Governor Patrick Announces Details for $20 Million Loan Fund to Acquire Foreclosed Homes and Foster Neighborhood Stabilization
Program fully funded by private lenders and non-profit foundations
BOSTON - Tuesday, July 1, 2008 - Governor Deval Patrick today announced the details of a unique state-sponsored, low-interest loan fund for developers to buy abandoned and at-risk properties, and get them quickly reoccupied with new homeowners or renters. The fund, consisting of $17 million from private lenders and another $3 million from private non-profit foundations, is part of the Patrick Administration's comprehensive response to the foreclosure crisis in Massachusetts.
"This rich blend of private and non-profit resources will help us stabilize neighborhoods hard hit by foreclosure, and turn troubled properties into brand new affordable family housing opportunities," said Governor Patrick.
The $20 million program is available to non-profit and for-profit developers, and targets communities with a high concentration of vacant properties including Boston, Brockton, Chelsea, Lawrence, New Bedford, Springfield and Worcester. Preference will be given to applicants with clear and realistic plans for property acquisition and use after rehabilitation. Preference will also be given according to need, as the central aim of this fund is to stabilize properties and prevent neighborhoods from experiencing further decline.
Bank-funded loan resources within the Massachusetts Housing Investment Corp (MHIC) and the quasi-public Massachusetts Housing Partnership (MHP) will contribute $17 million. MHIC is a private non-profit entity founded in 1990 by a consortium of banks and other corporate investors to fill a critical gap in meeting the credit needs of affordable housing developers and owners. MHP is a statewide affordable housing organization that is funded by banks, and works in concert with the state to help increase the supply of affordable housing in Massachusetts.
"We will be making loans based on what we think can be reasonably repaid, based on the long-term plan for the property," said MHIC Executive Director Joseph Flatley. "The benefit of this loan fund is to go to the borrowers and the neighborhood - and is not intended in any way to generate higher prices for the lenders who foreclosed on these properties. We believe that this should be an opportunity to acquire properties at low prices, and we are looking to support local groups who want to take advantage of those opportunities as part of larger strategies to stabilize their neighborhoods."
"The key here is targeting this support to cities where local officials, local non-profit and private developers, and property managers who are working together to stabilize neighborhoods hard hit by foreclosure," said Clark Ziegler, MHP's executive director. "We're giving local officials and developers the tools to work together to tailor local strategies that bring life to neighborhoods that would otherwise get significantly worse."
The Boston Foundation will contribute $2 million to the fund, and the Boston-based Hyams Foundation will add another $1 million, which will be targeted specifically to the purchase of foreclosed properties in the city of Chelsea. MHIC will implement and administer the funds and the state Department of Housing and Community Development (DHCD) will oversee the program.
"This is an important initiative for the Commonwealth and an effective strategy for addressing the most pressing community issues related to the foreclosure crisis," said Paul S. Grogan, President and CEO of the Boston Foundation. "Neighborhoods that took decades to revive can unravel overnight as a result of the foreclosure crisis-this targeted intervention can limit the damage and contain what could otherwise become spreading blight and disorder."
The Boston Foundation is one of the nation's oldest and largest community foundations, with assets of almost $1 billion. It serves as a major civic leader and sponsor of special initiatives designed to address the community's and region's most pressing challenges.
The loan fund has been structured in two tiers:
- Acquisition fund: Revolving lines of credit of $250,000 to $1 million to each organization, based on the borrower's strength and stabilization plan. This will enable borrowers to move quickly in the marketplace to purchase qualified properties.
- Holding pool fund: Once acquired, proposed deals will be moved into this holding pool, where they will be reviewed and considered for loans to support rehabilitation and long-term stabilization.
In addition to the $20 million loan pool, the Patrick Administration will provide a critical safety net for the fund with a $1 million commitment from the state's Affordable Housing Trust Fund as a loan loss reserve, and up to $60,000 per unit in subsidy from existing programs to support the rehabilitation of the purchased properties as affordable housing. Also, Living Cities, a New York City based partnership of some of the largest foundations and philanthropic and financial organizations in the nation, has awarded a $500,000 grant to MHIC to help facilitate the sale of the foreclosed properties. An estimated 250 to 500 housing units are expected to be reoccupied with the initial allotments capitalizing this loan pool.
"Many vulnerable people are being affected by the current mortgage foreclosure crisis, including scores of unsuspecting renters. This is an especially critical time to preserve rental housing while also protecting the significant investments we have all made in revitalizing low-income communities," said Beth Smith, Executive Director, The Hyams Foundation, Inc. "As a private foundation, we are very pleased to be pooling our resources with others to preserve and maintain affordable housing and vibrant neighborhoods in Chelsea."
The Hyams Foundation supports nonprofit organizations that are working to increase affordable housing, civic engagement and the long-term success of low-income teens in Boston and Chelsea.
"Governor Patrick and his administration deserve high praise for keeping our neighborhoods stable through their comprehensive foreclosure prevention efforts. Also, we are most grateful for the contributions by MHIC, MHP, Living Cities, the Hyams Foundation and The Boston Foundation to this important loan fund," said Chelsea City Manager Jay Ash. "We are especially appreciative of the Hyams Foundation's focus on the city of Chelsea in helping us to maintain our ongoing neighborhood revitalization efforts."
The acquisition fund is part of the Patrick Administration's comprehensive foreclosure initiative to assist homeowners and stabilize neighborhoods across the Commonwealth. A series of state-sponsored foreclosure prevention workshops paired more than 350 homeowners from the Western and SouthCoast regions of the state with their lenders. These face-to-face meetings helped homeowners secure loan modifications and other restructuring agreements that will keep them in their homes. The Administration will host workshops in Worcester on July 16th and in Lawrence on July 17th. For more information, please visit www.mass.gov/foreclosure.
The Administration has also been implementing key provisions of Chapter 206, An Act to Preserve Homeownership, a new law the Governor signed in November 2007. The statute requires a foreclosing lender to provide notice of a mortgage delinquency to a borrower, and then provide 90 days for the homeowner to resolve the delinquency. Homeowners were previously only entitled to 30 days notice, and the lender did not have to give the homeowner an opportunity to pay the arrearage, cure the default, and avoid foreclosure. The Governor and Attorney General Coakley have both urged lenders to use this time period to restructure more loans and avoid unnecessary foreclosures.
The Governor has also directed the Division of Banks to promulgate regulations that evaluate all state licensed mortgage lenders on the number of loan modifications they complete for delinquent borrowers. This first in the nation action builds on the extension of the Community Reinvestment Act to non-bank mortgage lenders called for by Chapter 206 and puts additional pressure on lenders to make loan terms more affordable for the state's homeowners.