Baltimore Brew: Homeless advocates vow to sue city over failure to provide housing for women

As the occupy Wall Street movement has gained increasing attention over the last several weeks, the protests have prompted criticism, praise, and, for better or worse, many questions. Among others, many have wondered what the protesters’ demands are. What are their objectives? Why aren’t they protesting in front of Congress? What will they accomplish?

Naturally, we at St. Ambrose have wondered how the Occupy movement relates to the ongoing housing crisis. Contrary to what some have claimed, the housing crisis—which commenced with the rapid depletion of home values, leading to the evaporation of assets tied to these values—is likely the central cause of the financial crisis. While the crisis has accelerated unemployment and stricken a blow to the credit markets, keeping families in their homes should likewise remain a vital concern.

In a rather shocking article (link pasted below) that first appeared in the Baltimore Brew last week, writers Mark Reutter and Fern Shen shed light on a related issue: homelessness. Moreover, it appears that some of the article’s interviewees have taken refuge at Occupy campsites, a sign that this issue, perhaps along with that of housing generally, may be on the movement’s radar.

The article, titled “Homeless advocates vow to sue city over failure to provide housing for women,” discusses the new Harry and Jeannette Weinberg Resource Center, located at 620 Fallsway. According to the article, administrators of the center, as a matter of policy, have routinely been turning away homeless women while accepting their male counterparts, for whom they have more designated beds. These women have been forced to sleep in the Center’s parking lot, and on one occasion, a group of women were given blankets and asked to sleep under a bridge on a rainy day. The writers describe:

“’I saw a pregnant girl lay right here on the concrete with her boyfriend,’ said a middle-aged woman. Just a few days ago, a homeless man added, eight women turned away from the shelter were given blankets and huddled for the night under the Jones Fall Expressway. ‘It could be raining and you’re still sitting out there,’ he said.”

Naturally, the situation has attracted attention from the state’s ACLU, who have threatened to sue on constitutional grounds, claiming that the shelter violates the Fourteenth Amendment’s equal protection clause. The ACLU has invoked Mayor Rawlings-Blake’s name, asking the mayor to take action and claiming that as a lawyer, she should be aware of the city’s exposure to liability because of the situation.

Amidst this crisis of its own, the authors offer one ray of hope: at least one of the women interviewed has found shelter at the Occupy Baltimore campsite at McKeldin Square. This woman, named Bernadette, told the Brew: “You get respect there and you get a good meal. And I’m much safer than being outside.”
While this woman’s reaction is in no way an accurate reflection of the broader values internalized by Occupy Baltimore, or the movement nationally, it prompts us to wonder the extent to which the protesters think about housing and homelessness, and what effect the movement will have on these issues.

Indeed, as far as the housing crisis, the article’s subject, Bernadette, provides a pithy observation, “There are so many vacant houses in Baltimore and so many homeless people. This is what I don’t understand: why can’t we fix these houses for people that need them?”

http://www.baltimorebrew.com/2011/10/26/homeless-advocates-vow-to-sue-city-over-failure-to-provide-housing-for-women/

Affordable Rental Housing A.C.T.I.O.N.

And we’re back: we will resume our regular weekly posting shortly.

In the mean time, we encourage readers to take a look at the website of Affordable Rental Housing A.C.T.I.O.N., an advocacy organization whose stated purpose is pasted below.  The website of A.C.T.I.O.N.–an acronym for A Call to Invest In Our Neighborhoods–contains several of excellent resources and news updates.

Affordable Rental Housing A.C.T.I.O.N. (A Call To Invest in Our Neighborhoods) is a grassroots campaign led by a broad, cross-industry coalition of over 290 national, state, and local organizations.

Through Housing Credit advocacy and education, the A.C.T.I.O.N. campaign focuses on ensuring that low-income working  families  throughout the nation have access to decent, safe, affordable rental housing.

As the 112th Congress considers tax reform and deficit reduction solutions, the campaign has reconvened to revise its strategy in light of the changed political and fiscal environment.  Moving forward, A.C.T.I.O.N. will focus on both protecting and preserving the Housing Credit in whatever deficit reduction or tax reform plan Congress considers, and enacting national consensus proposals to sustain the program’s  effectiveness and efficiency in solving the nation’s affordable rental housing challenges.

Sun Editorial: “Baltimore Needs Housing Tax Credit”

The purpose of this week’s post is to echo an editorial that appeared in the Baltimore Sun a few days back, titled, “Baltimore needs the federal housing tax credit.”  The opinion piece was penned by David Abromowitz and Jack Manning, who are, respectively, a fellow at the Center for American Progress and the C.E.O. of a Boston-based real estate finance firm, Boston Capital.  Their editorial is a pressing one, as speculation over exactly which government programs will be slashed by the newly created, bipartisan debt reduction commission pervades the public sector, particularly housing and community development NGOs like St. Ambrose, whose livelihood often depends on federal programs.  The authors points out that the private sector may take a hit as well, as programs like the federal housing tax credit thrive as a result of public-private partnerships, involving investors on one side and newly resourced renters on the other.

The article makes several good points, the pith of which is copied below:

For nearly 25 years, the federal government has encouraged the development of affordable rental housing by using a unique federal tax credit — one that fosters a strong partnership between public and private interests, while benefiting families and local communities. This housing tax credit, however, may be at risk of being a casualty in the bigger budget negotiation. But gutting this program would be counterproductive to economic recovery. Despite headlines filled with stories of vacant foreclosed houses, Baltimore and communities across the nation still face a shortage of reasonably priced rental housing. Maryland expects a net shortage of more than 130,000 rental units through 2015, according to the city’s housing department.

Beyond this picture, the authors deliver several cold, hard facts, all of which buttress their position that right now, it’s crucially important for the government to assist renters in the process of securing an affordable home.  They argue that: 1) for various sociological reasons, the population of renters is soaring while an adequate supply of affordable rental housing does not exist to meet this demand, making rental units less affordable.  2) This exact tax credit has proven effective in the past, as it requires private investors to sink their own money into a project, which usually ensures that property owners remain accountable to their tenants, maintain their properties well, and keep rents low—the success of the credits are evidenced in the fact that foreclosures on tax credit properties occur rarely.  3) Thousands of new construction related jobs would be created by new tax credit opportunities—“In Baltimore this year alone, roughly $5 million in housing tax credits just awarded will spark more than $60 million in new construction and rehabilitation of nearly 300 rental units.” 4) Finally, the tax credits will lead to community stabilization and help encourage diverse neighborhoods, both of which this city must maintain as we head forward into the recession.

This editorial comes on the heel’s Vinnie Quail’s recently published Letter to the Sun’s editor, in which Vinnie defends the President’s stimulus program, arguing that the program has, contrary to popular opinion, delivered stability and job creation in Charm City: “Baltimore suppliers, hardware stores, contractors and their families thank God for the President’s stimulus program. America’s unemployment problem is certainly real but would be much worse were it not for the stimulus program.”

Moreover, recently, multiple new outlets have reported a revealing study by the web site Trulia, which found that buying real estate was cheaper than renting in roughly three quarters of the nation’s fifty largest cities, an increasing trend that has resulted from the combination of a depressed housing market, a sharply increased demand for rental units, and low interest rates.  The news further supports the notion that governmental assistance to renters is critical in this poor economy.

Frankly, NGOs too often function as some of the most potent providers of low-income housing in cities across America.  While non-profits (or “charities”) remain a popular bastion of welfare services in a time of cuts, few people know the extent to which government funding plays a role in helping us do our job well, whether the funds be direct—in the form of grant money, for instance—or indirect. Tax credits for lower-income Americans comprise the latter, but they nevertheless help us deliver our service to a wider swath of Baltimore residents, ultimately leading to more stable neighborhoods.

 

AIG Levels Claims Against BoA for Losses Tied to Mortgage Bonds

Image Source: New York Times

American International Group’s lawsuit against Bank of America was widely reported yesterday, as news outlets revealed that the financial firm initiated the suit in an effort to recover more than ten billion dollars in losses resulting from asset-backed securities they purchased from the bank.  According to the New York Times’ financial reporters Gretchen Morgenson and Louise Story, AIG “claims that Bank of America and its Merrill Lynch and Countrywide financial units misrepresented the quality of the mortgages placed in securities and sold to investors,” say inside sources.

As many of you many now know, BoA has faced intense scrutiny over the last several weeks.  A few weeks back, we covered the controversy clouding the bad loan settlement the bank negotiated with investors, in which BoA managed to secure a tremendously favorable outcome.  Just a few days ago, Morgenson penned a follow up piece documenting New York Attorney General Eric Schneiderman’s decision to challenge the settlement.  Apparently, Schneiderman takes issue with a number of the settlement’s terms, particularly those that preclude private litigants who may have suffered from the bank’s troubled loans from making a further claim.

The settlement has prompted other investors, like AIG, to join in on the litigation against the bank.  As Morgenson and Story’s article points out, BoA has encountered 25 suits related to the financial crisis thus far, many more than any other American bank.  Moreover, the journalists correctly tie this ongoing litigation into a broader theme: the federal government’s inability to successfully prosecute members of the banking industry.

Citing legal scholars and the insiders at the Justice Department, the writers imply that the lack of government intervention may be the result of the higher standard of proof necessary to secure a criminal conviction.  This notion has been buttressed by the fact that federal prosecutors were unable to deliver a conviction against Washington Mutual and Countrywide, two banks that have been involved in Justice Department investigations. These failures, unfortunately, create a situation in which investors must regulate the banks through litigation, which is extraordinarily costly and inefficient for all parties involved.

Whether the suit has any merit is a question in and of itelf—BoA rebuts AIG’s claims by arguing that the securities at issue appeared safe to both parties, and that their decline was the result of an unexpected depression in the housing market.  BoA further contends that “AIG is the very definition of an informed, seasoned investor,” and that they fully assumed the risk in purchasing the bank’s potentially high yield securities.

As we have stated several times, the underlying theme that constitently presents itself throughout the media analysis of BoA’s pre-courtroom saga is the lack of regulation in the securities industry.  While it is unclear as to which industry player has the upper hand here, all bear some fault—BoA for marketing the securities in the first place, AIG for creating a market for them, the ratings agencies for ensuring their legitimacy, and perhaps most of all, the government for failing to regulate.  Had these toxic assets not hit the market in the first place, the transaction and subsequent dispute would never had occurred and the economy may be much better off.  Along with it, our clients, many of whom had mortgages resold to Wall Street banks before the crisis, would have been better off, too.

From WBAL: “Candidates Vow to Rehab Vacant Property”

Image Source: WBAL

The network apparently asked mayoral candidates to weigh in on the issue.  From what we can tell, they received at least one response, from Frank Conaway, Sr., pasted below:

We need to conduct triage on our inventory of vacant and blighted properties. Properties that are in viable locations should be fixed if they are city owned, or acquired through condemnation if they are privately owned and repaired for occupancy. In areas where the neighborhoods are on the borderline between viability and failure, we should have a broader strategy to acquire multiple properties and rehab them in groups. We need to acknowledge that there are some houses that are not suitable for rehab. These properties should be razed. No one in Baltimore has wanted to deal with this reality, but the truth is that some areas are beyond repair and need to be redone from the ground up.

HuffPost: “Rats Spread as Baltimore Fights Foreclosures”

Earlier today, The Huffington Post, one of the nation’s most popular news sites, drew attention to some of the ongoing research of Matthew Kachura and the Baltimore Neighborhood Indicators Alliance–the Post covered BNIA’s study cataloguing the increased presence of rats in Baltimore City since the foreclosure crisis began.  From the article:

The rise in rats is an example of the declining quality of life in some sections of the city as foreclosures and vacant properties have begun to take their toll.

Since 2003, rat incidents in his majority-black city of nearly 621,000 are up more than 300 percent, according to the Baltimore Neighborhood Indicators Alliance-Jacob France Institute at the University of Baltimore. There were more than 37,000 reports of rats in 2009, data show.

The rate of dirty streets and alleys is up nearly 250 percent since 2003, according to the research institute.

Like urban centers across the country, Baltimore is fighting foreclosures with fewer resources at a time when home prices are still declining and a rise in home seizures remains a constant threat. While home prices shot up during the bubble, boosting neighborhoods that had been slowly making progress, the precipitous decline has wrecked what were up-and-coming sections of the city.

Baltimore rats have long commanded a storied reputation for their pervasiveness, a notion that has been internalized by residents and non-residents alike.  Thoughts and comments on this long present nuisance, as well as perceptions about whether the rat rate is, indeed, increasing, are welcome.

The Debt Ceiling and Housing

Source: Center for American Progress

August 2nd.  The day looms over the American public drearily, as failed negotiations leading up to the imposing government debt deadline make the possibility that the United State will default on its debt all the more likely.  We have heard from pundits and economists that the consequences would be devastating, that inflation would soar and unemployment would also increase, all while spiraling the U.S. economy into a double-dip, “U-shaped” recession.  The consequences of default on some facets of the U.S. economy seem more apparent than others, like the demand for government issued securities and the market for our bonds.  Among all of the apocalyptic speculation about what would happen if we defaulted, however, little commentary has emerged focusing on the housing market.

However, Christian Weller of the Washington-based Center for American Progress, a left-of-center think tank, had already analyzed the effects that a potential default would have on the housing market as early as last May. Now, Weller’s analysis seems all too apropos, as default increasingly looks like it could be a real possibility.  Back in May, long before most analysts even considered a default scenario, Weller wrote in a CAP brief that “if Congress fails to raise that ceiling then the U.S. housing market would most likely experience a severe double-dip contraction marked by lower housing sales and depressed home prices.”  It turns out, albeit not surprisingly, that the potential downgrade of treasury securities and the depressed market for government issued bonds could have a devastating effect on the housing market as well.

The brief goes on to outline six main contentions as to what a default would mean for housing: 1) mortgage interest rates will rise more than U.S. Treasury rates; 2) mortgage rate will remain high for some time; 3) new home sales could drop to record lows; 4) existing home sales will decrease;  5) housing prices will drop in the wake of fewer sales; and finally, 6) the economy will suffer.

Throughout the analysis, a subtly consistent point emerges: mortgage rates are directly tied to treasury interest rates, and thus, higher treasury interests would translate to higher mortgage rates.  Because U.S. government debt is perceived to be an almost risk-free investment, a default would very likely increase the interest rate on U.S. Treasury bonds.  As the table above shows, the correlation with between increased debt and higher mortgage rates are staggering.

But what’s worse, according to Weller, “the assumption is that even if the debt ceiling is not raised in August, members of Congress will eventually come to a budget agreement to pay for the government’s operations and pay the outstanding debt.”  However, even a temporary default will have an impact a major, perhaps permanent impact on interest rates, as investors, for the first time, will associate risk with U.S. debt.

While all of this may come across as overly abstract and theoretical, the effect that a default will have on the housing market, and more specifically, on St. Ambrose and the Baltimore community, will be huge.  To name just one example, much of revenue that helps fund our operation here in Baltimore comes from home sales [hyperlink], as our inventory of competitively-priced, high quality homes in the Baltimore area has long been an asset building and neighborhood stabilizing resource for low and middle income homeowners of Baltimore City.  With higher mortgage rates, however, fewer and fewer families would realistically be able to secure a home loan that may fund even our modest properties.  This fact coupled with the recent news that a median income Baltimore resident may be unable to afford a Baltimore home makes the prospect of a default significant.

Beyond this, our foreclosure prevention department, which is swamped with cases, would certainly have to shoulder an increase in clients.  More foreclosure and less affordable housing means more vacant properties, depressed mean home values in neighborhoods, and depleting household equity for Baltimore families.  In total, the effect on our community would be devastating, and we hope that our two major political parties will find a way to stave off this disaster.  Time will tell.

What’s Up with Bank of America’s Bad Loan Settlement??

Late last month, Bank of America, one the nation’s largest mortgage servicers, entered into a settlement agreement with multiple investors, in what has been hailed as one of the most significant settlements involving mortgage-backed, toxic assets since the onset of the financial crisis.  At $8.5 million, the settlement, at least on its face, seems to present an optimistic message for investors, who can now maintain some measure of hope that legal remedies exists for the opaque, sometimes fraudulent securities on which they spent their money.

But a closer look at the agreement reveals a different picture.  While $8.5 million may be a convincing figure to some, the value of the mortgages held by the Bank of America totals at about $172 million, meaning that Bank of America secured a deal in which they were obligated to pay back less than five cents on every dollar.  This statistic has prompted many, including New York Attorney General Eric Schneiderman, to demand more information about the settlement.  Schneiderman and other critics suspect that the deal was put together hastily and unfairly: the New York Times reports that the investors involved in the settlement hold interest in merely one quarter of the 172 million in assets.  Moreover, because of the legal parameters of such a settlement, the deal would have a comprehensive effect, foreclosing claims from investors and individuals that may hold interest in the BoA loans but were not privy to the settlement negotiations.

More specifically, the settlement involves loans held by a BoA subsidiary, Countrywide Financial, which BoA purchased in late 2008 under what was apparently a disaster mitigation circumstance.  While BoA has every incentive to get rid of the Countrywide loans, given their toxicity and total lack of profitability, they neglect to consider the far-reaching policy effects that the deal will have.  Most conspicuously, the settlement will almost certainly accelerate foreclosure processes, which will impose devastating consequences on families.  These foreclosures will have broader economic ramifications.  According to Times columnist Paul Krugman, the settlement:

“would just accelerate foreclosures, and if more families were evicted from their homes, that would mean more homes offered for sale — an increase in supply. An increase in the supply of a good usually pushes that good’s price down, not up. Why should the effect on housing go the opposite way?”

Indeed, as Krugman writes, this settlement presents yet another example of letting bankers of the hook.  Furthermore, the Countrywide mess and the subsequent short sale of the firm to BoA indicates the crucial need for greater regulation of asset-backed securities, the danger of which is now well documented.  The deal will certainly affect our job at here at St. Ambrose, where our foreclosure prevention team negotiates with banks everyday in an effort to stymie foreclosures.  Settlements like this one set a precedent of “going easy on the banks,” as Krugman writes, enabling them to feel that they are beyond legal remedies for honest negotiation.  Such settlement will, in other

NYT: Backlog of Cases Gives a Reprieve on Foreclosures

The Map Above Shows the Average Number of Days that Loans Have Been in Default, By County (Source: New York Times)

By Anne B. Norton and Harsha Sekar

A few days ago, the New York Times presented yet another angle of the chaotic and disorganized foreclosure crisis, a maelstrom that has revealed, among other things, poor ethical practices and other bizarre behaviors on the part of both homeowners and lenders.  Apparently, the backlog of foreclosures is now so extensive that mortgage servicers may be delaying the process altogether.  In some cases, this practice (or lack thereof) has conferred legitimate relief upon buyers, who are able to continue living in their homes.  In others, buyers have taken advantage of stalled foreclosure processes, strategically defaulting on their loans.  The Times reports that some homeowners have even discovered creative (yet unscrupulous) was to earn a profit off of their foreclosure, one of the more shocking news items we’ve come across.

The Times explains the magnitude of the crisis straightforwardly:

In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm.

Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.

The Times goes onto distinguish states which mandate that foreclosures be filed in court versus those that do not (and states are more or less evenly divided throughout the country).  “The pace is much more brisk,” in states that bypass the court process, declares the paper, “three years in California, two years in Colorado and Nevada.” According to a foreclosure lawyer to whom the Times was able to speak, “banks aren’t trying to win.”  While the banks, in a strong effort to mitigate the understandable concerns of investors that may purchased their assets, have categorically denied allegations that they have made any attempts to intentionally prolong foreclosures.

Perhaps not surprisingly, while the new phenomenon is a relief for those less fortunate, certain people have chosen to take advantage of the situation:

Mr. Stopa, the Florida lawyer, said he divided his clients into three groups. Some are unemployed or disabled and just getting by. Others are able to save money and improve their financial situation as their case drags on. The third group are those who have strategically defaulted. They can afford to pay but are taking advantage of the banks’ plodding pace. Often the members of this group rent out the foreclosed home and keep the proceeds.

While so much of the coverage of the foreclosure crisis has emphasized ordinary American families that have fallen on hard times, here, we get a rather appalling glimpse of another, new side of the equation.

Is the backlog for real, and what does this all mean in the grander scheme, one might ask?  In total, the Times definitely delivers a few valid points in terms of delay.  The process in NY will be substantially longer due to the judicial process that can take more than 500 days to complete if there was no backlog and no objections to the foreclosure sale filed.  As for locally, there is no question that there is backlog of foreclosures in Maryland thanks to the July 1, 2010 mediation law followed by robo-signing followed by new changes to the mediation law coming soon as well as a looming settlement with the OCC, DOJ/AG group and state bank regulators.  The state’s Foreclosure Bar has said that there largest national bank clients have 10’s of 1,000’s of loans in the pipeline that are waiting for some of the uncertainty to resolve.

Everyone’s hope is that the economy will start to pick up a little as the filings start to move through the system and that certain changes in servicing make it more likely that the homeowners in line for foreclosure will find relief.  But, without clearing the market of the foreclosure inventory, can there be a true economic recovery? We’re not certain.