House Passes Key Housing Legislation

The U.S. House of Representatives passed the American Housing Rescue and Foreclosure Prevention Act (H.R. 3221) on Thursday.

The legislation combines a number of bills, including measures to modernize the Federal Housing Administration and reform the government-sponsored enterprises.

The bill also provides for a temporary 20 cents increase in the low-income housing tax credit ceiling as well as a temporary increase in the mortgage revenue bond authority to allow for the issuance of an additional $10 billion in tax-exempt bonds.

Bush Nominates HUD Secretary

President Bush today nominated Steve Preston, head of the Small Business Administration (SBA), to be the next secretary of the Department of Housing and Urban Development (HUD).

During his tenure at the SBA, Preston has managed loan guarantee programs that are similar in structure to those run by the Federal Housing Administration, said Bush in his announcement.

Preston’s nomination follows Alphonso Jackson resignation from HUD’s top post. The last day of Jackson’s troubled tenure was April 18. He left office amid allegations of political favoritism and investigations about whether he steered lucrative housing contracts to friends.

The choice of Preston comes as a surprise to those who had speculated that the nominee would come from within HUD. Preston has been head of the SBA since July 2006. He is credited with streamlining the agency’s work in providing loans to small businesses and homeowners devastated by Hurricane Katrina.

New Orleans Rehab At Risk?

The New Orleans Times-Picayune reports that the redevelopment of four public housing complexes in the city is at risk because of the decline in prices for low-income housing tax credits.

Word on the street is that prices are in the low 80-cent-range per dollar of credit, a big decline from this time last year, when investors were paying about 95 cents on the dollar.

City officials told the Times-Pic the developers have enough contingencies built into their financing plans to complete the projects. And two of the developers said declines in other costs will offset the loss of capital from declining tax credit prices.

Meanwhile, market-rate development in the Big Easy is moving forward at decent clip, says New Orleans-based apartment broker Larry Schedler, who spoke at our Apartment Finance Today conference earlier this week.

Who's Next at HUD?

Who's next at HUD?

Washington insiders say the latest speculation is that the Bush
Administration's third and presumable last housing secretary might be James
B. Lockhart III, who is now director of the Office of Federal Housing Enterprise Oversight.

He would replace Alphonso Jackson, who leaves office April 18. He resigned
to focus on personal matters, according to his statement. He is under
investigation for steering lucrative federal contracts to his friends and
political allies.

The other leading candidate for the top job is Brian Montgomery, who is now
assistant secretary for housing. Several housing industry leaders, including
mortgage bankers, are hoping he will move up to the top job and that his
current deputy, John Garvin, can move up to be assistant secretary for
housing and commissioner of the Federal Housing Administration (FHA).

Garvin is widely viewed as a very competent administrator who has tried to
move FHA programs forward despite many obstacles.

Rangel Introduces Key Housing Bill

A much-anticipated housing bill was introduced today by House Committee on Ways and Means Chairman Charles Rangel (D-N.Y.).

The Housing Assistance Tax Act of 2008 would provide:

* A first-time homebuyer tax credit to assist in making a down payment on a home. This would provide individuals and families with a refundable credit (equivalent to an interest-free loan) of ten percent of the purchase price of their home (up to $7,500). Taxpayers would be required to repay any amount received under this provision to the government over 15 years in equal installments. The credit will be phased out for taxpayers with adjusted gross income in excess of $70,000 ($110,000 in the case of a joint return).

* An additional standard deduction for real property taxes to help homeowners who claim the standard deduction by allowing them to claim and additional standard deduction of up to $350 ($700 for joint filers) for State and local real property taxes. This provision applies for 2008.

* A temporary increase in low-income housing tax credit and simplification of the credit. The bill would increase the current limit of the credit from $2 for each person residing in a state by an additional 20 cents per resident. This will help put builders to work to create new options for families seeking affordable housing alternatives. The credit will also be simplified to improve its effectiveness.

* A temporary increase in mortgage revenue bonds to allow for the issuance of an additional $10 billion of tax-exempt bonds to refinance subprime loans, provide loans to first-time homebuyers and to finance the construction of low-income rental housing.

HUD Secretary Jackson Resigns

Alphonso Jackson resigned as the nation’s top housing official today amid ethics investigations and calls for him to step down as secretary of the Department of Housing and Urban Development (HUD).

Jackson’s resignation is effective April 18. He said it was time for him to attend to personal and family matters. Sources in Washington said the timing of his resignation may indicate that the U.S. Department of Justice is nearing completion of an investigation into HUD contracting and the truthfulness of Jackson's testimony regarding those contracts.

Sen. Chris Dodd (D-Conn.) and Sen. Patty Murray (D-Wash.) called for Jackson to step down a little more than a week ago, saying that he is not fit to run HUD. The move followed hearings in which Jackson did not adequately respond to Congressional inquiries, said the senators.

Federal authorities are investigating whether Jackson, who has been secretary since 2004, steered lucrative housing contracts to friends. AFFORDABLE HOUSING FINANCE has reported extensively about HUD contracting, and its investigative report “Is HUD Contracting Out of Control?” was recently honored by American Business Media with a Neal Award, the nation’s most prestigious honor for business-to-business journalism. The report ran in the June and July 2007 issues.

Jackson is also being questioned about his role in trying to punish the Philadelphia Housing Authority for refusing to sell a piece of land to an individual designated by HUD who is reportedly a friend of Jackson’s.

"Ten days ago, I called on Secretary Jackson to resign because it was clear that the ethical allegations against him meant that the Bush administration's ineffective housing policies were being burdened by an even more ineffective HUD secretary,” said Murray in a written statement “Today, Secretary Jackson has decided to move on, but the immense challenges ahead of us to calm the housing crisis remain.”

Murray called on President Bush to nominate a new HUD secretary that has “the experience and credibility to attach this [housing] crisis rather than hide from it.” “Hopefully, with new leadership at HUD, we can negotiate a bipartisan plan with the Bush administration to spare the maximum number of families the devastating consequences of losing their home,” she said.
Murray added that she hoped that the resignation was “more than a move to simply save face.” “I hope this signals an end to the neglect of needy tenants and struggling homeowners and the beginning of an administration policy that responds meaningfully to the needs of both.”

President Bush said he accepted Jackson’s resignation with regret. “While leading the Department of Housing and Urban Development, Alphonso made significant progress in transforming public housing, revitalizing and modernizing the Federal Housing Administration, increasing affordable housing, rebuilding the Gulf Coast, decreasing homelessness, and increasing minority homeownership,” said Bush.

He did not name any possible successors. Early speculation within HUD is that a new secretary will come from an internal promotion, possibly either Deputy Secretary Roy Bernardi or Assistant Secretary for Housing Brian Montgomery. HUD staff told Affordable Housing Finance that Bernardi is widely considered to be a capable administrator who has high standards of integrity. Bernardi, who came to HUD in 2004, was previously the mayor of Syracuse, N.Y. Montgomery has the advantage of being a Texan who worked in the White House before coming to HUD in 2005 and was personally acquainted with President Bush, but he has the disadvantage of being at the helm of the Office of Housing, where several of his subordinates are alleged to have engaged in questionable activities regarding contracting and handling of expense accounts.

Congress Gets in Gear on HUD, Tax Credits

After a very long silence, leaders in the Senate on housing issues are finally speaking out about corruption in the Department of Housing and Urban Development (HUD), calling for the resignation of Secretary Alphonso Jackson.

Meanwhile, after years of inertia, Congress is moving bills that would make the low-income housing tax credit program more flexible and help attract more investment.

Sen. Patty Murray (D-Wash.) and Sen. Chris Dodd (D-Conn.) wrote to President Bush on March 21 asking him to request Secretary Jackson’s resignation. Murray chairs the HUD appropriations subcommittee and Dodd chairs the Senate Banking Committee.

In their letter, they said “The nation is in the midst of a housing crisis and it is imperative that the department be headed by a leader who can work tirelessly to find solutions to the problems plaguing the housing and mortgage markets.”

“During this critical period, the American people do not need a HUD secretary that is distracted by the clouds of Justice Department investigations and reports of an empanelled grand jury,” they went on.

Jackson may have incurred the wrath of Dodd and Murray by refusing to answer questions about his involvement in contracting decisions and his role in trying to punish the Philadelphia Housing Authority for refusing to sell a piece of land to an individual designated by HUD who is reportedly a friend of Jackson’s.

Meanwhile, Congress appears to be moving faster than usual on legislation to improve the tax credit program, giving industry leaders hope that even the Senate might actually pass a useful bill in this election year.

Some of the proposed changes have been on the table for years, but some are new and there is new urgency due to the current slowdown in corporate investment in tax credits. One very useful change would allow projects to get credits for up to 130 percent of basis where a high level of need is demonstrated. Another would allow the credits to be applied toward corporate and individual alternative minimum tax liability. The House Ways and Means Committee has been working on a bill for some time, including many “modernization” measures sought by the industry. The Senate bill is S. 2666, and it was introduced in February.

LIHTC Hits the News

The falling price of low-income housing tax credits and its effect on housing projects recently got some unexpected news coverage. The Wall Street Journal published a rather sympathetic story, “Losses Stall Affordable Housing Projects.”
Take a look at the March 12 issue for the article, which quotes Matt Greer of Carlisle Development Group in Miami, Fred Copeman of Ernst & Young, and others.

Affordable Housing Legislation: Take the Poll

Fannie Mae Scopes Micro Loans

Fannie Mae has rolled out a new small-balance loan program, called Micro Loans, to complement its conventional small-loan program.

The Micro Loans program targets loans of up to $750,000 on properties of five units or more, a market segment dominated by community banks. The company expects the bulk of Micro Loan deals to be for Class B and C buildings housing those earning 100 percent of the area median income and below. Tax credit properties, however, are not eligible for the program.

Read full article here.

LISC Launches Green Development Center

In March, Local Initiatives Support Corp. (LISC) opened its Green Development Center, a new effort to put green design, construction, and management principles to work in the neighborhood revitalization projects in which it invests.

"Lowered operating costs, increased household income, and the improved health of children, these are direct results of green-focused development," said Greg Maher, LISC's senior vice president for lending.

The center will be led by Madeline Fraser Cook, who recently served as vice president of New Ecology, Inc., a Cambridge, Mass.-based organization that provides technical assistance on green and sustainable design techniques to community-based organizations and affordable housing developers.

Read full article here.