Great Lakes Metros &

New Opportunity Summit “Responding to the Foreclosure Crisis”

Presented by: Arlo Monell Chase, Esq.

SVP For Policy Initiatives at nyhomes

Goals of PresentationGoals of Presentation

Thanks-to Sarah Szurpicki, Mike and Aaron Thanks-to Sarah Szurpicki, Mike and Aaron Bartley Bartley

Introduction to Introduction to nyhomesnyhomes Intro to Foreclosure Problem in Great Lakes Intro to Foreclosure Problem in Great Lakes

StatesStates Federal Response to Foreclosure CrisisFederal Response to Foreclosure Crisis New York State Response to Foreclosure New York State Response to Foreclosure

CrisisCrisis Great Lakes Specific: NSP & Block by BlockGreat Lakes Specific: NSP & Block by Block Going ForwardGoing Forward

nyhomesnyhomes is the State’s Affordable is the State’s Affordable Housing BankHousing Bank

nyhomesnyhomes is the New York State Housing Finance is the New York State Housing Finance Agency (HFA), State of NY Mortgage Agency Agency (HFA), State of NY Mortgage Agency (SONYMA) and Affordable Housing Corporation (AHC).(SONYMA) and Affordable Housing Corporation (AHC).

SONYMA offers mortgage products (through participating SONYMA offers mortgage products (through participating lenders) intended for income targeted first-time lenders) intended for income targeted first-time homebuyers- homebuyers- Funding comes from issuance of bonds exempt from federal income Funding comes from issuance of bonds exempt from federal income

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AHC provides grants to local governments and non AHC provides grants to local governments and non profits to promote homeownership for low income.profits to promote homeownership for low income. Eligible uses include new construction, Eligible uses include new construction,

acquisition/rehabilitation, and home improvementacquisition/rehabilitation, and home improvement Funded by annual state appropriation- last year $45 million but Funded by annual state appropriation- last year $45 million but

normally $25 millionnormally $25 million

Foreclosure in the Great Foreclosure in the Great Lakes Lakes

Recent Data from CRL shows that to date in 2009, Recent Data from CRL shows that to date in 2009, the following number of the following number of newnew foreclosure actions foreclosure actions filed:filed: New York- 32,000New York- 32,000 Michigan 42,000Michigan 42,000 Ohio 40,000Ohio 40,000 Pennsylvania- 23,000Pennsylvania- 23,000 US- 2.3 million in 2008: In 2009 2.4 million projected US- 2.3 million in 2008: In 2009 2.4 million projected

(CRL)(CRL) 2009-2012- 9 million foreclosures projected (Credit 2009-2012- 9 million foreclosures projected (Credit

Suisse)Suisse) These are huge numbers for MI & OH and US overall, These are huge numbers for MI & OH and US overall,

given this is the 4given this is the 4thth year of explosion in foreclosures year of explosion in foreclosures

Obama’s ResponseObama’s Response

OBAMA’S PLAN-Announced in FebruaryOBAMA’S PLAN-Announced in February 1. Refinancing for 4-5 Million through GSE Portfolio1. Refinancing for 4-5 Million through GSE Portfolio

Available to those in mortgages held or insured by GSEAvailable to those in mortgages held or insured by GSE Increase Permissible LTV to 105% from 80%Increase Permissible LTV to 105% from 80%

2. Enabling Mortgage Modifications for 3-4 million2. Enabling Mortgage Modifications for 3-4 million Available to Owner occupants, either “underwater” or high Available to Owner occupants, either “underwater” or high

DTIDTI Analyze that Net Present Value of modification exceeds costAnalyze that Net Present Value of modification exceeds cost

Big problem for borrowers in good marketsBig problem for borrowers in good markets Lender must get DTI to 38% Lender must get DTI to 38% Lender & Gov’t matching funds, get DTI to 31% (Gov-$75 Lender & Gov’t matching funds, get DTI to 31% (Gov-$75

billion)billion) Incentive payments to maintain mortgage: to servicer Incentive payments to maintain mortgage: to servicer

($1000/year, 3 yrs ) Lender ($1500/at outset) and Borrower ($1000/year, 3 yrs ) Lender ($1500/at outset) and Borrower ($1000/year, 5 years)($1000/year, 5 years)

GSE to monitor complianceGSE to monitor compliance

Obama’s Response Obama’s Response (cont’d)(cont’d)

Big problem- 2Big problem- 2ndnd liens- up to 50% of troubled mortgages have liens- up to 50% of troubled mortgages have 2nds2nds

Program mod of 4/28, when a mod on a first lien, second lien servicers can Program mod of 4/28, when a mod on a first lien, second lien servicers can either either

reduce payments on the 2reduce payments on the 2ndnd lien to sustainable level, or lien to sustainable level, or extinguish the second lien in return for a lump sum payment extinguish the second lien in return for a lump sum payment

under a pre-set formula determined by Treasury.  under a pre-set formula determined by Treasury. 

3. Bankruptcy Reform for those not assisted by Loan Mods3. Bankruptcy Reform for those not assisted by Loan Mods Passed House, died in Senate with little action by White HousePassed House, died in Senate with little action by White House

4. Strengthening GSEs/Lowering Mortgage Rates- 4. Strengthening GSEs/Lowering Mortgage Rates- up to 200 billion more in federal funds to cover lossesup to 200 billion more in federal funds to cover losses Increasing GSE Limits for size of loans can insureIncreasing GSE Limits for size of loans can insure Treasury to continue buying GSE Securities- Rates shot up Treasury to continue buying GSE Securities- Rates shot up

recentlyrecently

5.5. NSP2-$2 billion-National competition, results in FallNSP2-$2 billion-National competition, results in Fall6.6. Refundable Tax Credit for first time homebuyers-Refundable Tax Credit for first time homebuyers-$8000$8000

Obama Plan EvaluatedObama Plan Evaluated

ProsPros Detailed plan that uses all the tools available, incl GSEDetailed plan that uses all the tools available, incl GSE Incentives to Servicers, Lenders, Borrowers for Incentives to Servicers, Lenders, Borrowers for

restructuring and staying current on loans, incl those not restructuring and staying current on loans, incl those not yet in defaultyet in default

Recent studies showing high % of restructured loans default againRecent studies showing high % of restructured loans default again Balances scale and excluding investors & speculatorsBalances scale and excluding investors & speculators

Cons-Cons-Not address enough borrowers Not address enough borrowers Limits on size of loans GSEs will refi Limits on size of loans GSEs will refi LTV limitations on refi (105%)LTV limitations on refi (105%) Restructurings depends on private lender/servicer assistance, slow Restructurings depends on private lender/servicer assistance, slow

to emerge in the scale that is needed- to emerge in the scale that is needed- Servicers are debt collectorsServicers are debt collectors Without Bankruptcy reform, no stick for servicersWithout Bankruptcy reform, no stick for servicers

Obama Plan Evaluated Obama Plan Evaluated (cont’d)(cont’d)

Big questions remain unansweredBig questions remain unanswered

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

NationallyNationally

2.2. What will GSE’s look like?What will GSE’s look like?

3.3. Will he Use Crisis to Tackle Sacred Will he Use Crisis to Tackle Sacred Cows prioritizing homeownership?Cows prioritizing homeownership?

1.1. Need more focus on RentalsNeed more focus on Rentals

FORECLOSURE CRISIS-FORECLOSURE CRISIS-Impact in NYSImpact in NYS

Through the first 5 months of 2009, 32,000 new foreclosure actions were filed in New York State.

However, as a % of all households, New York is not one of the hardest-hit states, ranking 39th nationwide

Foreclosures are highly concentrated in the State The top 10 counties account for 79% of foreclosure

filings Queens and Brooklyn account for over 25% Long Island represents another 20% of the state total. Upstate Cities also troubled, more tax liens than

subprime For complete info, see year end HALT Report

FORECLOSURE CRISISFORECLOSURE CRISIS NY State Response NY State Response

Since 2007, NY State Initiatives-Proactive & TimelySince 2007, NY State Initiatives-Proactive & Timely Early in 2007 Spitzer created the HALT Interagency Force Early in 2007 Spitzer created the HALT Interagency Force August 2008, Gov Patterson signed legislation which:August 2008, Gov Patterson signed legislation which:

Regulates certain loans strictlyRegulates certain loans strictly Requires conference for subprime borrowers facing foreclosureRequires conference for subprime borrowers facing foreclosure If Leg comes back, further changes proposed by GovIf Leg comes back, further changes proposed by Gov

Foreclosure Mitigation Counseling & Legal ServicesForeclosure Mitigation Counseling & Legal Services DHCR $50 million in appropriated funds (2008 and 2009) DHCR $50 million in appropriated funds (2008 and 2009) Banking Department, $2 million awarded to 22 groups Banking Department, $2 million awarded to 22 groups SONYMA, as conduit for Fed funds-almost $2.5 million SONYMA, as conduit for Fed funds-almost $2.5 million

FORECLOSURE CRISISFORECLOSURE CRISIS State Response State Response

Preventing Foreclosure-RefinancingPreventing Foreclosure-Refinancing 2007 SONYMA launched Keep the Dream

refinancing program, which enables borrowers in subprime mortgages to refinance to a safe fixed rate loan. First time SONYMA ever offered a refinancing product. Unable to use our tax exempt bonds to finance, so Unable to use our tax exempt bonds to finance, so

entered into an agreement with Fannie Mae to entered into an agreement with Fannie Mae to purchase the loanspurchase the loans

Partnership with Fannie came with limitations:Partnership with Fannie came with limitations: Borrowers limited to 60 days delinquent.Borrowers limited to 60 days delinquent. Higher interest rate than we wantedHigher interest rate than we wanted

KTD was severely undersubscribed and cancelled

FORECLOSURE CRISISFORECLOSURE CRISIS State Response State Response

Addressing Neighborhood Effects of Addressing Neighborhood Effects of Foreclosures:Foreclosures:

Neighborhood Stabilization Initiative (NSI)Neighborhood Stabilization Initiative (NSI) IntentIntent: To assure continued stability of certain New : To assure continued stability of certain New

York neighborhoods with high concentrations of York neighborhoods with high concentrations of recently foreclosed properties by facilitating the recently foreclosed properties by facilitating the quick return of these properties to sustainable quick return of these properties to sustainable homeownership. homeownership.

With nyhomes in the lead, this is a joint initiative With nyhomes in the lead, this is a joint initiative with HUD, Banking Dep’t, DHCR, local with HUD, Banking Dep’t, DHCR, local governments, non profits and the leading governments, non profits and the leading lender/servicers in the state.lender/servicers in the state.

$64 million, $54 from HUD, $10 from AHC$64 million, $54 from HUD, $10 from AHC

Great Lakes SpecificGreat Lakes Specific NSP: OF State’s $64 million, NSP: OF State’s $64 million,

Buffalo groups were allocated 5.7 millionBuffalo groups were allocated 5.7 million Municipalities (Buffalo/Tonawanda and Municipalities (Buffalo/Tonawanda and

Cheektowaga) and non-profits, Cheektowaga) and non-profits, Plans include Ac/Rehab, Demo and Land bankPlans include Ac/Rehab, Demo and Land bank

Rochester allocated 5.1 millionRochester allocated 5.1 million All to City of Rochester, include suburbsAll to City of Rochester, include suburbs Plans include Financing, Ac/Rehab, Demo Plans include Financing, Ac/Rehab, Demo Other Great Lakes CitiesOther Great Lakes CitiesUnder NSP 1, Detroit allocated $47,137,690, Under NSP 1, Detroit allocated $47,137,690,

Cleveland allocated $16,143,120. Buffalo-$0, Cleveland allocated $16,143,120. Buffalo-$0, Rochester $0Rochester $0

Great Lakes -Block by Great Lakes -Block by BlockBlock

November 2007- after conversations with people like Mike Clarke, Aaron Bartley, Sam Hoyt, Michael Gainer, nyhomes announced the “Block-by-Block” program.

Special funding of up to $ 3million to rebuild and renovate existing housing as part of larger redevelopment plans.

Each proposal had to consider revitalization of an entire city block in Buffalo.

Prioritized following criteria: Energy efficient improvements and other green building; Provided rental options (homeownership required); Consistent with the City of Buffalo’s comprehensive plan, and Likely to be completed within two years.

Results: 4 grants 2 went to the City of Buffalo (i) owner rehab,; (ii) ac/rehab (Mid City

area) HomeFront, 19th Street ac/rehab Westside NHS, homeowner rehab (2 blocks, Black Rock and Grant Ferry) Greater conversation, coordination amongst groups and City?

Going ForwardGoing Forward

1.1. Federal & State Governments need to fund great Federal & State Governments need to fund great lakes specific strategies for housing and economic lakes specific strategies for housing and economic dev. dev.

2.2. But, we need help-when fractured, easier to ignoreBut, we need help-when fractured, easier to ignore3.3. Come together regionally-develop Come together regionally-develop

solutions/advocatesolutions/advocate4.4. Hard Choices need to be made:Hard Choices need to be made:

1.1. Planned shrinkage/transportationPlanned shrinkage/transportation2.2. Consolidating Governments/working with suburbsConsolidating Governments/working with suburbs3.3. More rehab & weatherization, less new constructionMore rehab & weatherization, less new construction

5.5. Opportunities:Opportunities:1.1. New NSP Money-$2 BillionNew NSP Money-$2 Billion2.2. Sympathetic Administration.-Bruce KatzSympathetic Administration.-Bruce Katz