Focus Put on Foreclosure

High foreclosure rates in low-income neighborhoods are prompting community development organizations to become more active in foreclosure prevention and working with lenders and servicers to help troubled borrowers.

Neighborhood Housing Ser-vices organizations in Chicago and New York have developed foreclosure prevention and intervention programs that involve partnerships with local lenders and government agencies.

NHS of Chicago started its partnership program called the Home Ownership Preservation Initiative Act in October 2003 in response to rising foreclosure rates.

By the end of 2004, the HOPI partners had saved over 650 families from foreclosure and it has become a model for foreclosure prevention and preserving neighborhoods.

NeighborWorks America, a federal government-funded organization, and Federal Reserve district banks are holding workshops for the mortgage lenders, state and local governments and community development organizations to highlight the success of the Chicago program.

The first workshop was held in Columbus, Ohio, and a second is slated for May 23 in Atlanta, as MSN went to press.

Federal banking regulators, such as the Office of the Comptroller of the Currency, are encouraging lenders to participate in these partnerships.

"The evidence is overwhelming that these programs work. Because they work, they are catching on," acting comptroller Julie Williams said at a meeting of state and federal regulators in New York recently.

"Nationwide, we're already past the point that more than half of all seriously delinquent borrowers are being contacted and offered financial rescue plans to avoid foreclosure." But more needs to be done, Ms. Williams said.

The comptroller noted that increases in subprime lending have contributed to rising foreclosure rates in low- and moderate-income communities and predatory lending is taking its toll as well.

In addition, homeownership initiatives to provide affordable financing to low-income borrowers has created a "new class of borrowers," she said, who can quickly get behind in their payments due to unexpected financial demands.

"There may be no more immediate challenge facing community development today," the comptroller said, "than the problem of foreclosure."

In January, NeighborWorks published a report that reviews the research on foreclosure trends and community-based responses, including case studies of the NHS of Chicago and New York foreclosure prevention programs.

The report, "Combating Foreclosures as Part of a Neighborhood Revitalization Strategy," by NeighborWorks researcher Lindley Higgins also looks at foreclosure prevention programs in Idaho, Ohio, Vermont, Boston and Portland, Ore.

Pre-purchase, homeownership counseling has been shown to be effective in reducing default rates, the NW report says, and it is likely foreclosure prevention programs will demonstrate similar success. "While they are resource-intensive, these programs can protect distressed communities from higher-risk lending."

NeighborWorks America is the parent of 235 local organizations, including NHS of Chicago that is dedicated to homeownership counseling, housing rehabilitation and community development.

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