Foreclosure Mitigation Toolkit for Communities

Step One: Assess the Foreclosure Situation

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.

Data and Maps

Dynamic Maps of Nonprime Mortgage Conditions in the United States

The Federal Reserve System provides dynamic maps and data showing subprime and alt-A mortgage loan conditions in the U.S. These maps, maintained by the New York Fed, display regional variation in the condition of subprime 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, or contact your Bank’s Community Affairs 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 , 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 pre-foreclosure 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 pre-foreclosure 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

• U.S. Foreclosure Laws
• Foreclosure Laws and Procedures by State

Step Two: Reach Troubled Homeowners

A recent Freddie Mac/Roper poll showed that despite increased news media coverage of the foreclosure crisis, almost 57 percent of the nation’s late-paying borrowers still do not know their lenders may offer alternatives to help them avoid foreclosure. The combined stress of being delinquent on their mortgage and the associated problems that caused the financial difficulties can interfere with a homeowner’s ability to strategize and make rational decisions about how to deal with his or her financial crisis.

A critically important service that community leaders can provide to their constituents is to inform them of the necessity of talking with the loan servicer or a qualified housing counselor as soon as they know they are going to have trouble making their payments. The U.S. Department of Housing and Urban Development maintains a searchable database of HUD-approved housing counseling agencies organized by city, state, and ZIP code.

Community leaders can also inform troubled homeowners of the many valuable resources at their disposal for addressing their mortgage problems, including refinance options available from the Federal Housing Administration (FHA) .

Example of Outreach Effort

A brochure published by the Ottawa County (Ohio) Auditor’s office provides a foreclosure prevention checklist, a directory of national and local help organizations, suggestions on what to do if faced with foreclosure, as well as information about scams.

Communities in areas affected by foreclosure are taking many approaches to reach troubled homeowners:

• Hosting community workshops, default clinics, and telethons.
• Publishing flyers in utility bills.
• Posting notices on city websites.
• Airing public service announcements on city cable TV stations.
• Conducting direct mail campaigns to targeted ZIP codes.
• Warning consumers about foreclosure rescue scams.
• Posting links to resources on community organizations' websites.

National Community Resources

The Federal Reserve Board hosts a website with links to the latest consumer information on foreclosure from HUD, the FHA, the IRS, and other government agencies.

Federal Reserve Consumer Help provides assistance to consumers who would like to file a complaint against a bank or other financial institution, and also provides information and resources on consumer issues. Consumers may also contact Federal Reserve Consumer Help by calling (888) 851-1920, or by e-mail at: ConsumerHelp@FederalReserve.gov .

NeighborWorks America is a national nonprofit organization created by Congress to provide financial support, technical assistance, and training for community-based revitalization efforts. The Fed is working with NeighborWorks to find ways to stabilize neighborhoods and mitigate the impact of foreclosures and vacant properties on communities. NeighborWorks has created a substantial document, Formula for Success: Questions and Answers for Local Leaders Designing a Foreclosure Intervention Program , providing a wealth of comprehensive information for communities wanting to do more to address local foreclosure issues, including contacting distressed homeowners.

NeighborWorks’ Center for Foreclosure Solutions provides research and reports; resources for counselors, such as training opportunities and predatory lending tips; and marketing resources for helping communities connect to troubled homeowners.

NeighborWorks also administers a national fund established by Congress to increase the availability of foreclosure counseling services in communities of need across the country. The National Foreclosure Mitigation Counseling Program (NFMCP) provided grants to HUD-approved housing counseling intermediaries, qualifying state housing finance agencies, and local NeighborWorks organizations to expand their capacity for counseling borrowers at risk of foreclosure.

NFMCP funds will also be used to train foreclosure counselors by the NeighborWorks Center for Homeownership Education & Counseling through NeighborWorks training institutes, regional training, place-based training in partnership with local intermediaries and housing finance agencies, and the development of an online Foreclosure Basics e-learning course .

The Homeownership Preservation Foundation operates a national foreclosure hotline staffed by trained counselors who can help borrowers assess their situation, set up a mortgage repayment plan, and get back on track financially. The service is free and is available in both English and Spanish, 24 hours a day, seven days a week. In addition, callers to 888-995-HOPE can be referred to local nonprofit resources that provide other forms of assistance or additional face-to-face counseling.

Public Service Announcements (PSAs)

NeighborWorks teamed up with the Ad Council to create a national PSA campaign to encourage homeowners at risk of losing their homes to call 888-995-HOPE. The campaign includes television, radio, newspaper, magazine, web, and outdoor advertising, in addition to downloadable tools for direct mail and grassroots marketing.
Example

Creating a Partnership

Another important step in addressing foreclosure issues in your state and community is to join a local homeownership preservation or foreclosure prevention coalition or task force. Or if there is increased foreclosure activity in your community and no such partnership exists, take a leadership role in creating one.

Key partners in a local foreclosure mitigation task force can include lenders, servicers, regulators, Realtors, housing counselors, city/state/federal government representatives, community-based organizations, and faith-based organizations. Successful task forces have been organized by institutions willing to devote the time and resources needed for the ongoing work of the task force.

The Texas Foreclosure Prevention Task Force is an example of a successful statewide partnership. Leadership for the creation of the task force was provided by the Texas Department of Housing and Community Affairs and NeighborWorks.

Hosting Community Events

Consumer Workshops/Clinics

Conducting foreclosure prevention workshops and/or default clinics in community locations such as schools and public libraries has proven successful in helping borrowers avoid foreclosure. There are at least two different models of foreclosure prevention workshops: the mitigation workshop and the default clinic.

Mitigation workshops are typically hosted by a local coalition or task force to give borrowers a chance to meet face-to-face with a counselor and their lender. Workshops are held in a meeting place located near an area of concentrated foreclosure activity. Participating loan servicers send invitations to their delinquent borrowers in area ZIP codes.

Local municipalities post notices of the workshops on their websites and in their public facilities. Local nonprofit counselors are on site to counsel borrowers and assist any borrowers whose lenders are not present. In most cases, lenders and servicers are willing to participate in a summit that is well-designed and well-marketed.

Generally, a local foreclosure coalition or task force will coordinate efforts to provide the meeting space and marketing for the event. It is important to be aware that these workshops are already taking place across the country and one may be scheduled in your community that you can support. Freddie Mac maintains a national calendar of consumer outreach events. To receive the most recent version of this calendar and add your local events, e-mail borroweroutreach@freddiemac.com .

Default clinics are often hosted by nonprofit credit/housing counselors as a way to triage distressed borrowers and streamline the default counselors’ time. This model helps the clients self-select the appropriate assistance needed. Family Services of Charleston, S.C., has put together a useful presentation on how to set up a default clinic .

HOPE NOW Alliance

This national partnership includes over 25 lenders, loan servicers, and counseling organizations dedicated to preserving homeownership and minimizing foreclosures. The HOPE NOW lender members have agreed to a uniform set of procedures and guidelines designed to increase outreach to troubled borrowers and reduce foreclosures.

HOPE NOW has partnered with NeighborWorks America to conduct homeowner workshops in cities across the U.S.

• The HOPE workshops provide opportunities for borrowers to meet face-to-face with their lender and local nonprofit housing counselors to develop a workout solution that can help borrowers stay in their homes.
• Extensive marketing and media precedes the workshops, and any homeowner facing difficulty or anticipating trouble with mortgage payments is invited to attend.
• Participating lenders and servicers mail invitations to their delinquent borrowers in the area.
  

Facilitating Communication Between Lenders/Servicers and Counselors

Some homeowners have reported frustration because of a disconnect between lenders/servicers and counselors. Local efforts can be effective in facilitating interaction between different agents in the mortgage industry.

• The Federal Reserve Bank of Philadelphia hosted a meeting of servicers and counselors recently that included formal presentations as well as breakout sessions where counselors could meet individually with loan servicers to discuss issues and problems. View the agenda .

Step Three: Establish Post-Foreclosure Support Systems

Sadly, foreclosure cannot always be avoided, even when borrowers make the call to their lender/servicer early in the process. Circumstances such as loss of income may prevent the mortgage from being modified to a payment that is affordable under the borrower’s current circumstances.

Communities should take steps to identify resources that are available to consumers who are losing their homes and be prepared to direct citizens to those resources. Many servicers offer financial incentives to get the homeowner or renter to leave the property sooner and in good condition. This service is often called “cash for keys.”

A list of local social services resources needed by displaced homeowners may include:

1. Public agencies and nonprofit organizations with information or deposit assistance for rental housing or information about temporary shelters.
2. Nonprofit credit counselors to help with budgeting and credit rehab.
3. Social services agencies such as United Way and the Salvation Army . They are equipped to handle the many needs of a person or family temporarily without shelter.
4. Food banks.
5. Local, county, and state housing agencies, which are often familiar with a host of other services that may be needed by someone facing foreclosure.
6. Faith-based organizations that offer assistance and services.
7. Legal Aid offices, where low-income homeowners can get information about their legal rights and receive free to low-cost legal assistance.
8. Utility companies with deposit assistance programs.
9. Mental health professionals with programs targeting people affected by trauma and depression.

Step Four: Stabilize Neighborhoods

Foreclosures are not only devastating to the homeowner, but they 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 is sponsoring Recovery, Renewal, Rebuilding , a series of forums to generate discussion on the after-effect of the foreclosure crisis and explore solutions for community recovery, rebuilding, and preparing for the future.

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, which includes a list of property preservation contacts for numerous large loan servicers from around the country.

The National Vacant Properties Campaign

This campaign 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 decision-makers through technical assistance and training.

The Local Initiatives Support Corporation (LISC) is a co-founder of the National Vacant Properties Campaign as part of the LISC Vacant Properties Initiative . LISC provides practitioners and policymakers with models, research, and technical assistance to turn vacant properties into vehicles for positive change.

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 ordinances for numerous cities 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 Bank 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.

Living Cities, the National Community Development Initiative

Since 1991, Living Cities , a collaborative of corporate and philanthropic organizations, has invested more than $543 million in 23 cities, leveraging more than $15 billion, to increase the vitality of cities and urban neighborhoods and improve the lives of the people who live there.

Living Cities recently launched a multicity pilot to support new and existing programs in several U.S. cities that will mitigate the impact of concentrated foreclosures by returning foreclosed properties to productive use. The programs selected for this pilot demonstrate promising local initiatives in strong, moderate, and weak housing markets and use tools such as new markets tax credits, land trusts, and nonprofit real estate brokers.