NJ Nonprofit Makes Bulk Default Purchase

Housing and Neighborhood Development Services, Inc. (""HANDS"":http://www.handsinc.org), a chartered affiliate of ""NeighborWorks America"":http://www.nw.org, recently announced that it acquired the defaulted mortgages on 47 vacant homes in the greater Newark, New Jersey area.
According to HANDS, its bulk purchase of mortgages expected to foreclose is the first large-scale acquisition in the nation by a nonprofit organization and is a pioneering approach to addressing the fallout from foreclosure and reclaiming neighborhoods. All of the homes are vacant and abandoned, and most are deteriorated, contributing to blight in their local areas.
HANDS purchased the 47 Essex County properties from Washington Mutual Bank, now JPMorgan Chase, and is working with its partners in ""Operation Neighborhood Recovery"":http://www.handsinc.org/Recovery.htm to rehabilitate the properties to turn them into ""cornerstones for productive change in their surrounding communities.""
Homes left vacant and abandoned in the wake of foreclosure have a devastating effect on communities. Increased crime and vandalism, as well as property neglect, lead to decreased property values and increased cost - as much as $19,000 per home - to local and state governments, according to industry studies. According to HANDS, 654 New Jersey homes were repossessed by banks in February 2009, and more than 600 New Jersey homes were scheduled for foreclosure auction the same month.
Patrick Morrissy, executive director of HANDS, said, ""Time is our enemy and early intervention is the key to battling the destabilizing influence of abandoned and foreclosed properties on neighborhoods.""
Commenting on the Essex County purchase, Morrissy continued, ""We knew that as time passed, the properties would continue to deteriorate, their values would plummet, as would the home values in the overall neighborhood. It became clear to everyone that the results of mortgage fraud, the descending real estate market, and the loss in value from vandalism and neglect would result in continued deterioration of our neighborhoods. Given the current economic circumstances, this transaction made the most sense for everyone, especially the community.""
HANDS specializes in the redevelopment of troubled properties in order to bring about long-term sustainable neighborhood change, and has created ""Operation for Neighborhood Recovery"":http://www.handsinc.org/Recovery.htm (ONR) as a proactive effort to deal with the rising number of foreclosures in the area. HANDS explained that to rehabilitate the homes now in its possession, it will hand off groups of the properties to the ONR partners within their respective neighborhoods. ONR partners include La Casa de Don Pedro, Unified Vailsburg Services Organization, Episcopal Community Development, Greater Newark Housing Partnership, Brand New Day, and HOMECorp. The ONR partners have agreed to rehabilitate the properties and make them available for affordable homeownership.
Ken Wade, CEO of NeighborWorks America, commented, ""At a time when real estate values have plummeted drastically, homeowners are facing unprecedented financial stress and insecurity, and the national foreclosure rate is at an all-time high, local nonprofit organizations in Essex County have found a way to work together to respond to the crisis. In order to reclaim our communities from abandonment and foreclosure, nonprofits are joining together and working alongside private sector partners to implement innovative solutions that effectively address the scope and scale of the crisis.""
The HANDS transaction required a collaborative effort to structure and provide the financing necessary for the purchase of the mortgages and ongoing maintenance and stabilization costs, which are anticipated to total $5.4 million. ""New Jersey Community Capital"":http://www.newjerseycommunitycapital.org, a community development financial institution working throughout the state, coordinated the provision of debt and equity for the transaction from its partners, Prudential Social Investment, Local Initiatives Support Corporation-Greater Newark & Jersey City (LISC), NeighborWorks America, and Enterprise Community Partners.
Robert Zdenek, president of New Jersey Community Capital, said, ""New Jersey Community Capital supported this project from the beginning because of its innovative nature and the dramatic impact it can have on the affected communities. Because of its extensive financing needs and risky nature, the collaboration on this transaction was essential, and provided a new opportunity for this group of socially responsible funders to work together on such a pivotal project.""
According to HANDS, the project has the makings of a national model to address the foreclosure crisis across the nation - a collaborative localized effort that the organization is calling the community asset preservation corporation (CAPC).