Public Policy

How the Attorney General Foreclosure Settlements are Affecting Revitalization Efforts around the Country

10/24/12

In February 2012, the U.S. Department of Justice, along with a group of state attorneys general from 49 states entered into a $25 billion settlement with some of the nation’s largest mortgage servicers after a lawsuit over flawed foreclosure practices. The settlement resulted in direct payments to the federal government, states and individual borrowers affected by these faulty foreclosure practices. While many states allocated the money to their general funds, a handful are dedicating a portion of their settlement money to blight elimination programs to address the vacant, abandoned and problem properties left in the wake of the foreclosure crisis. Through the acquisition and remediation of vacant properties in neighborhoods hit hard by foreclosures, these programs will help to restore stability and strengthen housing markets. These blight elimination efforts are in addition to other statewide activities including foreclosure counseling and mortgage relief for borrowers. Many cities will benefit from the increased blight elimination activities as they seek to improve the safety, health, quality of life and market conditions of their communities.

A summary of the settlement and each state’s allocation can be found on the National Conference of State Legislator’s website.

Additional discussion surrounding the use of settlement funds can be found in a recent study from Enterprise Community Partners and in Rooflines, the Shelterforce blog.

Below is a brief summary of statewide blight elimination efforts. Please contact us if you have additional information to share about these or other efforts.

Kentucky

Kentucky Attorney General Jack Conway directed a share of his state’s $19.2 million from the mortgage settlement to programs directly addressing the problem of vacant and abandoned properties. This includes $3 million to go to the Kentucky Housing Commission to create a down payment and a closing cost assistance pool for owners who want to purchase vacant properties. Another $3.2 million will go towards revitalization efforts within the city of Louisville. These include the city’s Vacant and Abandoned Property Initiative, the Targeted Demolition Program and the Affordable Housing Trust Fund. Approximately 25 percent of the state’s foreclosures occurred in Louisville.

Excerpt taken from the City of Louisville website with quotes from Mayor Greg Fischer:

“This $3.25 million will have a real impact in our city; a real impact in neighborhoods; and most importantly, it will have a real impact on citizens who are living everyday with the problems that vacant and abandoned properties create,” Fischer said.

Fischer said there are 6,000-7,000 vacant and abandoned properties in Louisville.

“These properties encourage crime; they depress property values of people who live nearby; they cost the city money in the form of lost taxes; and they require taxpayers to waste tens of thousands every year on boarding the homes, mowing the yards – money that could be spent on other services,” Fischer said. “We plan to use this money to strategically invest in programs with real results.”

More information can be found here.

Maryland

Maryland controls $59.7 million in settlement funds; $14 million of which Attorney General Douglas F. Gansler and his Mortgage Settlement Funds Workgroup directed towards a neighborhood stabilization fund for projects that help to decrease blight. Local governments, nonprofits and developers are all eligible to participate, provided their proposed project helps to stabilize an area impacted by foreclosures. In addition, the City of Baltimore and Prince George’s County received $10 million each for anti-blight programs. Baltimore will use a large portion of its settlement money to demolish 700 dangerous and severely blighted properties, and create incentives for buyers to purchase vacant homes.

An excerpt from the Baltimore Sun with quotes from Deputy Commissioner Julie Day:

Julie Day, deputy commissioner for land resources at Baltimore's housing agency, said the city expects to earmark perhaps $500,000 of the $10 million it will get for incentives to buyers purchasing vacant homes. The rest will go to demolition.

The city, which has struggled with vacancy problems for decades and wants to tear down about 4,400 boarded-up homes, hopes the settlement money will cover costs for the first 700.

"The timing of this money is so fortuitous," Day said. "Having this has given us a jump-start, and once folks see real activity, it'll be easier to raise other funds."

Read the full article here.

For further information on the allocation of settlement money visit the Maryland Attorney General website.

Michigan

(Updated 3/13/2013)

Of the $97.2 million Michigan received as part of the recent settlement, Attorney General Bill Schuette set aside $25 million for a Blight Elimination Program in which the city of Detroit will receive $10 million and the remaining $15 million will be awarded throughout the state to various blight elimination efforts.

In connection with the Detroit Works Project and Michigan’s Neighborhood Revitalization Initiative – a partnership between the City of Detroit, the State of Michigan, Detroit Public Schools and the Pathways to Potential Program – three target areas impacting schools in Detroit were selected for the $10 million in funding. The money will help to demolish and rehab dangerous structures that currently pose a threat to neighboring residents and children traveling to school.

The $15 million in outstate funding was awarded through an application process to county land banks, nonprofit organizations and local governments. The Michigan State Housing Development Authority (MSHDA), the Department of Human Services (DHS) and the Michigan Land Bank Fast Track Authority (MLB) selected the project areas and allocated funding for projects that promote public safety, encourage economic development, stabilize property values and garner further investment.

A list of agencies receiving Blight Elimination Program awards can be found here.

Quote from Detroit Mayor Dave Bing in the Detroit Free Press:

"The effort with the state and DPS [Detroit Public Schools] is about more than just tearing down dangerous buildings," Detroit Mayor Dave Bing said. "It's about rehabilitating homes, turning the street lights on and making sure our children can walk to and from school safely."

Read the full article here.

Ohio

Of the $92.7 million received by Ohio, Attorney General Mike DeWine allocated $75 million to help establish the Moving Ohio Forward grant program across all Ohio counties. The purpose of the program is to eliminate blight in Ohio communities through the demolition and land banking of vacant and abandoned properties. The program encourages the use of deconstruction techniques and reuse of salvageable material. The Ohio Attorney General’s office is contracting with two organizations to assist with the grant application process and provide technical assistance to Ohio communities. The Greater Ohio Policy Center will work with communities in southern Ohio and the Thriving Communities Institute will focus on communities in northern Ohio.

An excerpt from a local Cincinnati news source with quotes from Matt Strauss of the Price Hill Will community group:

The demolition of the homes could put thousands of dollars into neighbor's pockets once the homes are torn down.
"A vacant property devalues all the neighboring properties on that block by $14,000. I don't know if that could be worse by now because this was a few years ago. But if you have more than one vacant property on your street, it can cause a lot of trouble," said Strauss.

Read the full article here.

Watch this video clip from 60 Minutes with interviews from Thriving Communities Executive Director, Jim Rokakis, on the impact of the foreclosure crisis on Cleveland.

Find out more about Moving Ohio Forward.

Washington

The state of Washington received $54.2 million in the mortgage settlement and Attorney General Rob McKenna has chosen to distribute a portion of the money to specific agencies and organizations who are addressing issues of blight and abandonment throughout the state. This includes roughly $4.8 million to go towards anti-blight activities with the City of Tacoma Community Redevelopment Authority and the Homestead Community Land Trust. They will use the money for blight prevention, and the purchase and rehabilitation of vacant and distressed homes for affordable housing.

Statement made by the City of Tacoma found on the Washington Attorney General website:

When a formerly foreclosed vacant house is occupied by a new owner, it typically becomes a model for the neighborhood. The lawn is mowed, the shrubbery is trimmed and the exterior surfaces of the house and fence are cleaned and painted. This pride in ownership spreads throughout the neighborhood and everyone starts to take a renewed interest in maintaining their own home. These funds are going to have a very positive impact on many neighborhoods in Tacoma.

More information on the allocation of funding in Washington can be found here.