Published October 21, 2015
By Joe Tyrrell

Massachusetts-based lender assists working people who are struggling to keep homes saddled with ‘underwater’ mortgages

A nonprofit financial institution based in Massachusetts has targeted struggling New Jersey homeowners for its next anti-foreclosure program.

Boston Community Capital announced it will begin buying high-priced mortgages here in cases where employed borrowers are facing eviction, then offer them better deals.

The private initiative, Stabilizing Urban Neighborhoods, has helped more than 600 families elsewhere keep their homes since 2009, said Elyse Cherry, the company's CEO.

Although housing values have rebounded in some areas since the Great Recession, New Jersey remains one of the most troubled states in the nation. The state's dubious economic achievements include the highest percentage of homes in the foreclosure process, while the Atlantic City metro area has the largest percentage of troubled mortgages of any community nationwide.

Cherry called it "a tale of two recoveries," successful in some places, but skipping others entirely.

That pattern was one reason BCC chose New Jersey as its latest expansion area after launching SUN in Massachusetts and adding Maryland, Illinois and Rhode Island.

"We're looking at states where there's a significant foreclosure problem... and prices are still significantly below their high point" before the recession hit, Cherry said.

Particularly in minority communities, the target states "were hit hard by predatory lending" that left borrowers with risky loans at inflated interest costs, she said.

As a result, many borrowers remain stuck with "underwater" mortgages, carrying debt higher than the current market values of their homes and unable to sell them to recoup their cost, Cherry said.

In addition, some fell behind on payments when they lost jobs during the recession, and although employed again have found lenders unwilling to work with them, she said.

"Often entire neighborhoods have never recovered from the artificial inflation of their housing prices" in the run-up to the recession, Cherry said. "We see that clearly in New Jersey, where the foreclosure rate is more than double than the national average."

The announcement came at a conference of the Housing and Community Development Network of New Jersey, which Cherry described as an "informal partner."

She called SUN "another tool" for housing counselors looking for potential ways to help clients keep their homes.

Staci Berger, president and CEO of the housing network, said her counselors will be "pleased to introduce" the lending program to clients trying to keep their homes, which she said should be a state goal.

“We need policies, programs and resources to fix this crisis that is harming families, damaging neighborhoods and holding back the economy for everyone," Berger said.

The move also drew welcomes from mayors of three New Jersey cities where BCC already has done outreach.

The SUN program will offer Elizabeth residents "the opportunity to access resources and receive valuable information about the foreclosure process," said Mayor J. Christian Bollwage in a statement. "I encourage the community to learn more about our partnership."

"I encourage our residents to explore the program," said Plainfield Mayor Adrian Mapp, noting it is tailored for people with stable income, "even Social Security or disability."

"It is imperative that we help homeowners and working families not lose their hard-earned investment," said Mayor Jose Torres of Paterson.

BCC's commitment is "open-ended," with no set limit on funding, Cherry said, but the parameters will depend on the program's success. That reflects BCC's business approach, which sustains itself through returns on investment.

"We're not a grant organization, we loan money out and charge interest," just at better terms than what borrowers are laboring under now, Cherry said.

To qualify, applicants must still be in the homes and trying to keep them, even if foreclosure proceedings have started, and they also must have stable current income, she said.

Of the borrowers BCC is dealing with in Massachusetts and elsewhere, "99 percent of them just want to square up their debt and move on," she said.

Like similar organizations around the country -- including New Jersey Community Capital in Newark and New Brunswick -- BCC provides a vehicle for investors, including religious or civic organizations and foundations, to use their money "to build healthy communities," in Cherry's words.

Started as a neighborhood group 30 years through fundraising and federal grants, BCC steadily grew and attracted a wide range of investors looking for worthy causes --or at least a way to meet regulatory requirements.

A 1977 federal law, the Community Reinvestment Act, set standards intended to prod institutions that accept financial deposits to make loans in the communities where they operate, even in poor and working-class areas.

Like the Fair Housing Act of 1968, the CRA was intended to reverse the effects of decades of discrimination by banks and the Federal Housing Administration. A 1961 report by the U.S. Commission on Civil Rights documented "redlining," the refusal to make loans in some areas, generally minority neighborhoods.

Although they have been weakened over the years and not always enforced, Cherry said some financial institutions have followed through on the legal requirements.

"We have a deep network of relationships" with large banks that have worked with BCC on previous projects to support schools, small businesses and neighborhood organizations, she said.

Compared to New Jersey Community Capital, whose recent initiatives have included buying up large blocks of troubled mortgages held by federal agencies, Cherry said BCC's New Jersey program will focus on individual dealings with borrowers.

"There's no overlap," she said, noting the ongoing flood of foreclosure cases in New Jersey means all the efforts are needed.

"Although it is different than our model we support their efforts to keep families in their homes," said Wayne Meyer, president of NJCC.

More information on the program is available directly from SUN Initiative at the toll-free number, 855-604-HOME (4663), via email or online. There is no fee to apply.