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Foreclosure Mitigation Toolkit for Communities

The Federal Reserve views the high rate of mortgage foreclosures as an urgent problem. Using the System’s expertise and extensive network of national and regional relationships, the Fed is collaborating with other regulators, community groups, policy organizations, financial institutions and public officials to identify solutions to prevent unnecessary foreclosures and their negative effects.

The goal of this toolkit is to provide resources to assist communities in addressing the current turmoil in the housing market and minimize the impact of foreclosures on neighborhoods. Web links and local resources are included. For more information, contact the Federal Reserve Bank Community Development Office in your region.

  • Step 1
  • Step 2
  • Step 3
  • Step 4

Step One: Assess the Foreclosure Situation

Data and Maps

The first step in any community effort is assessing the foreclosure situation in your community. This will also enable you to target limited resources to foreclosure hotspots.

U.S. Credit Conditions in the United States

The New York Fed maintains a website with dynamic maps and data showing credit conditions by county across the U.S. These mapsoff-siteshow delinquency rates for various types of credit including auto, bank cards and student loans in addition to mortgage loans. The maps may assist community groups in targeting financial counseling and other resources to at-risk homeowners. Policymakers can also use the maps and data to develop plans to lessen the direct and spillover impacts that delinquencies and foreclosures may have on local economies. Local governments may use the data and maps to prioritize the expenditure of their resources for these efforts.

Visit your Reserve Bank's website for research reports, data, and practical information, and/or contact your Bank’s Community Development Office with specific requests.

National Delinquency Survey

The Mortgage Bankers Association (MBA) provides quarterly reports on delinquency and foreclosure rates of loans at the national, regional and state levels. The MBA’s National Delinquency Survey off-site, conducted since 1953, covers 80 to 85 percent of all first-lien residential mortgage loans outstanding in the United States. Delinquency and foreclosure measures are broken out into various loan types (prime, subprime, VA and FHA) and fixed- and adjustable-rate products.

Regional and Local Data Resources

State laws require that notices of intent to foreclose real estate be posted for public view, although the exact posting process varies from state to state. These preforeclosure notices, along with actual foreclosure sales data, are compiled regularly by various companies who make the information available for sale. Some counties make maps and listings of property addresses available during the “publication” period prior to the foreclosure sale date. Contact a local title company in your community to get more information on the best local sources for preforeclosure and foreclosure sales reports.

Foreclosure Laws

Foreclosure laws and regulations are important to consider and can vary significantly across states. In some states with a judicial foreclosure process, the lender must take the borrower to court to seize the property. In other states, a nonjudicial foreclosure process requires no court action.

Sources for State Laws on Foreclosure

Step Two: Reach Troubled Homeowners

Raise Awareness

Surveysoff-site show many at-risk homeowners often fail to seek help. They may be embarrassed or don’t know where to turn. Stress can make dealing with credit problems even harder. Community leaders serve a crucial role by helping consumers find quality housing counselors at the first sign of trouble.

The U.S. Department of Housing and Urban Development (HUD) maintains a database of HUD-approved counseling agenciesoff-site. Additional information, including financing options, can be obtained from the Federal Housing Administrationoff-site.

Community leaders can also reach borrowers effectively using homeownership events, public service announcements, brochures and websites.

Build Partnerships

One important way to strengthen foreclosure outreach is to build strong partnerships with existing state and local coalitions and task forces.

If there are no existing coalitions or task forces in your area, you can start one by reaching out to grassroots and faith-based groups, legal aid offices, housing counseling organizations, community development organizations, and city and state consumer protection departments. Two good examples of state coalitions include:

Host Homeownership Events

Homeowner workshops and/or default clinics have proven successful in helping borrowers avoid foreclosure. They are held in accessible community locations such as convention centers, schools and public libraries. Sponsors invite troubled borrowers, issue media releases and post notices on websites and in public places.

Three basic models exist for effectively run workshops. They range from large events at which loan servicers and housing counselors meet face-to-face with borrowers to smaller events that are primarily educational in purpose.

  • HOPE NOW Homeowner Preservation Workshops Off-site PDFare typically held in large metro areas. They benefit from a national partnership with NeighborWorks America and an alliance with more than 25 lenders to allow borrowers to meet with loan servicers and housing counselors.
  • Community Foreclosure Mitigation Workshopsoff-site are typically hosted by a local coalition or task force. Local nonprofit counselors are on site to counsel borrowers. Lenders and servicers are often willing to participate in community events that are well-designed and marketed.
  • Default Clinics are hosted by nonprofit credit and/or housing counselors as a way to triage distressed borrowers and streamline the default counselors’ time. This model focuses on getting information to clients quickly to help them select the appropriate assistance needed.

Reach Out to Consumers

Community leaders are employing many direct approaches to reach troubled homeowners, making use of information and materials available from local and national organizations:

Public Service Announcements (PSAs)

Educational Brochures

Mailings, Flyers and Press Releases

Local Community Partnership websites

Public Television Partnerships

Access National Resources

A number of national organizations and government agencies maintain rich informational websites to assist communities and consumers in dealing with foreclosure issues, including prevention, mitigation, counseling, loan modifications, neighborhood stabilization and foreclosure-rescue scams.

Identify Foreclosure Alternatives

Identifying and understanding the alternatives to foreclosure can help prevent problems before they occur or significantly reduce the pain. The government implemented a major program in 2009 to encourage loan modifications. Local housing counselors are good sources for helping consumers find options. Just understanding the different terms can guide consumers to the right course of action.

Step Three: Establish Post-Foreclosure Support Systems

Sadly, foreclosure is unavoidable for some borrowers, even when they have made contact with their lender/loan servicer early on in the process. Circumstances such as severe loss of income may prevent the mortgage from being modified to a payment that is affordable to the borrower.

Working collaboratively, housing counselors and other stakeholders from community-based organizations, financial institutions and local government agencies can encourage former homeowners to regain personal financial stability and contribute to the overall recovery of their community.

A Resource Guide for Foreclosure RecoveryOff-site PDF has been developed for use as a tool for community leaders to assist consumers in achieving stability following foreclosure. The table of contents below provides an overview of the topics covered in the Guide.

Managing foreclosure and options for a graceful exit

  • Relinquishing ownership of the property
  • Renters’ rights

Components of foreclosure recovery

  • Relocation (housing and shelter)
  • Restoration (restoring normalcy to life)
  • Rebuilding (credit and finances)
  • Renewal (stability and looking ahead)

Appendix—additional reports and resources

Contact the local field staff from the Community Development Office in your region for assistance with recommendations for implementing this guide.

Step Four: Stabilize Neighborhoods

Impact to Neighborhoods

Foreclosures are not only devastating to the homeowner, but can also be destructive to neighborhoods and communities, especially when they happen in large numbers and in a concentrated area.

Research suggests that foreclosures reduce surrounding property values, which in turn can lead to more foreclosures, vacant and abandoned properties, and other neighborhood blight. Foreclosures also tend to be a magnet for crime, including property damage, trespassing, squatting and vandalism.

While foreclosure prevention is a critical component of a community foreclosure strategy, equally important is mitigating decline from existing and future foreclosures by protecting foreclosed properties, neighborhoods and the community tax base. The Federal Reserve sponsored Recovery, Renewal, Rebuilding off-site, a series of forums to generate discussion on the aftereffect of the foreclosure crisis and explore solutions for community recovery, rebuilding and preparing for the future.

Neighborhood Stabilization Program

To curtail the decline of communities severely affected by foreclosures, Congress created the Neighborhood Stabilization Program (NSP) as part of the 2008 Housing and Economic Recovery Act.

NSP funds may be used for:

  • purchase and rehabilitation of foreclosed properties,
  • demolition and redevelopment of demolished or vacant properties for rent or sale to lower-income households,
  • down payment and closing cost assistance programs,
  • creation of land banks, and
  • other housing-related activities to stabilize neighborhoods.

View a report on NSP programsoffsite in the Eleventh District.

Neighborhood Community Stabilization Trust

The National Community Stabilization Trustoffsite promotes productive reuse of foreclosed properties and stabilizes neighborhoods by facilitating the transfer of foreclosed and abandoned properties from financial institutions nationwide to states, local municipalities and community- based housing organizations. The Trust is a collaboration of six national nonprofit organizations: Enterprise Community Partners, Housing Partnership Network, Local Initiatives Support Corp., National Council of La Raza, National Urban League and NeighborWorks America. Through an agreement with the U.S. Department of Housing and Urban Development, the Trust's First Look Programoff-site gives communities participating in HUD's Neighborhood Stabilization Program a brief exclusive opportunity to purchase foreclosure properties so these homes can be rehabilitated, rented, resold or demolished.

Identifying Ownership and Registration of Vacant/Abandoned Properties

One common problem faced by cities with vacant or abandoned properties is identifying the person responsible for the property. Often ownership or servicing of the mortgage will be transferred between parties several times over the life of the loan.

  • A title search will identify the last owner of record, and generally some kind of contact information will be available on the title.
  • The local tax assessor can identify the name, address and possibly the loan number of the loan servicing agent on properties where the first mortgage is impounded for taxes and/or hazard insurance.
  • A good starting point for locating appropriate contacts for bank-owned property is the Mortgage Bankers Association website that includes a list of property preservation contacts off-site for numerous large loan servicers from around the country.

Land Banking

One option for dealing with vacant and abandoned properties is to create a land bank through which a municipality may buy and hold property for future sale or development.

The Genesee County Land Bankoff-site in Flint, Mich., has been touted as a national model. In 1999, the Michigan Legislature changed the way foreclosed properties were handled by giving outright ownership of these properties to the local county treasurer after only two and a half years. This change in the law opened the door for communities to reclaim, reinvest in and rebuild their neighborhoods.

The Genesee County Land Bank Authority (GCLBA) uses the new law to acquire abandoned land through the foreclosure process and determine the best use of that land. The GCLBA assembles land for transfer to adjacent homeowners, develops long- and short-term green spaces, and assembles land for new housing and commercial development.The objective is to restore the integrity of the community by removing dilapidated structures and redeveloping abandoned properties.

The Land Bank has spurred re-use of more than 4,000 residential, commercial and industrial properties that it has acquired since 2002 through the tax foreclosure process. In addition, with revenue generated from tax delinquent property fees and interest, the Land Bank has developed an $8 million self-sustaining fund to support cleanup and reinvestment.

The National Vacant Properties Campaign

This campaign off-site exists to provide individuals, advocates, government agencies, developers, nonprofits and others with information resources, tools and assistance to support their vacant property revitalization efforts. Vacant properties are defined as vacant residential, commercial and industrial buildings and lots that

  1. Pose a threat to public safety, and/or
  2. The owners or managers have neglected the fundamental duties of property ownership, such as failing to pay taxes or utility bills, defaulting on mortgages or carrying liens against the property.

The goal of the campaign is to help communities prevent abandonment, reclaim vacant properties and once again become vital places to live. Four actions fulfill this campaign:

  1. Creating a national network of vacant property practitioners and experts,
  2. Providing tools and research,
  3. Making the case for reclamation, and
  4. Building capacity of local, regional and national practitioners and decisionmakers through technical assistance and training.

The city of Minneapolis recently conducted an analysis of the cost of boarded and vacant properties. The analysis revealed that the true cost to the city was over $6,000 per property. Some communities have set up a building registry to record unfinished, abandoned, substandard and vacant properties left by homebuilders and other developers. New construction permits are not approved until the builder/developer has corrected existing problems.

A vacant property registration ordinance requiring owners of vacant or abandoned properties to register with the municipality may allow community officials to more easily monitor and inspect the properties and enforce code compliance. Safeguard Properties, a privately held field services company, works with loan servicers to preserve and maintain foreclosed properties. Safeguard provides a list of vacant property registration ordinancesoff-site for numerous cities around the country.

Living Cities, the National Community Development Initiative

In 2008, Living Citiesoff-site, a collaborative of corporate and philanthropic organizations, launched the Foreclosure Mitigation Initiative. This 10-city pilot supported new and existing programs to mitigate the impact of concentrated foreclosures by returning foreclosed properties to productive use.

The programs selected for this pilot demonstrated promising local initiatives in strong, moderate, and weak housing markets and used tools such as New Markets Tax Credits, land trusts and nonprofit real estate brokers.

A reportOff-site PDF on the results of the pilot along with a series of policy recommendations is now available.



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