Summary: While there may be debate about the cause of the foreclosure crisis, there is a little debate about the devastating impacts of the crisis. Chaletta Huertas comments on the Neighborhood Funders Group’s special report, The Foreclosure Crisis: A Blueprint for Foundation Intervention. The report documents the steps foundations are taking to respond to the foreclosure crisis.

The problem has had a disproportionate effect on low- and moderate-income communities, especially communities of color.

The report is timely given that many grantmakers are either in an emergency mode, are unsure of what to do, or are unaware of cost-effective ways to scale responses or maximize impact.

The Problem:

• 2.2 million homes will be lost through foreclosures in 2008-2009.
• 8.1 million foreclosures are expected between 2009 and 2012, representing 16 percent of all mortgages.
• 10 percent of the nation’s 56 million mortgage borrowers were delinquent in December of 2008.
• Black homeowners will lose $71-122 billion and Hispanic homeowners will lose $76-129 billion from foreclosures, which represent to be the greatest loss of wealth for people of color in recent U.S. history.

A Call to Action:

The report begins with an overview of the crisis, and then identifies types of foreclosure interventions strategies and some examples of effective responses from funders.

Research for the report came from an extensive literature search, a survey of NFG’s foundation members, and interviews with leading funders and their grantees across the country.

Funders tend to be engaged in eight main strategies to combat the foreclosure crisis:

1. Advocacy. Supporting community organizing campaigns against predatory or abusive lending

2. Planning and Convening. Convening stakeholder meetings, developing task forces, coalitions, or collaborative to address local, regional or state-wide issues.

3. Policy and Research. Supporting research on foreclosures and identifying “foreclosure hot spots”

4. Outreach and Education. Supporting marketing and public-awareness campaigns, call centers and telephone hotlines

5. Prevention Counseling. Providing foreclosure prevention counseling and coaching in financial management.

6. Intervention Activities. Developing refinance products and services, providing emergency or ‘catch up’ funds for borrowers

7. Legal Services. Supporting legal counseling, advice, and toolkits for homeowners and renters

8. Community Stabilization. Supporting the acquisition of REO and vacant properties, and developing land backs and trusts

Key Questions Remain:

Foundations cannot afford to sit on the sidelines and let past investments in their target communities be wiped out as they watch. Thoughtful action is needed, and the report by the Neighborhood Funders Group provides a roadmap for this work.

Even so, questions remain about what is the ‘right’ mix of prevention and intervention strategies, what particular regions of the country (vs. individual foundations) have been able to successfully stabilize communities, what federal and state policies are in play, and what ‘success’ ultimately looks like.

Because the foreclosure crisis is a relatively new issue, with almost overwhelmingly complex causes and effects, foundations should be ready to follow a moving target, be willing to make mistakes, and explore both short-term and long-term goals. But are they ready and willing to stay with grantees and partners when results fail to be linear?

For More Information:

The Foreclosure Crisis: A Blueprint for Foundation Intervention
By Doug Dylla, Neighborhood Funders Group, May 2009

NFG is a membership association of foundations focused on understanding and supporting community-based efforts to improve low- and moderate-income urban and rural communities.

Chaletta Huertas is a Program Officer at GMA Foundations.