In expected, but still very exciting, good news, Treasury has approved the Illinois Housing Development Authority’s application to apply Hardest Hit Funds to the Mortgage Resolution Fund developed by Mercy Portfolio Services. MRF is now operating as a partnership between Mercy, Enterprise, National Community Stabilization Trust, and Housing Partnership Network. Bill Goldsmith, of Mercy, is heading up the new LLC, and they will begin a search for other staff shortly.
MRF will purchase pools of distressed loans for which there is little private buyer interest in targeted neighborhoods at a discount, work with the borrowers through counseling agencies to craft a sustainable principal modification that doesn’t leave the borrower underwater, season the new loans and sell them, recycling funds for more modifications. Where modifications are not possible, they will seek household and neighborhood sensitive strategies like deeds in lieu or short sale over foreclosure.
A similar, if somewhat smaller scale program in Oregon, created by Further Development, is underway and doing deals, and branching out to Arizona with a variation on the model in partnership with NCLR. MRF is hoping to expand to New Jersey next, through a partnership with New Jersey Community Capital.
We will have more news about each program in the coming months, but for more on the note purchase model, see this talk I gave at the New America Foundation in April.