That’s one option under consideration by a task force plotting New Haven’s response to the foreclosure crisis.
Three members of a mayoral task force offered a preview Tuesday of what they’re learning so far about the pending crisis, and what steps they’re considering suggesting to combat it.
Mayor John DeStefano appointed the task force to study the growing number of foreclosures in New Haven, sparked by a collapse of the so-called “subprime” market — loans to people with bad credit, often on terms that are exploitative and/or difficult to repay. He wants the task force to report back with a plan of action as the number of foreclosures is projected to hit a peak later in 2008.
Task force members Sameera Fazili (in photo), Robin Golden, and Carla Weil shared some of what they’ve learned so far with 30 people gathered for breakfast at the Graduate Club. The event was organized by the Community Loan Fund and sponsored by TD Banknorth.
Golden (pictured), a former housing authority and Board of Ed official who now works at Yale Law School’s legal services unit, said the group is exploring whether to follow the lead of cities like Baltimore in suing some of the lenders who made the bad loans. Golden said after her talk that the idea is still in the exploratory stage.
Seven lenders are responsible for a full 40 percent of the loans that have gone into foreclosure in New Haven since 2005, Golden reported. The number of foreclosures in town jumped from 365 in 2005, to 545 in 2006, to 1022 in 2007. More than a third of the foreclosures have occurred in just three neighborhoods: Fair Haven, the Hill and Newhallville. More are expected this year. Most of the homes are owner-occupied, Golden said.
To see a neighborhood breakdown of city foreclosures and the list of top lenders involved in them, click here.
A class-action lawsuit can at the least make it easier for people in New Haven to reach often faceless, distant bureaucrats at out-of-town lending institutions to negotiate settlements to troubled mortgages short of foreclosure, Golden said. Yale’s legal services clinic would file the lawsuit if the idea progresses.
“One of the things you do with litigation is get people’s attention,” she noted. “We can make [lenders’] life miserable, which can get their attention.”
Fazili, who also works at Yale legal services, outlined other steps the task force is planning or considering:
‚Ä¢ Reaching out to homeowners in danger of being foreclosed on, but not yet missing payments. That makes it easier for them to qualify for “great new refinancing options.” Outreach efforts will include a March 4 community meeting with church and other community leaders who may have unwittingly led low-income people into predatory loans in recent years. “People were preyed upon in church and community settings by people they thought they could trust,” Fazili said.
• Create a lending pool to help troubled homeowners work their way out of debt without losing their property.
• Offer legal help to holders of subprime mortgages who are facing or potentially facing foreclosure. The lawyers could help negotiate short sales, prepare bankruptcy filings, or pursue other methods of limiting the damage.
‚Ä¢ Look at ways to keep foreclosed-upon property out of the hands of out-of-town speculators. One idea is to have a quasi-government agency snap up properties and rent them out, sometimes to their previous owners. Click here for a story about Dan Kildee’s efforts to do that in Michigan and his work spreading the word to cities across the country.
‚Ä¢ Plan neighborhood-wide strategies for parts of town where a cascade of foreclosures could repeat a pattern from the ’80s and mid ’90s: abandoned buildings as well as substandard properties snapped up by out-of-town speculators and real-estate flippers who milk the properties but don’t improve them. An aggressive effort by City Hall helped cut the number of abandoned buildings in New Haven from 1,500 to under 300 from 1996 to November 2005. But over the last 12 months, the city has seen a 19 percent rise in abandoned buildings, most of that increase coming in the past half-year.
Weil, executive director of the Community Loan Fund, noted that the current crisis has innocent roots: Efforts to help more people afford to buy homes. In some cases, experts now agree that such efforts put homes in the hands of some people who could never afford to keep them. In other cases, dishonorable lenders signed people up for exploitive terms they didn’t understand, lured by low original interest rates that ballooned two years later. Also, the mortgage market changed: Local banks and other lenders no longer maintained the risk of making risky loans. Instead they packaged mortgage loans to out-of-state lenders. That reduced accountability.
At the end of the presentation, Matthew Nemerson, head of the Connecticut Technology Council, questioned whether the burgeoning number of foreclosures, painful as they are, might represent a market correction that could have some positive results — whether for instance out-of-town property owners may be able to maintain and rent out needed apartments.
“Isn’t it possible in some neighborhoods, having more rental properties might be a better thing?”
The panelists agreed some people should never have bought homes, and rental housing is needed. But they argued that absentee landlords, especially from out of town, often do a worse job keeping up properties, and can drag down an entire neighborhood in the process.
New Haven saw that happen in the 1980s and ’90s when a wave of speculators snapped up properties in poor neighborhoods. Some milked them for federally subsidized Section 8 rents without reinvesting in properties. Others — some of them eventually arrested and convicted of federal fraud charges — falsely inflated land values through complex flipping schemes involving shell corporations, leaving neighbors to clean up the damage. One neighborhood group, Trowbridge Renaissance, recently started going to house auctions to seek to outbid the speculators. (Read about that here.)
Read previous Independent coverage of New Haven’s foreclosure crisis:
• WPCA Hearing Delayed
‚Ä¢ Megna’s “Blood Boils” at WPCA Tactics
• Goldfield Wants WPCA Answers
• 2 Days, 8 Foreclosure Suits
• WPCA Goes On Foreclosure Binge
• A Guru Weighs In
• WPCA Targets Church
• Subprime Mess Targeted
‚Ä¢ Renters Caught In Foreclosure King’s Fall
‚Ä¢ She’s One Of 1,150 In The Foreclosure Mill
‚Ä¢ Foreclosures Threaten Perrotti’s Empire
‚Ä¢“I’m Not Going To Lay Down And Let Them Take My House”
The following links are to various materials and brochures designed to help homeowners avoid foreclosure.
How to prepare a complaint to the Department of Banking; Department of Banking Online Assistance Form; Connecticut Department of Banking, Avoiding Foreclosure; FDIC Consumer News; Statewide Legal Services of Connecticut, Inc; Connecticut Bar Association Lawyer Referral Service.
For lawyer referral services in New Haven, call 562‑5750 or visit this website. For the Department of Social Services (DSS) Eviction Foreclosure Prevention Program (EFPP), call 211 to see which community-based organization in the state serves your town.
Click here for information on foreclosure prevention efforts from Empower New Haven.
<p>"Most of the homes are owner-occupied, Golden said." A quick perusal of the <a href="http://www.jud2.ct.gov/fsc/SCByCourtLoc.aspx#Instructions" rel="nofollow">Short Calendars by Court Location </a> checked against the <a href="http://visionappraisal.com/" rel="nofollow">Vision Appraisal database</a> seems to suggest that <b>none</b> of the "homes", aka investment properties, in my neighborhood are owner occupied, unless, of course someone can live in several places simultaneously. Why do churches, that steered members into financial ruin, get special exemption from responsibility, while subprime lenders get all of the blame?</p>
<p>"Isn't it possible in some neighborhoods, having more rental properties might be a better thing?" You're kidding right? Or have a "quasi-government agency snap up properties and rent them out." This proposal is an invitation for graft and corruption on a massive scale.</p>
How about the city buy the buildings, tear them down and sell the vacant land to adjoining, resident, tenured property owners, with deed restrictions as to the nature of any future development.