Brief Summary of Impact of Predatory Lending in St' Paul

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Brief Summary of Impact of Predatory Lending in
St. Paul

• CURA Housing Forum
• March 23, 2007
• Karen Reid
• Executive Director of NeDA

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NeDAs Experience in Foreclosure Prevention
Counseling

• In 2004 we served 13 clients that were headed
  towards foreclosure. This first quarter of 2007
  we expect to see 60 clients. If this keeps up we
  are on track to see 240 clients by the end of the
  year . By clients we mean families with
  children. NeDA serves the metro area.
• NeDA has noted that 98 of the families coming in
  for foreclosure prevention counseling had little
  or no understanding of the home buying process.
  All of the families seen were Spanish speakers
  who did not know or understand their loan
  product the loan terms the property condition
  that the financing received was (for example) an
  80/20 with two separate mortgage payments, which
  did not include property taxes and insurance or
  an adjustable rate mortgage with pre-payment
  penalties. But it was not a language barrier
• All of these families were assisted by someone
  who spoke Spanish, as with other populations
  preyed upon, the families we see were not given
  all the information necessary to make the right
  decision when purchasing a home.
• Historically weve helped about 48 remain in the
  homes, 24 have sold their homes the remaining
  percentage has been foreclosed on or whom weve
  lost contact with. We always hope we can improve
  on the first number.

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City of St. Paul Foreclosures 2005 2006 Map

• Over the past 3 years the number of foreclosures
  in the City has increased by over 150.
• From Jan 2005 to June 2006 there were 1,550
  foreclosed properties in St. Paul.
• Of those, 1,425 had mortgages originating in 2001
  or later.

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Foreclosures 2005 06 by Yr. of Loan
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Foreclosures 2005 06 by District, Principle and
Amount Due
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Vacant Building Definition (St. Pauls
Legislative Code)

• A building or portion of a building which is
• a. Unoccupied and unsecured
• b. Unoccupied and secured by other than normal
  means
• c. Unoccupied and a dangerous structure
• d. Unoccupied and condemned
• e. Unoccupied and has multiple housing or
  building code violations
• f. Condemned and illegally occupied or
• g. Unoccupied for a period of time over 365 days
  and during which time the enforcement officer has
  issued an order to correct nuisance conditions.

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Vacant Buildings 19952006 Map

• St. Paul currently has 926 Vacant Houses listed
• St. Paul has doubled their inspection staff to
  address the growing number of vacant homes that
  must be inpsected.
• The Homes fall primarily in what is called the
  Arc of Hardship

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Vacant Buildings to Housing Stock
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Vacant Bldgs 19952006 by Start Qtr
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Vacant Building Outcomes 19952006Assumed
outcomes for current 926 Vacant Houses in St.
Paul Today

• 491 will be rehabbed and Occupied
• 120 will be razed
• 130 will have unknown outcomes
• 185 will remain open

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Municipal Losses

• Reduction in timely property tax collection
• Unpaid service fees Water, Heat, electricity
• A study in Chicago determined that municipal cost
  for foreclosure-related homes was 5,358 if
  building was not torn down
• 13,452 if torn down.
• If damaged by fire the cost averaged 34,199.

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Cash Outlay Assumptions

• If costs hold true for St. Paul the city will
  have an initial outlay of 1,614,240. (Liens
  are put on properties for recovery when land
  sold.)
• Cost for reoccupied home will be 2,630,788. City
  charges fees and put on title. So most will be
  recouped.
• But it is a question of lost revenue and
  irregular cash flow.

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Vacant Bldgs 19952006 Duration on List
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Indirect Impact on Area Property Values

• Vacant/Foreclosed homes can impact the value of
  adjacent properties. Within a 150 feet an owner
  could expect to loose about 7,000 in resale
  value
• Resident living up to 450 feet can loose about
  half.
• A typical block is 450 feet in length.
• Average number of homes on a block is 20
• Every home in that block will loose market value.
  
• Total decrease in value can be 95,000 per block.
  
• Having two abandoned properties on the same block
  was shown to have more than 10K loss for each
  house or 200,000.

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Vacant Buildings to Housing Stock
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Studies Used in this Report

• 2005 St. Paul Housing Study Owner-Occupied
  Housing. prepared by Robert Russell for St. Paul
  Coalition of Community Developers
• Report on mortgage lending in St. Paul from the
  institute on race and poverty, prepared by Erik
  Myott
• City of St. Pauls Council Research
  Investigation Centers Mortgage Foreclosure and
  Vacant Building Trends in St. Paul (July 2006
  draft)
• Homeownership Preservation Foundation (2 reports)
• The Municipal Cost of Foreclosures a Chicago
  Case Study
• Collateral Damage The Municipal Impact of
  Todays Mortgage Foreclosure Boom