1. Foreclosure Impacts and Strategies Alan Mallach Nonresident Senior Fellow The Brookings Institution

2. Mortgage delinquencies and foreclosures are still going up

3. …but not evenly across the United States North Carolina

4. North Carolina is not immune

5. … and is being affected by foreclosures ► As a % of owner-occupied stock, some areas are particularly hard hit (foreclosures from 1/2005-7/2009)  Dare County – 24.2%  Mecklenburg County – 21.6%  Franklin County – 17.3%  Durham County – 15.1%

6. Things may be getting worse ► Statewide filings increased 43% from August 2008 to August 2009 ► Filings declined from November through February, but have been rising steadily since then. ► In Mecklenburg County, filings increased 80%, to 1,316 in August 2009.

7. ….particularly in the Charlotte area Projection based on data through August 2009

8. What does this mean? ► Thousands of families are being affected – both homeowners and tenants ► Thousands of houses are becoming vacant and abandoned ► Neighborhoods are being destabilized – with loss of property value, safety and quality of life.

9. Protecting homeowners and tenants ► Making Home Affordable (HAMP) ► Tenant protections in Helping Families Save their Homes Act of 2009 ► Going further?  More extended tenant protections  Allowing owners to remain as tenants

10. Protecting properties ► Strengthen code enforcement and nuisance abatement ► Provide for effective collection of liens and judgments ► Impose habitability standards ► Make lenders responsible for maintaining vacant properties ► Work with investors

11. Stabilizing neighborhoods ► What is neighborhood destabilization?  Foreclosures undermine local housing markets and increase vacant housing  Market deterioration and vacant housing lead to neighborhood destabilization  Once destabilization begins, it can trigger a chain reaction of destabilizing events.

12. Destabilizing events include: ► Increase in number of foreclosure filings and foreclosure sales ► Increase in vacant and abandoned properties ► Increase in crime ► Increase in number of properties coming on market ► Too few home buyers for available supply ► Declining house prices ► Reduced property maintenance

13. How does one stabilize a neighborhood? ► Foreclosures and abandoned properties can trigger destabilization – but dealing with those problems alone may not be enough to restore stability. ► Neighborhood stabilization is about rebuilding confidence and fostering market recovery. ► Market recovery happens when the effects of stabilizing actions exceed those of destabilizing events.

14. Stabilizing actions include: ► Reducing the number of REOs coming onto the market ► Reducing the number of foreclosure filings ► Increasing the pool of home buyers ► Reducing the number of vacant and abandoned properties ► Stabilizing house prices ► Reducing crime ► Improving property maintenance and neighborhood appearance.

15. What should neighborhood stabilization strategies include ? ► Reducing future foreclosures ► Reducing the link between foreclosures, disinvestment and vacancy ► Putting vacant properties back in productive use ► Addressing other forces destabilizing the neighborhood ► Restoring confidence and fostering market recovery

16. They should leverage other tools and resources ► Property acquisition tools ► Code enforcement and nuisance abatement ► Public/private sector housing assistance and mortgage financing ► Legal tools to minimize foreclosure impacts and prevent future foreclosures ► Outreach, marketing and other activities to build confidence and rebuild market demand

17. Neighborhood stabilization efforts should…. ► Target resources strategically ► Reduce the link between foreclosures, disinvestment and vacancy ► Align with market realities ► Build partnerships

18. Target resources strategically ► Target areas where market conditions make impact possible or where strategic location or assets make it critical. ► Target areas where organizational capacity exists to carry out strategy. ► Make sure each target area receives enough investment to make impact possible

19. Align strategies with market dynamics ► Understand the market  Trends in properties coming onto market  Price trends/affordability of houses on market  Level and type of home purchase activity  Size and characteristics of home buyer pool ► Build strategies based on market conditions

20. Market conditions fall along a continuum Market correction Demand increases as prices fall to affordable levels, and supply/demand equilibrium is restored Market destabilization Demand potentially exists, but may need public/nonprofit intervention to trigger effective demand Market collapse Weak demand and large supply creates surplus that cannot be absorbed by market

21. Market-sensitive strategies: acquisition Market correction Market destabilization Market collapse Acquire properties only when specific property is an impediment to market recovery Acquire properties to create opportunities for reuse and neighborhood stabilization Acquire properties to land bank for future redevelopment opportunities

22. Market-sensitive strategies: reuse REUSE OPTIONS Market correction Market destabilization Market collapse Market sale  Subsidized sale or lease- purchase  Subsidizedrental Land banking 

23. Build partnerships ► Government agencies ► CDCs and non-profit service providers ► Foreclosure prevention entities ► Real estate industry players ► Local and regional institutions ► Residents and civic organizations

24. A final word…. In the end, neighborhood stabilization is not about how many units are acquired, rehabilitated or demolished. It is about restoring stability, in the sense of healthy market conditions and the confidence of residents and homebuyers, to the neighborhood.

25. Alan Mallach PO Box 623 Roosevelt NJ 08555 609.448.5614amallach@comcast.net