Orange County Business Council Work Force Housing Committee March 18, 2009 A Regional Response to the Foreclosure Crisis Foreclosures

The Foreclosures Crisis The Problem The number of mortgage foreclosures in Orange County and throughout the state has dramatically increased. This trend is expected to continue through This dramatic increase is overwhelming existing resources, displacing families, and leaving many affordable homes vacant and boarded. As of February 2009 there are over 20,000 foreclosure homes on the market. Approx. 8,300 are REO’s (Bank Owned) Approx. 8,300 are REO’s (Bank Owned) Approx. 8,500 are in Default Approx. 8,500 are in Default

Orange County Foreclosure Picture

Where are the Foreclosures February 2009 – Information from DataTrac Santa Ana650 approx.Irvine155 Anaheim500Hunt. Beach140 Garden Grove225Mission Viejo115 Orange 175La Habra110 Fullerton175Rancho SM110 Foothill Ranch 1 – 109Newport Coast Santa Ana 1 – 137San Juan Capistrano Rancho SM Alisa Viejo Stanton La Habra Countywide *******************************************************************************************

Homes on the OC Market January 25, 2009 (OC Register) Market Home ValueAll InventoryDistressedPercentage $0 - $250k 2,1391,43267% $250k - $500k 1,7591,03959% $250k - $500k 1,7591,03959% $500k - $750k 2, % $750k - $1 mil 1, % $1 mil. - $1.5 mil % $1.5 mil. - $2 mil % All O. C.11,5605,10444% All O. C.11,5605,10444% Attached 4,6282,31750% Attached 4,6282,31750% Detached 6,8712,67439% Detached 6,8712,67439%

Other Data Calif. home prices have dropped 26.7% in 2008 compared to national average of 11.6%. Calif. home prices have dropped 26.7% in 2008 compared to national average of 11.6%. Calif. is only behind Florida and Nevada in serious delinquent mortgages. Calif. is only behind Florida and Nevada in serious delinquent mortgages. 2,250 ave. per month new delinquencies in OC over past 3 months 2,250 ave. per month new delinquencies in OC over past 3 months Existing home sales up 84.7% over 2007 Existing home sales up 84.7% over 2007 In 4 th quarter 2008 the value of approximately 125,000 California homes dropped below the mortgage balance. In 4 th quarter 2008 the value of approximately 125,000 California homes dropped below the mortgage balance.

Classifying Local Strategies – Prevention and Mitigation While mortgage regulation and foreclosure laws are generally the domain of federal and/or state government, nonprofits, local governments, and even some local banks have responded to rising foreclosures in various ways. Their strategies include direct, local action, often in collaboration with other groups. While mortgage regulation and foreclosure laws are generally the domain of federal and/or state government, nonprofits, local governments, and even some local banks have responded to rising foreclosures in various ways. Their strategies include direct, local action, often in collaboration with other groups. Homeownership Prevention Efforts are made to reduce the numbers of foreclosures by providing foreclosure prevention education and counseling combined with successful loss mitigation strategies and community outreach. Efforts are made to reduce the numbers of foreclosures by providing foreclosure prevention education and counseling combined with successful loss mitigation strategies and community outreach. Maintain Housing Values Tackling the negative impacts of foreclosure in our neighborhoods and on individuals. It is about mitigating the “Spillover” problems caused by foreclosures. Tackling the negative impacts of foreclosure in our neighborhoods and on individuals. It is about mitigating the “Spillover” problems caused by foreclosures.

Homeownership Preservation Membership includes participants from: lending institutions, non-profits, local government, real estate industry, HUD, Federal Reserve, and elected officials. OCHOPC has held 7 foreclosure prevention workshops assisting over 2,200 distressed homeowners.

FDIC Model Key objectives Keep borrowers in their homes when the borrower is willing and has the capacity to make an affordable mortgage payment. Provide borrowers with immediate payment relief and stable long term mortgage payments. Modification must always result in a positive NPV outcome for the investor, i.e., the cost of the modification must be less than the estimated cost of foreclosure.

FDIC Model Strategy Return the loan to a current status. Capitalize delinquent interest and escrow. Modify the loan terms based on waterfalls, starting at a front-end 38 percent HTI ratio down to a 31 percent HTI ratio, subject to a formal NPV floor. Reduce interest rate to as low as 3 percent. Extend, if necessary, the amortization and/or term of the loan to 40 years. Forbear principal if necessary.

Preserving Home Values The Home Again Collaborative The Collaborative is envisioned to include key Orange County nonprofit housing organizations, local governments, cooperating lending institutions, and the Orange County Home Ownership Preservation Collaborative. The purpose of the organization is produce more affordable housing by coordinating the acquisition, rehabilitation and disposition of foreclosed residential properties.

Preserving Home Values The Home Again Collaborative Sources of Funds: Orange County Housing Trust Orange County Housing Trust Investments from Financial Institutions Investments from Financial Institutions NSP Funds NSP Funds Local Government Local Government NeighborWorks America NeighborWorks America Clearinghouse CDFI Clearinghouse CDFI Mortgage Financing Mortgage Financing

In responding to the foreclosure crisis, community development organizations, local government and the real estate and financial industries need to engage in a balanced approach to community revitalization which includes preventing foreclosures while assisting first-time homebuyers purchase foreclosed homes. In responding to the foreclosure crisis, community development organizations, local government and the real estate and financial industries need to engage in a balanced approach to community revitalization which includes preventing foreclosures while assisting first-time homebuyers purchase foreclosed homes. Ken Mutter Neighborhood Housing Services of Orange County Final Thoughts