Orange County Business CouncilWork Force Housing Committee

March 18, 2009

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A Regional Response to the Foreclosure Crisis

Foreclosures

The Foreclosures CrisisThe Foreclosures Crisis

The ProblemThe ProblemThe number of mortgage foreclosures in Orange County The number of mortgage foreclosures in Orange County and throughout the state has dramatically increased. and throughout the state has dramatically increased. This trend is expected to continue through 2010. This This trend is expected to continue through 2010. This dramatic increase is overwhelming existing resources, dramatic increase is overwhelming existing resources, displacing families, and leaving many affordable homes displacing families, and leaving many affordable homes vacant and boarded. As of February 2009 there are over vacant and boarded. As of February 2009 there are over 20,000 foreclosure homes on the market.20,000 foreclosure homes on the market.

Approx. 8,300 are REO’s (Bank Owned)Approx. 8,300 are REO’s (Bank Owned) Approx. 8,500 are in DefaultApprox. 8,500 are in Default

Orange County Orange County Foreclosure PictureForeclosure Picture

Where are the ForeclosuresWhere are the ForeclosuresFebruary 2009 – Information from DataTracFebruary 2009 – Information from DataTrac

Santa Ana 650 approx. Irvine 155

Anaheim 500 Hunt. Beach 140

Garden Grove 225 Mission Viejo 115

Orange 175 La Habra 110

Fullerton 175 Rancho SM 110

Foothill Ranch 1 – 109 Newport Coast 1 -194

Santa Ana 1 – 137 San Juan Capistrano 1 - 200

Rancho SM 1 -152 Alisa Viejo 1 -201

Stanton 1 -188 La Habra 1 -213

Countywide 1 - 282

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Homes on the OC Market Homes on the OC Market January 25, 2009 January 25, 2009 (OC Register)(OC Register)

Market Home ValueMarket Home Value All InventoryAll Inventory DistressedDistressed PercentagePercentage

$0 - $250k$0 - $250k 2,139 2,139 1,4321,432 67%67% $250k - $500k$250k - $500k 1,759 1,759 1,0391,039 59%59%

$500k - $750k$500k - $750k 2,115 2,115 701 701 33%33% $750k - $1 mil$750k - $1 mil 1,135 1,135 258 258 23%23% $1 mil. - $1.5 mil 876$1 mil. - $1.5 mil 876 95 95 11%11% $1.5 mil. - $2 mil. 56$1.5 mil. - $2 mil. 56 33 33 56% 56%

All O. C.All O. C. 11,56011,560 5,1045,104 44%44% AttachedAttached 4,628 4,628 2,3172,317 50%50% DetachedDetached 6,871 6,871 2,6742,674 39%39%

Other DataOther Data Calif. home prices have dropped 26.7% in 2008 Calif. home prices have dropped 26.7% in 2008

compared to national average of 11.6%.compared to national average of 11.6%. Calif. is only behind Florida and Nevada in Calif. is only behind Florida and Nevada in

serious delinquent mortgages.serious delinquent mortgages. 2,250 ave. per month new delinquencies in OC 2,250 ave. per month new delinquencies in OC

over past 3 monthsover past 3 months Existing home sales up 84.7% over 2007Existing home sales up 84.7% over 2007 In 4In 4thth quarter 2008 the value of approximately quarter 2008 the value of approximately

125,000 California homes dropped below the 125,000 California homes dropped below the mortgage balancemortgage balance..

Classifying Local Strategies – Classifying Local Strategies – Prevention and MitigationPrevention and Mitigation

While mortgage regulation and foreclosure laws are generally the domain of While mortgage regulation and foreclosure laws are generally the domain of federal and/or state government, nonprofits, local governments, and even federal and/or state government, nonprofits, local governments, and even some local banks have responded to rising foreclosures in various ways. some local banks have responded to rising foreclosures in various ways. Their strategies include direct, local action, Their strategies include direct, local action, often in collaboration with other often in collaboration with other groupsgroups..

Homeownership PreventionHomeownership Prevention Efforts are made to reduce the numbers of foreclosures by providing Efforts are made to reduce the numbers of foreclosures by providing

foreclosure prevention education and counseling combined with successful foreclosure prevention education and counseling combined with successful loss mitigation strategies and community outreach.loss mitigation strategies and community outreach.

Maintain Housing ValuesMaintain Housing Values Tackling the negative impacts of foreclosure in our neighborhoods and on Tackling the negative impacts of foreclosure in our neighborhoods and on

individuals. It is about mitigating the “Spillover” problems caused by individuals. It is about mitigating the “Spillover” problems caused by foreclosures.foreclosures.

Homeownership PreservationHomeownership Preservation

Membership includes participants from: lending institutions, non-profits, local government, real estate industry, HUD, Federal Reserve, and elected officials.

OCHOPC has held 7 foreclosure prevention workshops OCHOPC has held 7 foreclosure prevention workshops assisting over 2,200 distressed homeowners. assisting over 2,200 distressed homeowners.

FDIC ModelFDIC ModelKey objectives Keep borrowers in their homes when the

borrower is willing and has the capacity to make an affordable mortgage payment.

Provide borrowers with immediate payment relief and stable long term mortgage payments.

Modification must always result in a positive NPV outcome for the investor, i.e., the cost of the modification must be less than the estimated cost of foreclosure.

FDIC ModelFDIC ModelStrategy Return the loan to a current status. Capitalize delinquent interest and escrow. Modify the loan terms based on waterfalls, starting at a front-end 38 percent HTI ratio down to a 31 percent HTI ratio, subject to a formal NPV floor. Reduce interest rate to as low as 3 percent. Extend, if necessary, the amortization and/or term of the loan to 40 years. Forbear principal if necessary.

Preserving Home ValuesPreserving Home Values

The Home Again CollaborativeThe Home Again CollaborativeThe Collaborative is envisioned to include key Orange County nonprofit housing organizations, local governments, cooperating lending institutions, and the Orange County Home Ownership Preservation Collaborative. The purpose of the organization is produce more affordable housing by coordinating the acquisition, rehabilitation and disposition of foreclosed residential properties.

Preserving Home ValuesPreserving Home Values

The Home Again CollaborativeThe Home Again CollaborativeSources of Funds:Sources of Funds: Orange County Housing TrustOrange County Housing Trust Investments from Financial InstitutionsInvestments from Financial Institutions NSP Funds NSP Funds Local GovernmentLocal Government NeighborWorks AmericaNeighborWorks America Clearinghouse CDFIClearinghouse CDFI Mortgage FinancingMortgage Financing

In responding to the foreclosure crisis, community In responding to the foreclosure crisis, community development organizations, local government and the development organizations, local government and the real estate and financial industries need to engage in a real estate and financial industries need to engage in a balanced approach to community revitalization which balanced approach to community revitalization which includes preventing foreclosures while assisting first-time includes preventing foreclosures while assisting first-time homebuyers purchase foreclosed homeshomebuyers purchase foreclosed homes..

Ken MutterKen MutterNeighborhood Housing Services of Orange CountyNeighborhood Housing Services of Orange County

714-490-1250714-490-1250kenm@nhsoc.orgkenm@nhsoc.org

Final ThoughtsFinal Thoughts