Going Upstream
Another crucial problem is the limited types of purchases that can be made. NSP allows purchases of foreclosed properties, period. In December 2009, Mercy Portfolio Services, which runs Chicago’s NSP program, inventoried all the vacant units in their target area. Of 1,252 units, they found only 7 percent were eligible for NSP funding. The rest were bank owned and not listed, still in foreclosure, a lender had walked away from them, a private equity fund had bought the note and walked away from them, or a speculator had bought them with cash to hold until the market turns.
When neighborhood stability is the goal, prevention means more than just encouraging mortgage modifications. If NSP supported the purchase of distressed mortgages, pre-foreclosure, many of these properties could have been kept from going vacant in the first place, at a much lower cost than it would take to rehab them now even if they were available.
Mercy Portfolio Services and the National Community Stabilization Trust are creating a fund built with private, philanthropic and government capital and exploring a partnership with a major for-profit investor in distressed mortgages to bring such upstream interventions to scale.
While important clarifications to the early definitions of “abandoned” and “foreclosed” have expanded the pool of eligible properties somewhat, and short sales have been included as an eligible activity, the statutes still do not allow neighborhood stabilization work to truly move upstream.
Crossing Departments
Neighborhood stabilization funding of any sort doesn’t exist in a vacuum. It needs to be backed up with things like stronger regulatory and enforcement efforts and an alignment of Treasury programs with neighborhood stabilization objectives. Stronger efforts to prevent unnecessary foreclosures, streamline access to vacant properties and allow their quick transfer into responsible hands, and push for the wider availability of sound, affordable mortgage products will set the stage for more successful deployment of neighborhood stabilization funding.
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How we respond to the sea of vacancies and foreclosures will define our communities for years and even decades to come. We welcome your input and stories about the role NSP is playing or could play in your community as well; you can share them in the comments on these articles.
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