6 Steps to Prevent Foreclosures In Your Community

Foreclosure

6 Steps to Prevent Foreclosures In Your Community

Foreclosure

 

When it comes to foreclosures, there’s good news and bad news. The good news? Overall foreclosure rates have fallen across the country. The bad news? New Jersey is still one of the top five states with the highest foreclosure rates.

It’s not just foreclosure rates that are problematic. The length of time properties have been in foreclosure is troubling as well. According to RealtyTrac, the average time to foreclosure has jumped to a record high. U.S. properties foreclosed in the fourth quarter of 2016 have been in the foreclosure process an average of 803 days. That’s a 29 percent increase from the previous quarter and a 27 percent increase from a year ago. Not to mention more than half of all foreclosures nationwide are on loans originated between 2004 and 2008.

Homeowners aren’t the only ones impacted by foreclosures. Taxpayers and cities are often hit with higher costs – meaning less money for municipal services and other resources that keep communities safe and healthy (e.g. police, fire departments, public libraries, water drainage). Real estate is also impacted as foreclosures lower property values in surrounding neighborhoods.

Preventing foreclosed/abandoned/vacant properties is one of the best ways to help communities thrive. By addressing issues early on, municipalities can keep properties from reaching the foreclosure stage. In turn, this will improve public health, reduce crime and generate additional revenue for the community

Many cities want to prevent foreclosures, but aren’t sure what steps to take. Others may be aware of the steps needed, but lack the resources to move forward.

That’s why we’re sharing six steps municipalities can take to prevent foreclosures and the resources needed to achieve this goal.

Step #1: Tackle the problem early on.

You can’t address foreclosures if you don’t have all the details. The first step is to analyze the current situation. This involves asking the following questions:

  • How many vacancies are in the community?

  • Which properties are foreclosures?

  • Which properties are vacant or abandoned?

  • Does the municipality have a comprehensive inventory of foreclosed/abandoned and/or vacant properties listed by address and/or block and lot reference?

  • Does the inventory include information about which properties may be municipally owned? Have these properties been mapped?

  • Has there been any contact with the various banks that own foreclosed properties, and if so, is there a willingness to dispose of these properties?

Along with analyzing the foreclosure problem in your community, you’ll also want to assess the cost foreclosures and vacancies have on your municipality. This includes demolition and inspection, loss of tax revenue and unpaid utility bills. You’ll also want to determine how many fire calls involved a vacant or abandoned property, how many police calls were made regarding incidents at vacant properties, whether there were water or sewer issues, public works calls or other municipal expenses related to such properties. Having these costs handy will be helpful when coordinating with local stakeholders (see step #3).

Next, you’ll want to review real estate and tax databases and compile an inventory of the abandoned and vacant properties with reference to block/lot, street address and ownership. It’s a good idea to compile this data in an Excel spreadsheet so you can sort the information accordingly.

Once the inventory is compiled, you’ll need to map the abandoned and vacant properties. If you don’t have the resources to do this internally, you’ll want to hire an external firm to help you manage this project (this is something we’d be happy to help you with!).

Without a reasonable market to support the occupancy or rehabilitated, subsidized or market rate housing, your strategy will be limited. A neighborhood market assessment can identify areas where public investments can boost market activity. The market assessment is also essential in setting SMART goals (Specific, Measurable, Agreed Upon, Realistic, Timely). SMART goals are critical for success in future implementation/funding opportunities.

What does a neighborhood market assessment address? Here are a few items:

  • Basic housing conditions in neighborhoods throughout your municipality

  • Residential market to determine whether sales and value of real estate are increasing, stagnant or declining

  • Existing funding sources that may be available

  • Communities where there are housing trust funds, RCA funds or other sources of financing to acquire and rehabilitate foreclosed properties

Remember: you can’t tackle everything at once. Identify your priorities from the beginning and communicate those priorities to your team. One tool that can aid in this effort is a projects and programs funding matrix outlining the near – and long-term options facing a community. The matrix also includes grant opportunities, new partnerships and other funding alternatives.

[Side note: We develop these matrixes for many of our clients and would be happy to create one for your community. Email info@triadincorporated.com for more details.

Step #2: Create a central database.

Now that you’ve assessed the neighborhood and identified the priorities, you’ll want to create a central database of historic and current data (such as permits, violations, liens, utilities and parcel survey information). This data should be accessible to all stakeholders and will help your community determine where to focus its efforts and funding.

A central database will also help track and document inspections. For example, you can take note of which properties received a clean bill of health and increase the amount of time until the next inspection. For properties that receive a poor grade, you can increase the number of inspections and fees accordingly. Documenting this information will make the inspection process more efficient and save money in the long run.

Additionally, a central database will improve collaboration with banks regarding information on homes or properties that are nearing foreclosure. That way, you can deal with these properties before they become vacant.

It’s also important to document all ordinances in the database. Having these ordinances in one place will help you secure the funding needed to breathe new life into these properties and make improvements that benefit the entire community. There are a myriad of codes and ordinances that can affect a municipality’s ability to manage foreclosed and abandoned properties, assess fines and penalties and implement long-term measures to remedy the situation. Consider employing the help of an external firm to identify options and make recommendations to implement regulatory solutions.

Step #3: Get local leaders on the same page.

In order to successfully address foreclosures, you need to get local leaders on board. One way to accomplish this is to implement a task force of stakeholders to set goals and leverage federal, non-profit and philanthropic resources. The task force can include community members and municipal workers, such as police, fire and utility workers. These individuals will be instrumental in identifying foreclosures/vacant properties and reporting code violations.

After convening your task force, be sure to develop a strategic plan and process for bringing foreclosures back to life. The plan should involve analyzing the market, seeking input from residents, establishing ordinances and researching appropriate funding sources.

Step #4: Offer help for at-risk homeowners.

One of the best ways to prevent foreclosure is to connect at-risk homeowners with valuable resources in their area. New Jersey Housing and Mortgage Finance Agency (NJ HFMA)  offers a variety of programs for homeowners, including Homesaver, Homekeeper and Equal Housing Opportunity. The agency also hosts foreclosure prevention events and provides free counseling for homeowners.

Additionally, the U.S. Department of Housing and Urban Development (HUD) offers mortgage payment assistance through the Making Home Affordable Program. Municipal programs such as HOME also offer affordable housing and assistance with property maintenance and repairs, especially for first-time and senior homebuyers.

(Speaking of affordable housing, Triad runs an affordable housing program for residents across Central and Southern New Jersey).

Step #5: Know your options.

There may be ways to deal with foreclosures and vacant properties that you aren’t aware of. For example, did you know that municipalities can charge a registration fee for vacant properties? If there’s a cluster of abandoned properties, you can also designate an Area in Need of Redevelopment or an Area in Need of Rehabilitation. This can be done through the state Local Housing and Redevelopment Act (N.J.S.A. 40A:12A).

The NJ Abandoned Property Rehabilitation Act (APRA) is another resource you should consider. Enacted in 2004, the APRA allows municipalities to create an official inventory of foreclosed, abandoned and vacant properties.

Steps include:

  • Designation of a Municipal Official to create the list

  • Passage of a Municipal Ordinance to authorize its development

  • Formulation of the list per the guidelines of the APRA

APRA also offers additional tools and resources to help municipalities gain control of vacant properties and restore those properties to productive use. These options include:

  • An accelerated foreclosure process which allows the municipality to streamline the acquisition of the properties

  • A special tax sale that can advance private acquisition and rehabilitation

  • Spot blight elimination through eminent domain

If you need help determining which option is right for your community, give us a call.

Another option is to get the public involved. Provide a phone number for people to call with the addresses of foreclosures or other vacant properties. The more eyeballs you have on these properties, the more successful your rehabilitation efforts will be.

Step #6: Be honest about long-term growth.

Any strategy should be developed through the lens of a city’s long-term growth. For example, demolishing vacant properties without redevelopment prospects or rehabilitating properties in a city whose housing exceeds the population can lead to problems. Awareness and honesty about a city’s growth forecast will result in better decisions regarding foreclosures and vacancies.

Your growth strategy should include seeking planning grants to revitalize neighborhoods and drive business growth. Many grant programs offer loans to first-time homebuyers. For example, the NJ HMFA’s Live Where You Work Program provides low-interest mortgage loans to homebuyers purchasing homes in towns where they are employed. 

Regardless of which path you choose, make sure to get buy-in from community stakeholders and residents. When everyone is on the same page, real progress can be made.

How have you dealt with foreclosures in your community? Leave your comments and tips below!

Need help addressing foreclosures in your area? Send us an email: info@triadincorporated.com!

Share:

Leave comment