Community Coalition Acquires Mortgages of 47 Properties Before They Face Foreclosure

By Anuradha Kher, Online News EditorEssex County, N.J.–A community coalition led by HANDS Inc is acquiring first mortgages of 47 vacant properties in Essex County, N.J., which will be converted to affordable housing or rental units. The properties were acquired for a concession price of about $2 million.New Jersey Community Capital, a community development financial institution working throughout New Jersey, took a lead role in this transaction, coordinating the provision of debt and equity from its socially responsible partners, Prudential Social Investment, Local Initiatives Support Corporation-Greater Newark & Jersey City (LISC), NeighborWorks America, and Enterprise Community Partners.NeighborWorks America put in $100,000 of equity into the purchase of these mortgages while Enterprise provided $50,000 out of $750,00 for the deal that represents the first large-scale purchase of mortgages in the country by a local non-profit. All of the homes are vacant and abandoned, and most are deteriorated, contributing to blight in their surrounding communities. HANDS purchased the mortgages from Washington Mutual Bank, now J.P. Morgan Chase, as part of a pioneering new strategy to reclaim neighborhoods hard-hit by foreclosure, and is working with its partners in Operation Neighborhood Recovery to rehabilitate the properties so they may become cornerstones for productive change in their surrounding communities.  “Typically, non-profits acquire properties, not the mortgages,” Lydia Tom, senior advisor at Enterprise Community Partners, tells MHN. “Acquiring mortgages is an early intervention strategy, which will prevent a lot of these communities from deteriorating further. The goal was to intervene early so that less money is required for the rehabilitation.”All 47 properties are investor owned and were rented before the acquisition deal began. They are all vacant now. Some of them are in decent condition, but others are not, explains Tom. By acquiring the group of mortgages in bulk purchase, HANDS is able to immediately invest in stabilizing the vacant properties and return them to productive use. HANDS faces significant carrying costs (interest, property taxes and insurance) during this process, requiring a collaborative effort throughout all phases of the project to make it a success. With early intervention, she explains that a property (or in this case an entire community) can be saved from deterioration. “We have spent decades building communities and they are now in danger of being destroyed within months. Newark, for example, was just beginning to improve. It recently built its first market-rate building and now it is going back to the way it was,” says Tom.These buildings will be rehabilitated and converted to affordable housing or rental housing. However, the disposition may take several months or a year. Enterprise also led the Save America’s Neighborhoods Campaign, a cross-industry taskforce of more than 100 national organizations that secured $4 billion in the Housing and Economic Recovery Act to stabilize communities struggling in the foreclosure crisis. Enterprise also played a key role in creating the National Community Stabilization Trust to facilitate the transfer of foreclosed and vacant residential properties from financial institutions and government entities to qualified local housing development partners.