Stopping foreclosures

April 16, 2009; As originally appeared in the Bridgeport News

The U.S. secretary of housing and urban development (HUD) came to Bridgeport this week to discuss how federal funds designed to combat the foreclosure crisis will be spent at the local level. "We're putting in measures to stop the problem," said HUD Secretary Shaun Donovan, recently appointed to the position by President Barack Obama.

The city is receiving almost $6 million from the Neighborhood Stabilization Program to address the impact of subprime lending and foreclosures on neighborhoods. That's by far the biggest allotment being received by any city or town in Connecticut."

We are at the forefront of this," Mayor Bill Finch said. Finch said the help is needed to keep the middle class in Bridgeport, and to encourage other working-class people to move into the city."

The middle class has been preyed upon," Finch said. "There have been crimes involved, in terms of lending." Bridgeport has more than 5,000 proper ties with subprime loans, the most in the state.

Subprime loans are more likely to end up in foreclosure than regular mortgage loans.

There have been more than 1,000 foreclosures in Bridgeport since the national real estate downturn began.

Donovan was familiar with the numbers in Bridgeport." After years of inaction by the last administration, we're moving quickly to put in tools to keep people in their homes," he said.

Donovan and Finch were joined by U.S. Sen. Christopher Dodd, who encouraged people needing assistance to seek it." People don't have to feel alone," Dodd said.

Donovan said many homeowners in trouble feel "terror and embarrassment" about their financial predicament.

Joan Carty, who runs the nonprofit Housing Development Fund (HDF) in Bridgeport, operates on the front lines of the foreclosure crisis every day." People are desperate for assistance," Carty said.

"We need an army of volunteer counselors, and we can't wait." She said the impact is being felt throughout Bridgeport, where housing prices had risen sharply for about five years before dropping just as sharply in the past year and a half." It's pretty startling to see the effect of subprime lending and what it's doing to our neighborhoods," Carty said.

The HDF will use the federal funds to buy, maintain, fix up and sell foreclosed properties.

In some cases, badly run-down homes will be demolished." Some of these buildings that have been walked away from," Finch said, "aren't salvageable." 'Turn this Titanic around' Carty pointed to a map on the wall of her office that showed properties in danger of going into foreclosure.

"We are really trying to turn this Titanic around," she said.

One focus will be on growing problems in the North End, Brooklawn, and the area near St. Vincent's Medical Center.

She said there are an increasing number of bank-owned properties in these sections of the city.

The agency is working with St. Vincent's to encourage hospital employees to buy homes near where they work." This would be a great workforce housing model," said Carty, noting some workers then could walk to work.

The HDF is working with potential purchasers to make sure they could pay their mortgages, avoiding the use of any non-traditional mortgage approaches." We really believe in doing it the old-fashioned way," Carty said.

"It really works, and I'm glad we're going back to it." Finch said the easy money that had been available for mortgage and home equity loans helped create the crisis.

He wants to go back to "conservative, traditional underwriting" that requires people to spend only about one-third of their income on all housing-related costs." Like the way we did it until the go-go '80s," said Finch, who previously worked in the nonprofit housing revitalization sector.

Dodd said the number of foreclosures statewide increased to 2,200 in March from 1,700 in February." Candidly, the evidence is that we'll have this problem for a while," he said.

Donovan said counseling homeowners in trouble, and working with them to get their loans modified, is the key to keeping people in their houses.

The housing sector had been the first sign of a coming recession, Donovan said, and fixing the problems in real estate is essential to turning the economy around.

Still, he said, there also must be a focus on creating jobs and dealing with health care.

He said the lower interest rates now available are helping.

The number of people refinancing to take advantage of lower rates has increased by 88% in recent weeks, said Donovan, who had been New York City housing commissioner before taking the job in Washington, D.C.

The federal economic stimulus bill provides $14 billion for housing initiatives, including $2 billion for the Neighborhood Stabilization Program, according to Donovan.

Officials also emphasized the importance of using HUD funds to improve rental housing and make it more affordable.

After talking to the press for about 30 minutes, the officials met privately in Carty's office.

Media representatives were told to leave the room.