City of Milwaukee

Department of City Development

Neighborhood Stabilization ProgramFederal Reserve Conference

November 5, 2009

Foreclosures in MilwaukeeBackdrop for the NSP Program

• Over 10,000 foreclosure filings in Milwaukee (2007-2008); more than double historical averages

• Over 5,300 properties are currently subject to an open foreclosure filing – an increase of almost 20% from year end 2008

• 1,348 Milwaukee homes are currently bank owned foreclosures (REOs). An additional 302 are City owned tax foreclosed properties.

• Two thirds of foreclosed properties have open building code violations

Foreclosures in Milwaukee

• Hardest hit areas are CDBG areas; significant City investments are at risk

• Subprime lending activity peaked in 2005 with over $1 Billion of activity in Milwaukee

• Subprime lending disproportionately impacted low income and minority families; 59% of 2006 loans in CDBG areas were subprime/high-cost

Concentrations of Foreclosed

Homes

Trends

• Foreclosure filings are up since last year

• “Second Wave” – related to economy in addition to predatory lending

Trends

• Number of bank owned properties is declining as prices are being slashed and more buyers are entering the market

• In Milwaukee, there have been more sales of foreclosed properties than regular market transactions

Neighborhood Stabilization Program (NSP)

Milwaukee’s NSP Plan

Program Summary

Homebuyer Assistance (80 homes) $1,600,000

Rental Rehabilitation (75 units) $1,312,500

Rental Development - Large Project (40 units) $1,200,000

Buy in Your Neighborhood (40 units) $240,000

Acquisition, Rehab, Resale (5 homes) $375,000

Demolition (75 properties) $1,312,500

Vacant Land Initiative  

Vacant Lot Reprogramming (50 properties) $100,000

Vacant Lot Redevelopment (40 units) $1,200,000

Land Bank $864,219

Neighborhood Stabilization Program (NSP)

Homebuyer Assistance

• Up to 30% of purchase/rehab cost, indexed to buyer income (final levels of assistance being determined).

• 0% interest 2nd mortgage, forgivable after five or ten years depending on level of assistance received.

• Code compliance: Each property will be inspected to insure that it meets the minimum standards for the program. A rehabilitation specialist will prepare a scope of work, monitor the construction and perform a final inspection to insure that the property meets program standards)

Provides forgivable loans for owner occupant purchasers of foreclosed homes

Neighborhood Stabilization Program (NSP)

Rental Rehab

Provides forgivable loans to investor purchasers for the rehabilitation of foreclosed homes.

• Up to $17,500 per unit (example: 2 unit property is eligible for $35,000). Funds can be used for rehab costs only and must be matched dollar for dollar by landlord.

• Property must be rented to income-eligible tenants and held for a minimum of 5 years. Tenant income: < 60% AMI with priority to landlords who agree to rent to tenants with incomes < 50% AMI.

• Code compliance: Each property will be inspected to insure that it meets the minimum standards for the program. A rehabilitation specialist will prepare a scope of work, monitor the construction and perform a final inspection to insure that the property meets program standards.

• Participating landlords must have a responsible track record including a good record with the Department of Neighborhood Services and a history of paying their property taxes on time.

Neighborhood Stabilization Program (NSP)

Buy in Your Neighborhood

Provides low interest loans for investors purchasing a foreclosed home in their neighborhood.

• 3.0% interest 2nd mortgage for up to 20% of purchase/rehab cost.

• Property must be located within three blocks of purchaser’s primary residence.

• Property must be rented to income-eligible tenants and held for a minimum of 5 years. Tenant income: < 60% AMI with priority to landlords who agree to rent to tenants with incomes < 50% AMI.

• Code compliance: Each property will be inspected to insure that it meets the minimum standards for the program. A rehabilitation specialist will prepare a scope of work, monitor the construction and perform a final inspection to insure that the property meets program standards)

What’s Helping

• Created guidelines and before launching, met with lenders, home buying counseling agencies and realtors to solicit feedback

• Continue to meet to work through issues and identify process improvements

What’s Helping

• Strong Marketing Efforts – Getting the Word Out

– Community Organizations– Newly formed Milwaukee Homeownership

Consortium– Website– Other Partners – Milwaukee Public Schools, City

employee brown bags, Milwaukee Police Dept.

Challenges

• Most properties in need of rehab – length of process to approve assistance doesn’t always match timeframe of offer to purchase – lenders/servicers motivated to sell and would prefer to accept a “cash offer”

• Access to financing, especially for non-owner occupied properties, continues to be a challenge

• Create realistic expectations on process – partners are key in the communication

• Working on this – applied for NSP 2 funds, as well as secondary market, and local banks

Land Bank• City formed the Milwaukee Neighborhood

Reclamation Company LLC

• Forged partnership with National Community Stabilization Trust, as well as individual relationships with lenders

• Targeting neighborhoods with ongoing initiatives and past and current investment activities

• Currently acquiring first Land Bank properties

Large Project Pool

Rehabilitation and New Construction

• Resources for developers with the capacity to handle larger scale projects

• Targeting neighborhoods with ongoing initiatives and past and current investment activities

• Issued a “Request for Qualifications” to identify development partners

Demolition and Reuse Funds

• Demolition of most severely blighting properties

• Where unbuildable lots result, stipends for landscaping, urban gardens, or other productive reuse

What’s Helping

• Multiple tools (demolition, development subsidy, property acquisition capability) provide more options for making an impact as well as more flexibility in decision making

• City already had an established development arm, as well as real estate staff

• Utilizing local neighborhood partners to assist in property identification as well as reuse strategies

Challenges

• Property condition – left vacant, properties are deteriorating and/or being vandalized, creating fewer and/or more expensive options for their reuse

• DNS property registration and vacant property ordinances

• Neighborhood outreach

Challenges

Foreclosed properties are

selling at 38% of assessed value

Speculators are active in the marketplace – purchasing properties without the intent or capacity to make the necessary repairs

Recent Examples

2712 N. 46th St.

2009 Assessed Value: $104,800

Sales Price: $42,000

(10/29/2009)

1603 S. Union St.

2009 Assessed Value $72,000

Sales Price: $15,000

(10/9/2009)

What we are doing:

• Stepped up homeownership marketing efforts

• Considering a real estate broker" incentive

program” for owner occupant purchases

• Aggressive and coordinated code enforcement efforts

• Database for tracking foreclosed properties, as well as properties in the foreclosure process

Website

www.milwaukeehousinghelp.org

Additional ResourcesForeclosure Mapping (Public)

WHAT’S MOST HELPFUL OVERALL?

A coordinated effort –

NSP Program is part of a larger foreclosure strategy for the City of Milwaukee that also includes prevention and intervention activities.

Everybody has a vested interest in addressing the issue – ask them to be part of the effort.

Questions?

• NSP program information, applications, Q & A and information on other City foreclosure initiativeswww.milwaukeehousinghelp.org

• Information on the Department of Neighborhood Services foreclosure legislationwww.city.milwaukee.gov/DNS/APIF