The North Carolina Division of Community Assistance held a meeting yesterday in Greensboro to help cities, counties, and non-profits with their NSP applications.  The NSP is a federal program, administered through HUD, that enjoins these groups to fight the foreclosure crisis in their communities.  HUD has allocated $3.92 billion.  Approximately $57 million will go to North Carolina, including $12 million for non-profits.

What is emerging is that in North Carolina, the NSP will be designed in such a way that only a narrow set of strategies can qualify.

The criteria are especially daunting for non-profits.  There will be no land banking, for example.  This is one of the ideas supported by one of North Carolina’s largest non-profit housing developers and credit unions, Self-Help.

[polldaddy poll=1062393]  Moreover, all funds must be recaptured.  What does that mean?  Well, if DCA grants a county $200,000 to do infill redevelopment of blighted property, the following scenario would emerge:  The county might partner with a non-profit on redevelopment.  Say the property was made into a multifamily rental and resold for $225,000.  The non-profit would be able to take its costs of management out, but it would have to return what was left of the $225,000 after those costs.

Last, non-profits have to meet more stringent tests for population served.  The HUD regs are written to require that at least half of all residents served by any grant are at incomes at or below 50 percent of area median income.  That is a tough test, all by itself.  It pretty much guarantees that most projects are going to be for rental housing.

Non-profits in North Carolina will have to go one more step.  100 percent of residents in non-profit projects must have incomes at or below 50 percent of AMI.

Last, although anyone is eligible, it looks like only twelve counties are “competitive.”  All twelve are east of Winston-Salem.  Folks from Buncombe County were not happy when they heard about that at yesterday’s meeting.

It seems likely that the NSP in North Carolina is going to be have requirements that make it most amenable for supportive housing.

There is always a tension in any non-profit or cooperative park. It has to do with leadership and decision-making. On one hand, everyone would prefer to have residents with as much control over their own destiny as possible.  With each bit of self-governance, residents get that much closer to enjoying the same privileges that people who own stick built houses are able to enjoy.

Yet at the same time, there are some issues that make that easier said than done.

In almost any park, there is likely to be a shortage of people who can adequately understand financing.  Mix that with cultures where men are expected to be the decision-makers, and it can lead to some problems.  No one wants a situation where people feel afraid to ask questions. 

It can make a difference to a lending institution if there are people involved who have had some real estate development experience.  A landlord, a local property owner…it does not have to be someone who has done tax credit deals.

It isn’t just as the point of acquisition, either.  There is also the nuts and bolts of running a park.  Someone has to collect the rents.  Someone has to enforce rules.

There are also the technical issues of running a park.  Not many people know how to operate a septic system.  Not everyone can adequately test a well. 

When these things work, they are a wonderful example of democratic action.

Last month, the SEC put more than 700 financial services firms on a list that gave them protection from short sellers.  The idea was to to thwart short-term short selling the exposed companies to runs on the value of their shares.  

It was not just banks, but also some builders, some insurance companies, and plenty of consumer finance firms.  There were a few odd exceptions (HSBC, GE), but the list was complete in its detail.  

Elsewhere, Congress extended huge loans to our automakers.  Now they are talking about more action.

But, what if you were in the business of making homes, financing them, and also providing vehicles for traveling?  

You would be out of luck.  Fleetwood (FLE) could use the help, as could just about anyone in the manufactured housing business.  Fleetwood makes homes and also vehicles (although they have exited finance) and their share prices are really low right now.  Their own access to credit is part of the problem — they have to pay off some notes by December at a time when their cash flows are not great.  

The same protections could be sorely needed at Champion (CHB) which has dropped from 13 to just 2.17 in the last twelve months.  

This is an industry that supplies a good percentage of America’s affordable housing.  

Now there

HUD has announced its 2008 allocations for housing counseling.  This is important.  Housing counseling serves as a first responder system for predatory lending.  It can steer families into making decisions about loans that they can afford.  It can help families when they are in trouble.  They can act as an intermediary between a lender and a borrower, helping to find a repayment agreement when a loan is delinquent.

There are a lot of reasons why so many housing counselors are empathetic.  Also, there are a lot of reasons why so many are exhausted.  Its a hard job.

HUD allocates a great deal of the funding that goes to housing counseling agencies.

Turns out that funding is dropping 23 percent in North Carolina this year.  Whereas about 1.23 million went to the state last year, this year only $988,000 is coming for HUD counseling.

It’s a shame.  It’s hardly believable.   True, housing counseling is increasing year-over-year for the country as a whole.

The reasons for this are complicated.  HUD counseling dollars are very difficult to spend.  While an agency gets points for having experience in HUD’s allocation criteria, they lose points for having received funding from HUD in the past.

Nonetheless, its a matter of scale.  We are quibbling about $50 million across the country for housing counseling, after Wall Street just got $700 billion.  This is crumbs for predatory lending prevention and for loan modifications of delinquent loans.  These activities that are ultimately very cost-effective.  Aside from that, they keep people in their homes.

Although a lot of pundits and critics (Neil Cavuto, Charles Krauthammer) have attempted to blame the housing finance crisis on the Community Reinvestment Act, reality keeps getting in the way.

These numbers show the servicing companies that have born the most losses on subprime loans.  With a few exceptions, most of these firms are not regulated by CRA.  Moreover, most are players that came to the mortgage loan market well after the CRA Act was written.  Some, like AIG or Bear Stearns, came in to the game well afterwards.

• Countrywide Financial
• HSBC
• JP Morgan Chase
• Wells Fargo Home Mortgage
• American Home Mortgage (Wilbur Ross)
• Ocwen
• Litton (Goldman Sachs)
• Home Loan Services
• HomeEq Mortgage (Barclays)
• Washington Mutual
• ResCap (General Motors)
• Saxon (Morgan Stanley)
• Citi
• American General Finance (AIG)
• EMC Mortgage (Bear Stearns and Chase)

source: Inside Mortgage Finance

What this tells me is that these companies made the decision to seek out risky loans, not because they were made to by CRA, but because they were tempted by the promising of fat returns.  They are Wall Street firms, not bank-holding companies.  These are the smartest guys in the room.  For their poor decision, they are being punished.

And swiftly.  If only we weren’t all suffering for their excesses.