Housing agency leaders see lessons from crisis 10 years later
Alternative funding strategies, collaboration with working partners and resiliency awareness are all lessons learned since the financial crisis of 2008, housing authority experts said at an S&P Global Ratings conference in New York.
“What we can do is much broader than 10 years ago,” said Jonathan Hanks, chief operating officer of the Utah Housing Corp. “Collaborate with your lending partners, your bond attorneys, financial professionals, that sort of thing.”
S&P’s U.S. chief economist, Beth Ann Bovino, sees strengths in the housing market.
“We’re still pretty optimistic about the housing sector although we do recognize some issues the housing sector will face,” she said.
The rate of U.S. housing finance agency loan delinquencies improved while the first-time borrower profile remains strong with high FICO scores and manageable debt-to-income levels, according to S&P analyst Richard Kubanik.
Loan delinquencies, defined as 60-days plus and in foreclosure, dropped to 5.11% in the fourth quarter of calendar 2017 from 5.76% a year earlier with the largest improvement in judicial-foreclosure states, said Kubanik.
Those states include Connecticut, Illinois, Kentucky, Maine, New Jersey, Pennsylvania, Vermont and Wisconsin. Judicial foreclosures require lengthy court actions.
Only one HFA bond program, from the New Jersey Housing & Mortgage Finance Agency, had a delinquency rate above 6% on Q417. Kubanik said a state-imposed moratorium on foreclosures from 2010 to 2012 may have driven up the levels.
Favorable economic conditions, he added, bode well for continued home price appreciation with the Rocky Mountain states showing the strongest demand for affordable housing.
“Over the past five years, low unemployment rates, rising home prices and growing consumer confidence created an environment favorable to refinancings that has helped U.S. consumers improve their personal balance sheets and stay current on mortgage payments,” said Kubanik.
Hurricane Sandy three years later brought an immediate awareness about resiliency, said New York City Housing Development Corp. president Eric Enderlin.
“I think this is true in a lot of places. Hurricane Sandy introduced a new vocabulary to people,” said Enderlin.
“I remember working weekends and around the clock right after that, and people were [saying] ‘What is resiliency, what is it all about?’
“Prior to that, what a lot of people talked about was sustainability and green, and that sort of initiative and thought long-term, what might happen to the coast and that sort of thing. They didn’t have this wort of experience. We were pressed into a triage mode.”
Hanks said his agency has taken out earthquake insurance for its portfolio, notably along the Wasatch Front, where roughly 80% of Utah’s population lives.
“The biggest potential for natural disasters in Utah is for earthquakes,” said Hanks, who said the corporation has taken out $100 million of reinsurance.
Carmen Chubb, deputy commissioner for housing for the Georgia Department of Community Affairs, said housing sector in her state remained fairly stable thanks to a systematic approach that predated the crisis, and the agency concentrating on its core functions.
“We are very clear about who we are as an agency,” she said.
Her agency is authorized to issue $200 million to $250 million in mortgage revenue bonds annually. “That’s not a lot compared with some states but that is the structure that we work within. We have a board that sets that limit and that’s sort of the guard rail within which we work.
“But within that structure, even before the housing crisis, we were very aggressively managing our balance sheet,” Chubb said. That, she said, included controlling debt and creating subsidies to continue to make mortgages amid an unfavorable market.
“That was really a partnership with our cash-flow consultant who had the vision to do that well before the market changed.”