SUMMARY: Venice has long been a city of trade and travelers, but Venetians now feel tourism is squeezing them out. The city is currently losing about 1,000 residents every year as the cost of housing rises and mass tourism poses a threat to food, culture and the Venetian way of life. Special correspondent Christopher Livesay reports on what's behind the depopulation.
SUMMARY: According to a new report, more than 40 million American households are spending a third of their income on rent, and housing shortages in major cities such as New York and San Francisco may ultimately lead to billions of dollars in lost economic productivity. Special correspondent Duarte Geraldino reports on the origins of the problem and why it has progressed to such a drastic level.
HARI SREENIVASAN (NewsHour): The cost of buying or renting a home in key American cities keeps on rising. A new study out finds more than 40 million households are spending a third of their income on rent.
And the housing shortage in cities like New York, Washington and San Francisco may be costing more than 100 million American workers thousands of dollars in lost wages.
Special correspondent Duarte Geraldino explains why as part of our weekly series on Making Sen$e of financial news.
DUARTE GERALDINO (NewsHour): You can hear so much in this old building, every sort of step.
BRIAN HANLON: Yes, it's like every creak.
DUARTE GERALDINO: Brian Hanlon has multiple graduate degrees, a steady job and a middle-class income.
BRIAN HANLON: This is it right here. It probably hasn't been renovated since the Eisenhower administration.
DUARTE GERALDINO: Yet, at 34 years old, he's the subtenant of a woman lucky enough to have a rent-controlled apartment. But Hanlon's time is running out.
BRIAN HANLON: I have been in this room for about four-and-a-half years.
DUARTE GERALDINO: Four-and-a-half years?
He worries the owner of his apartment house will offer the actual leaseholder a lot of money to move, meaning Hanlon will have to pay a lot more to live in this Mission District neighborhood.
BRIAN HANLON: Well, so market rate for this place, I'm guessing, is probably — it would probably be about $5,000 a month.
DUARTE GERALDINO: Five thousand dollars a month?
BRIAN HANLON: A three-bedroom in the Mission? Sure.
DUARTE GERALDINO: The situation is forcing a growing number of people low-, medium-, and high-income workers into ever tighter living conditions; and some, with no income, out of their homes altogether.
In 2010, the New York City affiliate of Habitat for Humanity received a $21 million federal grant to work on a city neighborhood hit particularly hard by the foreclosure crisis and help stabilize it.
The funds would allow Habitat-NYC to launch the most ambitious project in its 32-year history. Its neighborhood pick was Bedford-Stuyvesant, a historically poor neighborhood in central Brooklyn, where the charity would focus on buying and renovating abandoned apartment buildings.
There was just one problem. With few vacancies in the gentrifying area, longtime tenants were pushed out of their apartments — some into homelessness — clearing the way for developers to sell to Habitat at a hefty profit, a ProPublica investigation has found.
Ultimately, Habitat's project came with a cost: While scores of families gained new homes, other even needier ones were displaced.
Though Habitat promoted the properties it acquired to renovate as “long-vacant,” four of nine were still occupied shortly before the charity moved to buy them, records show. In two cases, Habitat targeted buildings just days after the last families living there moved out.
The deals, and what local Habitat executives said about how they were being accomplished, left some inside the charity so upset that at least two employees emailed anonymous complaints to the nonprofit's international headquarters in Georgia.
“Habitat-NYC's Director [of] Real Estate and Construction speaks openly about making deals with developers, saying that we can not buy buildings from them until they get rid of all their tenants,” one of the employees wrote in a May 2012 email, which was provided to ProPublica. “We are spending federal money to throw low-income New Yorkers out of buildings.”
ProPublica's reconstruction of the events was based on hundreds of pages of internal Habitat emails and memos, as well as a review of public real estate records related to those buildings. ProPublica tracked down former tenants and used public complaints filed with the city's housing department as well as court records to establish the buildings' occupancy.
Between 2010 and 2011, at least seven Bed-Stuy families were pushed out of their rental apartments shortly before Habitat purchased them, ProPublica found. All had relied on federal housing subsidies or New York's rent regulation laws to afford their units. None were evicted in court. Three of the families ended up homeless.
Internal emails show that Habitat officials were willing to consider buildings even when they were aware that they hadn't been empty for long. “The Jefferson building I researched before is now vacant, and I am speaking with the owner,” Bill Bogdon, the director of real estate and construction, wrote to a colleague in 2011. “The challenge with this one is the recent occupancy.”
Overall, with privately raised funds heaped onto the $21 million grant, Habitat spent $43 million on the Bed-Stuy housing initiative.
Some $8.4 million went to buy six properties from developer Isaac Katz and limited liability corporations he represented. In 2006, New York's Attorney General sued Katz and his associates over a scheme in which they allegedly sold blighted buildings to dozens of minority homebuyers at artificially inflated prices. Katz settled his share of the suit for $750,000, admitting no wrongdoing.
“There's zero doubt in my mind that [Katz is] a bad guy and did bad things,” wrote then-Habitat-NYC Executive Director Josh Lockwood in a June 2011 email, responding to a colleague's inquiry. “Agreed its unlikely that an investigative reporter would target us specifically, but obviously we'd need to be prepared in the event s/he does.”
One day after Lockwood wrote the email, Habitat's Real Estate Investment Committee approved the purchase of three additional buildings from what they considered to be a group controlled by Katz for $6 million.
Katz's attorney said his client never had an ownership stake in the buildings, and was merely facilitating their sale to Habitat.
One of the buildings was the elegant, but rundown brownstone on Madison Street where Tashemia Tyson, a single mother of three, rented a third-floor apartment with public assistance. Around three months before Habitat began discussions to acquire the building, Tyson said Katz began pressuring her to leave.
Katz's attorney denied Tyson's allegations, saying that his client “never spoke to Tyson” and that all the units were vacant when he facilitated the sale to Habitat.
The apartment had no heat. “He told us that just as they were going to fix the boiler, the pipes burst,” Tyson said. Reluctant to move, she said she relied on her gas stove for heat and hauled water buckets up the stairs to cook and to bathe for more than a week.
Finally, in February 2011, she said she accepted an offer from Katz of six months' free rent at another building, but couldn't afford the new apartment once the regular rent kicked in. Today, she sleeps in a shelter in the Bronx.
Habitat said in a statement that “at no point were we aware that any tenant had been forcibly moved or incentivized to move out of their homes in properties we were intending to purchase. Moreover, we would condemn the use of any such tactics.” The charity added that they had retained outside legal counsel to investigate complaints made about their handling of the federal grant, but said the lawyers found no evidence of wrongdoing and that Habitat International concurred with their finding.
A spokesperson for Habitat International said “the anonymous hotline submitter… did not have documentation and their concerns were speculative.”
Bogdon called the allegations made against him in the whistleblower email “hearsay and erroneous.” He also said that the Jefferson building he had discussed with his colleague was never purchased.
Lockwood, who is now the CEO of the Red Cross's greater New York region, declined to comment.
Habitat acknowledged that they had struggled to find vacant properties in Bed-Stuy despite their extensive efforts and that “many of the [grant]-appropriate properties in that area were owned by Isaac Katz.”
Katz's lawyer denies that he owned many properties.
But Habitat said that they “undertook numerous steps to ensure that our actions adhered to all grant guidelines.” They said they had paid no more than the appraised value for each property and that Katz and other developers signed good-faith agreements affirming that no tenants had been improperly displaced.
“If we are able to determine that any former residents were affected by such tactics, we are willing to work with them to connect them to affordable housing resources,” Habitat said.
Paul Aloe, an attorney representing Katz, said “Mr. Katz was in no way involved in any harassment or removal of any tenants from the properties.” Later, he added, “Mr. Katz only got involved at all when the subject buildings were vacant.”
Karen Haycox, the CEO of Habitat-NYC, who joined the charity in 2015, long after the Bed-Stuy deals, said in statement, “we are proud that Habitat for Humanity-New York's participation in the [federal grant program] enabled our organization to help 105 families in need of affordable housing become homeowners.”
Four dozen of those families moved into new homes built on vacant land. Still, the majority of families helped by the project moved into units made available, in part, because others had been displaced
Many of those who bought Habitat's renovated homes earned around $50,000 a year — almost double the median income for renters in the neighborhood and about five times as much as the disability income of Charles Watson, a tenant who lived a floor below Tyson and ended up living on the streets after he was pushed out. Watson did not remember the name of the person who pushed him to leave.
“I didn't want to move,” Watson said. “They wanted everybody out because they knew they were going to sell and make the apartments into condos. And they knew that would be a lot of money. That's what it was all about, anyway: money.”
Josh Lockwood had a bold vision for Habitat-NYC when he was named its acting executive director in 2007
“In the face of New York City's crushing housing shortage, Habitat-NYC is adapting our volunteer building model to a large-scale project,” Lockwood was quoted saying in the charity's summer newsletter that year.
For most of its history, Habitat-NYC built only a handful of single-family homes annually. It was a model pioneered by Habitat International, the Christian charity that sprung to fame in the 1980s thanks in part to former President Jimmy Carter's close involvement.
Under Lockwood's leadership, the charity moved into large-scale construction, breaking ground on a 41-unit complex in the Brownsville neighborhood of Brooklyn. It was celebrated as the largest building project ever undertaken by a Habitat affiliate in the United States.
Lockwood was a rising star in the nonprofit world. In 2010, Crain's New York Business honored Lockwood as one of the city's “40 under 40.”
The federal grant was crucial in Lockwood's expansion plans. Now, Habitat would develop more than 100 units in one project. But taking the funds, part of the Obama administration's stimulus package, would require Habitat to modify another aspect of its building model.
In the past, Habitat acquired vacant lots and buildings from the city at nominal prices. With the federal grant money, Habitat would be going on the open market for the first time. The nonprofit also had to move forward on an accelerated timeline as it had agreed to spend half of the $21 million grant by the end of 2011, only a year and a half after receiving access to the money.
On the surface, it made sense that Habitat chose to work in Bed-Stuy. The neighborhood had the highest foreclosure rate of multifamily rental properties in the city, according to a report by New York University's Furman Center for Real Estate and Urban Policy, and Habitat had worked in the area.
The charity purchased nine apartment buildings to renovate in Bedford-Stuyvesant with the help of federal dollars starting in 2010. (Map source: City of New York; Credit: Al Shaw/ProPublica)
But according to city data, the neighborhood had few vacancies. That's because tenants who live in old, multifamily buildings are usually protected from eviction. New York's rent regulation laws afford those tenants the right to renew their leases even in the case of foreclosure.
All seven families who moved shortly before Habitat bought their buildings lived in rent-regulated units.
“If I were looking for vacant buildings as a result of the foreclosure crisis Bed-Stuy would not have been the first place to look,” said Harold Shultz, a former deputy commissioner at the city's housing department.
The rules governing the grant did not set out how long a property had to be vacant to be eligible for acquisition, but federal officials did not want their money to entice developers to empty out buildings to score a sale.
During a web seminar with the federal department of Housing and Urban Development in June 2010, a Habitat-NYC employee asked, according to a transcript of the meeting, if it would be okay to make an offer on an occupied building where “the tenants were not all paying their rent and there might be some eviction proceedings going on.”
“I see that as a big problem,” an official replied. If Habitat were to buy that property, he explained, the federal funds would be linked to the eviction of tenants.
By the end of the month, Habitat began targeting several buildings for acquisition. They worked with a real estate broker named Jordan Bardach, who knew Isaac Katz. At the time, Katz was still paying off his settlement to the attorney general.
Bardach has operated several ventures under the name “Imagine.” One of them, Imagine Equities, advertises services on its website to help “remove tenants” in case of “future building renovations and upgrades.” Another, Imagine Living, lists on its website the buildings Habitat ultimately purchased. In 2013, he and Katz developed an app that “speeds up” the process for landlords to get tenants “paying rent again or evicted swiftly.”
Through a lawyer, Bardach said “Habitat reached out to me because of my general experience and asked for assistance in acquisitions.”
Three of the buildings Habitat acquired with Bardach's help were long vacant. But another, 849 Halsey St., still had three tenants shortly before Habitat targeted it for acquisition in late June, according to city housing records, and letters mailed to these tenants that were obtained by ProPublica.
Twana Midgette said she left the building in June 2010 after she found what looked like an eviction notice on her door. “Because of the conditions of the building, I didn't even put up a fight, and I didn't have anyone to contact,” Midgette said. She now lives in upstate New York, where she said she continues to pay rent with public assistance.
Melinda Ortiz remained as long as she could. “They said they wanted to gut the apartments. They even started working on the apartments downstairs,” she said. “They said that they weren't going to accept any more money.” Ortiz left shortly after Midgette and has spent the past few years moving from apartment to apartment.
David Coachman, a tenant who lived in a rent-stabilized unit, said he left on June 12, after accepting a $10,000 settlement. Four days later, a Habitat employee visited the property, HUD records show. “They wanted me out because they wanted the whole building empty,” he said. Today, Coachman lives with his son in Flatbush, Brooklyn.
On July 19, 2010, Katz signed a document that said he would notify Habitat if there had been tenants at 849 Halsey in the past three months and would “not order current occupant(s) to move, or fail to renew a lease, in order to sell the property to us as vacant.”
That was a little more than a month after the three tenants left.
Habitat declined to say whether Katz had told them about the tenants when he signed the document.
The tenants all said they had been pressured to leave, but do not remember the names of the people who spoke to them. Katz's attorney told ProPublica his client hadn't purchased the building until early July. “When Katz purchased the building, it was vacant,” he said.
If Habitat had independently tried to verify the occupancy history of the building, they might have found housing records that documented a call from Ortiz's apartment to register complaints of bedbugs, mold and a broken banister. The date of the call was June 1, 2010 — 15 days before a Habitat official first visited the property.
“I found all the units to be vacant,” the official wrote to HUD.
Katz's LLC closed on the sale of 849 Halsey to Habitat in late January 2011.
That month, Katz also sold a building at 203 Marion St. to the charity for about $620,000.
It was a remarkably quick and lucrative flip. Katz had purchased the six-unit property earlier that day for about $380,000 from Lena and Percy Spellman, an elderly African American couple who had owned it since 1983.
Internal Habitat documents provided to ProPublica show that Habitat first targeted the property for acquisition the previous June, when it was still owned by the Spellmans.
Katz's lawyer said this was “incorrect,” but did not elaborate.
Property records show that the Spellmans did not sign a contract agreeing to sell the property to Katz until July 30.
“I'm not very up to date on real estate law, but I don't know how you can sell something you don't own,” said Jerome Spellman, the son of the building's longtime owners. “And that's what he did.”
Habitat officials deny this was the case. In a statement, they said Katz already had a binding contract in hand when they first learned about the property. “There was no legal way Habitat-NYC could have directly purchased the property from the Spellmans,” they said.
Michael Kozek, a real estate lawyer, who reviewed the documents for ProPublica, said the Spellmans may have cause for complaint.
“The circumstances indicate something suspect,” he said. “It appears that the Spellmans were deprived of the full value of their property.”
Talk about thinking outside the proverbial box! When the going gets cold, the smart sustainability devotees experiment with …. greenhousing a whole structure. Via Ecowatch, meet Marie Granmar and Charles Sacilotto:
The couple recently gave Fair Companies a tour of their “Naturhus” (or Nature House) that’s surrounded by a 4-millimeter pane of glass that cost roughly $84,000 to install.
The Naturhus was built on the site of an old summer house on a Stockholm archipelago and was inspired by Swedish eco-architect Bengt Warne, who was also Sacilotto's mentor.
There are many advantages of living in a greenhouse for this family. Sunlight helps warm the home during the day and residual heat is stored in the bedrock below the house. The roof deck can be used for year-round activities such as sunbathing, reading or playing with their son.
Of course, a couple this dedicated doesn’t only go for the non-obvious extreme—they’ve tackled other sustainability challenges along the way. They collect rainwater for plants and household use, they compost, they grow their own food within the greenhouse. And Sacilotto even designed a sewage system that “begins with a urine-separating toilet and uses centrifuges, cisterns, grow beds and garden ponds to filter the water and compost the remains,” according to Ecowatch.
Check out the Fair Companies video that explores this “Naturhus” in more detail.
At a conference on housing finance last month, a collection of investors described their innovative "rent-to-own" products.
Rent-to-own schemes have long exploited the poor. Naturally, marketers address that problem with euphemisms. Today, it's called lease purchase. The arrangements work in myriad permutations, but the basic deal is that a person rents a home and pays for an option to buy it at a later date.
All the panelists hailed the product, calling it a "yield enhancer" that would increase profits. In a standard lease, one panelist explained, the owner covers costs like taxes, maintenance cost and insurance. With lease purchase, the renter pays those expenses. And it's easier to evict because the occupant has only a rental agreement. It's not a foreclosure proceeding against an owner, after all.
One went further. Eli Shaashua, of Red Granite Capital Partners, described it this way: "Basically, it's an added fee to the rent. For us, it instills pride in homeownership for some tenants who cannot currently when they rent a house own their own home."
Having pride in ownership means that the renter takes care of the property more carefully. So that's a good thing — for the owner, that is.
Shaashua went on to explain that his options last generally for two years. A renter pays a bit extra for the right to buy the house at a predetermined price, one above the current value.
Then Shaashua delivered the kicker to the roomful of would-be investment managers: "Most times, given the reality, tenants do take it, but it's hard for them to execute the option," he said. "Our experience is that most stay until the end and then they say they cannot come up with the down payment or decide not to stay in the property."
Voila, free money. This amounts to an admission that the product exploits consumers' lack of financial savvy. This shouldn't be surprising. Who are you going to bet gets the price right, an aspiring home buyer or analyst with access to oceans of data on prices and historic trends?
"I regret that my words at the panel were taken out of context and understood in a way which is completely different than the one I was intending to convey," Shaashua said in response to a request for comment. "Our firm actively engages, and incentivizes home ownership and community renewal, which, according to our experience and our opinion, constitutes a clear win-win scenario for all parties involved. However, despite our intention to encourage home ownership and the given incentives, we noticed that the conversion rate to home ownership does not meet the level we hope to achieve."
The country is facing a shortage of rental housing. At the same time, financial giants like the Blackstone Group have come into the market, raising worries that such investors would neglect the upkeep of the homes they bought or inflate another bubble. There may be some of that, but they have acted to stabilize plummeting prices. So the influx of financial firms hasn't been entirely malign.
The rent-to-own business appears to be a small, grubby niche of finance. People I spoke with said that the big players were not doing rent-to-own. And I couldn't find any serious Internet presence for Red Granite Capital Partners.
Yet even if rent-to-own is a small, dark corner, there are some important lessons to be drawn. The first, obvious one is that someone should look out for renters in markets where people might take advantage of them. That's where the Consumer Financial Protection Bureau comes in. As it happens, the very thing Republicans would like to do now that they control Congress is gut this fledgling agency.
This is another lesson. Today, we are having a debate about how to properly run a housing finance system. About seven in 10 new mortgages have government backing, mainly from Fannie Mae or Freddie Mac. On one side is pretty much everyone on the right, center and left-of-center. They argue that the government needs to have a much-reduced role. There are various positions, but the main one is that the market can deliver more mortgages more efficiently to more people.
But there is another side: That the top-down, dominant government role works. Melvin L. Watt, the Obama appointee who now heads of the Federal Housing Finance Agency, seems to hold a lonely position in this camp. He is pushing Fannie and Freddie to expand credit, widening the types of mortgages they will back from the private sector. In doing so, he is reversing direction from his predecessor, Edward J. DeMarco. Watt is staking out the position that the government can be a responsible steward for most of the housing market.
In recent months, Watt has pushed through changes to allow Fannie and Freddie to buy loans made to borrowers who made lower down payments on houses, loosened up the mysterious "credit box" at the giant mortgage companies and lowered fees.
Some critics argue that the real problem is not tight credit from banks but lack of demand, because the middle class is getting squeezed.
But both things can be true. The economy is certainly not producing high enough wages for people to be able to afford homes and that bears addressing. But credit is tight and can be loosened as the economy turns up.
Loosening credit naturally leads to a queasy feeling for people who well remember the excesses of the last decade. Conservatives and some Wall Streeters are criticizing Watt. They are doing so while still advocating "reform" for Fannie and Freddie — code for privatizing the mortgage market. They seem to have a point: Didn't we learn anything from the housing crash?
Actually, we did. We learned that the private sector ran amok, selling inappropriate loans to unqualified buyers. This is not what Fannie and Freddie will be doing under Watt's watch.
Watt is doing "all of the kinds of things we would have liked to have done at the peak of the crisis," said Christopher J. Mayer, a housing expert at Columbia University. "It's refreshing for people to say that homeownership is important for wealth accumulation. You have to do it responsibly, but government needs to play a role."
Doing it conscientiously, of course, is the key.
These Watt changes are an important test. Can the government do it when the private sector, with its rent-to-own sharks, cannot?
Correction: This column incorrectly said that about nine in 10 new mortgages have government backing. Recently, more than seven in 10 new mortgages have government backing, mainly from Fannie Mae or Freddie Mac.
JUDY WOODRUFF (NewsHour): Now: how Detroit is tackling a staggering amount of blight with some unusual help. The city is going through the largest municipal bankruptcy in U.S. history.
Earlier today, a judge ruled that Detroit is permitted to shut off water for residents if they don’t pay their bills. This comes as the city is under a great deal of pressure to turn around its larger deteriorating situation, including thousands of shuttered buildings.
Special correspondent Christy McDonald from Detroit Public Television has our story, as part of the Detroit Journalism Cooperative, funded by a grant from the Knight Foundation and the Renaissance Journalism Project of the Ford Foundation.
CHRISTY MCDONALD, Detroit Public Television: A demolition crew at work in Northwest Detroit. This one crew will knock down up to 10 houses in a day. Ronald Garrison lives next door to this one, vacant for years. Trespassers looted it of anything of value.
RONALD GARRISON: The man down the street boarded it up. And they used to come rip the boards off and still go back in there. And he would have to come board it up again.
CHRISTY MCDONALD: The numbers are in. There are nearly 80,000 dilapidated structures across the city of Detroit, a number so high because of scrappers, vandals tearing everything of value out of vacant properties, leaving them open to the elements. Once there is structural damage, the houses have to come down.
DERRICK WATTS: Oh yes.
The scrapping is so rampant, Derrick Watts says even inhabited homes can be targets.
DERRICK WATTS: You have to watch your house even if you go on vacation. You can go on vacation, and come back and your house will be scrapped. So you got to watch it, really, 24 hours a day, because that’s the thing now. That’s the hustle now.
CHRISTY MCDONALD: With the city bankrupt and operating under an emergency manager, Detroit’s new mayor, Michael Duggan, is focusing on the demolition of the tens of thousands of houses stripped beyond repair.
Tonight’s episode of “This American Life” will feature a story based on ProPublica’s yearlong investigation “Living Apart: How the Government Betrayed a Landmark Civil Rights Law.”
Called “House Rules,” the TAL segment will examine the ways zip code determines the destiny of many Americans. The show will feature some of the actors who go undercover to test the market for hidden housing discrimination, a highly effective tool seldom used by the government.
Our reporting chronicled the U.S. Department of Housing and Urban Development’s repeated failures in enforcing the 1968 Fair Housing Act. This landmark legislation not only barred discrimination in housing sales and rentals – it also required communities to “affirmatively further” residential integration.
Since we published our first stories late last year, there have been several significant developments on matters we reported. Here’s what’s happened.
HUD Proposes Regulation
In July, HUD issued a proposed regulation that for the first time clearly defined the steps local and state governments that receive HUD funding must take to examine housing segregation based on race and show they are in line with the Fair Housing Act. The effort to define such rules began under the Clinton Administration, but stalled because of objections from cities and counties. President Obama had promised the regulation would be issued by the end of 2010, but conflicts within HUD and pressure from powerful outside groups kept it bottled up for years.
The proposal would create a new planning process under which HUD grantees must use data provided by the federal government on segregation, racially concentrated areas of poverty, access to education, employment, transportation and environmental health to set housing and development priorities.
Advocacy groups such as the National Fair Housing Alliance and the Poverty & Race Research Action Council have praised the regulation. Others, including The Weekly Standard, have accused HUD of social engineering.
The public comment period on the proposal ended Sept. 17. The final regulation has not yet been issued.
Westchester County Loses Grant Dollars
In August, HUD took the unprecedented step of stripping $7.4 million in community development block grants from Westchester County, N.Y., the tony New York City suburb that settled a landmark fair housing lawsuit in 2009.
The second installment of ProPublica’s “Living Apart” series documented how, even with the explicit backing of a federal court, HUD had not taken steps to make Westchester County comply with requirements of the Fair Housing Act. But this summer, after years of defiance by county leaders, Westchester became the first jurisdiction ever to lose its allocation of HUD grant dollars for not affirmatively furthering fair housing.
“It is unfortunate the County continues to fall short in its duty to identify barriers to fair housing choice and to work to overcome these obstacles,” HUD Deputy Secretary Maurice Jones said in a press release. “This continuing failure to meet these requirements offers HUD no choice but to make these funds available to other jurisdictions that are willing to meet their civil rights obligations.”
Case Settles, Enforcement Tool Saved
For the second time since early 2012, a tool of fair housing enforcement has been saved from possible extinction by a case settling before it reached the Supreme Court. Last week, the town of Mount Holly, N.J., settled a lawsuit slated to go before the court on Dec. 4.
As ProPublica reported in February, the Mount Holly case centered on allegations of what’s called “disparate impact”: That a policy or practice disproportionately harmed racial minorities or other protected groups. The Fair Housing Act does not explicitly mention disparate impact, but federal courts have consistently affirmed the principle in rulings over a 40–year period. Since modern-day discrimination is rarely overt, this precedent has become a powerful tool for the government and civil rights groups, allowing them to bring cases against landlords, lenders or jurisdictions by showing their policies or actions had disproportionate effects on certain groups of people. (Not all such impacts violate the law; if a legitimate business practice leads to the disparity, it’s not a violation.)
Mount Holly was sued a decade ago over its development efforts in a predominately black and Latino part of town. The town bought and destroyed most of the homes in the neighborhood, planning to build more expensive housing that never came to be. Residents sued, saying the town’s actions had a disparate impact on African Americans and Latinos.
The legal battle finally made its way to the nation’s highest court this year, setting the stage for a potential challenge from its conservative wing, which has revisited aspects of several pieces of landmark civil-rights legislation in recent sessions. This summer, the court limited the reach of the Voting Rights Act.
In 2011, the Supreme Court accepted a disparate impact case out of St. Paul, Minn., but federal officials and civil rights activists persuaded the city to withdraw the case to avert a ruling that might strike down the principle.
In February, as the Court contemplated whether to hear the Mount Holly case, the Obama Administration released a long-promised disparate-impact regulation aimed at solidifying the principle’s place in fair housing enforcement.
Last week, Mount Holly avoided the Supreme Court showdown when its town council voted to compensate those who’d lost their homes.
Disparate impact lives to fight another day.
Americans are in a buying mood, thanks largely to the housing recovery.
The latest sign emerged Tuesday as the Standard & Poor’s Case-Shiller home price index posted the biggest gains in seven years. Housing prices rose in every one of the 20 cities tracked, continuing a trend that began three months ago. Similar strength has appeared in new and existing home sales and in building permits, as rising home prices are encouraging construction firms to accelerate building and hiring.
The broad-based housing improvements appear to be buoying consumer confidence and spending, countering fears earlier this year that many consumers would pull back in response to government austerity measures.
In January, the two-year-old payroll tax holiday ended, stripping about $700 from the average household’s annual income, according to the nonpartisan Tax Policy Center. Federal government spending cuts that started in March are also serving as a drag on economic growth, economists say. And some recent data on other parts of the economy, like manufacturing and exports, have also disappointed.
Yet consumer confidence reached a five-year high in May, according to a Conference Board report also released on Tuesday, with big improvements in Americans’ views about both the current economy and future economic conditions. Consumer spending has also been strikingly resilient so far this year, given the tax hikes.
“Five years after the start of the financial crisis in earnest, and four years and a week’s time from the beginning of the economic recovery, we’re finally starting to get more of a pickup,” said John Ryding, chief economist at RDQ Economics. “It’s been a very drawn-out process, but you have to remember what we’ve been digging our way out of.”
The recent decline in gas prices is probably helping, as are increases in the stock market even though only about half of Americans own any equities. Perhaps most important, economists say, the growth in the value of the existing housing stock means that homeowners around the country are finally feeling richer, and that so-called wealth effect is probably making consumers loosen their purse strings a bit.
The positive impact of rising home values and the appreciating stock market is expected to offset at least a third of the fiscal tightening, according to Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors.
The Case-Shiller 20-city composite index rose 10.9 percent over the last year, the biggest increase since April 2006. Several cities — Charlotte, N.C.; Los Angeles; Portland, Ore.; Seattle; and Tampa, Fla. — had their largest month-over-month gains in more than seven years.
HARI SREENIVASAN (Newshour): The latest numbers showed the biggest gains in home prices since the onset of the financial crisis. The S&P/Case-Shiller Index found prices rose in the largest 20 markets by a little more than 8 percent in January, compared to a year ago.
Separately, a government report out today found new home sales were down by five percent last month, but still up 12 percent compared to 2012. While some markets are reporting prices are climbing more quickly than expected, the average price of a new home is nearly $247,000 dollars.
For a closer look at what's driving the pace of this recovery, we turn to Nicolas Retsinas. He teaches about real estate at the Harvard Business School.
MARGARET WARNER (Newshour): Ten of the country's major banks have agreed to pay $8.5 billion to settle claims that they improperly foreclosed on homeowners during the height of the housing crisis. The companies include giants J.P. Morgan, Bank of America, and Wells Fargo.
The settlement stems from the way they handled some millions of foreclosures during 2009 and 2010. More than $3 billion of that will go in direct payments to borrowers foreclosed on during those years. Another $5 billion is earmarked for other assistance to homeowners who are struggling now.
In a separate housing crisis-linked settlement today, Bank of America also agreed to pay mortgage giant Fannie Mae more than $10 billion to settle claims that it sold Fannie risky mortgages.
For more, I am joined now by two people who track the housing industry from different perspectives.
Guy Cecala is publisher of "Inside Mortgage Finance," a housing industry research publication.
And Diane Thompson is an attorney with the National Consumer Law Center.
JEFFREY BROWN (Newshour): And we turn to another kind of look at the election. We call it Missing Issues, important topics on the American agenda that neither candidate is spending much time discussing.
Tonight, our subject is housing.
It was the housing bubble that helped lead to the financial crisis in 2008 and has continued to drag on the national economy.
There's been better news recently as the housing sector has shown new signs of life. Just today, a new report found sales of new homes rose 5.7 percent in September. That's the best pace since April of 2010, and continues an upward trend in recent months. And the average price of new homes has risen more than 14 percent in the last year.
But big problems remain. More than 20 percent of U.S. homeowners are underwater on their mortgages, meaning they owe more than the value of their home, and some 950,000 homes are in the process of being foreclosed on currently.
Last October, Mitt Romney took a largely hands-off approach to the problem.
MITT ROMNEY (R): Don't try and stop the foreclosure process. Let it run it's course and hit the bottom.
JEFFREY BROWN: But by January, the Republican hopeful was quoted by The New York Times as saying, "The idea that somehow this is going to cure itself, all by itself, is unreal."
SUMMARY: Though new reports show that banks are repossessing fewer homes from a year ago, mortgage defaults are on the rise. Jeffrey Brown talks to Guy Cecala of "Inside Mortgage Finance" about why foreclosure rates remain high, even when the house market shows signs of improvement.
Hundreds of millions of dollars meant to provide a little relief to the nation’s struggling homeowners is being diverted to plug state budget gaps.
In a budget proposed this week, California joined more than a dozen states that want to help close gaping shortfalls using money paid by the nation’s biggest banks and earmarked for foreclosure prevention, investigations of financial fraud and blunting the ill effects of the housing crisis. California was awarded more than $400 million from the banks, and Gov. Jerry Brown has proposed using the bulk of that sum to pay the state’s debts.
The money was part of a national settlement valued at $25 billion and negotiated with five big banks over abuses in their mortgage and foreclosure processes.
The settlement, reached in February after a year of talks and intervention by the Obama administration, was the second-largest in history involving the states, trailing the tobacco industry settlement, and represented the first large-scale commitment by banks to provide direct aid to borrowers.
As part of the settlement, the banks agreed to pay the states $2.5 billion, money intended to help homeowners and mitigate the effects of the foreclosure surge. But critics complained that this was the only cash the banks were required to pay — the rest comes in the form of “credits” for reducing mortgage debt and other activities. Even that relatively small amount has proved too great a temptation for lawmakers.
Only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group. So far about 15 states have said they will use all or most of the money for other purposes.
JUDY WOODRUFF (Newshour): The signs of strain were evident again today in the U.S. housing market. The latest numbers highlighted how tough it's been to fix a vital economic sector.
Tonight, we look at the housing news as we begin a series, "After the Fall," on how Wall Street, the economy, and financial regulation have changed since the crisis of 2008.
Builders have been cutting back on housing construction, but, in March, there were still more new homes for sale than people wanted to buy. The National Association of Realtors reports sales last month fell over 7 percent, the most in more than a year. Overall, some 328,000 homes sold, less than half the rate in a healthy market.
And a closely watched index found home prices fell 1 percent as well. They have been falling for six months in a row. Overall, the data underscored just how much the housing market continues to struggle four years after the mortgage meltdown.
The Bush and Obama administrations both created programs to stem foreclosures, but they have come up short. One program designed to help four million homeowners refinance has led to just about 900,000 permanent loan modifications so far.
NARRATOR: Geithner realized he needed to know how bad Bear's books looked. He dispatched a SWAT team of investigators from the Federal Reserve to Bear's headquarters.
BETHANY MCLEAN, "All the Devils Are Here": Tim Geithner is frantically involved in trying to figure out what's going to happen if Bear melts down and how you need to prevent it from going into freefall and dragging down the rest of the financial sector with it.
BRYAN BURROUGH, Vanity Fair: By midnight, by 1:00, 2:00 in the morning, everybody and their mother has teams at Bear, Morgan, the Fed, the SEC, and they find out Bear is stuffed to the gills with toxic waste.
NARRATOR: Bear was party to complicated financial deals.
BETHANY MCLEAN: Nobody understood how subprime mortgages had proliferated through these things called credit default swaps, and nobody understood how they'd kind of gotten into the blood of the financial system.
After months of painstaking talks, government authorities and five of the nation’s biggest banks have agreed to a $26 billion settlement that could provide relief to nearly two million current and former American homeowners harmed by the bursting of the housing bubble, state and federal officials said. It is part of a broad national settlement aimed at halting the housing market’s downward slide and holding the banks accountable for foreclosure abuses.
Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.
Still, the agreement is the broadest effort yet to help borrowers owing more than their houses are worth, with roughly one million expected to have their mortgage debt reduced by lenders or able to refinance their homes at lower rates. Another 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000. The aid is to be distributed over three years.
The final details of the pact were still being negotiated Wednesday night, including how many states would participate and when the formal announcement would be made in Washington. The two biggest holdouts, California and New York, now plan to sign on, according to the officials with knowledge of the matter who did not want to be identified because the negotiations were not completed.
The deal grew out of an investigation into mortgage servicing by all 50 state attorneys general that was introduced in the fall of 2010 amid an uproar over revelations that banks evicted people with false or incomplete documentation. In the 14 months since then, the scope of the accord has broadened from an examination of foreclosure abuses to a broad effort to lift the housing market out of its biggest slump since the Great Depression. Four million Americans have been foreclosed upon since the beginning of 2007, and the huge overhang of abandoned homes has swamped many regions, like California, Florida and Arizona.
In New York State, more than 46,000 borrowers will receive some form of benefit, with an estimated 21,000 expected to see what they owe reduced through a principal reduction, according to estimates by the Department of Housing and Urban Development.
The five mortgage servicers in the settlement — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — have largely set aside reserves for the expected cost of the accord and investors are likely to cheer its announcement because it removes one more legal worry for the industry, analysts said.
JEFFREY BROWN (Newshour): Florida may be known as the Sunshine State, but like much of the country, conditions remain poor when it comes to the housing market.
A national report out today, the so-called Case-Shiller index, shows U.S. home prices fell for a third straight month in major metropolitan markets, including Miami and Tampa. In Florida, home values have dropped by 40 percent or more in some areas since the housing bust. Nationwide, prices have dropped by more than a third.
And the foreclosure crisis continues, with nearly 2.7 million foreclosure filings last year. Several states have been particularly hard-hit, including California, Nevada, Arizona, and indeed the site of today's primary election, Florida.
Some voters in Tampa today said they wanted the candidates to offer more solutions to the problem.
SHARRY STEINER, Florida voter: I'm not thrilled with the reactions from them talking about it. I think they have kind of just gone past it. I really don't think they want to talk about it.
RAY SUAREZ (Newshour): As the economy climbs back from one of the country's deepest recessions, it's now clear that a dragging housing market remains a pivotal part of the problem.
But, back in 2006, many economists didn't see big risks in a growing housing bubble or the potential body blow housing could give the economy. Yesterday, we learned the extent of that thinking at the Federal Reserve in 2006, on the cusp of the crisis.
The insights come from newly released transcripts detailing conversations between Federal Reserve Chairman Ben Bernanke and his colleagues at the Fed Board of Governors in 2006. They discuss the changing conditions surrounding an overheated housing market.
But, as Bernanke put it that march: "Strong fundamentals support a relatively soft landing in housing. I think we are unlikely to see growth being derailed by the housing market."
Binyamin Appelbaum has been reading these documents for The New York Times. And he joins me now.
RAY SUAREZ: It's not like they were totally blind. They were seeing steady supplies of intelligence about what was going on in the field.
Here's a quote from Federal Reserve Gov. Susan Bies. She says: "A lot of private mortgages that had been securitized during the past few years really do have much more risk than the investors have been focusing on."
But, often, they moved ahead as it they weren't seeing what they were seeing. Did they ignore the details they were getting?
BINYAMIN APPELBAUM, The New York Times: You know, it's so striking. If you kept reading from that quote, what you would see is that she went on to say, basically, but this is a small problem. The market as a whole is doing fine. The overall quality of these securities is very good. I'm not worried about the housing market.
In fact, at one point, she said that if there was a mild correction in housing, it would benefit the economy by moving resources to healthier sectors of the economy. You're right. They saw it. They saw that housing was crashing. They joked about the problems that home builders were having in selling homes. They would tell these stories about home builders giving away cars or dressing up empty properties so they looked occupied.
And they understood that there was a problem in the housing market. What they didn't understand was how important the housing market had become to the economy as a whole.
RAY SUAREZ: Early in the year, new chairman Ben Bernanke said at a meeting: "So far, we're seeing, at worst, an orderly decline in the housing market, but there still is, I think, a lot to be seen as to whether the housing market will decline slowly or more quickly."
Did Ben Bernanke not join in the rah-rah that many of the other governors around the table were indulging in?
BINYAMIN APPELBAUM: This -- these transcripts offer a really interesting look at Chairman Bernanke, because what does emerge in that, in the context of that board, he was the person who most frequently said, hey, this could be worse than we think. There is a possibility here that we're missing some of the consequences that could unfold, some of the damage that could be done to the real economy.
But it was a relative distinction. He did not see the crash coming. He didn't warn of the consequences that would unfold. You know, he holds the distinction of being, among that group of people, the one most cognizant of the downside possibilities, but it was a group of people who were all unaware of the cracks beneath their feet.
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BINYAMIN APPELBAUM: This was a failure to some extent of the economics profession. Most economists, if you put them into this room, would have reached the same conclusions and said the same things. It should always be noted that there were people who were right, who saw this, who warned about it, but they were a minority. Most economists didn't see it.
But it should also be said that you know, it may be the case that any of us put into center field at Fenway Park wouldn't play center field very well, but we're not all the center fielders on the Red Sox. Some people are paid to do this. They're supposed to be doing it well. That's the role the Federal Reserve is supposed to be playing, and they didn't do it.
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RAY SUAREZ: For all that emerges in these 1,200 pages of transcript, what about the response that these same people around the table launched when it was clear that there were problems? Did they stop the freefall? Did they keep things from getting worse?
BINYAMIN APPELBAUM: Yeah, that's a very different story, and it's one that the Fed comes out looking much better in.
I think a lot of economists give them a lot of credit for having intervened decisively, for having moved really strongly to arrest the fall of the economy, to prevent what many people were concerned could become the first real depression in 80 years, to have prevented the collapse of financial markets through a series of unprecedented and massive interventions.
The state gatekeeper to tens of millions of dollars in federal affordable housing subsidies promised Wednesday to study the soaring costs of those developments and make reforms if needed.
That group, the California Tax Credit Allocation Committee, called a special meeting here as the last in a series of hearings it has been holding across the state. By the end of the session, it had pledged to conduct an in-depth examination of development costs to establish why affordable housing projects so often cost wildly more than private, market-rate developments.
Affordable housing is designed to provide homes for tens of thousands of working families who can't afford to pay high rents. But with tens of millions of tax dollars set aside each year to build it, affordable housing in California has also evolved into a delivery mechanism for social goals that have little to do with that central mission — and even less to do with containing costs.
As a recent voiceofsandiego.org investigation found, the result is that far fewer affordable apartments get built than could be.
Wednesday's meeting was a strong sign that the state has taken note of the rising costs.
The commission plans to update a study completed in 1993 that comprehensively compared the cost of building affordable housing to market-rate developments.
"In light of these figures and the comments that we've taken in our various public forums, it is still not clear to us yet what path to take going forward to get our arms around cost containment and begin to address it," the committee's executive director, Bill Pavão, said in announcing the new study.
The committee, headed by State Treasurer Bill Lockyer, is tasked with choosing which of dozens of projects around the state receive federal low-income tax credits.
The process by which those multimillion-dollar grants are awarded has come under criticism in recent years, with some developers decrying the lengthy, complicated process of winning tax credits as a beauty pageant that forces them to meet policy objectives that have little to do with the core mission of housing working people.
As the process of winning tax credits has become more convoluted and competitive in recent years, the costs of the projects the committee funds have been growing. Statewide, the cost of building each affordable housing apartment in the publicly funded projects has increased 60 percent since 2005. That's led the committee to regularly reassess its model for awarding grants.
At the meeting Wednesday, developers and affordable housing advocates lined up to discuss the relative merits of those policy goals and to explain to the committee the complicated factors driving up the cost of building affordable housing.
Several speakers pointed to the committee's complicated points system, which rewards developers for building on expensive, tough-to-develop plots of land. The requirement to incorporate green building elements like solar panels can also increase costs, the committee was told. So can the requirement to build large, family-sized apartments that most market-rate developers won't consider building.
But speaker after speaker also cautioned the committee not to ignore the benefits all those public policy goals bring to communities.
Building affordable housing isn't just about building cheap homes for people to live in, the committee was told.
The industry also aims to redevelop blighted neighborhoods by building attractive new buildings in them, and doing so has ancillary benefits like pushing up local property values and even driving down crime rates, said Laura Archuleta, president of Jamboree Housing Corp., a nonprofit developer based in Irvine, one of seven speakers invited to make presentations to the committee.
Archuleta said one of her company's projects in the city of Fontana actually led to a significant drop in calls to local police. In addition to making the city safer, the project will actually save the Police Department money in the long-run, she said.
"I would encourage you to evaluate the success of the California tax credit program by the total impact it has on the residents living in and around the developments it helps to create, not just on the cost per unit," Archuleta said.
But several affordable housing developers and officials at the meeting acknowledged that there is room for improvement in the tax credit allocation system in California.
Andy Agle, director of housing and economic development for the city of Santa Monica, said his city limits developer fees on all projects to $16,000 per unit, for example. The average developer fee on projects statewide is more like $25,000 to $35,000, estimated Pavão.
Some speakers cautioned that without reform, affordable housing funding could become a target.
Pat Sabelhaus, a board member of the California Council for Affordable Housing, an advocacy group, said tightening up the tax credit system is especially important given the current economic and political climate. With so much attention focused on reducing the federal deficit, all taxpayer-funded programs will likely be given close attention by conservative hawks in Washington in the coming months, Sabelhaus said.
"I think all of us should be concerned about costs and what we can do to build a cost-efficiency program into the system so that the public and the taxpayers and Congress will view this as a program that they should continue to support," Sabelhaus said.
Joe DeAnda, Lockyer's spokesman, said the committee hopes to have feedback from its study of costs within six months.
JEFFREY BROWN (Newshour): The troubled U.S. housing market got a bit of good news today with word that some prices are rising, but full recovery remained a long way off.
Four cities, Chicago, Minneapolis, Washington and Boston, posted the largest increases in the latest Case-Shiller home price index. But prices in Detroit, Cleveland, Las Vegas and Phoenix were selling at the same levels as January of 2000, more than 10 years ago.
What's more, the survey of 20 cities found overall home prices have actually fallen over the last 12 months. And home sales for this year are on track to be the worst in 14 years. And things could get worse yet, once banks pick up the pace on millions of foreclosures, as expected. They have been delayed by a government investigation into mortgage lending practices.
PROTESTERS: Prosecute the criminals! Attorney generals, prosecute the criminals!
JEFFREY BROWN: Amid anger over the banks' handling of foreclosures, 36 state attorneys general and the Obama administration have been trying to negotiate a settlement with the five largest mortgage servicers. It could include a lump sum settlement of more than $20 billion that states could then use to modify mortgages.
Meanwhile, the futures of mortgage giants Fannie Mae and Freddie Mac are still to be determined, with a new plan from the Obama administration reportedly in the works. Fannie Mae and Freddie Mac still back most home loans in the U.S.
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NICOLAS RETSINAS, Harvard Business School: It's amazing. Interest rates are at a 50-year low, and yet we have such a tepid housing market. And, yes, prices have gone up in a number of cities over the last couple months, but they're down from a year ago and really down from where they were almost at beginning of the decade. So it's still a very difficult, sort of shaky time in the housing market.
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GUY CECALA, "Inside Mortgage Finance": Most people would say the real number to look at is the year-over-year change. And as long as we keep declining, that's bad news. I think, cumulative, we have already seen a 30 percent or so decline, according to the Case-Shiller index. So, this is just more bad news.
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JEFFREY BROWN: Now, Nic Retsinas, fill in the picture a little bit behind the big numbers. Talk about -- you mentioned some of the differences in regional and in different cities. What do you see there when you look out?
NICOLAS RETSINAS: Well, it's a big country.
And some markets are in better shape than other markets. Clearly, in the markets such as the Southwest, south Florida, parts of California, there was such substantial overbuilding that we have a huge excess inventory. In other parts of the country, like the Upper Midwest, that have faced severe economic problems, you have struggles on the demand side.
So while there are some silver linings, parts of Texas, parts of the Northeast, where you think we're probably at or near a bottom, as long as this foreclosure cloud is hovering overhead, a recovery is going to be in the distance.
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NICOLAS RETSINAS: Well, it's better to think in terms of regional, because people buy homes in particular neighborhoods, not in the United States of America.
However, we do have a national housing finance system. And that national housing finance system is tightening credit, requiring higher down payments. So it is discouraging people who might want to buy. And for those who have the means to buy, they're discouraged because what they see is a possible downfall in prices.
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JEFFREY BROWN: Now, we have all mentioned the foreclosure issue.
Let me start with you, Guy Cecala, on this. It seems as though it's somewhat in limbo at this point, given what the attorneys general are doing, what states are doing, legal proceedings. What's going on?
GUY CECALA: Yes, backing up a little, one of the things that is pushing housing prices lower is the fact that we have so many distressed property or foreclosed properties that make up housing sales. They tend to have lower prices.
And if you compare those to what we saw several years ago, it's naturally going to result in price declines. The issue going on now is that foreclosures have slowed down. And you might think, gee, isn't that good news? But it's not slowing down because unemployment has improved and a lot of people are catching up on their mortgages. It's slowing down because there's this big settlement that the federal government and mostly the state attorney generals are trying to work out with the largest mortgage servicers in this country.
And it's bogged down the whole foreclosure process, to the point where legitimate foreclosures are being kept out of the market. And that's going to create a backlog going forward.
JEFFREY BROWN: And the point is that we need this process to take place. As painful as it's going to be, we need the foreclosures to go forward.
GUY CECALA: Yes. We have somewhere in the neighborhood of four million distressed properties out there. Those are either seriously delinquent mortgages or ones already in the foreclosure process.
And most of those loans have to be pushed through the system at some point. And the longer we take to get through that, the longer the housing market is going to take to recover.
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JEFFREY BROWN: And, so, Nic, staying with you, what difference would it make once a settlement comes through? What difference would it make to consumers and to these banks?
NICOLAS RETSINAS: Well, in the short term, it would probably even more properties on the market. And in the very near term, it might further depress prices.
But once we're through with this, we can start dealing with the excess inventory. And when we clear the excess inventory, we can have a supply-demand balance. And that's when you can see a recovery begin.
JEFFREY BROWN: Now, Guy, the administration also has talked about its sort of hoped-for plan for new foreclosure settlements. What's going on with that?
GUY CECALA: Well, they're also trying to work this through. And I think there's a of pressure on the administration now to do something to revive the morbid housing market.
One of the few things they see as necessary is resolving the foreclosure crisis. As we said, everybody is sort of in agreement now that there's a huge pipeline that has to start moving through the process. And if you keep that backlog, you're not talking about a recovery for two or three more years.
So the sooner you can do it, the better. And that's why I think the administration is trying to goose along this settlement as much as they can. They just haven't had a lot of luck.
