The Shriver Brief : Poverty Law Commentary & Insights : Sargent Shriver National Center on Poverty Law : Affordable Housing, Healthcare Reform

The Department of Justice (DOJ) ended 2011 with a bang, reaching an enormous $335 million fair-lending settlement with Countrywide Financial Corporation and its subsidiaries. The record-setting settlement secures relief for more than 200,000 African American and Hispanic borrowers who were more often steered into subprime mortgage loans or were charged higher fees than were white borrowers with similar credit profiles. The proposed consent order of December 21 resolves DOJ’s claims that Countrywide’s lending practices during the housing boom of 2004–2008 violated both the Fair Housing Act and the Equal Credit Opportunity Act.

The Equal Credit Opportunity Act (ECOA) prohibits discrimination in every phase of a credit transaction such as a mortgage loan. When creditors discriminate on the basis of race, ethnicity, marital status, or another protected class, they subject themselves to civil liability for actual and punitive damages. Private citizens can bring ECOA claims, as can several authorized government agencies such as the Department of Justice and the new Consumer Financial Protection Bureau. ECOA has been on the books since 1974, but its enforcement has been minimal. The foreclosure crisis and its disproportionate impact on minority groups, however, have renewed public interest in fair-lending laws such as ECOA—and given DOJ’s landmark discrimination settlement, this revived focus has come none-too-soon.

ECOA is valuable for more than just compensating victims of discriminatory lending, as was accomplished by DOJ. Many people who were unfairly steered into subprime mortgages ultimately found themselves facing foreclosure. In the current issue of Clearinghouse Review: Journal of Poverty Law and Policy, Jennifer D. Newton and Tamara St. Hilaire of Florida Legal Services explain how advocates can use ECOA to challenge and prevent such foreclosures. The authors explain that borrowers, depending on where they live, may file a lawsuit under ECOA to prevent a foreclosure or, if a foreclosure case is already underway, may countersue under ECOA or use it as a defense against the foreclosure action. Plaintiffs may prove discrimination with direct evidence of discriminatory intent. Most courts also allow plaintiffs to meet their burden of proof with circumstantial evidence of disparate treatment or impact.

When courts allow disparate impact claims under ECOA, they look to fair housing discrimination cases for guidance. The U.S. Supreme Court will also be looking at disparate impact claims under the Fair Housing Act (FHA) later this year when it decides Magner v. Gallagher, which is scheduled for oral argument on February 29. Specifically, the Court will decide whether disparate impact claims are cognizable at all under FHA and, if so, how they should be analyzed. The outcome of Magner will likely affect how courts view disparate impact claims brought under ECOA as well.

In the meantime, the Justice Department will be appointing an independent administrator to identify victims of Countrywide’s discriminatory lending who are entitled to compensation as a result of the settlement. Those who believe they were discriminated against by Countrywide and have questions about the settlement may contact the Department at countrywide.settlement@usdoj.gov. 

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The Low-Income Housing Tax Credit Preservation Program’s purpose is to encourage developers to build affordable residences for low-income tenants. In this program, the federal government and the states work together; the federal government gives tax credits to state governments, and the state governments give those credits to housing developers that promise to include low-income housing units in their projects. In turn, the developers sell the credits to investors. Sadly, the tenants sometimes get lost in the complicated process of financing, constructing, and maintaining LIHTC properties. 

That’s what initially happened to tenants at a 264-unit complex in Southeast Portland when the Oregon Housing and Community Services Department decided that their homes no longer met the requirements of the LIHTC Program. After the department released the complex from the program’s requirements, the project’s owner sold it to a developer, who evicted all the low-income tenants.

Under the terms of the agreement between the original owner and the department, the low-income tenants never should have been evicted. The agreement stated that the original owner would maintain 100 percent of the project as low-income housing for 30 years and that, in order to receive low-income housing tax credits, the owner (or any subsequent owner) would regulate and restrict the way the property could be used to make sure that the original purpose of the project would survive. The owner of the property entered into those restrictions—or, in legalese, recorded a “declaration of land use restrictive covenants”—and, in return, the project received more than $2 million of LIHTC tax credits.

Years later, the project was sold. The Oregon Housing and Community Services Department determined that the project was not complying with the LIHTC program, and notified the Internal Revenue Service. The department then entered into a release with the project. The release was a crucial document for the tenants of the complex, because it said that the department and the property’s owner released one another from all of their obligations but stated that the owner or any new owner could not evict a tenant of a low-income unit for three years.

After the release was entered into, the property was sold again, and the new owner evicted the tenants. This meant that the developers received all of the benefits of the LIHTC program without providing low-income housing for the original 30-year period. (And the new owner did not even have the decency to wait for the three-year safe harbor period to elapse.)

A group of tenants represented by the Oregon Law Center and two private attorneys sued the new owner and the department, but lost at the trial court. The trial court ruled that the department’s decision to end the complex’s participation in the LIHTC program and enter into the release agreement meant that the low-income tenants had no power to enforce the terms of the original declaration.

Thankfully, in Nordbye v. BRCP/GM Ellington, the Oregon Court of Appeals disagreed and overruled the trial court’s decision. In a thorough, detailed opinion, the court explained that the release that the department signed with the complex’s second set of owners did not wipe out the original declaration. Most importantly, the court emphasized that the low-income tenants had the right to enforce the original restrictions requiring that the property be used for low-income housing. Citing an amicus brief by the National Housing Law Project, the court included the following insightful language:

. . . if failure to comply with program requirements were grounds for early release from the applicable use restrictions, it would create a perverse incentive to encourage noncompliance. An owner of a property subsidized with public funds would be encouraged to violate program requirements in order to secure early release from the LIHTC program. Once released from the obligation to maintain the property as low-income housing for the stated period, an owner would be free to charge market-rate rent or to sell the project for a profit, thereby profiting from a public subsidy without fulfilling the conditions of that subsidy.

This important decision is a must-read for housing advocates, and will surely keep many low-income renters in their homes.

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Most of the news we hear about housing in the United States is bad. Homelessness, evictions, and foreclosures are omnipresent, and housing assistance is hard to find. In some parts of the country, homelessness is being criminalized—either directly through laws that criminalize sleeping and camping in public places, or indirectly, through laws that try to hide homeless populations, such as the Orlando ordinance that requires organizations to obtain permits to feed groups of twenty-five or more people in city parks. (Because the Orlando ordinance also states that only two permits a year will be issued for any one park, it means that organizations conducting large-scale feedings have to move from place to place—making it difficult for homeless people to establish a routine.) Debates about homelessness have even surfaced at Occupy Wall Street and other Occupy demonstrations across the country, where some protesters welcome homeless people, and others worry that their presence adds unwelcome complications to the Occupy movement. 

But there has been some good news about housing in 2011, and it’s from an unexpected corner: human rights law. The United States has long lagged behind other countries when it comes to recognizing a human right to housing. The United States has signed but not ratified the International Covenant on Economic, Social and Cultural Rights, the major international human rights instrument acknowledging “the right of everyone to an adequate standard of living . . . including adequate food, clothing, and housing.” Unlike other countries, such as South Africa, the U.S. Constitution does not provide its citizens with such a right, and efforts to push the U.S. Senate to ratify the International Covenant on Economic, Social and Cultural Rights have stalled.

All of this background makes the events of 2010 and 2011 seem even more exceptional. As Eric S. Tars and Déodonné Bhattaraiwrite in the 2011 Special Issue of Clearinghouse Review: Journal of Poverty Law and Policy:

Over the course of 2010 and early 2011 an extraordinary series of events opened the door to discussion about housing as a human right in the United States. The Universal Periodic Review began with a nationwide consultation involving thousands of community participants and culminated in an international review of human rights in the United States in Geneva in November. At this review the U.S. Department of Housing and Urban Development (HUD) affirmed for the first time the relevance of an international human rights mechanism to its role in setting domestic housing policy. Five months later, again for the first time, the U.S. Department of State, in consultation with HUD, supported recommendations on affordable housing and protecting the rights of homeless persons, among others, in response to the Universal Periodic Review. The following week the State Department announced a reembrace of economic and social rights, including the right to housing, after seventy years of treating them as second-class rights.

This remarkable progress shows how U.S. poverty law advocates can use international human rights mechanisms—such as the Universal Periodic Review—to help their clients. The 2011 Special Issue of Clearinghouse Review, titled Human Rights: A New (and Old) Way to Secure Justice, contains articles from practitioners and academics demonstrating how poverty law practitioners can harness the power of international human rights law to work for their clients. With case studies from across the country and as far away as Australia, Clearinghouse Review’s 2011 Special Issue is a must-read for any poverty lawyer trying to approach his or her work from a new angle. It should as well be essential reading for members of Congress as they consider the final fiscal year 2012 levels of funding for HUD’s affordable housing programs. Without the dollars necessary to sustain these housing programs, a human right to housing is essentially meaningless to the millions of families in need.

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With a penchant for equating criminal activity with the participants of various anti-poverty programs, it’s not surprising James Bovard recently took aim at one of the most important federally-assisted housing programs—the Section 8 “Housing Choice Voucher” program. Bovard’s August 17, 2011 Wall Street Journal piece “Raising Hell in Subsidized Housing” blames the Section 8 housing subsidy program for increased crime, allowing criminal-minded Section 8 tenants to stave off evictions by falsifying claims of domestic violence, and, oh yes, argues that the Obama Administration is responsible for the alleged failings of this more-than-40-year-old, Republican-created program. 

Bovard’s blaming of Housing Choice Voucher holders for the rise in crime in their communities is not unlike Hanna Rosin’s widely discredited 2008 American Murder Mystery piece in the Atlantic Monthly. Like Bovard, Rosin’s claim of a link between crime and voucher participants made dangerous assumptions and stereotypes about program participants. Both writers also conveniently avoided reviewing empirical research to support their claims of a Section 8 to crime connection. Indeed, a new study commissioned by HUD found that Section 8 Housing Choice Vouchers do not bring crime when they move to a new community.

In reality, the Section 8 housing subsidy programs provides 2 million low-income Americans with a chance to afford their housing, find new opportunities, and escape poverty. Rigorous admission screening practices and lease compliance laws make participants some of the most scrutinized tenants in the country. 

In this era of debt ceilings and super committees, Bovard’s rant might help rally budget hawks to push for the end to this program. Even without Bovard’s allegations gaining traction, the federal assisted housing programs are part of a package of discretionary spending programs that could face draconian budget cuts totaling $1.2 trillion beginning in 2013 should the super committee fail to reach agreement.  With cuts that significant, low-income Americans who rely upon Section 8 programs to make their housing affordable could actually lose their housing subsidies. These households would then join the millions of families across the country who are considered “housing burdened”—paying up to 100% of their income towards rent, and being forced to choose between utilities, food, transportation, and medicine in order to stay housed. Worse still, they would join the ranks of the homeless. So that’s the real danger here—not some mob of people with Section 8 subsidies wreaking havoc on a community—but pushing law-biding low-income Americans into even deeper poverty.

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When the Secretary of U.S. Housing and Urban Development (HUD) recently urged public housing authorities (PHAs) to use their discretion to admit applicants with past arrest and conviction records rather than simply exclude them from subsidized housing, we wondered: what happens when discretion means denial?

In a report entitled “When Discretion Means Denial: The Use of Criminal Records to Deny Low-Income People Access to Federally-Subsidized Housing in Illinois,” the Shriver Center reviewed the criminal records policies of nearly all the public housing and Housing Choice Voucher programs in the state as well as over 100 properties participating in the project-based Section 8 program. Concentrating on areas where HUD give PHAs discretion to admit applicants with criminal records, the report identifies four areas where PHAs and project owners are most likely to abuse their discretion. The report also urges HUD to align its programs with its “belie[f] in the importance of second chances” by taking affirmative steps toward ending each of these abusive practices.

Many PHAs and project owners fail to set reasonable limits on how far back to look when considering an applicant’s criminal history.  Even though federal law requires PHAs and project owners to narrow their inquiries to criminal activity that occurred during a “reasonable time” before screening takes place, many admissions policies often give them license to look back as far as they want.  These policies often:

• Have no time limits and simply deny admission to applicants who have certain types of criminal history in their backgrounds.  Without a specific look-back period as a guide, many applicants with criminal records do not bother applying.
  
• Impose permanent bans on people who have been convicted of certain criminal activity. Given that the federal government has chosen to impose permanent bans in only two narrowly tailored instances, however, permanent bans in federally assisted housing should be sparsely used in only the most compelling circumstances.
  
• Use excessively long look-back periods, which essentially function as permanent bans. In two particularly egregious cases, the written admissions policies actually allow owners look back 99 years and 200 years, sending a strong message to people with criminal records—and their families—that they are not welcome in federally subsidized housing.
  
• Rely on minimum look-back periods rather than engage in the usual practice of setting maximum look-back periods. As a result, applicants are deprived of any notice of how long their criminal records will prevent them from accessing federally-assisted housing.

PHAs often rely on arrests as sufficient proof of criminal activity, even where the charges were ultimately dismissed and the arrests never led to convictions. Federal law allows PHAs to deny admission to applicants who have engaged in “criminal activity.” But instead of determining whether criminal activity actually occurred, many PHAs substitute a criminal arrest for criminal activity. This administrative shortcut often deprives people of housing when no wrongdoing may have ever taken place.  Moreover, its effect on reducing crime is questionable. What is certain, however, is that arrest record screening impedes the fair housing choice of racial minorities disproportionately represented in the criminal justice system and therefore highly suspect under the federal Fair Housing Act.

What do these policies look like? About one out of every ten public housing programs in Illinois define “criminal activity” simply by the number of arrests on a person’s criminal record, even if no conviction resulted. The Housing Authority of Edgar County and Massac County Housing Authority, for example, go so far as to deny public housing applicants for a single arrest within the past decade.

More common are PHAs that consider arrests as evidence of criminal activity. Although about half of these admissions policies add that “a conviction for drug-related or violent criminal activity will be given more weight than an arrest for such activity,” the authority to deny admission on the basis of mere arrests remains. As a result, these PHAs are susceptible to violating their duty not to discrimination and their duty to affirmatively further fair housing under the Fair Housing Act. 

Some PHAs and project owners use categories of criminal activity so vague that neither applicants nor administrators fully understand how to apply these standards. Admissions policies usually refer to the three types of criminal activity listed in HUD regulations: drug-related criminal activity, violent criminal activity, and other criminal activity that threatens the health, safety, and right to peaceful enjoyment of other residents. Sometimes, PHAs and project owners supplement this list with vague categories of criminal activity that provide little notice to applicants of the housing provider’s actual standard, such as crimes of “moral turpitude,” an imprecise term that is not defined in the Illinois Criminal Code. 

Other amorphous categories include criminal activity “that indicates that the applicant may be a threat and/or negative influence on other residents” and “criminal activity that will adversely affect the reputation of the Development.” Neither standard reflects any language found in federal statutes or regulations, making them vulnerable to abusive application. Furthermore, a standard based on a building’s reputation strays from a property owner’s legitimate interest in resident safety, further increasing the potential for abuse.

A number of housing providers underuse mitigating circumstances, thus depriving applicants of the opportunity to overcome their past arrest and conviction records. Although HUD regulations require PHAs to consider the time, nature, and extent of a public housing applicant’s conduct, including the seriousness of the offense, more than half of the written admissions policies in Illinois gloss over the fact that applicants could—and in some cases, have the right to—present mitigating circumstances upon being denied for criminal history. Without notice of how to challenge a denial based on a criminal record, many applicants are likely to select themselves out of the admissions process.

In the project-based Section 8 program, consideration of mitigating circumstances is encouraged but not required. One out of four tenant selection plans reviewed explicitly stated that the project owner would not consider an applicant’s mitigating circumstances, thus stacking the odds of admissions against anyone with a criminal record.

Together, HUD, PHAs, and project owners need to ensure that criminal records screening respects the applicant’s right to be free from unwarranted discrimination. More than simply pulling a person’s criminal history, proper screening requires thoughtful consideration and proper balancing of various factors, such as the nature and severity of the offense, the time elapsed since the commission of the offense, and its relationship to a person’s tenancy. In the quest for bright-line rules, however, policies in Illinois today instead allow PHAs and project owners to abuse the discretion given to them by HUD. 

For proper screening to happen, HUD must make clear that housing providers need to look beyond the criminal history or face potential consequences. To help ensure that people with criminal records are not unnecessarily barred from federally subsidized housing, we recommend that HUD, PHAs, and project owners:

1. reign in unreasonable look-back periods;
   
2. end the use of arrests as conclusive proof of criminal activity;
   
3. enact clear standards for reviewing criminal history that have a basis in federal law; and
   
4. ensure that applicants can overcome criminal records barriers by presenting evidence of mitigating circumstances.
   

Only when HUD, PHAs, and project owners take these affirmative steps can discretion lead to admission, not just denial.

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While political pundits reminisce about the month-long government shutdown of 1995-96 as the current budget battle takes place, I can only think of a political cartoon from that time. In December 1995, my local paper ran a political cartoon depicting two homeless men huddled together in front of a fire on a blustery winter day. In that cartoon, a member of Congress walks by and proclaims, “What a relief! For a minute I thought you were burning a flag!” That more than 15-year-old symbol of Congressional disconnect from the real-life challenges facing low-income people still rings true today. As our national poverty rate among children is set to hit a record 25%, the U.S. House of Representatives proposes to cut $61 billion from the FY 2011 budget, representing the largest cut to domestic spending programs in U.S. history.

Among hundreds of programs that help low-income households, H.R. 1 proposes deep cuts to housing programs that prevent homelessness and provide stability to low-income households. H.R. 1 proposes to cut $5.4 billion from domestic housing programs, which could mean fewer available rental vouchers (which help families rent housing in the private market), the loss of 10,000 vouchers for homeless veterans, almost a 70% cut to programs providing affordable housing for the elderly and disabled, a $1.1 billion cut to capital money needed to repair and maintain public housing, and the loss of HOME dollars, which enable local governments to meet local affordable housing needs.

These deep cuts to critical housing programs come at the same time the U.S. Department of Housing and Urban Development released a report, finding that “worst case housing needs” grew by 1.2 million households, or more than 20%, from 2007 to 2009. “Worst case housing needs” are defined as low-income households who pay more than half their monthly income for rent, live in severely substandard housing, or both.

To avoid a government shutdown, the House and Senate must figure out how to fund the remainder of FY 2011 by March 18, 2011. Given the hard lines being taken in this budget battle, more proposed cuts are expected to domestic spending programs, including housing. Campaign rhetoric cannot ignore everyday people and children, who rely upon this Congress and President to protect them from deep poverty and homelessness. In the end, domestic spending cuts that eliminate critical housing programs will not save us money—they will cost us money. Research has shown that homelessness costs us more than paying for programs that prevent/address it. Indeed, a recently published study found that the cost of family homeless programs far is nearly double the cost of the nation’s rental assistance programs. These housing programs deliver real assistance on a daily basis so that seniors, families, and persons with disabilities do not have to choose between medicine, food, and housing. Wake up Congress, put aside this political blustering, and provide the necessary support for our nation’s low-income housing programs.

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Even as the home prices and rents decrease in the wake of the housing crisis and communities see more and more vacant units, American families increasingly need more affordable housing.

Last month, the Joint Center for Housing Studies of Harvard University released its “The State of the Nation’s Housing 2010” report. The report describes a housing market sputtering toward stabilization, but facing significant obstacles. 

Indeed, many aspects of the housing market continue to erode. The Joint Center reports that one in seven homeowners owed more on their mortgages than their homes were worth at the end of 2009. Similarly, foreclosures continue to rise; 2.1 million loans were in foreclosure during the first quarter of 2010. Nonetheless, 2009 saw an increase in home affordability and a surge in first-time homebuyers (due in large part to the first-time homebuyer tax credit). 

On the rental front, the number of renter households grew by 800,000 in 2009. But, due to a combination of new multifamily completions and a jump in the number of existing homes for rent, vacancies continued to rise and rental prices correspondingly sagged. (For information regarding Chicago-area rents and vacancy data, see DePaul University's Institute for Housing Studies first-quarter 2010 Cook County Rent and Vacancy Report.)

Despite increased vacancies and lowering prices, housing continues to become less and less affordable for more families. There has been a significant increase in the number of households with a severe housing cost burden (more than 50% of income spent on housing) since 2000. As of 2008, one in four renter households and over 44 million Americans, of which nearly 14 million are children, are living within households with severe cost burdens. Over half of renter households spend over 30% of household income on housing. Of these households, low-income, single-parent, minority families are more likely to suffer from harsher cost burdens.

Amid the upheaval in the housing market, The State of the Nation’s Housing 2010 makes clear that the nation’s housing remains unaffordable for more and more low-income Americans--especially in light of the staggering rate of unemployment. Indeed, while the number of vacant rental units priced at $1,500 or above per month jumped 23 percent, the number of vacant rental units for less than $600 remained virtually the same as the year before. Exploring ways to increase the availability of housing that is affordable to American families is more important now than ever.

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Thousands of homeowners will be getting relief soon if they took out a loan with Countrywide Financial before 2008. Charges against Countrywide, now a subsidiary of Bank of America, are part of the largest mortgage-servicing case ever to come before the Fair Trade Commission (FTC), and one of the largest overall judgments. The New York Times reported that Bank of America will pay $108 million to families who were charged inflated “cost of service” fees such as lawn mowing and property inspection.

Over the past few years, Countrywide has become the poster child for the predatory lending industry and has received much of the blame for the housing crisis. Reports of abuses include the inadequate underwriting of adjustable rate mortgages or ARMs, unhelpful customer service, abysmal record keeping, abusive origination fees, and making false and defaming claims against homeowners who filed for bankruptcy protection.

As part of the monetary settlement, the FTC is requiring Bank of America to establish internal procedures and to use an independent third party to verify that bills and claims filed in Countrywide’s ongoing bankruptcy proceedings are valid. Countrywide also faces a criminal investigation by the Federal Fraud Enforcement Task Force into the defamation charges against it.

Unfortunately, Countrywide is only one of many lenders accused of predatory lending and consumer abuses. Although the FTC has played an integral role in holding Countrywide accountable, these predatory practices still abound in the mortgage industry. We need strong laws that protect consumers; that is why the Shriver Center supports an independent consumer protection agency which will prevent these abuses from happening in the future.

For more information contact the Community Investment Unit at the Shriver Center.

This article was co-authored by Susan Ritacca.

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Congress and several states take actions to stop evictions of victims of violence

For women and children in this country, domestic violence is one of the leading causes of homelessness. Survivors of domestic violence (of which 90 to 95% are women), dating violence, sexual assault, and stalking living in rental housing are particularly vulnerable to homelessness because they are often threatened with eviction after an incident of violence. These evictions are frequently born out of property owners’ stereotypes about survivors of violence as individuals accountable for the acts of their abusers. Indeed, up until a few years ago, when victims of violence who lived in federally assisted low-income housing called the police to report intruders, being shot, or otherwise terrorized by their abusers, they would immediately receive an eviction notice.

In 2005, Congress adopted federal protections against evictions and denial of housing for victims of domestic violence, dating violence, and stalking. The 2005 reauthorization of the Violence Against Women Act prohibits evictions and admission denials of victims of violence who live certain types of federally supported low-income housing. The 2011 VAWA reauthorization should improve upon VAWA 2005 and expand it to cover other types of federal supported low-income housing. Any reauthorization must also extend those protections to survivors of sexual assault. 

On April 27, the Illinois Legislature passed H.B. 5523 and joined several other states, including Indiana, Colorado, Arkansas, Delaware, Texas and Virginia in protecting victims of violence from evictions based upon incidents of violence and/or their status as a victim of violence. Maryland has recently passed a similar bill. The governors of those states should sign the bills immediately.

However, property owners are not the only ones threatening survivors’ housing. A growing number of municipalities have adopted aggressive property nuisance codes or “crime-free” rental housing ordinances that obligate owners, under threat of losing their license to operate rental property, to evict all tenants when there is a crime or multiple police calls for assistance. To limit a survivor’s access to police assistance under threat of homelessness or to blame them for the crime committed against them likely violates their rights under the U.S. Constitution and Federal Fair Housing Act. While we support the idea of improving the quality and safety of rental housing, municipal actions cannot interfere with a survivor’s safety or hold them accountable for a perpetrator’s actions. Municipalities should amend these ordinances to eliminate these harmful and likely illegal provisions.   

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Bill seeks to ensure that Illinois homeowners benefit from federal Making Home Affordable Program

On April 29, 2010, the Chicago Tribune reported that the number foreclosures reaching completion in the Chicago area was higher in the first quarter of 2010 than in any other period during the past five years. This is according to Woodstock Institute data released the same day. 

While the worsening crisis in the Chicago region certainly highlights the shortcomings of federal foreclosure prevention programs like the Home Affordable Modification Program (HAMP), HAMP servicers have also been failing Illinois homeowners. Advocates report that homes are being lost to foreclosure even while homeowners are still trying to modify their loans under HAMP, in violation of the program. Indeed, the National Consumer Law Center and the National Association of Consumer Advocates reports that in a recent survey of over 100 consumer advocates, nearly 95% of the surveyed advocates have represented homeowners in cases where a servicer tried to proceed with a foreclosure sale without a completed review under HAMP. HAMP can hardly be successful if homeowners who apply to the program are losing their homes because the program is violated. Illinois homeowners deserve the opportunity to try and benefit from federal foreclosure prevention programs, even if they are not as effective as was hoped.

Recognizing the need to improve the effectiveness of the HAMP program, the Treasury Department issued new directive 10-02 on March 24, 2010, that, among other things, (a) clarifies that servicers must inform homeowners who meet basic criteria about the HAMP program, (b) prohibits referrals to foreclosure until either the homeowner has been evaluated and determined ineligible for HAMP or reasonable solicitation efforts have failed; and (c) requires that a servicer of a mortgage potentially subject to HAMP certify to the foreclosure attorney or trustee that the homeowner is not HAMP-eligible before a home can go to foreclosure sale. 

Although these new rules give foreclosure attorneys better guidance about when to file cases and proceed to sale, the directives still rely on the compliance of servicers. In order for the HAMP program to truly benefit homeowners, they must be able to stop foreclosure court proceedings when the HAMP program is violated before their homes are lost.

A proposed Illinois law may help. HB 5735, spearheaded by former Representative Deborah Graham, Representative Al Riley, and Senator Jacqueline Collins, makes clear that if a home goes to foreclosure sale in violation of the Making Home Affordable Program (of which HAMP is a major component), the homeowner can have the court set aside the sale, so that the owner can continue to work through the federal program. HB 5735 should be heading to Governor Quinn’s desk shortly. We implore Governor Quinn to sign the important protections of HB 5735 into law.

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A new report released by the Illinois Assisted Housing Action Research Project (IHARP) shows that Chicago families in the Housing Choice Voucher (HCV) Program continue to live in overwhelmingly poor, African American neighborhoods on the city’s south and west sides. These neighborhoods also experience high rates of crime, mortgage foreclosures, poor health, and high levels of lead.

The HCV program is supposed to give families the chance to rent in “healthy communities,” meaning areas with job opportunities; good schools, services, and transportation options; and low rates of crime. But this study and others like it shows that the majority of HCV families don’t live in those communities.

Being stuck in communities without opportunities is a significant issue not just for HCV families but for all low-income families, especially minority families. A recent Urban Institute report on residential mobility found that “residential churning,” or moving short distances due to financial stresses and housing problems, is prevalent in low-income communities. Nearly half of families originating in the report’s study areas were described as “churning movers” who gained little in neighborhood amenities and opportunities by moving. Strikingly, higher percentages of African-American and Hispanic families who moved were “churning movers” than white families who moved. 

This may be due to the fact that minority households face race-related barriers to residential mobility, and remain in poor neighborhoods due to racial segregation and social and economic inequities. As cited in the Urban Institute report, African Americans are less likely to move to better neighborhoods than other groups, even when they have achieved the same levels of income and education as other groups who moved out.   

We can do more to help HCV families move to healthy neighborhoods. Mobility counseling must be offered and supported provided both before and after families move. The rents offered by the HCV program must also be adjusted to reflect the block-by-block distinction of many communities, particularly in urban environments. If the rents are not set high enough to compete with the actual market rents in a healthy community, then no amount of mobility counseling will make a difference. As well, too many HCV families across the country are denied the chance to live in a healthy community because of open discrimination by property owners. Only by protecting voucher holders against source-of-income discrimination will these types of practices end. Finally, some thought should be given about how to make these moves to healthy communities more permanent--converting some of these vouchers to site or project-based subsidies (so the housing subsidy remains even after the tenant leaves but the tenant receives another voucher) could secure a long-term supply of affordable housing in these communities.

All in all, we need to reconsider how many housing choices not just low-incomes families really have under the current HCV program, but all low-income families in this country have.

This post was co-authored by Elizabeth Frantz.

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As the foreclosure crisis has unfolded throughout the country, it has become evident that renters – not just homeowners - have been victims of this crisis. Indeed, the National Low-Income Housing Coalition reports that renters make up about 40% of the families facing the loss of their housing due to foreclosure and more than one in every five foreclosed properties is a rental property. 

Residents in foreclosed properties have been caught unaware that their home is being foreclosed and have scrambled with very little notice to find safe replacement housing. Rental properties in foreclosure fall into disrepair – even when there are still families living there.  Advocates throughout the country, grappling with the effect of the economic downturn, have called for increased protections for renters affected by foreclosure. Legislators have listened.

On May 20, 2009, President Obama signed into law the Protecting Tenants at Foreclosure Act of 2009, part of the Helping Families Save Their Homes Act of 2009 (Pub. L. 111-22). This law, which sunsets in 2012, ensures that renters in foreclosed properties receive at least 90 days notice before they have to move, and that tenants who start a lease term before the notice of foreclosure may continue to live in their homes until the lease expires.

In Illinois, Representative Will Burns and Senator Jacqueline Collins have championed a bill, HB 3863, which would provide much needed protections for Illinois renters living in foreclosed properties. Currently, Illinois renters are not entitled to notice when control or ownership of the property in which they live changes as a result of foreclosure. Consequently, they frequently do not know who owns the property, where to pay rent, or who to call if repairs are necessary. Among other protections, HB 3863 would provide renters with essential information regarding their homes. 

The basic provisions of HB 3863 include:

·         During the foreclosure case, if a receiver (or mortgagee in possession) is appointed to operate and manage the property while the foreclosure case is pending, the receiver must:

a)      Make a good faith effort to identify residents of the property; and

b)      Notify residents of his or her appointment, inform residents that the property is the subject of a foreclosure action, and provide contact information for resident concerns and repair requests.

c)       Post notices with contact information at the property.

·         After the foreclosure is complete, the lender/new owner must:

a)      Make a good faith effort to identify residents of the property; and

b)      Notify residents that the lender/new owner has acquired the property, inform residents that the property has been the subject of foreclosure, and provide contact information for resident concerns and repair requests.

c)       Post notices with contact information at the property.

·         Tenants evicted as a part of the foreclosure case are granted a minimum of 30 days to move after the eviction hearing.

HB 3863 has been sent to the Governor’s desk. We implore Governor Quinn to sign it to protect the hidden victims of the foreclosure crisis.

Call 217-782-0244to encourage Governor Quinn to sign HB 3863.

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Dedicated advocates around the country are working furiously on behalf of clients who face foreclosure. Surely some of these creative minds have figured out how to solve the foreclosure crisis—haven’t they? Well, no. Lenders and loan servicers continue to resist loan modification, despite new federal incentives contained in the Home Affordable Modification Program, and advocates continue to grapple with the foreclosure monster.  

But promising efforts are underway. Philadelphia’s mandatory foreclosure diversion program, often held up as a model, can force lenders to come to the table. Of course, as advocates there point out, the program’s success relies on multiple pieces being in place: organizers (from ACORN, Philadelphia Unemployment Project, and other organizations) making personal contact with homeowners facing foreclosure, the Philadelphia Legal Assistance hotline, housing counselors, and representation in the actual mediation. While no panacea, a report on the program’s first year credits it with averting 1,400 foreclosures.

In areas where property values hit the stratosphere a couple of years ago many borrowers, to keep their homes, need not just loan modification but also principal reduction. In Los Angeles’ San Fernando Valley, advocates from Neighborhood Legal Services and community organizers from One LA joined forces to help homeowners negotiate collectively with their loan servicers; One LA used the data gathered to get the city council involved. The result is a pilot project through which, if the lender agrees to reduced principal and a fixed interest rate, the city will fund a “silent second” mortgage to reduce payments even further; the second mortgage is payable only upon sale or refinancing of the property.

Both these approaches were highlighted in a June 23 Shriver Center webinar, and the Los Angeles effort is also the subject of an article in the May-June 2009 issue of Clearinghouse Review. What innovative approaches are underway in your community? We’d love to hear about them. Email marciahenry@povertylaw.org  

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During the past eight years, almost 100,000 units of public housing have been approved for demolition, and fewer than 40,000 units of public housing have been constructed, meaning that over 60% of public housing units demolished have not been replaced. In 2007, the U.S. Department of Housing and Urban Development (HUD ) approved a request from the San Diego Housing Commission “to get out of the public housing business” by vouchering out its entire stock of over 1,300 units. Vouchers allow residents to rent a unit in the private market. In 2008, the housing authorities in Las Vegas and Atlanta submitted applications to HUD to dispose of all their public housing units.

While most displaced residents receive Housing Choice Vouchers in which to move, the vouchers do not compensate for the loss of public housing to a community. Public housing is a commitment from the government that there will always be a housing resource for our most vulnerable populations—a commitment that the private sector cannot make. Even though vouchers are an important part of the nation’s affordable housing supply, they are not a permanent replacement for hard public housing units. 

On June 15, 2009, the Chairman of the U.S. House Financial Services Committee, Representative Barney Frank, and the Chairwoman of the Subcommittee on Housing and Community Opportunity, Representative Maxine Waters, sent a letter to HUD Secretary Shaun Donovan asking him to impose a one-year moratorium on the approval of applications for demolition or disposition of public housing units. The Committee noted that, “Until such time as housing authorities are required to replace demolished or disposed units on a one-for-one basis, we risk losing the crucial investment and significant asset these units represent.”

We applaud the decision of Representatives Frank and Waters in making this request and in working on legislation to require one-for-one replacement of demolished public housing units.  In order that the nation not lose any more public housing units, it is imperative that HUD Secretary Donovan declare a one-year moratorium on public housing demolitions so that legislation can be enacted to preserve the nation’s supply of low-income public housing. 

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