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Neighborhood Housing Services of Chicago. Serving Lower Income Neighborhoods in Distress Bruce Gottschall, Executive Director Neighborhood Housing Services of Chicago FDIC Advisory Committee on Economic Inclusion February 5, 2009. Neighborhood Housing Services of Chicago.

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neighborhood housing services of chicago
Neighborhood Housing Services of Chicago

Serving Lower Income Neighborhoods in Distress

Bruce Gottschall, Executive Director

Neighborhood Housing Services of Chicago

FDIC Advisory Committee on Economic Inclusion

February 5, 2009

neighborhood housing services of chicago2
Neighborhood Housing Services of Chicago
  • Mission: Neighborhood Housing Services of Chicago creates opportunities for people to live in affordable homes, improve their lives and strengthen their neighborhoods.
  • We do this by:
    • Educating and preparing new homeowners for success
    • Lending to help people buy, fix and keep their homes
    • Sustaining home ownership through foreclosure prevention services
    • Preserving, rehabbing and investing in housing
    • Building powerful and enduring community partnerships
  • NHS started in 1975 to combat redlining in Chicago
  • Created or preserved 26,923 units of housing through:
    • Lending
    • Rehab
    • New construction
  • Directly invested $458 million
  • Neighborhood Lending Services & NHS Redevelopment Corporation
nhs of chicago
NHS of Chicago
  • 9 target communities
  • Community building and neighborhood reinvestment strategies
  • Block and institutional organizing
  • Home ownership training and counseling
    • Pre-purchase
    • Post-purchase
  • Foreclosure prevention
home ownership preservation initiative hopi model
Home Ownership Preservation Initiative (HOPI) Model
  • Partnership begun in 2003 between
    • NHS of Chicago
    • City of Chicago, Department of Housing
    • Federal Reserve Bank of Chicago
    • Major Lenders/Servicers
  • HOPI approach
    • Quality homeowner education to prevent current and future delinquencies
    • Direct interventions to assist homeowners at risk of foreclosure
    • Reclaim foreclosed homes for owner-occupants
    • Study mortgage and servicing impacts on neighborhoods to develop best practices as a laboratory for training and replication
hopi recent activity
HOPI Recent Activity
  • Activity Sept-Dec 2007 Sept-Dec 2008
  • New F/C Cases 215 680
  • Workshop Attendees 46 840
  • Counseled Borrowers 772 1226
  • Documented Saves 114 181
loan modifications
Loan Modifications
  • More Modifications Offered, But Not On Sustainable Terms
    • Only 1/3 of Mods Lower Monthly Payment
    • The Rest Freeze or Increase Monthly Payment
  • Workable Mods require considering Homeowner's Total Budget
  • Time to Solution for counselor is Still 3-6 month
  • Execution of “new” programs has not reached loss mit staff level
why aren t loan mods sustainable
Why aren’t loan mods sustainable?

- Investor Restrictions On How Much Loan Can Be Modified

  • Lack of Accurate Data On What Homeowner Can Afford
  • Servicer Capacity to Handle Volume Of Requests
  • Investors Waiting On Bailout Programs
  • Servicer Disincentives To Do Loan Modifications v. Foreclose
new nhs foreclosure client profile
New NHS Foreclosure Client Profile
  • Average NHS Client: Monthly Household Expenses Are 137% of Income
  • More Families With Good Loans Delinquent Because Of Other Expenses And Decreases In Income
  • Streamlined Modification Programs Can Handle the Cases With Reasonable Total Household Expense Ratios. @ 30-40% of NHS Population
  • Next Tier, @ 20% Require Intensive Counseling On Budgeting/Cost Cutting
Streamlines the Loan Resolution and Process for Counselors And Servicers
  • Quickly identify borrowers who are eligible for these options, and
  • Gets them through the process faster.
  • Counselors, borrowers, and lenders all speaking the same language
A transparent Web-based solution that offers:
    • Automated loan resolution proposals based on borrower characteristics
    • Automated identification of federal and state “rescue” programs available for refinance solutions
    • A password-secure Web site that facilitates the fast, easy exchange of loan and borrower information between counselors and servicers
neighborhood lending services cdfi and licensed mortgage bank
Neighborhood Lending ServicesCDFI and Licensed Mortgage Bank
  • Lending to families and individuals to: buy, fix or keep homes
  • Tool to fill lending gaps to create reinvestment
  • City-wide to low/moderate income borrowers
  • Neighborhood Lending Program:
    • CBDG subsidy funds to leverage private funds and create investment and affordability
nhs borrower
NHS Borrower
  • Owner occupant in target neighborhood
  • African-American (71%) or Hispanic (19%)
  • Female Head of Household (42%)
  • Household income at or below 80% of the Area Median Income (65%)
  • Loans to borrowers in Low/moderate income census tracts (90%)
  • Up to 10% of transactions may be to homebuyers or homeowners with ITINs
new 2009 loan pool overview
New 2009 Loan Pool Overview
  • $150 million loan pool over next three years
  • Loans to low/moderate income borrowers and/or neighborhoods
  • Dedicated 6.00% loan loss reserve
    • MacArthur foundation participant
  • Public/private partnership effort
  • Loans originated by NHS of Chicago’s non-profit residential mortgage licensee - Neighborhood Lending Services, Inc. (NLS)
why participate
Why participate?
  • Extensive community development lending and investment opportunity
  • Sound economics from an investor perspective
  • Sound financial optics on investor income statement and balance sheet
  • NHS delivers on promises making reward worth effort
  • Wide recognition from regulatory and public sector, including City of Chicago and public at large
  • Visibility and marketing effort creates additional opportunities for lender originations
  • Newly-originated first mortgages by lender made possible by tandem NHS second mortgage
  • Managed reserves address credit risk
  • Innovative template replicable in other markets for private, public, and non-profit collaborations to create innovative community development opportunities
investor participation 2009 in progress
Allstate Bank

Beverly Bank

Charter One Bank

Cole Taylor Bank

Community Savings Bank

First Savings Bank of Hegwish

Harris, N.A.

Hoyne Savings Bank


MB Financial Bank

* Midwest Bank and Trust

National City Bank

Neighborhood Lending Services

The Northern Trust Company

Park Federal Savings

Park National Bank

The Private Bank and Trust

Prospect Federal Savings

Standard Bank

State Farm Bank

Investor Participation 2009(in progress)
nhs redevelopment corporation
NHS Redevelopment Corporation
  • Direct real estate ownership and development
    • Tool for neighborhood reinvestment
    • Fix problem vacant properties
    • Create visible investment to set standards for improvement
    • Provide affordable housing opportunities
  • Multi-family rental rehab and new construction (tax credits, etc.)
  • New home construction to encourage homeownership on vacant lots
  • NeighborHomes: purchase, rehab and resale of vacant 1-4 unit properties for sale to owner occupants
current purchase rehab resale issues
Current Purchase, Rehab, Resale Issues
  • Very soft market
    • Even in formerly okay neighborhoods
  • Tightening credit availability
  • Overall holding costs
  • Decreasing sales prices
  • Increased subsidy needs and lower acquisition cost
  • Rental single family - option
  • Lease to purchase options
    • Subsidy needs
    • Management and counseling costs
    • Subsidy to cover costs of those lease to purchasers who don’t become the owner and need to replace with new
new reality
  • 97% of properties that go to foreclosure auction end up in REO inventories.
    • Investor interest has been dramatically reduced had declined from 30% of foreclosures purchased at auction
  • Large inventories of bank owned REO property are putting tremendous downward pressure on local real estate markets.
  • Servicers are actively pursuing opportunities to move REO.
    • Increased interest negotiating transactions
    • “Make us an Offer”
neighborhood perspective
Neighborhood Perspective
  • Currently there are 358 single family active listings in Roseland.
  • 279 listings are priced less than $149,999
  • 47 are listed for less than $30,000 with an average time on market of 167 days.
    • In ‘05 & ’06 no properties under $30,000
  • 10 are listed for less than $15,000 with an average market time of 105 days.
market capacity vs price
REO property most likely will have substantial deferred maintenance

Cost to rehabilitate properties has not decreased

Soft resale and rental market makes rehabilitation challenging without significant subsidy.

Single family rental demand still an unknown in hardest hit communities.

Market Capacity vs Price

Bank Owned REO located at 331 West 110th Street. Photograph taken from MLS listing # 06834796

neighborhood housing services of chicago26
Neighborhood Housing Services of Chicago

Serving Lower Income Neighborhoods in Distress

Bruce Gottschall, Executive Director

Neighborhood Housing Services of Chicago

FDIC Advisory Committee on Economic Inclusion

February 5, 2009