The new state “foreclosure clearinghouse” announced last week gives affordable housing organizations and municipal housing authorities a shot at new real estate owned (REO) property before it hits the open market, and will allow for bulk property sales.
The initiative includes REO properties owned by eight major lenders, including: Fannie Mae; Freddie Mac; Citibank; Wells Fargo; GMAC; JP Morgan Chase, including Washington Mutual; and Bank of America, including Countrywide.
But the program does not include foreclosures from the two largest servicers of REO properties in the state, Deutsche Bank and US Bank. Those two companies own 1,750 of the 5,500 lender-owned properties in the state, according to The Warren Group, publisher of Banker & Tradesman.
“They’re considered trustees, and we’re only working with the ones that are actually owners of the mortgage,” said Aaron Gornstein, executive director of CHAPA. “It’s our understanding that they don’t make decisions on disposition, but they have agreed to give us listings of their properties [already on the market] regularly.”
The program, the first statewide clearinghouse in the nation, was unveiled March 16 by Gov. Deval Patrick, Congressman Barney Frank and the Citizens Housing and Planning Association (CHAPA).
CHAPA will administer the database, which will give affordable housing organizations approximately 48 hours to express interest in newly-added REO properties before they hit the open market. Despite not including Deutsche Bank and US Bank, about 60 percent of foreclosures in the state will be centralized.
Once a buyer expresses interest, the two sides have two weeks to come to an agreement over price, with CHAPA and the National Community Stabilization Trust serving as intermediaries. The community organization and municipalities will be able to tap into the $54 million in Neighborhood Stabilization funds Massachusetts received from the federal governement last fall.
Forging A Link
The mediation between lenders and buyers is much needed; perhaps the greatest struggle for housing organizatons is dealing with lenders who have thousands of REO proeperty on their books.
Lenders have been woefully unprepared to deal with the adminsitration and listing of their properties; often, they aren’t even aware that a property is theirs.
Joe Rodrigues is the executive director of the Fall River Community Housing Resource Board, one of the 50 groups that have been pre-qualified to take advantage of this initiative.
Rodrigues spend weeks last year dealing with IndyMac bank in California, trying to buy a REO property on Fourth Street in Fall River. After weeks of negotiating the purchase with the loss mitigation department of IndyMac, it turned out the bank didn’t actually own the property, and had wrongfully foreclosed on the home. IndyMac has since had its assets seized and is under the stewardship of the FDIC.
“I’m wholeheartedly happy CHAPA is involved with this, because it certainly has been a struggle over the last couple of years … dealing with some of these mega-banks,” Rodrigues said.
“It was really a nightmare [for housing groups to buy foreclosed properties],” said Gornstein. “There was no coordinated system that has been set up, and that’s what this clearinghouse is going to do.”
The plan also allows affordable housing organizations to purchase 10 or more properties at a bulk rate.
“It’s more efficient,” said Gornstein. “You have a single closing, and you’re able … to revitalize an entire block, instead of one home at a time. The trust has worked out agreements with each of these lenders so that in the case of a bulk sale, they’ll work across the lenders.”
“Having a central location to get this availability pinned down will be a great assist to us,” said Rodrigues. “It’s just another tool, and lord knows we can use a lot of different tools in this housing crisis. It’s not a panacea, but it’s a step in the right direction.”
CHAPA is working with 30 Massachusetts communities to mediate between the housing authorities and other interested parties. Only one organization per community would be entitled to first rights on available properties.
“We’re hoping to recover some of these properties that would have just languished on the market, or be purchased by a [speculator],” Gornstein said. ”We’re trying to put it in the hands of a responsible homeowner.”
