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HomeMy WebLinkAboutMINUTES - 08212012 - D.2RECOMMENDATION(S): ACCEPT the report concerning the impact of the decline in real estate values and ongoing foreclosure crisis on communities in Contra Costa County and the ongoing efforts by the Department of Conservation and Development to address these impacts. FISCAL IMPACT: None. BACKGROUND: On May 8, 2012 the Board of Supervisors received a report from the County Clerk-Recorder and the District Attorney regarding their efforts to combat fraud related to mortgage foreclosures. During that report, the Board requested an update from the Department of Conservation and Development (DCD) regarding the impact of the current high foreclosure rate on the County's Code Enforcement program. In summary, the collapse of property values following the real estate "bubble" that developed between 2001 and 2006 has led to a variety of negative impacts for communities in Contra Costa County, including a rise in the number vacant structures that have become a public nuisance and have required Code Enforcement intervention. From 2007 through 2009 DCD experienced a significant increase in Code Enforcement cases involving vacant structures. In 2008, responding to these conditions, the Board of Supervisors revised the County's ordinance concerning vacant structures, shortening the time period required for DCD to board up a vacant structure if it becomes a public nuisance. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 08/21/2012 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Candace Andersen, District II Supervisor Mary N. Piepho, District III Supervisor Karen Mitchoff, District IV Supervisor Federal D. Glover, District V Supervisor Contact: (925) 674-7722 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: August 21, 2012 David Twa, County Administrator and Clerk of the Board of Supervisors By: June McHuen, Deputy cc: D. 2 To:Board of Supervisors From:Jason Crapo, County Building Official Date:August 21, 2012 Contra Costa County Subject:Update on Foreclosure Crisis, Community Impact, and County Response Boarding a vacant structure can remove an immediate hazard to a community, but the long-term health of communities relies upon responsible ownership and occupancy of residential structures. To that end, DCD has utilized State and Federal program funding to implement a variety of measures to prevent foreclosures and to rehabilitate and reoccupy vacant properties. The foreclosure rate and the number of code enforcement cases involving vacant structures both peaked in 2008, and have been declining since. However, foreclosures and their associated impacts remain much greater than pre-crisis levels. The real estate market is slowly recovering, but property values in most of the County are now lower than they were ten years ago. The process of recovery is taking much longer than previous recessions, particularly for low-income areas that experienced the most dramatic rise in prices during the bubble, and the most severe decline in the years since. DCD is implementing a number of local, State and Federal programs to address the negative impacts of the foreclosure crisis. BACKGROUND: (CONT'D) Status of Real Estate Market Conditions and Foreclosure Rates Like much of California and the nation, Contra Costa County experienced a dramatic decline in property values, and a simultaneous increase in the rates of mortgage delinquency and foreclosure, beginning in 2006 and continuing through 2008. The median price of a single family residence in Contra Costa County decreased from $570,000 in 2006 to $340,000 in 2008. Property values have continued to fall to a current median value of $255,000. The decline in property values has been least extreme for higher priced properties and most extreme at the lower end of the market. Sale rices for higher value properties have recovered their value from the pre-bubble period, but lower value properties are still valued less than they were in 2001 (Attachment 1). Clearly, the recovery of the real estate market is proceeding at a slower pace for lower income communities. Rates of mortgage delinquency and foreclosure in the County began to increase slightly in 2006 then accelerated rapidly in 2007 and 2008. After peaking in the 2008 and 2009 period, rates have declined. However, the numbers remain much higher than the pre-2006 period (Table 1). Table 1: Foreclosures Peaked in 2008, but Remain High Year Notice of Default Foreclosure 2005 2,519 131 2006 4,380 502 2007 11,837 4,189 2008 17,714 11,679 2009 18,323 8,360 2010 13,222 7,562 2011 11,021 6,869 Rates of delinquency and foreclosure have varied considerably throughout the County. Higher delinquency and foreclosure rates have generally correlated with low income levels (Attachment 2). Impact of the Foreclosure Crisis on County Code Enforcement The sharp rise in rates of mortgage delinquency and foreclosure has led to an increase in Code Enforcement cases involving vacant structures that have become a public nuisance. However, throughout the recent economic downturn vacant structure cases have remained a small percentage of the County's overall Code Enforcement caseload, currently comprising about 2% of all code enforcement cases. Vacant structure cases are concentrated in a small number of lower income communities, where property values remain most severely depressed. These properties are a source of blight, frequently subject to unauthorized use or occupancy, and often attract those seeking a refuge to engage in illegal activities. They are a safety hazard to the surrounding community. Vacant structure cases increased significantly at the beginning of the foreclosure crisis, in 2007 and 2008, but have since declined. Roughly half of vacant structure cases involve properties at some stage of the foreclosure process. 47% of all vacant structure cases since 2005 have involved a property in default, and 26% of the cases during this period had completed the foreclosure process and become bank owned (Table 2). Table 2: Vacant Structure Code Enforcement Cases and Foreclosures Year Total Vacant Structures Notice of Default Bank-Owned 2005 13 0 10 2006 10 1 1 2007 11 3 3 2008 49 33 7 2009 45 21 12 2010 24 12 6 2011 27 14 7 TOTAL 179 84 (47%)46 (26%) Similar to the trends in delinquency and foreclosure rates, the geographic distribution of vacant structure Code Enforcement cases is concentrated in low-income areas (Attachment 3). Given the weak demand in the housing market due to continued high unemployment and surplus housing inventory created during the boom years of the last decade, it will likely take years for market forces to reduce the number of vacant structures in low income communities and return the number of vacant structure Code Enforcement cases to pre-crisis levels. Therefore, DCD has implemented a number of local, State and Federal programs to prevent foreclosures and reduce their negative impacts. DCD Response to Foreclosure Crisis DCD has responded to the foreclosure crisis by implementing a variety of local, State and Federal programs to mitigate the negative impacts of foreclosures and prevent additional foreclosures. The local program response most directly related to the impact of foreclosures on County Code Enforcement is the streamlining of procedures to quickly board-up and secure vacant structures that become a public nuisance. In 2008, the Board of Supervisors revised the County's ordinance related to vacant structures, reducing the period of time required to board-up and secure an abandoned home from 90 - 120 days to 30 - 40 days. The decline in vacant structure caseload since 2008 and faster response times under the revised ordinance have reduced the impact vacant structures in many communities. There are also numerous State and Federal housing and community development programs that assist in preventing and reducing the negative impact of foreclosures. One of the most successful of these initiatives is the Neighborhood Stabilization Program (NSP). NSP uses federal funds to purchase foreclosed properties, rehabilitate them, and resell them. The program converts homes that could become a public nuisance into attractive residences that add value to a neighborhood. The County has received $8.87 million in NSP funds to date. The first two funding installments, which totaled $7 million, were used to purchase 36 foreclosed homes, of which 34 have been rehabilitated, and 31 have been resold to new owners (Table 3). The third installment of $1.87 is currently being used to purchase and restore a 12 unit apartment building in Concord's Monument Corridor. Table 3: NSP Homes Rehabilitated and Reoccupied City/Community Purchased Rehabilitated Sold Bay Point 9 9 9 Concord 8 7 7 Montalvin Manor 1 1 1 North Richmond 6 6 3 Oakley 7 6 6 San Pablo 5 5 5 TOTAL 36 34 31 Another area of success has been the foreclosure prevention efforts funded through the County's Community Development Block Grant (CDBG) Program. Since 2008, the County, and the cities of Antioch, Richmond, and Walnut Creek have allocated CDBG funds to help finance the Contra Costa County Home Equity Preservation Alliance (HEPA) program. HEPA partners include Community Housing Development Corporation of North Richmond (CHDC) and four other nonprofit partners: Housing Rights, Inc., Bay Area Legal Aid, Pacific Community Services, and Housing and Economic Rights Advocates. By pooling CDBG funds and other State and federal resources, the HEPA partners have addressed the foreclosure crisis in the County by sponsoring a number of community education / foreclosure prevention events, providing one-on-one default and loss mitigation counseling, assisting homeowners submit loan modification applications and negotiating with lenders, and providing legal advice and representation to homeowners facing or in foreclosure. HEPA staff link County residents to various State and Federal programs that provide assistance to families and individuals seeking some form of mortgage adjustment or relief. An important part of HEPA services is to provide advocacy and representation for clients who are attempting to access complicated State and Federal programs that can be challenging to understand. Many of these State and Federal programs are described in greater detail in an attachment to this report. Table 4: HEPA Mortgage Assistance Outcomes Outcome FY 2008 FY 2009 FY 2010 FY 2011 Total Brought Mortgage Current 3 5 5 2 15 Mortgage Refinanced 1 0 2 0 3 Mortgage Modified 127 87 79 62 355 Initiated Forbearance Agmnt.25 CONSEQUENCE OF NEGATIVE ACTION: N/A CHILDREN'S IMPACT STATEMENT: N/A CLERK'S ADDENDUM Speaker: Maria Benjamin, Community Housing Development Corporation; Kari Rudd, Bay Area Legal Aid. ACCEPTED the report; and REQUESTED the department return to the Board with an update in six months. ATTACHMENTS Attachment 1 Attachment 2 Attachment 3 Attachment4_State and Federal Programs RICHMOND ANTIOCH CONCORD OAKLEY HERCULES PITTSBURG DANVILLE PINOLE ORINDA LAFAYETTE SAN RAMON WALNUT CREEK MARTINEZ BRENTWOOD MORAGA CLAYTONPLEASANT HILL EL CERRITO D I S T R I C T 3 D I S T R I C T 5 D I S T R I C T 2 D I S T R I C T 1 D I S T R I C T 4 Attachment 1: Change in Median Housing Sales Price between 2006 - 2011 Map Created on June 26, 2012 by Contra Costa CountyDepartment of Conservation & Development Bay Area Housing Sales Price Trends Data Source: Case Schiller Tiered Price Index 2012. Bay Area inlcudes Alameda, Contra Costa, Marin, San Francisco, and San Mateo counties Disadvantged Community is defined by the State of California as any area where the median household income is at or below 80% of the State's Median Household Income ($60,883). For the purposes of this map, Lower Income communities are census tracts with a median household income between 80%-120% of the State's Median Household Income.Data Source: US Census Bureau, American Community Survey, 5-year estimates 2006 - 2010 Community's EconomicCharacteristics Disadvantaged Community Lower Income Community Remainder of County City Limit Boundaries Areas with Significant Decrease in Median Sales Price 2011 Median Sales Price was 50 - 60% less than 2005 2011 Median Sales Price was 60 -75% less than 2005 2011 Median Sales Prices was 75 - 80% less than 2005 Data Source: DataQuick Report 100 120 140 160 180 200 220 240 260 280 300 200020012002200320042005200620072008200920102011LOW TIER MIDDLE TIER HIGH TIER Supervisorial District Boundaries D I S T R I C T 3 D I S T R I C T 5 D I S T R I C T 2 D I S T R I C T 1 D I S T R I C T 4 D I S T R I C T 3 D I S T R I C T 5 D I S T R I C T 2 D I S T R I C T 1 D I S T R I C T 4 D I S T R I C T 3 D I S T R I C T 5 D I S T R I C T 2 D I S T R I C T 1 D I S T R I C T 4 2005 2008 2011 Total Foreclosures: 109 Total Foreclosures: 11,350 Total Foreclosures: 6,738 0 7 143.5 Miles Map Created on June 26, 2012by Contra Costa County Department of Conservation & Development ² Foreclosures are defined as Trustee'sDeed upon Sale according to the ContraCosta County Recorder's office and assembled by DataQuick. 1 Dot = 10 Foreclosures Foreclosure Activity in Contra Costa County 2005 - 2011 Disadvantged Community is definedby the State of California as any area where the median household income is at or below 80% of the State's Median Household Income ($60,883). For the purposes of this map, Lower Income communities are census tracts with a median household income between 80%-120% of the State's Median Household Income. Data Source: US Census Bureau, American Community Survey, 5-year estimates 2006 - 2010 Community's EconomicCharacteristics Disadvantaged Community Lower Income Community Remainder of County Attachment 2: Foreclosures Activity in Contra Costa County between 2005 and 2011 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 200020012002200320042005200620072008200920102011Notice of Default Foreclosure ! ! 2 1 2 2 2 8 6 18 2 21 2 78 3 1 1 4 12 10 ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !! D I S T R I C T 3 D I S T R I C T 5 D I S T R I C T 2 D I S T R I C T 1 D I S T R I C T 4 RICHMOND ANTIOCHCONCORD OAKLEY HERCULES PITTSBURG DANVILLE PINOLE ORINDA LAFAYETTE SAN RAMON WALNUT CREEK MARTINEZ BRENTWOOD MORAGA CLAYTONPLEASANT HILL EL CERRITO SAN PABLO Attachment 3: Vacant Structure Code Enforcement Cases between 2005 and 2011 Map Created on June 26, 2012 by Contra Costa County Department of Conservation & Development Number of Vacant Structure Code Enforcement Cases in Unincorporated (Size is proportional to number of cases) * North Richmond includes portion of the City of Richmond located within the North Richmond Mitigation Fund Area. Communities with the Most Vacant Structure Cases North Richmond*: 78 CasesEl Sobrante: 21 CasesBay Point: 18 Cases Montalvin Manor/Bayview: 12 CasesRollingwood: 10 CasesBethel Island: 8 CasesRodeo: 6 Cases Vacant Structure Case in Unincorporated Countywith Notices of Defaults and Foreclosures noted Disadvantged Community is defined bythe State of California as any geographicarea where the median household income is at or below 80% of the State's Median Household Income ($60,883). For the purposes of this map, Lower Income communities are census tracts with a median household income between 80%-120% of the State's Median Household Income. Data Source: US Census Bureau, American Community Survey, 5-year estimates 2006 - 2010 Community's EconomicCharacteristics Supervisorial DistrictBoundaries Disadvantaged Community Lower Income Community Remainder of County 0 20 40 60 0 10 20 30 40 50 60 2005 2006 2007 2008 2009 2010 2011 Total Vacant Notice of Default Bank Owned FORECLOSURE PREVENTION PROGRAMS The following is a summary of various State and Federal foreclosure prevention programs that can be accessed through the Contra Costa County Home Equity Preservation Alliance (HEPA), a program funded by the County and the cities of Antioch, Richmond and Walnut Creek. State Program Keep Your Home California is the State’s strategy to help homeowners who are experiencing a hardship and can’t pay their mortgage. The following summarizes the various programs that are currently available to homeowners: • Unemployment Mortgage Assistance (UMA): UMA is one of CalHFA’s federally funded programs developed to provide temporary financial assistance to homeowners who want to stay in their home but have suffered a loss of income due to unemployment. UMA provides mortgage payment assistance for up to nine months, with the purpose of preventing avoidable foreclosures until the homeowner retains employment sufficient to pay their regular mortgage payment. • Mortgage Reinstatement Assistance Program (MRAP): MRAP is one of CalHFA’s federally-funded programs developed to provide temporary financial assistance to homeowners who want to stay in their home but are in imminent danger of losing their home to foreclosure. MRAP provides funds to assist income-qualified homeowners to help them cure their delinquent first mortgage loan arrearages. • Principal Reduction Program (PRP): PRP is one of CalHFA’s federally-funded programs developed with a goal to provide capital on a dollar-for-dollar matching basis with participating lenders to reduce over a three-year period the outstanding principal balances of qualifying properties with negative equity. PRP will provide funds to reduce the principal balance of the first mortgage loan for the purpose of establishing an appropriate level of debt for eligible homeowners. • Transition Assistance Program (TAP): TAP is one of CalHFA’s federally- funded programs developed to provide eligible homeowners with transition assistance when it is determined that they can no longer afford their home. TAP is typically used in conjunction with a short sale and deed-in-lieu programs to help homeowners make a smooth transition to other housing. • State Attorneys General Mortgage Settlement: After many months of negotiations, 49 state attorneys general and the federal government reached an agreement with the country’s five largest loan servicers (Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo) to provide as much as $25 billion in relief to distressed borrowers and direct payments to states and the federal government. California is slated to receive approximately $2.6 billion. Key provisions of the settlement include: (1) aid to homeowners needing loan modifications; (2) aid to borrowers who are current on their mortgage but whose mortgage currently exceeds their home’s value; (3) payments to borrowers who lost their homes to foreclosure; (4) payments to states to help fund consumer protection and foreclosure protection efforts; (5) reforms to servicing standards; and (6) State AG oversight of national banks. Regarding provision #4 above, California’s Attorney General announced that approximately $205 million will be made available to nonprofit housing counseling agencies that work on foreclosure prevention. However, the Governor recently announced that he intends to use this funding to help reduce the state’s budget deficit. Federal Program The Making Home Affordable (MHA) Program is the Administration’s broad strategy to help homeowners avoid foreclosure, stabilize the country's housing market, and improve the nation's economy. Homeowners can lower their monthly mortgage payments and get into more stable loans at today's low mortgage rates. And for those homeowners for whom homeownership is no longer affordable or desirable, the program can provide a way out which avoids foreclosure. Additionally, in an effort to be responsive to the needs of today's homeowners, there are also options for unemployed homeowners and homeowners who owe more than their homes are worth. The following summarizes the various programs that are currently available to homeowners: Programs that Modify or Refinance Loan for Lower Payments • Home Affordable Modification Program (HAMP): HAMP lowers monthly mortgage payment to 31 percent of a homeowner’s verified monthly gross (pre- tax) income to make payments more affordable. The typical HAMP modification results in a 40 percent drop in a monthly mortgage payment. According to the most recent data, 18 percent of HAMP homeowners reduce their payments by $1,000 or more. Originally designed to help 4 million mortgage borrowers when it was introduced in February, 2009, HAMP has helped fewer than 1 million homeowners. In April 2012, the Administration made adjustments to the program in an attempt to help more homeowners. • Home Affordable Refinance Program (HARP): If a homeowner is current on their mortgage and has been unable to obtain a traditional refinance because the value of their home has declined, they may be eligible to refinance through HARP. HARP is designed to help homeowners refinance into a new affordable, more stable mortgage. • Principal Reduction Alternative (PRA): PRA is designed to help homeowners whose homes are worth significantly less than they owe by encouraging servicers and investors to reduce the amount a homeowner owes. • Second Lien Modification Program (2MP): If a homeowner’s first mortgage was permanently modified under HAMP and there is a second mortgage on the same property, a homeowner may be eligible for a modification or principal reduction on the second mortgage. • Treasury/FHA Second Lien Program (FHA2LP): If a homeowner has a second mortgage and the mortgage servicer of the first mortgage agrees to participate in FHA Short Refinance, the homeowners may qualify to have the second mortgage on the same home reduced or eliminated through FHA2LP. If the servicer of the second mortgage agrees to participate, the total amount of your mortgage debt after the refinance cannot exceed 115% of your home’s current value. Assistance for Unemployed Homeowners • Home Affordable Unemployment Program (UP): If a homeowner is having a difficult time making mortgage payments because they are unemployed, the homeowner may be eligible for UP. UP provides a temporary reduction or suspension of mortgage payments for at least twelve months while the homeowner seeks re-employment. • FHA Forbearance for Unemployed Homeowners: Federal Housing Administration (FHA) rules now require servicers to extend the forbearance period for unemployed homeowners to 12 months. The changes to FHA’s Special Forbearance Program, announced in July 2011, require servicers to extend the forbearance period for FHA borrowers who qualify for the program from four months to 12 months and remove upfront hurdles to make it easier for unemployed borrowers to qualify. Managed Exit for Borrowers • Home Affordable Foreclosure Alternatives (HAFA): If a homeowner’s mortgage payment is unaffordable and they are interested in transitioning to more affordable housing, they may be eligible for a short sale or deed-in-lieu of foreclosure through this program. • “Redemption”is a period after a home has already been sold at a foreclosure sale when the previous owner can still reclaim the home. The homeowner will need to pay the outstanding mortgage balance and all costs incurred during the foreclosure process.