[p2p-research] Fwd: NY Times article : Finding in Foreclosure a Beginning, Not an End

Sun Mar 28 12:22:40 CEST 2010

Hi Sam, since this is very broadly speaking in your neighborhood, I wonder
if the following could inspire you to some blog commentary on community
capital approaches?

Michel

---------- Forwarded message ----------
From: Dante-Gabryell Monson <dante.monson at gmail.com>
Date: Sat, Mar 27, 2010 at 5:52 AM
Subject: NY Times article : Finding in Foreclosure a Beginning, Not an End
To: Alex Rollin <alex.rollin at gmail.com>, Smári McCarthy <smarimc at gmail.com>,
Michel Bauwens <michelsub2004 at gmail.com>, Samuel Rose <samuel.rose at gmail.com
>

http://www.nytimes.com/2010/03/22/us/22foreclose.html

 By JOHN LELAND<http://topics.nytimes.com/top/reference/timestopics/people/l/john_leland/index.html?inline=nyt-per>
Published:
March 21, 2010
BOSTON — Jane Petion lived in her home for 15 years and saw its value rise
slowly, rise rapidly and, when the housing bubble burst, plunge at a
sickening pace that left her owing $400,000 on a house worth closer to
$250,000. Last June, her lender foreclosed on the property. The family
received notices of eviction and appeared in housing court.

Then they discovered a surprising paradox within the nation’s housing
crisis: Their power to negotiate began after foreclosure, rather than ending
there.

In December Ms. Petion signed a new mortgage on her house for $250,000, with
monthly payments of less than half the previous level. She and her husband
now have a mortgage they can afford in a neighborhood that benefits from the
stability they provide. A nonprofit lender made the deal possible by buying
the house from her original mortgage company and selling it to her for 25
percent more than its purchase price — a gain to hedge against future
defaults.

“It was exactly what we needed to get back on our feet,” said Ms. Petion,
who works for a state agency. “We have income. But another bank, it would
have been easy to look at our foreclosure and say, ‘I’m sorry, we have
nothing for you now.’ ”

This counterintuitive solution — intervening after foreclosure rather than
before — is the brainchild of Boston Community
Capital<http://www.bostoncommunitycapital.org/>,
a nonprofit community development financial institution, and a housing
advocacy group calledCity Life/Vida Urbana <http://www.clvu.org/>, working
with law students and professors at Harvard Law
School<http://www.harvardlegalaid.org/>
.

Though the program, which started last fall, is small so far, there is no
reason it cannot be replicated around the country, especially in areas that
have had huge spikes in housing prices, said Patricia Hanratty of Boston
Community Capital. “If what you’ve got is a real estate market that went
nuts and a mortgage market that went nuts, what you’ve got is an
opportunity.”

Two years into the nation’s housing meltdown, and after hundreds of billions
of dollars of federal rescue programs, government officials and housing
advocates denounce the unwillingness of lenders to adjust the balances on
homes that are worth less than the mortgage owed on them.

Research suggests that such disparity, rather than exotic interest rates, is
the main driver of foreclosures, in tandem with a job loss or another
financial setback. The financial industry lobbied aggressively to defeat
legislation that would empower bankruptcy judges to adjust mortgage balances
to properties’ market value.

That reluctance, however, eases after foreclosure, when lenders find
themselves holding properties they need to unload, Ms. Hanratty said.

“We found, frankly, the industry wasn’t ready to do much pre-foreclosure,”
she said. “But once it was either on the cusp of foreclosure or had been
taken into the bank portfolio, banks really do not want to hold on to these
properties because they don’t know how to manage them, don’t know what to do
with them.”

Working with borrowed money, Boston Community Capital buys homes after
foreclosure and sells or rents them to their previous
owners<http://www.bos.frb.org/commdev/c&b/2010/spring/spring10.pdf>,
providing new mortgages and counseling to the owners, who typically have
ruined credit. During the process the families remain in their homes. Since
late fall it has completed or nearly completed deals on 50 homes, with an
additional 20 in progress, Ms. Hanratty said. The organization is now trying
to raise $50 million to expand the program.

Steve Meacham, an organizer at City Life/Vida Urbana, is one reason banks
may be willing to sell their foreclosed properties to Boston Community
Capital. When families receive eviction notices, his group holds demonstrations
or blockades <http://www.pbs.org/moyers/journal/12182009/watch2.html> outside
the properties, calling on lenders to sell at market value. It also connects
the residents with the
Harvard<http://topics.nytimes.com/top/reference/timestopics/organizations/h/harvard_university/index.html?inline=nyt-org>Legal
Aid Bureau, whose students work to pressure lenders to sell rather than
evict <http://www.law.harvard.edu/news/bulletin/2010/winter/outside.php> by
prolonging eviction and “driving up litigation costs,” said Dave Grossman,
the clinic’s director.

“So they’re being defended legally, and we’re ramping up the pressure
publicity-wise,” Mr. Meacham said. “And B.C.C. came in; they had a part that
buys properties and a part that writes mortgages. It wouldn’t work without
all three.”

A focus of the program has been the working-class neighborhood of
Dorchester, where home prices dropped 40 percent between 2005 and 2007,
compared with a 20 percent drop statewide, according to research by the
Federal Reserve Bank of Boston. Foreclosures and delinquencies there are
more than twice the state average, the bank found.

In such neighborhoods, lenders and residents are hurt by evictions, which
often leave vacant properties that invite crime and drive down values of
neighboring houses, Ms. Hanratty said. “So it’s in the lenders’ interest to
get fair market value as quickly as possible, and in the interest of the
community to have as little displacement as possible.”

The program is not a solution for all lenders or distressed homeowners.
After months of post-foreclosure negotiations with her bank, Ursula Humes, a
transit police detective, is waiting for her final 48-hour eviction notice.
Her belongings are in boxes.

Mrs. Humes owed $440,000 on her home; her lender offered to sell it to
Boston Community Capital for $260,000. But after assessing Mrs. Hume’s
finances, the nonprofit asked for a lower selling price, and the lender
refused.

On a recent evening, Mr. Grossman of the Harvard law clinic counseled Mrs.
Humes on her options. “This is a case that doesn’t have a happy ending,” Mr.
Grossman said.

Mrs. Humes said, “I depleted my retirement account and everything I owned,
but I’m still going to lose it.”

Many commercial lenders, similarly, would shy away from such a program
because it involves writing mortgages for borrowers who have already
defaulted once — a high risk for a small reward.

For other homeowners, though, the program is a rescue at the last possible
second. Roberto Velasquez, a building contractor, lost his home to
foreclosure last November, owing the lender $550,000. After extensive
wrangling, during which his family stayed in the house, he bought it again
in March for $280,000, a price he can afford.

On the night after he closed, he joined other members of City Life/Vida
Urbana at a foreclosed four-unit building in Dorchester from which most of
the tenants had been evicted. A group of artists projected videos on sheets
in the windows, showing silhouettes of families re-enacting their last 72
hours before eviction<http://www.nytimes.com/interactive/2010/03/21/us/0321-foreclosure-art-audioss/index.html>.
Garbage filled one of the units. Mr. Velasquez said it hurt to stand amid
such loss, but he was jubilant at his own perseverance.

“We’ve been fighting for so long,” he said, “and we win, because we’re still
in the house.”
   A version of this article appeared in print on March 22, 2010, on page
A12 of the New York edition.

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