Sustaining Homeownership and Communities
by Donna Sheline, senior vice president, Homeownership Preservation Office, JP Morgan Chase
Participants in a NeighborWorks® America foreclosure prevention training, standing before a renovated property, are proud of their organization's efforts to establish the Home Ownership Preservation Initiative (HOPI) in partnership with the City of Chicago, lenders, and nonprofit counseling agencies.
The United States currently enjoys the highest rate of homeownership in its history. Many communities have benefited from affordable mortgage products and historically low interest rates. Unfortunately, other communities have been seriously affected by a record number of foreclosures.
This article focuses on Chicago's strategic plan to reduce foreclosures and reclaim abandoned properties—a plan that grew out of a public-private partnership of lenders, loan servicers, city government, and the nonprofit Neighborhood Housing Services of Chicago (NHS). It is also about the new Chase Homeownership Preservation Office (HPO), which was created to work directly with community-based organizations to help families sustain homeownership.
Home Ownership Preservation Initiative
Between 1993 and 2002, the rate of Chicago foreclosure filings increased 91 percent. A disproportionate share of these filings was concentrated in the low- and moderate-income neighborhoods of Chicago's South and West sides. In 2003, Mayor Richard Daley, Michael Moskow, president of the Federal Reserve Bank of Chicago, and Bruce Gottschall, executive director of Neighborhood Housing Services of Chicago, convened a leadership group to form the Homeownership Preservation Initiative (HOPI) - a unique partnership among NHS, the city of Chicago, the Federal Reserve Bank of Chicago, leading financial institutions, including Chase, and other nonprofit and industry leaders. HOPI set out to launch an aggressive campaign to preserve homeownership and reclaim neighborhoods.
In 2003, HOPI established a three-year plan that included the following goals:
- Homeownership Preservation: Help 1,500 families avoid foreclosure through loss mitigation, preservation loans, refinancing, and property disposition strategies.
- Property Preservation: Reclaim 300 foreclosed properties for affordable homeownership through direct development activities and purchase-rehab lending tools.
- Community Development Best Practices: Document lessons learned and best practices in homeownership preservation and property preservation.
In the first two years of operation, HOPI accomplished the following:
JP Morgan Chase's Homeownership Preservation Office has provided its toll free number to nearly 200 nonprofit organizations so that they know who to contact and have a single point of entry.
The city of Chicago established the 311 Homeownership Preservation Campaign, whereby homeowners at risk of foreclosure can call the city's non-emergency 311 call center. The homeowner is connected immediately to credit counseling with the Credit Counseling Resource Center (CCRC), a nonprofit counseling agency; to NHS of Chicago for those callers who also desire a local agency contact; and to the city's local resources for job training, emergency repairs, and senior services.
Nine hundred and forty foreclosures have been prevented through the improved mitigation measures undertaken by lenders and servicers, and through the direct intervention and counseling provided by NHS of Chicago, HOPI lender partners, and the credit counseling organizations linked to the 311 call center.
NHS and the HOPI lenders/servicers developed a series of Homeowner's Workshops to provide incentives for customers in neighborhoods with high foreclosure rates to attend informational sessions prior to experiencing any financial difficulty. NHS staff prepares and presents these workshops, which focus on issues to help homeowners preserve and sustain their homeownership, while allowing the sponsoring lenders/servicers to interact with their customers in a non-crisis environment.
NHS and 10 HOPI lender partners reclaimed 175 formerly vacant single family (1-4 units) properties in Chicago neighborhoods through direct development activities and purchase-rehab lending that resulted in these homes being sold to and occupied by low-and moderate-income families. Several financial institutions began partnerships with NHS to donate or discount REO properties in NHS neighborhoods.
Community Development Best Practices
NeighborWorks® America established the Center for Foreclosure Solutions to explore how lessons learned through Chicago's HOPI could help community-based organizations in other cities, and how the partnership can be expanded to reduce foreclosures.
Clearly, Chicago's HOPI is a successful model for fighting the growing number of foreclosures and vacant properties. HOPI engaged local and national leaders, mobilized dedicated resources, raised needed funds, developed targeted marketing campaigns, and provided loss mitigation seminars for delinquent borrowers.
NeighborWorks® America established the Center for Foreclosure Solutions to explore how lessons learned through Chicago's HOPI could help community-based organizations in other cities, and how the partnership can be expanded to reduce foreclosures. Chase supported HOPI by providing real estate owned (REO) properties at a discount, or as a donation to NHS, to help stabilize Chicago communities through local owner-occupied homeownership. As a result of the success in Chicago, the HOPI model has been shared with other markets facing high foreclosures, including communities in Michigan, Texas, and Ohio. NHS of Chicago and its partners are eager to share HOPI's best practices and help launch additional initiatives. Chase recognizes the importance of local partnerships to build viable and sustainable communities. In July 2004, Chase's new HPO began to work with community leaders, housing advocates, public officials, investors, and other stakeholders on practical solutions to serious mortgage problems, including abusive practices, such as fraud and predatory lending. Financial literacy programs play a critical role in helping borrowers make informed decisions when looking to purchase a home and when they run into trouble as homeowners. Chase engages in a number of initiatives in communities across the country to provide financial literacy training and raise public awareness on making the right choices.
Chase Homeownership Preservation Office
The HPO often serves as a bridge between the Chase Homeowner Assistance Department—a department that works directly with customers in default—and local mortgage counseling and legal aid organizations working with clients in default. HPO has provided its toll free phone number to nearly 200 not-for-profit organizations as a single point of entry into Chase Home Finance Servicing. HPO staff assists mortgage counselors by working with them on potential resolutions for delinquent homeowners. HPO staff can also explain, where possible, the process to a successful workout solution. While not all mortgage defaults can be resolved through workouts, many mortgage problems can be remediated. Under our model, HPO clients receive service from both a local not-for-profit and an internal Chase advocate.
By participating in housing forums and foreclosure summits, Chase learned that counselors wanted to better understand loss mitigation options. Working with Chase's Homeowner's Assistance Department, the HPO developed loss mitigation training for community-based mortgage counselors. Since March 2005, HPO has conducted training sessions in nine cities across the country and plans to do more training in the coming months. While dispelling myths, the training provides information on investor guidelines and the range of workout solutions, and underscores the need for early intervention.
Summing It Up
Most people default on their mortgage payments because of financially disabling hardships. Chase recognizes that many of these households will get back on their feet. We want to help them weather their financial storms. Chase's HPO is one effort to bring the resources of Chase closer to the community, sustaining homeownership in good times and in bad. The Chicago HPO illustrates how the public-private partnerships that can mobilize local resources to serve the needs of at-risk homeowners and begin to reclaim distressed communities. Anything is possible when everyone is focused on the goal and working together as a team to build a better future for our communities.
For additional information, contact Donna Sheline at (317) 236-5698; www.chase.com