Tag Archives: Low-Income

Over 130 Organizations Call on FHFA to Review Policies that Fuel Displacement

FHFA NEEDS TO “REFOCUS” ITS STRATEGIC PLAN

San Francisco, CA—Nov.15, 2017— Earlier today, 136 organizations sent a letter to Mel Watt, the director of the Federal Housing Finance Agency (FHFA), urging him to review and possibly end policies that are enabling the widespread displacement of low income people and people of color. FHFA is currently revising its strategic plan and had asked for input, which is why advocates are weighing in with the agency. The letter is signed by nonprofit organizations serving communities in more than 20 states.

“It’s no secret that working families throughout the country are facing high housing costs,” explains Kevin Stein, deputy director of the California Reinvestment Coalition. “What we’re calling attention to with this letter is that FHFA policies are exacerbating this problem. As FHFA updates its strategic plan, it has a key opportunity to change policies and to mitigate this problem of working families and households of color being displaced from their homes and their communities.”

“We know that some of the investments by the GSEs are actually increasing housing costs and the displacement of low income people and people of color.  In light of this, FHFA should re-focus its strategic plan to better support homeowners and communities, not Wall Street executives that are buying up our neighborhoods,” adds Maeve Elise Brown, executive director of Housing and Economic Rights Advocates.

“The REO to Rental phenomenon has been a clear disaster for working families,” adds Merika

Regan, a community leader with ACCE in East Oakland. “Renters are experiencing slum-lord conditions, unaffordable rent increases, and are being displaced as a result. There is no compelling reason for Fannie or Freddie to provide financing to companies who are exacerbating the housing crisis in communities across the country.”

Three Victorian Houses in Alamo Square, San Francisco

In their letter, advocates are outlining how the FHFA, in its role overseeing Fannie Mae, Freddie Mac (the GSEs), and the Federal Home Loan Bank System, is failing low and moderate income households and people of color in 3 important ways:

1) GSEs are Financing Displacement via Investments in REO to Rental  REO to Rental, a business model created by some of the same Wall Street actors who caused the housing meltdown, has wreaked havoc on local communities. Potential first time homeowners can’t compete against all-cash investors, meanwhile, long-term tenants are experiencing slum-lord conditions and rapidly rising rents, and/or being displaced. Yet, Fannie Mae recently invested in this harmful practice by guaranteeing a $1 billion loan by Wells Fargo Bank to Blackstone/Invitation Homes. Beyond the harm caused to consumers, the California Reinvestment Coalition also highlighted in a 2014 report how the financing structure for most REO to Rental deals is eerily similar to the financing mechanism that ultimately led to the housing meltdown.

2) Federal Home Loan Bank Funds Used for Questionable Mortgage Purchases: FHLB members are supposed to use their access to FHLB credit in order to finance affordable housing and community development. But, according to media reports, Starwood Property Trust, a Real Estate Investment Trust (REIT), is using relatively cheap funding from the Chicago Federal Home Loan Bank in order to buy non-Qualified Mortgage (QM) loans. These loans do not meet federal ability to repay standards and are therefore riskier for the borrower and the lender. Beyond safety and soundness concerns, advocates are deeply concerned Starwood and similar companies may have a perverse incentive to engage in poor mortgage servicing of these loans in order to foreclose and add more homes to its REO to Rental empire.

3) GSE Affordable Housing Goals Should Consider Gentrification Pressures: FHFA sets important annual affordable housing goals for both Fannie and Freddie that dictate the percentages of loans the GSEs should buy that are made either to low-income consumers or made in low or middle income areas. The Affordable Housing goals are hugely important to efforts to create homeownership for all Americans. But, as gentrification pressures increase, advocates are concerned about the GSEs buying mortgages that were originated to higher-income homeowners in lower income areas or in high-minority census tracts, which could be contributing to gentrification. This is a problem that even FHFA acknowledged, stating that the GSE’s share of loans to wealthier borrowers in low-income census tracts and high-minority census tracts has been increasing.  Advocates suggest FHFA consider lowering the “cap” of loans to higher-income people that count for the GSEs (currently at 14%) in order to meet their affordable housing goals. In this way, FHFA would signal to the mortgage and banking industry the need to increase their efforts to serve low-income homebuyers, not just homebuyers who are purchasing in low-income communities.

Recommendations to FHFA

Advocates are urging Director Watt to review all GSE and FHLB policies with an anti-displacement lens to mitigate the displacement currently happening in low-income communities and communities of color in California and across the US.

Specifically, FHFA should:

1) Prohibit Fannie and Freddie from financing REO to Rental transactions. If FHFA will not do so, it must at the least implement significant protections. If the GSEs intend to continue with these investments, they must include safeguards against first time homebuyers being elbowed out as well as protections for tenants against shoddy maintenance, unnecessary evictions, and unaffordable rent increases.

2) Immediately prohibit REITs from using Federal Home Loan Bank advances for purchasing non-QM loans, distressed loans, or for any investments in REO to Rental that have the effect of destabilizing low and moderate income and of color households and communities.

3) Minimize incentives for lenders to extend mortgages to wealthier homebuyers in low income zip codes.  Currently, the GSEs are allowed to “count” as part of its affordable housing goals up to 14% of their mortgage purchases that are to wealthier homebuyers in lower income or high minority census tracts, and FHFA is proposing to increase this to 15%.  However, advocates suggest that if FHFA were to lower this “cap,” it would incentivize the GSEs, and the lenders they buy mortgages from, to refocus their efforts on serving low and middle income homebuyers. GSE affordable housing goals are critical and must be strengthened and refocused on low and moderate income and of color borrowers to ensure that all Americans are able to achieve the dream of homeownership and wealth accumulation, especially in communities vulnerable to gentrification pressures.

4) Increase oversight and transparency in regards to GSE foreclosures and note sales to guard against unnecessary foreclosures, especially as it relates to Wall Street and private equity companies buying and servicing mortgages as a result of financing from the GSEs.

Additional Context:

In a 2014 report, the California Reinvestment Coalition detailed how REO to Rental companies are depleting affordable housing stock, elbowing out potential first-time homebuyers, and displacing long-term tenants. 

See the original press release on CRC’s website here.

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Advanced Policy Analysis-Medical Debt & Hospital Charity Care Policies: A Case Study

Advanced Policy Analysis

Medical Debt & Hospital Charity Care Policies: A Case Study

by Nisha Kurani  as part of the program of professional education at the Goldman School of Public Policy, University of California at Berkeley.

Project Overview

Medical bills and medical debt have a lasting impact on the financial stability for families, particularly vulnerable populations. The uninsured and lower income groups are more likely to experience problems paying medical bills, although people of all socio- economic groups report experiencing problems with medical costs. The Affordable Care Act (ACA) aimed to increase protections for consumers by increasing access to private and public insurance coverage, as wel

l as mandating charity care for low-income, uninsured or underinsured patients in nonprofit hospitals. While uninsured individuals do not have any insurance to help cover costs in the case of medical necessity, underinsured refers to a person who has health insurance but faces high medical costs. This is especially relevant today: recent surveys show that 35% Americans still experience issues with medical costs, and 47% of that group reported that they were unaware of charity care after receiving health care services. While health insurance mitigates the impact of medical bills by providing some protection, medical bills nonetheless remain a problem for millions of insured and uninsured individuals.

Family smiling.jpg

This is particularly relevant for the client, Housing and Economic Rights Advocates (HERA), a legal advocacy clinic based in Oakland, California. HERA provides legal services and information to Californians, particularly those most vulnerable, to promote financial security free of economic abuses. They also advocate for stronger consumer protections from debt at the state level. While HERA’s focus in the past has centered around homeownership and protections from mortgage debt, over the past 6 years, HERA has opened its doors to address the vast array of debt and credit concerns experienced by tenants and homeowners alike that are unrelated to housing, while continuing to address housing related concerns for renters and homeowners.

The goal of this report is two-fold. The first is to analyze the current landscape of medical costs, bills, and debt for low-income individuals, with a case study on HERA  clients, to understand why medical bills may persist among insurance coverage expansions and charity care policies in California. The second part of this paper examines charity care policies for hospitals in Alameda and Contra Costa counties in the Bay Area, California. California in particular has policy protections in place for low-income uninsured and certain insured individuals, yet data suggests that those policies are underutilized by eligible populations. The paper will conclude with policy recommendations on how to improve charity care and consumer protections in the U.S.

See the full paper here.