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Moving Quickly to Stave Off Decline

Real-estate-owned properties (REOs) are on the rise, and neighborhoods are paying the price when banks simply sit on distressed properties. “Basically, what happens is when theses properties go into foreclosure, and they become vacant, they become abandoned, and they deteriorate,” according to Alan Mallach, a senior fellow at the National Housing Institute and the Brookings Institution. Once vacant, the properties destabilize neighborhoods “very dramatically in so many ways.

“Unless you can get a handle on some of these properties, your ability to stop the bleeding and stabilize that neighborhood is very limited. It’s a critical issue.”

Stopping that bleeding is a key component of the ONR model. And while it serves as the first large-scale purchase of mortgages as a means of stabilizing neighborhoods, other efforts are beginning to mushroom around the country in order to ward off, or stop in its tracks, the devastating effects of foreclosure. Those efforts include Mercy Portfolio Services, Inc. in Chicago working with the city to create a nonprofit to redevelop vacant, foreclosed properties; Enterprise Home Ownership Program (EHOP)-Dallas, Inc., which hopes to develop 345 post-foreclosure properties over the next three years; and Cleveland’s Neighborhood Progress, Inc., whose pilot program works in six neighborhoods, identified as Strategic Investment Initiative areas, and involves foreclosure mitigation, demolition, and redevelopment. Other high-impact projects are underway in Detroit; Washington, DC; Los Angeles; Minneapolis/St. Paul; Massachusetts; New York City; and Rhode Island.

A report recently released by NeighborWorks America, “Post-Foreclosure Community Stabilization Strategies: Case Studies and Early Lessons,” examines 14 case studies involving 13 nonprofits that can provide “the sort of large sale solutions that will be required to restore neighborhood housing markets to equilibrium.” The report looks at each individual case, outlining the financing structure, and the carefully arranged partnerships involved in putting each project together.

In addition to having existing financial tools like the New Market Tax Credits program and CDFIs, CDCs and municipalities are also beginning to see foundation support. The National Community Stabilization Trust (NCST), a partnership composed of community-based nonprofits, of which HANDS is a member, recently received a $50 million Program Related Investment from the Ford Foundation to assist NCST in providing acquisition and construction financing to local CBOs that attempt to address the effects of foreclosure. NCST aims to act in over 100 localities by the end of this year.