Local Housing Foundations Tackle Foreclosure Problem

NJBIZ — Monday, November 17, 2008

By Beth Fitzgerald

The sight of low- and moderate-income citizens moving into their first homes is a vision that inspires those who work in New Jersey's nonprofit housing community.

Now the foreclosure crisis is blowing through their world like a hurricane, forcing housing activists to embrace a far different mission: keeping families from losing their homes, slipping into poverty and reversing decades of progress in rebuilding fragile neighborhoods.

Two nonprofits are buying up foreclosed homes to shelter vulnerable families struck by the housing recession: Orange-based HANDS Inc. and First Baptist Church of Lincoln Gardens in Somerset. And New Jersey Citizen Action, whose mortgage counseling has helped thousands of low- and moderate-income first-time homebuyers qualify for low-cost mortgages, has switched gears to make foreclosure prevention its highest priority.

Since it was founded in 1986, HANDS — short for Housing and Neighborhood Development Services — has been working "to change the momentum in challenged neighborhoods," said Patrick Morrissy, executive director. The group has acquired 106 blighted houses in Orange and East Orange, rehabilitated them and sold them to first-time homebuyers, "not one of whom has ever gone into default or foreclosure," Morrissy said.

But plenty of other New Jersey homeowners are facing foreclosures, which are expected to total 50,000 this year, compared with about 18,000 in 2005, according to the state Department of Banking and Insurance. This alarming trend could trigger a downward spiral of falling home values and rising vacancy, neglect and vandalism, experts said.

"This is like 150 Katrinas hitting 150 cities at the same time," Morrissy said. "The whole face of community development is about to change because of the threat to urban neighborhoods from the subprime/foreclosure mess. Community development will either reinvent itself or become irrelevant."

So HANDS has partnered with five other community development corporations, raising $4 million from foundations — including New Jersey Community Capital and Prudential Social Investment. By the end of November, HANDS hopes to purchase its first 50 homes from a bank that acquired them through foreclosure. This nonprofit coalition, the Community Asset Preservation Corp., could eventually buy, renovate and resell 500 or more foreclosed homes in Essex County, Morrissy said.

"This is one of the most substantial and furthest along bulk [housing] purchases in the country resulting from the subprime crisis," Morrissy said. The other members of CAPC are Episcopal Community Development, Unified Vailsburg Services Organization and La Casa de Don Pedro, all in Newark; Brand New Day of Elizabeth and HOME Corp. of Montclair.

"This is a market-based approach. We are identifying responsible buyers who can purchase these properties and live in them," said Wayne Meyer, director of housing for HANDS.

First Baptist Church of Lincoln Gardens in Somerset has been rehabilitating affordable housing through its community development corporation for nearly a decade. Now the church's pastor, the Rev. DeForrest "Buster" Soaries, is partnering with banks to buy foreclosed homes to help families sidestep eviction.

Foreclosure counselors, such as New Jersey Citizen Action, can intervene with lenders and renegotiate mortgages, "but many families waited so long, and were so far into the process, that loan modification and workout were virtually impossible," Soaries said.

So the church created a new program to buy foreclosed homes, lease them back to the former owners, then help the families get back on their feet financially so they can buy their house back from the church, Soaries said. Magyar Bank in New Brunswick and Roma Bank in Robbinsville are providing financing.

There are 200 foreclosed homes in the pipeline; three have been purchased so far and Soaries hopes to purchase 20 more by Christmas. "One case is an 83-year-old woman who thought she was getting a reverse mortgage, and nearly lost her house," Soaries said. "Many of these people have equity in their houses, and we make sure they keep that equity."

New Jersey Citizen Action has helped 13,000 low- and moderate-income citizens qualify for affordable mortgages — and foreclosures are less than 1 percent, according to Phyllis Salowe-Kaye, executive director. "These are good loans, and the banks made them to people we counseled to repair their credit and qualify," she explained.

But now Citizen Action is flooded with new clients seeking help getting out from under the "bad" mortgages: subprime mortgages, typically with escalating adjustable rates that the homeowners can no longer afford. Citizen Action expects to provide foreclosure counseling to about 1,000 homeowners this year — four times as many as last year.

Citizen Action still works with first-time homebuyers, but foreclosure intervention commands a bigger share of the group's resources, Salowe-Kaye said. "This is an emergency. People need to be kept in their homes."

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