Educating and preparing new homeowners for success ..

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Neighborhood Housing Services of Chicago

• Serving Lower Income Neighborhoods in Distress
• Bruce Gottschall, Executive Director
• Neighborhood Housing Services of Chicago
• FDIC Advisory Committee on Economic
  Inclusion
• February 5, 2009

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Neighborhood Housing Services of Chicago

• Mission Neighborhood Housing Services of
  Chicago creates opportunities for people to live
  in affordable homes, improve their lives and
  strengthen their neighborhoods.
• We do this by
• Educating and preparing new homeowners for
  success
• Lending to help people buy, fix and keep their
  homes
• Sustaining home ownership through foreclosure
  prevention services
• Preserving, rehabbing and investing in housing
• Building powerful and enduring community
  partnerships
• NHS started in 1975 to combat redlining in
  Chicago
• Created or preserved 26,923 units of housing
  through
• Lending
• Rehab
• New construction
• Directly invested 458 million
• Neighborhood Lending Services NHS
  Redevelopment Corporation

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NHS of Chicago

• 9 target communities
• Community building and neighborhood reinvestment
  strategies
• Block and institutional organizing
• Home ownership training and counseling
• Pre-purchase
• Post-purchase
• Foreclosure prevention

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Home Ownership Preservation Initiative (HOPI)
Model

• Partnership begun in 2003 between
• NHS of Chicago
• City of Chicago, Department of Housing
• Federal Reserve Bank of Chicago
• Major Lenders/Servicers
• HOPI approach
• Quality homeowner education to prevent current
  and future delinquencies
• Direct interventions to assist homeowners at risk
  of foreclosure
• Reclaim foreclosed homes for owner-occupants
• Study mortgage and servicing impacts on
  neighborhoods to develop best practices as a
  laboratory for training and replication

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HOPI Recent Activity

• Activity Sept-Dec 2007 Sept-Dec
  2008
• New F/C Cases 215
  680
• Workshop Attendees 46
  840
• Counseled Borrowers 772
  1226
• Documented Saves 114
  181

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Loan Modifications

• More Modifications Offered, But Not On
  Sustainable Terms
• Only 1/3 of Mods Lower Monthly Payment
• The Rest Freeze or Increase Monthly Payment
• Workable Mods require considering Homeowner's
  Total Budget
• Time to Solution for counselor is Still 3-6 month
• Execution of new programs has not reached loss
  mit staff level

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Why arent loan mods sustainable?

• - Investor Restrictions On How Much Loan Can Be
  Modified
• Lack of Accurate Data On What Homeowner Can
  Afford
• Servicer Capacity to Handle Volume Of Requests
• Investors Waiting On Bailout Programs
• Servicer Disincentives To Do Loan Modifications
  v. Foreclose

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New NHS Foreclosure Client Profile

• Average NHS Client Monthly Household Expenses
  Are 137 of Income
• More Families With Good Loans Delinquent Because
  Of Other Expenses And Decreases In Income
• Streamlined Modification Programs Can Handle the
  Cases With Reasonable Total Household Expense
  Ratios. _at_ 30-40 of NHS Population
• Next Tier, _at_ 20 Require Intensive Counseling On
  Budgeting/Cost Cutting

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• Streamlines the Loan Resolution and Process for
  Counselors And Servicers
• Quickly identify borrowers who are eligible for
  these options, and
• Gets them through the process faster.
• Counselors, borrowers, and lenders all speaking
  the same language

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• A transparent Web-based solution that offers
• Automated loan resolution proposals based on
  borrower characteristics
• Automated identification of federal and state
  rescue programs available for refinance
  solutions
• A password-secure Web site that facilitates the
  fast, easy exchange of loan and borrower
  information between counselors and servicers

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Neighborhood Lending ServicesCDFI and Licensed
Mortgage Bank

• Lending to families and individuals to buy, fix
  or keep homes
• Tool to fill lending gaps to create reinvestment
• City-wide to low/moderate income borrowers
• Neighborhood Lending Program
• CBDG subsidy funds to leverage private funds and
  create investment and affordability

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NHS Borrower

• Owner occupant in target neighborhood
• African-American (71) or Hispanic (19)
• Female Head of Household (42)
• Household income at or below 80 of the Area
  Median Income (65)
• Loans to borrowers in Low/moderate income census
  tracts (90)
• Up to 10 of transactions may be to homebuyers or
  homeowners with ITINs

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PSSA 2003 and 2006 Cumulative Loan Originations
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New 2009 Loan Pool Overview

• 150 million loan pool over next three years
• Loans to low/moderate income borrowers and/or
  neighborhoods
• Dedicated 6.00 loan loss reserve
• MacArthur foundation participant
• Public/private partnership effort
• Loans originated by NHS of Chicagos non-profit
  residential mortgage licensee - Neighborhood
  Lending Services, Inc. (NLS)

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Composition of Originations
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Why participate?

• Extensive community development lending and
  investment opportunity
• Sound economics from an investor perspective
• Sound financial optics on investor income
  statement and balance sheet
• NHS delivers on promises making reward worth
  effort
• Wide recognition from regulatory and public
  sector, including City of Chicago and public at
  large
• Visibility and marketing effort creates
  additional opportunities for lender originations
• Newly-originated first mortgages by lender made
  possible by tandem NHS second mortgage
• Managed reserves address credit risk
• Innovative template replicable in other markets
  for private, public, and non-profit
  collaborations to create innovative community
  development opportunities

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Investor Participation 2009(in progress)

• Allstate Bank
• Beverly Bank
• Charter One Bank
• Cole Taylor Bank
• Community Savings Bank
• First Savings Bank of Hegwish
• Harris, N.A.
• Hoyne Savings Bank
• HSBC
• MB Financial Bank

• Midwest Bank and Trust
• National City Bank
• Neighborhood Lending Services
• The Northern Trust Company
• Park Federal Savings
• Park National Bank
• The Private Bank and Trust
• Prospect Federal Savings
• Standard Bank
• State Farm Bank

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NHS Redevelopment Corporation

• Direct real estate ownership and development
• Tool for neighborhood reinvestment
• Fix problem vacant properties
• Create visible investment to set standards for
  improvement
• Provide affordable housing opportunities
• Multi-family rental rehab and new construction
  (tax credits, etc.)
• New home construction to encourage homeownership
  on vacant lots
• NeighborHomes purchase, rehab and resale of
  vacant 1-4 unit properties for sale to owner
  occupants

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ACA Model BlockGreen Bungalow HomesBefore
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ACA Model BlockGreen Bungalow HomesAfter
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Current Purchase, Rehab, Resale Issues

• Very soft market
• Even in formerly okay neighborhoods
• Tightening credit availability
• Overall holding costs
• Decreasing sales prices
• Increased subsidy needs and lower acquisition
  cost
• Rental single family - option
• Lease to purchase options
• Subsidy needs
• Management and counseling costs
• Subsidy to cover costs of those lease to
  purchasers who dont become the owner and need to
  replace with new

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NEW REALITY

• 97 of properties that go to foreclosure auction
  end up in REO inventories.
• Investor interest has been dramatically reduced
  had declined from 30 of foreclosures purchased
  at auction
• Large inventories of bank owned REO property are
  putting tremendous downward pressure on local
  real estate markets.
• Servicers are actively pursuing opportunities to
  move REO.
• Increased interest negotiating transactions
• Make us an Offer

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Neighborhood Perspective

• Currently there are 358 single family active
  listings in Roseland.
• 279 listings are priced less than 149,999
• 47 are listed for less than 30,000 with an
  average time on market of 167 days.
• In 05 06 no properties under 30,000
• 10 are listed for less than 15,000 with an
  average market time of 105 days.

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Foreclosures in NHS Neighborhoods
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Market Capacity vs Price

• REO property most likely will have substantial
  deferred maintenance
• Cost to rehabilitate properties has not decreased
• Soft resale and rental market makes
  rehabilitation challenging without significant
  subsidy.
• Single family rental demand still an unknown in
  hardest hit communities.

Bank Owned REO located at 331 West 110th Street.
Photograph taken from MLS listing 06834796
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Neighborhood Housing Services of Chicago

• Serving Lower Income Neighborhoods in Distress
• Bruce Gottschall, Executive Director
• Neighborhood Housing Services of Chicago
• FDIC Advisory Committee on Economic
  Inclusion
• February 5, 2009