Help Homeowners Avoid Foreclosure and Equity Loss

How does foreclosure prevention fit into the affordable housing toolbox?

While most communities have programs to help renters become homeowners, many communities do not focus enough on keeping existing homeowners in their homes. Foreclosure prevention programs help homeowners who have defaulted on their mortgage and are in danger of foreclosure or a forced sale that will strip them of hard-earned equity. By providing these families with counseling and access to attractively priced refinancing options, foreclosure prevention can keep families affordably in their homes while preserving home values and stability in the surrounding community.

Why should communities get involved in foreclosure prevention?

Communities across the country are facing rising foreclosures as interest rates reset on adjustable rate mortgages (ARMs) originated between 2004 and 2006. While foreclosures also occur on other mortgages, the adjustable rate mortgages issued by the subprime sector between 2004 and 2006 are particularly vulnerable as many of these loans will reset to very high fixed interest rates. According to one estimate, the number of foreclosures nationally due to interest rate reset may exceed one million (or 13 percent of adjustable rate first mortgages). [1]
Foreclosures affect more than just individual borrowers. Government efforts can help both individual borrowers and the community overall by:

  • helping families stay in their homes and retain their equity,
  • preventing widespread losses in low- and moderate-income homeownership,
  • stabilizing communities,
  • safeguarding local property tax rolls, and
  • protecting nearby homeowners from equity loss.

For a more thorough explanation of why governments provide foreclosure prevention assistance, click here.

Learn more about foreclosure prevention.

 

Go back to learn about other policies that help residents succeed.

 

Solutions in Action

Chicago’s Home Ownership Preservation Initiative (HOPI) is an early example of a one-stop approach to foreclosure prevention that includes both counseling and research efforts to prevent foreclosures now, reduce foreclosure risk in the future, and mitigate the damage foreclosures can cause.
Neighborhood Housing Services, the organization that administers HOPI, reports that the initiative prevented over 1,300 foreclosures in its first three years.

Learn more about HOPI…

[1] Mortgage Payment Reset: The Rumor and the Reality. [PDF] 2006. By Christopher L. Cagan. Santa Ana, CA: First American Real Estate Solutions.

The Center for Housing Policy gratefully acknowledges the input and feedback provided for this policy section by the following reviewers (in alphabetical order): Sonia Garrison, Self-Help; Steve Tuminaro, NeighborWorks America; and Christen Wiggins, Neighborhood Housing Services of Chicago. Please note, however, that the views and opinions expressed on HousingPolicy.org are those of the Center for Housing Policy alone.

 

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