Home Matters™ Launch Is Today!

Today, in Washington, DC, National NeighborWorks® Association joined (NNA) with a coast-to-coast coalition to launch a unique national movement called Home Matters. Home Matters™ aims to build public support for the essential role that Home plays as the bedrock for thriving lives, families, and a stronger nation. As it expands, Home Matters™ will go beyond housing and illuminate the connections between stable housing and other important facets of American life such as:

  • Individual Success: Home recharges adults and children alike for the day ahead.
  • Education: Children in stable homes learn and achieve more in school.
  • Health: Healthy habits take root more easily in stable affordable homes.
  • Public Safety: Stable homes make communities safer.
  • A Strong Economy: By having a Home that is affordable, people of all income levels have more to spend and support the economy.

Participating in the two-day launch, today and tomorrow, are leaders of more than 150 local and regional housing and community development organizations from across the nation – many of them NNA members – as well as national entities including NNA, Citi Community Development and Wells Fargo. Members of the U.S. Senate and U.S. House of Representatives will join us this evening, and U.S. Secretary of Housing and Urban Development Shaun Donovan will speak with the coalition tomorrow. Please visit the Home Matters™ website (www.HomeMattersAmerica.com), share your insights, tell your colleagues and friends about the movement, and connect to it through Facebook and Twitter. It’s time for the crucial roles that Home plays to be more broadly understood.

“Like” St. Ambrose; Help Your Community

Click “Like” to vote.

St. Ambrose is happy to announce a partnership with Liberty Mutual Insurance and we need your support!  The “Like My Community” campaign started on June 25th.

Like My Community is designed to honor organizations that are making a difference in Baltimore with a $30,000 award. Grants like this enable St. Ambrose to continue supporting affordable homes and vibrant communities for hundreds of Baltimore families.

But we need your vote!  You can vote daily for St. Ambrose between now and August 20th on the Liberty Mutual Facebook page, and you can text LMBAL5 to 61698 for a second vote.

Can we count on your vote?

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.

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.

 

 

Talking With the Experts: An Interview With Dr. Matthew Kachura

Baltimore Neighborhoods Indicatory Alliance Program Manager Matthew Kachura (Image Source: University of Baltimore)

Today, we Talk To St. Ambrose have posted our second interview of our “Talking with the Experts Series,” and we are honored to host Program Manager for the Baltimore Neighborhood Indicator Alliance-Jacob france Institute, Dr. Matthew Kachura.  As many of you already know, Dr. Kachura is a hugely respected community member and activist on behalf of Baltimore City.  He is likewise a pre-eminent scholar in the areas of housing, community economic and workforce development, and other issues affecting urban communities.  Dr. Kachura recently conducted an innovative study examining the effects of foreclosure on Baltimore’s schoolchildren, which gained much deserved local and national attention, as it remains one of the only empirically-backed projects studying the residual, far-removed affects of the foreclosure crisis.  Dr. Kachura has also conducted influential research on the Baltimore Empowerment Zone, the earned income tax credit, and commuter issues, among many others.

Again, we are honored to host such an important and distinguished scholar and community member.  My interview with Professor Kachura is below.

Harsha Sekar: It was fascinating to read the results of Phase I of your study on the effects of foreclosures on Baltimore’s schoolchildren. For me, one of the study’s most salient implications concerned the interrelationship of social problems.  It appears that public policies that encourage affordable housing will not be effective without the implementation of a broader welfare state, as widespread access to decent housing seemingly cannot materialize without strong neighborhoods, schools, and access to healthcare.  Given the findings of your study, can policymakers effectively curtail the problem of inadequate housing without simultaneously addressing the needs of other, related social institutions?

Matthew Kachura: The short answer is no.  I believe that urban issues, whether it is affordable housing, high unemployment, social ills such as crime, or issues relating to education, are all interconnected and that policies that take into account this interdependency need to be created and implemented.  Trying to address one issue without recognizing that there are a host of other issues related to it will not lead to sustainable or long-term improvement.

HS: Following up on the last question, what are some of the other, less obvious residual effects of foreclosure that you have noticed in your work?

MK: I think a non-obvious issue is exactly what we set out to identify.  Little attention has been paid to the smallest victims of foreclosure – children.  It is not just that children are also victims of foreclosure, but that the increased mobility resulting from foreclosure can have lasting, long-term effects on their social and personal development and educational performance.  These negative impacts might not occur in the year following the foreclosure, but research has shown that missing days of school as a result of having to move can lead to an increased chance of a student dropping out of school, not completing their degree and in the long run earning less income.

HS: Your study also catalogues the disproportionate effect of foreclosures on minorities.  While many commentators have discussed this issue, few academic studies document this phenomenon with empirical data.  How has the foreclosure crisis functioned to reinforce systemic racism?

MK: We found several interesting findings as a result of this analysis, including the largest numbers of students who were affected by foreclosure in Baltimore City were African American.  This was not surprising though since two thirds of the residents of Baltimore City are African American.  There were two other important findings.  First, the share of Hispanic students impacted by foreclosure had been increasing to a point where the share of students impacted by foreclosure was the same as the total percentage of students attending the City public schools.  Second, we believe the share of white students impacted by foreclosure was not accurately counted, potentially being significantly undercounted.  According to American Community Survey data, nearly a quarter of the children in Baltimore City are white but only 8% of children that attend the City public schools are white.  This means that these students are attending other schools – most likely private schools – and were not included in the analysis.  Overall though, the fact that African American residents and their children were affected by foreclosures in such large numbers supports the facts that predatory lending policies and sub-prime loans were targeted to those persons who could least afford to lose their home.  The loss of the home, the primary vehicle to building wealth for many of these families, only perpetuates a vicious cycle of poverty.

HS: At Mayor Rawlings-Blake’s recent Vacants to Values Summit, the market-drive notion of “Code Enforcement” was promulgated a means to reduce blight in the city, which would impose sheriff sales on properties that do not meet the city’s code.  How do you feel about this tactic, and what other policies do you advocate to incentivize property owners to invest in Baltimore’s underserved neighborhoods?

MK: I believe that the Mayor’s plan has merit and there have been a variety of other strategies taken in an effort to reduce blight and to turn vacant housing into occupied housing.  There are issues with using code enforcement including identifying and locating individuals to serve them with the necessary paperwork, issues relating to selling the properties at Sherriff sales, and then trying to turn them into occupied properties.  Many of these properties are so beyond being able to be lived in, they will require significant repairs and persons willing to take the time and expense in making the repairs before anyone can live in the property.

I also believe that there are already a number of policies that are making strides in having residents invest within Baltimore’s neighborhoods.  Among these are live where you work programs, which also encourages employment, Healthy Neighborhoods, and the Neighborhood Stabilization Tax Credit.  I also believe that the City’s use of data and its Housing Typology model supports the use of strategic investment – targeting neighborhoods with the types of interventions that are needed most within those neighborhoods instead of spreading resources too thinly across a variety of neighborhood types.  Most of all, I believe that residents living in Baltimore’s neighborhoods are the best means to encourage other residents to invest and live in Baltimore City.

HS: Much of your scholarly work examines economic development in urban areas.  How have established NGOs like St. Ambrose contributed to economic development and vibrancy in the Baltimore area over the past few decades?  What do you feel is the role of NGOs in stimulating economic activity relative to that of the city government and the private sector?

MK: NGOs are a critical component to the overall continued health, vitality, and improvement to Baltimore City and its neighborhoods.  NGOs have been recognized as an important partner in economic development strategies that cities, such as Baltimore City, rely on for their ability to produce results and make an impact.  With fiscal constraints and the need to provide the same if not improved services for a shrinking residential base, NGOs have become a more important partner that the City has embraced to push economic and workforce development.  NGOs typically can operate without the bureaucracy and red tape that government agencies have in place, making them, in many cases, more effective and efficient in creating job opportunities and in neighborhood vitality.

While Unemployment Improves, Many Citizens Remain Unable to Meet Basic Needs

Source: New York Times

Commentators around the country have been touting last month’s uplifting unemployment statistics, which indicate, ever so subtly, that the nation’s job situation may be improving.  While many large businesses have remained profitable throughout the recession, it now appears that the private sector is willing to invest in new hiring, suggesting an increased demand for goods and services.

As the Obama administration enjoys temporary praise, a new study, highlighted a few days back in the New York Times, presents a gloomier picture.  The study demonstrates that the greater job creation we’re experiencing may be much less rosier that we think, because many of the country’s newly created jobs do not offer a living wage.

The study was commissioned by the non-profit, Wider Opportunities for Women, which authoritatively titled their report, “The Basic Economic Security Tables for the United States.”  In order to arrive at their disconcerting findings, the study’s researchers had to determine what constitutes a living wage.  Thus, the many tables presented by the study premise themselves on the following notion:

“Families, the media and policymakers often focus their attention on volatile, rising expenses, such as food and fuel. While such expenses are important in day-to-day life, they are small parts of families’ much larger economic security challenges. Expenses such as housing, transportation and child care receive less attention, but are much larger pieces of the economic security puzzle, and can be greatly influenced by policy.”

Here, the authors put forth a rather bold contention, as they turn on its head the paradigmatic metric utilized by economists to measure adequate wages, the Consumer Price Index, which considers some of the former, more “traditional” tables—food and fuel—to a much greater extent.   Perhaps equally innovative, the authors further posit that “Not all families require homeownership…[though] such savings can contribute to long-term and intergenerational economic security, however, when investments are careful and savers plan for the long term.” By deflating the value of homeownership while making sure to mention it’s virtues, the authors, in a sense, take a swipe at a bipartisan generation of policymakers that abetted the crisis.

Substantively speaking, I’d guess that to many, the study’s results are equally eye-opening.  The Times reports that “a single worker needs an income of $30,012 a year,” while a “a single worker with two young children needs an annual income of $57,756, or just over $27 an hour, to attain economic stability.”  My cursory research indicates that this figure exceeds the median family income in the Unites States.

The study’s econometrics are advances, no doubt, but they convey a truth that many other commentators—from the activist Barbara Ehrenreich to the former Labor Secretary Robert Reich—have articulated for far too long (and that policymakers have, in turn, stubbornly ignored): that wages have not kept up with inflation over the last several decades, forcing far too many Americans to borrow more than they can afford to.  So while pundits and the administration alike hail the new job data, make sure to consider the human aspect behind these statistics, which certainly may not be as peachy.