FSBR:FSBR:“Foreclosure Sale by Region”“Foreclosure Sale by Region”

4-R Program4-R Program

GWRC Affordable Housing Task ForceGWRC Affordable Housing Task ForceJuly-August, 2008July-August, 2008

Housing Affordability ContinuumHousing Affordability Continuum

HousingActions

By Income Segment

Less than 30% of Area Median Income

FSBR 4-R Program Focus:

30% to 50% of Area Median Income

50% to 80% of Area Median Income

Under $20,800 - $29,500*

$20,800 - $29,500* to$34,650 - $49,200*

$34,650 - $49,200* to$55,540 - $61,400*

Housing Need:

Emergency Shelters

Supportive Housing

Affordable Rental

Low-Moderate Income

Homeownership

Moderate - Middle Income

Homeownership

ProductionContinuum

of CareContinuum

of Care CVHCCVHC & GFHFH CVHC

PreservationContinuum

of Care Continuum

of Care

CVHC &

Faith-

based

CVHC & GFHFH CVHC

* Range of HUD Income Guidelines for 4 person household in GW Region, see:

http://www.vhda.com/MultiFam/hudincome.asp for complete income guidelines

ObjectivesObjectivesTo increase the supply of affordable workforce To increase the supply of affordable workforce housing by purchasing foreclosed homes at a housing by purchasing foreclosed homes at a reduced price, renovate, and resell to low- & reduced price, renovate, and resell to low- & moderate-income families using local, state moderate-income families using local, state and federal programs for down-payment and federal programs for down-payment assistance. assistance. To maintain workforce housing stock and To maintain workforce housing stock and preserve housing affordability for future re-preserve housing affordability for future re-sales.sales.To stabilize neighborhoods, property values & To stabilize neighborhoods, property values & local government tax baselocal government tax baseIncrease opportunity for credit, budget and Increase opportunity for credit, budget and homebuying counseling to increase the pool homebuying counseling to increase the pool of eligible homebuyersof eligible homebuyers

StakeholdersStakeholdersGWRC & Local GovernmentsGWRC & Local GovernmentsNon-profit organizations:Non-profit organizations:• Fredericksburg Area Assoc of Realtors (FAAR)Fredericksburg Area Assoc of Realtors (FAAR)• Fredericksburg Area Builders Assoc. (FABA)Fredericksburg Area Builders Assoc. (FABA)• Central Virginia Housing Coalition (CHVC)Central Virginia Housing Coalition (CHVC)• Greater Fredericksburg Habitat for Humanity (GFHFH)Greater Fredericksburg Habitat for Humanity (GFHFH)• Fredericksburg Regional Chamber of Commerce (FRCoC)Fredericksburg Regional Chamber of Commerce (FRCoC)• Fredericksburg Regional Alliance (FRA)Fredericksburg Regional Alliance (FRA)• Housing Opportunities Made Economical (HOME)Housing Opportunities Made Economical (HOME)• disAbility Resource Center (dRC)disAbility Resource Center (dRC)

Faith-based CommunityFaith-based Community (e.g. MICAH)(e.g. MICAH)

Business CommunityBusiness Community• Lowe’s & Home DepotLowe’s & Home Depot• Major EmployersMajor Employers (Mary Washington Hospital, UMW, Germanna Community College, GEICO)(Mary Washington Hospital, UMW, Germanna Community College, GEICO)• Utilities: Dominion Power & Rappahannock Electric Cooperative Utilities: Dominion Power & Rappahannock Electric Cooperative

Local BanksLocal BanksState & Federal AgenciesState & Federal Agencies

FSBR 4-R Program ComponentsFSBR 4-R Program Components

B. Identifying, Evaluating, Purchasing & Renovating REO Properties

C. Financial, Legal &

Governance Framework

A.Recruiting, Pre-Qualifying & Counseling

Potential Buyers

FSBR 4-R ProgramFSBR 4-R ProgramReductionReduction• housing cost/ interest rateshousing cost/ interest rates

RenovationRenovation

ResaleResale• Low- and moderate-income families Low- and moderate-income families • (30-80% AMI)(30-80% AMI)

RestockRestock• Preservation of affordable housing stockPreservation of affordable housing stock

Partner RolesPartner RolesLocate REO Foreclosure Housing StockLocate REO Foreclosure Housing Stock• GWRC AHTF: CVHC, GFHFH, Banks and FAAR GWRC AHTF: CVHC, GFHFH, Banks and FAAR

FinancingFinancing• Local banks, VHDA, USDA, Major employers, local govts, etc.Local banks, VHDA, USDA, Major employers, local govts, etc.

Contract to Purchase by CVHC or GFHFHContract to Purchase by CVHC or GFHFHRenovationRenovation• CVHC & GFHFH: staff project managers/ rehab specialists & contractorsCVHC & GFHFH: staff project managers/ rehab specialists & contractors• Partner with FABAPartner with FABA

Locate Qualified PurchasersLocate Qualified Purchasers• CVHC & GFHFH qualify buyers, based on income & other criteriaCVHC & GFHFH qualify buyers, based on income & other criteria

Pre- & Post Closure CounselingPre- & Post Closure Counseling• CVHC & GFHFH run counseling for clientsCVHC & GFHFH run counseling for clients

Contract with PurchaserContract with Purchaser• CVHC & GFHFH draw up contract with qualified buyerCVHC & GFHFH draw up contract with qualified buyer• 22ndnd Deed of Trust Deed of Trust: CVHC & GFHFH execute 2: CVHC & GFHFH execute 2ndnd Deed of Trust to protect Deed of Trust to protect

affordable investmentaffordable investment

Property ClosingProperty Closing

Example FSBR Deals:Example FSBR Deals:GFHFHGFHFH CVHCCVHC

Foreclosure Sale Foreclosure Sale Price to AcquirePrice to Acquire $70,000$70,000 $70,000$70,000 $80,000$80,000 $90,000$90,000

Rehab CostsRehab Costs 5,0005,000 10,00010,000 5,0005,000 10,00010,000

Down-Payment Down-Payment Assistance*Assistance*

5,0005,000 10,00010,000 10,00010,000 10,00010,000

FBSRFBSR

Re-Sale PriceRe-Sale Price$80,000$80,000 $90,000$90,000 $95,000$95,000 $110,000$110,000

Closing CostsClosing Costs 2,8002,800 3,1503,150 3,3253,325 3,8503,850Loan Interest Rate Loan Interest Rate (15 or 30 yr fixed)(15 or 30 yr fixed)

0%0% 0%0% 5.5%5.5% 5.5%5.5%

Est. Tax & Insurance Est. Tax & Insurance PaymentPayment $100$100 $113$113 $119$119 $125$125

Estimated Monthly Estimated Monthly P+I+T+IP+I+T+I $572.00$572.00 $641.00$641.00 $650.00$650.00 $750.00$750.00

* FSBR investment backed by 2nd deed of trust

Regional Distribution of FSBR Foreclosure, Regional Distribution of FSBR Foreclosure, FSBO & Bankruptcy ListingsFSBO & Bankruptcy Listings (June 2008)(June 2008)

No. of Properties by Selling PriceNo. of Properties by Selling Price$60,000 - $60,000 - $74,999$74,999

$75,000 - $75,000 -

$99,000$99,000

$100,000 -$100,000 -

$114,999$114,999

$115,000 -$115,000 -

$130,000$130,000

Caroline CoCaroline Co 11 11 11 11King George CoKing George Co 00 00 00 00Spotsylvania CoSpotsylvania Co 22 44 11 33Stafford CoStafford Co 22 22 33 44City of City of FredericksburgFredericksburg

00 33 22 00

GW REGIONGW REGION 55 1010 77 88

Key provisions of U.S. housing Key provisions of U.S. housing rescue billrescue bill Local communities that are burdened with Local communities that are burdened with maintenance of abandoned properties: access to maintenance of abandoned properties: access to $3.92 billion in federal grants to buy and repair $3.92 billion in federal grants to buy and repair those homes.those homes.• GW Region Potential Allocation: $13,227,000GW Region Potential Allocation: $13,227,000

First-time home buyers (April 08-July 09) would be First-time home buyers (April 08-July 09) would be eligible for a tax break worth up to $7,500eligible for a tax break worth up to $7,500$200 million would be offered to foreclosure-$200 million would be offered to foreclosure-prevention programs: prevention programs: potential up to $675,000 for GW region

Local governments would have authority to issue Local governments would have authority to issue an additional $11 billion of tax-exempt bonds to an additional $11 billion of tax-exempt bonds to refinance shaky loans.refinance shaky loans.

Indications are that the federal Indications are that the federal funds will be distributed through funds will be distributed through the CDBG program through the CDBG program through DHCD, & grant award will be DHCD, & grant award will be based on competitive merits of based on competitive merits of applications. The GW Region applications. The GW Region needs a plan ready to take action needs a plan ready to take action when the federal housing bill when the federal housing bill money is ready to be distributed!money is ready to be distributed!

A. Recruiting, Qualifying & Training Potential Buyers

Promotional Campaign:Promotional Campaign:• Potential Program Partners: Local Govts, COC, Potential Program Partners: Local Govts, COC,

FAAR, Major Employers, FRA, Military Bases, FAAR, Major Employers, FRA, Military Bases, Faith-based Organizations, newspaper & radioFaith-based Organizations, newspaper & radio

• Media: Newspaper, radio, pay stub insert, flyersMedia: Newspaper, radio, pay stub insert, flyers• Regional Affordable Housing “Information Fairs”Regional Affordable Housing “Information Fairs”• Sub-regional Buyer Orientation Open House:Sub-regional Buyer Orientation Open House:

Program description & Pre-Qualification Survey & Program description & Pre-Qualification Survey & Pre-Purchase Counseling to get on “waiting list”Pre-Purchase Counseling to get on “waiting list”

• Ranking CriteriaRanking Criteria: Income, family size, locational : Income, family size, locational preference & housing type requirementspreference & housing type requirements

Pre-Purchase Counseling:Pre-Purchase Counseling:Client is required to attend: Client is required to attend: VHDA Introduction to Homeownership classVHDA Introduction to Homeownership class• Class conducted at CVHC or alternate siteClass conducted at CVHC or alternate site• No cost to clientNo cost to client• Client receives certificate- required by VHDA loans & Client receives certificate- required by VHDA loans &

several first time homebuyer programs to receive a several first time homebuyer programs to receive a reduction in PMI ratesreduction in PMI rates

• 6 hours of instruction to include:6 hours of instruction to include:Personal financePersonal financeCreditCreditRole of realtorRole of realtorRole of LenderRole of LenderRole of Home InspectorRole of Home InspectorRole of Title Company/ AttorneyRole of Title Company/ Attorney

Pre-Qualification Counseling:Pre-Qualification Counseling: • Application is completedApplication is completed• Proof of income on all earned/available incomeProof of income on all earned/available income• 2 months bank statements from all open sources2 months bank statements from all open sources• Credit report with score dated within 60 daysCredit report with score dated within 60 days

(review of all documentation- does client meet (review of all documentation- does client meet criteria & obtain pre-approval from bank)criteria & obtain pre-approval from bank)

• Intake Appointment is Set

• Review pre-approval with client

• Review list of available properties

• Review rules & regulations concerning any assistance GWRC may provide- sign disclosures for program rules/regs. (home retention/ payback/ interest rate/ payments/ etc.)

Rules/ Regulations of SaleRules/ Regulations of Sale

Must be owner-occupiedMust be owner-occupied

No investorsNo investors

No subordination of FSBR-lienNo subordination of FSBR-lien

Home retentionHome retention

Post-Purchase CounselingPost-Purchase Counseling Within first 3 months after closing:Within first 3 months after closing:• Client must attend a post-purchase class, which Client must attend a post-purchase class, which

covers:covers:Predatory Lending practicesPredatory Lending practicesBasic preventative home maintenance & repairBasic preventative home maintenance & repairGoing Green & Utility Conservation/ImprovementsGoing Green & Utility Conservation/ImprovementsInsurance issuesInsurance issuesWarranty issuesWarranty issuesGenerational wealth buildingGenerational wealth buildingEmergency reservesEmergency reserves

• Client will receive $200-500 reduction in down- Client will receive $200-500 reduction in down- payment lien from program after attendancepayment lien from program after attendance

CVHC Certified Comprehensive Housing Counselor is certified in Post CVHC Certified Comprehensive Housing Counselor is certified in Post Purchase Homeownership EducationPurchase Homeownership Education

B. Identifying, Evaluating, Purchasing & Renovating REO Properties

Developing Supply Chain:Developing Supply Chain:• Ask FAAR to partner with program to:Ask FAAR to partner with program to:

• Give sales commission concession for supplying waiting list Give sales commission concession for supplying waiting list of pre-qualified buyersof pre-qualified buyers

• Property managers to report complaint calls to identify Property managers to report complaint calls to identify problem propertiesproblem properties

• Ask REO managersAsk REO managers to provide 1 to provide 1stst right of refusal to right of refusal to

FSBR Program for most affordable properties based FSBR Program for most affordable properties based on general program criteriaon general program criteria

• Mobilizing for quick property inspectionMobilizing for quick property inspection, evaluation , evaluation & acquisition decision & acquisition decision

• Work with partners to minimize acquisition, Work with partners to minimize acquisition, renovation & selling costsrenovation & selling costs

Locate list of REO properties:Locate list of REO properties:• Contact investors for REO listContact investors for REO list

VHDAVHDANational & Local BanksNational & Local BanksHUD/ VAHUD/ VAREDCREDCNewspapersNewspapersAssociation of RealtorsAssociation of Realtors

• Work with bank directlyWork with bank directly on purchase of REOs in on purchase of REOs in package deal – reduction due to group purchasepackage deal – reduction due to group purchase

Will Bank provide program a LOC for short time purchase?Will Bank provide program a LOC for short time purchase?– Interest only/ flexible terms/ no prepayment penaltyInterest only/ flexible terms/ no prepayment penalty

If Realtor already has listing:If Realtor already has listing:• Each property must be bid on separatelyEach property must be bid on separately• Could LOC from bank still be a viable option?Could LOC from bank still be a viable option?• If purchased in groups from same realtor- possible If purchased in groups from same realtor- possible

reduction in realtor cost (i.e. commission reduction in realtor cost (i.e. commission concession)concession)

Rehab of acquired foreclosure propertiesRehab of acquired foreclosure properties

• Due to economic slowdown- homes must Due to economic slowdown- homes must be in top shape to stand out from crowdbe in top shape to stand out from crowd

• Rehab must include all major mechanicalsRehab must include all major mechanicals

• Rehab must include updates in top areas: Rehab must include updates in top areas: kitchens/ bathskitchens/ baths

• Cosmetic touches must be considered in Cosmetic touches must be considered in this marketthis market

• All rehab/renovations must take into account All rehab/renovations must take into account market price sustainability with market price sustainability with improvementsimprovements

C. Governance & Financial, Legal Framework

Governance:Governance:• Program implementation through MOU Program implementation through MOU

between GWRC & CVHC, GFHFH, FABA, between GWRC & CVHC, GFHFH, FABA, FAAR and others (?)FAAR and others (?)

• Program developed through GWRC’s AHTF, Program developed through GWRC’s AHTF, which manages Components A & B through which manages Components A & B through partner organizationspartner organizations

• GWRC functions as governing board to GWRC functions as governing board to authorize acquisition, renovation & disposition authorize acquisition, renovation & disposition of properties to pre-qualified buyersof properties to pre-qualified buyers

• GWRC could apply for any govt. planning GWRC could apply for any govt. planning grants, acquisition program funds on behalf of grants, acquisition program funds on behalf of the regional affordable housing programthe regional affordable housing program

Legal Framework:Legal Framework: • CVHC & GFHFH would retain 2CVHC & GFHFH would retain 2ndnd deed of trust deed of trust

to preserve future affordabilityto preserve future affordability• Proceeds from sale of renovated REO Proceeds from sale of renovated REO

properties would revert to regional Affordable properties would revert to regional Affordable Housing fund to be re-invested in additional Housing fund to be re-invested in additional home purchases, renovation costs, down home purchases, renovation costs, down payment & closing cost assistancepayment & closing cost assistance

• Local governments &/or area employers could Local governments &/or area employers could put up down-payment assistance for eligible put up down-payment assistance for eligible workers which could be recovered through workers which could be recovered through employee payroll withholdingemployee payroll withholding

Sale of HomeSale of Home

Client enters into contract:Client enters into contract:• Must have pre-approvalMust have pre-approval• Must have certificate from homebuyers ed classMust have certificate from homebuyers ed class• Must have attended intake meeting & have Must have attended intake meeting & have

disclosures signeddisclosures signed• Closing can be 30-60 days depending on Closing can be 30-60 days depending on

program requirementsprogram requirements• No allowance for pre-purchase possessionNo allowance for pre-purchase possession

Financial Package:Financial Package:• Negotiate discounts with banks on Negotiate discounts with banks on

foreclosure purchase priceforeclosure purchase price

• Corporate and personal donations, Corporate and personal donations, foundation grants & possible fee foundation grants & possible fee concessions to reduce acquisition, rehab concessions to reduce acquisition, rehab and resale costsand resale costs

• Down-payment Assistance programsDown-payment Assistance programs

• Closing Cost Assistance programsClosing Cost Assistance programs

• VRA low-interest loan money for rehab VRA low-interest loan money for rehab energy efficiency/conservation measuresenergy efficiency/conservation measures

Corporate, Local Govt & Personal Donations:Corporate, Local Govt & Personal Donations:Corporate Options:Corporate Options:

• Retailers: discounts on appliances & bldg suppliesRetailers: discounts on appliances & bldg supplies• Employers: down-payment assistance programsEmployers: down-payment assistance programs• Utilities: donate the cost of electrical meter installation & Utilities: donate the cost of electrical meter installation &

CFL light bulbsCFL light bulbs

Local Government Options:Local Government Options:• Sponsorship of promotional effort with public employeesSponsorship of promotional effort with public employees• Waiver of local recording feesWaiver of local recording fees• Waive taxes on property during FSBR holding periodWaive taxes on property during FSBR holding period• Waiver of water hook-up/turn-on feeWaiver of water hook-up/turn-on fee• Employee down-payment assistance programsEmployee down-payment assistance programs• Dedicated revenue stream for FSBR programDedicated revenue stream for FSBR program

Personal/Philanthropic Donations/Grants: Personal/Philanthropic Donations/Grants: • High school car washes for teacher down-payment High school car washes for teacher down-payment

fundsfunds• Benefactor donationsBenefactor donations• LISC & other foundationsLISC & other foundations

Down Payment AssistanceDown Payment Assistance

As the fallout from foreclosures increases As the fallout from foreclosures increases one effect is an immediate re-evaluation of one effect is an immediate re-evaluation of the current lending guidelines.the current lending guidelines.

• Credit score requirements are tighteningCredit score requirements are tightening• Down payment requirements are increasingDown payment requirements are increasing• No income /stated income loan products are No income /stated income loan products are

being abolishedbeing abolished• Private Mortgage Insurance companies are Private Mortgage Insurance companies are

tightening their guidelines.tightening their guidelines.• Loan products that were available are now goneLoan products that were available are now gone• (CVHC inquiring to DHCD of possibility of HOME (CVHC inquiring to DHCD of possibility of HOME

funds being used)funds being used)

Down Payment Assistance Down Payment Assistance (continued)(continued)

Program holds 2Program holds 2ndnd Deed of Trust to assist Deed of Trust to assist with down payment:with down payment:• Small increments 3-5% of sales priceSmall increments 3-5% of sales price• Home retention requirementsHome retention requirements• Resale/refinance: full pay-back, no forgiven Resale/refinance: full pay-back, no forgiven

fundsfunds• Other entities (Fairfax, etc) are requiring a 1-3% Other entities (Fairfax, etc) are requiring a 1-3%

of equity sharing to continue self-funding of of equity sharing to continue self-funding of programprogram

Down Payment Assistance Down Payment Assistance (continued)(continued)

Options for loans with low down-payment Options for loans with low down-payment requirementsrequirements• FHA: 3% down payment: funds can be giftedFHA: 3% down payment: funds can be gifted

30 year fixed rate loan30 year fixed rate loan

First time homebuyers eligibleFirst time homebuyers eligible

Relaxed DTI and credit criteriaRelaxed DTI and credit criteria

Federally backed loan program through HUD, Federally backed loan program through HUD, may transition to VHDA?may transition to VHDA?

If home is sold with FHA financing- home must If home is sold with FHA financing- home must pass FHA appraisal requirementspass FHA appraisal requirements

Down Payment Assistance Down Payment Assistance (continued)(continued)

Other large national banks have their own Other large national banks have their own special products: (e.g.)special products: (e.g.)• CountrywideCountrywide - House America Loan for - House America Loan for

borrowers with alternative credit histories, borrowers with alternative credit histories, savings patternssavings patterns

• Bank of AmericaBank of America: “No Fee Mortgage PLUS”: no : “No Fee Mortgage PLUS”: no PMI, no closing costs, no application feePMI, no closing costs, no application fee

• Provident BankProvident Bank: matching down-payment funds : matching down-payment funds up to $1,500 on their 30 year fixed rate loanup to $1,500 on their 30 year fixed rate loan

Down Payment Assistance Down Payment Assistance (continued)(continued)

VHDA 1VHDA 1stst-time homebuyer programs:-time homebuyer programs:• FHA plus- provides a 2FHA plus- provides a 2ndnd loan to assist with loan to assist with

d/p and closing costs/ fixed rate paymentsd/p and closing costs/ fixed rate payments

• RHS- Rural Development loans thru VHDA/ RHS- Rural Development loans thru VHDA/ no down payment/ 30 year fixed rateno down payment/ 30 year fixed rate

• Conventional loans- standard 30 year fixed Conventional loans- standard 30 year fixed rate/ below market VHDA ratesrate/ below market VHDA rates

Closing Cost AssistanceClosing Cost Assistance

In a buyers market:In a buyers market:• A buyer will gravitate towards homes with A buyer will gravitate towards homes with

closing assistance, to the extent of not viewing closing assistance, to the extent of not viewing homes that do not offer assistance.homes that do not offer assistance.

• As the seller a 2-3% margin can be built in to As the seller a 2-3% margin can be built in to offer back to the purchaser as closing cost.offer back to the purchaser as closing cost.

• FHLBAT offers a closing cost assistance FHLBAT offers a closing cost assistance program and this may need to be investigated.program and this may need to be investigated.

ChallengesChallenges

Creating a regional product: “FSBR”Creating a regional product: “FSBR”

Regional CooperationRegional Cooperation

Establishing Financing program & revenue Establishing Financing program & revenue streamstream

Covering Administrative FeesCovering Administrative Fees

Oversight Board DevelopmentOversight Board Development• Personnel selection Personnel selection (?)(?)• What will be FSBR BoD responsibilitiesWhat will be FSBR BoD responsibilities

Questions?Questions?

Credits: Prepared by Staff of the Central Virginia Housing Coalition,

Greater Fredericksburg Habitat for Humanity &

the George Washington Regional Commission

with input from the members of the GWRC Affordable Housing Task Force