Fixing The Foreclosure Crisis
Although residential mortgage foreclosures have wreaked havoc on many communities in metro Detroit and Michigan, efforts to stem the damage and boost property values are under way. But do the relief programs go far enough?
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“Although it has not been equal in every city, when the foreclosure crisis hit, it impacted all of our neighborhoods across the region,” says Kevin Vettraino, a community economic development planner at SEMCOG. “We have seen vacant homes, declining maintenance of houses, and a significant drop in property values. With far less tax revenue, it has limited the ability of cities to provide services and (maintain) the desirability of their communities. That’s why we need to develop and implement programs to stabilize neighborhoods.”
Oakland County Treasurer Andy Meisner has not only seen the county’s taxable value drop to $54 billion from $64 billion since 2007, but the county seat of Pontiac has been struggling with 25 percent unemployment, a projected $12.5 million budget deficit, and a housing stock that is 70 percent rental.
As a result, whether it’s Pontiac, River Rouge, Ecorse, or Highland Park, budgets for city services will be squeezed for years. “With Proposition A and the Headlee Amendment, there are limits on revenue growth,” says Meisner, an attorney and former state representative. “Tax revenue cannot go up as quickly as it drops, so therefore it will take decades to recover that lost revenue.”
Meisner and others believe the solution to the foreclosure crisis ultimately comes down to increasing property values — and creating jobs. The turnaround effort includes foreclosure prevention programs, neighborhood stabilization programs, and foreclosure and appraisal reforms.
“To turn it around, we need to continue with very aggressive foreclosure prevention counseling by certified HUD counselors, the implementation of existing federal and state neighborhood stabilization programs, appraisal reform, the promotion of small businesses and economic development to address joblessness, and changes to the foreclosure process to yield better results,” says Meisner, who initiated a countywide foreclosure prevention program with United Way in 2008. Since that time, similar prevention programs have been set up throughout Michigan.
The primary federal response to the foreclosure crisis has included the implementation of the Hardest Hit Fund. Administered through individual states, the program provides cash subsidies to eligible hardship participants. In addition, HUD Neighborhood Stabilization Program grants allow local governments to rehabilitate and return foreclosed or abandoned properties to the housing stock on a more affordable basis, as a way to stabilize neighborhoods and increase fallen home values.
To be eligible for a grant, participants must be below federal income limits, be approved by a mortgage lender for a fixed-interest-rate home loan, and complete eight hours of homeowner counseling from an approved agency. Qualified buyers may also receive federally funded down-payment assistance.
So far, Michigan has received $498.6 million in funding for the Hardest Hit program, which is administered by the Michigan State Housing Development Authority through www.stepforwardmichigan.org. By 2014, the Authority expects to help nearly 39,000 households in Michigan that are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition.