Obama, the Administration that keeps on giving, $73 million in Homeowner Counseling Grants

OBAMA ADMINISTRATION ANNOUNCES

NEARLY $73 MILLION IN COUNSELING GRANTS

TO HELP FAMILIES FIND AND KEEP HOUSING

12/23/10
Housing and Urban Development

WASHINGTON – In an effort to help families find decent housing and to prevent future foreclosures, the Obama Administration today announced nearly $73 million in housing counseling grants to more than 500 national, regional and local organizations. As a result of the funding announced today, hundreds of thousands of households will have a greater opportunity to find housing or keep the homes they have because of the housing counseling and counseling training grants awarded today by U.S. Housing and Urban Development Secretary Shaun Donovan.

The grants announced today represent a $13 million, or 22 percent increase over last year’s funding level. In announcing the grant awards, Donovan said HUD-approved housing counseling agencies are a critical part of the nation’s housing recovery.

"These organizations are on the front lines of helping families who are desperate to remain in their homes," said Donovan. "Now, more than ever, it’s crucial that we support these agencies that are working with struggling families on a one-to-one basis to manage their money, navigate the homebuying process,　and secure their financial futures."

Housing counseling grants will assist families in becoming first-time homeowners and remaining homeowners after their purchase. HUD-approved counseling agencies not only provide homeownership counseling, but also offer financial literacy training to renters and homeless individuals and families.

"Now, more than ever, it is crucial that Americans better understand how to manage their money, navigate the homebuying process,　and secure their financial future." said Donovan. "This critical funding will help counseling organizations continue to assist families in making more informed choices before they purchase a home and counsel families facing foreclosure."

Nearly $68 million will support the direct provision of housing counseling services by 24 national and regional organizations, 5 multi-state organizations, and 484 state and local housing counseling agencies. In addition, HUD is awarding more than $5 million to three national organizations to train approximately 4,500 counselors who will receive the instruction and certification necessary to effectively assist families with their housing needs.

National and regional agencies distribute much of HUD’s housing counseling grant funding to community-based grassroots organizations that provide advice and guidance to low- and moderate-income families seeking to improve their housing conditions. In addition, these larger organizations help improve the quality of housing counseling services and enhance coordination among other counseling providers.

Counseling agencies will use $9.5 million to help assist senior citizens seeking reverse mortgages or Home Equity Conversion Mortgages (HECM). These agencies will provide counseling for the rapidly growing number of elderly homeowners who seek to convert equity in their homes into income that can be used to pay for home improvements, medical costs, and other living expenses.

The organizations that provide housing counseling services help people become or remain homeowners or find rental housing, and assist homeless persons in finding the transitional housing they need to move toward a permanent place to live. Grant recipients also help homebuyers and homeowners realistically evaluate their readiness for a home purchase, understand their financing and downpayment options, and navigate what can be an extremely confusing and difficult process.

In addition, grantees help combat predatory lending by helping unwary borrowers review their loan documentation, and avoid potential mortgage scams, unreasonably high interest rates, inflated appraisals, unaffordable repayment terms, and other conditions that can result in a loss of equity, increased debt, default, and even foreclosure. Likewise, foreclosure prevention counseling helps homeowners facing delinquency or default employ strategies, including expense reduction, negotiation with lenders and loan servicers, and loss mitigation, to avoid foreclosure. With foreclosures at critical levels nationwide, these services are more important than ever. HUD Press Repease and Links

Homeowners' tax benefits facing cuts?

For a commission meeting since February, they have been awful quiet!

By Kenneth R. Harney
Boston Herald
10/24/10

Could a report due Dec. 1 from a bipartisan presidential deficit-reduction commission lead to fundamental changes in the way the federal tax system treats home ownership?

For decades, the political rule in Washington has been that nobody messes with homeowners’ tax benefits - mortgage-interest deductions, capital-gains exclusions and property-tax write-offs.

That’s true even though these breaks cost the U.S. government hundreds of billions of dollars in tax revenues a year and increase the federal deficit. But now the sheer size of the country’s fiscal problems - a $1.3 trillion deficit for 2010 and a fast-mounting $13.6 trillion debt overall - could be slowly altering the equation.

Not only are some Republicans and Democrats joining in support of plans to lower the deficit through across-the-board cuts in defense spending, social programs and tax subsidies, but even leaders in the real estate industry are speaking up.

All five panelists at the opening session of the Urban Land Institute’s annual meeting this month agreed - Democrat and Republican alike - that while continuing tax-system support for housing is important, the current mix of tax incentives is costly and imbalanced. They admitted that it disproportionally favors home ownership over renting.

One panelist, former U.S. Housing and Urban Development (HUD) Secretary Henry Cisneros, privately added afterward that leaders on both sides of the political aisle increasingly believe deficits could wreck the economy within the decade.

“This is a catastrophe looming,” Cisneros said. He noted that Congressional Budget Office (CBO) estimates that public debt will hit 69 percent of gross domestic product by 2020, hobbling the country with $778 billion in annual interest payments alone.

Since leaving office, Cisneros has been in the housing development industry and is currently executive chairman of realty investment company CityView.

Though long an ardent proponent of home ownership, he now believes the real estate and housing industries must be willing to contribute their fair share to any “comprehensive long-term plan” to balance the budget.

J. Ronald Terwilliger, former CEO of giant developer Trammell Crow Residential and a contributor to some Republican campaigns, agreed that federal tax incentives for ownership should be throttled back - “a phased-in reduction” over a period of years so as not to worsen an already-strained housing market.

Steve Preston, who headed HUD toward the end of President George W. Bush’s term, suggested a “comprehensive policy” for deficit reduction, covering all economic sectors of the economy. He said that stands the best chance of gaining the broad political support needed to push serious deficit-reduction measures through a fractious Congress.

In theory at least, that’s what the National Commission on Fiscal Responsibility and Reform is supposed to deliver to President Obama six weeks from now.

The 18-member commission - co-chaired by former Republican Sen. Alan Simpson of Wyoming and former Clinton White House Chief of Staff Erskine Bowles - has been holding hearings and gathering deficit-reduction ideas since February.

Most commissioners are current members of Congress, but the group also includes representatives of private industry and labor.

Though the commission has provided no public hints of where it’s headed, analysts say it’s inevitable that the panel will propose cutbacks to tax subsidies for real estate.

Likely Targets:

• The mortgage-interest deduction, which added about $100 billion to the deficit in fiscal 2010 and more than $400 billion during the last five years
• Capital-gains exclusions for home-sale profits, which cost more than $128 billion between fiscal 2006 and 2010
• Property tax write-offs, which cost $70 billion-plus during the same period

HUD Seeking Authority to Charge Lenders for not Following FHA Guidelines (Housing Wire)

By Jon Prior
Housing Wire

The Department of Housing and Urban Development pushed for more authority to charge lenders for writing nonperforming mortgages that did not meet Federal Housing Administration guidelines.

Under the new proposal, HUD would force FHA lenders to pay the government for "serious and material" violations of origination guidelines. HUD will charge a lender for compensation if it failed to verify and analyze the creditworthiness, income, and employment of a borrower who defaulted on an FHA-backed loan.

Lenders also will be charged if they didn't verify the source of assets the borrower used to make the downpayment or closing costs. HUD will determine if the lender addressed property deficiencies identified by the appraiser and ensure FHA-appraisal requirements were met.

Any violation found will result in penalties to the lender.

For those cases not involving fraud or misrepresentation from the borrower, HUD requires a penalty to be set within five years of the FHA endorsement. But with the new proposal HUD will set a "reasonable time period" for those cases where fraud was detected.

"It's important that our expectations are crystal clear," said FHA commissioner David Stevens. "We need to clarify which circumstances we'll require indemnification and the level of loan performance we expect lenders to maintain."

The new proposal would also allow HUD to grant FHA approval to one-state lenders under different standards. Under current guidelines, HUD gives unconditional, direct endorsement to lenders who can self-insure their own mortgages and hold a default and claim rate at or below 150% of the national average for insured mortgages for the previous two years.

The new proposal compares single-state lenders to the average default rate for insured mortgages in the state it operates in.

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