PHC and Friends Celebrate Two Decades of "Homeownership Done Right"

Our 20th Anniversary Event last Thursday was chock full of wonderfulness. About 300 guests—board members (current and former), funders, customers, City officials, and other partners—joined us at the Nines Hotel in downtown Portland for an evening of appreciation, education, and celebration.
There was great music from Lloyd Jones and his band, and endless trays of tasty food and drinks. The Silent Auction and the Golden Ticket Raffle were both popular and successful. And Portland Mayor Sam Adams presented us with an official Proclamation declaring “July 15th to be the Day of Appreciation for the Portland Housing Center!”

Our keynote speaker, Dr. Melissa Harris-Perry, professor of political science at Tulane University, author, and political commentator, educated and impressed us all with her presentation on “Home, Civil Rights, and the Challenge of Post-Racial Organizing.”

I was especially impressed with her ability to take the “long view” of political, social, and economic progress in America, and for reminding us that we all have a role in history—whether high history or low. She told us about her father, a long-time political activist and educator. Instead of signing her birthday cards, “Love, Dad,” she said, he’d sign them, “The struggle continues.”

The significance of that, particularly as we move through challenging economic and political times, is profound, for all Americans committed to equity and fairness, and who may sometimes face a momentary waning of our passion for righting wrongs.

Here’s one of my favorite Dr. Harris-Perry quotes from that speech:

“What’s useful with growing up with “the struggle continues” as a basic mantra is that it serves as an excellent act of humility to remember that you are just a part, just a moment of a struggle, that has gone on long before you, and that will continue long after you.

There is much hubris required for you to believe that you have to live during the winning time. No, you might be living during the losing time. The winning time might come at some earlier point or some later point—you don’t always get to choose what your era is—but certainly, inevitably, the struggle continues.”

We received some excellent press coverage in The Oregonian, too. Writer Connie Potter did an extensive profile of PHC customer Demetria Peterson, with excellent background on our founding and recent successes.

I think Demetria best summarized the value and importance of what we do. She said of us, “They were a constant resource for me…If it wasn’t for the Portland Housing Center, I wouldn’t have been able to buy. I wouldn’t have known what steps to take, who to trust, who not to trust.” Thank you, Demetria. That’s what we call “homeownership done right.”

Events like this celebration take untold hours of hard work, so my sincere thanks to the 20th Anniversary Event Committee and volunteers for their limitless supplies of determination, creativity, and massive attention to the many details our party demanded. We owe big thanks to Event Committee Chair Raejean Sly (whose 3-tier “house” cake was the best-dressed item at the event!). Shout outs are due, also, to Lead Volunteer Carol Hushman and our Auction Procurement Wiz Mary Mayther-Slac.

So, now we’re 21--and “the struggle continues.” Important words for us to remember as we step into our third decade of helping our customers make real the dream of homeownership.

Whose Skin?

The implosion of the national housing market and the resulting financial meltdown that began in 2007 stripped American families of $11 trillion of wealth—including home equity, family savings, and retirement accounts. Millions, too, lost jobs. Now the solution Congress designed may soon be transformed into a major block to homeownership for creditworthy families.

 

Last year Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act to reduce the risk of another such economic catastrophe. The legislation eliminates most prepayment penalties and places limits on certain fees homebuyers pay. It also aims to protect mortgage market investors by requiring those who package and sell mortgage loans to hold 5 percent of their value. This is known as risk retention, or ensuring that they keep “skin in the game.”

 

Dodd-Frank, however, exempts from this risk retention requirement “qualified residential mortgages” (QRMs), low-risk loans meeting high underwriting standards. Congress left it up to the Treasury Department and other federal agencies to devise those standards.

 

The agencies’ proposed QRM standards could have required private mortgage insurance, requirements for prudent underwriting, and prohibitions on balloon payments and other high-risk features. Instead, they focus on extreme and onerous financial burdens for potential homebuyers, such as requiring a borrower to make a down payment of one-fifth (20 percent) of a home’s purchase price.

 

We know that down payment requirements can prevent households of modest means from obtaining a mortgage. In Portland, for example, the current median price for a home is about $200,000. A purchaser using a QRM would have to make a down payment of $40,000 to purchase that home.

 

The proposed down payment requirement also would increase significantly the time necessary for families to become homeowners, and bar thousands of creditworthy homeowners from a mortgage with low rates and attractive terms. According to the Center for Responsible Lending, a typical family earning the median income would need 14 years to accumulate the 20% down payment on a median priced home.

 

We know, too, that first time homebuyers have driven much of the recent recovery in the residential real estate market. First time buyers (assisted by a federal tax credit) were the source of the 2009 increase in home sales, including the purchase of thousands of distressed properties, and were vital to the increase in 2010 of the purchases, as well (The State of the Nation’s Housing 2010). Many of those buyers, including PHC customers, purchased their homes via programs requiring mortgage insurance and down payments of one to five percent.

The median down payment amount Portland Housing Center customers paid in FY2010 was $7,652.85, or 4.29 percent of the purchase price. If QRM down payment requirements had been in place, thousands of first time homeowners would not have been able to contribute to the fragile revitalization of the housing market, and the nation’s economy. Those are some of the reasons the National Association of Home Builders, the Consumer Federation of America, and the Center for Responsible Lending oppose the QRM proposal.

 

There are a number of ways to structure QRMs to help borrowers and reduce risks for mortgage product investors, such as requiring borrowers to have income to support monthly mortgage payments for the life of the loan, and prohibiting risky underwriting features like balloon payments and negative amortization. Burdening borrowers with unreasonable down payment requirements is punitive, unnecessary, and will close the door to homeownership and wealth creation for millions of qualified and creditworthy Americans.

 

Over the last 20 years, the Portland Housing Center has done one thing very well: provided education, access to resources and support to more than 6,000 families purchasing their first home. We believe “homeownership done right”—intensive education, access to resources, and other support—and not more “skin in the game” helps our customers make good, long-term financial choices, and our mortgage delinquency rate of less than 1 percent bears that out.

 

This burdensome down payment requirement and other elements of the proposed QRM standards could undermine the 20 years of work the Portland Housing Center has done to assist first- time homebuyers find and use safe and affordable financial tools. If put into place, they will, I believe, also have long-range negative effects on our families and communities.

 

The proposal is now available for comment for the next six weeks; the agencies expect to adopt them by summer. We urge all of those who support the Portland Housing Center, and value the benefits of homeownership, to become educated about the issue, and express to members of Congress your alarm about the serious and very negative effects these standards, if adopted, will have. America’s families and neighborhoods deserve no less.