Report to profile efforts to stabilize Charleston neighborhoods in foreclosure distress

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Charleston’s participation in a federal program for stabilizing neighborhoods with high foreclosure rates will be chronicled in a study by the Federal Reserve Banks of Richmond and Cleveland. The study, which includes four communities, will look at the local impact of the Neighborhood Stabilization Program, which sent $7.4 million to the tri-county area.

 

By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published Sept. 1, 2009

Charleston’s participation in a federal program for stabilizing neighborhoods with high foreclosure rates will be chronicled in a study by the Federal Reserve Banks of Richmond and Cleveland.

The study will focus on the $7.4 million that the Lowcountry Housing Trust received earlier this year from the federal government to purchase foreclosed homes in distressed neighborhoods. A total of 71 homes are to be purchased, repaired and sold or rented at affordable prices.

The money came from the $4 billion federal Neighborhood Stabilization Program, which Congress created in 2008 in response to the foreclosure crisis. Congress included another $2 billion, still unallocated, for the program in this year’s stimulus act.

The Federal Reserve Bank, in partnership with the National Vacant Properties Campaign and the Metropolitan Institute at Virginia Tech, is studying difference the program makes in small communities and the challenges it presents. Charleston is one of four communities profiled in the report expected to be published late this year.

Other communities in the study are Cleveland, Ohio; Winchester, Front Royal and Strasberg, Va.; and Fayette County, Pa.

The study is meant to help other small communities improve their stabilization efforts, officials said. It’s also meant to shape recommendations for future government policies meant to help address neighborhoods with high rates of foreclosures.

At a meeting today with researchers, representatives of the 10 local nonprofit and for-profit groups that purchase foreclosed homes shared some of the challenges they are facing.

Some said banks prefer to sell foreclosed homes to investor groups in large numbers instead of piecemeal to small developers with federal money and the red tape that comes with it.

Others said banks are focusing more on short sales than foreclosures, and the federal money isn’t available for short sales.

Some at today’s meeting questioned whether federal money could better accomplish the goal of neighborhood stabilization if given out in grants to homeowners struggling to stay in their homes.

Tammie Hoy, executive director of the Lowcountry Housing Trust, said the foreclosure crisis isn’t always visible in Charleston, but that doesn’t mean it’s not playing out here.

Instead of foreclosure signs, many distressed properties simply have for-sale signs in front, she said. That has made it more of a challenge for developers participating in the Neighborhood Stabilization Program to find properties eligible for the program.

“There isn’t a lot of visible signage out there,” Hoy said. “It’s more of a hush-hush scenario.”

Hoy said developers partnering with the Lowcountry Housing Trust so far have properties under contract representing $2.2 million of the $7.4 million the group received. Those properties are scheduled to close in the coming weeks.

Of the total 71 properties the groups will acquire, 10 will be offered for sale and the rest as rental units.

In Charleston, the study will pay particular attention to the Dorchester Terrace community in North Charleston. Of the 71 homes local non-profit and for-profit developers plan to purchase from banks, six are located in Dorchester Terrace.

Hoy said the neighborhood was built in the 1950s and struggled with abandoned homes even before the recent foreclosure crisis.

Carl Neely, regional community development manager for the Federal Reserve Bank of Richmond, said the bank’s role is ensuring full employment and price stability. Because of those goals, the Fed has an interest in the neighborhood stabilization program.

“You can’t have a stable economy if you don’t have a stable community,” Neely said.