By Eugene T. Lowe
February 11, 2008

Green Bay (WI) Mayor James J. Schmitt, Vice-Chair of the Conference of Mayors Community Development and Housing Committee, moderated a meeting of the policy committee January 23, primarily focused on the mortgage foreclosure crisis. In addition to the mayors on the committee and other conference participants, the meeting was attended by the ten HUD Regional Directors and their deputies.

The Committee heard from staff of the House Judiciary Committee on H.R. 3609, the “Emergency Home Ownership and Mortgage Equity Protection Act of 2007,” the HUD Assistant Deputy Secretary for Field Policy and Management, and representatives from a national and a local organization, both of whom have developed models for addressing the mortgage foreclosure crisis.

Chief of Staff David G. Lachmann and Counsel Susan A. Jensen-Lachmann of the House Committee on the Judiciary told the mayors that Representative John Conyers, Jr., (MI), Chairman of the Judiciary Committee, began looking at the issue of using bankruptcy protection that would allow debtors to modify subprime mortgages last Spring. Hearings were held and the result was H.R. 3609. A compromise on the bill was reached with Representative Steve Chabot (OH), and the bill passed the Judiciary Committee on December 12. Both staff members thanked the mayors for the Conference of Mayors support of the legislation. They urged the mayors to call on their constituencies to support the bill when it goes to the house floor.

HUD Acting Deputy Secretary for Field Policy and Management Bob Young spoke briefly to the Committee about letters that had been sent to the cities from HUD with new community development and planning program allocations. Young then introduced the ten HUD Regional Directors and their deputies attending the Committee meeting. The Deputy Secretary said the Regional Directors would be available to address any concerns that the mayors might have.

Ali Solis, Vice President for Public Policy and Industry Relations of the Enterprise Community Partners, Inc., and Mark McDermott, Vice President of the Central Region of Enterprise, presented an overview of the pilot initiatives, new financing vehicles, and public policy solutions developed by their organization in response to the foreclosure crisis. They described the Dallas Model for single-family REO mitigation, the Cleveland three-year pilot program for six neighborhoods, and the Columbus (OH) New Market Tax Credit model.

In Dallas, Enterprise bought FHA-foreclosed REOs at a discount, rehabilitated the homes and sold them to families below 120 percent of the area median income. One hundred and ninety-nine homes were acquired, rehabilitated and sold in two years. Cleveland’s three-year pilot program helped 300 families at risk of foreclosure stay in their homes, while also demolishing 300 obsolete, blighted structures, and redeveloping 150 vacant homes for homeownership, lease/purchase or rental housing. Using the Enterprise New Market Tax Credit Allocation and other funding sources in Columbus (OH), 737 foreclosed homes will be purchased, rehabilitated and sold in targeted communities to eligible homebuyers (80 percent below median income).

Finally, Solis and McDermott encouraged the mayors to support a special CDBG allocation, the creation of a neighborhood stabilization tax credit, and the use of Community Reinvestment Act (CRA) incentives to address the foreclosure crisis.

Kat Taylor, Director, and Salavador Menjivar, Executive Director, of One California Foundation, presented an overview of Oakland’s approach to the subprime mortgage crisis. They said that OneCal Bank and Foundaton created a one million dollar revolving loan fund called the OneCal Home Loan Fund “to provide additional impetus for lenders and servicers to restructure select mortgages in low-income communities.” Taylor and Menjivar stressed that the OneCal Home Loan Fund “...will only provide revolving loan funds to achieve a restructured, viable loan package if the lender or servicer forgives enough to make the loan funds cost effective.”

Taylor and Menjivar also presented recommendations for federal government policy that would avert a housing collapse and slow the contagion of foreclosures into the broader economy. Their suggestions included raising the loan limits of FHA, Fannie Mae and Freddie Mac to $625,000 in high price markets such as California; creating a bright line standard through legislation that protects from investor lawsuits any good faith efforts at renegotiation of subprime mortgages by servicers; and, giving banks more flexibility in restructuring home loans.