elect Jim Kenney, who was attending a symposium on development, criticized what he said was a “slow” and “frustrating” process of getting the program up and running, then pledged to support it.

Kenney, who as a Council member voted for the Land Bank legislation, said he would direct the people in his administration working on housing, economic development, and commercial issues to get involved with the process and try to solve problems.

“Whenever there’s snags, the administration can play a role in un-snagging it and making sure the district Council person and developer get where they want to be,” Kenney said.

After the Council and PHDC transfers go through, Kenney will get to oversee the transfer of 4,000 city-owned properties to the Land Bank.

Source: The Philadelphia Inquirer

Massillon Looks to Partner With Land Bank on Blighted Homes

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Land Bank Update
December 14, 2015

Massillon is looking to partner with the Stark County Land Reutilization Corporation to help tear down shoddy structures.

MASSILLON

Some shoddy structures in the city could soon be coming down.

The city is looking to partner with the Stark County Land Reutilization Corporation, also know as the land bank, to assist in tearing down some vacant deteriorating homes.

An agreement would initiate a neighborhood program to remove homes in disrepair, including ones on blighted properties with high grass and/or asbestos.

A contract between the city and land bank was discussed Monday night during a City Council work session. Further consideration is scheduled during next week’s regular meeting.

In addition to bettering neighborhood aesthetics, the effort aims to help stabilize or improve property values of homes in proximity to those in disrepair.

The city has a wide range of homes needing attention. Some residences have been vacant for a couple of months, while others have been unoccupied and falling apart for a decade or more, according to David Maley, a city code enforcement officer.

Most homes in disrepair are on the city’s southeast side, said Maley, while the northeast side has the smallest amount of blighted units.

In many cases, homeowners have disappeared or died, or banks that assumed control through foreclosures have walked away. Property tax payments continue to be tardy over multiple years whether or not homeowners have been found, or not.

Legal and public notifications would be mandatory before any city-initiated demolishing could begin, said Maley. In addition, the city would have to acquire the properties.

The city is in the process of garnering about five homes in disrepair for eventual demolition, which could occur in early 2016, Maley said.

Source: IndeOnline.com (full article)

Forces Join to Protect Borrowers from Foreclosure Relief Scams

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Industry Update
December 12, 2015

The Office of New York State Attorney General Eric Schneiderman and several media associations within the state have announced a joint initiative to crack down on unlawful advertising of foreclosure rescue scams, which have surfaced all over the country in the last few years but have been especially prominent in New York, one of the markets hardest hit by the foreclosure crisis.

In addition to Schneiderman, who has been a fierce advocate not only of foreclosure prevention but of preventing perpetrators from scamming vulnerable homeowners facing foreclosure, media outlets participating will be the New York News Publishers Association, the New York Press Association and the New York State Broadcasters Association.

Perpetrators of the scams target homeowners who are in the process of foreclosure and seeking some help with a mortgage modification. The number of scammers targeting New Yorkers has risen in recent years, including an increase in so-called “Deed Theft” cases in which the scammers convince the homeowners to forfeit ownership rights to their homes.

Through the new initiative, the media outlets will scrutinize foreclosure relief advertisements for possible scammers, who often target vulnerable homeowners through trusted local media outlets. The initiative is voluntary; dozens of community outlets are being asked to participate.

“Vigilant, well-informed homeowners are the best protection against these deceitful mortgage rescue scams,” Schneiderman said. “These scams are particularly repugnant because they take victims of the housing crash and make them victims again.”

Foreclosure rescue scams have conned approximately $100 million from 42,000 homeowners, according to a December 2014 report by the Center for NYC Neighborhoods and the Lawyers Committee for Civil Rights Under Law. In New York alone, more than 2,700 homeowners have submitted complaints to the Lawyer Committee’s office, trailing only California and Florida in the number of complaints reported to the Loan Modification Database. New York homeowners have documented more than $8.25 million in losses as a result of foreclosure relief scams.

Victims of the scams have often reported to the AG’s office and housing counseling partners that it as advertising in local media outlets that lured them into the scam. The ads are often in violation of state and federal laws that require the companies who are advertising to include specific disclosures in ads pitching foreclosure prevention or loan modification services.

New York homeowners have documented more than $8.25 million in losses as a result of foreclosure relief scams, or an average of about $4,183 per victim—about $900 more than the national average. Losses have the potential to go far beyond the initial dollar amount, however; they could wind up in the tens or even hundred of thousands of dollars if the victim’s home falls into foreclosure.

Victims of the scams have often reported to the AG’s office and housing counseling partners that it as advertising in local media outlets that lured them into the scam. The ads are often in violation of state and federal laws that require the companies who are advertising to include specific disclosures in ads pitching foreclosure prevention or loan modification services. Schneiderman and the media outlets are asking the members of their organizations to review foreclosure relief ads to make sure they are in compliance with the state disclosure laws.

This initiative is part of a broader effort by Schneiderman to end the mortgage crisis in New York. In 2012, he launched the Homeowner Protection Program (HOPP), a network of 85 housing counseling and legal services providers that provides free, high-quality representation to struggling borrowers who are at risk of foreclosure. HOPP has assisted more than 50,000 New Yorkers to date.

Schneiderman’s office launched AGScamHelp.com, a Web-based app that helps homeowners determine if a mortgage assistance company is government-vetted. The app helps users locate nearby counseling and legal services agencies in the HOPP network, search government-vetted agencies, report scams, and receive tips on avoiding scams. The AG’s office reports that the app has more than 6,600 weekly users and has been used by more than 112,000 people since the site was launched.

Source: DS News

Congress Set to Give Detroit Demolitions a Huge Boost

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Updated 12/18/15: The Detroit Free Press published an article titled Detroit-led blight fight may spur demolitions across U.S.

Link to Article

Industry Update
December 17, 2015

Spending legislation includes key measure from Michigan lawmaker plus proposals regarding Great Lakes, Asian carp

WASHINGTON — A massive federal spending bill expected to be passed this week includes a provision allowing the U.S. Treasury to transfer billions of dollars into a fund which has already sent or promised $130 million to Detroit to tear down thousands of blighted buildings and is expected to provide at least tens of millions more.

The U.S. House Rules Committee on Wednesday evening sent to the full chamber a so-called omnibus bill to fund government through the next fiscal year. And tucked into a section of the $1.15-trillion bill is a provision allowing Treasury to add up to $2 billion more for its Hardest Hit Fund, a $7.6-billion program which was set to expire at the end of 2017 but could, under the proposal, also be extended.

Michigan lawmakers were at the forefront pressing for the change. Detroit Mayor Mike Duggan told the Free Press on Wednesday he expects, if the proposal is passed as expected and Treasury begins freeing up more funding for blight removal soon, the city’s efforts to pull down rundown, abandoned structures could continue at its current pace, with as many as 15,000 properties to be demolished by 2018.

“We’re optimistic we can get another two years of life out of this,” said Duggan, who noted that no city in America is pulling down blighted buildings as fast as Detroit. He said he approached U.S. Sen. Debbie Stabenow, D-Mich., about the proposal two months ago and that she and others have been “relentless” about seeing it through since.

Duggan said the effort to win support for the measure — which takes unused funds from the Home Affordable Modification Program to help eligible homeowners rewrite their mortgage debt — saw Rock Financial founder Dan Gilbert and JPMorgan Chase head Jamie Dimon among others calling top legislative leaders to lobby for it on Detroit’s behalf.

“It was amazing,” said Duggan, noting that independent studies have shown that efforts so far to pull down more than 7,000 blighted buildings in Detroit have led to significant increases in property values. He declined, however, to say how much he thinks the city could get under the change, which will be up to the state and the Treasury Department.

While there is no way to know exactly how much of the funding will end up in Michigan and Detroit, it’s almost certain to: The extension would be limited to “current program participants,” which includes the state of Michigan, and no city in America has received as much funding to tear down abandoned, blighted buildings as Detroit, where there are still thousands marked for demolition.

Stabenow said she’d been working for weeks to cobble together a coalition to support the proposal which included several members of the Michigan delegation and U.S. Sen. Rob Portman, R-Ohio. She said she expects Detroit to see at least “tens of millions” more in blight removal funds and that the city’s already successful program to tear down buildings helped sell the change.

“The successful strategy (in Detroit) … has been instrumental in getting us the support we need. It’s working. We’re seeing property values going up and people investing in their homes again,” she said.

Blight removal “changes neighborhoods and communities and makes them safer,” said Stabenow, who several months ago was working to beat back an effort rescind unused portions of the Hardest Hit Fund, which has helped pay for blight removal across Michigan. “Certainly in Detroit, in Flint, in other cities in Michigan it’s about bringing them back to life. We made the case.”

The provision was included in a sweeping bill that, if passed by both the U.S. House and Senate as expected this week, will keep the federal government open through Sept. 30. It also includes several other Michigan-specific provisions, as well as U.S. Rep. Candice Miller’s proposal to tighten restrictions on 38 countries whose citizens are allowed to visit the U.S. without a visa.

For months, Duggan has been trying to drum up more funding to keep the program going. The city is already expected to remove more than 8,000 properties with the $130 million already committed to it via the Hardest Hit Fund program. But that is only expected to get it through next April, with thousands more buildings marked for demolition.

Meanwhile, some have continued to raise questions about the city’s bidding process, which Duggan defends as proper, and whether it reached unit-price agreements with contractors to speed up demolitions in a way that may have led to avoidable cost overruns. But the city’s per-property cost of about $14,000 is still well under the $25,000-per-property cap set by the Treasury Department, and, according to Stabenow, federal officials are impressed with Detroit and Michigan’s success.

Michigan in October got word that Treasury was allowing it to transfer another $32.7 million of its original Hardest Hit Fund award of $498 million to blight efforts in Flint and Detroit, which was set to the get the lion’s share of $21.25 million. So far, Michigan has committed about $208 million of its award to blight, including the $130 million earmarked for or spent in Detroit.

A key group of Michigan legislators supported the change, including Miller, a member of House leadership, as well as Democratic U.S. Reps. Dan Kildee of Flint Township, John Conyers of Detroit and Brenda Lawrence of Southfield. U.S. Sen. Gary Peters, D-Mich., was a key supporter as well.

Kildee, long a supporter of using blight funds in Michigan, noted that, “Getting rid of abandoned homes in cities like Flint, Saginaw and Detroit helps to strengthen neighborhoods and decrease crime.” Lawrence, noting the widespread presence of blight in Detroit and Pontiac, which make up parts of her district, said the money is needed to eradicate a problem “that has weakened too many neighborhoods and communities within our cities.”

As for Miller’s visa measure, it won overwhelming support in the U.S. House last week. It bars people who are dual citizens of Syria, Iraq or other nations linked to terrorism, or who have recently visited those countries, from visiting the U.S. without a visa.

By including the measure in the bill to pay for government operations, Congress gives the Senate a chance to concur in the proposal, which is all but certain to pass despite criticisms from some Michigan Democrats that it discriminates against dual nationals of Syria or Iraq who have become citizens of other nations the U.S. is allied with.

Miller has defended the bill saying it’s meant to keep the U.S. safe from potential terrorists who could try to use the Visa Waiver Program to infiltrate the nation. Dual nationals of Syria and Iraq could still enter the U.S. if they qualified for a visa as well, she has said.

Meanwhile, other parts of the 2,000-page omnibus legislation:

  • Directs the Army Corps of Engineers to move ahead with studying the prospects for blocking the spread of invasive Asian carp toward the Great Lakes at the Brandon Road Lock and Dam in Joliet, Ill., a proposal both Miller and Stabenow have been actively pushing, and ensuring there are emergency procedures in place to stop the fish species.
  • Increases from $250 million to $300 million annual funding for the Great Lakes Restoration Initiative, which is used to clean up polluted areas, reduce runoff and restore fish and wildlife habitat. Said Stabenow: “Just like generations before us, it is our responsibility to protect and preserve the Great Lakes.”
  • Keeps in place $500 million for infrastructure investments known as TIGER (Transportation Investment Generating Economic Recovery) grants, which in past years have helped fund the M-1 Rail project in Detroit – though Michigan received no TIGER grants this year. The overall funding level is $400 million more than the House’s proposal, but $750 million below what President Barack Obama proposed.
  • Includes $100 million to continue construction of the Facility for Rare Isotope Beams at Michigan State University, which will allow researchers to study the properties of rare nuclear isotopes. Said Peters: FRIB will also “generate millions of dollars in economic activity for the Lansing area, create thousands of jobs and play a central role in training the next generation of nuclear physics researchers.” It is expected to be completed in 2022.

Source: Detroit Free Press

Cheat Sheet: What to Expect from Regulators in 2016

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Industry Update
December 14, 2015

WASHINGTON – Mortgage lenders and servicers weary from a raft of regulatory changes in recent years may see some respite in 2016.

While many lenders are still struggling to implement new mortgage disclosures – an area likely to be a focus in the New Year – and face new Home Mortgage Disclosure Act requirements soon, the pace is still likely to slow.

“Thankfully the onslaught is somewhat over,” said Robert Lotstein, managing attorney of LotsteinLegal in Washington.

Still, lenders will face significant challenges in 2016. Following is a guide to some of the biggest ones:

TRID Part II

Industry groups all but begged Consumer Financial Protection Bureau Director Richard Cordray for a temporary safe harbor to shield lenders from possible lawsuits and enforcement actions when new mortgage disclosures went online on Oct. 3. But despite reports of vendor problems with the new Truth-in-Lending/Real Estate Settlement Procedures Act integrated disclosures, the agency has refused to grant a formal safe harbor.

Instead, it has pledged not to punish institutions that make a “good faith” effort to comply with the new rules.

“We are still operating under this good faith compliance framework, which I think is helpful,” said Pete Mills, senior vice president at the Mortgage Bankers Association.

Yet that informal grace period will expire sometime in the New Year, and there are a number of TRID issues that must still be clarified.

The industry is hoping for the CFPB to provide guidance that will help narrow the differences in TRID interpretations between lenders and loan aggregators.

When a lender goes to sell a loan to Wells Fargo, U.S. bank or JPMorgan Chase “all three should be willing to buy that loan because it is following a common interpretation of TRID,” Mills said.

Other industry representatives are hoping the CFPB will provide some clarity around non-standard loans, such as home construction-to-permanent loans. Borrowers like the security of a single construction-to-perm loan closing because they can lock in the mortgage interest during the construction phase.

“Some lenders are finding ways to do it but others are anxious” said Robert Davis, an executive vice president with the American Bankers Association. Because of TRID, they are separating the construction and permanent loan closings.

“There are other special loan products where there is uncertainty about the loan disclosures,” Davis added.

One overarching question is when the CFPB will end the grace period – and what kind of actions it will take related to the new disclosures.

The Return of HMDA

The CFPB finalized a rule this year that requires the industry to collect more data under HMDA. Though the rule doesn’t go into effect until 2018, it’s still a massive undertaking.

The new HMDA rule adds 25 new data points and modifies 14 others in addition to the existing 9 data fields that were already required. Lenders must also begin reporting data on other types of loans like reverse mortgages and home equity lines of credit for the first time.

“Next year, lenders will have to start figuring out how to capture the data,” said Davis. “You can’t wait.”

Lenders are already beginning the process of complying with the new HMDA rule and some industry representatives are hopeful it will be relatively smooth.

This is just a matter of “getting through the implementation process,” said Ron Haynie, a senior vice president at the Independent Community Bankers of America. “I don’t think it will be a hard year where you have to digest 1,000-page rules every couple of months.”

New Servicing Rule

The CFPB is expected to issue a final servicing rule in mid-2016 that will also require a lot of system changes. This rule addresses the servicing of troubled loans, transfers of servicing from banks to non-bank servicers and loss mitigation.

“It won’t be as earthshaking as the first servicing rule,” Davis said in an interview. But the 500-page rule is still going to require a lot of system changes and training to ensure compliance.

Loan Certification Regulations

Lenders are also anticipating that the Federal Housing Administration will finalize its loan certification rule early next year. The contentious regulation has already been issued for two comment periods.

Industry groups are hoping FHA will provide more clarity around loan defects or errors that could result in penalties or indemnification for loan losses.

“It is a complicated issue,” said Mills. “But you need to have a standard that doesn’t put folks at risk of treble damages for minor, non-material document or other underwriting defects.”

Scott Olson, an executive director of the Community Home Lenders Association, noted that lenders will be watching to see if FHA comes up with a fair standard or just tries to stick lenders with loans that go into default.

The loan certification rules will also have an impact on FHA’s initiative to get lenders to serve lower credit score borrowers.

“Lender perceptions of where FHA is on indemnification and False Claims [Act] can have an impact on their willingness to lend to lower FICO borrowers,” Olson said.

Condo Rule Changes

FHA also is working on reviving its condominium loan program by streamlining its approval process. The Department of Housing and Urban Development is working on a plan to make permanent alterations to its owner-occupancy requirements, limits on commercial space and spot approvals.

Spot approvals would make a single unit in a non-certified condo building eligible for FHA-insurance. FHA stopped allowing spot approvals several years ago.

HUD data shows that FHA condo loan endorsements dropped to 22,800 in fiscal year 2014 from 57,800 a year earlier.

Working Overtime

Meanwhile, the Department of Labor is expected to issue a final rule next year that that will govern overtime pay for all workers, including mortgage loan officers.

The MBA staged a multi-year legal battle to deny overtime pay to loan officers. But that was settled in March when the Supreme Court unanimously ruled that loan officers are entitled to overtime pay after a 40-hour work week.

The final rule is slated to be issued in June and it upwardly adjusts the salary thresholds for workers that are eligible for overtime.

“If implemented as proposed, the rule would increase the salary threshold, under which most salaried workers are guaranteed overtime pay, from $455 a week – roughly $23,660 a year – to a projected $970 per week in 2016, or approximately $50,440 a year,” said Heidi Shierholz, the chief economist of the Labor Department, in a blog post earlier this year. “This new rule will help ensure that millions of additional workers are fairly compensated for the hours they put in on the job and will make sure that their overtime protections won’t again be allowed to erode.”

Source: National Mortgage News

3-Year Foreclosure Ban for Sandy Victims Headed to Christie’s Desk

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Industry Update
December 17, 2015

TRENTON — A bill aimed at keeping thousands of Hurricane Sandy victims from entering into foreclosure for three years passed both houses of the state Legislature on Thursday.

The bill (S2577) would prevent lenders from foreclosing on homeowners waiting for funds through rebuilding grant programs run by the state.

It would also allow homeowners waiting for grant money to qualify for a three-year forbearance period, during which time they would not have to make mortgage payments.

State Assemblyman Gary Schaer (D-Passaic), one of the bill’s sponsors, said state “has not adequately or appropriately addressed the needs” of Sandy victims.

A Monmouth University poll released in October found 41 percent of residents affected by Sandy said they still need money to rebuild or elevate their storm-damaged homes.

The measure was supported by housing advocates who said it would give “breathing room” to homeowners left in the lurch while they await disaster recovery aid.

But a representative from the New Jersey Bankers Association told lawmakers at a hearing on the bill earlier this year that lenders “are getting forced to carry the burden the government has failed to do themselves.”

Source: nj.com

The Uneven Housing Recovery

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Industry Update
November 2, 2015

See also: Interactive Map: The Uneven Housing Recovery by Michela Zonta, Sarah Edelman, and Andrew Lomax

The Great Recession, which began with the collapse of U.S. home prices in 2007, resulted in an enormous number of households with negative equity. Housing prices dropped nationally by 35 percent during the collapse. As home values fell, the mortgage debt obligations of millions of American homeowners remained fixed, leading to an unprecedented number of homes being worth less money than what was owed on them.

Seven years later, about 7.5 million American homeowners are still underwater. Even though home values have continued to rise and the national percentage of homeowners with negative equity is down from 30 percent in the second quarter of 2011 to 15 percent in the first quarter of 2015, there is still much work to be done in order for the market to fully recover.

Negative equity is considered one of the principal challenges to an economic recovery at both the local and national levels.2 The persistence of negative equity imposes significant costs not only on homeowners but also on local communities and the economy at large. When homeowners owe more on their homes than what they are worth, they are unable to draw on home equity to invest in their children’s education or to start small businesses. Homeowners also may curtail their consumption by purchasing fewer goods and services from local businesses, thus curbing employment and income levels. Finally, because of underwater borrowers’ high propensity to default, large concentrations of underwater properties threaten to induce future waves of foreclosures and can contribute to a continuing cycle of decline and disinvestment.

The mortgage crisis has affected the entire nation and economy. It is important, however, to recognize that the negative equity crisis has tended to be concentrated in certain areas of the country, and its evolution has followed different patterns based on geography. This report examines the course of negative equity at the county level nationwide and provides an account of the characteristics of counties that have experienced a decrease in the incidence of negative equity compared with those where negative equity rates are stagnating or getting worse.

The following key findings are based on the analysis presented in this report:

  1. The negative equity crisis is a dynamic phenomenon, as it varies in magnitude and impact over time.
  2. Not all counties are recovering. Close to 1,000 counties across the country present either stagnating or increasing percentages of underwater homes. Among counties that are improving, many continue to experience above average rates of negative equity.
  3. Struggling counties tend to be located in nonmetropolitan and rural areas. Counties that are experiencing an increase in negative equity rates tend to be located in nonmetropolitan and rural areas, which are less likely to be equipped with the resources that could ease the recovery.
  4. Trends in negative equity are consistent with trends in other socioeconomic indicators. Changes in negative equity rates are significantly correlated with variations in household formation, job growth, and income levels.
  5. Renter affordability is a growing problem across the board. It is a growing problem for the large majority of counties as a result of the pressure on the rental market generated by the foreclosure crisis.

In light of these findings, policymakers should consider these actionable steps to help the counties that are still far from a full recovery:

  1. The Federal Housing Finance Agency, or FHFA, and the Federal Housing Administration, or FHA, should promote neighborhood stabilization efforts and foreclosure prevention.
  2. Congress should support the development of affordable rental housing programs that provide local governments with sufficient resources to help meet local rental affordability challenges.
  3. Policymakers should implement specific policy interventions for the revitalization of rural areas experiencing increases in negative equity.
  4. More negative equity data need to be made available in order to identify and monitor local markets that are economically stagnant and still present high levels of negative equity.

The negative equity crisis has improved since 2011. Millions of households, however, are still underwater, and as a result, the communities in which they live are still a long way from a full housing and economic recovery. This report illustrates the dynamic nature of the negative equity crisis and its strong ties to local economies and concludes with some policy recommendations that could help ease the impact of the negative equity crisis on not only local communities but also the economy at large.

A note on county-level data

The availability of historical data on negative equity and of other socio-economic and housing indicators at the national level allows for a comprehensive longitudinal analysis of negative equity and its correlates. The analysis focuses on multiple years, including those preceding and following the financial collapse. Most analyses so far have focused on static portraits of negative equity by concentrating on data for one specific point in time or for specific localities. As this report illustrates, the negative equity crisis has been dynamic, especially from a geographic perspective. By looking at trends over time, it is possible to understand and predict the housing and economic trajectory in counties experiencing different levels and patterns of negative equity. In addition, by utilizing counties as the unit of analysis, it is possible to better gauge the relationships between negative equity and regional economies and housing markets.

For instance, as a Washington Post article published earlier this year illustrated, Prince George’s County, Maryland, still features high rates of negative equity and serious delinquency rates that make the housing and economic recoveries of its neighborhoods seem remote. A closer look at trends over time and job market indicators, however, shows that unlike many counties with serious negative equity challenges, Prince George’s County’s economy and housing market are slowly and steadily improving. While the housing market is still fairly distressed in Prince George’s County, there are reasons to be hopeful that positive trends will continue. In particular, the county’s close proximity to Washington, D.C., should continue to provide greater access to jobs to county residents, as well as attract new residents.

As with any analysis of aggregate data, the analysis of negative equity at the county level may fail to reveal important intracounty variations. Several counties feature various promising patterns of economic and housing recovery. Yet many are characterized by substantial variations in negative equity at a more granular level, as ZIP code data suggest. Therefore, it is important to keep in mind that the analysis presented here is not intended to lead to conclusions related to areas smaller than the county.

Another potential shortcoming is related to causation. The analysis explores several correlations among real estate and business cycle indicators. Although a longitudinal analysis of these correlations may hint to possible causal relationships, this study is not intended to make inferences about causation, as more information, including historical data on foreclosures and delinquencies and on local regulatory environments, would be needed to explore statistically any causal relationship between negative equity and housing and economic recovery.

An example of intracountry variation

Although negative equity tends to be concentrated in particular counties, the distribution of negative equity by ZIP code reveals important variations within counties that are not captured by aggregate data. For instance, although the negative equity of Contra Costa County, California, is 9.8 percent in 2015 and has declined from 38.6 percent in 2011, there are considerable variations in the incidence of underwater homes in the county across ZIP code areas. For instance, the ZIP codes located in the northwestern part of the county still present high negative equity rates. These include Richmond, California, where the negative equity rate in the first quarter of 2015 was 16.2 percent.

Michela Zonta is a Senior Policy Analyst for the Housing Policy team at the Center for American Progress. Sarah Edelman is the Director of Housing Policy at the Center.

To speak with our experts on this topic, please contact:

Print: Liz Bartolomeo (poverty, health care)
202.481.8151 or lbartolomeo@americanprogress.org

Print: Tom Caiazza (foreign policy, energy and environment, LGBT issues, gun-violence prevention)
202.481.7141 or tcaiazza@americanprogress.org

Print: Allison Preiss (economy, education)
202.478.6331 or apreiss@americanprogress.org

Print: Tanya Arditi (immigration, Progress 2050, race issues, demographics, criminal justice, Legal Progress)
202.741.6258 or tarditi@americanprogress.org

Print: Chelsea Kiene (women’s issues, TalkPoverty.org, faith)
202.478.5328 or ckiene@americanprogress.org

Print: Benton Strong (Center for American Progress Action Fund)
202.481.8142 or bstrong@americanprogress.org

Spanish-language and ethnic media: Jennifer Molina
202.796.9706 or jmolina@americanprogress.org

TV: Rachel Rosen
202.483.2675 or rrosen@americanprogress.org

Radio: Chelsea Kiene
202.478.5328 or ckiene@americanprogress.org

Source: Center for American Progress

Additional Resource:
The Uneven Housing Recovery (full report)

Servicers Turn to DIY Tech to Improve the Customer Experience

Posted on by Safeguard

Industry Update
November 19, 2015

From single-point-of-contact requirements to the need for better and more user-friendly self-service options, servicers surveyed by National Mortgage News are taking a much-needed hard look at the full range of customer touch-points that they operate.

NMN, in partnership with SourceMedia Research, deployed a survey in September 2015 to a sample drawn from across the mortgage industry. The pool of more than 300 respondents includes C-suite and other senior-level professionals at mortgage origination and servicing firms of all sizes.

Much like their counterparts on the origination side of the mortgage industry, servicers enter 2016 with a relatively upbeat outlook on some basic strategic questions. For example, like originators, most servicers expect their firms to increase staff next year, while one in six expect staff to decrease. Top objectives for the coming year also mirror the originators’ — regulatory and compliance requirements and process improvements were virtually tied as the objectives most frequently cited among servicers’ top priorities.

While servicers’ main concerns heading into 2016 mirror those of lenders, there are critical points of divergence between the two sectors. For one thing, servicers face distinct regulatory requirements, and the risks associated with those requirements do not align precisely with those faced by lenders.

Perhaps more tellingly, servicers diverge from the origination side on some key questions related to infrastructure. In particular, the sector self-identifies as one with very specific pain points when it comes to data and technology, a technology gap with wide customer-service and compliance implications.

The Service Spectrum

Mandates, both regulatory and operational, are driving extensive change in terms of customer service activity across the servicing business. Survey responses show that improving customer service is high on servicers’ to-do list for 2016 — 66% of servicers cited it as a high priority for 2016, and about half said purchasing new technology was a top strategy for this initiative.

The role of technology in improving customer service suggests servicers recognize the need to offer more and better tools for borrowers to manage their loans. These views also reveal increasing demand for products and services that effectively integrate with existing systems.

One area where the industry has made fairly substantial advances is in making certain self-service functions readily available to borrowers. These tend to be specifically in the area of payments: Two-thirds of servicer respondents said their firms offer technology for borrowers to make one-time mortgage payments online, and 74% let customers schedule automatically recurring mortgage payments online.

However, use of technology that enables borrowers to engage in more complex customer interactions is lagging. For example, adoption of Web-based and self-service tools that can assist distressed borrowers with loss mitigation processes significantly trails that of online payments.

Only 25% of servicers said they provide distressed borrowers with tools to fill out, process and check the status of loss mitigation applications, while just 13.2% of servicers use online chat technology on their websites. The most widely used self-service technology not directly involving payments was interactive voice response, and even here less than half of servicers providing an IVR option to borrowers.

Given the relatively recent implementation of SPOC requirements, monitoring and managing this element of the servicing business would seem one particularly well suited for a technology solution. And in fact most do — nearly seven in 10 companies use CRM technology to help in their group SPOC efforts. (Most servicers said their firms employ either a group SPOC, also known as “continuity of contact,” approach, or a combination of group SPOC and one-on-one activities.)

Other technologies, including IVR, online chat and mobile phone text messaging, are far less prevalent among servicers’ SPOC operations. Some 20% of servicers said their firms use no technology to manage SPOC requirements.

Source: National Mortgage News

Scranton Creating Registry of Foreclosed Homes

Posted on by Safeguard

Industry Update
November 19, 2015

To fight blight, Scranton plans to require banks that own foreclosed vacant homes to register them with the city and pay a $200 fee per property.

City council is scheduled to vote tonight on adopting a resolution authorizing a three-year contract to hire Community Champions of Melbourne, Florida, as the city’s property management company for a foreclosure registration program.

The firm would create and maintain a registry to ensure that vacant foreclosed homes mostly owned by large out-of-area banks don’t become eyesores and bring down their neighborhoods, council members said.

The city currently has about 350 such bank-owned foreclosures, Councilman Pat Rogan said.

“Oftentimes they’re a nusiance because the bank is not there to maintain the properties,” Mr. Rogan said. The new rules would require a contact to be designated, “so if a window gets broken, or if the grass is high or the snow needs to be shoveled, they have somebody that they could contact to get out and do those repairs.”

After learning of the firm from state Rep. Marty Flynn, D-113, Scranton, council in May heard representatives of Community Champions explain the program. This month, the Courtright administration submitted to council legislation to hire the firm. Council on Nov. 12 voted 4-0 — with Mr. Rogan, Wayne Evans, Bill Gaughan and Joe Wechsler all in favor, and Bob McGoff absent — to introduce the resolution authorizing the city to execute the contract with the firm.

After a home is foreclosed upon, it may take many months before a bank is ready to market the property and that’s when blight issues often arise, Mr. Evans said.

The firm’s fee would be $100 per registration. It’s anticipated that the firm and city would split a $200 registration fee that would be set by the ordinance.

With 350 properties subject to registration and the city receiving $100 per home, the program would generate $35,000 for the city, Mr. Rogan said. He and Mr. Evans also are exploring using registration revenue as grants for purchasers of foreclosed homes to “make the money come around full circle.”

“The banks are paying to register the properties. They give the contact information so we can keep control of the blight,” Mr. Rogan said. “And then in the end, (we) give that money back to people who want to invest in the city of Scranton.”

Mr. Evans called the registry program “another tool in the tool belt to go after blight, (and) taking it one step further” by creating grants.

Source: The Scranton Times-Tribune