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TIF reform? Not yet.

With the release of his TIF Reform Panel report, Mayor Emanuel may want to check “TIF reform” off his to-do list, but community activists who work on the issue say that would be highly premature.

“They’re talking about transparency as if that’s all we have to do,” said Sonia Kwon of the Raise Your Hand Coalition.  “Transparency and accountability are just tools to reform TIF.  I don’t see this as TIF reform.”

In any case, Emanuel’s panel skips “the first step in transparency” – listing TIF information on property tax bills, said Kwon.  “To know you are in a TIF district and how much of your tax money is going to TIF – that’s the first step.”

That was a major proposal of the Community TIF Task Force of the Neighborhood Capital Budget Group, which brought together dozens of community groups, said Jacqueline Leavy, former executive director of NCBG.  (It was also a major proposal of then-Cook County Commissioner Mike Quigley, apparently forgotten when he reacted enthusiastically to the report this week.)

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Attention Congress: Homelessness rising

Homeless shelters around the state are facing increased demand, according to a new report from Housing Action Illinois, and calls for homelessness prevention assistance are up sharply, new figures from  the Chicago Community Trust show.

The figures add to evidence cited recently by the Center for Budget and Policy Priorities that homelessness is rising nationally.  And they make the case for more housing spending in the recovery package now being considered by Congress, said Bob Palmer of Housing Action Illinois.

“Our numbers are incredibly high,” said Mike Wasserberg of South Suburban PADS. A year ago the group’s shelters were serving an average of 140 men, women, and children each night; now the figure is regularly reaching 200.

Sites that were sheltering 25 people a night are now getting 40 or 45, he said.

They’re seeing many more families with children who don’t have housing, he said. He cited rising foreclosures and unemployment along with “jobs that don’t provide enough income.”

And where before two or three families might be living together due to economic circumstances — a situation that advocates argue should be counted as homelessness — “now we’re seeing four or five families inhabiting a single residential unit,” Wasserberg said. “Under those kinds of stress…at a certain point it becomes time to depart.”

Increased demand means the group needs more supplies and volunteers. And it comes at a time when individual donors are also struggling, he said. “Our annual appeal was off by almost 30 percent.”

At the San Jose Obrero Mission in Pilsen, Israel Vargas says clients are having a harder time finding employment. He sees people leaving for other cities in hopes of finding work — as well as people arriving from other cities where job searches were unavailing.

Along with interim housing with the goal of getting men jobs and housing, the mission serves as an emergency shelter when temperatures go below freezing. And the winter has been harsh. “The weather has been a major factor,” Vargas said.

A summary of the economy recovery proposal released by the House Appropriations Committee last week (pdf) includes $1.5 billion for homelessness prevention assistance — three-fourths the amount requested by housing advocates — but no additional funds for Housing Choice Vouchers.

Housing Action Illinois and other advocates are calling for 200,000 new vouchers in order to help people stay in their homes in the growing recession. New vouchers “are really needed to create more stable housing options for vulnerable households,” Palmer said.

At the state level, housing advocates are hoping Illinois will pass a budget and replace recent funding fixes with more sustainable solutions. The state’s emergency food and shelter fund was reduced in last year’s budget crisis.

The homeless prevention fund, which provides families with short-term help with rent and utilities, has remained steady at $11 million a year. But in 2006 its funding was shifted from the state’s general revenue fund to a portion of the Illinois Affordable Housing Trust Fund — a net loss for housing resources. And since the trust fund gets money from the real estate transfer fee, and home sales are down dramatically, this year funding from other human services was diverted to homelessness prevention.

According to the Chicago Community Trust’s Metro Chicago Vital Signs report, calls for homelessness prevention assistance in the Chicago area were 50 percent higher last month than in December 2007.

With homelessness growing, “Illinois needs to find a way to pass a fiscal year 2010 budget that provides an adequate safety net for people at risk of or experiencing homelessness,” Palmer said.

Would Bailout Help with Foreclosures?

As Congress ponders possible reconsideration of the Paulson bailout package, local housing experts say it would have limited impact on the growing foreclosure crisis.

“I don’t know if it would make a huge dent on foreclosures,” said Geoff Smith, vice president of the Woodstock Institute. “It might have some impact.”

“It’s not the type of plan we would have proposed,” he said. “It’s a bailout that’s geared toward Wall Street and if it helps homeowners, so much the better.”

In the version voted down Monday, Congress added language allowing the Secretary of the Treasury to modify mortgages acquired in the course of the bailout. But buying up investments in mortgage-backed securities doesn’t mean the government will hold a controlling portion needed to enable it to offer loan modifications.

“A key facet of this crisis is the incredible complexity of these instruments,” and that means the government’s “ability to modify loans may be limited,” Smith said.

The language of the legislation left a great deal of discretion to the Treasury secretary, said Bob Palmer of Housing Action Illinois. A lot would depend on rules to be promulgated by the Treasury secretary, he said.

“If the idea is to stabilize markets, but homes continue to be foreclosed on, that’s going to reduce the larger faith in markets as well,” Palmer said.

A recent study by the Pew Charitable Trusts points out that 26 percent of all home loans made in 2005 and 2006 were subprime (29 percent in Illinois) and projects that 1 in 33 homeowners will face foreclosure as a result of high-cost loans over the next two years, with 61 percent of homeowners expected to feel the ripple effects of foreclosures, including reduced home values.

In Illinois, the state and local tax base is expected to lose $27.3 billion as a result of foreclosures over the next two years, according to the study.

Woodstock has advocated a federal program to buy up and modify troubled mortgages, Smith said. He said the financial costs of the Paulson package, if enacted, would make such a program unlikely.

A cost-free proposal would allow bankruptcy courts to modify mortgages for primary residences, as they now can for vacation homes and yachts. That would help homeowners who end up in bankruptcy and would also create an strong incentive for loan services to modify mortgages, Smith said.

“At this point that would have the most impact,” he said.

He said many modifications now being offered by mortgage services are short-term fixes and not sustainable in the long term. Many of these are headed for trouble, he said.

“When this portion of the Bankruptcy Code was written, mortgages were the most stable kind of debt,” he said. Lenders required big down payments and banks often held the loans instead of selling them off. But with incomes stagnating and the housing bubble encouraging homeowners to use home loans to cover expenses, “it’s now the most insecure kind of debt.”

But financial industry opposition to such a fix seems overwhelming, he said.

Woodstock has also emphasized the need for regulatory reform. In a statement the organization noted: “Although this is a long term proposition, it is key that safety and soundness standards, community reinvestment obligations, and consumer protections be expanded to include non-depository financial institutions who were the core cause of the current financial crisis.”

No funds for predatory lending data base

[UPDATED] – A new anti-predatory lending program faces uncertain prospects as it goes into effect today — with a state appropriation for expanded mortgage counseling yet to be disbursed by the Illinois Housing Development Authority.

July 1 is the first day for the state’s new Anti-Predatory Lending Data Base program. It’s a revision of an earlier program that required loan counseling for mortgage customers with credit profiles that indicated vulnerability to predatory lending in ten Southwest Side zip codes with high foreclosure rates.

The new program covers all of Cook County and is triggered not by purchasers’ characteristics but by types of loan products that have been abused in the past.

Mortgages being sold to first-time homebuyers or people refinancing primary residences will require one-on-one review sessions with housing counseling agencies if they feature prepayment penalties, adjustable rates, negative amortization or stated-income documentation.


That allows counselors to make sure borrowers understand the terms of the often-complicated mortgage product they are getting (many don’t), to compare loan products with what is standard in the industry, and to check for unfair rates and fees, said Caleb Sjoblom of the Rogers Park Community Development Corp.

“It adds a level of disclosure,” he said. “People learn a lot about their loan products.”

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Housing counselors ‘swamped’

Housing counselors helping families with troubled mortgages are “swamped,” said Livia Villarreal of Southwest Reach Center.

“A year ago we were averaging three calls a week” about troubled mortgages, she said. “Now we’re getting three or four a day.”

Neighborhood Housing Services of Chicago saw its default and foreclosure caseload double in 2007 over the previous year, and projects that it will double again this year, said Barbara Harfmann.

Liz Caton at Northwest Side Housing Center said that in addition to default counseling, she used to provide pre- and post-purchase counseling and landlord-tenant training. “I can’t really do that any more,” she said.

About 20 HUD-certified housing agencies (including NHS, with seven neighborhood offices) are the only source for default and foreclosure counseling in Chicago. They are mainly small nonprofits with small staffs. The assistance they provide homeowners isn’t available elsewhere.

“The number of counselors is really small — it doesn’t come close to meeting the demand,” said Bob Palmer of Housing Action Illinois. Housing Action is backing legislation that would increase mortgage brokers’ licensing fees to help fund counseling agencies.

The problem is compounded by the necessity of dealing with the flood of foreclosures on a case-by-case basis, often with mortgage servicers who aren’t very helpful, said Geoff Smith of the Woodstock Institute.

“There’s a lot of lip service to helping borrowers” from the mortgage industry, “but we don’t see evidence that they’re really doing reasonable loan modifications” on a signficiant scale, Smith said.

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Report: Mortgage Counseling Needed

With the subprime mortgage industry reeling from rising foreclosures – and mortgage rescue fraud a growing problem – a new study is expected to show the continuing relevance of a controversial state law requiring outside review of high-cost and high-risk mortgage loans.

HB 4050, requiring reviews by nonprofit counseling agencies of high-risk loans, was suspended by Governor Blagojevich in January, four months after it was implemented as a pilot program in ten Southwest Side zip codes. Last week the state proposed new rules for the program, expanding the pilot area to all of Cook County; a 45-day comment period is now in effect.

While mortgage brokers criticized the program for inhibiting home sales, a large majority of the transactions reviewed under HB 4050 were for refinancing mortgages, not home purchases, according to Livia Villarreal of Southwest Reach Center, a nonprofit housing counseling agency.

About half of the loans reviewed were found to be unaffordable based on the borrower’s debt-to-income ratio, she said, and many borrowers did not fully understand the terms of their loans.

Bob Palmer of Housing Action Illinois said a report on data collected by counseling agencies under HB 4050 would be released next week. Among the concerns raised will be ensuring that counseling agencies have the capacity in place to handle the increased volume of mortgage reviews expected with the expanded pilot program, he said.

According to recent reports, refinancing rates are increasing as subprime borrowers face rising rates and scramble to avoid default and foreclosure.

Foreclosures often come after troubled homeowners have refinanced their mortgages one or more times, said David McDowell of the South West Organizing Project.

A Woodstock Institute report this week found that foreclosures increased last year by 36 percent in the Chicago area, driven in part by “complicated and risky products combined with loose mortgage underwriting standards that often include no documentation of borrower income,” according to Geoff Smith.

Rising foreclosure rates have also meant rising mortgage rescue fraud. Homeowners should be wary of mortgage rescuers who promise to save homeowners from foreclosure and instead strip homes of equity, observers say. “We advise people not to sign a deed to their home without checking with a lawyer,” said Bruce Gottschall, executive director of Neighborhood Housing Service. “And if it sounds too good to be true, it probably is.”

NHS and other nonprofit housing counseling agencies offer workshops on avoiding foreclosure, provide individual counseling, and will negotiate workouts with lenders. NHS also offers fixed-rate refinance loans to help homeowners who are at risk of foreclosure. (Information is at 1-800-882-0882.)

Low-Income Housing Program Falling Short

The major federal program for producing low-income rental housing is not serving the poorest families in Illinois, according to a recent report by the Illinois Assisted Housing Research and Action Project.

As administered by city and state housing agencies, the federal Low Income Housing Tax Credit program is heavily skewed to the highest range of below-median incomes. So in Illinois only 8.4 percent of 35,000 LIHTC units built since 1987 are affordable to the 600,000 families earning 30 percent or less of area median income — roughly the federal poverty level. (In the Chicago region there’s a giant deficit of housing affordable for families earning below 30 percent of median income, and a sizable surplus affordable to families in the 30-50 percent range.)

And since the program in Illinois has funded too few units with more than one bedroom, only 4 percent of LIHTC units serve very low income families with children.

The report also criticizes Chicago’s Department of Housing for evaluating proposals by general criteria rather than a detailed scoring system, allowing aldermanic vetoes, and “undermining the federal mandate for a fair and competitive selection process.”

In Chicago’s South Side, rents in developments receiving tax credits exceed neighborhood median rents.

Other findings: nonprofit housing developers are “invaluable” for directing credits to low-income renters. The complexity of the tax credit process increases costs going to lawyers, accountants, and syndicators. And affordability agreements for 4,550 tax credit units will expire by 2006.

IHARP is a project of the Statewide Housing Action Coalition and Latinos United, with research by the Voorhees Center at UIC; they’ve created the first comprehensive data base of assisted housing in Illinois, in response to the fact that “housing policy is being created in a vacuum of information.”

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