Cheryl Cassell | HCT Training

Providing Housing Counseling and Direct Services for
Homeowners Transitioning from Homeownership to Rental
Housing

PROVIDING HOUSING COUNSELING AND DIRECT
SERVICES TO HOMEOWNERS TRANSITIONING TO
RENTAL HOUSING
Cheryl Cassell
Director-Housing Counseling Network

Dr. Jade K. Brightly
Founder- Global Soulutions
April 18, 2012

Providing Housing Counseling And Direct Services To Homeowners
Transitioning To Rental Housing
Presentation Title Here

AGENDA
 Housing Landscape

 Fair Housing Act

 Landlord Tenant Rights

 Rental Process

 Important Documents

 Transitioning from Homeownership to Rental

 Renting versus Owning

 Neighborhood Stabilization and Real Estate Owned Properties


Housing Landscape
National Findings
 The United States grew by 0.5 million households from
2008 to 2009.

 Renter households grew (+0.9 million).

 The number of homeowners fell (-0.4 million).

 According to Fannie Mae, renters believe that buying a
home is a safe investment while 75% of renters still agree
that owning a home makes more financial sense than
renting.
Source: National Realtors Association


State Findings
 Working households, with a severe housing cost burden,
increased significantly in 25 states across the nation while
no states significantly decreased.

 2009, housing cost represented a severe burden for at
least one in 10 households in every state in the US and
exceeded 30% in a handful.

 Housing cost burdens worsened significantly in four states
Oklahoma, Missouri, Minnesota, and Indiana.



State Findings
 2008 and 2009, Arizona, California, Florida, New Jersey,
and New York share of cost-burdened working
households exceeded the national average and
experienced a statistically significant increase.
 The share of working households with a severe housing
cost burden in Florida and California (33 percent) is
nearly three times the rate observed in North Dakota and
Iowa (12 percent).
 The share of working households with a severe housing
cost burden in Florida and California (33 percent) is
nearly three times the rate observed in North Dakota and
Iowa (12 percent).


Housing Affordability Trends
 Higher income earners are experiencing affordability
problems.

 Earners between $45,000 and $60,000 pay more than
30% their incomes on housing

 46.2 million households spends 50% on housing costs

Source: Harvard Joint Center for Housing Studies


Housing Affordability Trends

 25% of working renters have housing cost burden.

 Housing affordability has worsened for renters than for
owners.

 Four out of five working households, with extremely low
incomes, had a severe housing cost burden in 2009.



Shift in Demand for Homeownership
 In 2008, homeownership rates decreased from 66.6% to
65.9% due to:
 Foreclosure crises
 High unemployment
 Government downsizing
 Tight lending standards
 Stringent credit challenges



Recovery of Rental Demand
 The number of owner households fell by 201,000
annually.

 Two trends underlie this shift:
 The rising number of renters who have
deferred home buying, and

 the rising number of owners who have
switched back to renting.



Recovery of Rental Demand
 The Housing Vacancy Survey indicates that the
number of renters swelled by 3.9 million from 2004 to
2010.

 The rental market has gained strength over the past
year.

 By 2020, minorities are expected to make up a third of all
U.S. households.

 Hispanics alone will contrib-ute nearly 40% of the
increase.

Add Presentation Title Here

FAIR HOUSING ACT
The Fair Housing Act, 42 U.S.C. 3601 et seq.,

Prohibits discrimination by direct providers of housing,

Such as landlords and real estate companies as well as
other entities, such as municipalities, banks or other lending
institutions

and homeowners insurance companies whose
discriminatory practices make housing unavailable


Fair Housing Act
 The Act is applicable to:

 Race or color

 Religion

 Sex

 National Origin

 Familial Status

 Disability


Fair Housing Act

The Department of Justice can bring a lawsuit:

•In cases involving discrimination in mortgage loans or home
improvement loans,

•May file suit under both the:

•Fair Housing Act and

•The Equal Credit Opportunity Act.


Fair Housing Act
• Under the Fair Housing Act, the Department of Justice
may bring lawsuits:

• where there is reason to believe that a person or

• entity is engaged in a "pattern or practice" of
discrimination or

• where a denial of rights to a group of persons raises an
issue of general public importance.


Fair Housing Act

Ways an individual can file a discrimination complaint:

Department Of Housing and Urban Development (HUD)

Federal Court

State Court

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Housing Discrimination Based on Color
• The majority of DOJ’s pattern or practice cases involve
claims of race discrimination.

• False information about availability of housing.

• Steering home seekers to certain areas based on race.

• Fair Housing Testing Program

• Most mortgage lending cases brought by Department of
Justice are under Fair Housing Act and Equal Credit
Opportunity Act (which will be discussed later) have
alleged discrimination based on race or color.


Discrimination in housing based on Religion
 Overt discrimination against members of a particular
region.

 Zoning ordinance designed to limit use of private homes
as a place of worship.

 The number of cases filed in 1968 alleging religious
discrimination is small in comparison to other prohibited
bases, such as race or national origin.

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Discrimination in Housing based upon Sex, including Sexual
Harassment

 Humiliation to women who are poor.

 Degradation of sexual harassment

 Pricing discrimination


Discrimination in Housing based on National Origin

 The Fair Housing Act prohibits discrimination based upon national
origin.

 Such discrimination can be based either upon the country of an
individual's birth or where his or her ancestors originated.

 The Justice Department has taken enforcement action against
municipal governments that have tried to reduce or limit the number
of Hispanic families that may live in their communities.

 The Department has also sued lenders for discrimination against
Native Americans.


Discrimination in Housing based on Familial Status

The Fair Housing Act, with some exceptions, prohibits discrimination in
housing against families with children under the age of 18.

In addition to prohibiting an outright denial of housing to families with
children, the Act also prevents housing providers from imposing any
special requirements or conditions on tenants with custody of children.


Housing Discrimination based on Familial Status

 In most instances, the amended Fair Housing Act prohibits a housing
provider from refusing to rent or sell to families with children.

 However, some facilities may be designated as Housing for Older
Persons (55 years of age). This type of housing, which meets the
standards set forth in the Housing for Older Persons Act of 1995, may
operate as "senior" housing.

 The Department of Housing and Urban Development (HUD) has
published regulations and additional guidance detailing these
statutory requirements.


Discrimination in housing based on Disability

The Fair Housing Act prohibits discrimination on the basis
of disability in all housing transactions.

Disability Defined-An individual with mental or physical
impairment that substantially limits one or more major life
activity.


Equal Credit Opportunity Act

The ECOA prohibits discrimination in credit on the basis of:

Race

Color

Religion

National Origin

Sex

Here


Marital Status

Age (provided the applicant has the capacity to contract)

Because an applicant receives income from a public
assistance program or

Because an applicant has in good faith exercised any right
under the Consumer Credit Protection Act



The Department of Justice may file a lawsuit under ECOA
where there is:

A pattern or practice of discrimination

Cases involving discrimination in home mortgage loans or
home improvement loans

Fair Housing Act and Equal Credit Opportunity Act


Other Federal Regulators
 Other federal agencies have general regulatory authority
over certain types of lenders.

 The regulators monitor creditors for their compliance with
ECOA.

 Referrals are made when there is a reason to believe that
a creditor is engaged in a pattern or practice of
discrimination with violates ECOA.


 The Consumer Financial Protection Bureau has issued
regulations under ECOA. These regulations, known as
Regulation B, provide the substantive and procedural
framework for fair lending.

 The agencies and the types of creditors that they regulate
for purposes of compliance with ECOA are as follows:



 Consumer Financial Protection Bureau (CFPB): Banks,
savings associations, and credit unions with total assets
of over $10 billion and their affiliates. Also shares
enforcement authority with the Federal Trade Commission
over mortgage brokers, mortgage originators, mortgage
servicers, lenders offering private educational loans, and
payday lenders regardless of size.


 Office of Thrift Supervision (OTS)-Savings associations
and federally chartered savings bank (the word “Federal”
or the initials “F.S.B.” appear in the federal institution’s
name.

 Comptroller of Currency (OCC)-National banks and
federal branches/agencies of foreign banks (the word
“National” or the initials “N.A.” appear in or after the
bank’s name).



Federal Reserve Board (FRB)-Financial institutions that
are members of the Federal Reserve System, except
national banks and federal branches/agencies of foreign
banks.

Federal Deposit Insurance Corporation (FDIC)-State
chartered banks that are not members of the Federal
Reserve System.



National Credit Union Association (NCUA)-Federal credit
unions (the words “Federal credit unions” appear in the
institution’s name).

Federal Trade Commission-Retailers, finance companies,
creditors (including most mortgage companies) that are not
assigned to another agency.


Servicemembers Civil Relief Act
 SCRA provides for the temporary suspension of judicial
and administrative proceedings and civil protections in
areas such as housing, credit and taxes for military
personnel while they are on active duty.

 The Servicemembers Civil Relief Act, formerly known as
the Soldiers’ and Sailors’ Civil Relief Act (SSCRA), is a
federal law that provides protections for military members
as they enter active duty.


Landlord/Tenant Rights
Landlord/Tenant Obligations

Responsibilities of the Landlord:

Unit must be in habitable and livable condition

Unit and Complex must be safe

Duty to Make repairs


Landlord/Tenant Obligations

Responsibilities of the Tenant:

Rent

Repairs

Be a Good Neighbor


Landlord Tenant Disputes

 Repairs

 Eviction


Renter’s Insurance
 Landlord insurance only covers their personal liability and
the premises and common areas, as well as the physical
building.

 It is important to note that the landlord’s insurance does
not cover tenant property, nor does it cover tenant’s
liability to people injured in their home.

 Rental insurance is highly encouraged. The monthly cost
is low (around $10). Provides good coverage in the event
of a fire, robbery, or other mishap. Some rental units even
require residents to purchase renter’s insurance.


Renter’s Insurance Coverage

 Typical Renter’s Coverage

 Types of Coverage


 Affordability

 Client Qualification

 Locating the Right Rental

 Housing Options

 Property Management or Privately Owned


RENTAL PHASE

 Complete Application

 Provide a Security Deposit

 Review and Sign Lease


POST RENTAL PHASE

• Review and Sign Lease
• Insurance
• Protect and/or Surveillance the Unit


THE RENTAL COUNSELING PROCESS

 Provide rental counselors with comprehensive guidance
and counseling services to clients seeking to move into a
rental unit.

 GOAL – To assist clients with moving into a comfortable,
affordable rental home.


 Perform intake
 Conduct needs analysis
 Create an action plan
 Discuss income and expenses
 Develop a budget and spending plan
 Affordability
 Review credit report
 Rental housing options; how to locate right unit
 Conduct a rental unit needs-versus-wants analysis
 Discuss the post-rental phase, including lease and move
 Make necessary referrals


 Intake - gather baseline information from client
 Conduct accurate needs assessment
 Document the household income and expenses
 Determine household debt level
 Review clients credit report
 Identify credit challenges
 Determine and document household savings


 Develop a household budget
 Analyze budget and recommend modification
 Conduct affordability analysis based on income and debt
 Develop a written action plan with follow up
 Make referrals for additional services
 Provide client information on delinquency/foreclosure
services
Source: www.homeownershipstandards.org
Guideline and Code of Ethics Reference Guide


Important Traits of a Rental Housing Counselor
 Educate – Provide a complete picture of the rental
housing landscape and thorughly discuss each step in
the rental process.

 Inform - Set appropriate expectations when guiding the
rental home search.

 Listen – Be open to hearing what the clients truly
want/need and make sure the clients know they are
being heard.


 Be Empathetic – Clients, transitioning from one home to
another, may be undergoing serious life changes. Be
sensitive and work to establish trust.
 Support – Be a source of secure informaiton and
guidance, backing up clients’ decisions as much as
possible.
 Provide Options – Let clients make decisions for
themselves in order to encourage a more sustainable
housing situaiton and greater security.
 Analyze – Determine the needs of each individual client
and help to match these needs with the best housing
options.


 Make Recommendations- Use your professional
expertise to recommend the best options for your client.

 Collaborate - Work in partnership with the client to
arrive at outcomes and make decisions. Work with other
agencies to provide referrals and other assistance the
client may need.

 Be Available – Rental counseling can be complicated
and lengthy. A counselor needs to provide support
through the entire rental process.


General Intake Action –

How to Conduct an Intake Session:
 1. Counselor gives an overview of the rental process

 2. Counselor gathers information regarding the
client’s current situation
 Financial Information
 Housing situation
 Credit information
 3. A physical file must be created for the above
information and it must be entered into a client
management system.


Record Keeping
HUD requires certain specific record keeping protocol:

Client files must be maintained properly
All agencies are required to use a client management
system (CMS).
Privacy- all client information must be kept strictly
confidential.
File Retention Requirements- client files must be kept a
minimum of 3 years.
Minimum client file requirements are on page 7 of manual.
Source – www.hud.gov- Housing Counseling Handbook


Budget Analysis
 One of the most important considerations when choosing
a rental unit is based on a clients income and expenses.

 Selecting a rental unit that is affordable in the long-term
encourages greater security and housing sustainability.

 To conduct an accurate analysis, the client should be able
to accurately present past, present, and future earnings.

 Landlords want to have valid documentation to determine
if the tenant can pay the rent each month.

 The budget analysis helps to secure the desired rental.


Budget Analysis

 Typical documentation needed to calculate income are:

 Past 2 years of tax returns

 Past 2 years of W-2’s

 3 months of consecutive, current paystubs.


Income Calculations

Hourly Employee Formula:

Year-to-date income: $___/Number of pay periods to date____ =

Average income pay period: $___ x Number of pay periods per year:___
=

Subtotal $___ + any other income: $___ =

Gross annual income: $___/12 = Gross monthly income: $___


Income Calculations

Salaried Employee Formula:

Weekly pay (or bi-weekly, semi-monthly, or monthly pay): $____ x

Number of pay periods remaining in the year: ____ = Subtotal: $ ____

+ Any other income: $_____ + Year-to-date income total: $ ____

Gross annual income: $____/12 = Gross monthly income: $____


Income Calculations
Self-Employed Formula:
From IRS Schedule C, Line 31: $____
+ From IRS Schedule C, Part II, Line 12 (Depletion): $ ___

+ From IRS Schedule C, Part II, Line 13 (Depletion): $ ___

Total: ____/ Total months business operation for the year: $ ___ =

Average monthly income per year: $____

Complete the above formula for multiple years and then average the
gross monthly income.
Determine the gross annual income by multiplying by 12.


Savings
A good rule of thumb –

Put at least 10% of net income into a savings account.
This builds a cash reserve and will earn interest.
A cash reserve can also be used for emergencies.

There are various types of savings accounts:

Traditional Savings Account
Online Savings Account
Money Market Account
Ceertificate of Deposit (CD)
Home Savings


Expenses Activity
Check the box indicating if an expense is fixed or flexible
Fixed Flexible
 vacation
 student loans
 school supplies
 utilities
 health insurance
 car payment
 haircut
 clothing
 credit card payment


Budget
 Budgets help to create realistic spending and savings goals.

 Budgets allow clients to see where money is going.
 Budgets encourag the forming of new spending habits to create
a secure financial life.
 Clients must decide on a method to track their income and
expenses. (www.mint.com is a free money management site)

 Clients should select a method which is most comfortable .
 Notebook receipts binder
 Worksheets
 Quicken software
 Online


Budget Activity
 Assume your client has the income and expenses listed in the
budge below. Where would you propose the client cut expenses
to make their budge more affordable?

 Make these changes in the chart below.

 Scenario-
 Mary works at the US Post Office and earns $45,000
 Her husband, Joe works as an independent contractor
 His average grossly monthly income is $3,200
 Their child attends daycare
 They have credit card debt/minimum payment of
$75/month
 Additional expenses listed

Where would you recommend the client make changes?


Determining Affordability
Factors to consider:
Prospective buyers
Number of children
Occupations
 Husband - Mechanic at a car dealership for 7 years
 Wife – full time teacher’s aid

 Combined Gross Monthly Income
 Savings
 Debts


Determining Affordability
Maximum Affordable Rent- no momer than 31% of gross
income should go toward rent.
Factors to consider:
Prospective buyers
Number of children
Occupations
 Husband - Mechanic at a car dealership for 7 years
 Wife – full time teacher’s aid

 Combined Gross Monthly Income
 Savings
 Debts


Required Cash

1. Application Fee

2. Security Deposit

3. First/Last Month’s Rent

4. Moving Costs

5. Utilities


Credit Issues

1. Avoid a Credit Check

2. Submit a Letter of Explanation

3. Get a Letter of Recommendation

4. Pay Off Creditors

5. Get a Co-Signer


Credit Issues

6. Pay More Money Up-Front

2. Rent from an Owner

3. Get a Referral from a Current Tenant

4. Sublet a Rental Unit


Action Plan
The counselor completes the action plan after the initial client
interview and all financial information is collected and
discussed.

•The action plan contains the goals of the counseling
process as well as the steps necessary to achieve those
goals.
•Each action plan is unique because it addresses the clients
needs.
•HUD requires a copy of the action be included in the file.

•A copy of the action plan must be provided to the client.


Action Plan Template:
• Discuss and list major obstacles to obtaining rental
housing.
• Determine and list the best strategies for addressing the
obstacles.

• Give the client specific actions to take before the next
meeting or before proceeding with the next step in the
rental process.
• List the ultimate outcome of the rental counseling.
• Have the client sign and date the action plan after
discussing all items.


LEASE AGREEMENTS
 A lease is a legally-binding document between a landlord and
a tenant.
 It is important that tenants read the lease carefully and
understand all terms before they sign.
 Leases can occassionally be "oral" or unwritten but usually in
writing. Oral leases are harder to prove. It’s best to get the
lease in writing.
 Along these same lines, sometimes at the signing of the
lease, the landlord will make oral promises or ask the tenant to
agree to something. These should also be written onto the
lease and initialed. This will help to discourage disputes later.


 The landlord agrees to provide a clean, sanitary, vacant
apartment and to make repairs.

 You agree to pay the rent, keep your apartment or house
clean, undamaged, and follow the rules of your lease.


 When you apply to rent a house or apartment, you apply
to qualify for a lease.

 The landlord requires you to fill out an application form
and pay an application fee before you sign the lease.

 The application requests information on:
 employment history
 credit references and
 often becomes part of the lease.


 When you apply to rent a house or apartment,
you apply to qualify for a lease.

 The landlord requires you to fill out an
application form and pay an application fee
before you sign the lease.

 The application requests information on:
employment history
credit references and
often becomes part of the lease.


Before Signing A Lease

 Review the lease.
 Get help for explanations.
 Make sure the terms of the security deposit are
clearly spelled out.
 Get all promises for repairs in writing.
 Initial changes to lease.
 Ask your landlord to sign his or her initials next
to each change.


After Signing A Lease
 The landlord must give you an exact, legible, and
signed copy of the lease and application within 7 days.

 Always keep your lease, application, and other
documents concerning your apartment or house in a
safe place.


Breaking A Lease
 Your lease is a binding contract .

 Breaking the lease is a breach of contract and you
could be penalized.

 There are exceptions:
 Natural disaster
 Crime
 Military duty
 Suffered health problems


Homeownership Benefits

 Renting can be about the same or less as
paying a mortgage.

 Home ownership offers tax benefits.

 Tax benefits offer savings.


Monthly Expenses
 Rental company’s cover certain housing expenses.

 Homeowners pay housing expenses:
 Property Taxes and Special Assessments
 Home/Hazard Insurance
 Utilities
 Maintenance
 Home Owner Association (HOA) Fee
 Membership Fee

Presentation Title Here
Transitioning from Rental to Homeownership

 Transitioning from homeownership to renting can be
extremely difficult.

 Housing counselors are essential in assisting
homeowners who become delinquent on their mortgage
and are facing foreclosure. Housing counselors can assist
a homeowner explore all options.

 The earlier in the process that a homeowner works with a
housing counselor, the more options and potential
outcomes are available.


Transitioning From Homeownership to Rental

 Loan Modifications and Foreclosure Alternatives

 Making Home Affordable Options

 Transition Options

 Real Estate-Owned Properties


Transitioning from Homeownership to Rental

 Deficiency Judgment

 Tax Implications of Short Sales, Deeds-in-Lieu and
Foreclosures

 Credit Implications of Short Sales, Deeds-in-Lieu and
Foreclosures

 Helping Clients Rebuild Credit after a Transition


Renting Versus Owning

 The renter starts out paying $800 per month
with annual increases of 5%.

 The homeowner purchases a home for
$110,000 and pays a monthly mortgage of
$1,000.


Buying Versus Renting

 After 6 years, the homeowner's payment is
lower than the renter's monthly payment .

 With the tax savings of homeownership, the
homeowner's payment is less than the
rental payment after 3 years


Advantages of Buying
 Property builds equity.

 Sense of community, community, stability
and security.

 Free to change landscaping and décor.

 Not dependent on landlord to maintain
property.


Considerations of Buying:
 Responsible for maintenance
 Responsible for property taxes

 Possibility of foreclosure or loss of equity

 Less mobility than renting

Advantages of Renting:

 Little or no responsibility for maintenance

 Easier to move


Considerations of Renting:
 No tax benefits

 No equity is built up

 No control over rent increases

 Possibility of eviction


The Neighborhood Stabilization and real Estate Owned
Properties
The Neighborhood Stabilization Program (NSP)
 Provides grants to purchase foreclosed or
abandoned homes and to rehabilitate,
resell, or redevelop these homes in order to
stabilize neighborhoods and stem the
decline of house values of neighboring
homes.

 The NSP program is authorized under Title
III of the Housing and Economic Recovery
Act of 2008.
Source: www.hud.gov


The Neighborhood Stabilization Program (NSP)

 The REO Portal supports more
efficient disposition of REO
properties to support the
stabilization of neighborhoods
and recovery of local housing
markets by enabling a
neighborhood-focused, strategic
approach to acquisition.
Source: www.hud.gov


Real Estate Owned (REO) Properties

 These foreclosed homes collectively
account for nearly half of all real estate-
owned or REO properties in the U.S.

 HUD’s REO gives a comprehensive view of
housing opportunities.

 The REO listing includes properties held by
Fannie Mae, Freddie Mac and the Federal
Housing Administration (FHA).
Source: www.hud.gov

THANK YOU!

To follow up with the speakers:
Cheryl Cassell
Director-Housing Counseling Network
202-383-7702
ccassell@ncrc.org

Dr. Jade K. Brightly
202-756-1838
brightlyjk@globalsoulutions.biz
www.GlobalSoulutions.biz
Presentations will be available at www.ncrc.org/conference
by
April 30, 2012

Cheryl Cassell | HCT Training

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