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WASHINGTON - Thank you so much, Congressman [Chris Van Hollen]. As Ranking Member of the House Budget Committee, you have worked tirelessly to expand access to and the supply of affordable housing in Montgomery County and the country. And your unyielding support for veterans’ supportive housing assistance that is helping courageous men and women who have defended this nation abroad who now struggle to find shelter at home secure decent housing. Thank you for all you are doing on their behalf.
I would also like to congratulate Congressman Cummings on receiving the Robert C. Weaver Housing Champion Award earlier today. Congressman Cummings has been a true champion for working families, and a valued partner in the Obama Administration’s effort to expand the supply of affordable rental housing and increase access to mortgage credit for America’s families.
And I couldn’t leave this podium without acknowledging the terrific work of your County Executive, Ike Leggett. His decades-long leadership and service to the people of Montgomery County has positively impacted the lives of countless area residents through improved housing, excellent schools and in so many other ways.
Given my role at the Department of the Treasury as the housing finance counselor to Secretary Lew, I meet frequently with a wide range of stakeholders from the world of housing, including researchers, market analysts, financial industry experts, investors, advocates, and legislative leaders from both sides of the aisle. Taking the pulse and gaining the insights of all of these groups is an essential part of my job.
But I especially enjoy speaking with groups such as your own, where I get the chance to meet with experts and leaders in the field of affordable housing. Your commitment and passion demonstrate an understanding that expanding affordable housing opportunities is not only about alleviating the financial burden of our least fortunate citizens – it is also about bringing greater strength and stability to families and communities across the nation.
There are two things that make this occasion particularly meaningful for me. First, I can be here to publicly recognize and help you celebrate a very special person known for his lifetime achievements not just here in Montgomery County, but far and wide in the world of affordable housing. I have worked with Conrad Egan at the Department of Housing and Urban Development and at the National Housing Conference, and sought his counsel throughout my career.
And I can tell you without hesitation that Conrad is highly-deserving of your recognition. And I should note the truly special nature of this award because of its namesake. As Chairman of the Senate Banking, Housing, and Urban Affairs Committee, Senator Sarbanes broadened the perspective of the Committee because he recognized that metropolitan regions were drivers of economic growth, and he significantly increased the Committee’s affordable housing agenda.
And on a more personal note, I am proud to say that twenty years ago, Senator Sarbanes oversaw my successful confirmation hearing for a position at the Department of Housing and Urban Development, and I remain grateful for his leadership and support.
The second reason why I am so pleased to be here is that Montgomery County has always been at the forefront of developing progressive and effective affordable housing policies. As a professor, I taught my own graduate students in city planning about Montgomery County’s successful inclusionary zoning and scattered site housing programs, and as a grant-maker, I funded rigorous evaluations of these kinds of programs, seeking to document how they advance opportunities for working families.
The Affordable Housing Conference of Montgomery County’s mission and reach is far greater than organizing this extraordinary annual event. Under the inspirational leadership of Barbara Goldberg Goldman, AHCMC continues to be one of the nation’s pre-eminent public-private partnerships devoted to finding creative solutions to affordable housing challenges that government alone cannot address. Thank you, Barbara, for your tremendous work.
We are very supportive of the kinds of collaborations between government, businesses, and non-profits that are built into AHMC’s DNA. Public-private partnerships will become even more important in the years ahead as the County tackles more complex social and economic challenges with greater resource constraints than it had back in the 1970s when it first adopted its pioneering inclusionary zoning and scattered site housing programs.
While political pundits and futurists often look to the West Coast as the harbinger of demographic, cultural and economic trends, the fact is that to get a glimpse of the American future, they don’t have to look any further than Montgomery County.
Consider this – in Montgomery County, thirty percent of residents are foreign-born, accounting for nearly half of Maryland’s immigrant population. Remarkably, Montgomery County’s widely acclaimed public school system now educates children from 157 countries who speak 138 different languages.
As the changing face of Montgomery County suggests, immigrants are increasingly becoming important drivers of housing demand. According to one recent study, from 2010 to 2020, immigrants are projected to account for more than a third of the growth in homeowners across the country. And while most foreign-born households start out as renters – many of whom qualify for rental assistance – the longer they reside in the country, the greater their demand grows for buying homes of their own.
For example, among Hispanics who came to the United States during the 1980s, homeownership rose from 15 percent in 1990 to 53 percent in 2010, and is projected to rise to 62 percent in 2020 when this cohort will have lived here for over 30 years.
In response to the changing demographic profile of Montgomery County, AHCMC has adjusted and expanded the policies it advocates and the partnerships it pursues. Now, just as your organization has evolved to address the rapidly changing housing and community development needs of the county, so too has Treasury evolved.
Today, Treasury is involved in the design and implementation of a host of innovative emergency and permanent programs that, taken together, act as a powerful force in addressing critical market failures in the housing finance system, and that drive capital to underserved markets and communities. These programs expand affordable rental housing, finance critical community facilities like day-care centers and charter schools, and support small business lending and other job creating activities. They are helping strengthen families and communities across the country, and I would like to spend some time highlighting a few of them here today.
As we take stock of a number of encouraging developments in the nation’s housing market, it’s easy to forget where we were only a few short years ago. Not historically known as a front-line, housing-driven agency, Treasury took bold and unprecedented actions to stabilize the housing finance system and help stem the dramatic fall in home prices in the midst of the worst financial crisis since the Great Depression.
Indeed, the situation necessitated an around-the-clock, all-hands-on-deck effort, which often required making tough decisions that weren’t politically popular. But these actions were essential in preventing even deeper damage to the financial markets – along with the investments of countless investors and the savings of millions of American families.
We worked with Congress to implement tax credits for first-time homebuyers. We supported neighborhood stabilization, community development and housing counseling programs. We bolstered state and local housing agencies with borrowing assistance so they could continue to lend. Three of our emergency programs were targeted to state and local housing finance agencies because we recognized that sustaining their activities and maximizing the use of their local market knowledge and expertise was critical to helping low- and moderate-income families’ access mortgage credit as the capital markets seized up and tax-exempt markets turned upside down.
Our $8.2 billion Temporary Credit and Liquidity Program enabled 12 housing finance agencies across the country to retire variable rate demand obligations. This assistance included an allocation of $118 million to the Housing Opportunity Commission of Montgomery County.
Our $7.6 billion Hardest Hit Fund, provided funding to state HFAs for locally tailored programs in the 18 states and the District of Columbia that were hit particularly hard by foreclosures, declining home values and unemployment.
Our $15 billion New Issue Bond Program, launched in October 2009, has helped HFAs overcome their struggle to maintain access to tax-exempt markets. Thanks to its outstanding execution, NIBP has helped finance more than 135,000 single-family homes and more than 40,000 rental homes.
The Housing Opportunities Commission made good use of its $100 million in New Issue Bonds, providing mortgage loans to 465 local first time home buyers and supporting the development of 288 affordable rental units. Statewide, New Issue Bonds are credited with producing more than $270 million in economic activity, including the creation of nearly 1,500 jobs and generating an expected $25 million in Maryland state and local tax revenue over the next 15 years.
The Administration has proposed replacing a fourth temporary financing vehicle – the Build America Bond program – with a new permanent program called America Fast Forward Bonds.
For the short 21-month period that they were available, Build America Bonds were used in all 50 states, raising $181 billion in reduced-cost capital financing for new public infrastructure when tax-exempt markets were upside down to help rebuild infrastructure and, in turn, create jobs.
The America Fast Forward Bond program is also designed to attract private capital to upgrade critical resources we need to prosper: modern ports to move our goods, modern pipelines to withstand a storm, modern schools worthy of our children, and more safe and decent affordable housing.
While housing finance agencies were not eligible issuers of Build America Bonds, they would be eligible under this new program, giving agencies like the Housing Opportunity Commission a taxable market funding alternative to the issuance of tax-exempt bonds.
While these programs have been critical to addressing breakdowns in specific financing markets, Treasury also developed programs with a focus on alleviating suffering the crisis has wrought on individual households.
Since the darkest days, Treasury has continuously worked to prevent avoidable foreclosures by helping struggling homeowners make their mortgage payments more affordable. And in the process, we helped transform a mortgage servicing industry that was woefully unprepared for a crisis of this scale.
Notably, Treasury’s Home Affordable Modification Program (HAMP), which to-date has helped more than 1.1 million struggling families permanently modify their loans, is saving these families about $550 every month. HAMP has helped more than 27,000 Maryland families with permanent, affordable loan modifications, including more than 4,800 families here in Montgomery County, whose median payment reduction of $730 represents a 40 percent saving.
In the process, the standards HAMP set have helped lead private lenders across the country to modify an additional 3.5 million mortgages. In total, public and private efforts have helped more than 6.5 million Americans save their homes from foreclosure.
While continuing to help troubled borrowers, we must also help as many performing borrowers as possible refinance into more affordable mortgages. Given historically low interest rates, refinancing can save a family up to $3,000 a year on their mortgage payments – the equivalent of a significant middle-class tax cut.
So far, more than 20 million borrowers have refinanced, and since the introduction of the Administration’s Home Affordable Refinance Program, or HARP, we have helped more than 2.2 million underwater homeowners secure a lower-cost mortgage – putting more than $27 billion a year in real savings back into their hands and into the economy. This includes more than 64,000 families in Maryland. Focusing as it does on homeowners with negative equity, HARP can be a particularly potent program for Maryland homeowners where almost one-in-four mortgages were still underwater in February of this year.
But, as you may know, HARP is limited only to Fannie Mae or Freddie Mac guaranteed loans. We should do more to help the hundreds of thousands of households whose loans are not owned or guaranteed by the GSEs refinance out of their high-cost mortgages. Approximately 30 percent of these loans – held in non-agency trusts or on bank balance sheets – are higher-risk, interest-only, or balloon loans that could pose a greater risk of default.
As the President has said, whether a household can take advantage of today’s historically low interest rates should not be a matter of who owns their mortgage. Fundamentally, this is an issue of fairness, which is why the Administration supports legislation that would level the refinance playing field for all responsible American homeowners.
While we are committed to continuing to help mitigate the effects of the crisis, we are encouraged by a growing housing recovery. Fewer borrowers are falling behind on their mortgages, or entering foreclosure. In fact, I’m pleased to say that the overall mortgage delinquency rate in Montgomery County is below the national average. Distressed properties and shadow inventories are also declining. Housing starts and home prices continue to recover.
The most recent S&P/Case-Shiller home price index for the 20 largest cities shows that home prices in February increased 9.3 percent compared with a year ago – the largest year-over-year rate of increase since May 2006 and the ninth straight month of year-over-year gains.
Importantly, housing has contributed positively to GDP growth in each of the last eight quarters, and forecasters expect that it will continue to be a positive force going forward as the housing market regains its health.
Locally, Maryland housing prices have seen a more modest recovery, about 4 percent since January 2012. Closer to home, Zillow estimates that home values in Montgomery County increased by 7% in March 2013 over the year-earlier month compared to an average 4% for about 690 counties across the country.
With things headed in the right direction, we are looking ahead with a keen focus on long-term housing finance reform.
As you know, nearly nine out of ten newly originated mortgages are still supported by the American taxpayer, a situation that is undesirable and unsustainable. The real challenge, however, is effectively revamping the system without severely disrupting the mortgage market and the ability of American families to access credit – a task made all the more delicate in the midst of a recovering housing market.
No matter what path we take to housing finance reform, Treasury and the Administration have core, fundamental, requirements that must be met. We support a system in which private capital is the primary source of mortgage credit that bears the primary burden for credit losses and strongly protects taxpayers. As Secretary Lew has stated, “We can’t ever again be in a place where American taxpayers are left responsible for mortgage financing practices that get out of control.”
We also seek a system that provides all American families access to sustainable mortgage credit, which must include long-term, fixed-rate mortgages, and which provides for predictable credit availability under all conditions – even during times of severe market stress. Any plan for housing finance reform must also meet the needs of our nation’s growing population of renters, and serve borrowers across the income spectrum.
But comprehensive housing finance reform is not just about achieving any one of these priorities – it is about developing a system that achieves all of these priorities.
We are seeking a bipartisan approach to reform, and that’s why the President took an important first step last week with the nomination of Congressman Mel Watt to be the Senate-confirmed director of the Federal Housing Finance Agency.
In his 20 years of service to the people of North Carolina’s 12th district, Congressman Watt has been a leader on housing issues, often working across the aisle as a member on the House Financial services Committee. Whether it was reining in unscrupulous mortgage and predatory lenders or protecting consumers from the risk-taking that led to the financial crisis, Congressman Watt has fought to expand access to affordable housing. We look forward to his confirmation and working with him, as appropriate, to put in place a sustainable housing finance system that will serve American families for generations to come.
In addition to supporting families during the ongoing recovery and laying the groundwork for long-term housing finance reform, Treasury continues to craft policies that generate resources that help strengthen families and create communities of opportunity.
Treasury’s Office of Tax Policy is working with the Department of Housing and Urban Development to improve the effectiveness of the Low-Income Housing Tax Credit. And Treasury’s Office of Financial Institutions is working to facilitate capital to more small businesses and affordable housing developments, and developing innovative tools and technologies to enhance the financial capability of our citizens.
The core principle underlying these efforts is that creating and driving capital to undercapitalized neighborhoods, institutions, entrepreneurs, and individuals who intimately know their communities and economies are best suited to most efficiently and effectively use these resources.
That is why the President’s FY 2014 budget requests substantial funds to both create and enhance several programs.
The budget proposes allocating $5 million towards a new Financial Capability Innovation initiative, which will help low- and moderate-income people get the support and services they need so they can save more and manage their finances more effectively.
The budget also envisions extending through FY 2015 the $1 billion per year CDFI Bond Guarantee Program that will help foster economic development in underserved distressed urban and rural communities by offering top-tier CDFIs with proven track records long-term, fixed-rated financing to fund a wide range of community development activities such as charter schools, small business loans, and affordable housing.
Also included in the budget is a $225 million funding request for the CDFI Fund to promote economic development investments in low-income and undercapitalized communities. Since its inception, 18 Maryland-based certified CDFIs have received more than $164 million from 796 separate allocations to bring much-needed capital to their communities.
And we continue to recognize the critical role played by the low income housing tax credit. Since its inception in the late 1980s, LIHTC has produced 2.5 million affordable rental homes, helping to revitalize distressed neighborhoods and expand affordable housing in high-opportunity areas – all with a cumulative foreclosure rate of only 0.6 percent.
This year’s proposals would, among other things, let states increase their effective LIHTC allocation caps by up to 19 percent by converting a portion of their private activity bond cap to tax credits; add preservation of federally-assisted housing to the current list of selection criteria for states to consider in their annual allocation plans; and let sponsors of tax credit housing adopt an income averaging plan to promote mixed-income housing.
While Treasury continues to take its traditional compliance responsibilities seriously, these proposed refinements are indicative of the way in which our affordable housing expertise is being used to support critical community development policy goals.
Over the last decade, Treasury’s New Markets Tax Credit (NMTC) has generated over $30 billion in private investment for operating businesses, economic development and community service facilities in economically distressed communities. Here in Maryland, ten organizations were allocated $420 million just last year. The President recognizes the impact of this catalytic tax credit, which is why his budget proposes making the tax credit permanent and increasing its value to $5 billion a year.
NMTC address one of the most significant obstacles to economic development that low-income communities face: a lack of access to patient, private investment capital. In effect, the LIHTC and NMTC enable investors to receive competitive market rates of return from publicly beneficial activities that can operate sustainably but need initial capital support.
Although investors are the nominal beneficiaries, they pass on most of the benefits to communities in the form of equity capital or below-market-rate debt financing. Importantly, private investors manage both credit risk and policy compliance risk, so the federal government pays only for policy success. Both types of tax credits are flexible enough to channel capital to a wide range of underserved communities, and both have built and maintained broad bipartisan support.
As we move forward, Treasury’s leadership role in driving capital to underserved markets will continue as the need for our emergency programs subside. Too many of our families lack access to affordable housing. Too many of our small businesses lack access to sustainable credit. And too many of our communities lack the resources they need to climb out of distress and fulfill their potential to become vibrant places to live, work, and thrive.
Treasury will continue to develop and implement innovate programs that tackle these issues head on – because we know that when credit flows freely and fairly to all of our cities and neighborhoods, we not only bring a measure of joy and dignity to a greater share of our fellow Americans, we help strengthen and secure the economic foundation our nation.
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