While the economic recovery is well underway in many parts of America, not all local markets are participating. Many communities that were hard hit by the housing and economic crisis, particularly in the Midwest and Southeast, are being left behind.
Mortgage servicers have a key role to play in this recovery, particularly in these “left behind markets.” Mortgage servicers and the investor owners of these loans must proactively support neighborhood stabilization efforts if we are to be successful.
The good news is that most of the big bank servicers, including Bank of America (BAC) and Wells Fargo (WFC), are constructively engaged. And some investors, most notably Fannie Mae and Freddie Mac, are also increasingly participating in local community development activities. These servicers and investors are making foreclosed properties available on a priority basis to community developers, donating low value property for local disposition, and working on loan modifications for delinquent borrowers.
But where are the non-bank servicers? The non-bank servicers have grown rapidly over the past two years, accumulating larger and larger servicing portfolios. Yet, for the most part, this growing segment of the mortgage-servicing world has been conspicuous only by their absence from neighborhood stabilization campaigns across the nation.
Among the larger non-bank servicers, only Ocwen Financial (OCN) appears to be contributing tangible and meaningful measures designed to keep families in their homes and to make foreclosed and abandoned homes available on a preferred basis to local developers for acquisition, renovation and resale.
A key obstacle in the path of community recovery in these markets is the highly visible, all-too-prevalent physical decay of the housing stock. Homeowners with seriously delinquent mortgages cannot afford repairs, previously foreclosed homes remain vacant and boarded up, and low-value property often lingers in a sort of pre-foreclosure limbo. Even property owners current on their mortgage obligations defer making property repairs in distressed neighborhoods. The reason - why make property improvements, when property values are stagnant or declining?
To a large extent, the prescription for community recovery in such markets necessitates the active engagement of the larger mortgage servicers. And, while the foreclosure inventory has been shrinking for big bank servicers, Federal Housing Administration, Fannie Mae and Freddie Mac, the level of distressed property remains high with non-bank servicers. If this growing segment of the servicing industry stands on the sidelines of this important fight, neighborhood recovery in hard hit markets will be in jeopardy.
The National Community Stabilization Trust was created over six years ago precisely for this purpose; that is, to help facilitate the scalable and predictable transfer of distressed real estate from servicers to community providers. We’re working in hundreds of communities, conveying thousands of foreclosed and abandoned homes to local developers; homes that are then renovated and resold to new homebuyers and to renter families. Servicers sell and donate foreclosed property and non-performing notes through the Stabilization Trust to community developers.
For their part, Ocwen has actively participated with the Stabilization Trust in our First Look Program for more than three years. The quick and certain sale of foreclosed homes through programs like First Look works economically for mortgage servicers and investors and it also helps communities to strategically re-knit the fabric of their neighborhoods.
It’s time for other non-bank servicers to follow Ocwen’s example. We must take these property eyesores that undermine neighborhood stability and turn them into billboards of hope for neighborhood residents. Our job in revitalizing our neighborhoods is not yet done.