NeighborWorks® America

Information About Innovation:

Title:

Operation Neighborhood Rescue

Contest Category:

Innovative strategies to address REOs in the community - 2008

Summary:

HANDS, Inc. of Orange, NJ, adapted its successful 10 year-old abandoned property strategy to purchase bulk mortgages and REOs from a major lender, stabilize the properties, provide mortgage work-outs with resident homeowners, rehabilitate the remainder and convey some of the properties to partner CDCs or resell the properties to first-time homebuyers. The strategy has become a demonstration model for a large-scale community asset preservation entity being developed in northern New Jersey.

Description:

At HANDS, we believe that a neighborhood is revitalized by the actions of hundreds of individuals investing their time, money, energy and hopes in the future of that neighborhood. Our role is to leverage those investment decisions, bolster public sector action and generate more private sector investment.

And so, for more than a decade, HANDS Inc., of Orange, NJ, has implemented a strategy of High-Impact Development of vacant, problem properties; pivotal properties that drain the hope from a community and are magnets for drugs, arson and other crimes, while deterring both public and private investments.

To accomplish our goals, we organized a Community Problem Property Task Force and helped rewrite state law to give municipalities dramatic new powers. We also became expert at clearing title on properties that languished due to title obstacles and mounting liens.

Our strategy has been successful. We began with over 400 vacant problem properties in Orange. HANDS cleared title and redeveloped 66 of these, most of which were sold to first time homebuyers. As successive problem properties were redeveloped, market forces and community involvement were catalyzed to reduce the remaining problem. Last year, there were under 50 vacant properties.

This year, for the first time in over a decade, the number of vacant properties has increased. This increase was felt throughout the state, but hardest hit are distressed urban areas, including Orange and surrounding communities such as Irvington, East Orange and Newark. Our strategy needed to be adapted to address this problem is a systematic and scalable way.

HANDS discovered that one lender held mortgages or title to more than 50 residential properties in these communities. Many of the properties were vacant, deteriorated and toxic to their neighborhoods. Some had already been stripped of siding and copper and a few had pushed adjacent properties into abandonment.

HANDS approached that lender and proposed an arrangement whereby HANDS and a group of participating CDCs would purchase these mortgages and REOs, step into the lenders shoes to offer work-outs to resident homeowners or execute foreclosures as appropriate, stabilize and manage the properties, rehabilitate them and return them to productive use.

HANDS and the lender signed an MoU, whereby HANDS has a time period to conduct due diligence with full access to each property and to determine a fair price.

We began by doing a physical inspection, title investigation, a determination of the cost to rehabilitate the properties, to execute foreclosures and to carry and manage the properties. We also made an assessment of their fair market value.

While conducting our assessment, we:
•formed a collaborative with four CDCs that would acquire the properties in their service area
•secured adequate financing commitments
•secured subsidy commitments
•secured new mortgage and servicing agreements

As we complete these acquisitions, we have developed a trusting relationship with the lender, built a CDC collaborative and performed a clear-eyed assessment of all the complex costs involved.

Our work has become a “demonstration” model for a scaled-up community asset preservation entity that will respond to the larger wave of foreclosures to come. To accomplish this, HANDS is leading the Property Recovery Working Group of the Newark/Essex Foreclosure Taskforce, which includes members from government, finance and the CDC community.

Projected Annual Operating Cost:

The operating budget for this initiative utilizes our existing housing development staff supplemented by consultants. Out-of-pocket expenses during Due Diligence will be $35,000 including foreclosure attorney, title company, realty appraiser and rehabilitation expert. HANDS’ Housing Director and Project Developer will both devote time to this project. Property management costs will be outsourced and all of those costs will be capitalized to the properties. All other out-of-pocket costs associated with the development will also be capitalized.

Specific Outcomes or Results in Calender Year 2008:

During the remainder of 2008, we will have executed our agreement with the lender to buy 46 mortgages and 10 REO properties and we will have raised $6.5 million to cover purchase and carrying costs. We will manage all the properties and secure the vacant houses. We will have devised mortgage work-outs with willing owner occupants, signed leases with tenants and begun foreclosure on the remaining homes. We will have secured public subsidies and begun the needed rehabilitation of the properties. By mid-2009, we will have completed the rehabilitation of the properties, conveyed title of some of the properties to partner CDCs, and resold the rest to first-time homebuyers.

Web Site (optional):

http://www.handsinc.org

Information About Organization:

Name:

Housing and Neighborhood Development Services, Inc.

Address 1:

15 S. Essex Avenue, Rear

City, State, Zip:

Orange, NJ 07050

501c3 Non-Profit:

yes

Contact Name:

Patrick Morrissy

Contact E-Mail:

patrick@handsinc.org

Contact Phone:

973/678-3110 x1

Keywords:

Print-Friendly Format

Return

Unless otherwise noted, all content © 2008 Neighborhood Reinvestment Corporation, dba NeighborWorks^® America. All rights reserved.

Terms of Use | Privacy Policy | Support | Contest Administration

1325 G St., NW, Suite 800, Washington, DC 20005-3100
Phone: (202) 220-2300 Fax: (202) 376-2600