Great Lakes Metros & New Opportunity Summit “Responding to the Foreclosure Crisis” Presented by: Arlo Monell Chase

1. Great Lakes Metros & New Opportunity Summit “Responding to the Foreclosure Crisis” Presented by: Arlo Monell Chase, Esq. SVP For Policy Initiatives at nyhomes

2. Goals of Presentation • Thanks-to Sarah Szurpicki, Mike and Aaron Bartley • Introduction to nyhomes • Intro to Foreclosure Problem in Great Lakes States • Federal Response to Foreclosure Crisis • New York State Response to Foreclosure Crisis • Great Lakes Specific: NSP & Block by Block • Going Forward

3. nyhomes is the State’s Affordable Housing Bank • nyhomes is the New York State Housing Finance Agency (HFA), State of NY Mortgage Agency (SONYMA) and Affordable Housing Corporation (AHC). • SONYMA offers mortgage products (through participating lenders) intended for income targeted first-time homebuyers- • Funding comes from issuance of bonds exempt from federal income tax • AHC provides grants to local governments and non profits to promote homeownership for low income. • Eligible uses include new construction, acquisition/rehabilitation, and home improvement • Funded by annual state appropriation- last year $45 million but normally $25 million

4. Foreclosure in the Great Lakes • Recent Data from CRL shows that to date in 2009, the following number of new foreclosure actions filed: • New York- 32,000 • Michigan 42,000 • Ohio 40,000 • Pennsylvania- 23,000 • US- 2.3 million in 2008: In 2009 2.4 million projected (CRL) • 2009-2012- 9 million foreclosures projected (Credit Suisse) • These are huge numbers for MI & OH and US overall, given this is the 4th year of explosion in foreclosures

5. Obama’s Response OBAMA’S PLAN-Announced in February • 1. Refinancing for 4-5 Million through GSE Portfolio • Available to those in mortgages held or insured by GSE • Increase Permissible LTV to 105% from 80% • 2. Enabling Mortgage Modifications for 3-4 million • Available to Owner occupants, either “underwater” or high DTI • Analyze that Net Present Value of modification exceeds cost • Big problem for borrowers in good markets • Lender must get DTI to 38% • Lender & Gov’t matching funds, get DTI to 31% (Gov-$75 billion) • Incentive payments to maintain mortgage: to servicer ($1000/year, 3 yrs ) Lender ($1500/at outset) and Borrower ($1000/year, 5 years) • GSE to monitor compliance

6. Obama’s Response (cont’d) • Big problem- 2nd liens- up to 50% of troubled mortgages have 2nds • Program mod of 4/28, when a mod on a first lien, second lien servicers can either • reduce payments on the 2nd lien to sustainable level, or • extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury.  3. Bankruptcy Reform for those not assisted by Loan Mods • Passed House, died in Senate with little action by White House • 4. Strengthening GSEs/Lowering Mortgage Rates- • up to 200 billion more in federal funds to cover losses • Increasing GSE Limits for size of loans can insure • Treasury to continue buying GSE Securities- Rates shot up recently 5. NSP2-$2 billion-National competition, results in Fall 6. Refundable Tax Credit for first time homebuyers-$8000

7. Obama Plan Evaluated Pros • Detailed plan that uses all the tools available, incl GSE • Incentives to Servicers, Lenders, Borrowers for restructuring and staying current on loans, incl those not yet in default • Recent studies showing high % of restructured loans default again • Balances scale and excluding investors & speculators Cons-Not address enough borrowers • Limits on size of loans GSEs will refi • LTV limitations on refi (105%) • Restructurings depends on private lender/servicer assistance, slow to emerge in the scale that is needed- Servicers are debt collectors • Without Bankruptcy reform, no stick for servicers

8. Obama Plan Evaluated (cont’d) Big questions remain unanswered 1. Great Lakes Region: Nothing in Obama plan addresses foreclosure problem in GL cities Nationally • What will GSE’s look like? • Will he Use Crisis to Tackle Sacred Cows prioritizing homeownership? • Need more focus on Rentals

9. FORECLOSURE CRISIS-Impact in NYS Through the first 5 months of 2009, 32,000 new foreclosure actions were filed in New York State. • However, as a % of all households, New York is not one of the hardest-hit states, ranking 39th nationwide • Foreclosures are highly concentrated in the State • The top 10 counties account for 79% of foreclosure filings • Queens and Brooklyn account for over 25% • Long Island represents another 20% of the state total. • Upstate Cities also troubled, more tax liens than subprime For complete info, see year end HALT Report

10. FORECLOSURE CRISIS NY State Response • Since 2007, NY State Initiatives-Proactive & Timely • Early in 2007 Spitzer created the HALT Interagency Force • August 2008, Gov Patterson signed legislation which: • Regulates certain loans strictly • Requires conference for subprime borrowers facing foreclosure • If Leg comes back, further changes proposed by Gov • Foreclosure Mitigation Counseling & Legal Services • DHCR $50 million in appropriated funds (2008 and 2009) • Banking Department, $2 million awarded to 22 groups • SONYMA, as conduit for Fed funds-almost $2.5 million

11. FORECLOSURE CRISIS State Response Preventing Foreclosure-Refinancing • 2007 SONYMA launched Keep the Dream refinancing program, which enables borrowers in subprime mortgages to refinance to a safe fixed rate loan. • First time SONYMA ever offered a refinancing product. • Unable to use our tax exempt bonds to finance, so entered into an agreement with Fannie Mae to purchase the loans • Partnership with Fannie came with limitations: • Borrowers limited to 60 days delinquent. • Higher interest rate than we wanted • KTD was severely undersubscribed and cancelled

12. FORECLOSURE CRISIS State Response Addressing Neighborhood Effects of Foreclosures: Neighborhood Stabilization Initiative (NSI) • Intent: To assure continued stability of certain New York neighborhoods with high concentrations of recently foreclosed properties by facilitating the quick return of these properties to sustainable homeownership. • With nyhomes in the lead, this is a joint initiative with HUD, Banking Dep’t, DHCR, local governments, non profits and the leading lender/servicers in the state. • $64 million, $54 from HUD, $10 from AHC

13. Great Lakes Specific • NSP: OF State’s $64 million, • Buffalo groups were allocated 5.7 million • Municipalities (Buffalo/Tonawanda and Cheektowaga) and non-profits, • Plans include Ac/Rehab, Demo and Land bank • Rochester allocated 5.1 million • All to City of Rochester, include suburbs • Plans include Financing, Ac/Rehab, Demo Other Great Lakes Cities Under NSP 1, Detroit allocated $47,137,690, Cleveland allocated $16,143,120. Buffalo-$0, Rochester $0

14. Great Lakes -Block by Block • November 2007- after conversations with people like Mike Clarke, Aaron Bartley, Sam Hoyt, Michael Gainer, nyhomes announced the “Block-by-Block” program. • Special funding of up to $ 3million to rebuild and renovate existing housing as part of larger redevelopment plans. • Each proposal had to consider revitalization of an entire city block in Buffalo. • Prioritized following criteria: • Energy efficient improvements and other green building; • Provided rental options (homeownership required); • Consistent with the City of Buffalo’s comprehensive plan, and • Likely to be completed within two years. • Results: 4 grants • 2 went to the City of Buffalo (i) owner rehab,; (ii) ac/rehab (Mid City area) • HomeFront, 19th Street ac/rehab • Westside NHS, homeowner rehab (2 blocks, Black Rock and Grant Ferry) • Greater conversation, coordination amongst groups and City?

15. Going Forward • Federal & State Governments need to fund great lakes specific strategies for housing and economic dev. • But, we need help-when fractured, easier to ignore • Come together regionally-develop solutions/advocate • Hard Choices need to be made: • Planned shrinkage/transportation • Consolidating Governments/working with suburbs • More rehab & weatherization, less new construction • Opportunities: • New NSP Money-$2 Billion • Sympathetic Administration.-Bruce Katz