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Woodstock Developments

A monthly update on new research, analysis, and advocacy from Woodstock Institute

April 21, 2011

 

From the President: We must restore funding for foreclosure counseling and homebuyer education at time of desperate need—and banks should step up to the plate, too

Dory Rand While I was in Washington, DC, last week for the National Community Reinvestment Coalition conference, the Congress passed legislation cutting the federal budget for the current fiscal year (Oct. 1, 2010-Sept. 30, 2011). As hundreds of conference attendees conducted Capitol Hill visits on April 14, the day the U.S. House of Representatives voted on the measure, we were shocked to learn that one of the many programs gutted was the entire $88 million line of the Housing and Urban Development (HUD) budget for housing counseling.

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Fighting for housing counseling and connecting with partners at the 2011 NCRC Annual Conference

At the NCRC Annual Conference, we shared ideas and learned new ones from community investment practitioners from Hawaii to Boston, discussed pressing issues with the Illinois congressional delegation, and got up-to-date on new strategies, programs, and financial products during the workshops.

Bad news was brewing as Illinois NCRC members flew in to DC on Wednesday morning. Details of the final FY 2011 budget compromise were made public in the form of H.R. 1473, and advocates noticed a scary line item:

“The level for ‘Department of Housing and Urban Development, Housing Programs, Housing Counseling Assistance’ shall be $0.”

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Related: Wealth gap challenges women’s economic security while incomes don’t keep pace, says Wider Opportunities for Women


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What can be done to address troubled foreclosed properties? Leaders propose solutions at Woodstock forum

It’s clear that vacant homes put a damper on their surrounding community. Not only are they eyesores, they put other homes at risk of losing value and may attract crime and other destabilizing elements. To minimize these risks, many municipalities have ordinances that allow them to hold the homes’ owners responsible for securing and maintaining the property. What can already-strapped local governments do if it’s unclear who the owner is, or the owner hasn’t notified them that the property is vacant?

We convened a group of experts to discuss how communities can tackle this complex problem.

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On principal writedowns and moral hazard: do we want to put out the fire or not?

We at Woodstock Institute have long argued that, in order for loan modifications programs to effectively prevent foreclosures on a broad scale, they need to include a component of reducing the principal owed on underwater homes. In fact, we bring it up pretty much every time we talk to policymakers, regulators, and the media when they ask us what needs to be done to fix the foreclosure mess. Principal writedowns became more relevant—and controversial—than ever when it was recently revealed that Attorneys General may include a principal writedown component to their settlement with loan servicers over improperly preparing foreclosure documents. A common criticism of principal writedown is that by offering to reduce the amount a borrower owes, it would encourage other borrowers who owe more than their home is worth but could afford to continue making payments to default on their loans so they too could get their principal reduced—or, as economists call it, moral hazard. That concern is not unreasonable, but it shouldn’t stop us from pursuing principal writedowns for one simple reason: they work.

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Debt protection products offer few benefits at high cost, says new report

Debt protection and credit insurance are high-cost, low-value products that are poorly understood by consumers and inadequately monitored by regulators. The new Consumer Financial Protection Bureau created by the Dodd Frank Wall Street Reform and Consumer Protection Act should shed some light on these often shady products.

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Related: Payday lenders lose first round in court

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New at Regional Home Ownership Preservation Initiative

West Cook County Housing Collaborative Breaks Ground on Project to Preserve Affordable Housing, Create Jobs in Maywood

When the South Suburban Housing Collaborative and the West Cook County Housing Collaborative were formed in 2009, they were built on a bold idea: that municipalities could look beyond political boundaries and work together to tackle the pressing housing needs of their areas, from foreclosure response to affordable housing to strategic and sustainable development. It was a tall order, and one that had scarcely been tried elsewhere. Almost two years later, the experiment is starting to show positive results. The West Cook County Housing Collaborative broke ground on their first project last month in Maywood.

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Members of Regional HOPI send letter in support of HAMP to Illinois House delegation

Members of the Regional Home Ownership Preservation Initiative sent a letter urging the Illinois delegation to the U.S. House of Representatives to vote against t H.R. 839, The HAMP Termination Act of 2011, which would cancel funding for the Home Affordable Modification Program (HAMP).

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In this issue

  Recent Work

File IconLeft Behind: Troubled Foreclosed Properties and Servicer Accountability in Chicago
January 2011 

File IconBridging the Gap: Credit Scores and Economic Opportunity in Illinois Communities of Color
September 2010

File IconPaying More for the American Dream IV: The Decline of Prime Mortgage Lending in Communities of Color
May 2010   

  [+] View All Publications

 

 Upcoming Events

Fostering Opportunity: Annual Community Investment Awards and Housing Finance Forum
May 12
Federal Reserve Bank of Chicago

 


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