Will the Foreclosure Crisis be With Us Another Two Years?

By Marietta Rodriguez
Director, National
Homeownership
Programs & Lending

With signs of a turnaround in housing appearing in various industry reports such as those from the National Association of Realtors for pending home sales, and from the National Association of Home Builders via its new home sales index, it’s not difficult to think that the foreclosure crisis is behind us. But it isn’t.

Recently I was on a panel at the National Association of Real Estate Editors spring meeting discussing the housing market alongside representatives from Bank of America and FNC, Inc., and we agreed that the foreclosure crisis won’t end for another two years – according to the most positive forecasts.

Mortgage rates are likely to remain very low for the foreseeable future and that’s good for housing and for ending the foreclosure crisis. However, what we really need to do in order to find the end more quickly is make it easier for qualified buyers to purchase homes and for homeowners in distress to find solutions that don’t end in foreclosure.

Neighborhood Housing Service of
South Florida educates a potential homebuyer

On the purchase side, NeighborWorks America supports efforts to make homeownership as accessible as possible without creating undue risk in the system. We support the availability of low down payment mortgages which enable homebuyers who are already saving to purchase a home more quickly. Additionally, we support underwriting that keep loans within the reach of deserving buyers. Finally, we think that homebuyer education is a critical piece of the process. Education is what prepares people for the true costs of homeownership, and helps them make sustainable choices.

Family outside their home
in Great Falls, Montana

On the foreclosure front, we’ve established partnerships that connect homeowners to the help that they need to find an alternative to foreclosure. For example, by partnering with local governments we are able to direct our efforts into neighborhoods that are at the greatest risk of foreclosures, and making those resident aware of options for assistance. We are also facilitating better homeowner communication with servicers through the HOPE Loan Port, which tracks individual requests for loan modifications. Servicer outreach centers are another key tool for stemming foreclosure, because they allow homebuyers to receive in-person advice on how they might keep their home. However, as I told the audience at the National Association of Real Estate Editors conference, all servicers could do more.

The housing market won’t rebound until the foreclosure crisis is behind us. However, by improving the availability of mortgage credit and homebuyer education, we can minimize the impacts of the crisis and make sure it ends within two years.

Achieving Excellence in Affordable Housing

By Stacey Epperson
President & CEO of Next Step Network

Some of you may have read my recent interview in Forbes, and I’d like to give a little background on the transformation I talk about there. Less than five years ago, I was the executive director of Frontier Housing in northeastern Kentucky, and one of manufactured housing’s worst critics. I adamantly disliked the industry, from its perceived shady dealers to its poor quality materials, and actively steered residents away from purchasing its homes. So when counselors began to tell me that those in need of affordable housing often opted for manufactured units, I refused to listen. When colleagues told me that they struggled to build more homes than the number manufactured housing dealers shipped into the county, I refused to listen. When my own staff admitted to living in manufactured homes or using them for temporary housing, I still refused to listen. It was not until Frontier’s housing production began to slip that I finally confronted the situation: the manufactured housing industry represented a worthy opponent, and Frontier would need to rethink its tactics in order to compete.

Phyllis Kelly, Isonville, Kentucky, one of the first to
join Frontier’s mobile home replacement program-and
a big influence on my transformation. Read more.
Source: Next Step Network, LLC

My transformation was guided by NeighborWorks America’s executive leadership program, Achieving Excellence in Community Development (AE). During the first week, the class examined the case of a nonprofit that could not compete with local loan sharks that offered quality choices along with less complicated rules and quicker results. I came to a staggering realization: the manufactured dealers were the loan sharks in the story. Frontier was treating clients as a unified group, not as customers with individual preferences. An exciting question soon emerged from the subsequent discussion: what if manufactured housing was the solution, not the problem?

Returning to Frontier with the AE focus on honesty and performance-driven change, I began to move away from old ways of thinking and critically assess the situation. I set an AE performance challenge for Frontier to triple the number of customers served while cutting production time in half and maintaining a loan delinquency rate below 5%. To meet this challenge, I restructured Frontier to run more efficiently and effectively, assigning staff to cross-department teams that made the best use of their strengths and encouraging them to adopt a unified commitment to measurable results.

Next Step® manufactured home built
to meet Energy Star standards
Source: Next Step Network, LLC

When I went public with the performance challenge, I did not receive an encouraging response; in fact, many individuals cautioned me to “not go there” and that while “modular housing was ok, I should stay out of the manufactured field.” Although I remained confident that I was on the right path, I had also learned from the AE program to pay attention to the criticism and to constantly seek out new opportunities for growth. So, we made changes and then we changed again. By listening to the voices of dissent and continuing conversations with those in the field, I learned of Warren Buffet’s purchase of Clayton Homes and realized that, in lieu of competing with the manufactured housing industry, Frontier could align with it. We eventually teamed up with Clayton Homes to become Kentucky’s first nonprofit dealer of manufactured housing.

In the end we met our goals, and even exceeded them. We tripled total housing production and our loan fund while cutting in half the time needed to get clients into a new home. Further, we have worked to improve the image of the manufactured housing industry, and encouraged other nonprofits to form similar partnerships. We've also established the Next Step® Network in 2010, a social venture that mobilizes a national network of nonprofits to provide affordable housing solutions tailored to the needs of their communities.

Gibson Family, Morgan County, Kentucky.
With help from Frontier, they replaced
their deteriorating 1-bedroom mobile home
with a 4-bedroom, Energy Star certified
manufactured home. Read more.
Source: Frontier Housing, Inc.

I credit Achieving Excellence for helping me challenge my own ideas about the manufactured housing industry and prompting me to restructure my organization. The program also opened my mind to the partnerships that have propelled Frontier and the Next Step Network to a new level of service. With the support of groups like CFED, I’ve been able to expand our efforts even further. Our program has not only been a success for us as an organization, but for families who’ve benefitted from having exceptionally good, viable, green housing at prices that would otherwise have been unaffordable.

For more information, please contact us:
www.nextstepus.org
Office: 502.992.9417
Email: nsinfo@nextstepus.org
Facebook: www.facebook.com/NextStepUS
Twitter: @NextStepUS

Vermont’s NeighborWorks Organizations: The Power of a Network

By Deborah Boatright,
Northeast Regional Director,
NeighborWorks America

I had the pleasure of spending NeighborWorks Week 2012 in Vermont, crisscrossing the state while visiting all five of our network affiliates. Each one is doing excellent work in challenging communities under inspired leadership. But it is what they are doing together that truly distinguishes them, and is a model for the region and the country.

Vermont's five HomeOwnership Centers have worked together for more than a decade to provide services statewide through the NeighborWorks Alliance of Vermont. This framework was critical last summer when Tropical Storm Irene struck, causing devastation everywhere. A dozen towns were totally cut off as nearly every river in Vermont flooded. Rebuilding efforts still loom large. The Alliance's NeighborWorks Week event was to restore a flood-damaged teen center and was featured by the USDA.

Vermont NWO volunteers load a heavy piece
of debris onto a truck. Photo courtesy
of Windsor Windham Housing Trust

Tropical Storm Irene was impetus for NeighborWorks Alliance of Vermont to undertake long-term planning for statewide disaster response, with NeighborWorks America’s support. As part of this effort, each organization now has video-conferencing cababilty to make collaboration easier. Already, the state's only two certified reverse mortgage counselors are planning to meet virtually with seniors from any location.      

The trust and mutual respect among Vermont’s NeighborWorks organizations (NWOs) runs deep within the organizations and was readily apparent throughout my visit. They are thriving in the nexus of independence and interdependence. Different NWOs take the lead based upon their capacity and expertise. Collaborations are based on strength and shared interest.

Champlain Housing Trust established a Mobile Home Lending Program to repair and replace mobile homes (over 15% destroyed by Irene) and received a prestigious Cornerstone grant to strengthen operations of six Community Land Trusts, including those at three other NWOs.  NeighborWorks Western Vermont's H.E.A.T. Squad, aggressively conducting energy audits and rehabbing homes under a multi-million dollar Department of Energy grant, will soon be statewide. Central Vermont Community Land Trust and Gillman Housing Trust are part of a national pilot aimed at keeping seniors in their homes. 

Brattleboro Food Coop
Photography by Ann Wright, courtesy of Windsor Windham Housing Trust

All the Vermont organizations embrace green. The expansive Brattleboro Food Coop complex just built by Windham & Windsor Housing Trust (WWHT) includes a green roof, a pellet-fueled boiler, and 24 units of affordable housing. It is another example of how Vermont’s NeighborWorks organizations are forging new partnerships well beyond the housing world.

I believe that the continued growth and impact of community development depends on its relevancy in areas such as health, employment, and education. It is all about taking part in strengthening our quality of life. The Vermont NWOs are leading the way by creating new pathways to sustainability and greater impact; and we are proud to support their success.

Making Scattered Site Rental Work

Reposted from the "Stabilize" blog of the NeighborWorks America Stable Communities program.
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Shelterforce discussed the thorny issue of managing scattered-site rentals by nonprofits in its winter 2011 issue, noting that it "has long been considered a very tough nut to crack for nonprofit housing groups." The lack of efficiencies of scale lead to higher costs for travel and time, maintenance for non-uniform household items, fewer units sharing equipment like laundry facilities, and security. One property manager estimates that management costs 25 to 30 percent more than traditional rental units.

So why do it? The glut of single-unit homes on the market means they're available, and mission-driven nonprofits also see it as an important. By putting these homes to good use, they make an impact on local neighborhoods. As quoted in the story, “Scattered-site rentals provide nonprofits with a strong physical presence and stakeholder role within a neighborhood, enabling them to be more involved in local political lobbying and neighborhood change,” says Benji Power of Neighborhood Housing Services of South Florida.

NeighborWorks America has developed the comprehensive Scattered Site Rental Toolkit: Business Planning for Development & Management to assist nonprofits that want to provide affordable housing and stabilize neighborhoods through such rentals.

Does your organization have experiences — successful or otherwise — with this type of work? What advice would you share?

Department of Education's Place-Based Strategy

Reposted from the "Stabilize" blog of the NeighborWorks America Stable Communities program.
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This progress report, "Impact in Place: A Progress Report on the Department of Education's Place-Based Strategy," presents outcomes to date on efforts at a case study of San Francisco on efforts by the Department of Education to strengthen the role of schools in their communities. According to the report, "Communities that face underperforming schools, rundown housing, neighborhood violence, and poor health know that these are interconnected challenges and that they perpetuate each other....In the education world, the focus on place is particularly important, as it gives the Department a mechanism to see how its investments focused on 'in-school' levers of change interact with 'out of school' conditions for learning and the interventions meant to address them."

Elements of the theory of action include:

• Engage the Community Through Asset Mapping and a Needs Assessment
• Focus on Clear Results and Develop Shared Data Tools
• Integrate Programs From Cradle to Career
• Build Core Capacities Within Organizations and Communities
• Break Down Silos
• Capture and Share Learning

San Francisco put these elements into action to refocus citywide strategies into place-based ones, using a report from its Human Services Agency that indicated that many families accessed multiple services: mental health, juvenile justice, and foster care. It retargeted some of the $100 million flowing into two zip code areas to focus on 2,600 families with 5,800 children.

The Department of Education’s Investing in Innovation (i3) program supports the development and expansion of innovative practices that can serve as models for improving student and school outcomes. The program also identifies and documents best practices that can be shared and taken to scale based on demonstrated success. As part of the Obama Administration's Open Data Initiative, a large focus of the place-based focus has been on improving data reporting and use for effective programming.

Have any of these efforts trickled down to the places you work?

Homeownership Is More Affordable Today

By Marietta Rodriguez
Director, National
Homeownership
Programs & Lending

A new wrinkle was added to the housing affordability debate recently with the news coverage in The Wall Street Journal of a paper by Andrew Davidson & Co. The paper and the article published in the Developments blog at The Wall Street Journal, suggests that housing affordability today is not better than it was in 2006, the peak of the mortgage bubble.

We couldn’t disagree more.

At NeighborWorks America, and throughout the NeighborWorks network, affordability simply means how much of a homeowner’s current income has to go each month toward the payment on a safe, sustainable mortgage. Under that definition, the cost of mortgage finance is as low as it has ever been.

30 year fixed mortgages are at historically low rates. This, combined with a broad-based decline in home prices,  means housing affordability is significantly better than it was back in the go-go 2000s. Nominal and real household income are down from the middle part of the 2000s, but not so much to negate the affordability benefits of very low mortgage rates and lower home prices.

What is affecting the ability of the housing market to recover fully is not a question of affordability, but of credit accessibility, and here Mr. Davidson gets it right. His research finds that because homeowners today need larger down payments to be approved for a mortgage, the all-in cost of homeownership has increased. NeighborWorks America won’t argue with that; higher down payments do mean that it costs more and that it is harder to become a homeowner. We just think that the higher down payments costs are an unnecessary barrier to homeownership.

NeighborWorks America has been helping its network of nonprofits make homeownership accessible to people with very little down payment, but who still are good candidates for homeownership. NeighborWorks America and NeighborWorks organizations couple support for low down payment mortgages with homebuyer education. Homebuyer education significantly helps to reduce default, by providing prospective homebuyers with the information they need to avoid the toxic mortgages that proliferated in the 2000s and advice on purchasing a home that they could afford the moment that they close on the sale, instead of hoping some time down the road that a refinancing will lower the payment to more affordable levels.

Since we have seen even homes with higher down payments go into foreclosure in recent years, we know that equity -- while an important driver of default -- is not the only driver. Lenders need to more aggressively and more broadly consider the value of pre-purchase homebuyer education when evaluating a borrower. Such education mitigates default and improves homebuyer accessibility, which in today’s low rate market, also means improved homebuyer affordability.

Turning Foreclosure Around: Jobs and Home Rehab

By Ascala Sisk, Senior Manager
Neighborhood Stabilization
NeighborWorks America

The foreclosure crisis and the economic crisis are inextricably linked. Families and neighborhoods experiencing high foreclosure rates are also those facing high unemployment. It is our experience at NeighborWorks America that solutions which support local job creation are an essential component of neighborhood revitalization. One of the key challenges of the foreclosure crisis is the negative impact vacant and blighted properties have on communities. Recently, Citi Community Development and the Citi Foundation launched an initiative which addresses both vacancy rates and small business job creation. Their Partnership for Small Business Development program convenes and funds a working group of national organizations that provide training and business opportunities to small business contractors owned by women and minorities.

According to the United States Small Business Administration, 65 percent of the new jobs created in America between 1993 and 2009 were in small businesses, with minority-owned businesses leading the way. Between 2002 and 2007, minority business growth outpaced that of non-minority firms in terms of total revenue, employment, and number of firms. NeighborWorks America supports this program because it is helping rehabilitate properties at the same time it supports local jobs for traditionally underserved groups. It has the potential to bring back strong neighborhoods and provide sustainable benefits to communities so that they can not only recover, but also prosper.

NeighborWorks America has also done its part to restore jobs while simultaneously serving local communities. In fiscal year 2011, NeighborWorks America and its affiliated NeighborWorks network created and supported an estimated 26,000 jobs. This is in addition to the many programs we run to help residents buy or rent affordable homes, build (or rebuild) communities and increase their financial capability.

Economic recovery and community stabilization will happen when jobs return.  It’s that simple and that difficult. Every effort to address one side must be connected to the other for us to succeed.

For more on ways communities are responding to the impact of foreclosures and vacancy visit the NeighborWorks America website: www.StableCommunities.org.

Making a Difference with NeighborWorks Week 2012

By Eileen Fitzgerald
Chief Executive Officer
NeighborWorks America

Every year NeighborWorks Week gives us an opportunity to step outside our normal routines, roll up our sleeves and connect with the people and places we work so hard to support. This year, NeighborWorks Week will take place June 2-9, and I am pleased to say that we have over 160 events planned thanks to the dedication of NeighborWorks network organizations across the country, and support from NeighborWorks America staff.

By volunteering this week, and throughout the year, we put our words into action and learn what’s working, and what challenges remain for local communities. These efforts enrich our work while providing much needed support and partnership to the communities we serve.

In FY2011, the NeighborWorks network generated 240,000 volunteer hours through the Community Building and Organizing program. This NeighborWorks Week I’ve invited all DC staff to a volunteer opportunity in Montgomery Housing Partnership in Silver Spring. We’ll be planting flowers, mulching playgrounds, painting and picking up trash around the property.

I hope that you, wherever you are, can volunteer at one of our many local NeighborWorks Week events, and that you will share your experiences and photos with us via Facebook and Twitter (#NWW2012).

To learn which events are near you, visit http://events.nw5.org/. You can also see pictures from last year’s events in our Flickr album.