HUD AWARDS NEARLY $109 MILLION TO FOUR COMMUNITIES TO REVITALIZE HOUSING, SURROUNDING NEIGHBORHOODS

HUD Grants

Funding to Cincinnati, San Antonio, Seattle & Tampa spurs nearly
$500 million in economic, community investment

WASHINGTON – U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan announced today that four communities will receive a combined $108.9 million to redevelop distressed housing and bring comprehensive neighborhood revitalization to blighted areas.

HUD’s Choice Neighborhoods Initiative (Choice) will help transform distressed communities in Cincinnati, Ohio; San Antonio, Tex.; Seattle, Wash.; and Tampa, Fla.  This landmark initiative promotes a comprehensive approach to transforming areas of concentrated poverty into viable and sustainable mixed-income neighborhoods. The $108.9 million federal investment of Choice Neighborhoods has generated $393 million in private investments and commitments from local jurisdictions and partners, a more than 300 percent leveraging.

“HUD’s Choice Neighborhoods Initiative supports local visions for how to transform high-poverty, distressed communities into neighborhoods of opportunity,” said Donovan. “We’re emphasizing a comprehensive approach to revitalizing neighborhoods by considering the totality of a community with regard to health, safety, education, jobs and quality housing in mixed-income neighborhoods.”

Choice Neighborhoods Initiative Implementation grants announced today:

HUD Grants

The communities announced today were selected from nine finalists HUD announced in August. Each of the finalists completed a comprehensive local planning process and ready to move forward with their plan to revitalize the housing and redevelop their target neighborhoods. Building on the successes of HUD’s HOPE VI Program, Choice links housing improvements with a wide variety of public services and neighborhood improvements to create neighborhoods of opportunity.

The Choice Neighborhoods Initiative is one of the signature programs of the White House Neighborhood Revitalization Initiative, which supports innovative and inclusive strategies that bring public and private partners together to help break the cycle of intergenerational poverty.  It encourages collaboration between HUD and the Departments of Education, Justice, Treasury and Health and Human Services to support local solutions for sustainable, mixed-income neighborhoods with the affordable housing, safe streets and good schools all families need.

Congress approved the Choice Neighborhoods Initiative with the passage of HUD’s Fiscal Year 2010 budget.  Funding is provided through two separate programs – Implementation Grants and Planning Grants.  In 2011, HUD awarded its first Choice Implementation grants for Chicago, Boston, New Orleans, San Francisco and Seattle, a combined $122.27 million investment to bring comprehensive neighborhood revitalization to blighted areas in these cities.  With this announcement, HUD has awarded a total of $231,250,000 in Choice Implementation Grants in eight cities.

HUD ACCEPTING APPLICATIONS FOR ENTITIES TO PURCHASE TROUBLED MORTGAGES, OFFER CHANCE TO AVOID COSTLY FORECLOSURES AND STABILIZE NEIGHBORHOODS

September loan sale to include neighborhood stabilization pools in Chicago, Newark, Phoenix and Tampa as part of broader Obama Administration effort to address shadow inventory, target relief to hardest hit communities

WASHINGTON – Qualified entities interested in purchasing pools of severely distressed loans formerly insured by the Federal Housing Administration (FHA) can now submit applications for the Distressed Asset Stabilization Program, an expansion of an FHA disposition program that sells pools of defaulted mortgages headed for foreclosure and provides the opportunity for the purchaser and borrower to avoid a costly foreclosure. According to loan pool information released today, approximately 3,500 loans will be sold in four metropolitan areas that are among those hardest hit by the foreclosure crisis – Chicago, IL; Newark, NJ; Phoenix, AZ; and Tampa, FL – aligning with other neighborhood stabilization efforts to help those communities recover as quickly as possible. The program is part of the Obama Administration’s broader strategy to encourage public/private partnerships to stabilize neighborhoods and home values in critical markets. Details on the Distressed Asset Stabilization Program can be found at www.hud.gov/fhaloansales.

“The housing market has momentum not seen since before the crisis,” said HUD Secretary Shaun Donovan. “But some metro areas are still under pressure and some FHA borrowers remain seriously behind on their loans and stand to lose their homes in a matter of months. As one step towards avoiding unnecessary foreclosures and further stabilizing communities, we are increasing the number of loans beyond our original goals of 5,000 per quarter to approximately 9,000 this quarter. Providing the opportunity for borrowers to potentially stay in their home under a new sustainable mortgage or other meaningful help not only benefits that homeowner but reduces the costs to FHA and ultimately benefits the entire community.”

Under the program, loans are sold competitively at a market-determined price generally below the outstanding principal balance. FHA then processes an insurance claim, removes the FHA insurance and transfers the loan to the investor. Once the note is purchased, foreclosure is delayed for a minimum of six additional months, giving the new servicer time to work through alternatives with the borrower, possibly finding an affordable solution to allow the borrower to remain in their home. Because the loans are generally sold for less than what the borrower currently owes, the purchaser has the ability to reduce or modify the loan terms while still making a return on the initial investment. If no viable alternatives exist, the purchaser may be able to help the borrower sell the property through a short sale and avoid the costs of foreclosure.

“This program creates the opportunity for everyone – the homeowner, the new mortgage holder, FHA, and the community – to walk away a winner,” said Acting FHA Commissioner Carol Galante. “FHA not only avoids the costs associated with a long foreclosure process, but also the high costs of maintaining and selling vacant properties in already distressed markets.”

FHA began selling distressed single family loans through what is now the Distressed Asset Stabilization Program in 2010 and has successfully sold more than 2,100 single family loans to date. An FHA-approved mortgagee can file a claim for FHA insurance benefits and assign the loan to FHA if the borrower is at least six months delinquent on their mortgage; the servicer has exhausted all steps in the FHA loss mitigation process; the servicer has initiated foreclosure proceedings; and the borrower is not in bankruptcy. These assigned loans are then pooled by FHA for resale through the Distressed Asset Stabilization Program.

Neighborhood Stabilization Loan Sales

In addition to the standard note sales, the enhanced program features new neighborhood stabilization requirements to encourage investment in communities hit hardest by the foreclosure crisis. Approximately 40 percent of the 9,000 loans in the sale scheduled for September 2012 will be located in Chicago, IL; Newark, NJ; Phoenix, AZ; and Tampa, FL – four metropolitan areas where high numbers of seriously delinquent loans could expand an already large inventory of REO properties over the coming months. Designed to help stem the flow of distressed properties hitting these markets, these neighborhood stabilization requirements provide that no more than 50 percent of the loans within a purchased neighborhood stabilization pool may be sold as real-estate owned (REO) properties.

“These markets were chosen because of the high concentration of FHA loans in the pipeline for foreclosure and because each allows us to test this strategy under a variety of market conditions,” added Galante. “Further, in some of these communities, state and local leaders are already acquiring these loans and using tools like the Neighborhood Stabilization Program and the Hardest Hit Fund to offer workable solutions for homeowners and communities. And in each city, nonprofit and for-profit investors have shown great interest in using this program to help borrowers in their community find affordable solutions as quickly as possible. FHA is working with local leaders to create additional smaller pools to fit their targeted neighborhood strategies.”

All parties seeking to bid on the sale pools must first be qualified by HUD. Parties seeking to bid in the neighborhood stabilization pools are required to meet several additional criteria to ensure they will comply with the program’s goal that fewer homes end up as vacant REO properties in metro areas already struggling with high numbers of foreclosures. Eligible investors must have experience in asset management and property management, as well as a proven track record in helping borrowers seriously delinquent on their loans to re-perform or to achieve an affordable alternative to foreclosure. An emphasis will be placed on experience within the metro area in which the bidder is interested.

Bidder qualification materials and guidelines for the Distressed Asset Stabilization Program bidding process can be found at www.hud.gov/fhaloansales.

HUD TO EXPAND SALE OF TROUBLED MORTGAGES THROUGH PROGRAM DESIGNED TO HELP BORROWERS AVOID COSTLY, LENGTHY FORECLOSURES

Enhanced FHA note sale program part of Obama Administration effort to address shadow inventory, target relief to hardest hit communities

CHICAGO – Thousands of borrowers severely delinquent on loans insured by the Federal Housing Administration (FHA) will have help from a new servicer to explore affordable mortgage solutions or achieve a favorable resolution under an enhanced government note sale program announced today. In a press conference held at the 2012 Clinton Global Initiative America Meeting, U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan and Acting FHA Commissioner Carol Galante launched the Distressed Asset Stabilization Program, an expansion of an FHA pilot program that allows private investors to purchase pools of mortgages headed for foreclosure and charges them with helping to bring the loan out of default.

“While our housing market has momentum we haven’t seen since before the crisis, there are still thousands of FHA borrowers who are severely delinquent today – who have exhausted their options and could lose their homes in a matter of months,” said HUD Secretary Shaun Donovan. “With this program, we will increase by as much as ten times the number of loans available for purchase while making it easier for borrowers to avoid foreclosure. Finding ways to bring these loans out of default not only helps the borrower, but helps the entire neighborhood avoid the disinvestment and decline in value that accompanies a distressed property.”

The FHA note sales program began as a pilot in 2010 and has resulted in the purchase of more than 2,100 single family loans to date. A servicer can place a loan into the loan pool if the following criteria are met:

  1. The borrower is at least six months delinquent on their mortgage;
  2. The servicer has exhausted all steps in the FHA loss mitigation process;
  3. The servicer has initiated foreclosure proceedings; and
  4. The borrower is not in bankruptcy.

Under the program, FHA-insured notes are sold competitively at a market-determined price generally below the outstanding principal balance. Once the note is purchased, foreclosure is delayed for a minimum of six additional months as the borrower gets direct help from their servicer to help to find an affordable solution to avoid foreclosure. The investor purchases the loan at a discount and then takes additional steps to help the borrower avoid default, whether through modifying their loan terms or helping them through a short sale, in order to maximize the return on the sale.

“The Distressed Asset Stabilization Program offers a better shot for the struggling homeowner and lower losses to the FHA,” said Acting FHA Commissioner Carol Galante. “By addressing the growing back log of distressed mortgages, FHA is helping to mitigate the negative effects of the foreclosure process as part of the Administration’s broader commitment to community stabilization.”

Beginning with the September 2012 scheduled sale, FHA will increase the number of loans available for purchase from approximately 1,800 each year to a quarterly rate of up to 5,000, and add a new neighborhood stabilization pool to encourage investment in communities hardest hit by the foreclosure crisis.

In an additional safeguard against blight, HUD will require that no more than 50 percent of the loans within a purchased pool become real-estate owned (REO) properties and – if the servicer and borrower are unable to bring the loan out of default – that the servicer hold the loan for at least three years.

“Currently, FHA’s inventory of REO properties available for sale is at its lowest level since FY 2009,” added Galante. “At the same time, the inventory of seriously delinquent loans is near an all time high. With many neighborhoods still fighting to recover from the housing crisis, going upstream will allow us to help more borrowers before they go through foreclosure and their homes ever come into the REO portfolio.”

BANK OF AMERICA AGREES TO PAY MORE THAN $160,000 TO SETTLE MATERNITY DISCRIMINATION CLAIM

Bank of America to pay in maternity discrimination case

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) announced today that Bank of America has agreed to pay up to $161,180 to settle allegations that one of the bank’s San Jose, California branches refused to refinance the mortgage of an Irvine woman because she was on maternity leave. HUD reached the agreement with Bank of America to resolve a Fair Housing Act complaint that had been filed by the Fair Housing Council of Orange County (FHCOC).

Bank of America to pay in maternity discrimination case

 

The Fair Housing Act prohibits housing discrimination in mortgage lending and real estate-related transactions based on a person’s race, color, national origin, religion, sex, family status and disability. Refusing to approve a mortgage loan or provide refinancing because a woman is pregnant or on family leave violates the Fair Housing Act’s prohibition against sex and family status discrimination.

“The Fair Housing Act prohibits lenders from denying home loans to women because they are pregnant or on maternity leave,” said John Trasviña, HUD Assistant Secretary for Fair Housing and Equal Opportunity. “Today’s settlement follows HUD actions involving other lenders across the country which we will continue until maternity leave discrimination is eliminated.”

The woman told FHCOC, a non-profit fair housing organization funded by HUD, that in December 2009, a Bank of America agent offered her a 5% interest rate for a home refinance loan, with no costs or fees. But in January 2010, after she had applied for the loan and supplied the necessary documents, the bank allegedly refused to process her application because she was on maternity leave. In her complaint, the woman alleged that a bank agent told her that she would have to return to work full-time in order for her loan to be approved. Even after she informed the bank that she received the same rate of pay and benefits while on maternity leave, the bank would not process her application. In March 2010, the bank finally approved the woman’s application, but by that time the interest rate on her loan had increased to 5.25%, making each loan payment higher.

A Bank of America official said: “We regret our treatment of the applicant. We take our Fair Lending responsibilities very seriously and will work with HUD to ensure our customers on maternity leave are treated appropriately during the mortgage application process.”

Under the terms of the Conciliation Agreement, Bank of America will pay $30,000 to the woman, $16,180 to her attorney, and $15,000 to FHCOC. The bank will also create a $100,000 Compensation Fund to pay damages to loan applicants or borrowers who may have been denied a loan, subjected to adverse loan terms, or had their loan applications delayed because they were pregnant or on maternity leave. In addition, the bank is requiring all of its loan officers nationwide to complete annual fair lending training.

Anyone who believes that a bank has discriminated against them during the mortgage application process because they were pregnant or on maternity leave should contact HUD at 1-800-669-9777 (voice), 800-927-9275 (TTY).