Online fair housing

Facebook has been under scrutiny for a number of issues, including privacy rights and political ads. In an effort to enforce online fair housing, HUD has made a complaint alleging that the social media platform has violated the Fair Housing Act. Online fair housing is a serious issue. HUD’s enforcement of fair housing extends to online social media and sharing platforms.

The US Department of Housing and Urban Development complaint (hud.gov) states that:

“Facebook unlawfully discriminates by enabling advertisers to restrict which Facebook users receive housing-related ads based on race, color, religion, sex, familial status, national origin and disability. Facebook mines extensive user data and classifies its users based on protected characteristics. Facebook’s ad targeting tools then invite advertisers to express unlawful preferences by suggesting discriminatory options, and Facebook effectuates the delivery of housing-related ads to certain users and not others based on those users’ actual or imputed protected traits…The alleged policies and practices of Facebook violate the Fair Housing Act based on race, color, religion, sex, familial status, national origin and disability.”

HUD’s August 17^th press release that announced the complaint alleges that Facebook

“invites advertisers to express unlawful preferences by offering discriminatory options, allowing them to effectively limit housing options for these protected classes under the guise of ‘targeted advertising.’”

HUD emphasizes that the Fair Housing Act “prohibits discrimination in housing transactions including print and online advertisement on the basis of race, color, national origin, religion, sex, disability, or familial status.”

HUD’s Secretary-initiated complaint follows the Department’s investigation into Facebook’s advertising platform which includes targeting tools that enable advertisers to filter prospective tenants or home buyers based on these protected classes.

Anna Maria Farias, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity who filed the complaint, stated:

“The Fair Housing Act prohibits housing discrimination including those who might limit or deny housing options with a click of a mouse…When Facebook uses the vast amount of personal data it collects to help advertisers to discriminate, it’s the same as slamming the door in someone’s face.”

Past online fair housing allegations

Allegations of online fair housing violations are not new for Facebook. ProPublica alleged in 2016 that Facebook allowed advertisers to purchase discriminatory ads through a targeted advertising platform (Facebook Lets Advertisers Exclude Users by Race; propublica.org; October 28, 2016). The targeted advertising platform had a “Ethnic Affinity” section (at that time, it was alleged that Facebook assigned “Ethnic Affinity” to subscribers based on posts and “likes”). Facebook claimed that “Ethnic Affinity” is different than race, and was part of a “multicultural advertising” effort.

Following ProPublica’s investigative reporting, HUD briefly investigated the matter. Facebook was said to have changed the targeted advertisement platform by moving “Ethnic Affinity.” Additionally, an anti-discrimination advertising system was to be implemented. However, a follow up investigation found that the reporters were able to purchase housing advertising that should have been rejected for discriminatory preferences (Facebook (Still) Letting Housing Advertisers Exclude Users by Race; propublica.com; November 21, 2017).

Facebook is not the first website to be accused of online fair housing violations. In 2006, a civil rights non-profit sued Craigslist for discriminatory housing ads that were posted by users. At the center of the matter was if Craigslist was considered a publisher. The case was dismissed based on a Communications Decency Act provision that states, “…[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Even though the suit was dismissed, Craigslist worked with HUD and housing advocacy groups to implement technology to prevent discriminatory words and phrases in housing ads (craigslist.org).

Original published at https://dankrell.com/blog/2018/08/26/online-fair-housing/

By Dan Krell.
Copyright © 2018.

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

January 27, 2017July 13, 2019

FHA mortgage insurance facts

There’s been a lot of reporting on FHA mortgages lately, creating some confusion. Of course I’m referring to the controversy surrounding FHA’s annual mortgage insurance premium (also known as MIP). Many were surprised to hear that one of the outgoing directives of the Obama administration was to lower the FHA MIP. And, eleven days later, many were just as surprised to hear that the new Trump administration reversed that directive. So what are the FHA Mortgage Insurance Facts?

FHA Mortgage Insurance Facts

Mortgagee Letter 2017-01, dated January 9, 2017 described revisions to the annual MIP for “certain” FHA loans. The effective date of the revisions was to be January 27^th. Meaning, that FHA mortgages that closed and/or disbursed on or after January 27^th would have had the lower MIP. Although the general reporting was that borrowers would save an average of $500 per year (an average of about $41 per month), the actual savings would have depended on the amount borrowed, term of loan and loan-to-value (percentage of loan amount to home value).

Additionally, the lower MIP would have been on new loans that were to have been disbursed (closed) on or after January 27^th. Contrary to some reporting (and more reporting and more reporting) and social media postings, existing FHA loans would not have benefited from the lowered the MIP. Also, the reduction was suspended before the effective date, so MIP did not increase for new mortgages.

The rational stated in Mortgagee Letter 2017-01 (Purpose and Background sections) for the lower MIP was that FHA has met the obligation to its Mutual Mortgage Insurance Fund (MMIF). The MMIF covers lender losses on FHA mortgages. Historically, HUD has adjusted the MIP (by increasing or decreasing MIP) as needed to meet the MMIF mandated requirements. HUD’s last FHA MIP reduction occurred in 2015. The November 15, 2016 Federal Housing Administration Annual Report to Congress reported that the MMIF increased from the previous year and the Fund’s capital ratio was 2.32 percent (above the 2 percent minimum capital reserve requirement). The Report did not signal any impending reduction to the MIP this year.

Some have talked about FHA mortgage insurance facts to include budget juggling and over projecting to make the MMIF appear solvent. Consider that the MMIF pre-crisis reserve ratio was well above the minimum 2 percent but needed about $1.7 billion to replenish reserves after the crisis. When the FHA MIP was reduced in 2015, many testified to congress about the potential risks. Douglas Holtz-Eakin, President of the American Action Forum provided such testimony February 26, 2015 to the United States House of Representatives Committee on Financial Services Subcommittee on Housing and Insurance “The Future of Housing in America: Oversight of the Federal Housing Administration, Part II.” Holtz-Eakin provided data stating:

Adding to concern surrounding premium reductions, FHA’s recent history has been plagued by missed projections. These missed projections enhance the perception that FHA downplays risks borne by taxpayers and cast doubt on the assumption that FHA will continually improve as projected despite cutting annual premiums. Since FY 2009, FHA’s capital ratio has been below the 2 percent minimum mandated by Congress. FHA has repeatedly projected marked improvement only to miss its targets…

In every actuarial review since 2003, the economic value of FHA’s MMIF has come in lower than what was projected the previous year …While FHA has in the past pointed to programs like home equity conversion mortgages (HECM) or the prevalence of seller-funded down payment assistance for losses greater than anticipated, erroneous economic assumptions and volume forecasts are more frequently to blame.

Following the dramatic fall in FHA’s economic value shown in Table 1, legislative attempts to reform FHA in the last Congress would have raised its mandated capital ratio even higher. Reform proposals have included a new capital ratio of either 3 percent or 4 percent, levels FHA’s MMIF is not expected to reach until 2018 and 2019 respectively before factoring in the effects of premium reductions. FHA’s capital buffer is meant to protect taxpayers in an economic downturn while preserving FHA’s ability to fulfill its mission; its restoration is critical. Furthermore, many rightly worry that FHA’s current economic value is overstated due to the influx of money from major mortgage‐related legal settlements and the one-time appropriation of $1.7 billion from the Treasury Department ..

An example of budgetary juggling is hinted by HUD Secretary Julián Castro in his July 13, 2016 oral testimony to the U.S. House Committee on Financial Services Hearing on “HUD Accountability.” In his statement earlier this year, he attributed the health of FHA’s MMIF to HUD’s Distressed Asset Stabilization Program (The DASP was put into place to help troubled home owners who were at risk of default, as well as dealing with delinquent and defaulted mortgages):

“…And when you consider that DASP has contributed more than $2 billion to the MMI Fund above what would’ve otherwise been collected, it’s clear this innovative program is a significant reason why the Fund’s capital reserve ratio is now above its 2 percent requirement.”

Of course, FHA mortgage insurance facts include changes to DASP. This would most likely reduce contributions to the MMIF. A HUD press release outlines those changes (FHA Announces Most Significant Improvements to Date for Distressed Notes Sales Program; June 30, 2016):

In addition, FHA’s latest enhancements prohibit investors from abandoning low-value properties in high-foreclosure neighborhoods to prevent blight. FHA is also offering greater opportunity for non-profit organizations, local governments and other governmental entities to participate in DASP. Loans are not eligible to be sold through DASP unless and until all FHA loss mitigation efforts are exhausted. On average, mortgages sold through this sales program are 29 months delinquent at the time of the auction.

One of the FHA mortgage insurance facts is that FHA is supposed to be self-funded through its MMIF. Suspending the MIP reduction may be to assure the longevity of FHA to future home buyers. In suspending the MIP reduction, Mortgagee Letter 2017-07 stated (Background section): “FHA is committed to ensuring its mortgage insurance programs remains viable and effective in the long term for all parties involved, especially our taxpayers. As such, more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions …”

Original published at https://dankrell.com/blog/2017/01/27/fha-mortgage-insurance-premium-facts/

By Dan Krell
Copyright © 2017

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February 21, 2013December 2, 2020

Sequestration will affect real estate and housing markets

by Dan Krell
DanKrell.com

(Dan Krell © 2013) Remember the “Fiscal Cliff?” Well, after a two month hiatus, sequestration concerns are again entering (if not intrusively) the minds of those who may be affected. And, if you remain indifferent on the matter, you might consider the local economic effect from looming government budget cuts that may begin on March 1st.

On February 14th, HUD Secretary Shaun Donovan provided written testimony to the “Hearing before the Senate Committee on Appropriations on The Impacts of Sequestration” (HUD.gov). Secretary Donovan outlined what he described as the “harmful effects of Sequestration” to not only at-risk populations, but families, communities, and the economy at large, as he concluded, “…Sequestration is just such a self-inflicted wound that would have devastating effects on our economy and on people across the nation.”

As a result, HUD counseling would be limited. According to Secretary Donovan, about 75,000 families would not be able to receive the critical counseling services that include pre-purchase counseling, and foreclosure prevention counseling. According to the Secretary: “…This counseling is crucial for middle class and other families who have been harmed by the housing crisis from which we are still recovering, and are trying to prevent foreclosure, refinance their mortgages, avoid housing scams, and find quality, affordable housing. Studies show that housing counseling plays a crucial role in those 3 efforts. Distressed households who receive counseling are more likely to avoid foreclosure, while families who receive counseling before they purchase a home are less likely to become delinquent on their mortgages.”

FHA has been the workhorse to stabilize the housing market as well as providing the means for affordable home purchases. Those directly affected by sequestration would be home buyers and home owners who are applying for FHA mortgages; as well as those seeking assistance through HAMP and HAFA. In written testimony, Secretary Donovan stated that “…furloughs or other personnel actions may well be required to comply with cuts mandated by sequestration.” As a result, “…The public will suffer as the agency is simply less able to provide information and services in a wide range of areas, such as FHA mortgage insurance and sale of FHA-owned properties.”

Another concern is the possibility of a sharp increase in interest rates. Up until now, home buyers (and those refinancing) have had the benefit of historically low mortgage interest rates. Low mortgage interest rates are one of the reasons why home affordability is also at historic levels. A sharp rise in interest rates combined with FHA mortgage delays could shock the housing and real estate market. The result could be housing activity similar to what we experienced immediately after the financial crisis. Granted, the shock would probably not be as prolonged as what occurred in 2008-2009, but nonetheless significant.

In a region that has been relatively unaffected by unemployment and economic issues due to a strong government workforce, sequestration could essentially put a damper on the local housing recovery. Home buyer activity has already been affected, as those who are concerned about sequestration have either put their home purchase plans on hold, or have changed their housing plans altogether. And of course, over time, the changes to consumer behavior would trickle down to various sectors of the economy.

But don’t worry, although sequestration is set to begin March 1st, budget cuts won’t occur all at once. Unless Congress acts on the matter, you might not immediately feel its effects.

More news and articles on “the Blog”

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

January 15, 2008October 5, 2019

Mortgage workout or workover?

by Dan Krell

Earlier in December, a new mortgage relief program was announced as the Bush-Paulson Mortgage Plan. The plan, although not yet approved nor agreed to by all parties involved, is intended to help those home owners who have sub-prime mortgages with interest rates that will adjust significantly higher. Proposed details, as revealed in a December 5th, 2007 Financial Times article, include a five year interest rate freeze for sub-prime adjustable rate mortgages that were dated between 2005-2007 and whose rates are to increase between 2008-2010. Lender participation will be voluntary. Additional borrower qualifications include having less than three percent equity in their home, not being more than sixty days behind on their mortgage payment, as well as demonstrating an inability to afford any mortgage increase (www.ft.com/cms/s/0/c4b23f82-a37c-11dc-b229-0000779fd2ac.html).

Many Wall Street investors have criticized any workout plan as excessive government intervention in a market that is already correcting itself. Some in the industry have described such intervention as delaying the inevitable for those in foreclosure, explaining that many home owners who can not afford a rate increase now would possibly not be able to afford a delayed (five year) rate increase. Other critics include self described “responsible“ home owners who feel they work hard to maintain their credit and pay their mortgage timely; they claim that any government intervention to help those in foreclosure sends the wrong message.

Others, including Presidential candidates, have criticized the President for not doing enough to help those home owners already in foreclosure. For example, Senator Hillary Clinton (as posted on her website HillaryClinton.com) criticized President Bush’s plan and proposed an alternative plan that includes immediate foreclosure moratoriums and across the board rate freezes. Although well intentioned, many proposed alternatives also have market and socio-economic consequences.

Unfortunately, many home owners who are facing foreclosure don’t know that a workout plan (know as a “loan modification”) may already be possible with their present lender. Of course the home owner must request it. Additionally, the proposed workout must make sense and the home owner must demonstrate a need as well as the ability to afford the modified payments. In many cases, lenders would rather work with financially troubled borrowers than foreclose; the foreclosure process is costly – for both the lender as well as the borrower.

The key to initiating a workout plan is for the home owner to communicate with their lender. Among the many reasons why home owners facing foreclosure do not communicate with their lender include lack of information of their options, misinformed of their options, and psychological stress (including apathy and feelings of hopelessness). The latter being the most prevalent because of the psycho-social complexity, which include the events that brought the home owner to their present financial problem as well as the time and effort involved in attempting to resolve any mortgage issues.

In an effort to assist home owners who are presently facing or at risk for foreclosure, Treasury Secretary Paulson and Housing Secretary Jackson created the Hope Now Alliance as a step in President Bush’s initiative to help American families keep their home. The Hope Now Alliance was created to facilitate communication between borrowers, lenders and housing counselors. For more information on loan work outs you can visit HUD.gov or HOPENOW.com.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of December 24, 2007. Copyright © 2007 Dan Krell.

October 19, 2007November 23, 2021

Before you buy- First time home buyer fundamentals

by Dan Krell © 2007
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Don’t let your first time home buying experience be overwhelming. Before you plan your Sunday trip to open houses, it’s important to review the fundamentals and make sure you are going into your home purchase fully aware of the responsibility you are about to take on, as well as prepare you for the process and pitfalls that may come your way.

The first item on the list is to determine how much you can afford. Affordability is determined by your financial state and interest rates. Your financial state includes factors such as your income, debt, savings, and expenses. Interest rates impact on your ability to purchase a home because your monthly payment is based on the rate you lock into; the higher the rate, the higher your payment.

Once you know how much you can afford, make a housing budget. Making a housing budget can help you understand your expenses, which included utilities, maintenance, and other expenses such as cable and internet. Additionally, take into account any interest rate adjustment (if you have an adjustable rate mortgage) and increasing real estate taxes. Many first time home buyers get into trouble because they underestimate their monthly housing expenses, as well as not accounting for rising mortgage payments and real estate taxes.

As a first time homebuyer, you will want to be aware of any special programs that are available to you. There are many local home buyer programs that offer special financing and/or closing assistance through the county, the Housing Opportunities Commission, as well as through banks and organizations.

Talking to a lender can help you understand your credit and how much you can afford. You should compare lenders for interest rates and fees. Lender fees vary significantly and by choosing the right lender, you can possibly save several thousand dollars at settlement.

Knowing your rights as a home buyer can help you prevent problems that may occur. As a homebuyer, you are affected by federal and local fair housing laws, RESPA (Real Estate Settlement Procedures Act), Equal Credit Opportunity Act, Fair Credit Reporting Act, and the Truth in Lending Act. Your real estate agent should be aware of these laws and can help you understand them. You can get more information about these laws at the HUD website, HUD.gov.

As a first time home buyer it is important to know that you have the right to choose your service providers, such as real estate agent, lender, title company, insurance company, etc. Additionally, you have rights specific to obtaining a loan and credit, such as the right to a good faith estimate of settlement charges and interest rate and other disclosures. A list of these rights can be found at the HUD website (www.hud.gov/offices/hsg/sfh/res/resborwr.cfm).

Your next step will be to choose a real estate agent. It is recommended to interview several agents before choosing as your agent will be your trusted guide through the home buying process. A good real estate agent will know and protect your rights, as well as know what home buyer programs are available to you.

Finally, HUD recommends that first time home buyers attend housing counseling to assist in learning these and other fundamentals. It is clear that doing your homework and choosing the right professionals to assist you can make the difference in your home buying experience.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of July 9, 2007. Copyright © 2007 Dan Krell.

Past online fair housing allegations

FHA Mortgage Insurance Facts

by Dan Krell DanKrell.com

by Dan Krell
DanKrell.com