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Great Lakes Metros & New Opportunity Summit “Responding to the Foreclosure Crisis” Presented by: Arlo Monell Chase, Esq.

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Great Lakes Metros & New Opportunity Summit “Responding to the Foreclosure Crisis” Presented by: Arlo Monell Chase, Esq. SVP For Policy Initiatives at nyhomes. Goals of Presentation. Thanks-to Sarah Szurpicki, Mike and Aaron Bartley Introduction to nyhomes

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Great Lakes Metros & New Opportunity Summit

“Responding to the

Foreclosure Crisis”

Presented by: Arlo Monell Chase, Esq.

SVP For Policy Initiatives at nyhomes

goals of presentation
Goals of Presentation
  • Thanks-to Sarah Szurpicki, Mike and Aaron Bartley
  • Introduction to nyhomes
  • Intro to Foreclosure Problem in Great Lakes States
  • Federal Response to Foreclosure Crisis
  • New York State Response to Foreclosure Crisis
  • Great Lakes Specific: NSP & Block by Block
  • Going Forward
nyhomes is the state s affordable housing bank
nyhomes is the State’s Affordable Housing Bank
  • nyhomes is the New York State Housing Finance Agency (HFA), State of NY Mortgage Agency (SONYMA) and Affordable Housing Corporation (AHC).
  • SONYMA offers mortgage products (through participating lenders) intended for income targeted first-time homebuyers-
    • Funding comes from issuance of bonds exempt from federal income tax
  • AHC provides grants to local governments and non profits to promote homeownership for low income.
    • Eligible uses include new construction, acquisition/rehabilitation, and home improvement
    • Funded by annual state appropriation- last year $45 million but normally $25 million
foreclosure in the great lakes
Foreclosure in the Great Lakes
  • Recent Data from CRL shows that to date in 2009, the following number of new foreclosure actions filed:
    • New York- 32,000
    • Michigan 42,000
    • Ohio 40,000
    • Pennsylvania- 23,000
    • US- 2.3 million in 2008: In 2009 2.4 million projected (CRL)
    • 2009-2012- 9 million foreclosures projected (Credit Suisse)
    • These are huge numbers for MI & OH and US overall, given this is the 4th year of explosion in foreclosures
obama s response
Obama’s Response

OBAMA’S PLAN-Announced in February

  • 1. Refinancing for 4-5 Million through GSE Portfolio
    • Available to those in mortgages held or insured by GSE
    • Increase Permissible LTV to 105% from 80%
  • 2. Enabling Mortgage Modifications for 3-4 million
    • Available to Owner occupants, either “underwater” or high DTI
    • Analyze that Net Present Value of modification exceeds cost
      • Big problem for borrowers in good markets
    • Lender must get DTI to 38%
    • Lender & Gov’t matching funds, get DTI to 31% (Gov-$75 billion)
    • Incentive payments to maintain mortgage: to servicer ($1000/year, 3 yrs ) Lender ($1500/at outset) and Borrower ($1000/year, 5 years)
    • GSE to monitor compliance
obama s response cont d
Obama’s Response (cont’d)
    • Big problem- 2nd liens- up to 50% of troubled mortgages have 2nds
      • Program mod of 4/28, when a mod on a first lien, second lien servicers can either
        • reduce payments on the 2nd lien to sustainable level, or
        • extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury. 

3. Bankruptcy Reform for those not assisted by Loan Mods

      • Passed House, died in Senate with little action by White House
  • 4. Strengthening GSEs/Lowering Mortgage Rates-
    • up to 200 billion more in federal funds to cover losses
    • Increasing GSE Limits for size of loans can insure
    • Treasury to continue buying GSE Securities- Rates shot up recently

5. NSP2-$2 billion-National competition, results in Fall

6. Refundable Tax Credit for first time homebuyers-$8000

obama plan evaluated
Obama Plan Evaluated

Pros

  • Detailed plan that uses all the tools available, incl GSE
  • Incentives to Servicers, Lenders, Borrowers for restructuring and staying current on loans, incl those not yet in default
    • Recent studies showing high % of restructured loans default again
  • Balances scale and excluding investors & speculators

Cons-Not address enough borrowers

    • Limits on size of loans GSEs will refi
    • LTV limitations on refi (105%)
    • Restructurings depends on private lender/servicer assistance, slow to emerge in the scale that is needed- Servicers are debt collectors
      • Without Bankruptcy reform, no stick for servicers
obama plan evaluated cont d
Obama Plan Evaluated (cont’d)

Big questions remain unanswered

1. Great Lakes Region: Nothing in Obama plan addresses foreclosure problem in GL cities

Nationally

  • What will GSE’s look like?
  • Will he Use Crisis to Tackle Sacred Cows prioritizing homeownership?
    • Need more focus on Rentals
foreclosure crisis impact in nys
FORECLOSURE CRISIS-Impact in NYS

Through the first 5 months of 2009, 32,000 new foreclosure actions were filed in New York State.

  • However, as a % of all households, New York is not one of the hardest-hit states, ranking 39th nationwide
  • Foreclosures are highly concentrated in the State
    • The top 10 counties account for 79% of foreclosure filings
    • Queens and Brooklyn account for over 25%
    • Long Island represents another 20% of the state total.
    • Upstate Cities also troubled, more tax liens than subprime

For complete info, see year end HALT Report

foreclosure crisis ny state response
FORECLOSURE CRISIS NY State Response
  • Since 2007, NY State Initiatives-Proactive & Timely
    • Early in 2007 Spitzer created the HALT Interagency Force
    • August 2008, Gov Patterson signed legislation which:
      • Regulates certain loans strictly
      • Requires conference for subprime borrowers facing foreclosure
      • If Leg comes back, further changes proposed by Gov
  • Foreclosure Mitigation Counseling & Legal Services
    • DHCR $50 million in appropriated funds (2008 and 2009)
    • Banking Department, $2 million awarded to 22 groups
    • SONYMA, as conduit for Fed funds-almost $2.5 million
foreclosure crisis state response
FORECLOSURE CRISIS State Response

Preventing Foreclosure-Refinancing

  • 2007 SONYMA launched Keep the Dream refinancing program, which enables borrowers in subprime mortgages to refinance to a safe fixed rate loan.
    • First time SONYMA ever offered a refinancing product.
    • Unable to use our tax exempt bonds to finance, so entered into an agreement with Fannie Mae to purchase the loans
    • Partnership with Fannie came with limitations:
      • Borrowers limited to 60 days delinquent.
      • Higher interest rate than we wanted
  • KTD was severely undersubscribed and cancelled
foreclosure crisis state response12
FORECLOSURE CRISIS State Response

Addressing Neighborhood Effects of Foreclosures:

Neighborhood Stabilization Initiative (NSI)

  • Intent: To assure continued stability of certain New York neighborhoods with high concentrations of recently foreclosed properties by facilitating the quick return of these properties to sustainable homeownership.
  • With nyhomes in the lead, this is a joint initiative with HUD, Banking Dep’t, DHCR, local governments, non profits and the leading lender/servicers in the state.
  • $64 million, $54 from HUD, $10 from AHC
great lakes specific
Great Lakes Specific
  • NSP: OF State’s $64 million,
    • Buffalo groups were allocated 5.7 million
      • Municipalities (Buffalo/Tonawanda and Cheektowaga) and non-profits,
      • Plans include Ac/Rehab, Demo and Land bank
    • Rochester allocated 5.1 million
      • All to City of Rochester, include suburbs
      • Plans include Financing, Ac/Rehab, Demo

Other Great Lakes Cities

Under NSP 1, Detroit allocated $47,137,690, Cleveland allocated $16,143,120. Buffalo-$0, Rochester $0

great lakes block by block
Great Lakes -Block by Block
  • November 2007- after conversations with people like Mike Clarke, Aaron Bartley, Sam Hoyt, Michael Gainer, nyhomes announced the “Block-by-Block” program.
  • Special funding of up to $ 3million to rebuild and renovate existing housing as part of larger redevelopment plans.
  • Each proposal had to consider revitalization of an entire city block in Buffalo.
  • Prioritized following criteria:
    • Energy efficient improvements and other green building;
    • Provided rental options (homeownership required);
    • Consistent with the City of Buffalo’s comprehensive plan, and
    • Likely to be completed within two years.
  • Results: 4 grants
    • 2 went to the City of Buffalo (i) owner rehab,; (ii) ac/rehab (Mid City area)
    • HomeFront, 19th Street ac/rehab
    • Westside NHS, homeowner rehab (2 blocks, Black Rock and Grant Ferry)
    • Greater conversation, coordination amongst groups and City?
going forward
Going Forward
  • Federal & State Governments need to fund great lakes specific strategies for housing and economic dev.
  • But, we need help-when fractured, easier to ignore
  • Come together regionally-develop solutions/advocate
  • Hard Choices need to be made:
    • Planned shrinkage/transportation
    • Consolidating Governments/working with suburbs
    • More rehab & weatherization, less new construction
  • Opportunities:
    • New NSP Money-$2 Billion
    • Sympathetic Administration.-Bruce Katz
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