Community Coalition Purchases 47 Homes in Foreclosure
The first large-scale purchase of defaulted mortgages by an alliance of U.S. nonprofit organizations was announced Wednesday. HANDS, Inc. said it has acquired the defaulted mortgages on 47 vacant homes in the greater Newark area, all of which are vacant and abandoned. HANDS purchased the mortgages from J.P. Morgan Chase (JPM), as part of a new strategy to reclaim neighborhoods hard-hit by foreclosure, and is working with its partners in Operation Neighborhood Recovery to rehabilitate the properties so they may become "cornerstones for productive change in their surrounding communities," instead of magnets for increased crime and vandalism, creating general neighborhood blight. “Time is our enemy and early intervention is the key to battling the destabilizing influence of abandoned and foreclosed properties on neighborhoods,” said Patrick Morrissy, executive director of HANDS, a member of the NeighborWorks network. “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." HANDS will ultimately convey groups of the properties to Operation for Neighborhood Recovery partners that work in the properties’ respective neighborhoods, and who have agreed to rehabilitate the properties and make them available for affordable homeownership. One may ask how such an organization acquired the funds to purchase, repair and maintain 47 homes -- a cost which is anticipated to total around $5.4 million. New Jersey Community Capital, a community development financial institution working throughout New Jersey, took a lead role in the transaction, according to a HANDS press statement. The institution coordinated the provision of debt and equity from Prudential Social Investment, Local Initiatives Support Corporation-Greater Newark & Jersey City, NeighborWorks America, and Enterprise Community Partners. “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," said Robert Zdenek, president of New Jersey Community Capital. "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." By acquiring the group of mortgages in bulk purchase, HANDS said it is able to immediately invest in stabilizing the vacant properties and return them to productive use. HANDS faces significant carrying costs -- interest, property taxes and insurance -- during this process, requiring a collaborative effort throughout all phases of the project to make it a success, the organization stressed. Operation Neighborhood Recovery represents the first transaction of its kind in the nation and looks to create a community asset preservation model, which the organization said could serve as a vital function in the solution to the foreclosure crisis. Write to Kelly Curran at firstname.lastname@example.org. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.