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Orange County Business Council Work Force Housing Committee March 18, 2009

Foreclosures. A Regional Response to the Foreclosure Crisis . Orange County Business Council Work Force Housing Committee March 18, 2009. The Foreclosures Crisis. The Problem

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Orange County Business Council Work Force Housing Committee March 18, 2009

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  1. Foreclosures A Regional Response to the Foreclosure Crisis Orange County Business Council Work Force Housing Committee March 18, 2009

  2. The Foreclosures Crisis The Problem The number of mortgage foreclosures in Orange County and throughout the state has dramatically increased. This trend is expected to continue through 2010. This dramatic increase is overwhelming existing resources, displacing families, and leaving many affordable homes vacant and boarded. As of February 2009 there are over 20,000 foreclosure homes on the market. Approx. 8,300 are REO’s (Bank Owned) Approx. 8,500 are in Default

  3. Orange County Foreclosure Picture

  4. Where are the ForeclosuresFebruary 2009 – Information from DataTrac Santa Ana 650 approx. Irvine 155 Anaheim 500 Hunt. Beach 140 Garden Grove 225 Mission Viejo 115 Orange 175 La Habra 110 Fullerton 175 Rancho SM 110 ******************************************************************************************* Foothill Ranch 1 – 109 Newport Coast 1 -194 Santa Ana 1 – 137 San Juan Capistrano 1 - 200 Rancho SM 1 -152 Alisa Viejo 1 -201 Stanton 1 -188 La Habra 1 -213 Countywide 1 - 282

  5. Homes on the OC Market January 25, 2009 (OC Register) Market Home ValueAll InventoryDistressedPercentage $0 - $250k 2,139 1,432 67% $250k - $500k 1,759 1,039 59% $500k - $750k 2,115 701 33% $750k - $1 mil 1,135 258 23% $1 mil. - $1.5 mil 876 95 11% $1.5 mil. - $2 mil. 56 33 56% All O. C. 11,560 5,104 44% Attached 4,628 2,317 50% Detached 6,871 2,674 39%

  6. Other Data • Calif. home prices have dropped 26.7% in 2008 compared to national average of 11.6%. • Calif. is only behind Florida and Nevada in serious delinquent mortgages. • 2,250 ave. per month new delinquencies in OC over past 3 months • Existing home sales up 84.7% over 2007 • In 4th quarter 2008 the value of approximately 125,000 California homes dropped below the mortgage balance.

  7. Classifying Local Strategies – Prevention and Mitigation While mortgage regulation and foreclosure laws are generally the domain of federal and/or state government, nonprofits, local governments, and even some local banks have responded to rising foreclosures in various ways. Their strategies include direct, local action, often in collaboration with other groups. Homeownership Prevention Efforts are made to reduce the numbers of foreclosures by providing foreclosure prevention education and counseling combined with successful loss mitigation strategies and community outreach. Maintain Housing Values Tackling the negative impacts of foreclosure in our neighborhoods and on individuals. It is about mitigating the “Spillover” problems caused by foreclosures.

  8. Homeownership Preservation Membership includes participants from: lending institutions, non-profits, local government, real estate industry, HUD, Federal Reserve, and elected officials. OCHOPC has held 7 foreclosure prevention workshops assisting over 2,200 distressed homeowners.

  9. FDIC Model Key objectives • Keep borrowers in their homes when the borrower is willing and has the capacity to make an affordable mortgage payment. • Provide borrowers with immediate payment relief and stable long term mortgage payments. • Modification must always result in a positive NPV outcome for the investor, i.e., the cost of the modification must be less than the estimated cost of foreclosure.

  10. FDIC Model Strategy • Return the loan to a current status. • Capitalize delinquent interest and escrow. • Modify the loan terms based on waterfalls, starting at a front-end 38 percent HTI ratio down to a 31 percent HTI ratio, subject to a formal NPV floor. • Reduce interest rate to as low as 3 percent. • Extend, if necessary, the amortization and/or term of the loan to 40 years. • Forbear principal if necessary.

  11. Preserving Home Values The Home Again Collaborative The Collaborative is envisioned to include key Orange County nonprofit housing organizations, local governments, cooperating lending institutions, and the Orange County Home Ownership Preservation Collaborative. The purpose of the organization is produce more affordable housing by coordinating the acquisition, rehabilitation and disposition of foreclosed residential properties.

  12. Preserving Home Values The Home Again Collaborative Sources of Funds: • Orange County Housing Trust • Investments from Financial Institutions • NSP Funds • Local Government • NeighborWorks America • Clearinghouse CDFI • Mortgage Financing

  13. Final Thoughts In responding to the foreclosure crisis, community development organizations, local government and the real estate and financial industries need to engage in a balanced approach to community revitalization which includes preventing foreclosures while assisting first-time homebuyers purchase foreclosed homes. Ken Mutter Neighborhood Housing Services of Orange County 714-490-1250 kenm@nhsoc.org

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