Mortgage buyback program appears to help SE Queens

Mortgage buyback program appears to help SE Queens
Photo by Michael Shain
By Patrick Donachie

A program created to buy back distressed mortgage notes held by the federal government that was championed by southeast Queens lawmakers is seeing promising results thus far, according to testimony at a City Council oversight hearing.

But new regulations enacted by the Trump administration have made continuing the project much more difficult, City Councilman I. Daneek Miller (D-St. Albans) said this week. He, along with Councilmen Donovan Richards (D-Arverne) and Ruben Wills (D-Jamaica) were strong advocates for foreclosure relief in southeast Queens.

The Community Restoration Fund, partially funded by the Council and administered by non-profits such as Center for NYC Neighborhoods and the Mutual Housing Association of New York, targets neighborhoods hit hard by the foreclosure crisis in the aftermath of the 2008 economic crash. Miller said it was incumbent on officials to do something for southeast Queens, where he said one out of every three foreclosures in New York had occurred.

“If you look at the impact on that community, those who stay and those who leave, the billions of dollars in wealth that is lost, the billions of dollars in services we don’t access,” he said. “We knew we had to do something about it.”

Housing and Urban Development, the federal agency, periodically conducts auctions of pooled delinquent mortgages, which are often sold to private equity firms or hedge funds for large costs and potentially larger profits. Municipalities would find it nearly impossible to financially compete with these private investors.

“The fact of the matter is the way they were bundled, it did not allow for anyone other than those groups to participate,” Miller said about the mortgage pools. “They would bundle 200 to 400 homes for a region. No one had those types of resources.”

HUD agreed to negotiate with non-profits and municipalities throughout the country, however, giving mission-driven organizations an opportunity to help endangered homeowners modify their mortgages to stay in their homes. Miller said the new process offered New York a way to aid some homeowners. In June 2016, the city became the first municipality to help fund the purchasing of mortgage notes from the federal government.

David Cort, the city Housing and Preservation Department’s deputy commissioner for strategy, research and communications, said the CRF was set to buy distressed mortgages for 24 homes. The fund had connected with 22 of the borrowers and completed initial intake counseling for 13 of them. A credit committee had reviewed eight of the borrowers and approved five thus far.

“By assisting troubled homeowners and putting them on firmer financial footing, we will encourage financial empowerment and encourage the preservation of the city’s housing stock,” he said.

Since Donald Trump’s inauguration, the negotiations between non-profits and municipalities and HUD about purchasing distressed mortgage notes have been halted. Municipalities can still buy mortgage notes, but must currently compete with private equity firms and hedge funds.

Miller said the mortgage buyback program was always going to be one small piece of a holistic approach to foreclosure prevention, but he was hopeful he could continue to make the case to Washington based on the merits and results of the program.

“Those who have strived to be a part of America’s middle class, how do we retain and sustain that?” Miller asked. “This is the bailout that never happened to Main Street. Mortgages aren’t being forgiven — they’re being modified.”

Reach reporter Patrick Donachie by e-mail at pdonachie@cnglocal.com or by phone at (718) 260–4573.