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Comprehensive Strategies for Foreclosure Prevention: Lessons from Cleveland

This report outlines a comprehensive response to the foreclosure crisis triggered by the 2004 wave of foreclosures in Cleveland. Factors such as population decline, surplus housing, and predatory lending practices fueled inappropriate refinancing and mortgage practices. The initiative brought together suburban mayors and local officials to allocate funding for foreclosure prevention. Key strategies included using a centralized referral system, mandatory counseling certifications, and community cooperation, resulting in over 2,250 foreclosures prevented and improved loan workout rates.

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Comprehensive Strategies for Foreclosure Prevention: Lessons from Cleveland

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  1. Foreclosure Preventionat Ground Zero Planning and implementing a comprehensive response

  2. The Perfect Storm • Population decline - weak demand • Surplus of obsolete post WWII houses • State refused to rein in predatory lenders • Result – inappropriate refinancing and purchase mortgages, exploding ARM’s, stated income buyers, equity stripping • Wave of foreclosures started in 2004

  3. Starting Out Slow • Turf fights among counseling agencies • Cleveland fighting its own battles • Suburban leaders don’t see any problem • Foreclosure backlog grows to 18 months

  4. Seizing the Day • Suburban mayors get organized • Elected officials agree to work together • Development and Treasurer lead the way • County Commissioners put up $1 million local property tax revenue over 3 years • Funding forces nonprofits to cooperate • Key decision – use “211” referral system

  5. Program Design • “Don’t Borrow Trouble” media outreach • Centralized referrals through “211” line • Mandatory HUD counseling certification • Free mandatory counselor training • Emphasis on workout negotiations • Rescue fund loans to “seal the deal” • Academic evaluations for three years

  6. Signs of Hope • Direct access to all major workout shops • Over 2250 foreclosures prevented to date • Loan workout rate up to 42% by year 2 • Built capacity to fully use extra counseling funding available through Neighborworks • Won State approval to use accumulated property tax penalties for rescue loans

  7. What’s Next? • Permanent foreclosure prevention office • Foreclosure recovery – financial literacy • Transition help for those who must move • Judicial mediation linked with counseling • Community recovery from vacancies

  8. Online Information Academic evaluation reports: urban.csuohio.edu/civic_education/publications/foreclosures_11_06.pdf urban.csuohio.edu/civic_education/publications/foreclosures_05_12_08.pdf Program summary for NACCED award: www.nacced.org/awards/awards2007.pdf (pages 13-14)

  9. Contact Information Mark Wiseman, Director Cuyahoga County Foreclosure Prevention mwiseman@cuyahogacounty.us (216) 443-7461 Paul Herdeg, Housing Manager Cuyahoga County Dept. of Development pherdeg@cuyahogacounty.us (216) 443-7257

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