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Programs Affordable Housing Mayor's Foreclosure Task Force'
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In February 2008, soon after taking office, Mayor Don Ness convened a diverse group of leaders, nonprofit developers, human service providers, real estate industry representatives, and County staff and City staff to explore the issue of home mortgage foreclosures and how the community can work together on prevention, stabilization and neighborhood recovery.
Dear Duluth Homeowner: We know how important your home is to you. For that reason, we urge you to contact a Foreclosure Prevention counselor right away. Foreclosure Prevention counseling is free and your questions can be answered confidentially. You can ask about what happens during foreclosure, your rights, and solutions for your situation. The most important thing a homeowner can do is to begin working with your lender and foreclosure prevention counselor early. Waiting limits your options. Many Duluthians have been able to keep their homes by working with LSS early in the process. LSS Financial Counseling 218-529-2227 or 800-777-7419. LSS Financial Counseling is a non-profit located here in Duluth and is the largest provider of foreclosure prevention counseling in Minnesota. LSS has a strong partnership with the City of Duluth and a network of community-based organizations that can provide you with advice about your mortgage situation. Community Impact Report 2008: Partnership Case Study Author, Title, and Organization: Dan Williams, Senior Program Manager, Lutheran Social Services (LSS)
Pam Kramer, Executive Director, Duluth Local Initiatives Support Corporation (Duluth LISC)
Kathie Severson, Planner II, Duluth Community Development Division
Telephone and Email:
Dan Williams 218/529-2271 •
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Pam Kramer 218/727-7761 •
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Kathie Severson 218/730-5480 •
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Title of Initiative:
City of Duluth Foreclosure Task Force
Lead Partner/Primary Partners:
Mayor Don Ness, City of Duluth
Keith Hamre, City of Duluth, Community Development Manager
Kathie Severson, City of Duluth, Community Development Division
Pam Kramer, Duluth LISC
Dan Williams, LSS
Joe Johnson, North Shore Bank of Commerce
Phil Sneve, Wells Fargo Bank
Angie Miller, Community Action Duluth
Rick Ball, Housing and Redevelopment Authority of Duluth (Duluth HRA)
Jeff Corey, Northern Communities Land Trust (NCLT)
George Garnett, Neighborhood Housing Services of Duluth (NHS Duluth)
Cathy Racek, St. Louis County
Other Members of Partnership/Initiative:
Sandy Al-Qudah, Catholic Charities
Kris Monson, Neighborhood Housing Services of Duluth
Mark Monacelli, St. Louis County Planning
Barb Hayden, St. Louis County
Lucy Hager, St. Louis County
Michelle Lyons, Port City Realty
Jason Serck, Superior Planning and Development
Year Established:
2008
Human impact story – submitted by Lutheran Social Services:
“Karen” is a single 47 year old single mom with 2 children. After a series of events, including a water leak in the home and other minor emergencies, Karen found herself in trouble. The family was not only nine months in arrears on the house payment also had a large utility bill in excess of $900 in danger of a shutoff. The mortgage delinquency was of such magnitude that the Lutheran Social Services Foreclosure Prevention Assistance Program alone could not cover it. Due to our participation, the county was willing to put forth $2,484 in emergency assistance and together with the clients participation of one house payment, we were able to bring current the $7,947 mortgage delinquency, and also avoid a utility shutoff by catching up the past due amount. The family is now stabilized and doing well, remaining in their home.
Situation:
Since 2005, home mortgage foreclosures have skyrocketed in many communities nationwide. The table below shows the number of foreclosures in Duluth, St. Louis County, and the State of Minnesota, as identified through sheriff sales. In Duluth, foreclosures have more than doubled (56%), from 71 in 2005 to 158 in 2007. This trend is expected to continue for the next two to three years. According to the Minnesota Home Ownership Center, an estimated 80,000 Minnesota homeowners will become delinquent on their mortgage payments during 2008.
Minnesota Sheriff Sales Data
Source: St. Louis County Sheriffs Sale data and the Greater Minnesota Housing Fund “Minnesota Foreclosures, An Update, February 2008”
As of June 30, 2008, St. Louis County recorded 236 foreclosures, an increase of 45 foreclosures since May 31, 2008. Given these numbers, it is projected that the number of mortgage foreclosures in the county will be between 400 and 500 foreclosures in 2008.
As of August 13, 2008, the Duluth Building Safety Division reported ninety-five (95) registered vacant properties on the Duluth Registered Vacant Properties List. This number is just the properties that have been reported, inspected, and processed. It does not include all vacant properties within the City of Duluth, nor does it reflect the more recent foreclosed properties that may be vacant.
Two quantifiable costs often associated with mortgage foreclosure and blighted properties include the costs to recover and rehabilitate the property, and the decrease in property value associated with the housing unit as well as the values of surrounding properties. As noted in the Minnesota Statewide Foreclosure Remediation Plan, prepared 3/17/2008 by Warren Hanson, President of Greater Minnesota Housing Fund, “even a small number of foreclosures in a community are proving to drag down house prices and clog local housing markets. According to a 2006 study entitled ‘The External Costs of Foreclosures,’ by Georgia Institute of Technology and the Woodstock Institute, each conventional foreclosure within an eighth of a mile of a single-family home results in a decline in property value of between 0.9 percent and 1.44 percent. Thus, a single home can affect values for 600 feet in every direction, damaging the property values of over 150 homes.” Concentrated foreclosures can compound the impact to a community and the declining property values will result in less property tax revenue, which can greatly impact city and county budgets.
According to a presentation document prepared by the Greater Minnesota Housing Fund (http://gmhf.com), Foreclosures in Minnesota, Sheriff’s Sale Data – 2005-2007, Foreclosure Impacts on Families and Communities, Response and Recovery Strategies, several current causes for this foreclosure situation are not the traditional reasons for foreclosure. The traditional reasons for foreclosure include: loss of job, loss of spouse, and loss of health. The following has been identified as the current causes: predatory lenders pushed high priced sub-prime loans that were too costly for borrowers; lending standards allowed homebuyers and investors to buy or refinance homes without adequate proof of income; negative amortizing loans which increased over time rather than decreased. Adjustable rate mortgages (ARMS) which are re-setting to higher interest rates, and mortgage fraud and collusion among unscrupulous speculators, realtors, appraisers, and lenders.
While the number of foreclosures in Duluth, St. Louis County, and surrounding areas has not reached the alarming numbers seen in other cities across the nation, the increasing rate of mortgage foreclosures has thrust many homeowners into serious financial hardship and has resulted in an increase in the number of people who need to access basic human needs.
By developing coordinated, proactive, strategies with early intervention and support services, the number of foreclosures can be kept down in our community and region. In addition, neighborhood revitalization plans can promote purchase/rehabilitation programs and homeowner-ship, block “less than desirable” investors and those investors only interested in “flipping” the properties, thereby preserving housing lost to foreclosure and stabilizing the neighborhood.
SOLUTION:
In February 2008, soon after taking office, Mayor Don Ness convened a diverse group of leaders, nonprofit developers, human service providers, real estate industry representatives and City staff to explore the issue of home mortgage foreclosures and how the community can work together on prevention, stabilization and neighborhood recovery.
Actions taken include initially researching the extent and nature of the problem, what resources exist to address it and what efforts are underway at the County, State and National level to coordinate with and learn from. The following five action categories have been taken to alleviate the local foreclosure crisis:
a. The Foreclosure Study Group is using data from the St. Louis County Sheriff’s Office, Housing Link, the Greater Minnesota Housing Fund, the Home Ownership Center, and the Federal Reserve to document and analyze the extent of foreclosure issues in Duluth.
b. Alt A and sub-prime mapping of St. Louis County is underway using Federal Reserve data. This is used as a predictor of possible foreclosure and neighborhood impact.
2. Outreach and Counseling – This was determined to be the highest priority activity.
a. Inserts containing information on foreclosure, as well as counseling and referral services offered by LSS were sent out with all June 2008 City of Duluth Comfort System utility bills.
b. The Foreclosure Study Group, working with Mayor Ness and the St. Louis County Sheriff’s Office, is sending letters to homeowners and property owners after receiving notice of Lis Pendens encouraging them to contact LSS for assistance. This includes a handout on homeowners’ rights during the Redemption Period after the Sheriff’s Sale.
c. Held a Foreclosure and Information and Referral Workshop on June 24, 2008 at First Lutheran Church which was well attended by local lenders, faith communities, community development and/or housing neighborhood organizations, community leaders, and others interested in information and referral services regarding foreclosure. The workshop was sponsored by the Minnesota Home Ownership Center, LSS, the City of Duluth Foreclosure Task Force, and the City of Duluth.
a. LSS has expanded their foreclosure prevention counseling program to further assist homeowners facing foreclosure and to reach out to loan services.
b. NHS Duluth is providing pre-purchase counseling to homebuyers. NHS Duluth has also partnered with LSS to create the Rescue Loan Fund with funds from the Northland Foundation.
c. Sixty households attended a Borrowers Workshop on July 15, 2008 that provided counseling for first-time borrowers and assistance for homeowners who are at risk of late payments or foreclosure. Sponsors included the Minnesota Home Ownership Center, LSS, and the City Foreclosure Task Force. LSS has seen a substantial increase in requests for counseling assistance.
a. NCLT and the Duluth HRA have partnered on a Purchase/Rehabilitation/Resale program for post-foreclosure homes to reduce vacancy and create safe, affordable housing. In addition, the Duluth HRA’s MURL and Campus Neighborhood Stabilization programs have been expanded to include the purchase and rehabilitation of foreclosed homes.
b. Duluth LISC, in partnership with three local lenders and the Duluth HRA, have been approved for $3.5 million in CASA Mortgage funds, as well as access to the federal HOME HELP program to provide assistance for foreclosed homes or homes in foreclosure impact areas.
c. The Creating Neighborhoods That Work – At Home in Duluth collaborative applied for funding from Minnesota Housing and the Greater Minnesota Housing Fund for the fall round of financing to aid in addressing foreclosure remediation. We are also hoping to secure new federal funds for further purchase/rehab/resale activities.
a. The Duluth Mortgage Foreclosure Study Group is monitoring strategies and legislation regarding foreclosure. A Duluth representative, Pam Kramer, has been added to the Minnesota Foreclosure Partners Council, which is working on all five aspects of the plan including policy, legal and legislative effects.
b. Members of the Task force have been working with elected officials to secure new state and federal neighborhood stabilization funds.
Impacts and Results:
The main impact of the partnership is in the collaboration and cooperation between the City, County, non-profit agencies and the for-profit world of banking. These disparate organizations are now really pulling together to come up with cohesive solutions to the problem of foreclosure. Examples of this include the fact that nearly 60 households attend the Borrower Workshop and LSS Counseling Services have seen a substantial increase in requests for counseling assistance.
Lessons Learned:
Foreclosure impacts our entire community. All income levels, ages, backgrounds and neighborhoods have felt the impact. This is a community issue that takes a united response to ensure homeowners, their families, neighborhoods and businesses are not negatively impacted. We also need to be diligent as consumers and a country to ensure we make wise decisions in the future about our investment, home purchase and refinancing decisions.
Partnership Statement:
By developing coordinated, proactive strategies, with early intervention and support services, the number of foreclosures can be kept down in our community and region. In addition, neighborhood revitalization plans can promote purchase/rehabilitation programs and homeownership, thereby preserving housing lost to foreclosure and stabilizing neighborhoods and the entire community.
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