Increasingly, community organizations are getting more involved in ensuring that their citizens are able to avoid foreclosure and stay in their homes. The motivation is simple, fewer foreclosures make for more stable communities. More stable communities reduce crime and protect property values.
To that end, Boston Community Capital (BCC) created the Stabilizing Urban Neighborhoods (SUN) program to allow borrowers to remain in their homes, while still achieving principal reduction and lowering their monthly payment.
The program boasts in the simplicity of the process. First, potential borrowers go through the qualifying process by having their finances and employment situations carefully analyzed for repayment likelihood.
The organization then negotiates a short sale with the lender’s representative to buy a foreclosed home at the current, distressed market value. The market value for these homes is typically substantially less than the amount originally paid by the homeowner.
Finally BCC resells the home, typically at current fair market value, to its existing occupants with a new, fixed-rate 30-year mortgage that fits within their budget.
BCC says that SUN has provided more than $71 million in mortgage financing to help more than 500 families remain in their homes. On average SUN borrowers receive a 38 percent reduction in principal to their loans, which are generally funded by private investors and foundations.
Although the principal is reduced, the interest rate on the loans is slightly higher than traditional banks. BCC contends that the delinquency rate on these new loans is extremely low.