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March 25, 2009 > Hayward Considers Foreclosure Problem

Hayward Considers Foreclosure Problem

By Simon Wong

The City of Hayward is exploring ways to include foreclosures as part of its affordable housing resources contained in the Housing Element and associated Update.

In July 2008, Hayward zip code 94544 ranked tenth in the list of Bay Area zip codes with the highest level of foreclosures.

Effective management of foreclosures requires a multi-faceted approach. Tools such as foreclosure prevention counselling, first-time homebuyer assistance and the acquisition and renovation of repossessed vacant properties were reviewed.

The City is trying to promote awareness of foreclosure prevention and help provide services. Advice for refinancing at-risk loans and details of legal services agencies and local counselling organizations approved by the Department of Housing & Urban Development, such as Eden Council for Hope & Opportunity (ECHO) and Operation Hope, are on the City's website.

Starting July 1, for one year, ECHO will receive increased funding through the Community Development Block Grant to provide foreclosure prevention services to distressed homeowners and help them contact their lenders to find solutions.

Each month the City plans to write to borrowers, who have received a Notice of Default, to direct them to available services.

"The challenge for struggling homeowners and those with a Notice of Default is dealing with the lenders. The person with whom a borrower has initial contact at the bank is seldom authorized to modify a home loan. The California Department of Real Estate (DRE) has contacted the banks at the national level and spoken with the people who can," explained David Stark, Public Affairs Director, Bay East Association of Realtors.

"DRE organizes local events at which borrowers can meet bank representatives who are authorized to modify the terms of their mortgages. Such an event can be organized in Hayward," he added.

The First Time Homebuyer Downpayment Assistance (FTHB) Program will see major changes.

First, substitution of a 3.5% fixed interest rate for the current variable rate. 3.5% is on a par with the fixed rates charged by other public lenders using affordable housing monies. Second, increasing the maximum loan amount to $315,000 from $285,000. Third, introduction of a five-year loan repayment deferral period. Other changes may be considered. Changes will comply with legislation governing the use of RDA monies for low and moderate income housing (Low-Mod funds) and mortgage lenders' requirements for public lenders.

Staff made several recommendations for the acquisition, renovation and sale of foreclosed properties:

* Commit $1.5 million of RDA Low-Mod funds to buy and repair foreclosed homes for moderate income households. Such a program may have an equity-share component with the owners. The current balance of Low-Mod funds, the main funding source for affordable housing, is approximately $9.84 million. Allocating the entire balance to foreclosed properties would impact other housing developments.

* Use $1.5 million of Neighborhood Stabilization Program (NSP) funds for an identical program aimed at very low and low-income households. NSP funds carry restrictions on the resale of such assisted homes.

* Create capacity through direct employment and/or outsourcing to rehabilitate and, possibly, market and sell the properties.

* Target foreclosed, vacant homes in areas with the highest incidence of foreclosure to preserve the communities and contain blight.

* Sell the renovated properties to eligible households at an affordable price or at cost (acquisition and rehabilitation), whichever is the lower. FTHB Education Program funds and other financing will be available to qualified low and moderate-income buyers.

The high cost of purchasing and renovating foreclosures is an obstacle to creating an effective program. Acquiring a reduced number of properties, say 8-10, at a time and using the sale proceeds to purchase more properties is one option. A more effective strategy might be to partner with Eden Housing, Habitat for Humanity East Bay and other organizations.

The depressed housing market has increased the availability of underused or vacant sites zoned for housing. Enquiries about the City's housing development plans from affordable housing developers, normally unable to compete with for-profit developers, have increased. It is an opportunity to further the goals of the Housing Element by constructing affordable housing units and revitalizing neighborhoods in Hayward.

At South Hayward BART, applying the City's Inclusionary Housing Ordinance to transit-oriented development (TOD) by Wittek Development and Montana Properties, and partnering with Eden Housing, will create 125 affordable rental apartments for low-income families and 81 affordable housing units for seniors.

Other projects include Eden Housing's purchase and renovation of Tennyson Gardens Apartments, Satellite Housing's proposed development of 34-38 affordable rental apartments for seniors on Gading Rd and Habitat's proposed development of 25-28 duet-style homes on Olympic Ave. The Cannery Place Development will include 25 affordable, off-site housing units for very low-income seniors by Citation Homes and Eden Housing on B St and Grand St.

The Council queried the efficacy of a foreclosure program but favors targeting properties to preserve neighborhoods and generate revenue. Some feel it more prudent to increase funding for counselling, the FTHB Program, proposed TOD around BART and planned affordable housing for seniors and families. Mayor Sweeney regards renovation of Tennyson Gardens as a case of "throwing good money after bad," preferring see new development on that site.

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