Foreclosure Impacts and Strategies

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Foreclosure Impacts and Strategies

• Alan Mallach
• Nonresident Senior Fellow
• The Brookings Institution

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Mortgage delinquencies and foreclosures are still
going up
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but not evenly across the United States

North Carolina
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North Carolina is not immune
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and is being affected by foreclosures

• As a of owner-occupied stock, some areas are
  particularly hard hit (foreclosures from
  1/2005-7/2009)
• Dare County 24.2
• Mecklenburg County 21.6
• Franklin County 17.3
• Durham County 15.1

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Things may be getting worse

• Statewide filings increased 43 from August 2008
  to August 2009
• Filings declined from November through February,
  but have been rising steadily since then.
• In Mecklenburg County, filings increased 80, to
  1,316 in August 2009.

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.particularly in the Charlotte area
Projection based on data through August 2009
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What does this mean?

• Thousands of families are being affected both
  homeowners and tenants
• Thousands of houses are becoming vacant and
  abandoned
• Neighborhoods are being destabilized with loss
  of property value, safety and quality of life.

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Protecting homeowners and tenants

• Making Home Affordable (HAMP)
• Tenant protections in Helping Families Save their
  Homes Act of 2009
• Going further?
• More extended tenant protections
• Allowing owners to remain as tenants

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Protecting properties

• Strengthen code enforcement and nuisance
  abatement
• Provide for effective collection of liens and
  judgments
• Impose habitability standards
• Make lenders responsible for maintaining vacant
  properties
• Work with investors

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Stabilizing neighborhoods

• What is neighborhood destabilization?
• Foreclosures undermine local housing markets and
  increase vacant housing
• Market deterioration and vacant housing lead to
  neighborhood destabilization
• Once destabilization begins, it can trigger a
  chain reaction of destabilizing events.

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Destabilizing events include

• Increase in number of foreclosure filings and
  foreclosure sales
• Increase in vacant and abandoned properties
• Increase in crime
• Increase in number of properties coming on market
• Too few home buyers for available supply
• Declining house prices
• Reduced property maintenance

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How does one stabilize a neighborhood?

• Foreclosures and abandoned properties can
  trigger destabilization but dealing with those
  problems alone may not be enough to restore
  stability.
• Neighborhood stabilization is about rebuilding
  confidence and fostering market recovery.
• Market recovery happens when the effects of
  stabilizing actions exceed those of destabilizing
  events.

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Stabilizing actions include

• Reducing the number of REOs coming onto the
  market
• Reducing the number of foreclosure filings
• Increasing the pool of home buyers
• Reducing the number of vacant and abandoned
  properties
• Stabilizing house prices
• Reducing crime
• Improving property maintenance and neighborhood
  appearance.

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What should neighborhood stabilization strategies
include ?

• Reducing future foreclosures
• Reducing the link between foreclosures,
  disinvestment and vacancy
• Putting vacant properties back in productive use
• Addressing other forces destabilizing the
  neighborhood
• Restoring confidence and fostering market recovery

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They should leverage other tools and resources

• Property acquisition tools
• Code enforcement and nuisance abatement
• Public/private sector housing assistance and
  mortgage financing
• Legal tools to minimize foreclosure impacts and
  prevent future foreclosures
• Outreach, marketing and other activities to build
  confidence and rebuild market demand

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Neighborhood stabilization efforts should.

• Target resources strategically
• Reduce the link between foreclosures,
  disinvestment and vacancy
• Align with market realities
• Build partnerships

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Target resources strategically

• Target areas where market conditions make impact
  possible or where strategic location or assets
  make it critical.
• Target areas where organizational capacity exists
  to carry out strategy.
• Make sure each target area receives enough
  investment to make impact possible

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Align strategies with market dynamics

• Understand the market
• Trends in properties coming onto market
• Price trends/affordability of houses on market
• Level and type of home purchase activity
• Size and characteristics of home buyer pool
• Build strategies based on market conditions

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Market conditions fall along a continuum
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Market-sensitive strategies acquisition
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Market-sensitive strategies reuse
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Build partnerships

• Government agencies
• CDCs and non-profit service providers
• Foreclosure prevention entities
• Real estate industry players
• Local and regional institutions
• Residents and civic organizations

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A final word.

• In the end, neighborhood stabilization is not
  about how many units are acquired, rehabilitated
  or demolished. It is about restoring stability,
  in the sense of healthy market conditions and the
  confidence of residents and homebuyers, to the
  neighborhood.

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• Alan Mallach
• PO Box 623
• Roosevelt NJ 08555
• 609.448.5614
• amallach_at_comcast.net