Mortgage servicers have gotten a reputation as the bad boys of foreclosure, putting people out of their homes and helping to power trends like a major American city (Detroit) losing 25% of its population in a decade.
A thoughtful session at the recent SourceMedia Mortgage Servicing Conference in Dallas, however, points to a way servicers can reverse that bad rep of creating urban ghost cities.
To boil it down, it's pretty logical: servicers can reverse that reputation by reversing the flow, by helping borrowers stay in homes until good resolutions are found.
Stephen H. Bancroft, executive director of the Detroit Office of Foreclosure Prevention and Response, told the conference that two large servicers in the area are using two programs to achieve just that. They are the Retained Occupancy On Foreclosures (ROOF) and the Foreclosure Limit Owner Occupancy Recovery (FLOOR).
ROOF happens after the foreclosure but before the redemption period. The foreclosed owner stays in the home and makes a sliding scale payment (not rent) until a solution is found.
FLOOR is preforeclosure and involves getting a deed in lieu of foreclosure to have something to work with before a loan modification. FLOOR takes 15 months to work through and keeps the owners in the home for that time.
The benefits of having people in foreclosed properties are obvious: less vandalism, less decline in home values, more neighborhood stability.
Another program in Detroit, called Project 14, aims to draw back city employees (police, fire, etc.) by offering them attractive homes at very reasonable prices, with the city subsidizing the mortgages.
Places like Detroit need to be nimble as they redevelop their vast empty acreage, said Bancroft.
Detroit has plenty of water, he said, meaning that urban farming is a real possibility there. Some of the empty automotive facilities there are too expensive to bring down, he said—but could easily be converted into green houses.
It's certain creative thinking is needed in reseeding urban centers that have been bled white over the last decade. In Detroit, some homes can be bought for less than $20,000. That's a car loan, not a mortgage!
It's good to know that servicers can have a role in the re-emergence as well as in the mass exodus.
