PLEASE NOTE: THE PROGRAM HIGHLIGHTED BELOW IS NO LONGER IN PROGRESS. Although there is no contact person available to discuss program details, the information in this report may still be helpful to you and your organization.

Neighborhood Housing Services of Chicago reduced foreclosure and subsequent abandonment with an innovative program combining foreclosure counseling; a foreclosure-prevention loan program; and a solid working relationship with mortgage companies. By keeping homes occupied when homeowners were experiencing default, NHS helped stabilize a market where it had been helping other families purchase.

A high number of vacancies in the NHS neighborhood of Roseland were threatening to lead to deterioration of the area's housing stock. NHS of Chicago realized that the best way to maintain the integrity of these structures was to initiate a program to prevent foreclosures.
 
Many homeowners were defaulting for personal reasons, mainly social and health problems that put a strain on their finances. NHS of Chicago already had implemented a foreclosure loan program in which homeowners who were behind on mortgage payments three months or less qualified for a loan up to $2,500, with payment deferred from three to nine months. High demand for the loan indicated a need for more than just loan money. Financially troubled homeowners needed help immediately, when they began to default.

NHS of Chicago received an allocation of $40,000 from NeighborWorks America to carry out a foreclosure intervention program. After researching how this money could best be used, NHS determined that the high level of foreclosures in the Roseland neighborhood could be reduced by loaning money to home-owners in danger of default.
 
In addition to implementing the program’s loan component, NHS of Chicago used funding from Chemical Bank and Fleet — which had foreclosed on a high number of Roseland homeowners — to do a coun-seling component for defaulting homeowners. NHS of Chicago received the funding from the National Training Information Center (NTIC), an affordable-housing advocacy organization, which had pressured the two mortgage companies to become involved in distressed neighborhoods. Out of the total amount NTIC garnered from the two companies, NHS of Chicago received from Fleet a first-year grant of $15,000 and a second year grant of $5,000, and from Chemical Bank, a first year grant of $4,000 and a second year grant of $1,500.
 
This funding, along with a City of Chicago Community Development Block Grant allocation ($30,000 for FY 1994 and $30,000 for FY 1995), enabled NHS of Chicago to hire a part-time administrator to implement the counseling component which would be coordinated with the loan component. Together, the two comprised the Foreclosure Intervention Program, also known as the Vacancy Prevention Program. This experimental program was not marketed but was administered through word of mouth or by referral.
 
In the Roseland neighborhood, NHS of Chicago shared an office with the Chicago Department of Housing, which had an overload of counseling cases involving defaulting homeowners. The Department of Housing counselor gave the NHS administrator names of Fleet or Chemical mortgagees who were having difficulties paying their mortgage loans. The administrator would then personally contact homeowners experiencing financial hardship.
 
The NHS administrator also maintained a close working relationship with the two mortgage companies, informing them that she was working with defaulting clients so that they would delay foreclosure proceedings. Fleet particularly became involved in the program by putting agents in the Roseland neighborhood. Moreover, staff from Chemical and Fleet would call the administrator and give her the names of defaulters that they felt were in need of NHS of Chicago’s help.
 
By establishing a strong presence in Roseland and, to a lesser extent, in the Garfield Boulevard and Austin neighborhoods, and by building trust with homeowners, NHS prevented the vacancies that follow foreclosure, thereby maintaining the integrity of the neighborhood's housing stock.

NHS of Chicago was able to prevent several foreclosures in the first three years of the program. The administrator, who had strong people skills, was successful in finding creative solutions to problems she encountered. She helped many NHS clients by meeting problems head on, as the following three stories illustrate.

1. In one area with a high number of foreclosures, the administrator discovered that grandchildren with substance abuse problem were draining senior family members’ finances. On several occasions, the administrator set up direct deposit of homeowners’ Social Security allowances into their savings institutions, which would then electronically pay the mortgage company each month.
    
2. When dealing with a couple that was about to lose their home, the administrator determined that the husband had a substance abuse problem of which his spouse was unaware. The administrator's handling of the situation resulted in the husband seeking dependency treatment. Soon after, the couple were able to make their payments in large part because that treatment.
    
3. In another case, the administrator was unable to keep a senior citizen from losing his house. At the time, she was helping another senior in danger of losing his home. Her skill at bringing people together resulted in the former renting a room in the home of the latter, who used that rental income to make his mortgage payments.

1.  Trust
This program’s success hinged on NHS of Chicago’s close association with the people in the neighborhoods it serves. This link establishes trust, which enabled the administrator to help financially troubled homeowners solve their problems. Moreover, vacancy prevention works best on a case-by-case basis, with an underlying strategy of leading homeowners in a certain direction.

2.  Mortgage Companies’ Role
Creating good working partnerships with mortgage companies benefits the mortgage company, which often can collect money when there was previously no hope of that, and the homeowner in financial difficulty, who has a new chance to hold onto the house.

3.  Reasonable Solutions
This creative, one-on-one approach to delinquency prevention lets NHS customers know that there is someone they can talk to about their financial and personal difficulties. Because financial problems often result from personal problems, a personable approach can get to the heart of matter, producing solutions allowing, in this case, homeowners to get back on their feet.

4.  Saving Housing Stock
Preventing vacancies often prevents housing stock deterioration, and by saving buildings, neighborhoods are saved. Without this program, many houses would be vacant, and the neighborhoods in which they are located would have declined substantially.

5.  Partnerships
Coordinating a loan program, a counseling service and a creative partnership with mortgage companies is necessary when trying to prevent foreclosures.
 
Agency interview with: Bruce Gottschall