Bankers say no to Housing Trust bill
At a time when the economy is stalled and construction jobs, in particular, have taken a heavy hit, affordable housing advocates say there’s no better time to put money into the state’s Housing Trust Fund, the primary source for affordable housing construction in the state.
HB 2906, sponsored by Rep. Mark Miloscia (D-Federal Way), would do that by issuing a $100 million bond for the Trust Fund. The bond would paid back by charging a $62 document recording fee when a home’s deed of trust is resold. The $62 fee is already collected today at the time a home is purchased, with $48 of the money directed to affordable housing efforts under four previous bills passed by the Legislature since 2002.
In a hearing this morning before the House Local Government & Housing Committee, however, representatives of the state’s banking industry said enough is enough. Marc Gaspard, speaking for both the Washington Mortgage Lenders Association and Washington Financial League, said his organizations had supported the previous efforts at raising recording fees to pay for affordable housing, but it was with the understanding that the fees would not be applied to later deed-of-trust transactions.
Miloscia said that was not his understanding. But Denny Eliason, a lobbyist for the Washington Bankers Association, explained that lenders would have few choices but to charge the extra fee to the home buyer on the front end, doubling or tripling the $62 the purchaser already has to pay.
Once loans are made, Eliason said, lenders bundle and sell them as securities to large financial institutions. It would be next to impossible, he said, to figure out a way to charge the institutions the $62, so lenders would have to raise interest rates to cover the cost or try to estimate how many times a loan might trade hands over the course of its life and charge that to the home buyer, possibly resulting in a front-end cost in the hundreds of dollars.
“This will be borne, we believe, very directly by the first-time home buyer,” Eliason said.
The Housing Trust Fund was reduced in 2009 Legislature from $200 million to $100 million. Housing advocates say that money is already committed to projects and that, in the coming 2010-11 fiscal year, there will be nothing in the way of state funding for affordable housing without more revenue.
Local jurisdictions such as Seattle depend on the funds, said Daniel Malone of the Washington State Coalition for the Homeless, to match dollars they have already allocated for affordable housing. By law, he said, the Seattle Housing Levy that voters renewed last fall can pay for no more than 40 percent of a given project, making Housing Trust Fund dollars critical to building any new affordable housing in the coming year.
Another affordable housing bill heard today by the committee — HB 2900, put forward by Rep. Roger Goodman (D-Kirkland) — seeks to replicate the model of Seattle’s 1811 Eastlake, a building developed and run by the Downtown Emergency Service Center that houses chronic inebriates and allows them to drink on the premises.
According to a study published in the Journal of the American Medical Association, residents of the building have cost the state and city $4 million less in emergency room, jail and medical costs in just one year, DESC Executive Director Bill Hobson told the committee, the majority of it in Medicaid dollars that the state saved.
Goodman said the model should be rolled out to other counties, but that a substitute bill will be offered in place of his original legislation.
Comments
By Fat-tailed on January 27th, 2010 at 1:48 pm
I know you guys are still getting your footing — and I wish you luck — but it’s not clear what’s added by an article like this. If Olympia Newswire is going to do better journalism than other outlets — and I sure hope that’s the goal — it would be great if your reporters did some actual reporting rather than just acting as stenographers listening in at a hearing or maybe just sitting at home listening to the webcast of a hearing. For example, how about asking some questions? Following up? Doing some research, god forbid?
Such a “journalistic” approach could have turned up a few things. First of all, even if the bankers are right that the $62 would necessarily be directly passed through to consumer — and they’re not, since profit margin is not an eternal constant of nature — it would have an infinitesimal impact on interest rates for first-time homebuyers. Amortize $62 over the life a 30-year mortgage and you’ll see. It’s pennies a month. It’s nothing in the context of home purchasing. If only there were a reporter covering this story your readers might know that.
Second, perhaps you could have asked a banker lobbyist why the hell is anyone supposed to care about the secondary mortgage market besides bankers and their accountants? When they answered, you would remind them that there were plenty of mortgages before the secondary market exploded (a relatively recent phenomenon). There are plenty of mortgages now that the secondary market is primarily US Gov-backed enterprises. And there will be plenty of mortgages if reassignment of a title costs $62 more. I would like to hear their counter-argument on this point. If only there were a reporter covering this story, your readers might have a better understanding of the debate.
These are transactions worth tens if not hundreds of thousands of dollars. $62 is child’s play. Surely the banks don’t want to pay it. That’s how they are. But why let them get away with meaningless quotes? You shouldn’t let anyone get away with spouting nonsense — you should ask questions of all parties. Instead, you’re just selectively transcribing when you should be reporting.
I expect and desperately want better of this publication. Please.
By sarah68 on January 28th, 2010 at 3:34 pm
We are no longer in the heyday of journalism where NYT-type journalists are paid by their employers to devote days of research and hours of interviews to support one article (or any articles). I doubt if Cyd was paid any more for this article (if at all) than she would have gotten working at McDonald’s. Don’t expect more than they can do.
By Sarajane Siegfriedt on January 28th, 2010 at 5:26 pm
I was in the room and testified on the State Housing Trust Fund on behalf of the King County Democrats. I’m not sure why the bankers’ testimony held more weight then did mine. As “Fat-tailed” said so well, it either wasn’t true or was so greatly exaggerated I was laughing and gesticulating in my seat. “It could appear as a line item on the closing documents,” they said. Not likely. I don’t think you can charge someone for a cost of doing business that you haven’t incurred. They’re paid to find something to say, but you don’t have to repeat it. This was a Stephan Colbert moment of “truthiness.”
If this bill is to pass, it will be not only because low-income housing is greatly needed and every dollar in the State Housing Trust Fund is matched 4:1, as Rachel Myers of the Washington Low-Income Housing Alliance testified, but because HB 2906 is a jobs bill. Because the projects in the Trust Fund pipeline are extensively vetted, we know there are 2,000 units of housing statewide that are literally shovel-ready. The construction industry is the hardest-hit in the state, 37% of jobs lost, and this $100 million, together with leveraged public and private financing, would put $500 million to work immediately. I recommend a follow-up article that puts this into perspective, perhaps with some quotes from those who would hire (ask Rachel) and those who would go back to work.
By Keith on January 28th, 2010 at 6:23 pm
But isn’t there already lots of housing, just not housing that people are willing to drop the price on? We are still correcting from the housing bubble, but there are 16 million units of unoccupied housing in this country. Falling prices and rising interest rates (yes, rising!) will do more for housing affordability than a few hundred million in a trust fund, and building more houses will just lower the price of existing houses further. The goals are noble but this isn’t the way to do ti.
By Cydney Gillis on January 29th, 2010 at 1:17 pm
Thank you all for your comments — to Sarah, especially for understanding I’m doing my best.
It is true that I wrote the blog after watching a webcast of the hearing, but it was never meant to be anything more than a recap. I did pick up the phone and make one call, however — to the Washington Bankers Association to confirm what I understood their argument to be. It’s that there’s no way to charge fees on individual loans once they’re bundled into a security.
I agree that the amortization of the fee over the life of a loan would be pennies on the dollar, but the question the bankers asked Wednesday was: How do we know how much to amortize over the life of the loan? My own mortgage loan, as it happens, has changed hands four times since I bought my house in 2003.
It’s a legitimate question — one that must be overcome to pass the bill. But, in a short news recap, I’m can’t call the bankers down without editorializing.
That doesn’t mean what the bankers had to say carried more weight than the Trust Fund advocates — the bankers’ refusal to support the bill was just the immediate news of the hearing. I do indeed plan an article that would start with one of those ready-to-go housing project plans and what will happen if there’s no Housing Trust Fund to bank it.
By Harry on January 30th, 2010 at 8:00 am
I think Cydney does us a favor by writing on this hearing and raising the issue. I was also there both to testify and listen to the opposition and my take is the bankers did their cause no great favor by using the terms “speculation”, “bundling” and “global resale markets” in their testimony – you could almost hear eyes in the room rolling as the lobbyists used the very causes of the current economic crisis as their rationale for avoiding a fee they have been exempted from for too long.
On Keith’s points: the supply of empty homes and vacant apartments is certainly larger than in past years but there are huge barriers of affordability, accessibility and supportive services that make that an insufficient resource to resolve the affordability crisis which itself is a heightened version of a crisis that existed well before the recent economic morass: the King County Consolidated plan estimates the need for an additional 155,000 homes affordable to new and current residents by 2020. By affordable I mean rent is no more than 30% of monthly income – the federal standard of affordability. Market rate units do not have a guarantee of affordability as we saw in the last housing boom with once affordable apartments turned to condos almost overnight – Trust Fund projects are guaranteed affordable for at least 50 years from opening!!
By Skinny-tailed on January 30th, 2010 at 1:06 pm
Amazing the banks can manage to track the sale and reassignment of millions of mortgages over dozens of years, but their systems will come to a screeching halt over $62.
Businesses do have costs they can’t directly pass on, by the way. They pay for them out of this source called profits.
Finally, isn’t the point if this publication to do a better job than McDonalds journalism? Otherwise, why bother?