Six Trends That Show Latino Homeownership is Important to the Housing Market and the Economy

By Agatha So, Policy Analyst, Economic Policy Project, NCLR

Headlines about the nation’s housing market have focused on the low homeownership rate, currently stalled at 63%, compared to a high in 2001 of more than 73%. Yet, little attention has been paid to the impact of the low Hispanic homeownership rate on America’s ongoing economic recovery, and in turn, the future of the nation’s housing market.

Overlooking this impact is a huge oversight, given that the majority of new households formed in the next two decades will be made up by homeowners of color. In fact, Latinos are expected to account for 40% of those new households. At the end of 2016, the Hispanic homeownership rate increased to 47%, but remained much lower than the peak of 50% nearly 10 years ago. With significant household growth on the horizon, creditworthy Latinos need access to homeownership to ensure that the opportunity to build wealth is available to all Americans in the decades to come.

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Why Isn’t the Federal Housing Finance Agency Doing More to Help Keep People in Their Homes?

By Nancy Wilberg Ricks, Senior Policy Strategist, NCLR

Years after the economic crisis, when financial institutions profited by steering unsuspecting families into risky and expensive home loans, corporations are once again playing the housing market for profit while a majority of low- and middle-income families continue to see the values of their homes flounder.

A recent PBS Newshour piece (video below) reinforced what we have long known: many homeowners could remain underwater—owing substantially more on their mortgage than their home is worth—for a lifetime. In particular, the PBS story highlighted how large states like California and Florida, areas with large Latino populations, continue to experience trouble in the housing market. These ongoing issues are detrimental to the national economy and eliminate homeowners’ ability to pass their single greatest asset—their home—on to the next generation.

Principal reduction Newshour piece

More than five million homeowners in the United States are paying much more in monthly mortgage payments than their homes are worth. Some homeowners owe anywhere from $60,000 to $150,000 beyond the current value of their house. They are barred from refinancing and are stretched thin in a market where the recovery has been uneven for low- and moderate-income families. Many end up losing their home or remain beholden to a mortgage that far exceeds any return they’ll see on investment.

The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, has the power to permit reasonable and safe principal reductions to help families keep their homes and prevent lenders from taking a substantial hit. While FHFA’s own study indicates that this is a proven win-win, FHFA refuses to make a change. Even more troubling is that families are now losing their homes only to see them bundled and sold to investors at or even below the cost of a reasonably adjusted mortgage. In response to this practice, community organizations rallied earlier this week to discuss this issue with FHFA Director Mel Watt. In addition, many nonprofits, including Hogar Hispano, Inc, a subsidiary of NCLR, run programs that purchase distressed assets from lenders and sell them back to home-ready families at market rate.

Moving from a community of dedicated homeowners to a conglomerate of faceless investors alters the makeup of once-thriving neighborhoods. To truly stabilize the housing market, the FHFA should exercise every option they have to reverse this practice, keep families in their homes, and stabilize communities across the country.

Congress Wants You to Believe Dodd-Frank is the Problem. Don’t Fall For It.

By Nancy Wilberg Ricks, Senior Policy Strategist, NCLR

At a the National Journal event this week,  experts discussed the state of sustainable homeownership, housing finance reform, and potential solutions to systemic problems in housing. Reforming Fannie and Freddie is of critical importance to the Latino community, who will comprise half of the housing market by 2020—but we wonder why the National Journal is leading the discussion and Congress isn’t. These topics should be the central focus in Washington when it comes to improving the housing market. Instead, Congress is trumpeting this misinformed notion that Dodd-Frank is the cause of all our problems.

Dodd-Frank was the comprehensive legislation that was passed to prevent total economic collapse seven years ago. It stopped the bleeding and helped lay the foundation for a better economic system for consumers and honest dealers. To build on its successes, we must now direct our attention to how the secondary housing market is managed. That is, how do Fannie Mae and Freddie Mac, and thus taxpayers, avoid being left with all the liability and none of the benefits should another crisis rear its head?

Congress has attempted to take on housing finance reform in several iterations only to be stymied by gridlock. We know there is a way. In its joint report with the Center for American Progress, Making the Mortgage Market Safe for America’s Families, NCLR outlined a research-based roadmap to a broad, accessible, and affordable housing market. For example, there is a dire need for a fully funded Market Access Fund (MAF) to promote broader access to mortgage credit and to foster new and safe mortgage products as a way of increasing access. The MAF would also fully fund the National Housing Trust Fund (NHTF)—a state block grant program administered by the Department of Housing and Urban Development, designed to increase and preserve the supply of rental housing for very and extremely low-income families. We finally saw advances in this department late last year when the FHFA announced plans to fund both the NHTF and the Capital Magnet Fund. This is just the beginning, though.

Along with adequate funding, a new housing finance system needs a robust regulatory mechanism to monitor for safety and soundness, consumer protection, and access and affordability. While national experts grasp the importance of an improved housing finance reform system, Congress continues to use Dodd-Frank as a scapegoat. They are wasting time and taxpayer dollars, while never getting to the real issue at hand.

Why Does Mel Watt Continue to Waver on Homeowner Relief?

By Nancy Wilberg Ricks, Senior Policy and Communications Strategist, NCLR

HousingDiscrimination_blogpic_newMore than five million homeowners in the United States are paying much more for their homes than they are worth. Ironically, one of those homeowners is Sylvia Alvarez, who heads the Housing & Education Alliance, a leading housing counseling agency in Tampa, Fla., and an NCLR Affiliate. Alvarez and her dedicated staff have helped many families escape unsustainable mortgages.

Alvarez is an ideal candidate for principal reduction, but she cannot get help because her mortgage is owned by Fannie Mae. Most of the largest banks have granted some families principal write-downs, understanding that reducing the principal on a home for a struggling homeowner is a win-win. Families stay in their homes, continue to pay their mortgages, and stabilize the economy.

After the housing crisis, many experts knew that the solution to a healthier housing market was large-scale principal reduction, and the best place to start was with the Federal Housing Finance Agency (FHFA), which manages Fannie Mae and Freddie Mac. Consumer advocates fought very hard to ensure that FHFA had a strong leader and advocate for homeowners.

That’s why NCLR and our allies rallied for Mel Watt, a former U.S. representative and housing proponent, to be appointed as director of FHFA. We fought for Watt so he could fight for homeowners like Alvarez who need relief now. In 2013 we won the fight, and Watt was confirmed as the leader of the most powerful housing entity in the business.

Two years later, we still wait for progress. During the first year of his leadership at FHFA, Watt wanted to study the issue. Research points to obvious benefits of helping homeowners keep their homes, and even the 2013 Congressional Budget Office reported that a principal reduction plan could assist 1.2 million borrowers and save Fannie Mae and Freddie Mac $2.8 billion.

Yet Watt wavered.

Mel Watt

Mel Watt

Now, eight years since the height of the crisis, Watt and FHFA refuse to implement principal reduction. Families pay mortgage dollars that far exceed the value of their homes, and many cannot keep up. In the meantime, banks and investors are pushing out homeowners and acquiring properties at pennies on the dollar. This devastates communities. Turning long-seasoned homeowner neighborhoods into rental communities might not seem bad, but studies indicate that homeownership translates into stability and greater investment in one’s own neighborhood.

When will FHFA and Mr. Watt finally give households the relief they need? Principal reduction remains the solution. It would finally restore homes to their true value. It would also help families hold on to the largest investment most will ever make.

Latino Families Benefit from Strong Leadership at FHFA


FHFA Director Mel Watt

Over the past year, the Federal Housing Finance Agency (FHFA) has taken significant steps to improve America’s housing market for struggling homeowners, prospective homebuyers, and those suffering from foreclosure. Yesterday, FHFA Director Mel Watt testified before the House Financial Services Committee to highlight how the agency’s actions have helped homeowners since his confirmation about a year ago.

Just last month, NCLR applauded Director Watt’s decision to fund two essential affordable housing programs: the National Housing Trust Fund and the Capital Magnet Fund. In the wake of a housing crisis that cost more than one million Latino families their homes due to foreclosure, our nation is in desperate need of increased affordable housing stock. Funded with just one-twentieth of a percentage point of Fannie Mae and Freddie Mac’s business purchases, at least $400 million is expected to become available for these programs annually.

In addition, the FHFA’s actions in promoting the Home Affordable Refinance Program has allowed thousands of qualified underwater homeowners—who owe more on their mortgages than their homes are currently worth—to refinance their mortgages, enabling savings on mortgage payments and preventing needless foreclosure.

Access to affordable mortgage credit continues to be a real barrier to homeownership; in response, the FHFA has recently introduced mortgage products with 3 percent down payments. These products are an important step in helping Latino families whose savings were wiped out by the financial crisis enter the home purchase market. By expanding mortgage eligibility to a greater section of prospective buyers, the FHFA is working to ensure all demographics are fairly served by our housing system. Low down payment products will be offset by proven housing counseling, private mortgage insurance, and other compensating measures of creditworthiness.

While the FHFA has taken great strides in improving the housing sector for families, the agency can still do more to improve mortgage access for the Latino community. We encourage the FHFA to strengthen its commitment to all Americans by issuing a strong duty to serve rule, requiring Fannie Mae and Freddie Mac to fulfill their statutory responsibility to serve all creditworthy borrowers. The FHFA should also continue to promote housing counseling in new ways, and should move beyond traditional FICO scores and toward alternative scoring options such as Vantage and FICO-9.

To truly make a difference in the lives of America’s millions of underwater borrowers, the FHFA should also direct Fannie Mae and Freddie Mac to implement principal reduction, adjusting mortgages to what underwater borrowers’ homes are currently worth.

As Director Watt approaches his one-year anniversary at the FHFA, the agency is on track to continue making a difference in the lives of American homeowners, prospective homebuyers, and renters. We urge Director Watt to continue the FHFA’s efforts to make housing more affordable and to take new and significant action to expand mortgage access to serve all creditworthy borrowers.

Watch the entire hearing below:

Relief for Latino Families, FHFA to Fund Essential Affordable Housing Programs

Family in front of homeThis week, the Federal Housing Finance Agency (FHFA) announced plans to fund two essential affordable housing programs—the National Housing Trust Fund (NHTF) and the Capital Magnet Fund.

At NCLR, we’ve long urged the FHFA to fund these programs, which would begin to correct the dire shortage of affordable housing in this country.

Nearly a year of inaction after his swearing in, we’re pleased to see FHFA Director Mel Watt take a stand for struggling families by directing FHFA to fund the much-needed affordable housing programs. To be funded from less than one-twentieth of a percentage point of Fannie Mae and Freddie Mac’s business purchases, the funds are expected to total between $400 and $500 million annually, amounting to a boon for low-income Latino families.

Created during the height of the housing crisis in 2008 and designed to increase the affordable housing supply at a time when families were rapidly losing their homes, the critical programs remained unfunded after Fannie Mae and Freddie Mac were placed under conservatorship in 2008.

Photo: Jeffrey Turner

Photo: Jeffrey Turner

Since the programs’ creation more than five years ago, America’s affordable housing stock for extremely low-income households has sharply declined.

With the freeing up of funds for the NHTF and the Capital Magnet Fund, this trend could soon be reversed as the programs’ provisions take effect in every U.S. state and the District of Columbia.

With full funding, the overwhelming majority of NHTF money will go toward the construction of affordable rental housing stock for extremely low-income individuals. This will greatly benefit Latino families who are struggling to get by, making 30 percent or less of the federal poverty income level.

Sold Home For Sale Sign in Front of New HouseA fully capitalized Capital Magnet Fund would also direct its funds toward the affordable housing work of registered community development financial institutions (CDFI) across America. These qualifying nonprofit organizations would be able to compete for grants to fund low-income housing developments and other projects designed to stabilize low-income communities, including workforce development, day care, and health care centers.

In deciding to direct funds toward the National Housing Trust Fund and the Capital Magnet Fund, Director Mel Watt and the FHFA have taken a powerful step toward mitigating the shortage of affordable housing in America. This is essential for the estimated 1.3 million Latinos having lost their homes between 2009 and 2012.

This holiday season, the FHFA announcement will help prevent homelessness and give Latino families the gift of basic housing security.

At Confirmation Hearing, Castro Supports GSE Overhaul and Wins Bipartisan Support

Photo: Wikipedia

Photo: Wikipedia

Last week, Mayor Julián Castro of San Antonio faced the Senate Banking Committee for his confirmation hearing as nominee to head the U.S. Department of Housing and Urban Development. Overall, the hearing went fairly smoothly, with Castro receiving support from committee Republicans Bob Corker of Tennessee and John Cornyn of Texas, who introduced him.

For the benefit of homeowners, renters, and all Americans, confirming Julian Castro as Secretary of Housing and Urban Development is the best opportunity to ensure a sustainable housing system and a housing finance overhaul that serves all communities.

A three-term mayor of America’s seventh-largest city, boasting a majority-Latino population, Julián Castro presided over San Antonio’s successful urban revitalization. As he succeeded in San Antonio, we believe he can succeed in the Obama Cabinet.

While NCLR has expressed strong support for Castro’s nomination, adding another highly qualified Latino to the Obama Cabinet, no matter who the new secretary is we urge that person to focus on ensuring real, affordable access to housing credit for communities of color in any housing finance overhaul.

Fortunately, there is strong reason to believe that such goals are consistent with Castro’s positions. Though the hearing did not delve into specifics, Castro highlighted support for major housing finance changes.

Currently, control of the two government-sponsored enterprises is placed under the Federal Housing Finance Agency, but this temporary system is unsustainable. The Senate Banking Committee recently passed the Johnson-Crapo proposal, which would overhaul the current system, replacing Fannie Mae and Freddie Mac with private capital backed by government guarantee.

Unfortunately, the current version of this bill passed in committee doesn’t do nearly enough for the Latino community, effectively cutting off unacceptable numbers of people of color and underserved communities from access to affordable mortgage credit. A newly confirmed Secretary of Housing and Urban Development could persuade the Senate to change that while also impacting access and affordability through improvements at the Federal Housing Administration. We hope that, if successfully confirmed, Julián Castro will make sustainable housing finance reform a top priority.

GSE Bill Passed in Committee Doesn’t Do Enough for Latino Community

HFG_LOGO-FullColor-horiz 6 4 12With a 13–9 vote, the Senate Committee on Banking, Housing and Urban Affairs approved the Johnson-Crapo government-sponsored enterprise reform bill yesterday, which would restructure our nation’s housing finance system. While our nation’s housing market is in need of a major overhaul, the legislation approved today simply doesn’t do enough to ensure affordable access to mortgages for Latinos and all communities of color.

In a statement, NCLR President and CEO Janet Murguía expressed serious concerns with the bill:

“Our housing finance system must, above all, maintain a duty to serve all creditworthy borrowers. Although there are components of this bill that we support, the legislation as a whole misses the mark because it fails to ensure that Latinos and other traditionally underserved communities won’t be unfairly cut off from affordable mortgage credit.

“In fact, this bill could actually make getting a mortgage tougher for middle- and low-income families, the same families who were hurt most by the predatory lending and irresponsible gambling practices of financial institutions that led to our housing crisis. We are deeply disappointed by the unwillingness of some members of the committee to adequately address the mortgage credit needs of our community.”

Murguía also stressed that despite the bill’s problems, opportunities still exist to improve it:

“While we are disappointed with the current version of the bill, there is still time to fix the serious structural problems that exist within this legislation.To create a housing finance system that works for all Americans, our concerns about access and affordability must be dealt with before the bill moves to the Senate floor.”

In Fannie Mae and Freddie Mac Overhaul, Don’t Leave Out Latino Families

(This was originally posted to the Home for Good blog.)

HFG_LOGO-FullColor-horiz 6 4 12Last week, the Senate Banking Committee announced a new bipartisan agreement to overhaul our nation’s housing finance system by restructuring government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. The draft discussion bill, authored by Committee Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho) (Johnson-Crapo), preserves the 30-year fixed mortgage and takes concrete steps to prevent a future housing crisis.

While we welcome these meaningful steps toward sustainable housing finance reform, the Johnson-Crapo draft contains shortcomings that reduce affordable access to credit for Latino families and underserved communities.

Under the proposed system, Fannie Mae and Freddie Mac would be dissolved and replaced with private capital overseen by a new government-backed mortgage-bond insurer and regulatory agency called the Federal Mortgage Insurance Corporation (FMIC).

Modeled after the FDIC, which insures bank deposits, the FMIC would provide a government guarantee for mortgages while private firms would be required to accept losses of up to 10 percent of capital. In exchange for the guarantee, firms would pay a small 0.1 percent fee on all mortgage securities to fund affordable housing and community development. This small fee would finally fund the National Housing Trust Fund and the Capital Magnet Fund, two essential affordable housing programs that NCLR has long advocated for. These funds have the potential to make significant, much-needed investments in affordable housing, yet they have never been funded since their inception more than five years ago.

Family in front of homeThough the bill contains numerous bright spots for the Latino community, Johnson-Crapo also removes beneficial features that exist in the current housing finance system under Fannie Mae and Freddie Mac. These features should be reworked in the Johnson-Crapo proposal to make affordable housing a real priority for housing finance reform.

One example is that Fannie Mae and Freddie Mac maintain a “duty to serve” the entire housing market, and as part of their public mission, they are required to provide financing for affordable housing. In contrast, the Johnson-Crapo system replaces this duty to serve and its affordability goals with an incentive-based fee structure to fund affordable housing programs. This mechanism, while creative, may not sufficiently address our current and future affordable housing needs. The fee can be raised or lowered based on how well entities perform in lending to underserved borrowers, but the criteria for who is considered high-performing is unclear. This could lead to the housing market not adequately serving the Latino community.

Photo: Jeffrey Turner

Photo: Jeffrey Turner

With regard to fair housing and fair lending, Johnson-Crapo does not explicitly prohibit involved entities from discrimination based on race, gender, national origin, familial status, and other characteristics. Failing to include such statements, combined with a lack of a strong regulatory body and transparency requirements, could create a recipe for failure to achieve fair lending that is free of discrimination.

Finally, the proposal does not incorporate the proven benefits of housing counseling in a post-GSE landscape. Research shows that homeowners who work with qualified housing counselors are less likely to be delinquent on their mortgages. When faced with foreclosure, they’re more likely to receive modifications. If the FMIC replaces the GSEs, the new agency should integrate housing counseling into its programs.

As debate begins on the merits of the Johnson-Crapo bill, Congress should not forget that a strong and sustainable commitment to fair lending and affordable housing is crucial to the well-being of not just the Latino community and other underserved groups, but the entire economy. Communities of color were affected most severely during the housing crisis, and they deserve a chance to rebuild what was lost. More importantly, these communities are the future of the housing market. If it is going to succeed, the new housing system cannot shut them out.

Weekly Washington Outlook – November 4, 2013

White House at Night

What to Watch This Week:


The House:

The House is in recess until Tuesday, November 12th.

The Senate:

The Senate on Monday will vote on a motion to proceed to the Employment Non-Discrimination Act (S. 815) and two judicial nominations.

White House:

Monday: The president will welcome the five-time Stanley Cup Champions the Chicago Blackhawks to the White House to honor the team and their 2013 Stanley Cup victory. Following the visit, President Obama will deliver remarks at an Organizing for Action event.

Tuesday: The president will travel to Walter Reed National Military Medical Center and visit with Wounded Warriors who are being treated at the hospital and their families.  Mr. Obama will also visit the Fisher House, a program that supports military families by welcoming them to stay at the House while their loved one receives specialized medical care.

Wednesday: President Obama will travel to Dallas to participate in Democratic party fundraising events.

Thursday: The president is scheduled to attend unspecified meetings at the White House.

Friday: President Obama will travel to the New Orleans area for an event on the economy.  Later that day, he will travel to Miami to participate in Democratic National Committee and Democratic Senatorial Campaign Committee events.

Supreme Court:

The Supreme Court is back hearing oral arguments this week on Monday, Tuesday, and Wednesday.  Among the cases being considered, is one involving the role of prayer in government meetings in Town of Greece v. Galloway.  Visit the Supreme Court website for the full list of cases. Additional information is also available on SCOTUS Blog.   Continue reading