Foreclosure-Response.org | Getting Started

How can we prevent foreclosures?

States and localities have adopted a range of short- and long-term educational, financial, legal, and regulatory policies for preventing foreclosures and protecting affected families and communities. To develop a foreclosure prevention approach that meets local needs and offers a wide range of policy solutions, some communities have brought stakeholders together to form foreclosure prevention task forces that look at options for immediate assistance, post-foreclosure stabilization of families and communities, and ways to reduce the risk of foreclosures in the future. Click here to learn more about developing a coordinated foreclosure response.

A second category of policy interventions involves education and counseling, legal services, and financial assistance to borrowers who are delinquent on their mortgages. Government agencies and their partners have disseminated educational information to residents about mortgage foreclosures through educational workshops, 24-hour hotlines, informational websites or other "one-stop shops" where families are connected to resources to help them stay in their homes.

To expand their reach and provide assistance to the greatest number of families in need, many localities have established partnerships with HUD-certified housing counseling or legal assistance agencies to help families stay in their homes.

Housing counselors typically work with families by laying out the

Photo Credit Chris Palladino, Courtesy of Mansur Real Estate Services, Inc.

various options available to prevent foreclosure, offering budget advice and assistance, providing information and referrals, and in some cases, helping to negotiate a workout with the lender. Legal assistance can also be a critical resource to help families stay in their homes and prevent financial losses by negotiating alternatives to foreclosure or providing representation for families who have been taken advantage of by predatory lenders. Click here to learn more about efforts to expand the availability of legal services and assistance.

Foreclosure prevention programs increasingly include mediation before a foreclosure can be completed. Foreclosure mediation brings the borrower and the loan servicer in the room together along with an impartial third party to try to come to a settlement agreement. Mediation may be the first time the two parties communicate with each other. Around 75% of cases that go to mediation result in a settlement. Click here to learn more about mediation program.

State or local housing finance agencies can help families avoid foreclosure by offering refinancing products with special loan products and other forms of direct financial assistance. Depending on local needs and resources, foreclosure prevention loans take a variety of different forms that all aim to help families stay in their homes whenever possible. Generally, loans geared toward foreclosure prevention tend to have less restrictive underwriting requirements and/or more suitable loan terms than private-market loans. Unfortunately, budget difficulties in many states have led to cuts in foreclosure prevention loan programs. Government agencies may also provide financial assistance indirectly by negotiating with lenders and servicers to obtain better terms for existing borrowers. The federal Making Home Affordable program offers incentives for servicers to modify loans for homeowners at risk of foreclosure and also includes a refinance program for borrowers with mortgages owned or guaranteed by Fannie Mae or Freddie Mac. Click here to learn more about efforts to obtain better terms for borrowers.

Another set of strategies focuses on reducing the risk of future foreclosures by working to reduce the likelihood that families take out unsustainable mortgages. State governments can strengthen predatory lending laws, regulations, and guidelines to limit excessively high fees and interest rates and other mortgage terms that are clearly exploitative, while allowing responsible uses of subprime lending to continue. Likewise, state authorities can adopt policies that increase oversight of mortgage brokers and originators to create a lending environment that is clear, fair, and consistent.

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How can communities avoid the negative effects of foreclosures?

Although there is no single right method for avoiding the negative impacts of foreclosures, a coordinated and strategic response can help. A strong plan will include policies for stabilizing neighborhoods affected by foreclosures as well as policies that can help prevent large numbers of foreclosures in the first place. States, metropolitan regions, and localities can work together to create a comprehensive approach that includes providing meaningful homeownership counseling, reducing risky mortgages, preventing foreclosures, and reusing vacant foreclosed homes as quickly and intelligently as possible. To learn more, visit the Policy Guide section on developing a coordinated response strategy.

From the Forum...

How are regions across the country responding to the mortgage foreclosure crisis? View online Q&A with Todd Swanstrom, Karen Chapple, and Dan Immergluck, authors of the report Regional Resilience in the Face of Foreclosures: Evidence from Six Metropolitan Areas. In the report, the authors look at foreclosure prevention and response in a variety of markets and metro areas - including Cleveland, OH; St. Louis, MO; Chicago, IL; the Inland Empire of Riverside and San Bernardino, CA; and the East Bay area of Alameda and Contra Costa Counties, CA - and present keys to stronger efforts.

Learn more on the HousingPolicy.org Forum.

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How do we prioritize neighborhoods to target for assistance?

Communities face difficult decisions when prioritizing neighborhoods for stabilization. It is better to stabilize a few neighborhoods successfully than to spread the limited resources so thinly that no neighborhood's situation improves. To prevent foreclosures from destabilizing sound neighborhoods and to revive those already in decline, communities will need to invest time and resources in those neighborhoods where the investments will have the most significant payoff. Communities should resist the urge to spread assistance thin in the hopes that everyone will get at least a little benefit. This approach does not stabilize neighborhoods and may just lead rehabbed properties to go into disrepair again quickly due to the impacts of other distressed properties in the area.

When prioritizing neighborhoods for stabilization, it may make sense to start with a fairly straightforward framework that classifies neighborhoods by housing market strength and the risk of being impacted by foreclosures (see table below). This will help communities tailor strategies appropriately and make informed choices about how to target scarce resources. The table includes direct links to information on policies that can help in different neighborhood situations.

For guidance and data tools that can help you apply this matrix to neighborhood stabilization planning in your metropolitan area, see the Setting Neighborhood Priorities page of the Maps and Data section.

MARKET STRENGTH	FORECLOSURE IMPACT RISK
MARKET STRENGTH	C. Actual high foreclosure density	B. High risk of high foreclosure density	A. Low risk of high foreclosure density
1. Strong	Facilitate rapid sales to sustainable owners, low/no subsidy	Lower cost effort to prevent foreclosures and vacancies, low/no subsidy	Lower priority
2. Intermediate	High payoff/priority, rehab and rapid sale to sustainable owners, target subsidies, neighborhood maintenance	High payoff/priority, prevent foreclosures and vacancies, emphasize neighborhood maintenance	Lower priority but watch carefully, head-off emerging problems early
3. Weak	More emphasis on securing/demolishing, land banking	Lower cost effort to prevent foreclosures and vacancies	Lower priority but watch carefully, head-off emerging problems early

Source: Developed by the Urban Institute for the Open Society Institute

Data can help you assess neighborhood needs and make an informed decision about targeting your limited stabilization assistance, but looking at data is just part of the toolbox for setting priorities. After understanding neighborhood conditions, there is still the critical question of which types of neighborhoods to target -- those with the greatest need or those that can be stabilized with just a little assistance? The answer depends on your community's goals and the resources you have available. To learn more, see the Policy Guide section on Developing a Local Action Strategy.

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How can we use data to target our response to foreclosures?

Data can help your community choose policies that fit local needs by answering questions such as "What neighborhoods have high foreclosure needs?" and "What are the housing market conditions in our high-foreclosure neighborhoods?" By understanding your local housing market and where your community's foreclosures and vacancies are concentrated, you can make informed decisions about targeting foreclosure prevention resources, investing public resources in the acquisition and rehabilitation of foreclosed properties, holding properties in a land bank for future development, or opting to demolish properties and finding new uses for the land.

The ideal data for answering questions about foreclosures would be generated by analyzing foreclosure filings, property tax delinquencies, and other local data sources. Where available, communities will want to tap those resources first. Valuable data also can be obtained from national vendors who specialize in information on mortgage delinquencies and foreclosures.

The data on Foreclosure-Response.org also provide a useful starting point for identifying the areas in need of priority attention within your community. The data available can help communities identify: (1) where foreclosures are likely to be concentrated, (2) demand in the local housing market, (3) the combined housing market strength and foreclosure risk levels in particular neighborhoods, and (4) serious mortgage delinquency rates and trends in a metropolitan area.

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How can we help renters affected by foreclosure?

The Protecting Tenants at Foreclosure Act, which was signed into law on May 20, 2009, provides significant protections for tenants in foreclosed properties. Most importantly, the Act requires

90 days notice before an eviction. In many communities, tenants have little or no warning that their rental property is going into foreclosure until they are notified of eviction. Prior to passage of the Act, they might have been required to vacate the property within just a few days, making it difficult to find new housing. Local and state governments can adopt or expand laws to provide additional protections for renters; where more protective state and local laws exist, they take precedence over the federal law.

In addition, there are three main legal exceptions protecting

From the Forum...

Learn more about the Protecting Tenants at Foreclosure Act on the HousingPolicy.org Forum, where you can listen to a presentation and view Q&A about the Act by Catherine Bendor of the National Law Center on Homelessness and Poverty, Danna Fischer of the National Low Income Housing Coalition, and David Rammler of the National Housing Law Project.

renters in the case of foreclosure. The first two exceptions are for
recipients of Section 8 vouchers and tenants living in rent-controlled units, who are able to maintain their leases after foreclosure by law. The third exception is for tenants renting in cities and states that require "just cause" as a condition for eviction. For example, New York, New Jersey, and New Hampshire, and a number of cities require "just cause" as a condition for eviction. "Just cause" laws protect renters by ensuring that landlords can only evict with proper cause, such as not paying rent on time. In general, foreclosure does not count as a cause for eviction in these locations.

A renter evicted as a result of foreclosure may have a damaged credit rating and face difficulties qualifying for a new rental property or mortgage. A few states and localities have adopted policies to ensure that foreclosures do not harm renters' future housing options. In Minnesota and Illinois, state legislators have passed laws to remove foreclosure-related evictions from renters' rental records so they are not left at a significant disadvantage when seeking future rental housing or to qualify for a mortgage. Other local governments are partnering with non-profit organizations to provide assistance to families to help cover first month’s rent, security deposits, or moving costs in the case they are evicted from a rental property.

Click here to learn more about ways to protect tenants of foreclosed properties.

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