In the subprime mortgage foreclosure fiasco, nonprofits have stood out as relative successes compared to their counterparts in the for-profit financial sector and among federal government agencies.
The affordable housing inventories of most nonprofit community development corporations, or CDCs, show minimal subprime mortgage foreclosure problems.
Unlike the housing units built and frequently self-financed by private developers, CDCs and most other nonprofit housing developers steered low-income home purchasers away from exotic financing with interest rates scheduled to explode in two or three years, and towards long-term, fixed-rate mortgages..
Moreover, unlike some subprime lenders and brokers, CDCs didn’t shove mortgage products they knew purchasers couldn’t afford.
CDCs and other solid nonprofit housing developers appear to have emphasized homeowner education and counseling — both pre- and post-purchase — to ensure that buyers would qualify for mortgages not only on day one, but for years down the line.
Now, housing developers are in the forefront of crafting solutions to the subprime mortgage foreclosure problem.
Nationally, Neighborworks America is serving as clearinghouse for taking a Congressional appropriation to vastly expand nonprofit housing counseling resources, in an incredibly short timeframe designing a system for distributing $150 million to expand the capacity of existing housing counseling agencies helping homeowners stave off foreclosures.
The banks, particularly the mortgage servicers, are proving less forthcoming in restructuring mortgage terms, preferring to negotiate three-to-six month payment-schedule modifications and such, but not to alter the basic rates and amounts of subprime mortgages.
It may be that Neighborhood Reinvestment and others gave the banking and servicer members of Treasury’s “Hope Now” coalition more “credit” than they merited.
But bills being pushed by legislators such as Democrats Chris Dodd in the Senate and Barney Frank in the House, among others, might spur banks and servicers to do more.
At a recent conference of the National Association of Community Economic Development Associations, CDCs described what they are doing to tackle the flood of vacant properties and displaced households.
Cleveland’s East Side Organizing Project is getting banks to turn over properties to nonprofits in the Slavic Village neighborhoods and elsewhere.
In northern New Jersey, a nonprofit developer called HANDS is fashioning a plan to acquire a bunch of foreclosed properties from one lender partnering with CDCs in East Orange and Newark to rehab and sell to aspiring homeowners.
Working with owners who haven’t yet lost their homes, the Neighborhood Assistance Corporation of America is refinancing the mortgages of families facing subprime-induced foreclosures.
The Center for American Progress and Enterprise Community Partners have proposed the Great American Dream Stabilization Fund, to be capitalized by a special multi-billion dollar community-development block grant to acquire and rehab foreclosed properties.
Nonprofits are not going to solve the subprime mortgage crisis on their own.
The problem is huge and merits a federal commitment geared to helping homeowners and stabilizing neighborhoods rather than bailing out Bear Stearns and others.
But to their credit, some nonprofits are crafting policy initiatives and programmatic models to show what is needed in terms of solutions.
Rick Cohen is national correspondent of The Nonprofit Quarterly.