Questioning Your Motivation

So, a couple weeks ago, Ms. Deborah Gore Dean, a former HUD official under the infamous Samuel Pierce reign was kind enough to pay the Crib a vist.  She left a hefty behind a hefty comment that I decided to give its own post.

And of course, that comment led to another comment. A comment that has been sitting in the “approve” que for more than a week because I was going to write a post about it–since ACORN seems to not be able to get off the hot seat.

Instead, I’d like to know what you think, and  hope that all of you knowledgeable folks who read this blog will take some time to leave a comment in the comment section (BTW–YOU CAN LEAVE AN ANONYMOUS COMMENT IF YOU PREFER) Here it is:

I, for one, would encourage people in any party, to revisit the late 1990’s reasons for abolishing HUD. They are all still good reasons. And if that is not an option, then how about radically reducing its budget? If that is not an option, then regulate it and the abusive housing agencies it sponsors with our taxpayer money?… Why do I, and others feel that way? Because HUD is perceived by many to be “Federally Sponsored” thugs.

Why is it that year after year, the American public is floored by what happens in leadership there? The corruption, the waste and misuse of taxpayer dollars.

·         http://theeprovocateur.blogspot.com/2009/01/inside-story-of-acorn.html

“Whenever ACORN receives any money, be it from the federal government or other resources, it first goes to CCI. Then, CCI filters that money to anyone of ACORN’s affiliates. Of course, this creates all sorts of room for malfeasance.”

 I have actually personally heard from from leadership at ACORN that wants change, that ACORN “pimps its own people” to line their own pockets – with OUR taxpayer money. HUD and these same sponsored agencies are out shaking down realtors, lenders, mortgage brokers, and banks. Not to help actual hosuing victims, but to line their own pockets.

There is a prevailing attitude by HUD and these so called “Housing Advocates” that actually scream “victim” and then they victimize by bending the law, bullying, and coercing “donations”. And where does the money go? Well, not to the alleged “housing victim”, if there even was a victim…but back into the coffers of organizations like ACORN.

Hmm…what say you?

Deborah Gore Dean Gives a former insiders take on HUD

If you get an email from me everytime I post something new, then perhaps you recall, my request for comments on what folks think about the future of HUD and what might be some of the most important things to get done in this first year.

Most chose to send me an email rather than post a direct comment here.  But to my surprise, Deborah Gore Dean, found this little ‘ole blog of mine and left a great comment. Mrs. Dean was high up in HUD during the Reagan administration and is now the proprietor of one of my favorite home accesory stores called Gore*Dean in DC’s Georgetown.   Rather than accept it into obscurity under another post, I decided to give it a bit of a spotlight. 

It is nice to read a blog about housing and urban development that comes from such passion for the subject.  You cannot travel to any part of this country where you do not see the need for a housing policy in this country, not to mention the obvious need for the funding for affordable housing and housing assistance.

In Washington, DC, Section 8 tenants (and their children) are living in motels because there are no funds to rehabilitate existing units and no way to build new.  Waiting lists across the country are at the levels now that only those used to institutionalized lifelong assisitance can partake in the Program.  If your need is immediate or short term – the purpose of the program- you are out of luck and on the street.

But you are mistaken if you think that any HUD Secretary can turn that around without Congress acting first.  The current state of the economy is such that it will be very difficult for the President to present the Congress with a budget for HUD that would even approach the funds needed for a long term multi-family build program, increased number of rent subsidies or vouchers; or even an increased multi-family insurance program.

I would venture a guess that the reason HUD has appeared to concentrate only on the single family programs is that they are the only ones that HUD can afford .  That and those programs of home ownership are a stabilizing force for the economy.

But if you understand the Department of Housing and Urban Development and I suspect you do; you know that there are vast differences in the mission of the Department from the GNMA, which is the country’s largest bank to single family, which is a moderate income home ownership tool to Section 8 which is for the poor.  You are pretty much running the gammet of brick and mortar in this country.  And we haven’t even gotten to the Block Grants and urban development subsidies and Fair Housing.

The dollar amounts for HUD even when not operating at any level of efficiency are staggering.  Any plan to turn it around, is going to require POLICY first, then massive funds.  I am not saying this to scare you but it IS the reality.  No funding can or will happen without it being of the highest priority, not of the President  – but of Congress.  To expect anything else is to set up President Obama for failure in this sector.

When the bridge collapsed in the Mid-west last summer; it brought home to the country that our infrastructure had too long been ignored.  Now there are calls for the testing of bridges and towers and the like and eventually a funding program will be established to address them but will another bridge fall while we wait?

That is where we find ourselves in housing in this country now.  Except that our infrastructure fails on a daily basis,- a shooting, a drug sale, a boarded up building.  We are losing the battle with poverty and HUD has no plan.  And as you know, whatever plan comes to be; it will take years to implement.  Luckily, there will be a HUD Secretary who will champion action.  But it is essential to keep the pressure where it can do the most good – on Capitol Hill.

What we should be calling for first- is a National Housing Plan and it should begin with Congressional hearings as to the state of the nation’s housing stock.

And because the nature of housing and urban development are so broad, from poverty programs and government assistance to the Donald Trumps of the world; we should include all ideas and view points.  There will be no housing plan without the support of both parties and a myriad of conjoining interests.

I cannot imagine that it is helpful to be too much on the fringes these days.  Jack Kemp was not a hero. Sam pierce was not the devil.  Cuomo probably meant well.  And the new HUD Secretary will not be the messiah.  And frankly, I don’t think of myself as a cocktail waitressing henchlady- although I might agree that I was not the right person for the job.  Still, if I had to go to Congress tomorrow for the sake of HUD, I would be looking for the Republicans on the Hill that understand the value of housing is in our country, like Stu McKinney and Alfonse D’Amato.

Keep your eye on HUD and perhaps blogs like yours will keep the place honest.  We could have used them in my day.

Deborah Gore Dean

 

Don’t worry, Ms. Dean, keeping folks honest is a part of my schtick here.

Come Tuesday

I have listened time and time again to the stories from my grandparents (who are still alive and good health) being my age during the time of Jim Crow. My grandparents were among the “talented tenth” who went on to get not only a college education but a Masters.  Their life was fascinating and some of the things they were able to accomplish, under what many would view as extreme duress, is impressive.

My grandmother was riveter like Rosie in WWII.  She left the factory and moved to Atlanta–by herself–while my grandfather was at War to pursue her Master of Social Work.  She is demure, my grandmother, and if you are familiar with the history of the black middle class–she  may falsely appear more socialite than independent woman, and more wife and mother from the times of the “best generation”, then capable equal partner.  But perserverance is her middle name.

My grandfather was a talented print man, who because of his color, had limited opportunity to make a career in printing and instead taught it as a vocation in the public school system.  Like many other black folks, teaching was one of the few ways to have a white collar job and secure a future staunchly in the middle class, running the printing press at  the Call and Post in the evenings.   He has a sharp-tongued wit at times. And from some of his stories, it seems his relative fair skin is what  kept him from ending up in a tree somewhere.

It is from my grandparents  purview of American history, that I see the world. It is from their vivid portrayl of the decline of the American dream–first begun in the demise of our urban centers at the precipise of “white flight” and “desegregation”, and further solidified by deindustrialization, that I dedicate my personal and professional time to revitalizing communities.  And it is from this purview, that the last 10 years have made me rethink this personal calling on many an occassion.

When a former community organizer first decided to run for US president, I thought him delusional. When he exceeded expectations in Iowa, I began to listen.  He talked about the importance of our urban centers and creating a poilcy arm that would focus on urban policy. He seemed to understand that the health and wealth of this nation hinged in large part on addressing many of our failures in domestic issues–health care,  encouraging small business, and revitalizing a viable manufacturing base that might actually allow blue collar folks who’s mothers and fathers once were “company men” in factories like Westinghouse and GM an opportunity to use their skilled labor to reach the American dream. It is then that  I began to work for him with “cautious optimism”.

Then he won the primary.

Then he won the presidency.

And now, come Tuesday,  the sun might cautiously shine again.

Luring Investors Back into the Tax Credit Market

They want their $40

About a month ago, I indicated that I thought the rental market in NY was surely going to take a hit amongst all the job losses on Wall Street.

Well, when folks start asking their landlords for rent concessions and getting them, I think its safe to say I was not far off the mark.

A bit of good news for  me(and countless others) at least. Perhaps, I’ll get to live my dream of living in Fort Greene?  On the other hand, that might be where these folks are going.

It’s Been a Long Time Since I left You

I have been egregious in my writing duties as of late. Part of it has to do with work, and the on slaught of the holiday season.  Add to that, new writing duties for Harlem Magazine, election volunteering, and finishing up the semester with my ESL (English as a Second Language) students, I had to take a step back and slow down a bit.

And admittedly, a large part of it has been me trying to identify a que of things to write about so that I can increase this blogs content and more easily post regularly. 

Look for more short posts about happenings around the nation in neighborhood and community revitalization. I also plan to feature more guest writers like Mr. Stewart. ( Yeah, I’m looking right at you. You know you are just dying to try this blog thing.). And to keep myself from keeling over from trying to digest way too much on my plate, a content rich (don’t worry we are talking 500-650 words here not War and Peace) piece from me on average of once a week. 

P.S. Lets all say thanks to my boy Ben over at Cleanup, who put me back on the horse with very nice kick in the tail. ( Now go buy some soap from him that will benefit landmine removal!)

Cleanup soap benefits Landmine removal

The Affordable Housing Box

In August, the Old Grey Lady (aka the New York Times) did a public lives profile on Sheena Wright, the prolific and straight-shooting executive director of one of the most politically significant community development organizations in New York City, the Abyssinian Development Corporation (ADC). Over the last year, ADC, sometimes criticized as being “complicit” (for lack of a better term) with the rapid gentrification of Central Harlem, has been subjected to significant criticism over one of its latest projects—The 19-story, 110-unit condo project, which is being built on the former site of the Renaissance Ballroom and Casino (20% of which are set aside for low-income homeownership). In response to criticism that ADC should be building the project to serve lower income folks, Mrs. Wright said, “It’s ludicrous for any one to accuse us of building market rate housing…there are different levels of affordability.”

 

I think she is exactly right. And her comment identifies a large looming issue that no matter how it is brought up is often anathema to community advocates.

 

Gentrification happens. The question is how do community organizations—particularly those who build affordable housing, manage a rapidly changing socio-economic landscape? After all, in the late 1960’s and early 1970’s, community development corporations were created to provide programs and services, advocate for decent affordable housing, and engage in other activities that support the community in which significant disinvestment had occurred.

 

Clearly, disinvestment is not the issue now.

 

It is obvious that there is a lack of affordable housing in New York City, and clearly those with the lowest income have the most difficult time finding it. Community development organizations such as ADC do and must continue to build projects that serve the needs of lower income folks.

 

But the other reality is that rising housing prices also squeeze out a large percentage of middle-class folks who cannot compete in the market, and are not eligible to apply for subsidized housing.

 

Where does that leave middle-class folks? When I say middle-class folks, I am referring to your local teacher, firefighter, police officer, etc. if you ask me, it leaves organizations like ADC to be the most logical advocate to develop much needed housing for them. There is no better type of organization to do so.

 

Whether a city has significant high-income earners like D.C., or is losing its middle-class like Detroit, a healthy city must find ways to retain the middle. Like the late self-made urban planner Jane Jacobs always said, healthy cities are diverse in income, culture, and even physical make up.  Even Mayor Bloomberg’s current housing policy, which encourages the development of  housing for those who would not traditionally be served by programs like the low-income housing tax credit, demonstrates that middle-income housing solutions are paramount to preserving some level of socio-economic diversity.

 

It can never be healthy for a community to have just a bunch of rich folks and poor folks and no income variation in between. Unless, Marie Antoinette’s idea about cake seems good to you.

It Ain’t CRA , Stupid

Here’s what the punditocracy has been saying about the cause of our large looming financial crisis:

Commentators say that’s what triggered the stock market meltdown and the freeze on credit. They’ve specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie’s and Freddie’s financial problems…

Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent.

And national news networks on the bandwagon. Recently, Neil Cavuto of Fox News said, “I don’t remember a clarion call that said Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster,”  Or as a friend of mine recently said, lets just blame it on the brown people.

But the truth is out there. And here is the truth:

Federal housing data reveal that the charges aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

And further more, according to Federal Reserve data:

• More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions. 

   

• Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year. 

   

• Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics. 

That’s right folks, only one of those top 25 lending institutions was subject to CRA.  Personally, I am highly perturbed by the fact that folks on the Hill, particularly our conservative representatives and Senators continually use CRA has a target for any mortgage market turmoil that occurs. Under the Bush administration, the teeth of CRA has slowly been dismantled in the name of the “free unfettered market”.  I am tired of hearing people say that poor and moderate income AND minority homeowners brought the market to its knees.

If this was a card game of a certain name, I’d call bull.

First of all, mortgage brokers, investment banks and finance companies like now defunct New Century and Countrywide are not subject to CRA. Only banks and thrifts are required to follow CRA regulations.  These companies only have to follow state banking regulations, which vary by state.

I guess one could say there was a lack of oversight and consistent regulation, perhaps?

Second, lending institutions that have made it their business to lend to low and moderate income buyers like CDFI’s, community development credit unions, and community development banks, have proportionally, one-tenth the default rate of their larger competitors.  According to my own research, banks like ShoreBank in Chicago had a default rate of less than 5%  (proportionately) to  the number of mortgage defaults then larger banks and thrifts through out the nation–which was more than double at 17%.  

Less regulation?  Significantly greater default. More oversight, tighter underwriting standards? Significantly less default. Well, isn’t that funny? 

But what is even funnier is that two of soundest lending institutions in the nation–JP Morgan Chase and  Bank Of America (which, did not have liquidity problems until it started trying to work out the loans held by Countrywide–formerly a private lending institution), also had very high CRA ratings.

But the money quote of the day sums it all up:

“Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans,” she said. “The CRA has increased the volume of responsible lending to low- and moderate-income households.”

In a book on the sub-prime lending collapse published in June 2007, the late Federal Reserve Governor Ed Gramlich wrote that only one-third of all CRA loans had interest rates high enough to be considered sub-prime and that to the pleasant surprise of commercial banks there were low default rates. Banks that participated in CRA lending had found, he wrote, “that this new lending is good business.”

Huh. Perhaps, one can do good and make money…and find a sound market with those pesky brown folks after all.

Looking for A New Deal

About two years ago, Dr. Nouriel Roubini, a then well-respected albeit obscure economist at New York University (Go Violets!), predicted a financial markets meltdown of epic proportion.  In a nutshell, he predicted a historic housing bust, crippling oil prices, and a deep recession which if badly managed, could be long term like the recession Japan faced in the 90’s (10 years of economic stagnation).

What did he get for it? The label, Dr. Doom.  After all,  when he made these predictions in 2006 (though the housing market was softening a bit), the economy was still growing, oil prices were relatively stagnant, and unemployment was low.

Well, if he is a betting man, he’s rich. And because of his now prophetic-like predictions, he is also famous. (Let me just say, I was right with him. But I was broke in grad school then, so no betting for me!)  I think he continues to be right with his thoughts about how to kick start the US economy, and it does not involve a $700 billion check with no oversight. 

His answer starts at the consumer level. He calls for the creation of the Home Owners Mortgage Enterprise (HOME), which is modeled on one of FDR’s New Deal programs– Home Owners Loan Corporation (HOLC) .  The HOLC bought mortgages from banks at a discount price, then reduced the face value of the mortgages, and refinanced the mortgages for borrowers at a lower mortgage rate.  The program staved off thousands of foreclosures and the further erosion of home values.

Why do I think he is right? While any action will need to help the financial industry out from under its bad debt, any plan should put the US consumer/taxpayer first.  Consumer spending is the backbone of the US economic model.  Falling home prices, stagnating wages, and rising cost of consumer goods is forcing an already debt ridden consumer base further down the slippery slope. As home prices fall, and consumers can no longer turn to their homes as nest eggs or lose them all together, we will not only have an unmanageble surplus of homes, but a continued erosion on consumer confidence and spending.  If consumer spending and US productivity is paramount to economic growth, no successful economic plan should exclude relief at the base level.

Some argue that the current economic crisis is due to a bunch of home purchasers throwing caution to the wind and buying homes they cannot afford and we should therefore let them fail. I think they are wrong.  Yes, lack of financial savvy on the part of consumers is part of the issue, but the problem starts and ends in the financial services sector. It boils down to failure to underwrite prudently and appraise properly. The National Association of Mortgage Brokers, the Center for Responsible Lending, and  the Federal Reserve have all come to the conclusion that the over valuation of real estate through the appraisal process, which was encouraged by the banking industry, is one of the largest culprits. (In a nutshell,  bigger value + bigger mortgage + bigger fee = bigger profit, until reality set in.)

Like Dr. Roubini, I believe the proposed $700 billion plan is part and parcel of the  clearly failing "Trickle Down", "Voo Doo" economics theory and is simply a short-term solution that only benefits those in the financial sector and does not take into account larger systemic issues or the people who will be most affected by the plan.

Not once. Not twice. But three times, we have seen that deregulation and trickle down theories just add up to over-regulation and tax payer bailouts on the other end. ( Unless the trickle down only works when something is rolling down hill.)  The $700 billion plan is no different.  Before the continued erosion of home values and the ability to pay turns the current crisis into a long term nightmare, lets start at the base where the impact can have some of the greatest long-term impact on the economic future of the US–the US consumer.

It’s the Credit Default Swap, Stupid (And other interesting end of week tidbits)

So much has been going on in the last couple of weeks that I have been unable to write as regularly as I would like. All of the upcoming topics take some significant research, and honestly I’ve been avoiding it. But…

I’m back!! So, here we go.

De Ja Vu

In the words of the wonderful, Dionne Warwick “You look like a [nightmare], I once knew.” Its 1985 all over again–on Steroids. Merril, Lehman, Morgan Stanley–the investment banking market is going the way of Arthur Anderson and some its “big 5″ homies.

And of course there is the news that we, the people, now own one of the biggest insurance giants in the world. Does this mean my rates will go down?

Its the Credit Default Swap, Stupid

On this weeks Bill Maher, The Atlantic’s Conservative reporter, Andrew Sullivan railed on about how it was lazy greedy American consumerism by the individual home mortgage consumer that led to this crisis

Perhaps that would be accurate, if 40% of all sub-prime loan defaults did not belong to owner-investors. (The ones most likely to drop the keys in the mail box and roll out). Or better yet, if the securitization of mortgages had not made it nearly impossible for an owner to figure out who owned the note, and who to talk to when in danger of default.

We should all thank Mr. Gramm, Senator John McCain’s top economic adviser. The blow by blow can be found here. Guess he and his friends didn’t learn from the Savings and Loan mess, or the Enron mess. The undoing of the Glass-Stegall Act (the one that fixed the foolishness that cause the Great Depression) is the Trifecta.

The Bottom is yet to come

Its not news to me.

But we have yet to reach the bottom of the housing market. Just in case, its still news to you.

Despite what oh-so many rosie -colored-glasses-wearing financial “guru’s” say, the bottom is not close by.  I more closely agree with others that we have a ways to go–maybe not $215k for many houses to $70k, but definitely below the current median price of $200k.

It feels good to be back!