Impact to Neighborhoods

Foreclosures are not only devastating to the homeowner, but can also be destructive to neighborhoods and communities, especially when they happen in large numbers and in a concentrated area.

Research suggests that foreclosures reduce surrounding property values, which in turn can lead to more foreclosures, vacant and abandoned properties, and other neighborhood blight. Foreclosures also tend to be a magnet for crime, including property damage, trespassing, squatting and vandalism.

While foreclosure prevention is a critical component of a community foreclosure strategy, equally important is mitigating decline from existing and future foreclosures by protecting foreclosed properties, neighborhoods and the community tax base. The Federal Reserve is sponsoring Recovery, Renewal, Rebuilding , a series of forums to generate discussion on the aftereffect of the foreclosure crisis and explore solutions for community recovery, rebuilding and preparing for the future.

Identifying Ownership and Registration of Vacant/Abandoned Properties

One common problem faced by cities with vacant or abandoned properties is identifying the person responsible for the property. Often ownership or servicing of the mortgage will be transferred between parties several times over the life of the loan.

• A title search will identify the last owner of record, and generally some kind of contact information will be available on the title.
   
• The local tax assessor can identify the name, address and possibly the loan number of the loan servicing agent on properties where the first mortgage is impounded for taxes and/or hazard insurance.
   
• A good starting point for locating appropriate contacts for bank-owned property is the Mortgage Bankers Association website that includes a list of property preservation contacts for numerous large loan servicers from around the country.

The National Vacant Properties Campaign

This campaign exists to provide individuals, advocates, government agencies, developers, nonprofits and others with information resources, tools and assistance to support their vacant property revitalization efforts. Vacant properties are defined as vacant residential, commercial and industrial buildings and lots that

1. Pose a threat to public safety, and/or
2. The owners or managers have neglected the fundamental duties of property ownership, such as failing to pay taxes or utility bills, defaulting on mortgages or carrying liens against the property.

The goal of the campaign is to help communities prevent abandonment, reclaim vacant properties and once again become vital places to live. Four actions fulfill this campaign:

1. Creating a national network of vacant property practitioners and experts,
2. Providing tools and research,
3. Making the case for reclamation, and
4. Building capacity of local, regional and national practitioners and decisionmakers through technical assistance and training.

A vacant property registration ordinance requiring owners of vacant or abandoned properties to register with the municipality may allow community officials to more easily monitor and inspect the properties and enforce code compliance. Safeguard Properties, a privately held field services company, works with loan servicers to preserve and maintain foreclosed properties. Safeguard provides a list of vacant property registration ordinances for numerous cities around the country.

Neighborhood Stabilization Program

To curtail the decline of communities severely affected by foreclosures, Congress created the Neighborhood Stabilization Program (NSP) as part of the 2008 Housing and Economic Recovery Act.
NSP funds may be used for:

• purchase and rehabilitation of foreclosed properties,
• demolition and redevelopment of demolished or vacant properties for rent or sale to lower-income households,
• down payment and closing cost assistance programs,
• creation of land banks, and
• other housing-related activities to stabilize neighborhoods.

NSP Resource Exchange

NSP Resource Exchange is a one-stop shop for the information and resources needed by NSP grantees, subrecipients and developers to purchase, rehabilitate, and resell foreclosed properties. There are three primary components to the Resource Exchange site including:

• Find a Resource - a database of policy guidance, practitioner support tools and training materials developed by HUD and technical assistance providers who specialize in NSP-related activities. It can be browsed by topic, audience, or type of information.
• Ask a Question a feature that can be used to direct users to previously asked questions based on the user’s questions. It also provides users with a question form that can be submitted electronically for those questions and answers that are not listed on the website.
• Request TA a mechanism by which users can communicate with technical assistance providers and request support in implementing NSP activities

The NSP Resource Exchange can also be used to learn about upcoming events related to NSP and coming soon the site will feature tool kits for designing programs and implementing activities.

Living Cities, the National Community Development Initiative

In 2008, Living Cities, a collaborative of corporate and philanthropic organizations, launched the Foreclosure Mitigation Initiative. This 10-city pilot supported new and existing programs to mitigate the impact of concentrated foreclosures by returning foreclosed properties to productive use.

The programs selected for this pilot demonstrated promising local initiatives in strong, moderate, and weak housing markets and used tools such as New Markets Tax Credits, land trusts and nonprofit real estate brokers.