Mayor Menino Announces City Could Benefit from $8M to Aid Boston’s Foreclosure Efforts

Funding Will Enhance Foreclosure Intervention Team’s Neighborhood Stabilization Initiatives

February 10, 2009 – (RealEstateRama) — Mayor Thomas M. Menino today announced that the City of Boston has been approved to receive $4.23 million from the U.S. Department of Housing and Urban Development (HUD) as part of the federal Neighborhood Stabilization Program (NSP), which Congress approved last July with the passage of the “Economic and Housing Recovery Act of 2008.” He said the City expects to apply for a matching grant of approximately $4 million from the state’s allocation of these funds through the Department of Housing and Community Development (DHCD) in the coming months.

Boston was allocated the funds last September, conditioned on the creation and subsequent HUD approval of a plan to spend the award in accordance with Congressional intent. The Commonwealth of Massachusetts was also awarded a total of $43 million for distribution among local communities as part of the $3.92 billion legislation that will deliver Community Development Block Grant (CDBG) funds to state and local governments for foreclosure relief.

“Although Boston is a lot better off than many cities around the country as far as foreclosures go, some of our neighborhoods have been badly affected,” Mayor Menino said. “These funds will compliment the City’s existing efforts to restore vacant properties, and will support homebuyers who will invest in these communities by buying and renovating these homes.”

Mayor Menino said the funding, which will be administered through the Department of Neighborhood Development, will also support the City’s efforts to directly acquire groups of foreclosed properties from banks at discounted prices which can be then sold to homebuyers and developers using these new funds. The City expects to close on its first package of seven properties from Countrywide (recently acquired by Bank of America) in the next thirty days. The properties are located in East Boston, Dorchester, Mattapan, and Roxbury.

DND Director Evelyn Friedman said the City was in the process of executing Purchase and Sale agreements with the lender, and said City officials are also in talks with several other major mortgage companies who have large portfolios of Real Estate Owned (REO) property in Boston in the hopes of acquiring additional vacant homes. Mayor Menino described the acquisition model as a productive beginning, and expressed hopefulness that other lenders would participate in similar negotiations as Countrywide.

In anticipation of such purchases, DND issued a Request for Qualifications (RFQ) last November to identify qualified development entities that could take possession of foreclosed/REO properties and promptly renovate and sell them to owner occupants or rent them as housing for low and moderate income households. Last month, 44 professional developers, non-profit development entities, and contractor-builders submitted their qualifications to the City.

Mayor Menino, who joined Congressman Barney Frank and other U.S. mayors at a congressional hearing last spring to testify in support of direct federal assistance to cities with high rates of foreclosure, said city officials began discussing possible uses for the funding when the Act was passed to ensure any additional programming could be implemented immediately.

In addition to supporting renovations of properties acquired by the City, the federal funding will allow for the provision of technical and rehabilitation assistance to new homeowners of foreclosed properties or to those interested in purchasing a vacant home. Specifically, the City plans to use its NSP allocation, plus additional funds to be requested from the state, to carry out a number of program activities within the target area, including:

• Turnkey Ownership Initiative: designed to assist for-profit and non-profit developers with the cost of rehabilitating vacant REO properties into owner-occupied properties;
• REO Buyer Incentive Program: designed to assist individual homebuyers with both the costs of acquiring and repairing vacant REO properties. Participating homebuyers will receive financial and homebuyer training from professionals experienced in the purchase and financing of these types of properties;
• Rental and Supportive Housing: designed to assist for-profit and non-profit developers with the cost of rehabilitating vacant REO properties into rental housing for low and moderate-income renters and for homeless families;

In February 2008, nearly nine months before the Neighborhood Stabilization Program was implemented, Mayor Menino announced the formation of a cross-departmental Foreclosure Intervention Team (FIT) targeting the Hendry Street area of Dorchester, a compact neighborhood with the highest concentration of foreclosed and abandoned properties in Boston. Last spring, the City, acting through the Boston Redevelopment Authority, acquired four properties with 12 units on Hendry Street and issued an RFP for their rehabilitation and resale as four owner-occupied triple-decker homes. A local developer is mid-way through rehabilitation work on the properties and expects to complete work by early summer.

The City’s Foreclosure Prevention Initiative took off in late 2005, as the Department of Neighborhood Development tracked an unusual spike in foreclosures rates. Between 2006 and 2008, Boston has been affected by approximately 1,750 foreclosures. During the same time period, however, the City has been able to help more than 450 homeowners avert foreclosure, preserving an estimated $130 million dollars in home values.

Contact:

Lucy Warsh
lwarsh.dnd (at) cityofboston (dot) gov