With property values falling and foreclosures mounting in the south coast cities of Fall River and New Bedford, three area institutions are working together to create a government-backed soft second loan program to save homes.
First Citizen’s Federal Credit Union, the New Bedford Office of Housing and Community Development, and the Catholic Social Services of the Archdiocese of Fall River have seen neighborhoods destroyed in Bristol and Dukes counties as families are ripped from homes and boards are slapped on buildings.
In Fall River, there were 216 foreclosures in the first 11 months of 2008; there were 169 through the same period in 2007. In New Bedford, there were 286 foreclosures through the end of November, up from 217 in 2007, according to the Warren Group, publisher of the Banker & Tradesman.
For Peter Muise, president and CEO of First Citizens’ Federal Credit Union, Arlene McNamee, executive director of Catholic Social Services of the Archdiocese of Fall River, and Patrick Sullivan, director of Office of Housing and Community Development, those numbers are more than alarming, they’re personal. To stem the tide, the three hope to create, fund, and administer a program to create new mortgages for properties at risk due to bad loans.
Calling On Barney
In late December, they presented their preliminary plan to Rep. Barney Frank, chairman of the House Financial Services Committee. Frank spent 20 minutes wiTH representatives from all three institutions. No formal deal was struck; Muise, McNamee, and Sullivan plan to meet with Frank’s office again to discuss how the program could receive funding.
Frank’s office declined to comment.
That government funding is essential for the program to succeed. As property values fall in the region, a new conforming mortgage at 80 percent of the value frequently cannot cover the old loan. The median home in Fall River in 2007 was worth $246,000. In 2008, that value fell to $197,150. In New Bedford, the median fell from $233,000 in 2007 to $190,000
Muise wants the government to step in and help back banks and credit unions that want to restructure, or tear up bad and write new loans.
“We need to get some sort of guarantee to support that value to allow us to lend money so that borrowers can take advantage of the current interest rates, and perhaps save a home,” said Muise. “Anybody that is upside-down in the mortgage now is not going to be able to rewrite the loan, and reduce the payments or extend the term.”
Muise said that while the program may not be revolutionary, it is urgent. He sees a second wave of foreclosures coming soon, this time tied to unemployment, not sub-prime loans.
“The next wave of foreclosures that’s going to come upon is going to crush the people already in foreclosure and in need of services,” Muise said. “If we can keep people off those services that are already stretched thin, than maybe they can be more effective. One fewer house on the foreclosure rolls is going to be important.
“Just get that money to the credit organizations so they can get it on the street – fast,” he said.
Keeping People In Homes
One fewer house could mean up to three fewer families without a home. Many of the homes forced into foreclosure in New Bedford and Fall River are two- or three-family homes with absentee landlords ready to walk away from troubled properties.
That is where McNamee and the Catholic Social Services of the Archdiocese of Fall River come in. She sees between 12 and 15 families a day who need counseling through the foreclosure process.
“We started to get the brunt of it, because we’re one of the few that’s [Department of Housing and Urban Development] certified [in the area],” said McNamee. “We get the stories. The other guys get the realities, but we actually see the people and try to find a way to keep people in their homes.”
When enough houses are boarded up, neighborhoods are devalued, and troubled mortgages are harder to salvage. The New Bedford Office of Housing and Community Development has strived to either save homes going into foreclosure, or find and finance first-time homebuyers to purchase the home from the bank.
“Some of the areas that are some of our challenged neighborhoods historically, we’ve made some inroads to bring those back,” said Sullivan. “They are the last to recover, and many of them are the first to feel the effects of disinvestment and declining values.”
Sullivan uses real-estate data from the Warren Group to reveal trends, but the city’s staff knows the streets, neighborhoods, and families who need the help. What they don’t know is if the economic climate will improve anytime soon.
“There are a lot of unknowns now, and we’re very fearful of the next wave of foreclosures in the city,” Sullivan said. “Hopefully we can all collaborate to grow out of this foreclosure crisis.”
