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Foreclosure Forums Present Solutions

Tuesday, January 1, 2008

Many cities across the nation had already been struggling with their own problems when the foreclosure crisis hit. The foreclosure crisis wiped out decades of neighborhood stabilization progress in a matter of months, according to Alan Mallach, nonresident senior fellow at The Brookings Institution.

Mallach was one of several hundred participants from community groups, the private sector, various levels of government, and the Federal Reserve System who gathered for a series of foreclosure forums this summer and fall across the country. Some of the common themes that developed include the need to:

  • give realistic expectations for all parties concerning scarce funding resources,
  • alleviate foreclosures so that properties don’t become REO (real estate owned) or lead to evictions,
  • develop mutually agreeable plans for vacant property, and
  • bring all parties to the table.

The short takeaway from the forums is that each municipality needs a good, localized plan. Youngstown, Ohio, Mayor Jay Williams, who spoke at the final forum Oct. 20 in Washington, D.C., said smart citywide planning is critical. As with many forum speakers, Williams talked about how to use the $3.92 billion Neighborhood Stabilization Program money allocated by HUD (Department of Housing and Urban Development) in September. While the money is welcome, Williams cautioned that during hard economic times, some people think that any investment is good investment.

“There must be a good plan because resources invested in needy but ill-prepared cities will result in disaster. We have to maintain a pragmatic approach of what we can actually do and when,” Williams said. “Using a peanut-butter strategy, where resources are spread thin, will typically fail to achieve measurable successes.”

A place at the table. Good planning should include all parties. Bankers, servicers and lenders can and should definitely play a role in community revitalization, said Faith Schwartz, executive director of the nationwide HOPE NOW Alliance. “There needs to be a bridge between servicers and locals to get a grip on these unprecedented volumes and understand each other,” Schwartz said at the final forum. Mary Tingerthal of the Housing Partnership Network agreed. “It’s apparent that nonprofits alone won’t solve this,” Tingerthal said at the Washington, D.C., forum. “Even though it’s sometimes tough for an angry mayor or nonprofit to call a servicer to talk about a specific property, it’s necessary to try to understand the situation from the servicer’s point of view.”

That’s something Jack Bailey can appreciate. As a mortgage officer with Heartland Bank in Chesterfield, Mo., Bailey needs to produce. From the bank’s perspective, he’s an originator who closes loans. “But it’s critical that we plug into what’s going on beyond what we’re doing,” says Bailey, who attended the St. Louis forum, held Sept. 24-25. “The concentrations of foreclosures and vacant properties are quite dramatic—and it’s incumbent upon us as individuals and organizations to do something.

“One thing that can help, though, is remembering that every loan—good or bad—is unique, and every issue is a one-on-one situation,” Bailey says. Using the tools already at hand—such as offering an FHA loan instead of a prime loan—can help.

Cynthia Jordan, business development representative at Southwest Bank in St. Louis, also attended the St. Louis forum and saw some opportunity. “The forum gave us new ideas and strategies to add to what we are already doing as a community or looking at putting in place,” said Jordan, whose bank has a foreclosure task force.

What next? If you’re wondering what you can do next, check out what some of the following organizations are doing. (Links go to forum presentations.)

See forum notes and PDF files of the presentations. For more on foreclosures, see the Foreclosure Resource Center.