Study: Low Foreclosures in Community Land Trusts

As unemployment rates and home financing problems continue to linger nationwide, delinquent mortgages and foreclosures are declining in community land trusts, according to a study conducted by a researcher from the Housing Fund and Vanderbilt University.

The study called “Stable Home Ownership in a Turbulent Economy” found that conventional homeowners were 10 times more likely to be in foreclosure proceedings than community land trust homeowners at the end of 2010. Only 0.46% of the mortgage loans held by CLT homeowners were facing foreclosure at the end of 2010, compared to a foreclosure rate of 4.63% reported by owners of market-rate homes.

The survey was based on 3,143 mortgage holders in 62 community land trusts in 29 states. Low- to moderate-income homeowners hold all the mortgages in the CLT sample, while owners in the conventional market have various levels of income.

“Lower earning homeowners were disproportionately hit by subprime lending and now they have been hit again by higher unemployment rates,” said Emily Thaden, the researcher of the study. “CLTs never allowed homeowners to obtain subprime loans in the first place, and now CLTs—through their stewardship—are buffering the impact of the economic recession on their homeowners.”

While the Mortgage Bankers Association reported all-time highs in foreclosure proceedings after the 2008 housing market collapse, CLTs reported ongoing declines of troubled homeowners, the study said. In terms of mortgage delinquencies, 1.3% of CLT homeowners were seriously delinquent—90 days or more behind in their payments or currently in foreclosure—compared to 8.6% of homeowners in the conventional market at the end of 2010.

From 2008 to 2010, the MBA reported an increase in seriously delinquent mortgages and foreclosure proceedings at the end of every year, but CLT homeowners experienced declines in both categories through the same time period, the study said.

A community land trust is a nonprofit corporation that acquires and manages land on behalf of the residents of a neighborhood, while preserving affordability and preventing foreclosures for any housing located upon its land.

One of the main reasons why CLT homeowners do not have delinquent mortgages and are not facing foreclosure as often as conventional homeowners is because of stewardship programs provided during both the pre-purchase and post-purchase periods. Many CLTs also oversee loan acquisition and interact with mortgage lenders and intervene with them if a homeowner is at risk of foreclosure.

In exchange for the programs CLTs offer a homeowner, they agree to limit the appreciation they receive when selling their property, creating sustained housing affordability for future generations of homeowners.

“Fostering sincere relationships is the most valuable tool we have in resolving challenges faced by our homeowners,” said Staci Horowitz, program director at the City of Lakes Community Land Trust. “Knowing what is happening sooner than later helps us readily connect homeowners to the resources needed to minimize the impact of unexpected financial or life changes.”

According to the study, the stewardship services offered by CLTs prevented foreclosure for 82% of the CLT homeowners who became serious delinquent during 2010.

Roger Lewis, executive director of the National CLT Network, said community land trusts do a better job of securing successful homeownership to lower-income earners than interventions by the federal government and private businesses.

“I feel supported all throughout my home buying and homeowner experience,” said Jackline Mukiibi, a homeowner in the City of Lakes Community Land Trust in Minneapolis. “I feel like I will always have a resource to get me through any challenges I may have while owning a home.”