A stable housing market is an important cornerstone for building strong neighborhoods and bringing financial security to the families who live and work and go to school in these communities. For many hardworking New Yorkers, owning a home serves not only as an important source of wealth creation and preservation for future generations, but also as a source of stability for raising a family and building community ties.
In 2008 the housing market collapsed, leading to a wave of foreclosures, evictions and vacant properties. While different parts of New York experienced the crisis in different ways -- and some parts of New York had experienced market declines long before the crash of 2008 -- all New Yorkers were deeply affected by the housing crisis: middle class homeowners saw the value of their most valuable possession plummet, affordable rental housing became harder to find for low-income workers and the elderly, and good-paying construction jobs disappeared across the state.
The challenges facing the housing market -- in particular the ongoing wave of foreclosures -- are far from over, and I will continue to do everything I can in Congress to ensure that New York’s housing needs are addressed.
Nearly 5 years after the housing market peaked and started to decline, tens of thousands of Americans are still facing foreclosure every month. Millions of unemployed Americans are struggling to pay their mortgages, and with long-term unemployment at record highs the foreclosure crisis appears unlikely to end soon.
The Administration has created the Making Home Affordable (MHA)
program to help Americans avoid foreclosure. Given the complexity of the foreclosure crisis, MHA is made up of several programs designed to offer a variety of solutions to eligible homeowners like lowering monthly payments, lowering interest rates, receiving assistance if unemployed, getting help with a second mortgage or home equity line, receiving help with decreasing home values, and providing alternatives to homeownership. More specifically, these programs include:
- Home Affordable Modification Program (HAMP) – This program is designed to assist homeowners with a sufficient documented income but are having a difficult time making a monthly mortgage payment by lowering the monthly mortgage payment to 31 percent of your monthly income. Typically, the monthly mortgage payment is lowered by either reducing the interest rate of the loan, extending the loan term, or deferring a portion of the loan principal until the loan is paid off. Homeowners who have their first mortgage permanently modified under HAMP and have a second mortgage on the same property can also be eligible for a modification or principal reduction on the second mortgage as well.
- Home Affordable Refinance Program (HARP) – This program is designed to assist homeowners who are current on their home mortgage but are unable to refinance because the value of the home has declined significantly to the extent that the homeowner may owe more than what the home is worth. HARP is designed to help homeowners refinance into a new mortgage loan so long as the current mortgage does not exceed 125 percent of the current market value of your home.
- FHA Short Refinance – If a homeowner is current on their mortgage but owes more than what the home is worth, FHA Short Refinance has been designed to help homeowners refinance into a more affordable, FHA-insured mortgage. The homeowner’s current mortgage lender must agree to participate in this refinance and will be required to reduce the amount that the homeowner owes on the first mortgage to no more than 97.75% of the home’s current value.
- Home Affordable Unemployment Program – If a homeowner is having a tough time making mortgage payments this program provides a temporary reduction or suspension of mortgage payments for at least three months while the homeowner seeks re-employment.
- Home Affordable Foreclosure Alternatives (HAFA) – This program is designed to provide alternatives to homeownership for homeowners who cannot afford their mortgage payment and are interested in pursuing more affordable housing options. Homeowners interested in this program may be eligible for a short sale or deed-in-lieu of foreclosure through HAFA. Homeowners who utilize this program no longer own the difference between the remaining mortgage note and the amount that the home sells for. Moreover, the homeowner receives $3000 in relocation assistance once successfully completing a short sale or deed-in-lieu of foreclosure.
These programs have not worked perfectly, but I think they should be modified and improved where possible, not abandoned. Last year I sent a letter alongside fellow members of the Senate asking that the Administration consider a long list of reforms to the Making Home Affordable program to ensure that homeowners are treated during the modification process. I will continue to push for reforms to these programs to ensure that they are as effective as possible and to fight for New Yorkers trying to stay in their homes.
Following reports of widespread shortcomings on the part of mortgage servicers, including so-called “robo-signing” of key mortgage documents, I teamed up with several of my colleagues to call for significant reforms to existing servicing standards, including providing a single point of contact for homeowners and requiring banks to pursue modification negotiations to the end prior to initiating foreclosure proceedings. I will continue to push for these important reforms through the regulatory process, but I have co-sponsored legislation that I will pursue if necessary to ensure that they are implemented.
Experience has taught us that access to knowledgeable housing counselors is key to putting homeowners on a level playing field with their lenders, and helping homeowners navigate loan modification negotiations and the foreclosure process. That’s why I have always fought for and supported full funding for homeownership counseling to provide New Yorkers with the knowledge and resources they need to stay in their homes despite the tough economy.
Combating Vacant Properties
For many regions in New York, the housing market crash exacerbated a preexisting vacant housing crisis caused by population and employment losses over the past thirty years. Local communities have struggled to cope with the scourge of large-scale vacancy and abandonment, which often destabilizes neighborhoods, drags down property values and increases the cost to remaining residents of maintaining local firefighters, law enforcement and other services.
I will continue to work hard to ensure that federal resources are made available to assist communities plagued by widespread property abandonment. In each of the last two Congresses, I introduced the Community Regeneration Act, which would create a new competitive pilot program within the U.S. Department of Housing and Urban Development (HUD)
that would support localities in developing innovative approaches to addressing vacant properties and abandonment. The program would target cities and metropolitan areas that have experienced large-scale property vacancy and abandonment due to population and employment losses.
Last year I hosted HUD Secretary Shaun Donovan on a tour of vacant housing in Buffalo and Syracuse to discuss the merits this legislation and the need for additional community resources to be accessible to combat vacant properties, and I look forward to continuing to work with HUD to explore ways the federal government can assist localities in this area.
Preserving Workforce Housing
In a high cost housing market like New York City, where market rents often increase at a much faster pace than median incomes, I know how difficult it can be to find safe and secure housing for the middle class workers -- the teachers, fire fighters and policemen -- who we depend on and who form the backbone of the city.
That is why I have fought long and hard to maintain the stock of affordable housing in New York City, through programs designed to support the development of new affordable housing and efforts to keep as many properties as possible from leaving the affordable housing stock. For example, I recently I worked with State and local leadership to secure the successful sale of Starrett City – the largest federally subsidized housing complex in the country – to a buyer who will preserve and maintain the property at affordable rents. While I consider the preservation of Starrett City an enormous success for New York City, there are dozens of other buildings with thousands more units at risk of leaving the affordable housing stock, and I will continue to work with community leaders to ensure that working New Yorkers have access to safe, secure and affordable housing.
Fighting Predatory Equity
During the housing bubble, I also discovered that private equity investors had begun to purchase affordable multifamily properties for exorbitant prices, financed mostly with debt, even though rent rolls were barely able to support basic operating expenses and maintenance. As a result, owners eventually defaulted, basic maintenance and upkeep fell by the wayside and tenants were left in virtually unlivable conditions. This practice – which I call “predatory equity” – has left a trail of devastated tenants and neighborhoods in its wake.
To ensure that this cycle doesn’t repeat itself, I authored a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act
directing the Department of Housing and Urban Development (HUD) and the Department of Treasury to create a Multifamily Mortgage Resolution Program. The program will provide a mechanism to ensure that physically and financially at-risk buildings are transferred to responsible ownership, under sustainable financing arrangements, who will work with local authorities to preserve affordability and ensure adequate maintenance and rehabilitation is performed.
The program will to protect multifamily housing from predatory equity investors, preserve affordable housing complexes in New York City and across the country and curb speculative practices that target vulnerable neighborhoods. Ultimately, the goal of the program is to avoid repeating the predatory equity cycle, and I am working with HUD and Treasury to ensure that the program is implemented promptly and effectively.