We are all reeling from the recent demonstrations of racial inequality in our nation. We can only hope that the recent horrors of police violence and the disproportionate impact of Covid-19 on communities of color has shown light on the fact that these problems are not just outliers or one-offs, but that they stem from flawed and biased systems that require structural change.
As a participant in our nation’s real estate markets, NCST knows that the way properties are bought and sold is another major contributor to racial and economic inequities, and that this system too requires a thorough overhaul.
I want to use my column this month to raise up a recent PBS NewsHour story that underscores how the prevailing system for selling REO properties can reinforce the inequities in our society. While I recommend watching the video before you read the rest of this column, the background is that after the financial crisis began, lenders and investors found themselves overwhelmed with REO properties. Although many of these properties were in distressed condition due to the foreclosure process, they were often sold (sometimes in bulk pools) to private investors without any outcome or reporting requirements governing the ultimate disposition of the properties.
In this video segment, PBS focuses on a company called Vision Property Management, which purchased many of these REO properties, including some large Fannie Mae pools. Vision devastated low-income families by “selling” these distressed, unimproved houses through predatory rent-to-own/contract for deed scams. The PBS segment provides vivid details about how families were put into substandard housing and lied to about whether they were the owner of the home. Other journalists have written similar stories, and learning of this outrageous, predatory behavior led both Freddie Mac (an original partner in NCST’s REOMatch/First Look program and still a participant) and Fannie Mae to prohibit for-profit REO buyers from selling these properties in rent-to-own or land contract arrangements without prior permission. NCST strongly supports this prohibition and recommends to other REO sellers.
NCST knows that in neighborhoods with lower home values or persistent disinvestment, the inequities inherent in the “neutral” REO disposition system will manifest themselves in the form of increased blight, lower home values, and limited (if any) access to responsible mortgages. That’s why we created REOMatch/First Look more than a decade ago: to take an equity-based, decidedly non-neutral approach to property disposition. Our system prioritizes mission-focused developers and LMI homeownership, includes clear requirements, and requires extensive reporting, which delivers much more positive results for families and communities than business-as-usual.
But forging a more equitable real estate market will take a more multifaceted approach than REOMatch/First Look alone. Over the past few years, with the help of many of our local partners, NCST has become involved in a broad range of activities related to housing policy and programs, and we are delighted to report that we are taking that work to a new level. In today’s newsletter, you will read about the launch of a Homeownership Alliance coalition, a reinvention of the Middle Neighborhoods Initiative, and new milestones toward passing the game-changing Neighborhood Homes Investment Act, which would use tax credits to support development in places where single-family rehab costs exceed fair market values.
We hope you enjoy learning about these initiatives. As always, thank you for your partnership and your work to make your communities more vibrant and equitable.
President of NCST