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Research Abstracts

The following abstracts describe research studies that provide additional insight into the impacts of foreclosures and the effects of different types of interventions. Click on the links below to skip to a specific topic, or scroll down to browse abstracts. When possible, direct links to the reports are provided. Click here to view a full list of resources referenced on Foreclosure-Response.org.



Impacts on Families


Displacement, Housing Instability


2008


Erlenbusch, Bob, Kelly O'Connor, Sherrie Downing, Sue Watlov Phillips. "Foreclosure to Homelessness: the Forgotten Victims of the Subprime Crisis: a national call to action." Washington, DC: National Coalition for the Homeless, April 15, 2008.
Online: 
http://www.nationalhomeless.org/advocacy/ForeclosuretoHomelessness0609.pdf

The National Coalition for the Homeless (NCH) surveyed local and state homeless coalitions in late 2007 and early 2008 about the people left homeless by the foreclosure crisis. Nearly two thirds of respondents reported seeing an increase in homelessness in their community due to the foreclosure crisis. Homelessness was seen significantly more in urban areas than rural areas. About two-thirds of respondents believed that, after being foreclosed upon, people stayed with family and friends; more than half believed that they went to emergency shelters; and about two-fifths believed they were living on the street. Less than half of respondents believed that there were state and local advocacy efforts underway to address the crisis. In addition to these findings, the paper includes complete results from the survey and other information about foreclosures and homelessness, including data broken down by state. Policy recommendations for both local and national authorities are included.



Khadduri, Jill. "Housing Vouchers Are Critical for Ending Family Homelessness." Washington, DC: National Alliance to End Homelessness, January 29, 2008.
Online: http://www.endhomelessness.org/content/article/detail/1875

Housing vouchers are successful in helping families exit homelessness and can protect poor families from becoming homeless. These programs may be important safety nets that can help prevent homelessness for low-income families looking to rent after a foreclosure. Such vouchers are the least expensive way of assisting equally poor households, most of the time and for most types of households. They are also less vulnerable to the risk of creating concentrations of the poor than property-based approaches to affordable housing because they have no fixed location. Furthermore, vouchers have been shown to dramatically reduce the incidence of homelessness among those who use them, while also reducing crowded living conditions and frequent moves associated with unaffordable housing. The current federal program, the Housing Choice Voucher Program, assists about 2 million households at any one time. This voucher program is critical to keeping families in foreclosure out of homelessness.



2007


Burt, Martha R., Carol Pearson, Ann Elizabeth Montgomery. "Community-Wide Strategies for Preventing Homelessness: Recent Evidence." Journal of Primary Prevention 28 (3-4): 213-228. Springer Netherlands, June 9, 2007.
Online: http://www.springerlink.com/content/ct570u80631g2144/

This article summarizes the findings of a study of community-wide strategies for preventing homelessness among families and among single adults with serious mental illness. A major finding of this study was that it was difficult to identify sites with communitywide strategies, and even harder to find any that maintained data capable of documenting prevention success. The study identified five prevention activities used in the study communities that may be implemented at all levels of prevention. Communities can use housing subsidies; provide supportive services coupled with permanent housing; encourage mediation in housing courts; offer cash assistance for rent or mortgage arrears; and ensure rapid exit from shelter. These strategies will be most efficient if they are part of a larger structure of planning and organization that provides a carefully articulated targeting strategy and mechanisms to assure that funds for prevention reach the people at greatest risk of homelessness. Finally, communities should establish routine systems to assess both the effectiveness and efficiency of its prevention efforts and use the resulting feedback to improve its targeting and balance among prevention activities. Some approaches followed include matching a prevention database against emergency shelter records and following changes over time within a single database. Communities can use all these tools together to improve effectiveness and efficiency.



Financial Insecurity, Economic Hardship


2010


Causa Justa :: Just Cause, Alameda County Public Health Department. "Rebuilding Neighborhoods, Restoring Health: A report on the impact of foreclosures on public health." Causa Justa :: Just Cause and Alameda County Public Health Department, September 2010.
Online: http://www.acphd.org/AXBYCZ/Admin/DataReports/rebuild_restore_fullrpt_sep2010.pdf

This study focuses on a survey of 388 residents in the East and West Oakland, California neighborhoods. The survey found that many residents facing foreclosure did not feel that they had adequate income to cover their basic living expenses and they were forced to make choices about foregoing medical care and limiting expenditures on food and utilities. The rate of foreclosure was higher among the unemployed and the underemployed—those with jobs but who are seeking more or better work. Many facing foreclosure had difficult living circumstances and felt as though they lived in unstable or substandard living conditions. Those facing foreclosure or housing instability were more likely to report deteriorating physical and emotional health during the previous two years. Foreclosures can also affect community health by increasing the number of vacant properties which may be poorly maintained, attract crime, and decrease property values.



2006


Fellowes, Matthew. "Credit Scores, Reports, and Getting Ahead in America." Washington, DC: Brookings Institution, 2006.
Online: http://www.brookings.edu/~/media/Files/rc/reports/2006/05childrenfamilies_fellowes/20060501_creditscores.pdf

Consumer credit reports and scores play a growing role in the ability of families to get ahead, now influencing prices for loans and insurance and efforts to get jobs and rent apartments. These reports may be adversely affected by foreclosure, which could lower credit scores and diminish the families’ abilities to succeed. An analysis of a quarterly sample of 25 million anonymous consumer credit reports and scores for every U.S. county between 1999 and 2004 reveals that consumer credit scores widely vary across counties, with the South having the highest concentration of consumers with weak credit scores. In addition, between 1999 and 2004, most counties with weak consumer credit scores saw declines in the average consumer credit score, while counties with strong scores generally experienced modest gains. Counties with relatively high proportions of racial and ethnic minorities are more likely to have lower average credit scores. High homeownership rates and county per capita income are strongly associated with high consumer credit scores. Financial insecurity, primarily measured by the frequency of loan delinquencies, rose between 1999 and 2004.



Singleton, Theresa, Lance George, Carla Dickstein, Hannah Thomas. "Subprime and Predatory Lending in Rural America: Mortgage Lending Practices That Can Trap Low-Income Rural People." Carsey Institute Policy Brief No. 4. Carsey Institute, University of New Hampshire, Fall 2006.
Online: http://carseyinstitute.unh.edu/documents/PredLending.pdf

This policy brief discusses the prevalence and effects of predatory mortgage loans in rural areas of the United States. It includes graphs and maps of Home Mortgage Disclosure Act (HMDA) data on the number and share of high-cost (or subprime) loans in non-metropolitan areas and persistent poverty counties. A case study focuses on predatory lending in Maine.



2004


Haurin, Donald R., Stuart Rosenthal. "The Sustainability of Homeownership: Factors Affecting the Duration of Homeownership and Rental Spells." Washington, DC: HUD, Office of Policy Development and Research, December 2004.
Online: http://www.huduser.org/Publications/pdf/homeownsustainability.pdf

Foreclosure can often cause a change from homeownership to renting for affected individuals. This paper begins with a description of ownership and rental spells, correlated with factors such as race, ethnicity and income. This is followed by a formal analysis of the factors contributing to the length of ownership spells and of other arrangements. Differences in race and ethnicity are often correlated with differences in homeownership rates. Whites had the highest homeownership rate in 2000, followed by Hispanics and then African Americans. In addition, a greater proportion of whites than minorities who had ever been homeowners were still homeowners in 2000. These differences are due both to the fact that fewer minorities attain first-time ownership and that minorities’ stay in owned dwellings are shorter while their stay in rented dwellings are longer. The average length of completed stay by first-time homeowners is estimated to be: 9.5, 12.5 and 16.1 years, while average time spent renting or living with parents is estimated to be 14.4, 14.3 and 10.7 years, for African Americans, Hispanics, and whites respectively. Many factors influence these gaps, including fewer weeks worked and fewer years of formal education among minorities. In addition, policies like post-purchase counseling programs should be used to educate households at risk of quick termination of homeownership.



Personal & Family Stress, Disrupted Relationships, Ill Health


2010


Causa Justa :: Just Cause, Alameda County Public Health Department. "Rebuilding Neighborhoods, Restoring Health: A report on the impact of foreclosures on public health." Causa Justa :: Just Cause and Alameda County Public Health Department, September 2010.
Online: http://www.acphd.org/AXBYCZ/Admin/DataReports/rebuild_restore_fullrpt_sep2010.pdf

This study focuses on a survey of 388 residents in the East and West Oakland, California neighborhoods. The survey found that many residents facing foreclosure did not feel that they had adequate income to cover their basic living expenses and they were forced to make choices about foregoing medical care and limiting expenditures on food and utilities. The rate of foreclosure was higher among the unemployed and the underemployed—those with jobs but who are seeking more or better work. Many facing foreclosure had difficult living circumstances and felt as though they lived in unstable or substandard living conditions. Those facing foreclosure or housing instability were more likely to report deteriorating physical and emotional health during the previous two years. Foreclosures can also affect community health by increasing the number of vacant properties which may be poorly maintained, attract crime, and decrease property values.



2009


Pollack, Craig Evan, Julia Lynch. "Health Status of People Undergoing Foreclosure in the Philadelphia Region." American Journal of Public Health 99 (10): 1833-1899. Washington, DC: American Public Health Association, October 2009.
Online: http://ajph.aphapublications.org/cgi/content/short/99/10/1833

This paper assessed the health status of people undergoing mortgage foreclosure in the Philadelphia region to determine if there was a relationship between foreclosure and health. Participants were recruited in partnership with a mortgage counseling agency. Participants’ health status and healthcare use were compared with a community sample from the 2008 Southeastern Pennsylvania Household Health Survey. Authors found that foreclosures affect already-vulnerable populations. Public health practitioners may be able to leverage current efforts to connect homeowners with mortgage counseling agencies to improve health care access.



2007


Lubell, Jeffrey, Rosalyn Crain, Rebecca Cohen. "Framing the Issues - The Positive Impact of Affordable Housing on Health." Washington, DC: Center for Housing Policy, July 2007.
Online: http://www.nhc.org/pdf/chp_int_litrvw_hsghlth0707.pdf

Foreclosure can lead to instable and less affordable housing outcomes for residents. This less affordable housing can have negative affects on health. This paper’s analysis focuses on the ways in which the production, rehabilitation, or other provision of affordable housing may lead to stronger health outcomes for residents, and reveals many such links. For example, by providing families with greater residential stability, affordable housing can reduce stress and related adverse health outcomes. Studies consistently show that homeowners achieve better physical and mental health outcomes than renters. Research suggests that homeownership may contribute to health improvements by fostering greater self-esteem, increased residential stability, and an increased sense of security and control over one’s physical environment. Stable, affordable housing may improve health outcomes for individuals with chronic illnesses and disabilities, and the elderly, by providing a stable and efficient platform for the ongoing delivery of health care and other necessary services. By providing families with access to neighborhoods of opportunity, certain affordable housing strategies can reduce stress, increase access to amenities, and generate important health benefits. By alleviating crowding, affordable housing can reduce exposure to stressors and infectious disease, leading to improvements in physical and mental health. The reverse effect may exist for residents in foreclosure.



2006


Dawkins, C. "Are Social Networks the Ties that Bind Families to Neighborhoods?." Housing Studies 21: 867-881. 2006.

This paper examines the impact of intra-neighborhood social ties on the inter-neighborhood residential mobility of families with children. Results suggest that local kinship ties and the social networks of children deter the inter-neighborhood mobility of families with children, while the density of adult friendships does not. Among low-income families, local social ties are even more ‘binding:’ the impact of nearby relatives on mobility is about 40 percent larger for low income families, and the magnitude of the impact of childhood friends is more than two times larger. These results imply that local community development policies should emphasize strategies that build upon existing social networks, enhancing those that already exist. In addition, housing and redevelopment programs that result in substantial displacement may disrupt existing social networks, which would be particularly harmful to the low-income families it is likely to impact most. Finally, the success of programs that aim to increase residential mobility among low-income families to higher-income neighborhoods is likely to be enhanced if such programs consider the geography of formal and informal social support systems.



Impacts on Children


2008


Lovell, Phillip, Julia Isaacs. "The Impact of the Mortgage Crisis on Children and their Education." Washington, DC: First Focus, April 2008.
Online: http://www.brookings.edu/~/media/Files/rc/papers/2008/04_mortgage_crisis_isaacs/04_mortgage_crisis_isaacs.pdf

The authors at First Focus estimate that 1.95 million children will be directly impacted by homes lost in foreclosure including half a million Latino children and roughly 280,000 African American children. These figures do not include children evicted from rental properties. The authors assert that moving will result in disruptions that may lead to decreased educational attainment, increased behavioral issues, and poor health. They call on Congress to make children a priority when dealing with the foreclosure crisis including providing emergency funds to families and funding school districts through the McKinney-Vento Homeless Education program so children who move due to foreclosure can remain in their original school (and receive additional educational supports). The report includes state-by-state estimates of the number of children directly impacted by foreclosure.



Partners for America’s Economic Success. "The Hidden Costs of the Housing Crisis: The Impact of Housing on Young Children’s Odds of Success." Issue Brief #7. Washington, DC: Pew Charitable Trusts, 2008.
Online: http://www.partnershipforsuccess.org/docs/research_brief_200807_housing.pdf

Without a safe, stable home, young children face tremendous obstacles to the critical cognitive, behavioral and social development that occurs during their earliest years. Children of families in foreclosure, though, often do not have such homes, and are at a disadvantage. For example, children who move at least three times between the ages of 4 and 7 have lower test scores and are 13 percent less likely to graduate from high school. In addition, families in foreclosure often spend a large proportion of their money on housing, and this burden can decrease spending on food, clothing and health care. Children of families in foreclosure may also be at risk of unsafe homes, with lead, vermin, lack of plumbing and other health risks. As low-income children, they are more likely to be in overcrowded homes, which can decrease success at school and create behavioral problems. They are also more likely to grow up in dangerous and violent neighborhoods, which often have poor schools and can increase the odds of drug abuse, crime and other negative actions. To respond to these risks, policy makers should help families create a stable and safe environment for their children with proven, well-designed affordable housing programs.



Waters-Boots, Shelly, Jennifer Macomber, Anna Danziger. "Family Security: Supporting Parent's Employment and Children’s Development?" Washington, DC: The Urban Institute, June 2008.
Online: http://www.urban.org/publications/411718.html

The authors promote a Family Security approach to policy making that supports the ability of low-income working parents to meet the developmental needs of their children. They note that the needs of children differ by child and age but can generally be organized around the need for stability, health, nurturing and activity. The authors assert that housing is a major component of stability. Stable housing helps parents provide needed stability in family routines including meal times and bed times. Proper eating and sufficient sleep are both important components in child health and educational attainment. Moreover, housing instability can disrupt child care and school patterns with adverse consequences on children.



2007


Lubell, Jeffrey, Rosalyn Crain, Rebecca Cohen. "Framing the Issues - The Positive Impact of Affordable Housing on Health." Washington, DC: Center for Housing Policy, July 2007.
Online: http://www.nhc.org/pdf/chp_int_litrvw_hsghlth0707.pdf

Foreclosure can lead to instable and less affordable housing outcomes for residents. This less affordable housing can have negative affects on health. This paper’s analysis focuses on the ways in which the production, rehabilitation, or other provision of affordable housing may lead to stronger health outcomes for residents, and reveals many such links. For example, by providing families with greater residential stability, affordable housing can reduce stress and related adverse health outcomes. Studies consistently show that homeowners achieve better physical and mental health outcomes than renters. Research suggests that homeownership may contribute to health improvements by fostering greater self-esteem, increased residential stability, and an increased sense of security and control over one’s physical environment. Stable, affordable housing may improve health outcomes for individuals with chronic illnesses and disabilities, and the elderly, by providing a stable and efficient platform for the ongoing delivery of health care and other necessary services. By providing families with access to neighborhoods of opportunity, certain affordable housing strategies can reduce stress, increase access to amenities, and generate important health benefits. By alleviating crowding, affordable housing can reduce exposure to stressors and infectious disease, leading to improvements in physical and mental health. The reverse effect may exist for residents in foreclosure.



2006


Hango, Darcy W. "The Long-Term Effect of Childhood Residential Mobility on Educational Attainment." The Sociological Quarterly 47: 631-664. 2006.

Moving during childhood has typically been found to have negative effects on educational attainment, but many such studies take a relatively short-term view by only looking at the effect for those no older than their late teens or early 20s. This study examines the effect of childhood residential mobility on educational attainment for individuals aged 25 and over in Canada. Results suggest that over the long run, those who move between birth and age 15 are more likely to eventually graduate from high school than those who remain in the same community, and each successive move increases this probability. This effect is visible even controlling for other variables, such as demographic and cultural factors. Residential mobility also generally increases educational attainment as measured by post-secondary schooling. The authors also find that not moving out of the province of residence in childhood leads to a reduction in the odds of completing postsecondary education. The children of families forced to move by foreclosures, however, may not have these beneficial effects, as they may be less likely to be moving to a better neighborhood than the one they left.



2004


Pettit, Becky. "Moving and Children’s Social Connections: Neighborhood Context and the Consequences of Moving for Low Income Families." Sociological Forum 19 (2): 285-331. June 2004.

Studies have shown that children who move face a variety of disadvantages when compared with children who do not move or who move less frequently during childhood. Moving during childhood is associated with decreased academic achievement, an increased probability of dropping out of high school, and lower levels of occupational status in young adulthood. Using data from the Moving to Opportunity (MTO) program, an experimental housing relocation program, this paper tests whether these disruptions are long-lasting, and whether they may be qualified by other factors, including why people move. It is found that there are few negative effects on social connections associated with moving from public housing projects into other neighborhoods. Most of the families who moved to low-poverty neighborhoods had developed social ties within a year of moving. This may be because parents and their children are more likely to make social connections in middle class neighborhoods that are perceived to be safe than in more dangerous poor neighborhoods. These results suggest that the negative effects of moving observed in previous studies may be due to poor economic conditions that cause the move rather than moving itself. This distinction, however, may not be relevant for families moving after foreclosure, as they may be unlikely to move to a higher-income neighborhood.



1999


Downey, D.B., S. Pribesh. "Why Are Residential and School Moves Associated with Poor School Performance?." Demography 36 (4): 521-534. 1999.

This article offers several conceptual and analytical refinements to the explanations for the association of residential and school moves with poor academic performance. Using longitudinal data, the authors find that differences in achievement between movers and nonmovers are partially a result of declines in social relationships experienced by students who move. Most of the negative effect of moving, however, is due to preexisting differences between the two groups.



Impacts on the Elderly


2008


Apgar, William. "The Mortgage Market Meltdown and Older Americans." Presentation. Cambridge, MA: Joint Center for Housing Studies, 2008.

The damage from today’s foreclosure crisis has serious implications for older Americans. Rather than pay down debt, increasingly owners carry mortgage debt into their retirement years. In 2007, more than half of all owners with head of household over 50 years had a mortgage, up from one third in 1987. Despite the fact that housing wealth remains a major component of the economic safety net for older homeowners, 2.3 million of these owners in 2007 have less than 20 percent equity in their homes, and 3.5 million devote more than 50 percent of their income to housing. This decrease in equity may jeopardize economic and retirement plans for millions of older Americans.



Impacts on Renters


2009


Been, Vicki, Allegra Glashausser. "Tenants: Innocent Victims of the Nation's Foreclosure Crisis." Albany Government Law Review 2 (1): 1-27. Albany, NY: 2009.
Online: http://www.albanygovernmentlawreview.org/articles/2/1/Glashausser.pdf

This article provides an overview of local proposals to mitigate the impact of foreclosures on tenants. Of particular relevance, the authors refer to expansion of an emergency rental assistance program in Chicago that would provide up to 3 months of rent support and moving expenses for eligible tenants and a program being created by the Housing Authority of New Haven to set aside tenant-based housing choice vouchers to prevent homelessness among tenants evicted as a result of foreclosures.



2008


Furman Center. "New Analysis of NYC Foreclosure Data Reveals 15,000 Renter Households Living in Buildings that Entered Foreclosure in 2007." New York: Furman Center for Real Estate and Urban Policy, NYU, April 2008.
Online: http://www.knowledgeplex.org/showdoc.html?id=1931801

Nearly 60% of the 15,000 foreclosure filings in New York City in 2007 were on 2 to 4 family or multi-family buildings, leaving a significant number of renters threatened by foreclosure. A conservative estimate puts the number of renter households impacted at about 15,000, and the number of individuals affected at about 38,000. These foreclosures are not evenly spread around the city; for example, about half of these households reside in Brooklyn. These findings are especially relevant given that proposed legislation to address the foreclosure crisis has focused on owner-occupants of single family homes. Most tenants living in buildings going through foreclosure face eviction if the property is sold at auction, though tenants protected by New York State’s rent regulation laws, which apply to many units in larger 6+ buildings, are not at risk.



Pelletiere, Danilo, Keith Wardrip. "Renters and the Housing Credit Crisis." Poverty & Race 17 (4). July-August 2008.

Renters are being hurt by the weakening housing market in several significant ways. First and most directly, renters make up a significant share of those facing tenure insecurity and eviction due to the foreclosure of the homes they live in (just as they make up a significant share-32%-of all U.S. households). In addition, the current crisis is reshaping the trends and patterns in housing markets, with an increase in rental demand already discernable and uncertainty about where an additional supply of affordable rental units will come from. Compounding this problem is the rapid rate at which banks are taking ownership of former rental properties, emptying them and leaving them unoccupied. Also, large numbers of foreclosures are on renter-occupied housing, which not only can result in new entrants to the rental market, but it also results in a unit being unoccupied and held off the market at least temporarily during and after the foreclosure process. To address these problems, housing has once again become a priority on the agenda of local, state and federal government, including a push for greater protections for renters. There is a real concern, however, among advocates that attempts to shore up home prices and stabilize homeowners will undercut efforts to create and maintain affordable rental housing.



Impacts on Neighborhoods


Declining Property Values, Physical Deterioration


2008


Been, Vicki. "External Effects of Concentrated Mortgage Foreclosures: Evidence from New York City." Testimony before the Subcommittee on Domestic Policy, Committee on Oversight and Government Reform. U.S. House of Representatives. Washington, DC: House of Representatives, May 21, 2008.
Online: http://oversight.house.gov/documents/20080522105505.pdf

Foreclosures in New York City are found to depress sale prices of nearby properties, whether the surrounding neighborhood is experiencing high or low rates of foreclosure. The size of the price impact generally increases with the number of nearby foreclosure starts, although the marginal impact of each additional foreclosure decreases once there is a concentration of foreclosures in a neighborhood. Even in low-foreclosure neighborhoods, sale prices of homes within 500 feet of just one or two properties for which a foreclosure notice had been filed in the prior 24 months were 1.8 percent lower than the prices of similar properties in the same neighborhood but not within 500 feet of any recent foreclosure start, all else equal. The largest decreases were within 500 feet of the foreclosure, though homes between 500-1000 feet from the foreclosure also sold for significantly less than comparable properties, but estimated price reductions were smaller. Other findings include that 60 percent of properties going into foreclosure in NYC were two- to four-family or multifamily buildings, representing approximately 38,000 renting individuals.



Calomiris, Charles W., Stanley D. Longhofer, William Miles. "The Link Between Foreclosures and House Prices." NBER Working Paper Series. Cambridge, MA: NBER, September 2008.
Online: http://www.nber.org/papers/w14294.pdf

Despite housing's importance to the economy and worries about recent financial and economic turmoil traceable to housing market difficulties, little has been written on how distress in the housing market, measured by foreclosures, affects home prices, or how these variables interact with other macroeconomic or housing variables such as employment, housing permits or sales. Employing a panel VAR model to examine quarterly state-level data, our paper is the first to systematically analyze these interactions. There is substantial regional variation across states, which facilitates our ability to identify linkages among variables. Importantly, price-foreclosure linkages work in both directions; foreclosures have a significant, negative effect on home prices, while an increase in prices alleviates distress by lowering foreclosures. Similarly, employment and foreclosures have mutually negative effects on each other. The impact of foreclosures on prices, while negative and significant, is quite small in magnitude. We demonstrate this by simulating house price changes in response to extreme foreclosure shocks. Even under extremely pessimistic scenarios for foreclosure shocks, average U.S. house prices, as measured by the comprehensive OFHEO house price index (which we argue is the most reliable and useful measure of house prices to use for our purposes), likely would decline only slightly or remain essentially flat in response to foreclosures like those predicted for the 2008-2009 period. This suggests that home prices are quite sticky, and that fears of a major fall in house prices, with all of its attendant negative macroeconomic consequences, typically are not warranted even in extreme foreclosure circumstances.



Harding, John, Eric Rosenblatt, Vincent Yao. "Contagion Effect of Foreclosed Properties." University of Connecticut, July 15, 2008.
Online: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1160354

Previous research has shown that, after controlling for hedonic characteristics, prices of homes in neighborhoods with foreclosures tend to be lower than those in neighborhoods without foreclosures. However, it remains an open question whether the observed price declines of properties near foreclosures are simply the result of an overall neighborhood decline in property values or whether foreclosures reduce the prices of nearby non-distressed sales as the result of a contagion effect. Contagion effects could arise because of reduced maintenance by distressed borrowers, neglect of vacant properties, increased competition for buyers or a perceived stigma associated with the foreclosure that affects nearby properties. This paper tests for a contagion effect by simultaneously estimating the overall price trend and the price impact of nearby foreclosures using a modified repeat sales methodology. It finds robust evidence that the presence of distressed properties results in lower sales prices for nearby non-distressed properties. The discount is roughly one percent per nearby foreclosed property and appears to be roughly proportional to the number of nearby distressed properties. The discount diminishes rapidly as the distance to the distressed properties increases. The paper also reports that the contagion effect of a foreclosed property grows in magnitude throughout the period from the onset of distress through the foreclosure sale. The effect stabilizes around the time of the lender’s sale to a third party. This pattern is consistent with the cause of the contagion effect being a combination of deferred maintenance, neglect and vacancy.



2006


Immergluck, Dan, Geoff Smith. "The External Costs of Foreclosure: The Impact of Single-Family Mortgage Foreclosures on Property Values." Housing Policy Debate 17 (1): 57-79. Washington, DC: Fannie Mae Foundation, 2006.
Online: http://content.knowledgeplex.org/kp2/cache/documents/1860/186040.pdf

To measure the impact of foreclosures on nearby property values, this study uses a database that combines data on 1997 and 1998 foreclosures with data on neighborhood characteristics and more than 9,600 single-family property transactions in Chicago in 1999. After controlling for some 40 characteristics of properties and their respective neighborhoods, this study finds that foreclosures of conventional single-family (one- to four-unit) loans have a significant impact on nearby property values. The most conservative estimates indicate that each conventional foreclosure within an eighth of a mile of a single-family home results in a decline of 0.9 percent in value. Cumulatively, this means that, for the entire city of Chicago, the 3,750 foreclosures that occurred in 1997 and 1998 are estimated to have reduced nearby property values by more than $598 million, for an average of $159,000 per foreclosure. This does not include effects on the value of condominiums, multifamily rental properties, and commercial buildings.



Crime, Social Disorder, Population Turnover


2008


Johnson, Kevin. "Police agencies fear more crime in financial crisis." USA Today. October 16, 2008.
Online: http://www.usatoday.com/news/nation/2008-10-16-crime-economy_N.htm?loc=interstitialskip&POE=click-refer

The collapse of U.S. financial markets is forcing deep cuts in local police agencies and stoking fears among police chiefs that mass home foreclosures are bringing more crime to suburbs. Some chiefs say that blocks of homes vacant from foreclosures are becoming magnets nationwide for gang members, drug users, prostitutes and thieves, who steal appliances and fixtures. Police chiefs are watching local responses to this concern, and responding to it themselves: Indio, a city in Southern California has passed a law forcing owners of dozens of vacant homes to register the properties with the city, holding them responsible for the upkeep of their properties; and in Cook County, IL, the sheriff declared a moratorium on evictions from homes because many "innocent" renters were getting tossed out after owner-landlords defaulted on mortgage payments. Concerns about the effects of foreclosures on crime are magnified by the declining economy, which is reducing local tax revenue, leading to cuts in police expenditures.



2005


Immergluck, Daniel, Geoff Smith. "The Impact of Single-Family Mortgage Foreclosures on Neighborhood Crime." Chicago: Federal Reserve Bank of Chicago, 2005.
Online: http://www.chicagofed.org/cedric/files/2005_conf_paper_session1_immergluck.pdf

The effect of foreclosures of single-family mortgages – both conventional and government guaranteed – on levels of violent and property crime are examined on a neighborhood level. Using data on foreclosures, neighborhood characteristics, and crime, it is shown that higher foreclosure levels do contribute to higher levels of violent crime: a one-percentage-point increase in foreclosure rate is expected to increase the number of violent crimes in a census tract by 2.33 percent, other things being equal. The results for property crime are not statistically significant. These findings must be placed in the context of research on physical and social disorder. Though often not crimes themselves, such disorder may either cause crime by undermining the ways in which communities maintain social control, or may be a component of crime. Similarly, foreclosed homes can harbor decay and criminal activity, and may be the target of vandalism, theft and arson. Indirectly, the presence of boarded-up and abandoned buildings may lead to a lack of collective concern by neighborhood residents with neighborhood crime. These findings indicate that an increase in violent crime is an important social cost – as well as an economic cost – that must be incorporated into policymaking concerning real estate and mortgage lending policies and regulation.



Local Government Fiscal Stress, Deterioration of Services


2005


Apgar, William C., Mark Duda. "Collateral Damage: The Municipal Impact of Today’s Mortgage Foreclosure Boom." Minneapolis, MN: Homeownership Preservation Foundation, May 11, 2005.
Online: http://www.995hope.org/content/pdf/Apgar_Duda_Study_Short_Version.pdf

Loan failures and foreclosures can have a significant cost to municipalities. Expenditures range from small administrative costs to thousands of dollars spent on facility upkeep, demolition and fire suppression. This paper examines Cook County and the City of Chicago’s estimated cost for five likely scenarios where a foreclosed property becomes vacant. If a property is vacant but secured, it is estimated to cost the municipalities approximately $430. Vacant and unsecured properties cost $5,358 if they are not destroyed and $13,452 if they are destroyed. If the property is abandoned before the foreclosure is complete, they cost $19,227. Abandoned properties damaged by fire are estimated to cost $34,199. These high costs indicate that the savings from foreclosure prevention, especially given spillover effect, may save municipalities in the long run. Local governments might also benefit from reforming the foreclosure process to better address problems from foreclosure before they occur. Finally, localities might work to ensure that those who benefit from the services they provide pay for them, by raising fees on foreclosure-related services or by establishing a subprime industry fund to help offset municipal costs.



Variations in Impacts for Different Types of Neighborhoods


2010


Bocian, Debbie Gruenstein, Wei Li, Keith S. Ernst. "Foreclosures by Race and Ethnicity: The Demographics of a Crisis." Durham: Center for Responsible Lending, June 2010.
Online: http://www.responsiblelending.org/mortgage-lending/research-analysis/foreclosures-by-race-and-ethnicity.html

The report shows that the foreclosure crisis is not over, and runaway foreclosures continue to drain hundreds of billions of dollars in wealth from families, hitting communities of color the hardest. Using HMDA and LPS data, the report found that an estimated 2.5 million foreclosures were completed from 2007-2009, and an estimated 5.7 additional ones are imminent. 17% of Latino homeowners and 11% of African-American homeowners have already lost their home to foreclosure or are now at imminent risk. The great majority of homes lost were owner occupied, as are those at imminent risk of being lost.



2009


Mallach, Alan. "Addressing Ohio's Foreclosure Crisis: Taking Next Steps." Washington DC: Brookings Institution, June 5, 2009.
Online: http://www.brookings.edu/~/media/Files/rc/papers/2009/0605_ohio_foreclosure_mallach/0605_ohio_foreclosure_report.pdf

In this paper, Alan Mallach gives 26 specific recommendations for changes to legislation or policies in Ohio to counter the effects of the foreclosure crisis and to stabilize neighborhoods. While Mallach is addressing issues in Ohio specifically, many of the policy solutions could be applied in other states and local jurisdictions. Some of these policy suggestions are updates or modifications to existing Ohio laws, such as barring abusive lending practices that are not already banned and strengthening surety bond provisions of the Ohio Mortgage Brokers Law. The most striking recommendations include instituting a fee on all foreclosure filings paid by the entity initiating the filing, the proceeds of which would fund foreclosure prevention counseling and neighborhood stabilization efforts in the state and the policies around preventing properties in foreclosure from becoming vacant, either through expediting the foreclosure process if the property does become vacant, or giving clear responsiblity for the property to the entity initiating the foreclosure in case the property does become vacant before sheriff's sale.



2008


Coulton, Claudia, Kristen Mikelbank, Michael Schramm. "Foreclosure and Beyond: A report on ownership and housing value following sheriff's sales, Cleveland and Cuyahoga County, 2000-07." January, 2008.
Online: http://blog.case.edu/msass/2008/01/13/Foreclosure_and_Beyond_final.pdf

This report explores what happens after foreclosed properties go to sheriff's auction in the city of Cleveland and Cuyahoga county using local records from 2000 to 2007. The number of foreclosures has increased substantially in the Cleveland area in the past few years. This increase has had an impact on the amount of properties that are being held by banks and how much value the banks are recapturing. They find that the majority of properties (~90%) are now being held by institutions such as local banks, mortgage companies and government-sponsored entities after a sheriff's sale. These properties are being held for increasingly longer periods of time after the sheriff's sale before they are resold to private owners. Additionally, institutions are recapturing decreasing percentages of the estimated market value for foreclosed properties over time and as more time passes after the sheriff's sale.



2006


Singleton, Theresa, Lance George, Carla Dickstein, Hannah Thomas. "Subprime and Predatory Lending in Rural America: Mortgage Lending Practices That Can Trap Low-Income Rural People." Carsey Institute Policy Brief No. 4. Carsey Institute, University of New Hampshire, Fall 2006.
Online: http://carseyinstitute.unh.edu/documents/PredLending.pdf

This policy brief discusses the prevalence and effects of predatory mortgage loans in rural areas of the United States. It includes graphs and maps of Home Mortgage Disclosure Act (HMDA) data on the number and share of high-cost (or subprime) loans in non-metropolitan areas and persistent poverty counties. A case study focuses on predatory lending in Maine.



Determinants of Foreclosure Patterns


2010


Jayasundera, Tamara, Joshua Silver, Katrin Anacker, Denitza Mantcheya. "Foreclosures in the Nation's Capital: How Unfair and Reckless Lending Undermines Homeownership." District of Columbia: National Community Reinvestment Coalition, 2010.
Online: http://www.ncrc.org/index.php?option=com_content&view=category&layout=blog&id=25&Itemid=76

Like the foreclosure crisis nationwide, the Washington DC area crisis has been driven by subprime and non-traditional lending. This study takes a statistical sample of loans with 2004-2007 vintages, examining the borrower, loan and neighborhood characteristics that drove subprime lending and foreclosure. The econometric analysis of the study confirms that individual African-American and Hispanic borrowers obtained subprime loans more often than white borrowers with similar economic and neighborhood characteristics. Second, minority borrowers are facing foreclosure more often than white borrowers, even after controlling for various characteristics. Next, Loans purchased by the Government Sponsored Enterprises (GSEs) are going into foreclosure at roughly half the rate of both portfolio loans and privately securitized loans. Lastly, loan characteristics, especially payment-to-income ratios, adjustable rates, high costs (subprime) and balloon payments were found to have a significant effect on loan performance.



Robinson, Breck L., Richard M. Told. "The Role of Non-Owner-Occupied Homes in the Current Housing and Foreclosure Cycle." Richmond Federal Bank Reserve 10-11. Richmond: Federal Bank Reserve of Richmond, June 2010.
Online: http://www.richmondfed.org/publications/research/working_papers/2010/wp_10-11.cfm http://www.richmondfed.org/publications/research/working_papers/2010/wp_10-11.cfm

This paper uses HDMA and LPS data to investigate non-occupant owners whose activity is associated with regional differences in housing appreciation and foreclosure impacts. Non-occupant homeowners differ from owner occupants in that they tend to have lower-risk credit characteristics, such as higher credit scores, but may also have weaker incentives to maintain mortgage payments when housing values fall. During the recent housing boom, the share of mortgage borrowing by non-occupant owners was relatively high in states where home values appreciated relatively rapidly. After the housing boom, foreclosures on non-occupant mortgages in several Midwestern and Northeastern states reflected primarily a high rate of foreclosure per mortgage, not a high volume of mortgages to non-occupants. The reverse held true in some coastal and mountain states. Nevada and Florida have experienced the greatest impact overall, because they have both a high volume of mortgages to non-occupant owners and a high rate of foreclosure on those mortgages.



2008


Mayer, Christopher J., Karen Pence. "Subprime Mortgages: What, Where, and to Whom?." Cambridge, MA: National Bureau of Economic Research, June 2008.
Online: http://www.nber.org/papers/w14083

This paper explores the types of data used to characterize risky subprime lending and consider the geographic dispersion of subprime lending. First, the strengths and weaknesses of three different datasets on subprime mortgages are described, using information from LoanPerformance, HUD, and HMDA. These datasets embody different definitions of subprime mortgages, and estimates of the number of subprime originations are somewhat sensitive to which types of mortgages are categorized as subprime. Second, the parts of the country and types of neighborhoods that had more subprime originations in 2005, and how these patterns differed for purchase and refinance mortgages, are analyzed. Subprime originations appear to be heavily concentrated in fast-growing parts of the country with considerable new construction, such as Florida, California, Nevada, and the Washington DC area. These locations saw house prices rise at faster-than-average rates relative to their own history and relative to the rest of the country. However, this link between construction, house prices, and subprime lending is not universal, as other markets with high house price growth such as the Northeast did not see especially high rates of subprime usage. Subprime loans were also heavily concentrated in zip codes with more residents in the moderate credit score category and more black and Hispanic residents. Areas with lower income and higher unemployment had more subprime lending, but these associations are smaller in magnitude.



Develop a Coordinated Foreclosure Response Strategy


Get Organized for Foreclosure Response


2008


Pierson, Julia. "Evaluation of the Baltimore Homeownership Preservation Coalition Activities in 2005, 2006, and 2007." 2008.

The Baltimore Homeownership Preservation Coalition (BHPC) was formed by public and private sector leaders in the summer of 2005 to address the high number of home foreclosures in the city. The coalition’s main activities were guided by several three-year goals in 2005. For example, they wanted to counsel 3,000 homeowners in danger of foreclosure and help 1,500 avoid foreclosure; success on this measure was difficult to determine, though many people were helped. Another goal was to partner with the lending community and the State to increase the number of homeowners who refinance safely out of high cost loans, and to expand the flexible capital needed for such refinances. Although BHPC did not directly accomplish this goal, at least one nonprofit established a $180,000 fund in partnership with lenders, and BHPC’s experience influenced the State’s decision to attract and allocate new capital resources towards helping people refinance their loans. BHPC also was able to help enforce laws that protect consumers from fraud and abuse in real estate transactions by bringing together people responsible for enforcement with housing practitioners and lawyers. Finally, the coalition was able to educate the larger community about homeownership issues with educational events, media and other outreach. With these and other accomplishments, BHPC has laid a strong foundation and has momentum it can channel into mitigating the foreclosure crisis’ effects on Baltimoreans and their neighborhoods.



2007


Essene, Ren S., William Apgar. "Understanding Mortgage Market Behavior: Creating Good Mortgage Options for All Americans." Cambridge, MA: Joint Center for Housing Studies, Harvard University, April 25, 2007.
Online: http://www.jchs.harvard.edu/publications/finance/mm07-1_mortgage_market_behavior.pdf

The report discusses consumer awareness and mortgage marketing practices that contribute to consumers making mortgage decisions that they later regret. The authors recommend a combination of regulatory and licensing changes for the mortgage industry and the creation of tools and an advisor network to better prepare consumers to make good mortgage decisions.



Strengthen the Metropolitan Policy and Regulatory Environment


2008


Mallach, Alan. "Tackling the mortgage crisis: 10 action steps for state government." Washington, DC: Brookings Institution, May 2008.
Online: http://www.brookings.edu/papers/2008/0529_mortgage_crisis_vey.aspx

Although state governments are constrained both by fiscal limitations and by potential federal preemption, their resources and powers give them broad scope for coping with the foreclosure crisis. State governments can try to mitigate the effect of foreclosure on borrowers at risk of foreclosure by helping borrowers gain greater access to counseling and short-term financial resources; ensuring a fair foreclosure process, which includes opportunities for borrowers to negotiate with creditors; encourage creditors to pursue alternatives to foreclosure; and preventing predatory and fraudulent foreclosure “rescue” practices. They can try to mitigate the impact of foreclosure on neighborhoods and communities at risk by establishing creditor responsibility to maintain vacant properties; making the process as expeditious as possible; and ensuring that the property is ultimately conveyed to a responsible owner. State governments can prevent a recurrence of the crisis by better regulating the mortgage brokerage industry; and banning inappropriate and abusive lending practices. Finally, these governments can establish sound, long-term policies to create and preserve affordable housing.



Pew Charitable Trusts. "Defaulting on the Dream: States Respond to America’s Foreclosure Crisis." Washington, DC: Pew Charitable Trusts, April 2008.
Online: http://www.pewtrusts.org/our_work_report_detail.aspx?id=37964

This April 2008 report presents a wealth of information on foreclosures nationally and by state, as well as examples of state responses to the rise in foreclosures. The report includes at-a-glance tables and graphics, including a map of foreclosure responses by state. Overviews at the start of the report summarize foreclosures' impact on states, homeowners, and home values and what states are doing to help. A more detailed examination of state initiatives divides responses into three categories: (1) programs that prevent foreclosures and keep families in their homes, (2) programs that prevent predatory or high-risk loans, and (3) task forces that consider broad-based solutions.



Develop a Local Action Strategy


2009


Mallach, Alan. "Addressing Ohio's Foreclosure Crisis: Taking Next Steps." Washington DC: Brookings Institution, June 5, 2009.
Online: http://www.brookings.edu/~/media/Files/rc/papers/2009/0605_ohio_foreclosure_mallach/0605_ohio_foreclosure_report.pdf

In this paper, Alan Mallach gives 26 specific recommendations for changes to legislation or policies in Ohio to counter the effects of the foreclosure crisis and to stabilize neighborhoods. While Mallach is addressing issues in Ohio specifically, many of the policy solutions could be applied in other states and local jurisdictions. Some of these policy suggestions are updates or modifications to existing Ohio laws, such as barring abusive lending practices that are not already banned and strengthening surety bond provisions of the Ohio Mortgage Brokers Law. The most striking recommendations include instituting a fee on all foreclosure filings paid by the entity initiating the filing, the proceeds of which would fund foreclosure prevention counseling and neighborhood stabilization efforts in the state and the policies around preventing properties in foreclosure from becoming vacant, either through expediting the foreclosure process if the property does become vacant, or giving clear responsiblity for the property to the entity initiating the foreclosure in case the property does become vacant before sheriff's sale.



2008


Been, Vicki. "External Effects of Concentrated Mortgage Foreclosures: Evidence from New York City." Testimony before the Subcommittee on Domestic Policy, Committee on Oversight and Government Reform. U.S. House of Representatives. Washington, DC: House of Representatives, May 21, 2008.
Online: http://oversight.house.gov/documents/20080522105505.pdf

Foreclosures in New York City are found to depress sale prices of nearby properties, whether the surrounding neighborhood is experiencing high or low rates of foreclosure. The size of the price impact generally increases with the number of nearby foreclosure starts, although the marginal impact of each additional foreclosure decreases once there is a concentration of foreclosures in a neighborhood. Even in low-foreclosure neighborhoods, sale prices of homes within 500 feet of just one or two properties for which a foreclosure notice had been filed in the prior 24 months were 1.8 percent lower than the prices of similar properties in the same neighborhood but not within 500 feet of any recent foreclosure start, all else equal. The largest decreases were within 500 feet of the foreclosure, though homes between 500-1000 feet from the foreclosure also sold for significantly less than comparable properties, but estimated price reductions were smaller. Other findings include that 60 percent of properties going into foreclosure in NYC were two- to four-family or multifamily buildings, representing approximately 38,000 renting individuals.



Columbus and Franklin County Foreclosure Working Group. "Prevention and Recovery Advisory Plan." Columbus, OH: Community Research Partners, October 2008.
Online: http://communityresearchpartners.org/uploads/publications/Foreclosure_Plan_2008.pdf

The Columbus and Franklin County Foreclosure Working Group has identified a set of comprehensive strategies that seek to leverage existing resources, create cross jurisdictional partnerships and prioritize prevention. The three main goals of these strategies are to prevent neighborhood decline associated with foreclosure in traditionally stable markets across Central Ohio; address the issue of backslide due to foreclosure in “tipping point” neighborhoods; and focus resources in neighborhoods traditionally targeted by revitalization efforts, preventing further disinvestment and decline due to the foreclosure crisis. Three strategies are summarized for each of three types of neighborhoods. The first strategy is to implement a comprehensive acquisition and holding plan for the targeted area; this strategy would work best in weak market neighborhoods with significant levels of foreclosure. A second strategy is to acquire and rehabilitate foreclosed and vacant homes with the goal of resale. This would be most appropriate for city-county interfaces that allow opportunities for foreclosure mitigation programs and infrastructure improvements through City-County partnerships; such areas also exhibit the highest home ownership rates of all areas studied, as well as the lowest levels of foreclosure. The third strategy combines elements of both Strategies 1 and 2, adding a long-term rental component to the mix as appropriate. This strategy could be pursued in converging investment neighborhoods; these are neighborhoods that have been the target of substantial government and private investment that is anticipated to increase significantly in the near future.



Coulton, Claudia, Kristen Mikelbank, Michael Schramm. "Foreclosure and Beyond: A report on ownership and housing value following sheriff's sales, Cleveland and Cuyahoga County, 2000-07." January, 2008.
Online: http://blog.case.edu/msass/2008/01/13/Foreclosure_and_Beyond_final.pdf

This report explores what happens after foreclosed properties go to sheriff's auction in the city of Cleveland and Cuyahoga county using local records from 2000 to 2007. The number of foreclosures has increased substantially in the Cleveland area in the past few years. This increase has had an impact on the amount of properties that are being held by banks and how much value the banks are recapturing. They find that the majority of properties (~90%) are now being held by institutions such as local banks, mortgage companies and government-sponsored entities after a sheriff's sale. These properties are being held for increasingly longer periods of time after the sheriff's sale before they are resold to private owners. Additionally, institutions are recapturing decreasing percentages of the estimated market value for foreclosed properties over time and as more time passes after the sheriff's sale.



Coulton, Claudia, Tsui Chan, Michael Schramm, Kristen Mikelbank. "Pathways to Foreclosure: A Longitudinal Study of Mortgage Loans, Cleveland and Cuyahoga County, 2005-2008." Cleveland, OH: Center on Urban Poverty and Community Development, Case Western Reserve University, June, 2008.
Online: http://blog.case.edu/msass/2008/06/23/Pathways_to_foreclosure_6_23.pdf

Foreclosure rates in Northeast Ohio have grown exponentially in recent years and present unprecedented challenges for communities, governments and households. The purpose of this study is to take a deeper look at the connection between foreclosures and the circumstances surrounding the mortgage loans that are the subject of these foreclosure filings, by looking at local records and Home Mortgage Disclosure Act (HMDA) data. The study finds that by far the strongest predictor of a loan foreclosing is its status as a high cost subprime loan. These loans were geographically concentrated, fueling additional foreclosures. In addition, African American borrowers at all income levels were much more likely to receive high cost subprime loans than their white counterparts, leading to high rates of foreclosure in this population. It was also found that a small list of lenders accounted for the majority of the foreclosures in Cuyahoga County, most of which were classified by HUD as subprime lenders. These findings suggest several strategies at the local level. First, localities should monitor lending practices in their area using data like the HMDA data set; such information should be made available to localities as a public service to allow them to monitor what is happening in their communities. Individual borrowers should also be educated about acquiring a loan, and access to local banks should be increased. Local governments and nonprofits should help borrowers after a foreclosure is filed so that they can stay in their homes. Finally, localities should receive and hold foreclosed properties until productive development can take place.



Immergluck, Dan. "Community Response to the Foreclosure Crisis: Thoughts on Local Interventions." Atlanta, GA: Federal Reserve Bank of Atlanta, 2008.
Online: http://www.stablecommunities.org/sites/www.stablecommunities.org/files/CommunityResponse_Immergluck.pdf

This discussion paper illustrates strategies and programs that local governments and non-profit agencies have used in response to foreclosures in their community. The author outlines the constraints and opportunities that these players face in dealing with foreclosure related problems, classifies responses to foreclosure crises and, in a broad way, suggests which types of organizations tend to be most involved in different categories of response. The final section discusses each category of response in more detail, using examples from around the country on how local actors have developed, or are developing, responses in the face of what are often very severe challenges.



Mallach, Alan. "How to Spend $3.92 Billion: Stabilizing Neighborhoods by Addressing Foreclosed and Abandoned Properties." Philadelphia, PA: Federal Reserve Bank of Philadelphia, October 2008.
Online: http://www.philadelphiafed.org/community-development/publications/discussion-papers/DiscussionPapers_Mallach_10_08_final.pdf

The Housing and Economic Recovery Act of 2008 created the Neighborhood Stabilization Program (NSP), under which states, cities, and counties will receive a total of $3.92 billion to acquire, rehabilitate, demolish, and redevelop foreclosed and abandoned residential properties. These funds can stabilize hard-hit neighborhoods, putting them on the path to market recovery. This will only happen, however, if they are used in ways that are strategically targeted and sensitive to market conditions. Grantees should first understand the local housing market, using this knowledge and sound ground rules to determine which properties to buy and what to do with those that are bought for them to have the greatest effect. They should think strategically about how to use NSP funds. These strategies can include forming partnerships with other public, private and nonprofit entities to maximize capacity and resources; leveraging the funds with other sources of money; integrating them with other neighborhood stabilization strategies, like code enforcement; and establishing benchmarks based on outcomes, not inputs. Grantees should also set up infrastructure to hold and maintain acquired properties until they can be put to reuse, including developing standard property maintenance protocols and encouraging interim treatments and uses of vacant properties. Finally, create a coordinated, effective local government management structure for neighborhood stabilization, taking into account the current system while giving someone authority to direct the strategy and establishing internal systems for better coordination and communication. By following these principles, the NSP funds can help protect states and localities from the effects of the foreclosure crisis.



Tetreault, Janna, Ann Verrilli. "Addressing the Foreclosure Crisis: State and Federal Initiatives in Massachusetts." Boston MA: Citizens' Housing and Planning Association, March 2008.
Online: http://www.chapa.org/pdf/StateandFederalForeclosureInitiatives08.pdf

While this report focuses on foreclosure prevention initiatives in Massachusetts, the examples and discussion of federal policies can be useful to those in other states as well. The report contains a wide array of foreclosure responses in effect or in various stages of planning as of March 2008. Examples include state policies, legislation, and programs, as well as initiatives led by municipalities, non-profit organizations, and lenders in the region. Federal policies and industry-led programs, such as FHA Secure and HOPE Now, are described in the final section along with a summary of federal legislative proposals.



2007


Pierce, Stephanie Casey, Kheng Mei Tan. "State Strategies to Address Foreclosures." Washington DC: NGA Center for Best Practices, September 19, 2007.
Online: http://www.nga.org/Files/pdf/0709FORECLOSURES.PDF

This report provides background on subprime and predatory lending, discusses the impact of foreclosures, and provides examples of state foreclosure prevention initiatives. The numerous examples are divided into two major categories: (1) helping troubled homeowners and (2) preventing future foreclosures. The first category includes default loan counseling, restrictions on foreclosure rescue scams, refinance loans, loan workout assistance, and longer foreclosure timelines. The second includes homebuyer education, anti- predatory lending laws, increased mortgage regulation, and criminalization of mortgage fraud.



2006


Li, Wei, Keith S. Ernst. "The Best Value in the Subprime Market: State Predatory Lending Reforms." Center for Responsible Lending, February 23, 2006.
Online: http://www.responsiblelending.org/pdfs/rr010-State_Effects-0206.pdf

The authors evaluate the impact of state anti-predatory lending laws by comparing the experiences of borrowers in states that have anti-predatory lending laws with that of borrowers in states that do not have such protection. After analyzing six million subprime mortgages made between 1998 and 2004, the authors find that, in states with anti-predatory lending laws that are stronger than the federal law, borrowers are less likely to have mortgage loans with "abusive" terms, continue to have access to subprime credit, and get similar or better interest rates for subprime mortgages.



Tatian, Peter A. "District of Columbia Housing Monitor." Washington, DC: NeighborhoodInfo DC, Fall 2006.
Online: http://www.neighborhoodinfodc.org/housing/

The District of Columbia Housing Monitor tracks trends in the most recently-available data on the District’s housing market with a focus on affordable housing. Each issue, published quarterly, analyzes one topic in greater depth; in this issue, the special section examines trends in home purchase mortgage loans through 2004. In the District of Columbia, subprime mortgages as a percentage of all conventional home purchase mortgage loans increased from 3.6 percent in 2003 to 5.3 percent in 2004, a level similar to that at the end of the 1990s. These levels vary widely across the city, and may be an indication that predatory lending is taking place. Even if no improper or illegal lending practices exist, the subprime lending itself may indicate the need for credit counseling or credit repair assistance for certain borrowers. Other data indicate new home purchase loans increased between 1995 and 2004, though the home sales market slowed in 2006.



2005


"Effective Community-Based Strategies for Preventing Foreclosures." Washington DC: NeighborWorks America, September 2005.
Online: http://www.nw.org/Network/pubs/studies/documents/foreclosureReport092905.pdf

This report looks at foreclosure prevention efforts by NeighborWorks America affiliates, with in-depth case studies of two programs: Neighborhood Housing Services (NHS) of Chicago's Home Ownership Preservation Initiative (HOPI) and NHS of New York City's foreclosure prevention work, including national partnerships. The report also provides background on foreclosures and subprime loans and foreclosure trends through 2004.



2004


Apgar, William, Mark Duda. "Preserving Homeownership: Community-Development Implications of the New Mortgage Market." Chicago, IL: Neighborhood Housing Services of Chicago, NeighborWorks, March 25, 2004.
Online: http://www.nw.org/network/neighborworksProgs/foreclosuresolutionsOLD/documents/preservingHomeownershipRpt.pdf

This report seeks to chart new ways that community-based organizations (CBOs) — working cooperatively with private industry and federal, state, and local governments — can develop new national-scale foreclosure prevention initiatives. It analyzes the subprime mortgage market and diagnoses issues and creates innovative partnership solutions around tools, strategies, and business models that serve to better manage mortgage delinquencies and foreclosures in distressed neighborhoods. Written in 2004, this report claimed that rising foreclosures threatened low-income people and families; that mortgage credit is not being allocated efficiently; that there is no effective demand-side check due to consumer confusion; that rigidities in the system hold back best practices; and that foreclosure avoidance, loan loss mitigation and REO procedures need further development. The report proposes five categories of solutions. First, CBOs, industry and government should work to create improved data collection, which can enhance foreclosure monitoring and avoidance efforts. They should help borrowers in distress with new programs and regulations. They should make foreclosures less damaging to neighborhoods when they are unavoidable. The capacity of the mortgage industry to respond should be enhanced. Finally, foreclosures should be engineered out of the system.



Assess Progress


2010


Federal Reserve of Richmond. "Neighborhood Stabilization Program: Best Practices in Early Implementation and Course Correction Webinar- Presentation Slides." Slides. District of Columbia: Neighborhood Stabilization Program, June 2010.
Online: http://hudnsphelp.info/index.cfm?do=viewResource&ResourceID=579

These slides are from a June 17, 2010, webinar, hosted by the Federal Reserve Bank of Richmond, the Federal Reserve Board, the Council of State Community Development Agencies and NeighborWorks America. The webinar was intended for grantees and sub-recipients seeking best practices in early program implementation and course correction. The slides provide case studies on NSP1 grantees and sub-recipients that have expended funds quickly from the start, and that have changed course to increase their spending pace. The case studies examine tradeoffs the grantees and sub-recipients considered, their early results, and how they are making strides to meet the September 2010 obligation deadline. More information about the webinar is available here: http://hudnsphelp.info/media/resources/NSP_EarlyImplementation_CourseCorrection.pdf



2009


Mallach, Alan. "Addressing Ohio's Foreclosure Crisis: Taking Next Steps." Washington DC: Brookings Institution, June 5, 2009.
Online: http://www.brookings.edu/~/media/Files/rc/papers/2009/0605_ohio_foreclosure_mallach/0605_ohio_foreclosure_report.pdf

In this paper, Alan Mallach gives 26 specific recommendations for changes to legislation or policies in Ohio to counter the effects of the foreclosure crisis and to stabilize neighborhoods. While Mallach is addressing issues in Ohio specifically, many of the policy solutions could be applied in other states and local jurisdictions. Some of these policy suggestions are updates or modifications to existing Ohio laws, such as barring abusive lending practices that are not already banned and strengthening surety bond provisions of the Ohio Mortgage Brokers Law. The most striking recommendations include instituting a fee on all foreclosure filings paid by the entity initiating the filing, the proceeds of which would fund foreclosure prevention counseling and neighborhood stabilization efforts in the state and the policies around preventing properties in foreclosure from becoming vacant, either through expediting the foreclosure process if the property does become vacant, or giving clear responsiblity for the property to the entity initiating the foreclosure in case the property does become vacant before sheriff's sale.



2006


Neighborhood Housing Services of Chicago. "Home Ownership Preservation Initiative Partnership Lessons and Results: Three Year Final Report." Chicago IL: Home Ownership Preservation Initiative, July 17, 2006.
Online: http://www.nhschicago.org/downloads/82HOPI3YearReport_Jul17-06.pdf

The report describes the Home Ownership Preservation Initiative (HOPI) of Neighborhood Housing Services (NHS) of Chicago. HOPI programs include homeownership education, lender workshops, a 311 hotline for default loan counseling, and programs for the stabilization and rehabilitation of vacant and abandoned buildings. The report presents statistics and focus group results on the impact of HOPI's counseling programs after the first three years. It also looks ahead to the challenges families will face as interest rates reset and as new mortgage products and problems arise.



Counseling and Intermediation to Prevent Foreclosures


2010


Mulligan, Casey B. "Foreclosures, Enforecment, and Collections under the Federal Mortgage." National Bureau of Economic Reserch. Cambridge: The National Bureau of Economic Research, February 2010.
Online: http://papers.nber.org/papers/w15777

Federal mortgage modification initiatives, targeting millions of borrowers, are intended to prevent foreclosures of underwater home mortgages. Those initiatives discourage principal reductions in favor of interest reductions, despite the possibility that the former would be a more durable foreclosure prevention tool. The programs also impose marginal income tax rates substantially in excess of 100 percent. Using the framework of optimal income taxation, this paper shows how alternative means-tested modification rules would simultaneously improve collections, efficiency, the number of foreclosures, and their total cost. This paper shows how actual modifications do little to reduce principal, are still outnumbered by foreclosures, and add to borrower uncertainty, may result from incentives created but those very guidelines.



National Community Reinvestment Coalition. "Foreclosure Rescue Scams: A Nightmare Complicating the American Dream." District of Columbia: National Community Reinvestment Coalition, March 2010.
Online: http://www.ncrc.org/images/stories/pdf/research/foreclosure%20rescue%20scams%20-%20%20nightmare%20complicating%20the%20american%20dream.pdf

This report identifies common scams perpetrated against consumers, including phantom help, reverse mortgages, title theft, and short sale fraud, and highlights those important red flags that every homeowner must know. The NCRC conducted a research study for three months in mid-2009 using “fair lending matched pair testing” or “mystery shopping” to assess the extent of the problem. NCRC’s findings demonstrate that an aggressive legislative solution and added public and private oversights and enforcement are necessary to prevent consumers from being harmed.



National Community Reinvestment Coalition. "HAMP (The Home Affordable Modification Program) Mortgage Modification Survey 2010." District of Columbia: National Community Reinvestment Coalition, 2010.
Online: http://www.ncrc.org/index.php?option=com_content&view=article&id=562:ncrcs-2010-survey-on-the-home-affordable-mortgage-program-hamp&catid=25:reports-and-research-library&Itemid=76

The national Community reinvestment Coalition (NCRC) conducted a survey of distressed homeowners seeking assistance from NCRC’s Housing Counseling Network (HCN). The survey found that White HAMP-eligible borrowers are almost 50% more likely to receive a modification than African-American HAMP-eligible borrowers. There are more employment-related foreclosures and delinquencies than foreclosures and delinquencies resulting from problematic loans. Only 68.2% of the distressed homeowners were eligible for a HAMP modification. 35% of respondents with one mortgage were approved for a modification compared to only 16% of those with two or more mortgages. The majority of the modification involved an interest rate reduction. Finally homeowners with foreclosures pending were less likely to receive a modification than those still current on their mortgage payments.



2008


Pew Charitable Trusts. "Defaulting on the Dream: States Respond to America’s Foreclosure Crisis." Washington, DC: Pew Charitable Trusts, April 2008.
Online: http://www.pewtrusts.org/our_work_report_detail.aspx?id=37964

This April 2008 report presents a wealth of information on foreclosures nationally and by state, as well as examples of state responses to the rise in foreclosures. The report includes at-a-glance tables and graphics, including a map of foreclosure responses by state. Overviews at the start of the report summarize foreclosures' impact on states, homeowners, and home values and what states are doing to help. A more detailed examination of state initiatives divides responses into three categories: (1) programs that prevent foreclosures and keep families in their homes, (2) programs that prevent predatory or high-risk loans, and (3) task forces that consider broad-based solutions.



2007


Essene, Ren S., William Apgar. "Understanding Mortgage Market Behavior: Creating Good Mortgage Options for All Americans." Cambridge, MA: Joint Center for Housing Studies, Harvard University, April 25, 2007.
Online: http://www.jchs.harvard.edu/publications/finance/mm07-1_mortgage_market_behavior.pdf

The report discusses consumer awareness and mortgage marketing practices that contribute to consumers making mortgage decisions that they later regret. The authors recommend a combination of regulatory and licensing changes for the mortgage industry and the creation of tools and an advisor network to better prepare consumers to make good mortgage decisions.



Frumpkin, Samuel, William Reeves, E. Matthew Quigley, Barry Wides, Julie Williams. "Foreclosure Prevention: Improving Contact with Borrowers." Community Developments Insights. Washington DC: Office of the Comptroller of the Currency, June 2007.
Online: http://www.occ.treas.gov/cdd/Foreclosure_Prevention_Insights.pdf

This report describes how banks can prevent foreclosures through improved communication with borrowers. It includes a summary of the impact of foreclosures on banks and survey findings on borrowers' reasons for avoiding contact with their lender. It discusses three approaches to borrower communication: (1) direct contact by the loan servicer, (2) direct contact by a counseling agency, and (3) facilitating borrower-initiated contact through a national hotline. The report then provides an overview of the foreclosure prevention options that can be discussed once borrower communication has been initiated.



Pierce, Stephanie Casey, Kheng Mei Tan. "State Strategies to Address Foreclosures." Washington DC: NGA Center for Best Practices, September 19, 2007.
Online: http://www.nga.org/Files/pdf/0709FORECLOSURES.PDF

This report provides background on subprime and predatory lending, discusses the impact of foreclosures, and provides examples of state foreclosure prevention initiatives. The numerous examples are divided into two major categories: (1) helping troubled homeowners and (2) preventing future foreclosures. The first category includes default loan counseling, restrictions on foreclosure rescue scams, refinance loans, loan workout assistance, and longer foreclosure timelines. The second includes homebuyer education, anti- predatory lending laws, increased mortgage regulation, and criminalization of mortgage fraud.



Sayeed, Almas. "From Boom to Bust: Helping Families Prepare for the Rise in Subprime Mortgage Foreclosures." Washington DC: Center for American Progress, 2007.
Online: http://www.americanprogress.org/issues/2007/03/pdf/foreclosure_paper.pdf

This paper summarizes the problem of increasing subprime foreclosures and discusses the benefits of state-funded mortgage assistance programs as a tool for helping families avoid foreclosure. A table provides an overview of five state-funded foreclosure prevention programs. The paper closes with a proposal for federal and state actions to encourage the creation of additional mortgage assistance programs.



2006


Hatcher, Desiree. "Foreclosure Alternatives: A Case for Preserving Homeownership." Profitwise News and Views. February 2006.
Online: http://www.chicagofed.org/community_development/files/02_2006_foreclosure_alt.pdf

This article discusses the costs of foreclosure to homeowners, private and public lenders, loan servicers, mortgage insurers, cities, and neighborhoods. It calculates the total cost of a typical foreclosure as $73,300 for an FHA loan and $26,600 for a privately-insured mortgage. It then lays out the standard foreclosure prevention options and discusses the cost-effectiveness of foreclosure prevention.



Li, Wei, Keith S. Ernst. "The Best Value in the Subprime Market: State Predatory Lending Reforms." Center for Responsible Lending, February 23, 2006.
Online: http://www.responsiblelending.org/pdfs/rr010-State_Effects-0206.pdf

The authors evaluate the impact of state anti-predatory lending laws by comparing the experiences of borrowers in states that have anti-predatory lending laws with that of borrowers in states that do not have such protection. After analyzing six million subprime mortgages made between 1998 and 2004, the authors find that, in states with anti-predatory lending laws that are stronger than the federal law, borrowers are less likely to have mortgage loans with "abusive" terms, continue to have access to subprime credit, and get similar or better interest rates for subprime mortgages.



Neighborhood Housing Services of Chicago. "Home Ownership Preservation Initiative Partnership Lessons and Results: Three Year Final Report." Chicago IL: Home Ownership Preservation Initiative, July 17, 2006.
Online: http://www.nhschicago.org/downloads/82HOPI3YearReport_Jul17-06.pdf

The report describes the Home Ownership Preservation Initiative (HOPI) of Neighborhood Housing Services (NHS) of Chicago. HOPI programs include homeownership education, lender workshops, a 311 hotline for default loan counseling, and programs for the stabilization and rehabilitation of vacant and abandoned buildings. The report presents statistics and focus group results on the impact of HOPI's counseling programs after the first three years. It also looks ahead to the challenges families will face as interest rates reset and as new mortgage products and problems arise.



2005


"Effective Community-Based Strategies for Preventing Foreclosures." Washington DC: NeighborWorks America, September 2005.
Online: http://www.nw.org/Network/pubs/studies/documents/foreclosureReport092905.pdf

This report looks at foreclosure prevention efforts by NeighborWorks America affiliates, with in-depth case studies of two programs: Neighborhood Housing Services (NHS) of Chicago's Home Ownership Preservation Initiative (HOPI) and NHS of New York City's foreclosure prevention work, including national partnerships. The report also provides background on foreclosures and subprime loans and foreclosure trends through 2004.



Collins, J. Michael, Rochelle Nawrocki Gorey. "Analyzing Elements of Leading Default-Intervention Programs." Ithaca NY: Policy Lab Consulting Group, 2005.
Online: http://content.knowledgeplex.org/kp2/cache/documents/94953.pdf

The authors interviewed representatives of six major foreclosure prevention programs in 2005 to identify the components of strong foreclosure prevention programs. The authors draw lessons from each program and also note that "[ideally] borrowers struggling to pay their mortgage would have access to a multi-tiered system of supportive services, including lender referrals, counseling, financial assistance, property services and referrals to other social-service agencies." Tables and figures provide easily accessible information on borrower characteristics, default loan interventions by length of delinquency, and overall program characteristics. One page descriptions of each of the programs are included at the end of the report.



Collins, J. Michael, Rochelle Nawrocki Gorey. "Analyzing Elements of Leading Default-Intervention Programs." Ithaca NY: Policy Lab Consulting Group, 2005.
Online: http://content.knowledgeplex.org/kp2/cache/documents/94953.pdf

The authors interviewed representatives of six major foreclosure prevention programs in 2005 to identify the components of strong foreclosure prevention programs. The authors draw lessons from each program and also note that "[ideally] borrowers struggling to pay their mortgage would have access to a multi-tiered system of supportive services, including lender referrals, counseling, financial assistance, property services and referrals to other social-service agencies." Tables and figures provide easily accessible information on borrower characteristics, default loan interventions by length of delinquency, and overall program characteristics. One page descriptions of each of the programs are included at the end of the report.



2004


Goldstein, Ira. "Bringing Subprime Mortgages to Market and the Effects on Lower-Income Borrowers." Joint Center for Housing Studies Working Paper Series. Cambridge MA: Joint Center for Housing Studies of Harvard University, February 2004.
Online: http://www.jchs.harvard.edu/publications/finance/babc/babc_04-7.pdf

This paper looks at subprime lending patterns in Philadelphia and their impact on low- and moderate-income populations. The authors make the case that subprime mortgage products are more prevalent in low- and moderate-income neighborhoods, not only due to a lack of access to prime credit but also as a result of aggressive targeting of these areas by subprime lenders. Their analysis shows that subprime loans are more likely to result in foreclosure than other loans and that these foreclosures occur sooner in the mortgage timeline than foreclosures on prime loans.



Secure and Maintain Vacant Properties


2010


"Snapshot Report: Neighborhood Stabilization Program Resource Exchange." District of Columbia: Neighborhood Stabilization Program, 2010.
Online: http://hudnsphelp.info/index.cfm?do=viewSnapshotHome

The National Stabilization Program (NSP) Snapshot Report provides a 'snapshot' picture for grantees and community stakeholders. The snapshots show how the NSP program as a whole and each NSP grantee, field office area, region, and state in the country are doing towards meeting their commitment and expenditure goals. The reports include graphs and pie charts showing commitment and expenditure progress and tables comparing the grantees in each group. The individual grantee reports also provide selected performance measure data including number of homes/properties created and number of households/persons served with NSP funding as well as a breakdown of each grantee's allocation by activity type. These snapshot reports are intended to be useful resources for measuring progress in different parts of the country and between grantees and to help grantees focus on the commitment and expenditure goals.



2006


Mallach, Alan. "Bringing Buildings Back: From Abandoned Properties to Community Assets: A Guidebook For Policymakers and Practitioners." New Brunswick, NJ: Rutgers University Press, 2006.

The foreclosure crisis has greatly increased the prevalence of abandoned properties. These vacancies do serious harm to their communities, diminishing property values and discouraging investment, increasing crime, raising the risk of fire, and imposing burdensome costs on the municipalities that must bear the expense of securing and demolishing such structures and providing the added police and fire services needed to protect the public. To address these problems, nonprofits and state and local governments must craft new strategies to help owners maintain their properties and keep them in productive use. A comprehensive abandoned property strategy must not only be grounded in a thorough understanding of the complex legal issues involved but also take into account local economic constraints and market opportunities, address the difficult social issues associated with neighborhood change, and, in considering alternative uses, confront the multifaceted questions of site layout and physical form. First, stakeholders should endeavor to prevent abandonment by understanding its causes in the community and developing strategies to keep buildings in productive use. Where this doesn’t work, governments and nonprofits should take place the properties in the hands of someone willing and able to put them to productive use. This can be accomplished by motivating the owner to reclaim the property or taking control of it, either taking the title with legal means or minimizing the period between abandonment and reuse, maintaining the properties in the interim. Finally, communities should foster sustainable reuse of abandoned properties, ensuring that this reuse provides the greatest social, economic and physical benefit to the community. Ultimately, though, only practitioners within the community can determine the best and most appropriate use of vacant properties.



Directly Acquire and Rehabilitate Foreclosed Properties


2010


"Snapshot Report: Neighborhood Stabilization Program Resource Exchange." District of Columbia: Neighborhood Stabilization Program, 2010.
Online: http://hudnsphelp.info/index.cfm?do=viewSnapshotHome

The National Stabilization Program (NSP) Snapshot Report provides a 'snapshot' picture for grantees and community stakeholders. The snapshots show how the NSP program as a whole and each NSP grantee, field office area, region, and state in the country are doing towards meeting their commitment and expenditure goals. The reports include graphs and pie charts showing commitment and expenditure progress and tables comparing the grantees in each group. The individual grantee reports also provide selected performance measure data including number of homes/properties created and number of households/persons served with NSP funding as well as a breakdown of each grantee's allocation by activity type. These snapshot reports are intended to be useful resources for measuring progress in different parts of the country and between grantees and to help grantees focus on the commitment and expenditure goals.



2009


Fleischman, Daniel. "Nonprofit Strategies for 1- to 4-Unit REO Properties: An Analytical Framework." Washington, DC: NeighborWorks, February 2009.
Online: http://www.nw.org/network/documents/Fleischman_Nonprofit_Strategies_for_REO_Properties.pdf

Real estate owned (REO) housing resulting from the recent foreclosure crisis threatens to destabilize low- and moderate-income neighborhoods across the country. Nonprofit organizations seeking to redevelop these properties into affordable housing face weak market conditions and operate with limited resources and capacity. This study presents a framework through which nonprofits can analyze REO redevelopment opportunities for 1- to 4-unit properties within their communities. The paper specifies the conditions necessary for REO redevelopment and discusses how local market conditions, the geographic distribution and the physical characteristics of REOs, their ownership and legal status, internal organizational capacity, and public policies each affect nonprofit efforts to acquire, rehabilitate, sell and rent REO properties. Finally, this paper considers the unique difficulties of the current situation relative to past vacant-housing scenarios and concludes that many nonprofits may wish to pursue alternative, non-redevelopment strategies.



2008


Kildee, Daniel T., Nancy Floreen, John Talmage, Vicki Been, Phyllis G. Betts, Alan Mallach, Doug Leeper, Dean Baker. "Neighborhoods: The Blameless Victims of the Subprime Mortgage Crisis." Testimony before the Subcommittee on Domestic Policy, Committee on Oversight and Government Reform. U.S. House of Representatives. Washington, DC: House of Representatives, May 21, 2008.
Online: http://oversight.house.gov/story.asp?ID=1961

In the past, government actions could do little to interrupt the incremental decline in the reutilization of tax-reverted land. Under the former system of tax foreclosure, abandoned properties were either transferred to private speculators through tax lien sales or became state-owned property through foreclosure. Changes to Michigan’s tax foreclosure law are a significant step in the right direction. Since the passage of PA 123 of 1999, the State of Michigan and county governments have greater authority in gaining control of vacant abandoned land. PA 123 of 1999 accelerated the process of tax foreclosure, which previously took as long as seven years to complete. The new system of county or state tax foreclosure is completed within a two-year period, and abandoned property is taken after only one year. While the new system is significantly more efficient, the testimony suggests we need to go further in order to optimize the reuse of vacant urban land with long-term neighborhood stability in mind. Over time however, land assembly for development and long and short-term green space development is made possible by “land banking” tax-reverted property, rather that simply selling land at public auction. The “smart growth” concept is also receiving serious state government attention.



Zuckerman, S. "The Lease to Purchase Model: Creating a Path to Affordability for REO Recapture." A presentation at "Stabilizing Communities, Addressing the Negative Impact of Foreclosures". San Francisco, CA: Federal Reserve Bank of San Francisco, July 2008.
Online: http://stlouisfed.org/RRRSeries/event_2.html

This presentation was on Self-Help, a nonprofit Community Development Financial Institution whose mission is to provide economic opportunity and wealth-building strategies for low income families. They have created the Neighborhood Preservation Project in response to rising foreclosures, with the goals of minimizing the cost of foreclosures on at-risk neighborhoods; turning foreclosed properties into wealth building assets for low-income families and communities; and creating viable path to homeownership for credit-impaired families. They first purchase REO homes in a suitable location with either favorable economics or subsidies. They then rehabilitate and redeploy these properties using a broad skill set in asset and property management and counseling. Self-Help rents to tenants with the goal of having the tenant purchase their home and assume the loan within five years. Self-Help uses this lease-to-purchase structure to accelerate their ability to occupy vacant homes and bridge mortgage qualification issues. A pilot project in Charlotte is currently beginning the leasing process; this is one of multiple pilot projects that are underway before Self-Help pursues scalability.



2006


Temkin, K., M. Turner, L. Davis, L. Buron, D. Rodda. "Assessment of the 602 Non-Profit Disposition Program." Report Prepared for the U.S. Department of Housing and Urban Development. Washington, DC: The Urban Institute, December, 2006.
Online: http://www.huduser.org/publications/commdevl/602assessment.html

The 602 Non-Profit Disposition program sells homes owned by the U.S. Department of Housing and Urban Development (HUD) to local governments and non-profit organizations for rehabilitation and resale. These homes, which were acquired by HUD after borrowers defaulted on HUD-insured mortgage loans, tend to need major repairs. The program’s purpose is to provide homeownership opportunities to low- and moderate-income households and to revitalize economically troubled urban spaces. Case studies of several sites showed that they appeared to have adequate financing for acquisition and repair of properties and the management of the program as well as sufficient contractors for property repairs and sufficient marketing plans to ensure that 602 Program properties were rehabilitated and sold within required timeframes. The sites studied are to purchase between 50 and 133 properties per contract year, and two sites have sold about 15 properties in their first year. Some sites, though, were hampered by having to deal with too large an area, meaning that gains were too scattered to be measurable in any one area. In addition, there were concerns that homes would be sold for less than the cost of repairing them, leading to potential monetary losses. Evaluation of this program, and similar ones, should incorporate such qualitative as well as quantitative measures of effectiveness.



Help Families Recover


2009


Been, Vicki, Allegra Glashausser. "Tenants: Innocent Victims of the Nation's Foreclosure Crisis." Albany Government Law Review 2 (1): 1-27. Albany, NY: 2009.
Online: http://www.albanygovernmentlawreview.org/articles/2/1/Glashausser.pdf

This article provides an overview of local proposals to mitigate the impact of foreclosures on tenants. Of particular relevance, the authors refer to expansion of an emergency rental assistance program in Chicago that would provide up to 3 months of rent support and moving expenses for eligible tenants and a program being created by the Housing Authority of New Haven to set aside tenant-based housing choice vouchers to prevent homelessness among tenants evicted as a result of foreclosures.



2008


Khadduri, Jill. "Housing Vouchers Are Critical for Ending Family Homelessness." Washington, DC: National Alliance to End Homelessness, January 29, 2008.
Online: http://www.endhomelessness.org/content/article/detail/1875

Housing vouchers are successful in helping families exit homelessness and can protect poor families from becoming homeless. These programs may be important safety nets that can help prevent homelessness for low-income families looking to rent after a foreclosure. Such vouchers are the least expensive way of assisting equally poor households, most of the time and for most types of households. They are also less vulnerable to the risk of creating concentrations of the poor than property-based approaches to affordable housing because they have no fixed location. Furthermore, vouchers have been shown to dramatically reduce the incidence of homelessness among those who use them, while also reducing crowded living conditions and frequent moves associated with unaffordable housing. The current federal program, the Housing Choice Voucher Program, assists about 2 million households at any one time. This voucher program is critical to keeping families in foreclosure out of homelessness.



2007


Burt, Martha R., Carol Pearson, Ann Elizabeth Montgomery. "Community-Wide Strategies for Preventing Homelessness: Recent Evidence." Journal of Primary Prevention 28 (3-4): 213-228. Springer Netherlands, June 9, 2007.
Online: http://www.springerlink.com/content/ct570u80631g2144/

This article summarizes the findings of a study of community-wide strategies for preventing homelessness among families and among single adults with serious mental illness. A major finding of this study was that it was difficult to identify sites with communitywide strategies, and even harder to find any that maintained data capable of documenting prevention success. The study identified five prevention activities used in the study communities that may be implemented at all levels of prevention. Communities can use housing subsidies; provide supportive services coupled with permanent housing; encourage mediation in housing courts; offer cash assistance for rent or mortgage arrears; and ensure rapid exit from shelter. These strategies will be most efficient if they are part of a larger structure of planning and organization that provides a carefully articulated targeting strategy and mechanisms to assure that funds for prevention reach the people at greatest risk of homelessness. Finally, communities should establish routine systems to assess both the effectiveness and efficiency of its prevention efforts and use the resulting feedback to improve its targeting and balance among prevention activities. Some approaches followed include matching a prevention database against emergency shelter records and following changes over time within a single database. Communities can use all these tools together to improve effectiveness and efficiency.



Foreclosure Crisis - Background References


National Analysis of the Foreclosure Crisis in the Context of the Rental Housing Market


2004


Haurin, Donald R., Stuart Rosenthal. "The Sustainability of Homeownership: Factors Affecting the Duration of Homeownership and Rental Spells." Washington, DC: HUD, Office of Policy Development and Research, December 2004.
Online: http://www.huduser.org/Publications/pdf/homeownsustainability.pdf

Foreclosure can often cause a change from homeownership to renting for affected individuals. This paper begins with a description of ownership and rental spells, correlated with factors such as race, ethnicity and income. This is followed by a formal analysis of the factors contributing to the length of ownership spells and of other arrangements. Differences in race and ethnicity are often correlated with differences in homeownership rates. Whites had the highest homeownership rate in 2000, followed by Hispanics and then African Americans. In addition, a greater proportion of whites than minorities who had ever been homeowners were still homeowners in 2000. These differences are due both to the fact that fewer minorities attain first-time ownership and that minorities’ stay in owned dwellings are shorter while their stay in rented dwellings are longer. The average length of completed stay by first-time homeowners is estimated to be: 9.5, 12.5 and 16.1 years, while average time spent renting or living with parents is estimated to be 14.4, 14.3 and 10.7 years, for African Americans, Hispanics, and whites respectively. Many factors influence these gaps, including fewer weeks worked and fewer years of formal education among minorities. In addition, policies like post-purchase counseling programs should be used to educate households at risk of quick termination of homeownership.



National Analysis of the Foreclosure Crisis and Policy Recommendations


2006


Hatcher, Desiree. "Foreclosure Alternatives: A Case for Preserving Homeownership." Profitwise News and Views. February 2006.
Online: http://www.chicagofed.org/community_development/files/02_2006_foreclosure_alt.pdf

This article discusses the costs of foreclosure to homeowners, private and public lenders, loan servicers, mortgage insurers, cities, and neighborhoods. It calculates the total cost of a typical foreclosure as $73,300 for an FHA loan and $26,600 for a privately-insured mortgage. It then lays out the standard foreclosure prevention options and discusses the cost-effectiveness of foreclosure prevention.



National Analysis of Scope and Effects


2009


Immergluck, Dan. "Intrametropolitan Patterns of Foreclosed Homes: ZIP-Code-Level Distributions of Real-Estate-Owned (REO) Properties during the U.S. Mortgage Crisis." Community Affair Discussion Paper 01 (09). Atlanta: Federal Reserve Bank of Atlanta, April 21, 2009.
Online: http://www.frbatlanta.org/filelegacydocs/dp_0109.pdf

In general, in traditionally weak-market metros REOs tend to be relatively concentrated in central cities. Conversely, in regions where REO accumulated more recently and in those with high central-city housing prices, REO tend to be somewhat more suburbanized. Second, while ZIP codes with high REO densities are disproportionately located in central cities, this pattern varies significantly across metropolitan areas. In particular, in the formerly hot-market regions where home values have declined rapidly, a large majority of ZIP codes with severe REO levels are suburban. Finally, among suburban ZIP codes, those with long commute times experienced larger increases in REO over the November 2006 to 2008 period than those with shorter commute times. The paper concludes with some broad implications for community development policy and planning.



2008


Immergluck, Dan. "The Accumulation of Foreclosed Properties: Trajectories of Metropolitan REO Inventories during the 2007–2008 Mortgage Crisis." Community Affairs Discussion Paper 02-08. Atlanta, GA: Federal Reserve Bank of Atlanta, 12/15/2008.
Online: http://www.frbatlanta.org/filelegacydocs/dp_0208.pdf

A key concern among policymakers and community developers during the ongoing mortgage crisis has been the extent to which lender-owned homes, often called real-estate-owned or "REO" properties, have been accumulating in different local housing markets. This paper describes the accumulation of REO properties in metropolitan areas across the United States from August 2006 to August 2008. The paper examines the differences in both changes and static levels of REO activity across metro areas and compare changes in REO levels to changes in home values over the same period. Special attention is paid to a set of large metro areas with substantial levels of REO. It also examines differences across metro areas in the aging or duration of how long properties are held in REO. Cluster analysis is used to identify a typology of metropolitan regions based on REO levels and home price changes. REO exit rates for prime and subprime loans within these three clusters are then compared.



2007


Center for Responsible Lending. "Subprime Lending: A Net Drain on Homeownership." Washington, DC: Center for Responsible Lending, March 27, 2007.
Online: http://www.responsiblelending.org/issues/mortgage/research/subprime-lending-is-a-drain-on-home-ownership.html

The paper argues that subprime lending will lead to a greater increase in foreclosures than in new homeowners -- resulting in fewer homeowners altogether. The authors estimate that the nation will experience a net loss of approximately 1 million homeowners as a result of subprime loans originated between 1998 and 2006. The paper includes graphs and tables depicting the number of foreclosures, subprime loans, and new homeowners over time, as well as the foreclosure rate and the impact of subprime lending and foreclosures on African-Americans and Latinos.



2006


Schloemer, Ellen, Wei Li, Keith Ernst, Kathleen Keest. "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners." Washington, DC: Center for Responsible Lending, December 2006.
Online: http://www.responsiblelending.org/issues/mortgage/research/page.jsp?itemID=31217189

The authors examine the performance of subprime mortgages originated between 1998 and the third quarter of 2006 and find an increase in foreclosure risk. They estimate that 2.2 million subprime loans made through the end of 2006 and one in five subprime loans originated between 2004 and 2006 will end in foreclosure. The authors discuss the costs of foreclosures for individuals, communities of color, low-wealth families, neighborhoods, and cities and address the causes of the recent rise in foreclosures.



Data and Data Sources


2008


Coulton, Claudia, Kristen Mikelbank, Michael Schramm. "Foreclosure and Beyond: A report on ownership and housing value following sheriff's sales, Cleveland and Cuyahoga County, 2000-07." January, 2008.
Online: http://blog.case.edu/msass/2008/01/13/Foreclosure_and_Beyond_final.pdf

This report explores what happens after foreclosed properties go to sheriff's auction in the city of Cleveland and Cuyahoga county using local records from 2000 to 2007. The number of foreclosures has increased substantially in the Cleveland area in the past few years. This increase has had an impact on the amount of properties that are being held by banks and how much value the banks are recapturing. They find that the majority of properties (~90%) are now being held by institutions such as local banks, mortgage companies and government-sponsored entities after a sheriff's sale. These properties are being held for increasingly longer periods of time after the sheriff's sale before they are resold to private owners. Additionally, institutions are recapturing decreasing percentages of the estimated market value for foreclosed properties over time and as more time passes after the sheriff's sale.