By Barbara Ray
Six years after the housing market bust, the effects of the foreclosure crisis still linger for thousands of communities hit hard by a spiral of disinvestment that left families facing painful decisions.
A father of three teens in suburban Chicago lost his job as a truck driver and soon began to fall behind on his $1,700 monthly mortgage payments and was on the brink of foreclosure. A mother, left with child support as her only income after a divorce, was repeatedly denied a modification on her mortgage when it threatened to swamp her. To add insult to injury, she lost $1,500 to a loan modification scam. She too faced foreclosure.
And it’s not over. As a recent CNN story reported, up to 180,000 people will see their mortgage payments increase on average about $200 a month this year, when rates under the Home Affordable Modification Program begin to reset.
In response to the continuing crisis, nonprofits across the country have been developing new approaches to stop the spiral of decline. As Sarah Berke of the Housing Partnership Network and Carolina Reid of the University of California Berkeley write in the latest issue of “Community Development Review,” published by the Federal Reserve Bank of San Francisco:
“It hasn’t been easy—funding for neighborhood stabilization remains small in comparison to need, and the volatile housing market has required quick thinking and the ability to design new solutions on the fly. And although the housing market has finally begun to rebound, nonprofits are working to sustain their work in response to continued historically-high levels of foreclosures and bank-owned inventory.”
One thing is clear: We can no longer address the foreclosure problem with yesterday’s policies. The crisis is too fast-moving and at such a different scale, and budgets are too tight, for siloed approaches to make a dent. Instead, it will be critical to continue creating funding models that blend public and private dollars.
In Confronting Suburban Poverty in America, Elizabeth and Alan point to the Mortgage Resolution Fund as a good example of a collaborative effort to leverage funds. At the height of the crisis, four national organizations, including Housing Partnership Network, joined forces to form the MRF. MRF aims to keep homeowners in their homes, and uses innovative tools and enterprise-level investment to do so. In a novel, market-based approach, the MRF partners tapped into the Treasury Department’s Hardest Hit Fund to negotiate a loan of $100 million with very favorable terms. This allowed them to buy 270 properties in four suburban areas in the Chicago region and work with the owners to keep them in their homes.
In summer 2013, MRF expanded to northeast Ohio, where the mortgage pool was riskier, according to Danielle Samalin in “Community Development Review.” Despite these odds, initial results from the loan pool purchases “have been extremely encouraging,” she says.
With the help of MRF, the suburban father of three was able to reduce his monthly mortgage to an affordable payment (and he found a new job). The young woman who had struggled after her divorce was able to move forward with her life by voluntarily entering into a deed in lieu of foreclosure. Communities were stabilized instead of depleted.
The Review showcases several other fresh approaches to the crisis. Boston Community Capital’s (BCC’s) Stabilizing Urban Neighborhoods (SUN) Initiative, for example, purchases foreclosed homes and then turns around and helps owners repurchase them at a lower price, bringing down housing expenses by an average of 40 percent. The program recently expanded to Maryland, which had the highest foreclosure “starts” in the country in the fourth quarter of 2013. And it’s not just in inner-city Baltimore. According to an NBC news report in January, “Montgomery, Frederick and Howard counties each suffered from 100 percent increases in home foreclosures between autumn 2012 and autumn 2013. There was a 50 percent increase in Prince George’s County. In Anne Arundel County, the spike is much larger: 400 percent.”
In the end, even these innovative models only begin to scratch the surface of a problem that has affected, and will continue to affect, metropolitan communities of all kinds. But they demonstrate that public-private partnerships must become more the norm, given the scale of the challenge.
Photo/ BBC World Service