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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

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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

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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

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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

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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

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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

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    Obama Plan Evaluated


    • 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

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    Obama Plan Evaluated (cont’d)

    Big questions remain unanswered

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


    • What will GSE’s look like?

    • Will he Use Crisis to Tackle Sacred Cows prioritizing homeownership?

      • Need more focus on Rentals

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    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

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    • 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

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    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

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    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

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    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

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    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?

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    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