Communities get funds to buy up foreclosures
Though the Wall Street rescue bill’s future is still uncertain, government officials are still trying to resolve the country’s housing market problems by helping communities purchase foreclosed homes. Massachusetts learned last week that it will receive $55 million from federal housing officials to help communities purchase foreclosed properties and revitalize neighborhoods, according to a Kimberly Blanton story in today’s Globe.
However, Bay State communities, such as Chelsea and Brockton, have not been successful so far in their attempts to acquire foreclosed properties, Blanton reports.
Earlier this year, the state created a $20 million fund to help cities and towns buy foreclosed properties, but no community has purchased foreclosed homes with the funds yet.
The problem stems from the fact municipal officials are having trouble tracking down property owners, or that investors who have assumed control of the property don’t want to sell because they are holding out for more money. Mortgages are bundled together by financial companies and then sold to investors as securities. Local housing officials told Blanton that they have not been able to break through the “tangled web of Wall Street investors, trustees of investment funds, and the loan-servicing companies.”
In Brockton, housing authority officials said they had to drop their attempt to buy one particular foreclosed property, which is near a newly renovated city apartment complex and has become a gathering place for local kids. City officials had signed a purchase agreement with an out-of-state bank in February, but then the bank said it didn’t have clear title and couldn’t sell the property. This left Brockton housing officials frustrated.
Do you think municipal officials should be trying to buy up foreclosure properties? Is there some better way this could be accomplished?
Enjoyed this post? Get blog updates delivered to your reader. Click here.
It appears that communities are facing the same issues buying foreclosures as private parties.
The story was a wee bit incoherent. To say the least
This is one reason why the so-called bailout would be helpful. These foreclosed or pre-foreclosed homes would be sold and marketed by one entity, the RTC or some version of it. Right now working in the foreclosure market is the wild west and unitl that is cleaned up it will be difficult to move the bulk of these properties.
What is the benefit of a municipality buying the foreclosed property? The owner still loses the house, the bank is bailed out but not enough to ease lending and maintain credit liquidity, it still sits empty and unmaintained. Cities and towns are not going to spend money, nor do they have the money, to cut the lawn and ensure the properties aren't used by teens, homeless, or drug dealers. Better to spend the money by giving it to owners to refi under better terms they can afford - Habitat for Humanity style.
This is one reason why the so-called bailout would be helpful. These foreclosed or pre-foreclosed homes would be sold and marketed by one entity, the RTC or some version of it.
No. You are talking about the New Deal-era Home Owners' Loan Corporation, which bought and serviced individual mortgages. The Paulson bailout does no such thing; it will buy the complex securities based on these mortgages. The security owners themselves have no say in loan forbearance or modification. That power lies with the trust at the hub of the securities, and that trust has fiduciary obligations to other security holders and other tranches whose only interest is in maximizing profit. The Senate bill, I believe, has a little dollop to buy mortgages directly, but not very many will benefit. The amounts are far too small.
Cities and towns often do have funds available, e.g. Community Preservation Act monies, to repair and then resell (and sometimes rent) these properties to low and moderate income families. Thus vacant and blighted homes are used to increased the town's affordable housing stock.
Marcus is right on this one. That's why groups working against homelessness are calling for public funds to buy up mortgages, not mortgage-based investment vehicles. In other words, let the banks rescue themselves: rescue the neighborhoods!
This blogger might want to review your comment before posting it.
Recent Posts
browse this blog
by categoryINside Boston.com