The National Community Stabilization Trust, a new collaborative venture of nonprofit housing organizations, private philanthropies, and financial institutions today announced the launch of its national effort to help revitalize communities where high concentrations of foreclosed and abandoned homes are pushing down housing prices and causing neighborhoods to decline. Over eighty cities — including New York, Los Angeles, and Chicago — are already working with the Stabilization Trust.
The Stabilization Trust will act as a transfer agent between financial institutions who hold or manage foreclosed homes and community housing providers who want to get these properties renovated and back into productive use as new, for-sale homes or affordable rental housing. In practice, communities seeking to acquire multiple properties in a targeted area have had to negotiate separately with a dozen or more separate financial institutions. Now communities have another option — dealing with the Stabilization Trust to get access to these properties from multiple financial institutions in a more predictable and cost effective manner.
Community efforts to reclaim neighborhoods that have been devastated by the nation’s foreclosure crisis received a major boost last week when the U.S. Department of Housing and Urban Development (HUD) announced the availability of $2 billion in additional funding for the Neighborhood Stabilization Program.
“These new federal resources alone cannot get the job done,” said Craig Nickerson, President of the Stabilization Trust and a former mortgage financier. “Communities also need a straightforward and streamlined way to access foreclosed properties from financial institutions, as well as a fast, flexible source of capital to finance their acquisition and renovation activity. Working with the Stabilization Trust, communities can now get the expertise, support, and information they need to rebuild their neighborhoods and expand the supply of quality, affordable housing.”
Six nonprofit organizations — Enterprise Community Partners, Inc., Housing Partnership Network, Local Initiatives Support Corporation, the National Urban League, the National Council of La Raza, and NeighborWorks America — serve as founding sponsors of the Stabilization Trust. They came together because they recognized that cities and towns needed a way to gain control of foreclosed homes more quickly, efficiently, and affordably. Working with financial services experts, government officials, and nonprofit organizations in communities across the country, they found creative new ways to solve the legal, financial, and logistical problems that have caused the inventory of vacant and abandoned property to grow.
The country’s major financial institutions, including Bank of America, Chase, Citi, Fannie Mae, Freddie Mac, GMAC ResCap, Saxon Mortgage, and Wells Fargo, are working with the Stabilization Trust on a number of acquisition programs to assist communities. For example, with the First Look program, participating financial institutions give the Stabilization Trust’s participating communities a “first look” at newly foreclosed properties pre-market and offer cost savings designed to expedite the closing process and dramatically reduce the time that foreclosed homes remain vacant.
To bolster its effectiveness and provide further assistance to participating communities, the Stabilization Trust is establishing an affiliated, revolving loan fund that will offer low-interest loans for the acquisition and renovation of previously foreclosed properties. Through a combination of public, private, and philanthropic investment, the Stabilization Trust hopes to build its REO Capital Fund in order to leverage over $1 billion in new financing.
The efforts of the Stabilization Trust began with a successful pilot program last fall in Minneapolis and St Paul. By the end of 2009, the Stabilization Trust expects to be supporting the transfer of foreclosed properties in more than 100 communities nationwide.
The MacArthur Foundation and the Ford Foundation jointly funded the formation and start-up of the Stabilization Trust through a combination of grants and low-cost loans. MacArthur provided a $250,000 planning grant and a $3 million working capital loan to launch the Stabilization Trust’s transfer agent operation. This support is part of MacArthur’s $68 million foreclosure prevention and mitigation project launched last year to address the foreclosure crisis in its headquarters city of Chicago. Ford made a $200,000 planning grant and a $500,000 operating support grant to the Stabilization Trust. The Foundation has also committed a $50 million loan to the Stabilization Trust’s REO Capital Fund. Ford has provided $15 million in grant support for other foreclosure-related activity across the country.