The national foreclosure crisis created vast stockpiles of distressed REO held by the large banking institutions as a result of the many foreclosures that occurred during the crisis and to now. Investors quickly stepped in and purchased much of the good inventory to sell in smaller trades or are holding these homes as rental properties with the intent of selling them at a great return as each market recovers. Today’s buyers have to compete with these cash investors making it difficult for owner-occupants to buy a home.
The banking institutions were under pressure to sell and or donate vacant and distressed REO to avoid a continued decline in market values, losses of tax revenue, additional neighborhood deterioration and other negative impacts caused by vacant and abandoned homes.
Investors were not interested in most of the severely distressed REO and most non-profit organizations were unable to respond to the REO volume. Those that did take advantage of the opportunity were only able to acquire one or two distressed properties a month which typically has a positive effect to some individuals but whose impact is not truly felt by the greater community. Other larger more sophisticated non-profit organizations and some municipalities were able to take advantage of Hardest Hit Funds and Neighborhood Stabilization Program funds to target specific markets and zip codes but communities outside of those markets were largely left with no resolution.
Many markets across the country were left with no solutions to their mounting housing crisis and many are still reeling under recession. Many people are predicting that we will have a second housing crisis in 2015-2016. In fact, Markets like Detroit, Michigan, Baltimore Maryland, many parts of Ohio and Florida and Puerto Rico are still reeling from the economic meltdown and the accompanying foreclosure crisis. Another crash would be devastating to them and to the country. Adding to the concerns is the fact that federal funding for the housing recovery has all but been deployed and no new federal funding is expected to be made available to respond to the remaining and potential upcoming market crises.
Hogar Community Reinvestment LLC was formed by HHI in 2011 to acquire distressed REO in these underserved communities. The program was designed to help communities restore local market housing values, restore local municipality’s income via real estate tax and other revenue, eliminate blight and crime by securing and or demolishing vacant and abandoned properties and renovate for sale or lease those homes that were habitable.
Some markets like Detroit have entire neighborhoods that will never recover and the best outcome for those few remaining homes is demolition and the creation of green space. Other communities that are recovering are better served by demolishing the most dilapidated of the homes and creating community gardens, play grounds or other shared open spaces that improve the neighborhoods desirability.
HHI was and is willing to go into these communities and do the hard work that needs to be done. Our program model allows us to attract private capital and to leverage the banks’ willingness to positively impact communities by making REO available through discount pricing or donations. Our approach leverages the work that other entities are doing using federal funding, with private capitals investments, the combination of which has a greater impact on the entire community.
We pride ourselves in our ability and willingness to renovate homes to a high standard and our ability to work with other non-profit organizations like the National Council of La Raza, the Neighborhood Community Stabilization Trust, Housing and Education Alliance and Homes on the Hill to name a few. We also work well with the U.S. Department of Housing and Urban Development, the State of Arizona, Fannie Mae and all of our partner banks and capital partners who are just as willing to do the much-needed work for deserving communities.
HHI’s statistics say it all. Because we only sell to “Owner-Occupants”, we have created homeownership for 718 low to medium income families and have a portfolio of 77 rental properties also available and or rented to income qualified families/individuals. We are now working on 140 properties that are in the rehab process and have another 76 properties which have completed rehab and are now listed for sale. We acquire approximately 12 properties per month and look to increase that number in the coming months.