The foreclosure crisis, which has caused around 4 million people to lose their homes, has wreaked havoc on many neighborhoods. Foreclosed homes drag down property values when they swell the housing supply and sell at below-market rates. These bank-owned homes also can erode the character of communities by attracting all manner of blight as they sit unoccupied.
The foreclosure scourge is especially acute in minority neighborhoods, according to a recent report by the National Fair Housing Alliance, which found that banks take much better care of their foreclosed properties in predominantly white neighborhoods than those in minority communities.
Some nonprofits are taking robust measures to combat the epidemic of foreclosures, also known as REO (for "real estate owned") homes. Three of them, Rebuilding Together, NeighborWorks America and the National Community Stabilization Trust, recently announced a new partnership designed to ramp up efforts to revitalize clusters of bank-owned foreclosures, highlighting what appears to be a growing focus on maintenance as a means to mend the housing market.
NeighborWorks America, which coordinates with affiliates that were awarded more than a total of $500 million from the $7 billion Neighborhood Stabilization Program fund in 2010, is teaming up with local affiliates of the nonprofit Rebuilding Together to train the groups to rehabilitate vacant foreclosed homes and sell them to low-income Americans.
The National Community Stabilization Trust, which was created in 2008 to facilitate the transfer of bank-owned homes to nonprofits, will work with the two groups to identify homes that will receive repairs under the program.
"This is a unique effort in that it's focused on transforming vacant and dilapidated properties into safe and affordable homes in the communities they serve," Rebuilding Together spokesperson Janice Walker told AOL Real Estate.
The announcement of the collective nonprofit initiative marks one of the latest attempts to reduce the strain of neglected foreclosed homes on neighborhoods and the housing market. Nonprofits, banks and the government use rehabilitation to combat REO blight, and sometimes provide affordable housing to low-income Americans after the homes' restoration. They've appeared to bolster their efforts in recent months in order "to figure out how to move upstream," says Ascala Sisk, senior manager of Stabilization Strategies at NeighborWorks. And there are "many different structures" to use to accomplish this.
For nonprofits, the Neighborhood Stabilization Program plays a key role in rehabilitation efforts, furnishing them with the necessary funds to invest in mass-scale neighborhood revitalization, which often takes the form of REO rehabilitation.
The Department of Housing and Urban Development administers the fund, which has received $7 billion in appropriations so far, Sisk says. And the National Community Stabilization Trust, one of the three partners of the new nonprofit initiative, helps put these funds into action by "providing the only nationwide platform that gives local housing providers a clear, consistent, and straight path to acquire foreclosed and abandoned properties from financial institutions," the National Community Stabilization Trust's website says.
With NeighborWorks guidance, Rebuilding Together, which purportedly completes 10,000 projects that assist low-income homeowners per year, is now beginning its first foray into REO rehabilitation. Rebuilding Together's plan is to rehabilitate REOs and sell them to community members who make between 80 and 120 percent of the local median income, and also provide them with homeownership education, Walker says.
Since the partnership has just formed, Rebuilding Together says that it can't provide an estimate of how many homes the program will impact.
By mandating that the properties be converted into rentals, the program aims to lower rents where foreclosures have hiked up rates and provide the homes with caretakers who are motivated to maintain them, namely, the investors themselves. After a few years of renting (and maintaining) the once-dilapidated properties, investors are expected to push the homes onto the market and sell them.
The program has its critics, including the National Association of Realtors. Detractors say that selling in bulk to investors could chip away at home prices (private investors often buy homes at discounts because they pay banks in cash, not borrowed money) and encourage prospective buyers to rent, instead of buy.
"Over time, servicers have adjusted their models to accommodate selling properties quickly rather than holding onto potentially wasting assets," the 2010 Federal Reserve report on neighborhood stabilization says. "At times this may mean selling to a cash investor immediately, at a slightly lower price, instead of waiting for a prospective owner occupant to receive financing for the purchase."
Bank of America has launched a similar pilot program, called the "Mortgage to Lease Program," that forgives the outstanding debt of some homeowners headed toward foreclosure and offers them the opportunity to rent their homes from Bank of America in exchange for handing over the titles to the bank. If homeowners opt for the program, they may rent for up to three years.
"If this evolves from a pilot into a more broadly based program, we also see potential benefits from helping to stabilize housing prices in the surrounding community and curtailing neighborhood blight by keeping a portion of distressed properties off the market," Ron Sturzenegger, a servicing executive of Bank of America, said in a statement.
For all the two programs' possible shortcomings, they reflect a growing interest across the real estate industry in finding innovative ways of ameliorating the housing crisis by attending to the REO threat, Sisk says.
"And that's great to see," she says.
An earlier version of this story misidentified a Rebuilding Together spokesperson. The spokesperson's name is Janice Walker. The story also incorrectly stated that Rebuilding Together's rehabilitation plan is to restore REOs and sell them to community members who make between 80 and 20 percent of the local median income. The income range is actually 80 to 120 percent of the local median income.
Rebounding Real Estate Markets: Top 10 Turnaround Towns
Foreclosure Rehab: Ramping Up the Battle Against Blight
Median List Price Appreciation: 17.79 percent
Median Age of Inventory: -16.18 percent
Inventory Change: -29.25 percent
Home Price: $2.999 million
Sq. Ft.: 5,123
After slipping out of Realtor.com's top 10 rankings for the third quarter of last year, Punta Gorda has reclaimed status as a town in the vanguard of real estate recovery. Home prices are reportedly just beginning to trend upward. But they still have a long way to go: home prices in town are 56.2 percent lower than they were in 2006, at the peak of the housing boom.
Median List Price Appreciation: 9.09 percent
Median Age of Inventory: -28.89 percent
Inventory Change: -35.28 percent
At 11 percent, the Lakeland-Winter area has the highest rate of unemployment on Realtor.com's top 10. But the real estate market seems to be another story. Realtor.com says that the area was the fourth-most-searched spot by users of their listing service. Distressed home sales have fallen significantly from last year as well.
Home Price: $1.3 million
Sq. Ft.: 7,813
The local market may be on the road to recovery, but distressed home sales still are hindering the market. This French mansion is selling by way of short sale.
Median List Price Appreciation: 7.84 percent
Median Age of Inventory: -35.71 percent
Inventory Change: -41.63 percent
Home Price: $5 million
Sq. Ft.: 8,700
Sale prices in this sultry town have risen 18 percent year-over-year, as of November, quite an encouraging sign for the local market. Meanwhile, unemployment is shrinking. The rate fell to 9.4 percent in November.
This Mediterranean may have just seen its price slashed, but with a $5 million ask, it'll still cost you a pretty penny.
Median List Price Appreciation: 13.38 percent
Median Age of Inventory: -13.64 percent
Inventory Change: -35.94 percent
Home Price: $19.9 million
Sq. Ft.: 8,226
Naples finds its way onto Realtor.com's list for the first time this quarter, thanks, in part, to its housing market's 13.64 percent decline in median age inventory and 13.38 increase in median list price.
Naples offers its fair share of uber-luxury homes. This waterfront mansion, at nearly $20 million, costs $2,419 per square foot.
Pictured here is a dining room of the home (we're guessing there's probably another one considering the place is 8,000 square feet). The elaborately decorated room features what appears to be a flying saucer. Maybe it can beam up the filet mignon.
Median List Price Appreciation: 13.77 percent
Median Age of Inventory: -23.42 percent
Inventory Change: -39.66 percent
Home Price: $1.5 million
Sq. Ft.: 4,875
A drop in foreclosures in this city shrank its year-over-year for-sale inventory by a whopping 40 percent as of last year's fourth quarter. The city also enjoys the benefit of an unemployment rate that is lower than the national average.
Median List Price Appreciation: 10.78 percent
Median Age of Inventory: -26.57 percent
Inventory Change: -31.01 percent
Home Price: $12.5 million
Sq. Ft.: 7,194
In Sarasota, home sales jumped 17 percent last year while median list prices defied the national downward price decline by ticking up 2 percent. Realtor.com goes so far as to suggest that the market may have graduated to "seller's market" status, unthinkable in most housing markets across the country.
Thrust out into the Gulf of Mexico, this jaw-dropping manse practically commands its own square-shaped peninsula. But apparently personal peninsulas don't come cheap in Sarasota: This property is listed to the tune of $12.5 million.
Pictured here is the home's covered dock that parks at least two boats. Inside the home you'll find an exercise room, library and attached "oversized" verandas. Other outdoor amenities include an expansive pool and shuffleboard courts.
Median List Price Appreciation: 31.27 percent
Median Age of Inventory: -17.60 percent
Inventory Change: -35.31 percent
Price: $8.7 million
Sq. Ft.: 13,723
The Fort Myers-Cape Coral area continues to chug along the path to recovery with its median sales price zooming upward by 20 percent last year. But there's more to brag about: The area experienced the highest year-over-year increase in median list price for the fourth quarter -- 31.27 percent.
Median List Price Appreciation: 8.22 percent
Median Age of Inventory: -36.52 percent
Inventory Change: -44.02 percent
Home Price: $3.99 million
Sq. Ft.: 8,676
Year-over-year inventory plummeted by 44 percent in Orlando in the fourth quarter of last year, while list prices rose 8.22 percent. Both movements point toward a market that is truly beginning to right itself.
Fit for the big-swinging, cigar-smoking mogul, this luxury home, which recently had its price cut, puts you close to the links.
Median List Price Appreciation: 15.38 percent
Median Age of Inventory: -27.47 percent
Inventory Change: -48.10 percent
Home Price: $5.995 million
Sq. Ft.: 11,039
An area that had its housing market severely bruised by the foreclosure crisis, the Phoenix-Mesa area is mounting a recovery in a big way. While residents continue to file for foreclosure at a rate above the national average, the glut of cheap homes idling on the market has lured bargain-hunters. The area's relatively low unemployment rate of 7.7 percent also will work in its housing market's favor.
Median List Price Appreciation: 28.57 percent
Median Age of Inventory: -30.89 percent
Inventory Change: -51.44 percent
Home Price: $6 million
Sq. Ft.: 3,870
Buy in the city where the heat is on -- all night on the beach 'cause the housing slump's gone! Welcome to Miami (beinvenido a Miami)!
Miami leads the pack of cities building toward a recovery. Existing home sales in the Miami area leaped 51 percent in the third quarter compared to a year ago. Meanwhile, inventory shrank by half. Realtor.com suggests that much of the improvement is attributable to strong foreign activity in the market.
This luxury apartment may soon be the trophy home of some foreign magnate. According to Realtor.com, in May of last year, international buyers purchased about 60 percent of existing houses and condos and 90 percent of the newly built homes in Miami.