6. HRSR 01-05-09ITEhd # 6.
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MEMORANDUM
TO: Housing & Redevelopment Authority
FROM: Catherine Mehelich, Director of Economic Developme
DATE: January 5, 2009
SUBJECT: Update on Neighborhood Stabilization Program Application
Attachments
• GMHF Technical Assistance Funds for Eligible NSP Foreclosure Recovery Planning
and Application Expenses
• Information - "Community developers in MN face the foreclosure crisis",
Community Dividend, Federal Reserve Bank of Minneapolis, 2009
Issue
The purpose of this memo is to provide an update to the HRA on the status of the
application for Neighborhood Stabilization Program (Foreclosure Recovery) Funds. In
addition, the HRA is asked to:
1) Authorize staff to submit an application to Greater MN Housing Fund fox
Technical Assistance Funds.
2) Call a Special HRA Meeting later this month for the purpose of approving the
Neighborhood Stabilization Program Funding Application prior to submittal.
Background
At its December 15, 2008 special meeting the HRA reviewed data collected to date of the
Elk River foreclosure situation. The following target neighborhoods were identified as the
areas of greatest need based on number of home foreclosures:
• The Bluffs of Elk River condos
• Windsor Oaks of Elk River
• Park Pointe
• Trott Brook development area (includes all Trott Brook subdivisions)
Update on NSP Application
HRA Meeting January 5, 2009
Page 2 of 2
The HRA directed staff to proceed in developing the following programs as eligible activities
under the NSP Fund guidelines to address foreclosure issues in the target neighborhoods:
• Establish financing mechanisms (e.g. downpayment assistance) for purchase of
abandoned or foreclosed homes
• Establish rehabilitation assistance program fox homes that have been abandoned or
foreclosed in order to sell
In addition the HRA approved contracting with S.E.H., Inc. for grant writing services at a
cost not to exceed $5,000.
Recent Activities
In follow up to the HRA's direction staff has completed the following recent activities in
preparation of the NSP application:
• Continue to research, collect and sort current and historical foreclosure data through
County Sheriff's sales, realtor listings and photo surveys
• Attended technical assistance provided by MN Housing Finance regarding
application submittal requirements
• Met with local mortgage consultant and realtors for input on Elk River's foreclosure
situation
• Met with lead bank, MinnWest, on The Bluffs and their realtor
• Exploring model downpayment assistance and rehabilitation assistance programs
Next Steps/Actions Requested
The Greater MN Housing Fund (GMHF) recently announced they are accepting
applications for Foreclosure Recovery Planning and Technical Assistance Funds to assist
cities in covering the costs to prepare NSP applications up to $10,000. The funds will be
awarded as a "recoverable loan" that will be forgiven if the city's NSP application is not
awarded. If the NSP application is awarded, GMHF would be repaid out of the NSP grant
award as an eligible administrative cost. The HRA is asked to authorize staff to submit
application to GMHF for up to $5,000 toward reimbursement of the grant writing services
contract with S.E.H., Inc. GMHF Technical Assistance applications are due January 7`''.
Details of the HRA's Neighborhood Stabilization Program activities and application are still
being developed as information continues to be gathered on Elk River's foreclosure
situation. Staff recommends the HRA consider calling a special meeting for later this month
to review and consider approval of the NSP application prior to its submittal to MN
Housing on January 28, 2009. This meeting would include details on the proposed program
activities and administration. Optional dates for the HRA's consideration for a special
meeting would be Tuesday, January 20~' or Monday, January 26~'.
Submit by Email Print Form
Greater Minnesota Housing Fund invites eligible sub-recipients of Minnesota Housing's
Neighborhood Stabilization Program (NSP) to apply for up to $ 10,000 in technical assistance
funds to help local communities in (a) foreclosure recovery planning and (b) preparation of
applications to Minnesota Housing for Neighborhood Stabilization Program (NSP) funds to assist
in local foreclosure recovery efforts.
Community Applicant: Housing & Redevelopment Authority for the City of Elk River
Contact Person, Title• Catherine Mehelich, Executive Director
Address• 13065 Orono Parkway, Elk River, MN 55330
Address 2:
Telephone• 763.635.1041 Fes, 763.635.1090
Email• cmehelich@ci.elk-river.mn.us
Name of Project: 2009 Neighborhood Stabilization Program Planning & Application
Location of Project: City of Elk River
Amount of Request:
Please attach: (I) budget of estimated
expenses and (2) any proposed/signed
contracts for consultant services). $ 5,000 (S.E.H., Inc. Contract for Grant Services Dec. 12, 2008;
As a condition of any award of technical assistance funds, the above-referenced Community
Applicant (hereinafter the "Applicant") must agree to participate in planning activities for the
purposes of securing Neighborhood Stabilization Plan (NSP) grant funds from Minnesota
Housing for foreclosure recovery efforts. Technical assistance funds awarded by Greater
Minnesota Housing Fund (GMHF) may only be used by Applicants to pay for consultant(s) to
assist the Applicant in developing NSP foreclosure recovery plans and competitive applications.
The technical assistance funds will be awarded to successful Applicants as a loan; however, if an
Applicant does not receive NSP funds, GMHF will agree to convert the loan to a grant.
GREATER MINNESOTA HOUSING FUND
Technical Assistance Funds for Eligible Neighborhood Stabiliution Program (NSP)
Foreclosure Recovery Planning and Application Expenses
Page I of 3
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Vii.?f ,Pire~~~E.~ 9
Communities awarded NSP funds from Minnesota Housing are permitted to use up to 8.7% of
their grant award to cover administrative costs. A community may use these funds to reimburse
themselves for NSP eligible costs dating back to September of 2008. Therefore Applicants that
are awarded technical assistance funds must agree that if they are awarded NSP funds by
Minnesota Housing they will pay back GMHF's loan out of their NSP award. (LOAN TERMS:
repayment due within 30 days of receipt of NSP award, 0% interest).
The technical assistance funds provided by GMHF may only be used for consultant(s) to work
on activities that are NSP eligible expenses.
Eligible NSP Administrative Expenses Include:
^ Creating the NSP Plan
^ Preparing the NSP Grant Application
^ Satisfying the criteria for citizen involvement
^ Research (foreclosure data, mapping and identifying target neighborhoods, financial
projections)
^ Home inspections
^ Identifying and contracting with a CDBG Administrator
^ Program design and activities plan
In addition to the above expenses, a consultant could assist the City or County in one or more
of the following activities:
^ Drafting the NSP application
^ Public approval notices and hearings
^ Preparation of exhibits to be included in the plan
Successful Applicants will be required to enter a loan agreement with GMHF incorporating the
terms outlined in this Application.
If the Applicant is not the City or County where the Project is located or any other person
representing the City or County, the City Administrator or other person of authority within the
City or County must also sign this Application.
The award and acceptance of technical assistance funds does not in any way guarantee that the
Project will receive other types of funding from GMHF, including, but not limited to
construction loans, infrastructure loans, and gap loans.
GREATER MINNESOTA HOUSING FUND
Technical Assistance Funds for Eligible Neighborhood Stabiliution Program (NSP)
Foreclosure Recovery Planning and Application Expenses
Page 2 of 3
Applicant:
Signature:
Name:
Title:
Catherine Mehelich
Executive Director
Date:
City or County Official (if not Applicant):
Signature: Date:
Name:
Title:
City or County Department:
Phone Number
* Please sign and submit this Application along with budget and contract attachments by January 7, 2009 to:
Andy Schlock aschlack~sa gmh f com.
GMHF will process requests on a first come first serve basis. Funds will be awarded no later than January 9~',
subject to execution o f the loan agreement.
GREATER MINNESOTA HOUSING FUND
Technical Assistance Funds for Eligible Neighborhood Stabilization Program (NSP)
Foreclosure Recovery Planning and Application Expenses
Page 3 of 3
i.
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ealities of
:t for deed
leave room for abuse and can pose risks
and uncertainties for both the buyer and
seller.. The following article presents
basic facts and features of the contract
for deed and offers suggestions for min-
imizing the risks associated with this
mortgage substitute.
..Facts and features
A contract for deed, also known as a
,~.
"bond for deed; -land contract; or
"installment land contract;' is a transac-
tion in which the seller finances the sale
of his or her own property. In a contract
for deed sale, the buyer agrees to pay the
purchase price of the property in
monthly installments. The buyer imme-
diately takes possession of the property,
often paying little or nothing down,
while the seller retains the legal title to
the property until the contract is ful-
filled. The buyer has the right of occu-
pancy and, in states like Minnesota, the
right to claim a homestead property tax
exemption. The buyer finances the pur-
chase with assistance from the seller,
from government contracts, third-party ~
payments, and direct fees and charges
paid by dients _or patrons: Because i,
many types of contributed income
come with strings attached, nonprofits
are eager to increase the percentage of
their total income from earned income.
Some nonprofits receive. earned"
income through their ongoing, care
activities. A nonprofit theater, .for
JG THE COMMUNITY:
>n to social enterprises
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who retains a security in the property
The contract for deed is a much
faster and less costly transaction to exe-
cute than a"traditional, purchase-money
'. mortgage. In a typical contract for deed,
there are no origination fees, formal
applications, or high closing and settle- ',
ment costs. Another important feature
'~ of a contract for deed is that seizure of I
the property in the event of a default is
', generally faster and less expensive than
seizure in the case of a traditional mort-
'( gage. If the. buyer defaults on payments
!, in a typical contract for deed, the seller
may cancel the contract, resume posses-
Sion of the property, and keep previous
installments paid by the buyer as liqui- '
~! dated damages. Under these circum-
ii stances, the seller can reclaim the prop-
', erty without a foreclosure sale or judi-
- ~ cial action."However, laws governing the
'. contract-cancellation process differ.
', from jurisdiction to jurisdiction and the
outcome may vary within any one state,
', depending on the contract terms and
the facts of the specific case.
Because the buyer in a contract for
~j deed does not have the same safeguards
as those afforded a mortgagor in a pur-
!, chase-money mortgage, the contract for
deed may appear to be essentially a rent-
' to-own arrangement. However, in a typ-
ical contract for deed, the buyer
', becomes responsible for the obligations
C
WEATHERING THE STORM:
Community
developers In .
Minnesota face
the foreclosure
crisis
By Rose Carr and
Andriana Abariotes
notice of foreclosure doesn't just
Continued on page 2 ', affect the homeowner who
_ _ _ ', receives it. It erodes the founda-
--- --_
- ~ tion of the entire community. It depletes
property values and institutional trust, ,
weakens self-confidence, and leaves a
' deep mark on personal finances, industry
~ ! balance sheets, and community stability.
Homeowners in Minnesota have
example, is expected to generate I f th f
income from ticket sales. In the past ~~
decade or so; .more nonprofits have..
been seeking opportunities to gener-
ate earned income from some less
expelled activities. For example, athe-
ater could increase its earned income
by offering ailing classes to the public.
Continued on page 6
been the recipients of most o e ore-
closure notices in the Ninth Federal
Reserve District. In 2007, Minnesota
experienced more than 20,000 foredo-
., sures-an increase of more than 200
percent over 2005.1 Most have been
~~ concentrated in the cities of
~' Minneapolis and St. Paul, which have
been dramatically affected by the wave
Continued on page 4
~a~e 4 Dividend ,SSUe 1, 2009
Community developers in Minnesota
face the foreclosure crisis
Continued from page 1
of foreclosures and resulting vacancies.
In the hardest-hit parts of the two
cities-North Minneapolis and St. Paul's
East Side neighborhoods-foreclosures
are dismantling neighborhood revitaliza-
tion efforts by reversing gains in home-
ownership rates and market values. It's
projected that Minnesota will experience
an additional 28,000 foreclosures in
2008,21ikely resulting in further neighbor-
hood deterioration and destabilization
across the state.
During the latter part of 2008, much of
the focus of the recovery from foreclo-
sures and the credit crisis was on large-
scale, national- solutions. Nonetheless, at
the neighborhood level, recovery will
'; come house by house and block by block.
', This article takes a close look at foreclo-
sures in Minnesota, with a focus on North
Minneapolis and the East Side of St. Paul,
and identifies ways communities are
addressing the problem, individually and
collectively.
A troubling trend
Historically, most foreclosures have been
caused by unexpected events that create
economic hardships for homeowners, such
i as job loss, divorce, or catastrophic illness.
Many foreclosures in the current market
have been triggered by broader factors,
such as mortgage rate resets, low or falling
home. equity values, real estate flipping,
and aggressive marketing of high-cost
loans. Neighborhood organizations such as ',
Dayton's Bluff Neighborhood Housing ',
Services (DBNHS) in St. Paul noticed the
last trend a number of years ago and
thought the future looked grim. ',
"When we looked at Home Mortgage
Disclosure Act data, we could see that there
was a lot of subprime lending going on [in
the neighborhood] and we could tell this was
not going to be a good thing. We first noticed
this in 2002; and saw it peak in 2005;' recalls
Jim Erchul, -executive director of DBNHS.
According to Erchul, the surge in subprime
', loans is partly due to the fact that brokers
encouraged some people with prime loans to
Housing partners create national intermediary
to. address property vacancies
On October 4, 2008, four of America's leading housing
and development organizations established a national,
nonprofit intermediary that will coordinate the acquisition
and. transfer of ownership of foreclosed, vacant proper-
ties. The new entity, known as the National Community
Stabilization Trust (NCST), will connect the holders of fore-
closed, vacant, REO~ properties with community-based
organizations that are working to halt the spread of fore-
closures. The ultimate goal of the trust is to promote the
revitalization of affected neighborhoods by facilitating the
rehabilitation and reuse of vacant homes.
The NCST and its sponsors will focus on four activities
• Providing an efficient, cost-effective mechanism for
transferring foreclosed properties from servicers and
investors to local groups;
• Aggregating capital from private and philanthropic
sources and providing financing to support communi-
ty-stabilization efforts;
• Coordinating efforts to develop effective neighbor-
hood-stabilization programs; and
• Serving as a focal point and voice for the housing
industry in the arena of foreclosed-property reuse and
community stabilization.
` Discussions about forming the NCST began in early
2008, when Enterprise Partners, Inc., Housing Partnership
Network, Local Initiatives Support Corporation (LISC),
and NeighborWorks® America formed a partnership to
develop solutions to the problem of home vacancies. The
NCST took shape over the summer as the four partners
convened a task force of loan servicers, performed data
collection to inform the development of business and
financial models, and completed a pilot project to confirm
the viability of the models. The Office of the Comptroller
of the Currency and the Ford and MacArthur Foundations
.provided support for various .stages. of the planning and
development process. Locally, the NCST has been con-
ducting pilot efforts with the Cities of Minneapolis and St.
Paul, Dayton's Bluff Neighborhood Housing Services, the
Greater Metropolitan Housing Corporation, and Twin
Cities LISC.
To learn more, visit vvww.stablecommunities.org/
taxonomy/term/339/all.
REO or real estate dwned, refers to properties that have been taken back through foreclosure and are owned by the lender.
Visit us at www.minneapolisfed.org
switch to subprime as a means of gaining z
equity to pay for other bills. o
"Some people have done this two or a
three times;' says Erchul. In one instance, .~
a
brokers convinced a family that had no
health insurance to switch to a subprime o
loan in order to gain equity to pay for their a
son's medical bills. "They were. told closing
costs would be $5,000 and they turned out
to be $20,000;' says Erchul. "They would
have been better off just not paying the bill."
The return of blight
Driving through`'North'Minneapolis and
St. Paul's East Side, the sight of vacant, fore-
. closed homes is hard to miss. In some of
the hardest-hit areas, no block is
untouched. The situation affects not only
the families who lose their homes, but also
those who remain in the neighborhood.
Foreclosures and the large number of real
I estate owned, or REO, properties they cre-
ate have contributed to declines in home
values. (REO refers to properties that have
', been taken back through foreclosure and
are owned by the lender.) For example, staff
at DBNHS estimate that values on the East
', Side of St. Paul have dropped almost 40
percent from 2007 to 2008. As a result,
more homeowners in the neighborhood,
j regardless of whether their loans are prime
'; or subprime, may now owe more on their
', .mortgages than their homes are worth. As
more and more homes are left vacant due
', to foreclosure, the return of housing
blight3 may overwhelm some neighbor-
hoods, leading to increased criminal activ-
~' ity and further declines in property values.
However, homeowners are not the only.
'; victims in the foreclosure crisis. Renters
', have also been affected. When a landlord
faces foreclosure, tenants often face evic-
tion. According to estimates from staff
~, members of city agencies, approximately
50-60 percent of .foreclosures in North
', Minneapolis and the East Side of St. Paul
have been on investor-owned properties.
As displaced renters. seek .out vacancies in
'. the remaining supply of rental housing,
they face competition from foreclosed
~, homeowners who have entered the rental
market. As a result, many families have
All photos accompanying this article were taken in North Minneapolis. Pages 1 and 4: Foreclosed, vacant homes of various ages, styles, and states of repair are a common sight. Page 5: The foreclosure crisis in close-up.
issue 1, 2009 ~ ®t ~' ~ ~ ~ ~ Page 5
To view a gallery of foreclosure images, visit Community Dividend on the Publications tab at www.minneapolisfed.org.
~~ ---~ ~.
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r~~sP- NoT~~E. = LISC -initiative takes
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paigns that market neighborhoods to spe-
cific groups of potential homebuyers.
"When the housing crisis started, the first
thing we did was access data that could give
us an accurate assessment of where the fore-
closureswere and how widespread the prob-
lem was;' says Tom Streitz, director of hous-
ing and polity development for the City of
Minneapolis Community Planning and
Economic Development Department.
"Once we realized the scope, we went to
work with a variety of outreach programs."
Examples include continuing the Don't
Borrow Trouble ad campaign, which
spreads the message that help is available to
people in "foreclosure; using the city's 311
information line to direct people to assis-
tance and counseling; putting informational
inserts in utility bills mailed to strategically
important areas; and sponsoring housing
fairs at which homeowners can talk directly
to lenders.
"Counseling and prevention were key in
those early days;' Streitz continues. "From
there, we moved toward intervention by tar-
geting six cluster areas [on the north side],
working with the neighbors and select non-
profit and for-profit developers to purchase
properties for demolition or for rehabilita-
tion and resale. Working in these clusters
enables us to have a strong, visible impact on
a community and to hold back blight.
Adding incentives for buyers-such as the
Minneapolis Advantage, which has been
wildly popular-has also had a positive
impact in these distressed communities:'
Collaborative efforts
are under way
As the examples from the City of
Minneapolis demonstrate, work is being
done to combat foreclosures in some
neighborhoods. However, the scope of the
foreclosure crisis in Minnesota demands a
widespread response from all sectors,
including banks, mortgage lenders and ser-
vicers, real estate agents, government agen-
cies, nonprofits and CDCs, elected officials,
private developers, and community leaders
and residents. Recognizing the need for this
collaborative, comprehensive approach,
key institutions came together in late 2006
and formed the Minnesota Foreclosure
Partners Council (MFPC). The .goal of the
MFPC is to identify, fund, and implement
coordinated policies and .programs that
effectively address the impact that the
recent surge in mortgage foreclosures has
For nearly 30 years, Local Initiatives Support Corporation (LISC) has provided
resources to strengthen and sustain neighborhoods across the country.
Historically, LISC has concentrated on providing capital investment for real estate
development in low-income communities. Recently, in light of the devastation
wrought by foreclosures, LISC has identified a need to connect neighborhood
recovery to broader efforts.
In LISC's view, community developers and neighborhood organizations are
uniquely positioned to broker relationships across sectors such as housing, educa-
tion, safety, health, jobs, the arts, and more, to help advance a holistic approach to
healthier communities. To encourage community development corporations
(CDCs) to embrace a broader agenda, LISC has launched an initiative called
Building Sustainable Communities.
found themselves homeless or without
quality housing alternatives. According to a
national survey conducted by the National
Coalition for the Homeless, nearly 61 per-
cent of local and state coalitions for the
homeless have seen an increase in homeless-
ness since the foreclosure crisis began.4
A threefold strategy
As the incidence of vacant properties has
increased, nonprofit neighborhood organi-
zations and community development cor-
porations (CDCs) have become key players ;
in addressing the negative effects of neigh- '.
borhood blight. To date, their strategy has
been threefold. First, community organize-
tions have identified the owners of individ-
ual properties that are in close proximity to ',
current or proposed developments of ':
housing, commercial, or community facili-
-ties in the neighborhood, usually in areas
where CDCs and others have made consid- '~
erable investments already. Second, CDCs I!
and other neighborhood-based organiza-
tions have stepped up communication and
coordination with city code-enforcement
agencies to try to make sure that the owners '.
keep their properties properly secured and
maintained. Third, these same groups have
increased marketing efforts to attract
prospective buyers. They promote neigh-
borhood amenities and the fact that housing
is now more affordable than in recent years.
In addition, several CDCs, local lenders,
and public institutions have begun to
develop financing products to hem
prospective~yers purchase pr~r-
ties in certain neighborhoods. For example,
the Minneapolis Advantage program is one ',
early effort on the part of the City of
Minneapolis to address the concentration !,
of foreclosures and vacant properties. The
program provides down payment and clos- i
ing cost assistance to first-time ho___ _mebuy` '
ers who purc ase a ome in the McKinley,
Folwell, or Webber-Camden neighbor- ',
hoods in North Minneapo is. The home-
buyer receives a $10,000, zero percent
interest loan that is forgivable if he or she
lives in the house for five years or longer.
The city has also used other creative tools
to address the problem of foreclosed,
vacant properties, including aggressive
acquisition; enhanced regulatory tools,
such as aggressive inspections enforcement
and increased vacant-property fees; legal
strategies, including lawsuits that force
lenders and servicers to the table to negoti-
ate workouts with borrowers; and cam-
The initiative weaves together five basic goals:
• Investing in the physical environment;
• Increasing family income and wealth;
• Stimulating economic activity locally and regionally;
• Improving access to quality education; and
• Fostering livable, safe, and healthy environments.
Building Sustainable Communities will form the basis of much of LISC's work
over the next three years. The approach involves integrating the work being done
on the issues community residents have identified as being important to improving
their quality of life. It also elevates the, importance of engaging with the commu-
nity throughout the development process-from issue identification to planning
to implementation. Finally, it involves a sense of mutual accountability among
residents and community organizations. CDCs remain absolutely central to this
approach but, in order for more comprehensive strategies to be employed, other
implementation partners need to be engaged as well.
Duluth, Minn., offers an example of LISC's Building Sustainable Communities
initiative in action. In Duluth's Hillside neighborhood, a new mixed-income
development is emerging on the site of what was once a troubled, 200-unit,
barracks-style public housing project. The development, known as Harbor View
Hillside Revitalization, is a partnership between the City of Duluth Housing and
Redevelopment Authority and The Communities Group, working in cooperation
with Duluth LISC. The revitalization will include new housing, a village center,
and amixed-use commercial and residential complex featuring a grocery store.
The neighborhood's existing Copeland Community Center will expand to include
child care, early learning, after school programs, and a technology training center.
There will be new parks, an outdoor softball field and skating rink, and an indoor
sports facility. .
Building Sustainable Communities is under way in the Twin Cities as well.
Twin Cities LISC is playing an important role in a multimillion-dollar neighbor-
hood investment project called Invest Saint Paul. The collaborative project, which
is led by the City of St. Paul, will coordinate and focus private and public
resources on four St. Paul neighborhoods suffering from disinvestment and fore-
closures: Dayton's Bluff, East Side, Frogtown, and North End. Twin Cities LISC is
helping coordinate funding efforts, community input, and outreach in two Invest
Saint Paul target areas and two additional target areas in Minneapolis. A suburban
target area is also emerging.
For more information on LISC, visit www.lisc.org. To learn more about efforts
in Duluth and the Twin Cities, click on the Local Offices tab.
Continued on page 7
Visit us at www.minneapolisfed.org
~ Issue 1, 2009
CommunityDividend o.,.,
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~rt'~~_~r i I~-f~fi ~f i~ IE° II I._ li ~i:i",I f _ ` r ~il~ ~ ~iCtl . i _ i~~rii_ ~ -', j~
-:~ganizatio~,~~, ~l ~~, , ,.~ ~~ ~ted social,enterpnses;of everycategory°~and
description., u;ue co.tne fragmented°nature,of the nonprofit sector,
efeterminmg;the total, number..of:.social enterprises: is a challenge.
According to th,e Directory_ of Social Enterprises,:an pnline database,
sponsored' fly Community- Wealth Ventures, Inc., and the Social:
Enterprise Alliance, there are 28 social enterprises in .the Ninth..
Federal Reserve District. The actual total may be much higher.
The directory,'s listings include construction companies, retail
shops, manufacturers, restaurants, and wholesalers. See below for
a sampling of Ninth District enterprises that appear on the list.
Child Care Resources !-- Child Care Training
Missoula, Mont. A provider of certification train-
www.childcareresources.org ing for child care professionals.
Focus: Provides advocacy and
support for child and youth
development programs.
The Green Institute H Reuse Center,
Minneapolis Deconstruction Services
www.greeninstitute.org A retail business that sells sal-
Focus: Promotes eco-friendly vaged building materials,
policies and technologies to including hardwood flooring,
improve communities and the lumber, siding, and fixtures.
environment.
Project for Pride in Living ~-- PPL Shop
Minneapolis A thrift store that sells home
www.ppl-inc.org and office furniture, building
Focus: Promotes community materials, and catalog surplus
and economic development by items.
providing employment training,
affordable housing, and human
services.
Ventures Unlimited, Inc. ~-- Just for the Birds, Inc.
Hayward, Wis. `A;rnahufacturer of bird feeders
www.justforthebirds.org and supplies, including suet
Focus: Provides job-placement balls, birdhouses, and humming-
services and life-skills training for bird and oriole feeders.
developmentally disabled adults.
West CAP (West Central ~"- Ideal Auto
Wisconsin Community Action A used car dealership that sells
Agency, Inc.) cars to West CAP program par-
Glenwood City Wis. ticipants, affiliated agencies,
www.westcap.org and the general public.
Focus: Promotes self-sufficiency-
and economic stability by devel-
- oping the social and economic-
assets of low-income families
and communities.
To search the Directory of Social Enterprises, visit www.communitywealth.com
Community developers in Minnesota
face the foreclosure crisis
Continued from page 5
had on families, neighborhoods, and com-
munities in the Twin Cities region and
throughout Minnesota. (For more on the
MFPC, visit www.ci.minneapolis.mn.us/
foreclosure.)
The council's early efforts included ramp-
ing up foreclosure prevention counseling and
making investments in pilot programs.
Interventions and pilot programs already
under way include the following.
• The Greater Minnesota Housing Fund,
Minnesota Home Ownership Center, Family
Housing Fund, and Minnesota Housing have
developed a collaborative statewide funding
plan to increase foreclosure prevention coun-
seling services, outreach, and tenant assis-
tance. According to its developers, the plan
will prevent nearly 5,700 foreclosures by the
end of 2008 at a counseling cost of $425 per
household. The intervention will save over
$2.4 million based on average foreclosure
costs to the homeowner and lender (estimat-
ed at roughly $57,000 per household).
• With help from the Family Housing Fund,
DBNHS in St. Paul and the Greater
Metropolitan Housing Corporation in
Minneapolis have developed a contract for
deed program that is designed to enable
renters to become homeowners in three to
five years. The contract for deed is 'designed
to assist individuals who want to be home-
owners but are not yet ready fora conven-
tional loan product.
• Through its Building Sustainable Commun-
ities initiative, Local Initiatives Support
Corporation (LISC) has been working in
Duluth and the Twin Cities to engage com-
munities affected by foreclosures and vacant
properties. The goal is to ensure that the
work being done to address the issue is con-
nected to and not isolated from other com-
munity development issues. (For more on
the Building Sustainable Communities ini-
tiative, see the sidebar on page 5.)
A framework for recovery
In recent months, the MFPC has turned its
attention toward neighborhood recovery.
Council members have designed a recovery
framework that identifies neighborhood-
focused strategies and pilot efforts for com-
bating the rising number of vacant and
boarded homes. The framework-which is
an evolving, collaborative document-also
identifies ways to meet homeowners' needs
for capital and credit to stave off foreclosures.
The framework's developers recognized that
prevention and workouts are critical strate-
gies for stemming the flow of foreclosures
and promoting community recovery.
The recovery framework has five key
principles:
• Strategies must be oriented toward providing
.incentives that reactivate and redirect the mar-
ketplace. Reactivating refers to getting conven-
tional lenders to lend to creditworthy borrow-
ers in areas affected by foreclosures, while redi-
recting refers to getting private investors to act
with the community's well-being in mind.
• Government and nonprofit institutions have
instrumental roles: providing clear and consis-
tent signals to the marketplace regarding what
public resources are available to developers and
what the expectations are, in terms of commu-
nity standards for property management and
maintenance; taking the lead on "research and
development" of new credit products; and fill-
ing-gaps in markets that are not profitable for,
or of interest to, the private sector.
• Unique community circumstances will
require a commonly available set of tools
and resources, which can be applied locally.
• Strategies must look to the future and
build on likely future economic and demo-
graphic trends.
• Urgent, yet sustained, effort is needed.
Drawing from these principles, the frame-
work has three main recovery goals:
• Prevent 10,000 foreclosures. The MFPC has
identified two main tools for reaching this
goal. The first is to provide foreclosure coun-
seling and the second is to develop refinanc-
ing loan products and/or provide incentives
for private market refinancing.
• Assist 2,850 homebuyers with acquiring
mortgages and homeownership counseling.
There remains a need for loan products for
prospective homebuyers, particularly in
neighborhoods where there are concentra-
tions of foreclosures and vacant properties.
Pre- and post-purchase counseling and
rehab guidance should also. be made avail-
able to the homebuyers.
• Acquire 4,500 homes, make appropriate
improvements to them, and place them back
onto the private market To support dis-
tressed neighborhoods, the MFPC has set a
goal of acquiring and rehabilitating the
homes through a partnership among public
agencies and nonprofit and for-profit devel-
opers. Disposition may take a variety of
forms-including selling homes to owner-
occupants or converting them to quality,
scattered-site rental-allowing fora con-
trolled release of properties back onto the
marketplace as localized neighborhood
housing markets begin to improve.
Perhaps most important, the neighbor
Continued on page 8
Visit us at www.minneapolisfed.org
o.aea CommunityDividend
Community developers
in Minnesota face the
foreclosure crisis
Continued from page 7
hood recovery framework has helped pre-
pare Minnesota to take full advantage of fed-
eral assistance from the $3.9 billion Housing
and Economic Recovery Act. The framework
has also positioned Minnesota to pursue cre-
ative property-disposition strategies, such as
the National Community Stabilization Trust,
or NCST. The purpose of the trust is to help
local organizations attain properties from
lenders and servicers in order to enable their
rehabilitation and reuse. In mid-2008, the
NCST's sponsors selected Minneapolis-St.
Paul as the national pilot site for refining the
negotiation and transfer process. (For more
on the NCST, see the sidebar on page 4.)
From crisis to opportunity
The correlation between the economic down-
turn and the housing market is clear. In the
words of private developer Chuck Leer of
Minneapolis, "The key to economic recovery is
the housing market. And housing will not
recover until we stem the foreclosure crisis. The
dark cloud of foreclosures has fractured neigh-
borhoods, sent prices into a tailspin, and left us
all feeling vulnerable. The silver lining for all is
an abundant supply of more affordable hous-
ing and unprecedented opportunities to revi-
talize our community. The foundation for
recovery will be built on civic ingenuity, hard
work, and market solutions. Our task is to turn
this crisis of fear into the promise of hope."
There are no easy solutions to the foreclo-
sure crisis and the upheaval it has brought to
our communities. The crisis has hit hard,
and there is plenty of bad news to go around.
But we can also take heart. New ideas, part-
nerships, and solutions are emerging. The
community development industry has over
30 years of experience and ingenuity. This
time of unprecedented challenge has created
an opportunity for the industry to reexam-
ine its approaches to neighborhood-based
revitalization and community development.
It has also created an opportunity to collabo-
rate, think holistically, and reposition efforts
to develop strong, stable neighborhoods that
can weather any future storm. m
Andriana Abariotes is the executive director
of Twin. Cities LISC. Rose Carr is an intern
with Twin Cities LISC and is pursuing a master's
degree at the University of Minnesota's Hubert
H. Humphrey Institute of Public Affairs.
1 Foreclosures in Minnesota: A Report Based on
County Sheriff's Sale Data, HousingLink, AprIl 2008.
2 Ibid.
3 Housing blight, broadly defined, refers to housing
structures and properties whose physical conditions
have deteriorated.
4 Foreclosure to Homelessness: The Forgotten Victims
of the Subprime Crisis-A National Call to Action,
National Coalition For the Homeless, April 15, 2008.
News and Notes
Fed releases report on con
centrated poverty
The Community Affairs offices of the Federal
Reserve System have released a report that
explores how pockets of concentrated poverty
develop and why they persist. The Enduring
ChaIlenge of Concentrated Poverty: Case Studies
from Communities Across the U.S. is based on
research conducted in 16 high-poverty com-
munitieslocated invarious regions of the coun-
try. Working in collaboration with the Board of
Governors of the Federal Reserve System and
the Brookings Institution's Metropolitan Polity
Program, Community Affairs staff members
from the 12 Federal Reserve Banks conducted
on-site interviews and data gathering in the 16
study communities throughout 2006.One of
the profiled communities, the Blackfeet Indian
Reservation in Montana, is located in the Ninth
Federal Reserve District.
For each of the 16 communities, the
report contains a detailed case study describ-
ing the history, causes, and effects of persist-
ent, concentrated poverty. The report also
includes a discussion of the factors. that the
selected high-poverty communities have in
common, such as physical or geographic iso-
lation and profound demographic changes.
To download the report or view an inter-
active map of the U.S. featuring the 16 study
communities, visit www.frbsf.org/cpreport.
NeighborWorks® America
releases report on foreclosure
counseling
NeighborWorks® America (NWA) has
released its first report to Congress about fore-
closure activities funded through the National
Foreclosure Mitigation Counseling (NFMC)
Program. The NFMC Program was among the
first federal responses to the nationwide fore-
closure crisis. It was created in December 2007
with the passage of the FY 2008 Consolidated
Appropriations Bill, which authorized $180
million for foreclosure counseling efforts and
named NWA as program administrator.
The report, titled National Foreclosure
Mitigation Counseling Program Congressional
Update: Activity through September I5, 2008,
is based on data gathered from 130 foreclo-
sure-mitigation and housing organizations
that had received a total of $55 million in
NFMC Program grants as of September 15,
2008. In addition to listing statistics about the
NFMC Program's activities and funding, the
report includes demographic information
about the clients who have received foreclo-
sure counseling through the program,
descriptions of the challenges foreclosure
counselors face in their work with clients and
mortgage servicers, and a discussion of suc-
cessful strategies that counselors employ.
According to the report, as of September
15, 2008, the NFMC Program had provided
foreclosure-related counseling to 105,071
homeowners in all 50 states. Of the clients
served, 55 percent are female and 30 percent
are married with dependents. Nearly two-
; thirds are ages 35 to 54, while one-fifth of
clients are age 55 or older. A majority of the
clients-52 percent-are African American,
Hispanic, or Asian or Pacific Islander, although
these groups make up just 18 percent of all
homeowners in the U.S. More than 40 percent
of foreclosure counseling clients defaulted on
their mortgages because of a loss. of income.
Only 9 percent defaulted because their loan
payment increased. Forty-four percent of
clients had adjustable-rate mortgages, or
ARMS, and 45 percent had fixed-rate mort-
Issue 1, 2009
gages. In comparison, 22 percent of all mort-
gages in the U.S. are ARMS and 72 percent are
fixed-rate. About 52 percent of clients reported
spending more than 40 percent of their house-
hold income on housing, while 20 percent
reported that their housing payments are more
than 75 percent of their household income.
In addition to the $55 million that has
been awarded directly to organizations that
provide foreclosure-related counseling, the
NFMC Program allocated $5 million to NWA
to build the skills and capacity of the grant
recipients. As of September 15, 2008, the
capacity-building funds channeled through
NWA had provided scholarships that enabled
2,555 staff members of the 130 grantee
organizations to attend foreclosure counsel-
ing training. The funds also enabled grantees
to hire 1,035 new foreclosure counselors.
To download the. report, visit www.nw.org.
:~
Wisconsin Indian Business Conference, February 11, and Tribal = '
Uniform Commercial Code Training, February 12-13; Keshena, Wis.
Sponsored by the Wisconsin Indian Business Alliance. Additional information:
e-mail Teresa.Walker@wisconsul.gov or call 608-267-1713.
Montana Indian Business Conference and Showcase. Apri120-21;
Missoula,Mont. Sponsored by the Montana Indian Business Alliance. Additional
information: visit www.mibaonline.org.
Personal Finance Decathlon State Championship. Apri129,'
Minneapolis. A knowledge competition for high school students. Preliminary
rounds take place online and the decathlon culminates in a live. championship
bout in April. Sponsored by the Federal Reserve Bank of Minneapolis; Minnesota
Council on Economic Education, and Sit Investments. Additional information:
visit www.mcee.umn.edu or call 612-625-3727.