Los Angeles Neighborhood Housing Services (LANHS) has conducted a study to identify foreclosure trends in its targeted neighborhoods. The study helped it create a plan for addressing the rising rates of foreclosure.

Los Angeles Neighborhood Housing Services (LANHS) was founded in 1984 to improve existing homes in the city of Los Angeles. It is a community development financial institution (CDFI) and NeighborWorks organization that is transforming neighborhoods through its partnership of residents, business and government.
 
LANHS is the largest affordable homeownership provider in southern California and offers financial information, credit counseling, affordable loan products, and neighborhood revitalization in addition to homebuyer education, house rehabilitation, and resident leadership programs. LANHS serves targeted areas in Central Los Angeles, South Bay, and NorthEast San Fernando Valley.
 
In 2003, LANHS decided to conduct a foreclosure study (officially titled “Mortgage Foreclosure Trends in Los Angeles: Patterns and Policy Issues”) to better understand the increase of foreclosures in Los Angeles. In the city, many foreclosures are concentrated in the lowest-income areas – areas that also have the highest concentrations of minority homeowners.
 
Although LANHS’s loan portfolio has been very successful over the years (it has had zero foreclosures since it opened in 1984), the foreclosure trends raised great concern because they threatened the overall health of the community. LANHS did not want these trends to undo 20 years of its homeownership and neighborhood achievements.

Study Purpose.  Staff decided to conduct a detailed examination of local trends so they could design effective responses to the rise in foreclosures. The study would identify pockets of high-foreclosure activity, and help staff create a comprehensive process for intervention and prevention, which would include other community agencies and partners. The overall goal was to save families and neighborhoods from the stress of foreclosure.

The Study.  Two consultants were hired early in 2004 to conduct research and write the study: William C. Apgar, the director of the Joint Center for Housing Studies at Harvard University and Mark Duda, a consultant. The study examined foreclosure trends from April 2001 to April 2004 and showed housing market performance from 1987 to 2003. Most information came from the Census Bureau and the city and county governments in Los Angeles. The study was completed in 2004.

Study Findings.  The study revealed that the lowest-income neighborhoods with the highest minority populations had the most foreclosures. During the study period, foreclosure proceedings were initiated on 62,070 homes in the city and county of Los Angeles. Although most mortgage companies tried to help homeowners avoid foreclosure, 14,415 families ended up losing their homes. The number of families who lost their homes in the city was three times higher than in the county, and these households were highly concentrated in specific neighborhoods. About 25 percent of the foreclosures occurred in census tracts with the highest minority concentrations and lowest incomes.
 
The study also revealed high levels of subprime lending issues within these households. When conventional lenders failed to provide affordable credit to lower-income borrowers, they turned to less-scrupulous lending options.

LANHS’s Response.  Historically, LANHS has focused on expanding homeownership opportunities in lower-income and minority communities. Since the release of the study findings, however, it has increased its homeownership preservation activities and shifted its focus from foreclosure intervention to prevention. The study also showed a need for policy intervention.
 
Since predatory loans were the largest factor leading to foreclosure, LANHS is closely monitoring the local subprime lending situation and working to educate residents on this issue. Staff provide consumers with information on fair and affordable lending choices and help borrowers make informed decisions. LANHS also is working to increase refinance and loan-workout options through financial partners.
 
When foreclosure cannot be avoided, LANHS tries to facilitate a swift response so the home can quickly return to the market. This minimizes the negative impact of abandoned properties.
 
LANHS will continue to work with city and county housing officials to collect local data and identify new “hot spots,” or neighborhoods with high rates of foreclosure. This will help businesses, governments and community-based organizations create a coordinated and effective foreclosure avoidance effort and help identify at-risk neighborhoods before problems get worse.

Cost and Funding.  The cost of hiring the consultants was $10,000 and was paid for by a grant from NeighborWorks America. The only other cost was staff time, which was covered by LANHS’s operating budget.

LANHS has found “homeowners in foreclosure” to be an emerging client: 10 percent of its postpurchase customers have foreclosure issues. The results of the study prompted LANHS to change its focus and intensify postpurchase and homeownership preservation activities. Staff members are educating the community; coordinating with government, business and community agencies to prevent foreclosure; and focusing on prevention at a policy level to create practical and tangible solutions.
 
LANHS was to hold a press conference in summer 2005 to raise awareness about the problem and recruit financial partners to address the growing concerns of foreclosures in Los Angeles.

• Collect comprehensive data. Precise details are vital to addressing the issue of foreclosure and preserving neighborhoods. The agency must know the facts in order to accurately inform the public and create obtainable goals.
   
• Review research from other NeighborWorks organizations. When it comes to foreclosure trends, communities will share similarities as well as have differences. Take the time to learn from other network organizations, but pay close attention to local conditions. Smaller cities may have different trends than more populated areas. Still, agencies can learn from one another’s experience.
   
• Create partnerships. Partnerships with homeowners, financial institutions, community agencies, and government are vital to resolving the foreclosure crisis. Change will be more effective if there are many partners at different levels.
   
• Accept that some foreclosures are unavoidable. When foreclosure is inevitable, have lenders, municipalities and community-based organizations work together to preserve the property for affordable homeownership. Try to transfer the property to a new homeowner as quickly as possible.
   
• Be patient. Addressing the foreclosure issue will take time. Know what to look for and be ready to respond.
   
• Obtain professional input. LANHS staff hired experts to conduct the study because they wanted a thorough and specialized report. Input from professionals in the housing industry will help guide your efforts.

Agency interview on 06-23-05 with: Ester Cadavid, Vice President and Chief Development Officer