Getting to Scale with Neighborhood Stabilization
Getting to Scale with Neighborhood Stabilization
The Top Seven Strategies to Increase Impact for NSP Grantees
1. National First Look – A national property transfer platform to enable economies of scale
The National First Look Program creates national connectivity for the first look property transfer model to become an essential resource in the toolbox to stabilize neighborhoods. National First Look ensures that federal funding for REO property acquisition is used responsibly, strategically, and in a process where NSP grantees will receive better concessions on property pricing from financial institutions.
2. Technology – Cutting edge technology to promote data-driven strategic planning and program implementation
With limited federal funding, NSP buyers have been increasingly motivated to be very strategic in identifyingthe rightproperties for their revitalization plans. Innovative technology is critical to getting to true scale with REO acquisition and disposition efforts. Access to tools such as Community Central, PolicyMap, and REOMatch are assisting NSP grantees more accurately assess their local real estate landscape, and to see upcoming trends, spot areas of further concentration, accelerate short sale executions, and drive other strategic moves. The Stabilization Trust will continue to make REOMatch available at no cost to NSP grantees.
3. Strategic Developer Engagement – Increase volume of properties under renovation through turnkey affordable housing development strategies.
While local community efforts to confront the foreclosure crisis have been commendable, capacity limitations are hindering the stabilization effort. More private sector developer engagement will be necessary in order to achieve true neighborhood stabilization. Highly qualified, experienced property developers that bring their own capital to the NSP effort for property acquisition and renovation can significantly increase the scale of local neighborhood acquisition and renovation activity without relying on public subsidies. When undertaken in conjunction with local government, non-profit, and private sectors, this approach could prove very instrumental in reclaiming stable market values in hard hit communities.
4. Moving Beyond REO – Pre-REO executions that work
Achieving concentrations of properties that will induce a tipping point in target markets will not be possible by relying on REO properties alone. In order to achieve neighborhood stability, localities must access troubled properties earlier in their default timelines, when the condition of properties is measurably better. The Stabilization Trust is pursuing new strategies to increase short-sales and deed-in-lieu conveyances. Most notably, the Stabilization Trust is working with other housing industry leaders on development of a new socially-motivated initiative to purchase non-performing mortgage notes. These geographically-focused note purchases will help keep more defaulted owners in their homes, while also ensuring that a safety net exists for both borrowers and properties within these impacted neighborhoods.
5. Avoiding “Walk-Aways” – Providing Localities, Servicers, and Investors with better options on low value properties
Low value, distressed real estate is a problem for all industry segments. A defaulted property, with a value below say $15,000, is often not economically viable for investor owners, for servicers, or for community buyers. And yet, in some communities, particularly in the Midwest, there are high concentrations of such property. In an effort to find common ground on this issue, the Stabilization Trust has been working with most of the major servicers and the GSEs to establish a more predictable, transparent approach and to discourage a charge-off or “walk-aways. A key next step is to encourage the largest Investors – Fannie and Freddie – to provide some working guidelines for the disposition of low value assets. The Stabilization Trust is seeking to establish pilots in select cities such as Cleveland, Detroit, Indianapolis, and Chicago. It is expected that all industry segments must “give a little” in order to gain a foothold with these properties.
6. Leveraging Private Financing – Identifying workable structures and more capital for interim acquisition/rehab and for permanent mortgages
A modest $7 billion in federal dollars cannot reclaim neighborhoods overwhelmed with foreclosed and abandoned homes. We must leverage private capital. To date, localities have principally used their NSP funding to cover most or all of the costs of acquisition and renovation, limiting the number of homes that can be addressed until a renovated property is subsequently sold to a new buyer. Going forward, it will be necessary to focus on three key areas: increasing availability of private capital for interim financing, expanding options for both conventional and FHA mortgages to ready buyers, and developing some specific mortgage tools for multifamily property.
7. Holistic Strategies – Linking local homeownership preservation and neighborhood stabilization efforts more effectively
Clearly, one of the most important methods of stabilizing a hard hit community is to avoid foreclosure in the first place; and yet,
