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Taking Action: A Status Report on the Compact for Home Opportunity

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Taking Action reports on the policy recommendations of our Compact for Home Opportunity and the progress that the Obama administration, Congress, states, cities and others have made towards stemming foreclosures, restoring communities, protecting fair housing, and ensuring that homeownership is an accessible pathway to American opportunity. It discusses developments from May 2013 to December 2013 as well as breaking developments in early 2014. Prior reports covered February through August of 2012 and September 2012 through May 2013.

The Status Report finds that the Executive Branch made progress in several areas, from new mortgage servicing rules by the Consumer Financial Protection Bureau to the proposed rule on Affirmatively Furthering Fair Housing by the U.S. Department of Housing and Urban Development. It also finds that states and cities have innovated and made progress on several fronts. This includes states enacting and implementing land bank laws and utilizing strong homelessness prevention strategies, as well as cities using the power of eminent domain to purchase and refinance mortgages and increasingly using vacant property registration and inclusionary zoning laws. Unfortunately, the Status Report finds a pattern of inaction by Congress, as well as regression in areas such as enacting positive reform of Government-Sponsored Enterprises and ensuring consumer readiness.

Our policy recommendations and major findings follow. (See Key to Graphics at the bottom of the page.)

Preventing Foreclosures 

  Make Mediation Mandatory: Progress toward making mediation a mandatory part of the foreclosure process continues to be mixed. While there was no federal policy action, a large settlement between the federal government and JPMorgan, as well as the National Mortgage Settlement provided funds for several state mediation programs. States and localities continued to initiate and strengthen programs that incorporate mandatory mediation into the foreclosure process in their jurisdiction.
  Invest in Pre- and Post-Purchase Counseling: The Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Housing and Urban Development (HUD) made significant progress toward providing more Americans with housing counseling. In addition, the State of New York allocated housing counseling funds to aid its residents who are facing foreclosure. There was, however, no Congressional action on the issue. 
  Reform Servicing Guidelines: There was significant progress. The CFPB issued guidelines that clarify consumer-friendly rules that went into effect in January 2014. The majority of the banks subject to the Attorneys General Settlement complied with their legal obligations, according to the monitor. This means that more struggling homeowners are receiving principal reduction, a short sale or deed in lieu of foreclosure, or refinancing at a lower interest rate. Also, the confirmation of Mel Watt as the Director of the Federal Housing Finance Agency (FHFA) was a positive move forward that holds much promise. 
  Reform and Expand the Making Home Affordable Program: There was mixed progress. The Obama administration extended the HAMP program until December 2015. However, the program has not reached nearly as many homeowners as the administration originally intended. Additionally, litigants with claims pursuant to HAMP had varied levels of success in federal courts. 
  Improve Legal Assistance: There was mixed progress. Congress did not remove funding restrictions on legal assistance for distressed borrowers. Several states, on the other hand, developed and funded programs that provide legal services to distressed homeowners. 
  Require Principal Reductions: The Senate’s confirmation of Congressman Mel Watt as the new Director of the FHFA is a significant step forward and provides a strong hope that there will be a change to the agency’s policy on principal reductions. Funds from the JPMorgan settlement will also go toward providing principal reduction to consumers harmed by the bank’s illegal conduct. Cities across the country acted upon this need. Richmond, California, for example, announced that it would use the power of eminent domain to purchase mortgages at below market value, and as owner of the mortgages, refinance them. Irvington, New Jersey, has followed suit and multiple other cities are considering doing the same. 
  Refinancing Legislation: There was mixed progress. Congress allowed the Mortgage Forgiveness Debt Relief Act to expire. States, with much less capacity than the federal government, have begun to experiment. Oregon, for example, expanded its successful pilot program to provide foreclosure assistance and refinancing opportunities for underwater homeowners, and other states are considering similar programs. 
  Allow Mortgages to be Restructured in Bankruptcy:Congress took no action on the Home Foreclosure Reduction Act of 2013. The legislation remains in committee and is unlikely to become law.   

Ensuring Fair and Sustainable Mortgages 

Enact Positive Reform of Government-Sponsored Enterprises: There was regression, primarily driven by Congress. Legislation in Congress remains in committee with very little chance of passage. In addition, the House Financial Services Committee voted to favorably report the Protecting American Taxpayers and Homeowners (PATH) Act (H.R. 2767), which would be a setback for affordable housing. 
  Issue an Accessible Definition of Qualified Residential Mortgages (QRM) that Preserves Access to Credit for Middle Class Families: Federal regulators, including the Federal Reserve Board, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Securities and Exchange Commission, the Federal Housing Finance Agency, and HUD, proposed a new QRM rule that would lower the down-payment requirement, and, if finalized, would benefit low- to middle-income borrowers. 
  Increase Consumer Protections: There was very modest progress. The Executive Branch, through the Department of Justice, held several banks accountable through legal settlements for abuses against consumers in the sale of mortgages. However, Congress made no progress on appropriations for the agencies that enforce consumer protections. 
  Ensure Consumer Readiness: There was regression as the House of Representatives cut the Supplemental Nutritional Assistance Program (SNAP or ʺfood stampsʺ) by $39 billion and Congress allowed existing SNAP benefits under the 2009 Recovery Act to expire. The sequester cuts caused additional suffering. Moving in the opposite direction, Illinois removed the asset eligibility requirement for the Temporary Assistance for Needy Families Program, joining seven other states that have done the same.
  Improve Credit Scoring Mechanisms: Our research identified no significant progress on this issue. 
  Improve Federal Housing Administration Practices and Oversight: Federal Housing Administration (FHA) practices, and oversight of the agency, are improving. However, Congressional oversight proposals create concern that FHA loans will not remain accessible for prospective homeowners. 
  Promote Flexible Housing Tenures (such as lease-to-own): Our research identified no meaningful progress on either the federal or state levels. 

Rebuilding Economic Security 

  Expand Owner Re-Sale Seed Capital Programs: There was modest progress. Neither the Executive Branch nor Congress expanded re-sale seed capital programs. However, Boston Community Capital announced the expansion of its Stabilizing Urban Neighborhoods Initiative to Maryland. 
  Expand Own-to-Rent Programs: There was very modest progress. Fannie Mae and Freddie Mac failed to substantially expand their available rehab-to-rent programs. Nor did Congress take any action in support of these programs. However, Minnesota passed a Homeowner Bill of Rights, which mandates that, among other things, lenders and servicers disclose to borrowers all options available to them before selling their home, which includes own-to-rent programs, and assist homeowners in the modification process. 
  Make the Protecting Tenants at Foreclosure Act Permanent with a Private Right of Action: There was modest progress. Congress failed to make the Protecting Tenants at Foreclosure Act permanent. Nevertheless, several states and cities took action. Minnesota’s Homeowners Bill of Rights created a private cause of action for homeowners wrongfully evicted from foreclosed properties, and Chicago passed legislation that allows tenants in properties in foreclosure to remain in their home for the term specified in their lease agreement. 
  Expand Homelessness Prevention Programs: There was mixed progress. Although targeted programs have proven successful, there were deep and disastrous Congressional cuts in funding of homelessness programs and housing assistance.
  Provide Credit Protection for Former Owners: There was modest progress, as FHA released guidelines for its Back to Work Program, which will help certain homeowners who have faced a foreclosure in the past become eligible for an FHA loan. 

Restoring Neighborhoods 

Support Creation of Land Banks: There was modest progress, as Nebraska joined four other states that have enacted land bank laws. At least five states have also used funds received from settlements with banks to support existing land banks, as well as other efforts to address foreclosures. 
  Require Vacant Property Registration: There was significant progress, as localities, including Springfield, Massachusetts, and Chicago, Illinois, were in the forefront of enacting legislation that requires vacant property registration. Despite legal challenges, a multitude of cities and municipalities have passed such laws. 
  Support Community Development Programs: There was modest progress, with the implementation of HUD’s Promise Zones initiative aimed at improving employment, education, public safety, and housing opportunities in communities particularly hard-hit by the Great Recession. Congress made no progress. 
  Encourage Mixed-Use Zoning: Our research identified no meaningful progress on this issue.
  Promote Responsible and Productive Disposition of Real Estate Owned (REO) Properties: There was modest progress. There are no current plans to continue the FHFA’s REO Pilot Program. Nevertheless, several states and localities utilized Neighborhood Stabilization Program funds to redevelop REO properties in their communities. Congress continued to make no progress. 
  Modernize the Community Reinvestment Act: Our research identified no meaningful progress, as Congress took no action on this issue. 

Fostering Fair Housing 

Strengthen Fair Housing Regulations: There was significant progress. HUD proposed a significant rule on Affirmatively Furthering Fair Housing. In addition, several cities across the country moved aggressively against discrimination in housing while regressive laws faced stiff scrutiny. However, the Treasury Department failed to issue civil rights regulations and Congress did not pass any legislation regarding fair housing. 
  Improve Coordination of Equal Opportunity Enforcement among Federal Agencies, State and Local Governments: There was modest progress overall. Federal agencies, states, and local governments coordinated in certain equal opportunity actions. Westchester County, New York, which was discussed in the two previous status reports, lost HUD funds as a result of discriminatory zoning. Congress, again, failed to pass any legislation regarding this issue.
  Develop Robust Consumer Financial Protection Bureau Regulations: There was modest progress. The Consumer Financial Protection Bureau’s consumer-friendly mortgage servicing rules went into effect, and the CFPB finalized modifications that help industry comply and better protect consumers. However, the CFPB’s work was met with pushback from Congress, where the House Financial Services Committee voted to limit its powers. 
  Incentivize Inclusionary Zoning: There was mixed progress overall. The Executive Branch opposed exclusionary zoning in the federal courts. However, Congress made no progress on this issue. At the state and local level, progress was also mixed. The District of Columbia began to implement its Inclusionary Zoning program, with prospects for improvement; New York City elected a new Mayor who campaigned on mandatory inclusionary zoning; and the New Jersey Supreme Court strengthened legal precedent that prohibits exclusionary zoning and mandates a minimum level of affordable housing. Yet, the Governor of California vetoed legislation that would have allowed cities and counties to enact mandatory inclusionary zoning. 

Key to Graphic in this Report

The degree of progress or regression that has been made in adopting and implementing the Compact’s policy recommendations from May 1, 2013 to December 1, 2013, as well as major developments in December 2013, are represented here by blue arrows to the right or left of a vertical line that serves as the axis. A blank circle at the center indicates no progress. The number of arrows shown measures the level of progress corresponding to a fixed set of terms: