Housing Cost Burden on the Rise, Especially Among Renters
By Center for Housing Policy on 05/13/2013 @ 04:30 PM
Image courtesy of Center for Housing Policy, National Housing Conference
The newest edition of the Center for Housing Policy (CHP)'s annual Housing Landscape report finds that severe housing cost burdens among working renter households have risen for the third consecutive year. Housing Landscape 2013 explores the latest American Community Survey data from 2011, showing that 26.4 percent of working renters spent more than half of household income on housing costs. While severe housing cost burdens stayed relatively stable for working homeowners between 2008 and 2011, roughly one in five working homeowners experienced severe housing affordability challenges throughout this period -- despite falling home prices and mortgage interest rates.
CHP, the research affiliate of the Washington-based advocacy group the National Housing Conference (NHC), charts the trends in housing cost burdens among working households from 2008 to 2011 in the latest edition of Housing Landscape. In addition to housing costs and income, the new report includes housing cost burden data from the 50 largest U.S. metropolitan areas, all 50 states and the District of Columbia. The report defines a working household as one with an income less than 120 percent of the median for its area, and with members working at least 20 hours per week on average.
The share of working renter households with a severe housing cost burden grew over the three-year period due primarily to falling incomes and rising rental housing costs. Nationally, working renters saw their housing costs rise by 6 percent from 2008 to 2011, while their household incomes fell more than 3 percent. Lead report author Janet Viveiros says renters are stretched so thin by growing housing costs that many face impossible choices.
"The growing rate of severe housing cost burdens among renters is not a new trend, but it is clearly an unsustainable one," said Viveiros. "While rental costs have steadily risen over the last few years, wages for these working families have not fully recovered from the hit they took between 2008 and 2009. Spending most of your paycheck on rent means cutting back on other necessities, including healthcare and even food."
Co-author Maya Brennan noted that the causes of rising housing cost burdens among working renters include a difficult economy and an increased demand for rental housing, partly due to the crisis on the homeownership side of the market.
"While the economy pushed both owners' and renters' incomes down, the shift away from homeownership is pushing rents up due to increased demand. What we're seeing with the rental market is not explainable by population trends alone -- it clearly reflects the movement of former homeowners into rentals as well as delays in home purchases by current renters ," Brennan explained. "But this increase in rental demand has not been matched by an increase in supply. This imbalance leads to rising rents in markets across the country."
Working homeowners may have dodged the upswing in housing costs that hit renters, but they have not avoided the effects of falling incomes. In fact, while housing costs among homeowners fell some 3 percent over the study period, household incomes among these homeowners fell even more than they did for renters, down more than 4 percent over the three-year span. However, NHC President and CEO Chris Estes cautioned that a high and growing proportion of all working households -- renters and homeowners combined -- cannot afford their housing, and that little is being done to help.
"The challenge we face is that despite the range of successful tools to help offset this crisis, we are still in a long trend of flat -- and even slashed -- funding for these important programs," said Estes. Estes notes that a recent report from the Bipartisan Policy Center's Housing Commission highlighted the success of federal housing programs like HOME, the housing voucher and the Low Income Housing Tax Credit and encouraged expanded funding for these programs to help respond to the housing affordability crisis.
Homebuyer Education is Critical, Especially in Rural Communities
By Erica Bradley, Guest Contributor on 04/29/2013 @ 01:00 PM
Erica Bradley works with the NeighborWorks America Rural Initiative, based in Boston. NeighborWorks America is a national intermediary with a network of 235 organizations serving communities across the country, including approximately 100 rural organizations.
American Home image by Bigstock Photo.
For years, community development professionals were advocates for financial education. Not many lenders, and certainly not customers, took financial education seriously, until the housing bubble burst in 2008. In rural markets, homebuyers typically do not have the same access to services, like homebuyer education. For many rural organizations, expanding their services to include online financial education courses has allowed them to reach more customers.
Tammy Hyman, Homeownership Program Administrator at PathStone, always knew how important homeownership counseling is. PathStone, she said, had offered it since the late ‘90’s. “If they would have done (homeownership counseling) back then, we wouldn’t be having these issues now,” she said of the lenders.
PathStone, which is headquartered in Rochester, serves New York, Vermont, Pennsylvania, New Jersey, Virginia, Ohio, Indiana and parts of Puerto Rico. Many of the markets they serve are rural, and homeownership counseling is offered in Indiana, New York and Pennsylvania.
Hyman said clients have the option of taking an in-person training, which consists of an eight-hour course, or they can take an online course from eHome America. eHome America is a certified provider of online homebuyer education.
For the in-person class, the requirement is an eight- to ten-hour day. Hyman said she tries to include guest speakers, such as real estate agents or lenders. The course is held every other month or sometimes quarterly, depending on the demand for it. Hyman estimates there are 8-18 students in each class.
If the client chooses to take the online course, Hyman said, a staff person schedules a one-on-one call to discuss the course material and answer any questions the client has. Hyman said the benefit to the eHome course is it allows people to take the course at a convenient time for them.
Like PathStone, NHS of Richland County also offers an in-person homebuyer education course as well as the eHome course. NHS of Richland County covers several counties in Southwest Wisconsin, including an area where homebuyer education was not offered.
Linda Smith, NHS of Richland County Homeownership Center Coordinator, said they offer in-person courses, and they attempted to offer distance learning classes. The distance courses were broadcast from the main Richland Center site to remote sites, typically high school classrooms, in neighboring counties. Smith said because broadcasting the course was too staff-intensive, and there were technology problems, the remote course was cancelled. They are now using eHome America for their customers who cannot attend the course in Richland Center, which has gotten a great response. “eHome, because we are rural, is a good fit. It fits the needs for many of our households, especially the younger households who cannot attend classes at night or on the weekends,” she said.
Like PathStone, NHS requires customers who have taken the eHome course to have a phone conference with a staff person.
Gary Throckmorton, eHome Senior Executive Vice President, said eHome’s model is a network of local agencies. “We want the customer to be connected to a local agency. Follow-up is key,” he said. eHome has had steady growth, he said, and approximately 250 agencies are registered with over 36,000 clients served since 2009. Throckmorton expects growth to continue, especially since online education has become more accepted. eHome is currently offered in English and Spanish, but Throckmorton said adding additional languages would be considered if there was a demand.
eHome America was started in May 2009 by Community Ventures Corporation (CVC), a Kentucky-based non-profit. It is endorsed by NeighborWorks America.
From Saver to Homeowner: Shannon Fox's Story
By Bank of the West on 04/15/2013 @ 03:30 PM
To help families achieve the goal of homeownership, Bank of the West has partnered with CFED to match the money that low-income individuals save for a down payment and to support the nonprofits that provide financial education to these savers. As part of Financial Literacy Month in April, this is the second story in a three-part series featuring Individual Development Account (IDA) program graduates from across the country.
For Shannon Fox, buying her first home was scary, exciting, and sometimes frustrating. “I thought I would never find anything in my price range,” she says. Eventually, Shannon opened an Individual Development Account through Home Forward and says, “Their encouragement gave me hope that maybe I can become a homeowner, something I thought would never be possible for me being a single woman and living in the great Northwest where prices for homes are a little more expensive than elsewhere.” In addition to the support from Home Forward, Shannon found that the homebuying class gave her knowledge and confidence she would not otherwise have had.
Still, the process wasn’t always easy. Shannon found that the paperwork associated with buying a home felt difficult and overwhelming. Reflecting on the experience, she relates, “I learned that dreams, like buying my own home, can come true if you save up for them. It was a long process, so it takes patience, but it was definitely worth it. I love my new home!”
Shannon says that given the opportunity, she would save using an Individual Development Account again in a heartbeat. To others, she shares the advice that helped her succeed: “Stick with it! Don't give up! Be patient, and your dream of owning a home can come true too, like it did for me.”
From Saver to Homeowner: Manuel Nava's Story
By Bank of the West on 04/08/2013 @ 01:00 PM
To help families achieve the goal of homeownership, Bank of the West has partnered with CFED to match the money that low-income individuals save for a down payment and to support the nonprofits that provide financial education to these savers. As part of Financial Literacy Month in April, this is the second story in a three-part series featuring Individual Development Account (IDA) program graduates from across the country.
Manuel Nava's Story
Manuel Nava and his wife bought their first home in 2012. While it only took them about two months to find the right house, their journey to homeownership took much longer.
Originally from Mexico, Manuel and his wife came to Oregon as farmworkers, living in housing owned by Bienestar, a nonprofit organization that also helped them find their first home. Although Manuel was a citizen, his wife was not, which made it difficult to settle in Oregon permanently or even consider homeownership. The couple yearned for a family-friendly home with a yard for their four children, and had begun saving for a down payment. However, in order for Manuel’s wife to gain citizenship, she had to go back to Mexico and wait while Manuel took care of the legal process with the state of Oregon. During this time of separation, Manuel kept his focus on saving for his home and supporting his family. “[The long separation] was frustrating and it broke my heart,” Manuel says.
After about five years of legal battles, Manuel and his family were reunited, and his wife became a citizen. Having wiped out their savings in legal and reunification fees, the family started again to save for a home and got a boost in savings from the Individual Development Account program at Bienestar. “I had to keep believing,” says Manuel. “I knew that we could do it.” Together, the whole family sat down and talked about their finances as a household and what each of them could do, coming up with $150 a month in discretionary money after looking where their money was going. Manuel and his family did not stop at the $3000 savings goal; they saved an additional $2000 for their home.
Reflecting on his experience in saving for his home, Manuel expresses pride that he set a goal and achieved it, adding that after all the family has been through, their new home also gives them a new beginning: “At this house, we can start over.”
More on the Strength of Mortgages for Manufactured Homes
By Greg Zagorski, National Council of State Housing Agencies on 04/05/2013 @ 10:30 AM
EDITOR'S NOTE: This post originally appeared on the blog of the National Council of State Housing Agencies (NCSHA). Special thanks to Greg Zagorski for covering the release of the I'M HOME Data Report.
On March 20, the Corporation for Enterprise Development (CFED), through its Innovations in Manufactured Homes (I’M HOME) initiative, released a study analyzing manufactured home loan performance. The report, which summarizes the analysis of mortgage data from 20 sources, including 13 state HFAs, says manufactured home loans perform similarly, and in some cases better, than similar site-built homes. NCSHA assisted in the report’s development and attended a roundtable last month to discuss a draft version. Other roundtable participants included NCSHA President Brian Hudson, executive director of the Pennsylvania Housing Finance Agency, and David Haney, executive director of the Wyoming Community Development Association.
The study finds that HFA loan products generally outperform similar loan products, and that manufactured home mortgages can serve low- and moderate-income borrowers who cannot afford large down payments and may not have top-tier credit scores, while still performing well. For example, the report says HFA-purchased USDA guaranteed loans have a non-delinquency rate of 82.3 percent, compared to 76.8 percent for all USDA guaranteed loans. This is despite the fact that HFA-purchased loans have a higher weighted loan-to-value ratio than non-HFA loans in the USDA guaranteed program. The Pennsylvania Housing Finance Agency (PHFA) and the Idaho Housing and Finance Association (IHFA) are credited specifically for their exemplary manufactured housing lending programs.
Comparing its manufactured home loan data to Office of the Comptroller of the Currency (OCC) data on mostly site-built homes, CFED finds that manufactured home loans not insured by the U.S. Department of Agriculture (USDA), which includes loans originated by private lenders and HFAs, had a non-delinquency rate of 90.3 percent, while the OCC loans had a performance rate of 89.2 percent. USDA manufactured home loans had a performance rate of 77.9 percent, but the report explains that some lenders and investors have portfolios of USDA loans that perform well.
The report finds that traditional underwriting standards, such as a borrower’s credit history, debt-to-income ratio, and loan-to-value ratio, are strongly associated with performance, but that manufactured housing loans can be successful without following the traditional criteria. For example, the study finds that manually underwritten self-insured loans following less stringent underwriting standards perform slightly better than conventional loans with mortgage insurance. The report also finds that lenders and HFAs that practice “high-touch” servicing (reaching out early and often to late-paying borrowers and offering short and long-term loan adjustments and loan modifications as may be required) enjoy strong performance on manufactured home loans. The report praises PHFA and IHFA specifically for their customer-driven servicing policies and the large proportion of their portfolios that are non-delinquent (97.5 percent average combined) of their manufactured home loans.
The report concludes with some recommendations. First, citing a lack of comprehensive data, CFED calls for the collection of additional data and analysis on affordable manufactured home loans to help attract more lenders and investors. This includes a recommendation that NCSHA and state HFAs work with government officials and private sector parties to develop loan data delivery protocols that ensure that manufactured loan data can be tracked and analyzed.
Second, the report suggests that stakeholders work to promote development and innovation in manufactured housing to increase manufactured housing lending. It also recommends developing best practices for manufactured housing lending.
From Saver to Homeowner: Hassan Rasheed's Story
By Bank of the West on 04/02/2013 @ 05:00 PM
To help families achieve the goal of homeownership, Bank of the West has partnered with CFED to match the money that low-income individuals save for a down payment and to support the nonprofits that provide financial education to these savers. As part of Financial Literacy Month in April, this is the first story in a three-part series featuring Individual Development Account (IDA) program graduates from across the country.
Hassan Rasheed's Story
Ever since he moved to Portland in 1996, Hassan Rasheed dreamed of owning a home for himself, his wife and their five children. His team of GOALS coordinators at Home Forward, formerly the Housing Authority of Portland, introduced Hassan to Individual Development Accounts, and encouraged him to save $50 each month instead of the minimum of $25. Hassan beams as he describes the team that helped him “get on his feet by saving” his way to a downpayment on his 2,725-square-foot home, a vast improvement on the 900-square-foot, three-bedroom apartment where his family of seven lived for five years. Reflecting upon the moment he received the keys from his broker, Hassan says, “I sat in the car and started crying. I couldn’t believe it.”
His favorite part of his new five-bedroom home? “It’s all my favorite,” smiles Hassan, who is originally from northern Iraq. When the country eventually became unsafe for him and his family, they were forced to flee to Turkey and Guam before settling in Oregon. Now, in their new home, everyone has their own space to thrive and a community in which they feel safe. Describing IDAs as “a good program for people to stand on their own feet, move to work and don’t [sic] stay in the same position,” Hassan adds that now that his dream of homeownership has been achieved, he has begun saving to help send his five children to college.
National Study: Manufactured Home Mortgages are Excellent Loans
By Juliana Eades, Guest Contributor on 03/29/2013 @ 10:30 AM
EDITOR'S NOTE: Today's post is the latest in a series on the new I'M HOME Data Report. It comes to us from our friends at the New Hampshire Community Loan Fund.
It isn’t often that a nonprofit from little New Hampshire gets to speak into a big megaphone. But in 2009 the New Hampshire Community Loan Fund received a national honor, the NEXT Award for Opportunity Finance, for being the first organization in the US to make real mortgage loans for manufactured homes (sometimes called mobile homes) located in cooperatives.
You might be surprised to learn that manufactured homes are usually financed like cars, with personal property loans at rates 3 to 5 percentage points higher than traditional mortgage loans. This financing is patently unfair, because not only do these short-term, higher-cost loans limit the affordability of these homes, lack of access to mortgages make them harder to resell.
We had seen the positive effects of offering fixed-rate, real mortgage loans for manufactured homes: Families became more financially stable and their homes gained value. So I used our NEXT acceptance speech to urge a roomful of community-lending peers from across the country to make loans like this in their states, too.
Acting on my request was heard as an act of faith, or wishfulness. Lenders regard owners of manufactured homes as riskier borrowers than other homeowners. Our peers weren’t convinced that our low loss record (1.6 percent—excellent loan performance by any standard) could be replicated outside of N.H.
This week the I’M HOME Loan Data Collection Project released its first report, which analyzed data from 23 organizations (including us) that originate or purchase manufactured-housing loans. It found that these are good loans, as good as mortgage loans for site-built homes. It also found that lenders like us, who accept low down payments, make decisions based on an applicant’s total financial picture (not just their credit scores), and who work with borrower through difficulties, were almost as successful as those with the most-stringent standards.
The national report validates our experience in New Hampshire. Our Welcome Home Loans for manufactured homes in resident-owned communities proved so successful over a decade that last year we started offering them to homeowners on their own land, who weren’t getting fair financing either.
And we’re still urging lenders to recognize that manufactured homes are real homes that deserve real mortgages, and that their owners are responsible borrowers—maybe even more responsible than most.
Juliana Eades is President of the New Hampshire Community Loan Fund.
Making the Case for Long Term, Affordable Mortgage Financing for Manufactured Homes
By Housing Assistance Council on 03/28/2013 @ 04:00 PM
EDITOR'S NOTE: This brief was authored by The Housing Assistance Council (HAC) and can be read here.
On March 21, 2013, CFED released Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes, which reported findings from an analysis of data on $1.7 billion in manufactured home mortgage lending from a variety of lenders and investors who provide long-term home mortgage products to owners and buyers of manufactured homes. The report finds that manufactured home mortgage borrower repayment records are generally comparable to the site-built mortgage market. In some instances, the repayment records of manufactured home mortgage borrowers were better than comparable general mortgage portfolios.
The report’s authors conclude that conventional underwriting criteria such as higher FICO scores, low loan-to-value and low debt-to-income ratios are strongly related to higher loan performance. However, some of the lenders have been able to achieve strong loan performance with manual underwriting of loans with lower downpayment and less stringent credit requirements by maintaining good contact with the borrowers.
Data were compiled by a two-year effort of the I’M HOME Loan Data Collection Project, part of Innovations in Manufactured Homes (I’M HOME), a national initiative managed by CFED. The goal of this effort is to make affordable manufactured home financing available to current and potential low- and moderate-income home owners and a viable alternative to higher cost personal property (chattel) loans.While this effort represents progress in documenting the viability of such financing, more data and further study is needed.
The report includes recommendations to improve the quality of the data, promote product development and innovation among lenders and investors, and organize stakeholders to build recognition of the value of manufactured housing as an energy efficient, lower cost housing option in the mainstream affordable housing policy in the United States.
Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes, Download the Executive Summary and the Full Report.
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Manufactured Home Mortgages Perform As Well As Other Mortgages
By Andrea Levere on 03/27/2013 @ 09:00 AM
EDITOR'S NOTE; This morning, we're sharing the second in a series of blog posts covering the release of Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes, the newest groundbreaking report from our Innovations in Manufactured Homes (I'M HOME) initiative. This post originally appeared in Rooflines, the official blog of Shelterforce Magazine.
The foreclosure crisis. Homeowners “underwater.” Neighborhoods blighted with vacated homes. Tougher credit standards and new regulations making it harder for lower-income households to qualify for a mortgage.
These have been sadly familiar headlines for almost five years. Is there anything new—and positive—one can say about mortgages?
To find that bright spot, we can turn in a surprising direction: toward manufactured homes.
A groundbreaking I’M HOME report released this week by CFED in partnership with the Fair Mortgage Collaborative, titled Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes, analyzes $1.7 billion in loan performance data and finds that, contrary to common belief, mortgages on manufactured homes perform as well as comparable site-built home mortgages.
The study goes on to identify manufactured home mortgage products that actually outperform other loans.
Based on this evidence, more lenders and investors should be convinced to enter or expand their manufactured home mortgage offerings as good business. Home owners will then benefit by finding it easier to obtain affordable, long-term financing.
More than seventeen million Americans rely on manufactured homes for affordable housing. Manufactured homes utilize factory-built technology and cost up to 30 percent less on average than comparable site-built homes. Modern manufactured homes can be highly energy efficient, safe and attractive.
But while the price of the home is one essential ingredient in affordability, it is not the only factor. The cost of financing can be an equal or even greater factor; despite the challenges of the past several years, the U.S. tradition of a fixed-rate, 30-year mortgage has been at the heart of achieving the dream of homeownership.
Sadly, millions of owners of manufactured homes don’t have the mortgage option. For up to three quarters of all owners and buyers of manufactured homes, a chattel loan is what they get. They must spend hundreds of dollars more each month to service their chattel loan—dollars that they could otherwise spend on food, clothing, utilities, education and savings. The reason that these households can’t get a mortgage is two-fold: the majority of mortgage lenders don’t lend for manufactured homes, and many manufactured homes are titled under state law as “personal property” like automobiles, and as a result don’t qualify for mortgages.
The good news is that, as shown in the new I’M HOME report, there are a solid group of lenders and investors offering mortgages to owners and buyers of manufactured homes—and these mortgages are performing well.
More good news can be found in the passage of the Uniform Manufactured Housing Act, or UMHA, by the Uniform Law Commission. The UMHA creates a simple and consistent method for owners and buyers who choose to title their manufactured home as real property instead of personal property. In many states today, the process is too onerous or limited to give homeowners a real choice, and UMHA would change that. As personal property, these homes can only be financed with chattel loans; as real property, they may be financed by mortgages. In almost every state, the UMHA would represent an improvement on existing titling law, but each state must introduce and enact the act in order to make freedom of choice a reality for more homeowners. Advocates in several states are considering introducing the UMHA, and Vermont made the first such introduction in February.
So, take heart! There is indeed good news on the mortgage front. First, owners and buyers of manufactured homes may already be able to find an affordable, long-term mortgage (if your home is titled as real property). Some sources you may want to consider include:
- Lenders doing business with your state Housing Finance Agency. Check the “HFA Directory” on the website of the National Council of State Housing Agencies (NCSHA) to find the HFA in your state, and ask for their approved lenders.
- Local credit unions. Resources for local credit unions include Credit Union Locator of the National Credit Union Administration (NCUA) and the Member Directory of the National Federation of Community Development Credit Unions (NFCDCU).
- USDA Rural Development 502 program (in qualified rural areas for eligible borrowers). Contact the USDA Rural Development office for your state to inquire about Direct or Guaranteed loans.
- FHA Title II lenders. Check the Lender List on HUD’s website.
- Community Development Financial Institutions. A helpful resource is the ‘Find a CDFI’ function of the Opportunity Finance Network.
Second, more lenders and investors are to be encouraged to initiate or expand their mortgage offerings for manufactured homes on the basis of the data analysis provided in the report, Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes.
We hope you will join us in realizing the potential of manufactured homes to play a vital role in establishing a stock of permanently affordable and energy efficient housing in the US.
“High Touch” Loan Servicing Pays Off for Lenders, Investors and Homeowners
By Brian Hudson, Guest Contributor on 03/25/2013 @ 04:30 PM
Brian Hudson, PHFA
EDITOR'S NOTE: This is the first in a series of blog posts covering last week's release of the new I'M HOME Data Report titled Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes. Special thanks to Brian Hudson, Executive Director of the Pennsylvania Housing Finance Agency, for today's post.
At the Pennsylvania Housing Finance Agency (PHFA), we understand that our public service mission includes an obligation to help our borrowers stay in their homes. More than 20 years ago, we made the decision to bring all of our loan servicing in-house and to use a variety of mostly low-tech, but “high-touch,” techniques to help borrowers in trouble. The effectiveness of this approach is reflected in PHFA’s lower-than-average foreclosure rates.
PHFA’s portfolio of manufactured housing mortgages is included in CFED’s new report, Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes. The report describes an important effort by the I’M HOME Loan Data Collection Project to compile and analyze loan origination and performance data on manufactured home loans. Manufactured homes are an important source of affordable housing for thousands of Pennsylvanians and millions of households across the US, which is why PHFA has invested more than $200 million in manufactured home mortgages during the past decade.
I am aware that there are many investors that, unlike PHFA, avoid manufactured home loans, possibly because they believe that these loans do not perform well. To the contrary, CFED’s new report, based on $1.7 billion of loan originations, finds that manufactured home mortgages actually perform comparably to general mortgage portfolios, and in some cases they outperform comparable site-built home loans.
An outstanding factor correlated in the study with superior loan performance is “high-touch” loan servicing of the sort practiced by PHFA for all of our loans. Steps taken by PHFA to help borrowers are not complicated but involve targeted communications with borrowers. For example, if a homeowner falls more than 12 days delinquent during the six-month period after the loan closes, PHFA staff will reach out by telephone to the customer prior to the 15th of the month.
Another example is that staff attempting to reach unresponsive homeowners will hand write addresses and use colored envelopes to avoid a formal business look. Postage is also applied by hand and not run through the office mail machine. The messages inside are handwritten in a friendly, informal tone and address borrowers by their first names. This not only raises the odds that the message will be read, but it also increases the likelihood the borrower will not be intimidated by the correspondence and will contact us. The goal is to let the borrower know that our staff cannot help them if they ignore the situation.
Since 2003, PHFA has helped nearly 1,100 borrowers, including owners of both manufactured and site-built homes, who would have otherwise certainly lost their home to foreclosure. We use a variety of tools, including lowered interest rates and extended repayment plans. The typical household helped by this program is a family of three with a remaining loan balance of about $70,000. A recent review of the special-treatment loans shows that 59 percent remain current with payment, 38 percent are delinquent and only 3 percent are in foreclosure.
I encourage you to read the new CFED report for its full analysis, findings and recommendations about manufactured home mortgage performance. Affordable mortgages for manufactured homes can produce positive returns for investors and lenders and are essential for homeowners. More investors and lenders should take a serious look at investing in manufactured home mortgages as good business. A “sustainable and responsible expansion of affordable mortgages for manufactured homes” will be an essential element of a comprehensive approach toward finding affordable housing solutions that benefit our neighborhoods and households around the state and around the nation.
Brian A. Hudson, Sr. is Executive Director and CEO of the Pennsylvania Housing Finance Agency, the Commonwealth’s leading provider of capital for affordable homes and apartments. PHFA is one of the largest housing agencies in America. He is also President of the National Council of State Housing Agencies (NCSHA), a national membership organization of state housing finance agencies.
One Step Toward Improved Manufactured Home Appraisals
By Jennifer Hopkins on 01/25/2013 @ 11:00 AM
EDITOR'S NOTE: This post originally appeared on the Community Loan Fund blog and can be read here.
We believe in manufactured homes and their owners.
The New Hampshire Community Loan Fund offers real mortgage loans for manufactured homes, Welcome Home Loans, because access to real, fixed-rate mortgages helps homeowners with low or moderate incomes achieve financial security.
We have appraisals done for every Welcome Home Loan we make. It’s how we know homebuyers are paying a fair price. But appraisers and manufactured housing professionals, like retailers, retailers and other lenders, have told us they’re frustrated by the existing process for appraising manufactured housing.
Appraisers face challenges that don't come up with site-built homes, such as rules on selecting comparable sales and difficulties in locating information about sale prices, title, foundation and energy use.
Manufactured housing professionals, in turn, believe that the appraisal process does not always result in fair valuation of manufactured housing, which provides homes for millions of Americans across the income spectrum.
CFED, spearhead of the I’M HOME: Innovations in Manufactured Homes initiative, attempts to address some of these issues in a new report that examines appraisals of manufactured homes. Real Home, Real Value: Challenges, Issues and Recommendations Concerning Real Property Appraisals of Manufactured Homes is an in-depth study based on interviews with appraisers, finance professionals and manufactured-housing practitioners.
The report by Robin LeBaron, Deputy Director of the Fair Mortgage Collaborative, details the issues affecting manufactured-home real property appraisals and leads to a good set of recommendations for improving the process.
Those recommendations include setting the value of a manufactured home based on its characteristics and condition, rather than just its age, along with updating appraisal standards to the current state of manufactured home quality.
I hope the report sparks progress in this key piece of the puzzle to advance the field of financing for manufactured homes.
Kudos to Anne Li, CFED’s program director for innovation and Robin LeBaron, the report’s author, for advancing this important message.
Jennifer Hopkins is the Single-Family Housing Program Manager at the Community Loan Fund.
Home Loans Matter
By Rick Minard on 01/23/2013 @ 02:30 PM
EDITOR'S NOTE: This post originally appeared on the Community Loan Fund blog and can be read here.
We knew that our Welcome Home Loans made a huge difference in the lives of people trying to buy a home. Now we know that they also make a huge difference to people trying to sell their homes.
Because the New Hampshire Community Loan Fund provides fair, fixed-rate mortgages for manufactured homes in resident-owned communities (ROCs), home sellers in those communities have found buyers with more money to invest in their homes. Home prices in ROCs reflect this, selling for about 3.5 percent more per square foot than homes in investor-owned communities in our recent case study. Even through the recession, sellers of homes in ROCs kept more of the value of their homes than sellers in investor-owned communities.
Home Loans Matter: Buyers and Sellers of Manufactured Homes Benefit from Financing – A Case Study summarizes our analysis of transactions in Rochester, N.H., over the last 11 years.
The data shows:
- Most mortgage lenders stopped providing mortgages for manufactured homes in parks during and after the housing crisis. The Community Loan Fund stayed in the field throughout the crisis, though it lent only to owners and buyers of homes in ROCs.
- The difficulty of obtaining a mortgage in investor-owned communities appears to have reduced the volume of transactions in those parks and depressed the sale price of those homes that did sell. The number of homes financed by mortgages in these communities fell by 77 percent during the period.
- These impacts were less pronounced in ROCs, probably because there was more “liquidity” in these markets. Liquidity is the ease with which one can exchange an asset for its true value. Mortgage financing, by providing cash to buyers, helps keep markets “liquid” and facilitates the exchange of homes at market values.
- The number of transactions financed with mortgages in ROCs increased by 50 percent during the period.
- Homes in ROCs, although older than homes in investor-owned communities, have, since 2006, sold for 3.5 percent more money per square foot than have homes in investor-owned communities.
- The continuous availability of fixed-rate mortgages for homes in ROCs may have kept that market functioning with relatively stable prices and relatively strong sales volume. We cautiously ascribe a causal relationship between the availability of mortgages and the robust performance of the market for homes in ROCs.
Our research focused only on Rochester. Please let me know whether you have seen similar – or different – patterns in other housing markets in New Hampshire.
Rick Minard is the Community Loan Fund's Vice President for Policy and Programs.
CFED & Bank of the West Announce Saver to Homeowner Story Fund
By Jimmy Crowell on 01/18/2013 @ 03:00 PM
Submit a success story that inspires savers to achieve their goals
Do you have an IDA saver who has recently purchased a home in California or Tucson, and who has a compelling story to share? CFED, with support from Bank of the West, is looking for stories and photos of recent homebuyers in California and Tucson, Arizona, to advance homeownership. In exchange, CFED and Bank of the West will provide your program with $2,000 in matching funds and $1,000 in administrative support for financial education (for a total of $3,000) for each story that is accepted.
IDA programs interested in applying must submit a homeowner’s story, photo and signed waiver for each eligible saver, and must comply with the terms on the Saver to Homeowner Story Fund website.
How to Submit Your Success Stories
To submit an entry, please visit the Saver to Homeowner Story Fund website for the terms of the program and required documentation. IDA practitioners may submit multiple entries, though we cannot guarantee that all entries will be accepted.
DEADLINE: February 28, 2013
This opportunity expires on February 28, 2013 and all submissions must be received by this date. Stories must feature savers who reside within the targeted areas in California and Arizona. CFED and Bank of the West may, at their discretion, offer additional opportunities to submit entries at a later date. If you have any questions, please visit the Saver to Homeowner Story Fund website.
CFED would like to thank Bank of the West for sponsoring the Saver to Homeowner Story Fund and for their continued support of IDA programs across the country.
New 'Ability to Repay' Rules Highlight Need for Affordable Housing
By Anne Kim on 01/17/2013 @ 10:00 AM
EDITOR'S NOTE: This post originally appeared on Real Clear Policy and can be read here.
This week, the Consumer Financial Protection Bureau (CFPB) released long-awaited new mortgage rules aimed at protecting consumers from abusive loans.
The new rules, when they take effect next January, will effectively shut down some of the worst practices leading up to the 2007-2008 housing crash: “interest-only” loans, predatory fees, and “teaser rates” that trapped people into mortgages they couldn’t afford once the low initial rates expired. Mortgages with these features are now excluded from what the CFPB defines as “qualified mortgages” shielded from consumer lawsuits.
Most significantly, the new rules will also require lenders to ensure that borrowers can pay back their loans. Among the new requirements, a borrower’s monthly debt payments (including the mortgage) can’t exceed 43 percent of pre-tax income.
Without doubt, the mortgage lending landscape will now be much safer for homebuyers, who once faced a confusing and potentially toxic array of “exotic” products. These rules will also provide much needed certainty to the mortgage finance industry, which has had a rocky few years.
Nevertheless, the “ability to repay” rule may have the unintended effect of shutting some Americans out of the housing market, unless policymakers address an issue they’ve the past few years: the need for affordable housing.
Despite the crash, many Americans are still stretching budgets to the breaking point for housing, especially in high-priced areas. As generous as the 43 percent debt-to-income standard is meant to be, the dearth of affordable homeownership options could make this requirement unexpectedly burdensome.
According to Harvard’s Joint Center for Housing Studies, 9.5 million homeowners spent more than half their income on housing in 2010, while another 13.3 million homeowners spent at least 30 percent of their income on housing. The number of these “cost-burdened” homeowners, say the Harvard researchers, has grown by more than 6 million since 2001. In high-cost states such as California and Hawaii, CFED finds more than half of homeowners are cost-burdened.
Moreover, many Americans are struggling with other debts—student loans and credit card balances—that limit how much house they can afford. In 2010, the average borrower held a credit card balance of $10,852, while the average student loan debt for graduates was $25,250.
While the CFPB is allowing some exceptions to its “ability to repay” rule, the solution isn’t to permit anything-goes underwriting again—that’s what got us into trouble in the first place.
Rather, the answer is to make homeownership more affordable, so that fewer homebuyers, particularly moderate-income buyers, bump up against the debt-burden threshold.
Two ideas could be the starting point for making responsible homeownership more attainable:
1. Help homeowners save for down payment.
Down payment requirements are a major hurdle to affordability, particularly for first-time buyers.
According to mortgage services provider Ellie Mae, Inc., borrowers coughed up an average 21 percent down payment on mortgages completed in November 2012. On a home worth the median price of $186,100 in the third quarter of 2012, that’s $39,081 down —a potentially insurmountable amount for a young prospective homebuyer. While future regulations could relax standards, credit is likely to stay tight in the short term, and the days of “zero-down” are deservedly long over.
One option is expanding special matched savings accounts, known as “individual development accounts,” to help lower and moderate-income Americans save. Small-scale experiments with these accounts have proven successful nationwide in helping even the poorest Americans save.
Another idea might be allowing employers to create and match down payment savings accounts in the same way they match retirement contributions to a 401(k).
Helping homeowners save for down payment would not only help meet stricter lending requirements, it would reduce the amount people need to borrow and start homeowners off with a needed cushion of equity. Moreover, research by CFED and the Urban Institute found that low-income Americans who used individual development accounts to buy a home were up to three times less likely to face foreclosure during the housing crisis.
2. Expand affordable homeownership options.
One overlooked option for affordable housing is manufactured housing. Over the last several decades, manufactured homes have made huge strides in quality, durability and energy-efficiency. It’s time to set the “trailer” stereotypes aside.
Already, manufactured housing is one of the nation’s largest sources of unsubsidized affordable housing. In 2009, manufactured housing accounted for 43 percent of new home sales under $150,000. 17 million Americans live in manufactured homes.
Unfortunately, the current mortgage finance system largely excludes manufactured housing. Manufactured home loans are typically personal property loans, not mortgages, and lack most of a mortgage’s protections.
Changing laws to treat manufactured homes as real property would both protect consumers and make manufactured housing a viable homeownership option for more Americans.
The CFPB’s new rules take a big step toward making homeownership “safer” for consumers. The next priority for policymakers should be to make homeownership more affordable as well.
Infographic: The Case for Affordable Housing Done Right
By Next Step Network on 01/15/2013 @ 01:30 PM
Impactful Returns From Mobile Home Parks
By Ellie Winninghoff on 01/10/2013 @ 11:00 AM
EDITOR'S NOTE: This post originally appeared on the Financial Advisor and can be read here.
Manufactured homes in mobile home parks were not always an intriguing alternative for low-income people. Homeowners could be evicted on 30 days notice simply because their landlord wanted to do something different with the land. And their value depreciated over time. The New Hampshire Community Loan Fund's transformative work in the mortgage market for these homes has changed that.
"These guys are really, really smart," says George McCarthy, director of metropolitan opportunity at the Ford Foundation. "[NHCLF] president Juliana Eades is creative, thoughtful, and willing to take risks and put the institution and the institution's money on the line to make things happen."
Since 1984, the Concord, N.H.-based community development finance institution, or CDFI, has helped organize and finance more than 100 cooperatives in New Hampshire that allow homeowners to own the mobile home parks underneath their homes. That's more than 20% of the parks in the state, and this does not just give control of the land back to people who were prey to random decisions by landowners.
Contrary to perception, it is also a key reason that 40% of these homes are appreciating in value, according to studies conducted by the Consumer Union and the Joint Center for Housing Studies at Harvard University.
Based on its success in New Hampshire, NHCLF in 2008 spun off ROC USA, a partnership with the Corporation for Enterprise Development and NCB Capital, to catalyze cooperative ownership of mobile home parks nationwide. And during the last nine years, NHCLF has also made $25 million in loans to finance 600 homes in those parks in New Hampshire. Loans range from $10,000 to $100,000, and the default rate is 1.6%.
NHCLF is also lauded for its innovative small business loans for growth businesses, which incorporate royalty financing that goes up and down based on ability to pay.
Individuals can invest in NHCLF for one to 25 years. Invested money is combined with NHCLF’s own capital to create the pool of funds it lends to create affordable housing and jobs.
Returns range up to 4% (for 7 to 9 years) and 5% (for 10 years-plus.) NHCLF is rated AAA+2 by the CDFI Assessment and Ratings System, or CARS, and the minimum investment is $1000. Top investors include Ford Foundation, Endowment for Health, Bank of America and Sovereign Bank.
Going Mobile
In l983 when an elderly couple needed to sell the land that supported 13 manufactured homes so the husband could go to a nursing home, the residents quickly realized there was no place to go and their homes were not really mobile. The group, aided by a board member of the newly forming NHCLF, organized as a cooperative to buy it together. But when no bank would lend them the funds, the NHCLF stepped in with a $43,000 loan so the cooperative could buy 67 acres.
"They weren't imagining themselves to have an access-to-capital problem," says NHCLF president Julie Eades. "They were imagining themselves as having a homelessness eviction lose-their-home problem."
After an article about the venture appeared in a statewide paper and she was flooded with calls about evictions so landowners could sell to developers, Eades realized the problem was "systematic rather than a one-off." In l988, after it financed the second ROC in the state (one in which the cooperative had engaged in a protracted legal battle for its right to own the park), NHCLF made its real mark.
It worked closely with Elliott Berry, managing attorney of the Manchester office of New Hampshire Legal Assistance, who convinced the state legislature to pass two laws. One required park owners to give residents 18 months notice before closing a park or evicting residents due to a planned change of use. And the other required them to provide residents notice of a proposed sale and to negotiate with them in good faith so they could buy the park.
"It basically let homeowners be part of the transaction in a way they were completely excluded before," Eades recalls. "It was not a right of first refusal. But because we're so active, it operates similarly to a right of first refusal because many sellers don't care who they may sell to as long as they get their price."
Since l988, NHCLF has organized and financed 101 more ROCs. It isn't easy and not all succeed. But when they do work, studies show, residents not only take control of their future but they plant more flowers, attend more school conferences and the like. In short, they tend to take care of the property and become community members.
And while a 2006 study showed property values increasing 12.5% per year, a study NHCLF commissioned this summer showed that manufactured homes in ROCs are still appreciating at 3.5% per year.
Throwing Away The Blue Book
According to McCarthy at the Ford Foundation, there are more low-income people living in manufactured housing than in all the country's subsidized housing programs.
But while manufactured homes are high quality these days--there have been housing codes since l976, and many are green and energy efficient--the terms for loans have been abusive. In 2003, NHCLF began making loans on manufactured homes in ROCs with a view toward system-wide change.
According to Eades, banks don't make loans on manufactured homes for "structural" reasons (the loans are too small, there is no secondary market and no mortgage insurance.) When loans are available, she says, the interest rates are exorbitant and terms limited to 15 years.
But the biggest problem, she says, is that the financial system treats manufactured homes like cars by appraising them on a blue book model. And she says loans are not available at all if the home is more than ten to twelve years old. This means, of course, that a homeowner does not have an asset that is growing in value or even maintaining its value. And it also means that a homeowner was not able to sell a home unless it was virtually brand new.
"We treat [a manufactured house] like a house, because it is a house," she says. "We get an appraisal. And we don't discriminate against a house based on its age."
At a current rate of 8.75%,Eades admits that NHCLF's loans are not cheap.
"It's better than 14% or nothing," she says, "and it costs us to do this. We're a lender and an organizer. Most lenders don't want to organize, and most organizers don't know anything about lending. The fact that we're a lender helps pay for the organizing."
Three months ago, NHCLF began offering mortgages in New Hampshire to manufactured homeowners who also own their own land. This should make it easier for people to choose manufactured homes as a housing option, which may be necessary considering there’s an average wait for subsidized housing of one to three years.
"If you clicked your fingers and imagined that manufactured housing would disappear," McCarthy asks, "where would all these people live?"
Ellie Winninghoff is a writer and consultant specializing in impact investing. More of her writing is linked at her blog, www.DoGoodCapitalist.com, and she can be reached at: ellie.winninghoff (at) gmail (dot) com.
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Hurricane Sandy and the Merits of Manufactured Housing
By Andrea Levere and Stacey Epperson, Guest Contributor on 01/09/2013 @ 11:30 AM
EDITOR'S NOTE: This post originally appeared on Andrea Levere's Huffington Post Politics Blog.
As the difficulties facing Hurricane Sandy victims continue to mount many weeks after the storm, several options have been considered for those whose homes were destroyed in the storm, including hotel rooms, apartments, boats and even shipping containers. Relatively far down on the list: manufactured homes.
FEMA administrator Craig Fugate recently acknowledged the negative connotations associated with manufactured housing, particularly their link with the notorious "Hurricane Katrina trailers": "When you say FEMA trailers, you harken back to Katrina... I think the majority of folks will be helped with rental assistance, which is faster and puts more money in the economy."
Unfortunately, Fugate's words only fuel outdated and incorrect notions about what manufactured housing is and what it has the potential to become, particularly for low-income families. While Fugate acknowledged the association, he failed to clarify that these trailers were not, in fact, manufactured homes. The temporary trailers used to house Hurricane Katrina victims, later found to contain toxic levels of formaldehyde, were actually recreational vehicles that were not built to meet federal building codes for manufactured homes.
In reality, today's manufactured homes have about as much in common with RVs or "Katrina trailers" as mini-mansions have with Buckingham Palace.
For starters, there is nothing mobile about today's manufactured homes, which range from single-room units to four-bedroom homes with covered front porches and attached garages. Unlike mobile homes, which have not been built since the enactment of the 1976 federal housing code and which could theoretically be driven off a property, today's manufactured homes are designed to be permanent and can be constructed on foundations like any other site-built home.
The term "manufactured housing" itself has less to do with quality and more to do with the production process, which is a derivative of Ford's assembly lines -- an innovative business model that helped grow the United States economy. This model allows manufactured homes to be built in a more controlled work environment, translating into predictable costs, increased efficiencies and reduced waste.
Because they are constructed in a factory in about one-fifth of the time and half the cost of site-built homes, manufactured housing is an ideal solution for low-income families -- and a compelling alternative for those seeking a quick and more permanent housing solution following a devastating storm like Sandy. Today's manufactured homes, particularly those that comply with the federal government's Energy Star standards, are also vastly more environmentally friendly than the old-school variety and offer significant energy saving costs to homeowners.
For too long, however, manufactured housing has been consigned to the back burner of public policy debate. As a result, many of the old notions about manufactured homes continue to dictate policy. Nearly two-thirds of these homes, for instance, are still titled as automobiles rather than real property, making it difficult for owners to obtain mortgage financing and reap benefits, such as building home equity, that often come from owning a home in this country.
Policymakers need to address these and a range of other issues that prevent families who own manufactured homes from benefiting in the same way as owners of traditional site-built housing. For instance, federal agencies like the Consumer Financial Protection Bureau could require that manufactured home lenders provide all their customers the same easy-to-read disclosure forms outlining the full cost of the loan (such as interest and fees) that site-built homebuyers will start receiving in 2013.
The housing challenges resulting from natural disasters like Sandy offer a perfect opportunity to change perceptions about manufactured housing and the role it can play in helping families find high quality, stable housing and build long-term assets. Thousands of Sandy's victims, for example, lived in public housing and likely had few assets of any kind. Many of these families could be put on a path toward permanent housing and a more financially secure future if they had the opportunity to purchase modern manufactured homes.
Research Symposium — Restoring Household Financial Stability After the Great Recession: Why Household Balance Sheets Matter
By Kim Pate on 12/18/2012 @ 01:00 PM
EDITOR'S NOTE: This event listing originally appeared on the Federal Reserve Bank of St. Louis' website here.
6 p.m. - 8 p.m. | Tuesday, Feb. 5, 2013 - Welcome Reception and Dinner
8 a.m. - 8 p.m. | Wednesday, Feb. 6, 2013 - Symposium
8 a.m. - 2 p.m. | Thursday, Feb. 7, 2013 - Symposium
America’s economic engine—its household sector—is sputtering. The common underlying vulnerability is widespread household financial instability: the inability of millions of Americans to meet their financial obligations, qualify for new credit, or play their traditional roles as consumers and homebuyers driving economic growth. This household financial instability was affirmed by the recently released Survey of Consumer Finances of the Federal Reserve, which showed that, overall, the median net worth of American households declined nearly 40 percent between 2007 and 2010. Particularly hard hit were younger, non-white and non-college-educated households.
Through commissioned papers, keynote speeches and a competitive call for papers, this symposium will highlight the critical role of household balance sheets in restoring household financial stability and national economic growth. Keynote speakers will include Michael Barr, former assistant secretary for financial institutions at the Treasury Department and current professor at the University of Michigan Law School; Christopher Carroll, professor of economics at Johns Hopkins University; and Federal Reserve Governor Jeremy Stein.
Sessions will explore:
- current data and research on household balance sheets as well as a framework for understanding the determinants and implications of household financial stability;
- the links between household balance sheets and attainment of homeownership, economic mobility and educational goals among households; and
- the connections between household balance sheets and macroeconomic outcomes, including economic growth and the transmission of monetary policy to the economy.
This event is free; however, registration is required by Tuesday, Jan. 29, as space is limited.
Sponsored by the Household Financial Stability initiative and Research Department of the Federal Reserve Bank of St. Louis, along with the Center for Social Development at Washington University in St. Louis.
To check out a draft of the agenda, click here.
Manufactured Housing by Any Other Name Would Work As Well
By Susan Bond on 12/04/2012 @ 11:30 AM
EDITOR'S NOTE: This post originally appeared on the Next Step blog and can be read here.
Note: This blog post is a response to an article that appeared in the Wall Street Journal, which speculated about the language being used to describe manufactured housing. The title “What’s in a Name?” is taken from a line in Romeo and Juliet, but the rest of the line is worth quoting: “That which we call a rose by any other name would smell as sweet.” The line conveys the arbitrary nature of naming, but offers positively that even tainted names like Romeo’s surname, Montague, would still not stop him from being be made up of his pleasant essence. Like Romeo, manufactured housing continues to be tainted with names like trailer and mobile home. Hopefully, this blog will address why we have come to call manufactured housing what it is, and I will try to get at the essence of what it means when we call manufactured housing a “home.“
In, “What’s in a Name? A Lot, for FEMA’s Housing Units” a linguistics professor was consulted to weigh in on the debate between politicians who used a variety of terms to describe FEMA manufactured housing. Stephen Schiffer asserted that changing the name “trailer” or “mobile home” to manufactured housing was just using a “euphemism” to wash over lower standards for FEMA housing, effectively ignoring the HUD spokesman. This simple linguistic trick ignores the great strides that manufactured housing has made to bring quality to homeowners. It’s true that renaming a product line can be used to create a new image for corporations, products, and even people to create distance from a tainted history. But that power of perception and linguistic symbolism can also be used for the reverse. It can also be used to reclaim identity and to distance a product from an unfair stigma. The same word reclaiming happens in all areas of social justice, and it is often employed in areas of race and gender among other causes. Similar discrimination bolstered by language happens to owners of manufactured homes based not only on their homes, but also their identity as people.
The term “manufactured housing” actually has less to do with quality and more to do with its production model. Its history is a derivative of the Ford business model of car production lines via RVs, a model that was an innovation for both business and transportation, helping grow the United States economy. This model allows manufactured homes to be built in a more controlled work environment, with less exposure to elements that can rot materials, and allowing work under all weather conditions – allowing increased efficiency, comfort, and access to amenities you wouldn’t get during site-built construction. And since the enactment of the HUD Code in 1976, manufactured homes built in these factories have been held to building and safety standards just as stringent as those for site-built homes. But solely because of their history in the travel trailer industry, owners of manufactured homes in most states still must title their homes as personal property, subjecting them to high interest consumer loans. Advocates for policy to ensure that owners of manufactured homes have the same rights as owners of site-built homes are working to change this, but many owners of manufactured homes continue to bear the effects of this discrimination.
Suggesting that a term like manufactured housing deserves to retain the social contamination of “trailer” may have the appearance of savvy critical thinking, but it also lapses into futility for change and progress. The stereotype of a “trailer” invokes racial and class smears that are more acceptable to use in the media than other dehumanizing slurs. Specifically, the term “trailer trash” is a slur that condemns a type of residence while characterizing its tenant as also less than human. The Appalachian region is the most impoverished region in the US, and was compared to the living conditions of the third world by Lyndon B. Johnson in 1964. There is still a dragging poverty in the Appalachian region, but manufactured housing has been used as tool to provide housing and financial stability. While a significant percentage of manufactured housing makes up the housing stock in this region, it is also spread out from coast to coast in both rural and urban environments, and across racial and financial demographics.
Language is easy to use to manipulate things into ready-made categories, but it takes deep, systematic change based on science to generate the material reality that will lead to equity in homeownership and subsequent, universal acceptance of people – the two are directly related. While it is important to note that turning a blind eye to perceived lower standards of housing will not bring equality, it is also important to make sure that we do not dismiss a great opportunity for housing people in immediate need for shelter or in the long term because we believe that the industry cannot or will not improve.
Ideally, manufactured housing used for natural disasters could provide people with homes furnished with electricity, plumbing, internet, phone, security, and privacy compared to stadiums, tents, or hotels miles from your home that hinder your ability to clean and rebuild faster. Because of its inherent efficiencies, it could also be used to replace a home entirely in as little as six weeks. Changing the terminology of trailer to manufactured housing is supported as much by nonprofits who wish to reframe how we view the people who live in manufactured housing, as much as the homes. Manufactured housing advocates have helped homeowners form land co-ops, create community associations that promote civic engagement, and save money for investments like college by getting access to responsible, fixed-rate financing and green homes which save on bills and energy. Language should not be arbitrary, but when backed up by a systematic approach of creating new building standards, equal access to homeownership, and social awareness and mobility, it can help communicate a direction for change.
Struggling Homeowners Headed Off the Fiscal Cliff
By Anne Kim on 11/30/2012 @ 02:00 PM
EDITOR'S NOTE: Anne's post originally appeared on RealClearPolicy. Read it here.
(Creative Commons image courtesy of respres on Flickr.)
If you’re working with your mortgage lender to modify your loan, hurry. Otherwise, you could be in for a nasty shock in April at tax time.
As the nation edges closer to the “fiscal cliff,” it’s not just millionaires and the middle class who might be looking at higher taxes. Struggling homeowners are also headed toward their own tax cliff, with potentially dire impacts for the housing market’s recovery and for lower-income homeowners in particular.
Unless Congress acts otherwise, mortgage principal reductions will become taxable “income” after December—even though no cash changes hands when a mortgage is forgiven and almost no one seeking a loan modification is in a position to pay hefty taxes (if they had cash, they likely wouldn’t seek a modification in the first place). A relatively small principal reduction of $20,000, for example, would mean $3,000 in taxes at a 15 percent rate—potentially insurmountable for a homeowner facing foreclosure after, say, a job loss.
For desperate homeowners, taxing principal reductions would essentially take loan modifications off the table—and at a time when the market is recovering but still vulnerable. When Congress finally cuts a deal on the taxes set to expire this year, it shouldn’t overlook these homeowners.
The particular provision in question is the Mortgage Debt Relief Act of 2007, passed in response to the deepening foreclosure crisis. As millions of borrowers plunged into default, and policymakers sought to keep people in their homes, Congress changed the tax law to temporarily exclude principal reductions from “income” normally taxable by the IRS.
But with housing not yet “normal,” there’s still strong reason to encourage modifications, especially with principal reduction.
For one thing, homeowners still need help. Consumer credit reporting agency TransUnion reports the national mortgage delinquency rate for loans 60 days past due was 5.4 percent in the third quarter of 2012. While declining, it’s still above what TransUnion calls the “more ‘normal’ conditions of a delinquency rate in the 1-2 percent range.”
There are also still deep pockets of distress. According to the Mortgage Bankers Association, 13 percent of mortgages in Florida are in foreclosure, as well as 8.9 percent of mortgages in New Jersey and 6.8 percent of mortgages in Illinois.
Another reason to encourage modifications is that lenders are finally doing them.
After a sluggish start, lenders have modified more than 5.8 million mortgages since 2007, says HOPE NOW, including nearly 1.1 million mortgages under the Home Affordable Modification Program (HAMP), the federal government’s leading mortgage modification effort. As of September 2012, more than 132,000 “trial” HAMP modifications were in progress. The majority of these modifications involve principal reduction, and under HAMP modifications alone, homeowners have saved $15.6 billion in mortgage payments to date.
Moreover, the nation’s five largest mortgage servicers have yet to spend down the money committed to mortgage relief under a $25 billion settlement this year with the federal government and state attorneys general over “robo-signing.” Under this deal, at least $10 billion is to go toward principal reduction. After the months it took for this settlement, it would be a mistake to allow any policy changes that could discourage every last dollar of this money from going to homeowners.
Third, loan modification might be the best way to preserve the wealth of lower-income and minority communities disproportionately damaged by the housing crisis. In Chicago, for instance, the Woodstock Institute found that nearly half the homes in minority communities were underwater or close to it, versus just 16.7 percent in predominantly white neighborhoods.
Data suggest that minority borrowers are especially benefiting from loan modifications. For example, researchers at the University of Wisconsin-Madison and the Federal Reserve Bank of San Francisco concluded that minorities were somewhat more likely to receive loan modifications than whites. Among delinquent borrowers who took out loans in 2005—the height of the subprime lending boom—11 percent of African-American borrowers got modifications, versus 5 percent of whites. And while evidence finds minority homeowners are more likely to end up in foreclosure, the study found that modifications virtually eliminated that elevated risk.
For lower-income borrowers, loan modification is particularly important because housing makes up a larger share of household wealth. In 2010, says the Federal Reserve, housing accounted for more than a third to one half of the total assets held by people in the bottom 40 percent of households by income, versus just one-fifth of the total assets held by families in the top 10 percent. Given the outsized importance of housing to these families, modification might be the best way to save what wealth they have. Levying taxes on loan modifications, however, could tip these same families into foreclosure.
Extending the Mortgage Debt Relief Act currently has bipartisan support, but because it wasn’t part of the original Bush-era tax cuts, it could just get lost in the shuffle. This would be tragic for struggling homeowners who might get the burden of a tax bill instead of much-needed mortgage relief.
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