Community Stabilization in the Wake of the Foreclosure Crisis

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Community Stabilization in the Wake of the
Foreclosure Crisis Ali Solis, Vice President,
Public Policy Industry Relations Enterprise
Community Partners, Inc. October 2, 2008
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The Enterprise Mission
Enterprises mission is to see that all
low-income people in the United States have the
opportunity for fit and affordable housing and to
move up and out of poverty into the mainstream of
American life.
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How We Do It
We advise, finance and assist in the
construction and rehabilitation of affordable
housing and economic development projects. We
create community development models and policies
that can be replicated.
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What Weve Accomplished
More than 9 billion in equity, loans and grants
invested since 1982 More than 240,000 affordable
homes created Investing 1 billion in equity,
loans and grants annually
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Foreclosure Tsunamis Impact on Whole Communities

• 44.5 million homes adjacent to subprime
  foreclosed properties will lose value.
• Property values for each home located within 1/8
  mile of a foreclosed house will drop an average
  of 5,000.
• Localities will lose 4.5 billion in property
  taxes and other local tax revenue.
• In short whole communities, not just individual
  homebuyers, suffer from concentrations of
  foreclosures.

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Goals of a Community Stabilization Strategy

• Keep residents in their homes
• Restore market confidence
• Prevent and eliminate blight
• Preserve property values
• Renovate and sell/rent vacant properties
• Create land banks for obsolete properties
• Reduce holding periods of REOs by
  lenders/servicers
• Target communities to stop downward cycle

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Successful Community Stabilization Initiatives

• Good data and mapping critical
• Precise geographic targeting
• Sustain at-risk owners through workouts
• Demolish obsolete blighted properties
• Renovate and sell/rent vacant properties
• Provide quality counseling
• Vacant land banking/reutilization
• Public/private partnerships with flexible
• subsidies to fill development gaps

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Concentration Example Cleveland
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Cleveland Foreclosure Response Pilot

• 3-Year Pilot Plan impacting on 750 homes in six
  Cleveland neighborhoods
• Help 300 families at risk of foreclosure stay in
  their homes
• Demolish 300 obsolete, blighted structures
• Redevelop 150 vacant homes for homeownership,
  lease/purchase or rental housing (60-120 AMI)

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Cleveland Foreclosure Response Pilot

• Partners Neighborhood Progress, Cleveland
  Housing Network, City of Cleveland, 6 CDCs
• Financing totals 21 million, including
• Demolition resources 1.2 million in CDBG
• REO Redevelopment 1.5 million in CDBG soft
  seconds (10,000 per homeowner)
• 4.5 million in gap funding from OHFA

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Challenges

• Production capacity need to ramp up quickly
• 3.92 billion great start, not nearly enough
• Timely access to discounted REOs in bulk
• Untangling REOs from complicated pools of loans

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National Approach to Bulk Dispositions

• National Community Stabilization Trust
• Debt and Equity Financing
• Transfer Agent - Servicers to Localities
• National Focal Point - REO and Neighborhood
  Stabilization

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New Innovation Community Stabilization Trust

• National Community Stabilization Trust (NCST)
  would coordinate the purchase and disposition of
  REO properties from lenders, loan servicers,
  investors
• Lead partner organizations Enterprise, the
  Housing Partnership Network, the Local
  Initiatives Support Corporation and NeighborWorks
  America

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Stabilization Trust Mechanism

• Acquire REO properties at a significant scale, on
  a systemic basis and at market-appropriate,
  risk-adjusted prices
• Assemble public, private and foundation resources
  to fund these acquisitions
• Work through local organizations to return the
  properties to the affordable ownership and rental
  housing stock for low- and moderate-income
  families
• Provide mechanisms for localities to use HUD
  Neighborhood Stabilization Program (NSP) funds
  effectively

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For Further Information

• Ali Solis
• Vice President, Public Policy and Industry
  Relations
• asolis_at_enterprisecommunity.org / 202.842.9190

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Thank You!