We want to leverage the residential foreclosure crisis in such a way that not only can more people keep their homes, but the quantity of green homes in the community will actually increase.

The project has two main features. First, we will buy first mortgages on foreclosure-threatened homes at discounts lenders would suffer if the home were foreclosed on, and then refinance the owners at current low interest rates. The refinance package will include green retrofits.

Second, we will buy foreclosed homes at bulk rates, sustainably rehabilitate them and make them available to clients of public and nonprofit housing agencies as well as people displaced by foreclosure.

We will also offer foreclosure counseling to include low-fee short sale assistance and free home energy audits.

Problem

For neighborhood economic revitalization to succeed, the micro housing market must be stabilized. Foreclosures and short sales negatively impact pricing and consumer confidence. Moreover, most of the targeted neighborhoods consist of low- to middle-income owners who are less likely to enjoy the health and financial benefits of a green home than wealthier owners. By directing efforts into mortgages, loan-to-value ratios can be positively adjusted and homes sustainably retrofitted.

Solution

If the average price decline resulting in negative loan-to-value ratios is 20%, the borrower is now at par or is slightly ahead. She or he not only benefits from a lower mortgage payment, but also benefits from a much lower utility bill and improved indoor air quality. The mortgage bondholder benefits from not suffering foreclosure costs and impact to principal by taking an upfront reduction approximating a short sale. Moreover, in Oregon, MERS issues are not settled and foreclosures are being placed on hold. This solution offers lenders relief from the massive uncertainties of MERS and government foreclosure intervention. The neighborhood achieves a degree of financial stability, and Main Street may more easily progress with its program. To implement the strategy, a new entity would have to be created to establish partnerships with lenders, housing agencies, public and private community development organizations.

Exemple

Select, for example, the working class Portland neighborhood of St. Johns, which is impacted by distressed properties but has also received funding for Main Street economic revitalization of its commercial district through the National Trust for Historic Preservation. Working through a HUD housing agency, groups of underwater homes are selected based on inversed loan-to-value ratios and their mortgage bondholders contacted to gauge interest in selling the mortgage. A $200,000 mortgage would be purchased for a minimum of $155,000. A needs assessment determines the home would benegit from a high efficiency furnace and water heater, as well as door and window sealing, for a cost of $7500. The borrower would be refinanced for $162,500 at current low rates, resulting in a much lower mortgage payment. Sourcing for the $7,500 retrofit charges would come from sources currently in place and actively doing it.

Marché

There are no competitors, and the program should work in any community, large or small, in America. Impediments may be existing agencies whose immediate missions may be diverted with the appearance of a new initiative.