Nuestra Comunidad Development Corp., located at 56 Warren St. in the Dudley Square section of Boston’s Roxbury neighborhood, is offering a Foreclosure Prevention Program funded in part by the city of Boston.

“If I told you that there was a loan product that would get 5 million people into a new home, but one-fifth would not succeed, what would you say about the 4 million who do?” Massachusetts Mortgage Bankers Association immediate past Chairman John Battaglia asked legislators at a Beacon Hill hearing on the subprime lending crisis last week.

Reflecting on that question, Penelope Pelton, the brand-new foreclosure prevention counselor at Roxbury-based Nuestra Comunidad Development Corp., said she thinks the 1 million who can’t succeed with those products “are all in [the Boston neighborhood of] Roxbury.”

Data in a report released last month by the Massachusetts Affordable Housing Alliance and others – which shows that certain neighborhoods with high concentrations of black and Latino residents have more high-cost home loans – is “compelling,” Pelton said.

In Roxbury, she said, 41.6 percent of the loans that homeowners had in 2005 were subprime. City of Boston data shows that 1.3 percent of Roxbury’s 22,211 homes – including both rentals and owned properties, and those with all types of loans – are currently in the foreclosure process.

The number of actual foreclosures in the whole city actually quadrupled between 2005 and 2006, from 60 to 261, but those numbers aren’t as high as they were in the early 1990s.

Massachusetts as a whole ranked 26th in the nation in “foreclosure inventory,” according to the Washington, D.C.-based Mortgage Bankers Association.

Pelton shut down her Mission Hill brokerage this year to shift her focus to trying to help people out of bad loans. She began working at Nuestra Comunidad in March.

Her salary – a small fraction of the community development corporation’s $4 million annual budget – is paid through a three-year, $150,000 city of Boston contract, funded by the city’s new First Choice Lenders program.

Nuestra Comunidad, along with Jamaica Plain-based ESAC (Ensuring Stability through Action in our Community), HOME (Homeowner Options for Massachusetts Elders), Urban Edge (a CDC in Roxbury’s Eggleston Square) and Mattapan Family Service Center, are providing foreclosure prevention counseling services to city residents through the program.

First Choice Lenders offers elements similar to some proposed in city- and state-sponsored bills heard last week at the State House. Pelton will advise homeowners who come to Nuestra Comunidad on how to head off foreclosure – if they can.

In fact, about half the borrowers who approach the CDC for help never should have been given a mortgage, according to Executive Director Evelyn Friedman.

With First Choice Lenders, homeowners who can afford a more conventional fixed-interest-rate mortgage are directed to one of six bank partners: Bank of America, Citizens Bank, Sovereign Bank, Eastern Bank, Mt. Washington Co-Operative Bank or Boston Private Bank and Trust. The banks, which have pledged $100 million in potential financing to help at-risk homeowners, were selected for their commitment to use lending practices that minimize risk of foreclosure.

Nuestra Comunidad used to partner in a similar manner with Wells Fargo, Friedman noted, but the national lender discontinued that program last fall.

‘Hard Work’
Pelton said the First Choice loan products still need to be “fine-tuned,” but she’s glad they’re out there.

What’s also out there – in development over the past 20 years, even as riskier subprime products proliferated and were offered to borrowers who couldn’t afford them – are “responsible” state-subsidized loan products, aimed at low- to moderate-income buyers, she said.

Examples are the Soft Second mortgage loan and other products offered by MassHousing, the state’s self-described “affordable housing bank,” which lends money to income-qualified homebuyers at below-market interest rates.

“It’s hard work for the borrowers, no doubt about it, to get that kind of loan,” Pelton acknowledged. “They’re probably thinking, ‘I have to sit through 15 hours of classes for this, when Fred down the street can give it to me so much faster.'”

The loans are harder for lenders, too.

Pelton recalled that she found it hard to persuade originators to work in her broker business because she required they disclose costs and terms fully to borrowers.

While she was able to make a living arranging loans that would work in the long term, she said, originator candidates often went to work for employers who weren’t so exacting.

Pelton said she’s already met with plenty of people who received loans that were inappropriate for them. No-income-documentation loans, which are designed for self-employed people whose income often looks artificially low on tax forms, were offered to people who had their job titles inflated – for example, from “short-order cook” to “chef” – and saw their incomes restated to match.

“The regulations around these loans are so lax,” she lamented. “It’s probably that the [non-bank] mortgage industry is just so new. It’s a case of [that] you tend to react to something rather than anticipate. I think nobody anticipated these kinds of problems.”

Today, people who ran into the problems are coming to Nuestra Comunidad for help at a rate of a dozen a month. That number used to be five per year.

The CDC is trying to think of ways to market to them even more.

“One of the questions we’re thinking about is how to reach people to let them know that we have this service,” Friedman said. Nuestra Comunidad is hoping to reach out through local churches, community groups or others who might come in contact with people who are facing foreclosure, she said.

“People are often reluctant to tell anyone they have this problem,” Friedman explained, because they find it embarrassing. “What we’d like to do with our campaign is see if we can get people before they are four or five months in arrears.”

Those are the people she believes Nuestra Comunidad can help the most, because banks feel better about working with a loan client whose debt isn’t that great.

Heading off future problems for them, Friedman believes, will help the CDC improve the neighborhood as a whole.