Kenneth D. Wade
Keynote Speech, Tuesday, October 16, 2007
Saving the American Dream:  Addressing the Foreclosure Crisis in Michigan
Sponsored by the Federal Reserve Bank of Chicago

Remarks by
Kenneth D. Wade
CEO of NeighborWorks America

Good afternoon! I’m delighted to be here today.  I want to thank the Federal Reserve Bank of Chicago for hosting this important event. We know that Michigan is one of the states being hit hardest by the national foreclosure crisis—in every foreclosure ranking it’s consistently in the top 5.  Times are tough here in Michigan, so it’s encouraging that all of you are here today so we can learn from one another and work in partnership to mitigate the impact of foreclosure.

First let me tell you a little bit about NeighborWorks America and then I will talk about how we are responding to the foreclosure crisis, nationally and here in Michigan. 

NeighborWorks America is a Congressionally-chartered nonprofit organization that creates opportunities for people to live in affordable homes, improve their lives and strengthen their communities.

We receive an annual appropriation from Congress but we are not a department or agency of the federal government.  We are a quasi-public non-profit corporation.  NeighborWorks America is governed by a 6-member board that is comprised of a senior representative from the FDIC, the Office of the Comptroller of the Currency, the National Credit Union Administration, the Office of Thrift Supervision, HUD, and the Federal Reserve System.

To achieve our mission we work with a network of more than 235 community development organizations in 50 states. We work closely with our network of affiliates to identify and address community needs. We provide financial resources, technical assistance, training, and a platform for developing partnerships that address local needs and programs that can be replicated elsewhere. Offering solutions that can be tailored at the local level is a hallmark of our approach. We recognize that what works in California might not work in Illinois, but there are lessons and resources that can be applied from one place to another—this maximizes the effectiveness of the national NeighborWorks network.

We have four NeighborWorks organizations here in Michigan:

1. Kalamazoo Neighborhood Housing Services, Inc. (Tim Lemanski)
2. Neighborhood Renewal Services of Saginaw (Mark Neumeier)
3. Southwest Solutions here in Detroit (Timothy Thorland)
4. Neighborhoods Inc. of Battle Creek (Jim Baldwin and Donna Garcia, co-CEO)

All four of our Michigan organizations assist lower income families achieve the American Dream. They also offer a wide spectrum of services that includes housing development, lending, and community building. In 2007 NeighborWorks America provided more than $800,000 in expendable and capital grants to further the work of these 4 Michigan organizations.  We are pleased they are part of the NeighborWorks network and we are proud of the work they are doing to strengthen communities.

Helping families achieve the American Dream is a central component of our work to strengthen communities and help lower income families build assets.  It’s also an area in which we’ve been very successful over the years.

Through our national homeownership programs we’ve assisted over 150,000 families become homeowners and we’ve counseled more than 635,000 people on the homebuying process. We have a comprehensive approach to homeownership, providing pre-purchase counseling, affordable loan products, and post-purchase assistance. At NeighborWorks America we believe in sustainable homeownership—we want people who purchase homes today to be able to afford those homes over the term of the loan. 

Earlier I mentioned the composition of NeighborWorks America’s Board of Directors. We benefit tremendously from the wisdom and knowledge of the high ranking representatives from HUD and the federal banking regulators that govern our organization.  Several years ago our Board Chairman, the late Governor Ned Gramlich from the Federal Reserve Board, warned us that a foreclosure crisis was on the horizon and that we needed to be prepared to respond.  He predicted that steep increases in foreclosure would erode the hard fought gains in homeownership that NeighborWorks had achieved over the years. In addition to creating challenges for individual families, increasing foreclosures can have a devastating impact on communities, particularly the lower-income communities that NeighborWorks America serves. We knew we had an obligation to take action.

So about three years ago we created the NeighborWorks Center for Foreclosure Solutions, a national foreclosure prevention initiative. We modeled our national effort on a successful home ownership preservation program created by our affiliate in Chicago.  In early 2003 Neighborhood Housing Services of Chicago discovered that the City was experiencing a dramatic increase in foreclosures concentrated in minority and low-income neighborhoods. Between 1993 and 2002 the City of Chicago experienced a 91 percent increase in the number of foreclosures initiated.

In response, our NeighborWorks organization developed a comprehensive home ownership preservation intervention (HOPI) that included targeted workshops for borrowers at risk of losing their home, a mortgage default hotline, and counseling services. Many partners came to the table in Chicago—including the Federal Reserve Bank—to ensure a robust, results-focused initiative.

The results of the first three years of that initiative are impressive:

• More than 4,000 Chicago households were educated about foreclosure and their options
• More than 1,300 families were able to avoid foreclosure as a direct result of the initiative
• More than 330 vacant or neglected buildings were reclaimed for homeownership opportunities
• The efforts resulted in an estimated collective savings of $267 million for the City of Chicago, its residents and the initiative’s lending partners

The Chicago program demonstrates that intervention works—we know we can’t save all homeowners from foreclosure, but we can turn things around for many families and save the American dream.

Through the Center for Foreclosure Solutions, NeighborWorks is providing a set of solutions to avert foreclosures nationwide:  we are raising awareness, building counseling capacity, conducting research and developing early alert systems, and fostering public and private partnerships in foreclosure hotspots.

Our Center for Foreclosure Solutions builds on NeighborWorks America’s key strengths in homeownership education and counseling, training and capacity building, and serving as a convenor to foster public and private partnerships at the local level. 

Now let me tell you a little bit about one of the central components of the Center’s foreclosure prevention work—a national public service campaign in Partnership with the Ad Council, which is designed to encourage homeowners in financial distress to reach out for assistance before it’s too late. The public service campaign includes print ads, radio ads and television commercials.  We will play those commercials at the end of my talk.

We created the public awareness campaign because research indicates that more than half of all homeowners who enter foreclosure never take any action to try to avoid it. 

Through interviews, focus groups and analyses of lending data we know that consumers are afraid or embarrassed to contact their lender directly. Some simply do not know that their lender can be helpful, while others presume that by contacting their lender they may be charged a penalty or a fee, or that the lender will foreclose on them faster. These borrower issues can be addressed through counseling, early intervention, and through partnerships that provide a neutral, trusted intermediary with whom the borrower can work. 

The public service campaign instructs homeowners in financial distress to contact a toll free hotline, 888-995-HOPE, to receive the housing counseling assistance they need. The HOPE Hotline is managed by our national partner, the Homeownership Preservation Foundation, and provides immediate access to free assistance from a HUD-certified housing counselor. The Hotline is available 24 hours a day, 7 days per week and provides counseling in English and Spanish. Homeowners that need face-to-face assistance are referred from the Hotline to local NeighborWorks organizations. Here in Michigan three of our NeighborWorks organizations are working in partnership with the Hotline to provide that face-to-face assistance.

A key challenge is to make this effective counseling available to those who need it most—and reaching them before it’s too late. The sooner someone makes contact with a counselor the more options that are available to them to avoid foreclosure. So we hope you will help us get the word out about the HOPE Hotline. I know the Detroit Homeownership Preservation Enterprise has promoted the hotline and there are other local efforts to spread the word.  

Hotline call volume has been increasing exponentially in response to the Ad Council campaign and media attention. Here in Michigan the hotline has received more than 4,000 calls this year and more than half of the callers have completed counseling. Overall, the hotline has received nearly 50,000 calls nationwide in the first half of this year.

We know that foreclosures are concentrated in certain markets, so in addition to our national public outreach campaign NeighborWorks America is also advancing local foreclosure prevention coalitions.  These coalitions build on the lessons learned in other markets, bringing many partners to the table to create a more effective and coordinated response to the problem.  Here in Michigan, NeighborWorks organizations have joined forces with other community based organizations and the Michigan State Housing Development Authority and the Community and Economic Development Association of Michigan to launch a statewide foreclosure prevention coalition. The statewide coalition is working with the national hotline and advancing strategies that respond to local market conditions. I want to recognize Nina Rodriguez from Southwest Housing Solutions and Angie Gaabo, the Executive Director of the Community and Economic Development Association of Michigan, who are leading that effort.

We are also building the local counseling capacity to make sure that there are enough trained professionals to meet demand. NeighborWorks has conducted two foreclosure prevention trainings for counselors—one in Detroit and one in Lansing. A total of 70 counselors have completed beginning to intermediate foreclosure prevention classes already and over the next year we will have at least one more full-week training where we expect to certify at least 30 foreclosure prevention counselors.  I would like to thank our local partners—the Michigan State Housing Development Authority, the Statewide Foreclosure Prevention Task Force members, and Comerica—who all provided resources to help make these trainings happen.

We at NeighborWorks believe that we can make a strong contribution to addressing the foreclosure crisis. Our national strategy builds on our core capacities and strengths, and provides resources and tools that can be applied locally and tailored to meet community needs.

But we know that our efforts alone cannot solve this national crisis. We each have unique strengths and resources that we can bring to the table.   For this very reason, NeighborWorks is proud to have partnered with the Department of the Treasury on the Hope Now Alliance that Treasurer Cabral mentioned earlier.

As part of the Hope Now Alliance, the American Securitization Forum, the umbrella forum for the securitization industry - the group of market participants we often call “investors” - has determined that counseling is a reimbursable expense in situations where the servicer concludes that the counseling service has or is likely to mitigate losses and maximize recovery on loans that are in default or where default is foreseeable. I mentioned earlier that the counseling available through the Hope Hotline and through NeighborWorks organizations is provided free of charge to clients. But obviously there is a cost to provide this valuable assistance. Unfortunately, there aren’t enough grant dollars or public resources to pay for counseling for everyone who needs it.  We need a sustainable funding model for this important counseling work and the American Securitization Forum’s commitment to counseling is a tremendous step forward.

I also applaud the new refinancing options that Governor Granholm has created to assist homeowners with ARMs and provide rescue refinancing.  Getting people out of problem loans is absolutely essential and the state housing finance agencies have an important role to play in advancing affordable financing options.  I hope the legislature moves quickly to approve those programs, which will help families at risk of foreclosure.

So in closing, I challenge each of you to think about what resources and capacities your organization can bring to the table to address Michigan’s foreclosure crisis.  We will all suffer the harsh consequences of an economic downturn if we do not work together to avert this rising wave of foreclosure.  The hardworking families in Michigan need our assistance—let’s help them keep the American Dream.

Now let’s show the Ad Council public service announcements.