Battling Foreclosure: What can elected officials do?

In 2007 almost 2,200 foreclosed homes were sold at sheriff’s auctions in Washtenaw and Livingston counties. In fact, one in 33 homes in Michigan faces mortgage foreclosure. Foreclosures are happening all across the state in all types of neighborhoods. When a home is foreclosed, the homeowner, the investor, the municipality as well as neighboring homeowners are all impacted.

To help local officials address these issues the League partnered with the Southeast Michigan Council of Governments on January 30th to present a SEMCOG University workshop on Battling Foreclosure. The speakers discussed the severity of the problem; the weapons local officials have in the battle to protect neighborhoods from abandoned buildings, blight and decline; and how to reduce the hardships facing residents who are delinquent on mortgages and taxes and facing foreclosure.

How Did We Get Here?
In the past few years predatory lending in a subprime market made it easy for people to buy a home with almost no money down. Add to this a loss of manufacturing jobs, reduced overtime and lay offs and the reasons for increasing foreclosures become apparent.

Michigan ranked third in the nation for foreclosure filings in 2007, with nearly 2 percent of all households in the state at risk for foreclosure due to defaulted mortgages.

How Can Officials Protect Neighborhoods from Abandoned Buildings, Blight and Decline?
Local officials can develop a comprehensive plan to deal with the effects of foreclosure, blight and abandoned buildings in a community. The League manual, Restoring Michigan Communities—Building by Building, was developed to help officials create a long-term solution to the eyesores caused by foreclosures, vacant buildings and blight. This four step solution involves:

• identifying the problems,

• making an inventory of existing tools and enforcement procedures,

• developing a plan, and finally,

• putting the plan in place.

Click here to download a pdf of the manual (you will be prompted to enter your user name and password).

How can Officials Reduce Hardships Facing Residents?
Washtenaw County Treasurer, Catherine McClary, is a leader in tax and mortgage foreclosure prevention in Michigan. McClary recommends building partnerships to create softer landings for residents facing foreclosure. Visit the Washtenaw Mortgage Foreclosure Prevention website for information on how to assist homeowners in preventing foreclosure.

Homeowners do have options if they find themselves in foreclosure. Foreclosure usually commences when a homeowner is 90 days or more past due on a mortgage payment. The good news from Greg Sterns, manager of financial education and counseling for Lighthouse Community Development, is that the housing counseling process does work. The average cost of helping a client avoid foreclosure through the Lighthouse program is $910. The average cost to society of a mortgage foreclosure is $22,330. The average cost to the investor is $50,000-60,000.

Another League publication created to help local officials help residents in their communities is Empty Houses. The Resident Tool Kit in this manual includes: repayment alternatives lenders may offer, foreclosure timelines, tips for avoiding foreclosure and online resources/forms. Click here to download a pdf of the manual (you will be prompted to enter your user name and password).

Homeowners facing foreclosure can contact a HUD-certified, not-for-profit counseling agency that is dedicated to helping homeowners avoid foreclosure. Unfortunately more than half of homeowners facing foreclosure do not call for help when they fall behind in their mortgage payments.

Foreclosure is a complex issue that all Michigan communities are facing. While some of the aspects are outside the control of local government, foreclosure is a lose-lose situation for the entire community. Officials can make a difference in their community by developing a comprehensive plan and educating residents about their options when the foreclosure wolf is knocking at their door.

Resources from this Seminar

Streaming Audio
Kelly Stanford, manager member services, talks with Sue Jeffers, associate general counsel for the League and a speaker at the workshop, about foreclosure and the League manual Restoring Michigan Communities Building by Building.