The main components of a foreclosure response strategy will be preventing foreclosures, addressing neighborhood spillover effects, and helping families recover. But assigning priorities is no easy task. The nature and extend of foreclosure problems differ dramatically across neighborhoods in most metropolitan areas. Some neighborhoods may warrant higher priority than others and solutions that work well in one may not prove effective in others.
Finding and Using Good Data
For the reasons outlined above, the tailoring of strategies to respond to the foreclosure crisis will require good reliable data. Local coalitions should strive to assemble and evaluate pertinent data at the neighborhood level and to use that data to develop strategic guidance for policy change, targeting specific types of mitigation actions to different types of neighborhoods.
Needed data include neighborhood-level information on the numbers of loans and foreclosures as well as on a host of other social, economic and physical characteristics that allow analysts to better interpret the implications of any particular level of "risk of foreclosure." The good news is that the cost of assembling such data from local records has dropped dramatically in recent years. University institutes and civic groups in a sizeable number of metro areas have already obtained, and are using, much of the data that may be needed. A rapidly growing network of such organizations in 31 cities -- the National Neighborhood Indicators Partnership -- works to advance techniques in this field and spread capacity to other cities. The National Neighborhood Indicators Partnership (NNIP) is a collaborative effort by the Urban Institute and local partners to further the development and use of neighborhood-level information systems in local policymaking and community building. Click here
to learn more about NNIP.Click here
to view foreclosure data made available on Foreclosure-Response.org
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|Local Experiences with Managing Foreclosed Properties|
In the break-out session on outreach and organizing for prevention at the NNIP/CURA Neighborhood Responses to the Foreclosure Crisis Symposium in Minneapolis-St. Paul, the overall theme throughout both presentations was that it is important to use data to track trends and outcomes over time, to develop capacity for increased code enforcement, and to increase accountability.
Michael Schramm, of Case Western Reserve's Center on Urban Poverty and Community Development (Cleveland, OH), discussed the use of property data in Case Western's Northeast Ohio Community and Neighborhood Data for Organizing (NEO CANDO) system to help manage foreclosed properties and to hold banks and flippers/investors accountable for the management of foreclosed properties. Cleveland faces enormous code enforcement challenges in dealing with foreclosed properties, including properties being sold to out-of-town buyers and flippers, bank-owned (REO) properties being sold at distressed prices to investors, and foreclosure-related abandonment. Some applications of NEO CANDO data include:
- Operation Prevent - Operation Prevent is an initiative that uses NEO CANDO to hold banks and flippers/investors accountable for the adequate upkeep of their properties. The activities of Operation Prevent and NEO CANDO include developing a weekly updated tracking system of properties entering and leaving REO status, linking banks to REO properties and resulting city expenses, linking purchases on the secondary market with foreclosure filings, establishing code enforcement partnerships with CDCs, tracking vacancies, collecting data on code enforcement complaints, and using data to inform community outreach efforts.
The City of Cleveland is also currently using NEO CANDO to inform Neighborhood Progress, Inc.'s nuisance abatement lawsuit against Deutsche Bank and Wells Fargo - two of the top holders of REO properties in the area. Some of the city's code enforcement strategies for foreclosed properties include trying banks and investors in absentia, seizing money from an investor's bank accounts to pay for city expenses, using federal Neighborhood Stabilization Program (NSP) money to increase demolition activity, and engaging in nuisance abatement to bring properties up to code more quickly.
- The First Suburbs Consortium - The First Suburbs NEO CANDO data collection project is being developed as a joint system for tracking code complaints and vacant properties within participating cities, and providing an early warning system.
John Kromer, Senior Consultant at the Fels Institute at the University of Pennsylvania, discussed public sector strategies and how they are informed by data, as well as code enforcement in Allentown, PA. According to Kromer, Allentown is an example of a region that underwent a lot of real estate activity and became a target for absentee investor owners and speculators. There were no zoning approval requirements required for conversion of single family and multi family units which resulted in overcrowding. Despite issues with data management and internal capacity, the city has tried to aggressively implement a series of strategies including requiring the licensing of rental properties, requiring an annual relicensing, an inspection at the time of relicensing, and point of sale inspections.
The City of Allentown and others also annually review properties unfit for human habitation and make a list of the 10-20 worst properties. They then work with the owners to achieve compliance. If compliance is not achieved, a certification of blight is issued and the redevelopment authority has the authority to declare they are taking it.
Click here or here to leave this site and learn more about Operation Prevent or click here to learn more about NEO CANDO. Click here to leave this site and learn more about the Fels Institute.
Developing a Neighborhood Typology for Targeting Funds
Even groups that do not have access to local foreclosure or housing market data can get started using nationally available data to begin to understand how the foreclosure problem is playing out in different neighborhoods and how local housing markets are faring. The Maps and Data section
of Foreclosure-Response.org provides a good place to start to access these data.
Local analysts may ultimately develop sophisticated analyses of available data as they work with policymakers and practitioners to craft sensible interventions in differing neighborhoods. It may make sense, however, to start with a fairly straightforward framework that classifies neighborhoods by housing market strength and the risk of being impacted by foreclosures. The following is an example of such a framework developed by the Urban Institute for the Open Society Institute:
- The rows classify market strength as: (1) strong; (2) intermediate; (3) weak; and
- The columns classify the foreclosure impact risk as: (A) low risk of a high concentration of foreclosures (high foreclosure density); (B) high risk of high foreclosure density; (C) actual high foreclosure density.
The table includes 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.
Source: Developed by the Urban Institute for the Open Society Institute
||FORECLOSURE IMPACT RISK|
|C. Actual high foreclosure density
||B. High risk of high foreclosure density
||A. Low risk of high foreclosure density|
||Facilitate rapid sales to sustainable owners, low/no subsidy
||Lower cost effort to prevent foreclosures and vacancies, low/no subsidy
||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|
||More emphasis on securing/demolishing, land banking to hold until market rebound
||Lower cost effort to prevent foreclosures and vacancies
||Lower priority but watch carefully, head-off emerging problems early|
This type of framework could help communities tailor strategies and make informed choices about how to target scarce resources. The central goals are to prevent foreclosures from destabilizing sound neighborhoods and to revive those already in decline. In a resource-scarce environment, this means investing time and resources in those neighborhoods where the investments will have the most significant payoff. At the simplest level, Urban Institute researchers suggest that planners might apply guidelines like the following:
1. Local strategies probably don't need to invest much in the way of foreclosure response resources in neighborhoods where there is a low risk of many foreclosures, regardless of market strength (1A, 2A or 3A), although trends should be monitored so that low cost interventions could be mounted in intermediate and weak market neighborhoods to head off problems quickly if risks start to increase.
2. Likewise, strategies should not have to devote much attention to strong market neighborhoods, even if there are some risks of foreclosure impacts (1B and 1C). There are not likely to be many neighborhoods in these categories. If risks increase substantially, however, there will be a need to act quickly to prevent actual foreclosures and then minimize vacancy in any properties where foreclosures do occur. But with modest intervention to do that, the strength of the market should prevent serious further slippage and no (or hardly any) subsidy funds will need to be applied.
3. Markets where there is an intermediate-level of market demand may be the best target for government investment, since they are susceptible to rapid decline if foreclosures are not prevented or the properties swiftly brought back into re-use. Where many properties are at risk, but foreclosures have not yet occurred (2B), the emphasis should be on prevention. This would include targeted outreach to offer counseling to troubled borrowers, accompanied by priority code enforcement and public maintenance to "keep up appearances" in properties and public spaces not yet directly threatened. Learn more
about foreclosure prevention.
4. Intervention in intermediate markets where a sizeable number of foreclosures have already occurred (2C) is also likely to be urgent. Officials need to continue all of the types of actions suggested for 2B above, but also add forceful direct public action to assure restoration of foreclosed properties to re-use as soon as possible. Rehabilitation will be needed in many cases and some subsidies may be appropriate. Rehabilitation may only be warranted, however, where the market is strong enough so that the new owners (investors or owner occupants), taking into account the full costs of rehab as well as available subsidies, will subsequently be able to operate the property in an economically stable manner over the long term. Learn more
about bringing foreclosed properties back into use.
5. Neighborhoods with both a weak market demand for housing and high risk of foreclosure impacts (3B and 3C) represent an even more difficult challenge. Ideally, local stakeholders would hope for large scale public investments that would move such neighborhoods into the "intermediate" category, but in most cities there is not likely to be sufficient funding to do that with all affected neighborhoods. Where the market is likely to remain weak for some time, it may be difficult to justify investments in the rehabilitation of homes because the costs of acquisition and rehabilitation will exceed what people are willing to pay for the renovated homes. With such investments, communities may find they quickly run through available funds and in the end do not have enough funding to successfully stabilize these neighborhoods. In a worst-case scenario, much of this public investment could ultimately be lost.
An alternative approach would be for government to acquire the foreclosed properties, demolish the structures, and hold the parcels as a part of a land bank until market conditions rebound enough to justify further investment. This is of course a difficult decision to make and significant discussion will be needed with many constituencies to reach a level of community acceptance that will allow this strategy to move forward successfully. Learn more
about how communities might determine whether to demolish or preserve foreclosed properties.
Real neighborhoods, of course, may not fall easily into just one of these boxes. When a neighborhood fits between two of them a blending of the actions suggested for the two will be appropriate.
|Also, even though market conditions and concentration of foreclosures are the most important indicators for these purposes, other information should be consulted as well in developing an action strategy. One additional factor to consider is the extent of other investment -- both past and present -- by the private or public sectors. Some neighborhoods may already have had substantial private and/or public sector investment, in which case no additional funding may be needed. On the other hand, these areas might require new funding to protect the long-term investments that have been made and prevent the neighborhoods from sliding into decline. Other neighborhoods may have community resources and assets, including anchor institutions or strong community groups that will be able to leverage new public investments to stabilize the neighborhood, even if the housing market data indicates a weaker market. Additionally, certain neighborhoods may have a greater capacity to influence the trajectory of areas that surround them; any funds targeted to these areas would have a higher impact than funds targeted to a neighborhood that is more economically and socially isolated.
A good example of a strategic planning effort that followed this "different treatments for different types of neighborhoods" approach is one developed in Columbus and Franklin County, Ohio, with technical support provided by Community Research Partners, the local NNIP affiliate (Columbus and Franklin County Foreclosure Working Group 2008). This effort explicitly sought to:
"(1) prevent neighborhood decline associated with foreclosure in traditionally
|Solutions in Action |
|Regional NSP Application for the Metropolitan Washington D.C. Area Consortium|
In July 2009, six jurisdictions in the metropolitan Washington D.C. area prepared a joint application for funding under the competitive round of the Neighborhood Stabilization Program (NSP2). In determining which neighborhoods to target for intervention, they looked for neighborhoods with strong or intermediate housing markets and either a high foreclosure density or a high risk of high foreclosure density.
Learn more about how the Consortium identified neighborhoods for intervention in our case study of the Metropolitan Washington D.C. Area Consortium's NSP2 application.
stable markets . . .; (2) address the issue of backslide due to foreclosure in "tipping point" neighborhoods; and (3) focus resources in neighborhoods traditionally targeted by revitalization efforts, preventing further disinvestment and decline . . ." "Weak market" neighborhoods were identified and "comprehensive acquisition and holding plans" were devised for each. For another example of strategic use of a neighborhood typology, see the Solutions in Action sidebar.
Finally, while addressing the current foreclosure issue is the highest priority, local coalitions also may want to be on the lookout for opportunities to use this immediate crisis to further broader housing policy goals, such as increasing the supply of affordable rental housing, promoting mixed-income neighborhoods, developing homeownership opportunities for the local workforce, and increasing green space.back to top