Just speaking about FHA, we’ve seen the dramatic growth in the last 15 years…
Well, what you saw was a drop and then a growth. Remember under Bush it dwindled very substantially and now it’s being built back up again.
Right. So with that growth, is there a concern about two-tiered mortgage lending here?
Are you asking if poor people are going to get screwed? Not with this. The FHA is a very good lender for low- and moderate-income borrowers. Does it create a two-tiered market? No. In fact, one of the things that we fought over in the previous administration was a proposal for risk-based pricing at FHA, which would have meant that people with weaker credit would have had to pay more for the same loan that a middle-income person would, even if that individual paid back the loan at the level that there was no income cross-subsidy. That was cross-subsidy by income. We fought that and the Obama administration has dropped that discussion.
There will be some increase in the FHA premiums, but it won’t be risk-based. A risk-based subsidy screws poor people, so we got rid of that.
But, getting back to a two-tiered market, maybe it’s the middle-income and the rich people getting screwed because some will be in the FHA and some won’t. I mean, where do you get a cheaper mortgage? How are poor people getting screwed if they’re in the FHA than not? In fact, I worry about how a non-guaranteed mortgage costs more than a guaranteed mortgage.
One of the things I want to do is raise the FHA limit by median house price. Right now, the FHA doesn’t work in much of my home state of Massachusetts or in places like northern California because it’s got a dollar limit. We had bumped that. But, it’s only helping rich people? No. A $400,000 limit might stop you from doing luxury housing in Nebraska, but it could stop you from doing any housing altogether in parts of Massachusetts and California. So, we want to use the area median. We like the idea of middle income, but it’s got to be area median.
So finally, in terms of a two-tier market, I need to emphasize that right now, people in the FHA program are treated better than people outside and that there was the potential under the Bush administration that would have created a two-tier system where the people who were lower-income, and purportedly higher risk, were going to pay more. The Obama administration is not doing that.
Fundamentally, I don’t see any problem with the FHA growing, as long as it maintains good standards, continues making prime loans with down payments — they don’t do subprime or ARMs. As long as they do that, then what’s the problem?
None, not unless it starts taking riskier loans, then it wouldn’t be a problem.
No, in fact it is the non-risky loan. Between 2002 and 2006, however, there was an inverse correlation between the growth of subprime loans and the role of the FHA. It was people started going outside the FHA. The FHA, if anything, is going to toughen their standards a little bit. So, for instance, they’ve cracked down on seller-financed down payments. Some of my colleagues in the minority communities are upset about that, but they say they’ve had a very bad record, and they’re not going to allow it.
What are your thoughts on the most recent changes to the Housing Affordable Modification Program? And in particular, are we seeing any reduction in red tape that potentially keeps borrowers from receiving modified loans?
There’s some reduction, but not as much as I’d like. I think when the House voted down the proposal to allow a homeowner to file for bankruptcy for primary residences, we lost a lot of our ability to do this.
Actually, one of the most encouraging things I’ve seen is Fannie and Freddie now skipping the servicers and doing the modifications directly. I’m all for that. What I also want to do, though, is further address the new group of foreclosures where there are people who took out, in some cases, conventional 30-year mortgages, but can’t pay because of unemployment. So, we have in the House jobs bill that takes $2 billion from TARP money to lend to people who are now unemployed and can’t make their mortgage payments.
I also support the administration’s move toward encouraging banks to offer principal reduction. But the best way — and the only serious way, I think — was to give people with mortgages on primary residences the right to go bankrupt, so they threaten to go bankrupt to get a principal modification. There was there some legislation that would have allowed that, but it was defeated.
NSP1 and NSP2, and the $2 billion more coming in regulatory reform: Do you think it’s enough?
No.
What do you think is going to be happening to some of the communities where we work and are represented by organizations like the National Low Income Housing Coalition? What do you see as possible solutions?
Cut the military budget and put more money in there, raise taxes on rich people.
You’re being facetious, but I understand you’re saying that we need a really big influx of money into these communities.
Well, what else? I mean, money doesn’t solve everything, but the absence of money makes solving these things almost impossible, and that’s why we’ve gotten almost $8 billion in there. That’s not an objectionable number, but sure, I’d like it to be more. I’d also like us to withdraw from Iraq, but, in the current situation, $2 billion is, well, we’re fighting right now for $2 billion.
You’ve been a strong advocate of rental housing, even when everyone was singing the mantra of homeownership. And yet, the kind of rental housing your state is known for, the double- and triple-deckers that provide nearly 70 percent of the affordable apartments for low-income households, don’t receive any form of subsidy. Is there anything you can do for them?
Those double- and triple-deckers are eligible and get some help in some communities from the HOME and CDBG programs, so we can put more money into [those programs to] help rehab them and fix them up. In New England, in the areas that I represent, the HOME and CDBG programs — low interest loans and revolving loan funds — have been used for the twos and threes in particular.
The other thing that helps the twos and threes in our area, by the way, is Section 8. So, there is a form of subsidy, but in large numbers the Section 8 units are — in Massachusetts — in twos and threes, but that’s typically the threes, including some that are not owner occupied.
The Protecting Tenants at Foreclosure Act of 2009 is the first federal tenant protection act in more than 20 years. Can we expect anything more coming down the pike in terms of tenant protections?
Well, we couldn’t do it freestanding, but we’re hoping we will put that into [future] legislation that goes even further with tenant protection and increasing support for legal services to help tenants that are victims of foreclosure.
Affordable housing advocates and community development corporations do tremendous work, as you know since your district houses so many exceptional organizations. Can we expect an increase in assistance to these groups?
Yes. We are trying to increase funding to community financial development institutions, but beyond that, you have to say “Yeah, raise taxes and cut military spending.” I mean, when it comes to money, the advocacy groups come in and say, “Can we have more money?” but they never help me find the money. I don’t remember the last time an advocacy group said, “You should raise taxes on rich people. You should cut the military budget.”
If I bring it up, they say, “We agree with that,” but they never bring it up.
You really expect them to do that?
They need to promote cutting the military budget and raising taxes on rich people. I will begin soon an effort to mobilize on the long-term cuts in the military budget, but right now, the resources aren’t there.
How would they advocate that? Right now, so many of these organizations are focused on advocating their own cause.
Right, and as long as they do that, they’re going to lose. They’ve got to join together and advocate for the resources to do that. That’s exactly right.
So they’re then not fighting for the scraps?
That’s right, but I mean for them to do both. I don’t expect them to forget about trying to get their piece of it, but also try and grow the pie.
Thank you.
About the Author
Comments