This is a true story. Actually, it is two stories about the foreclosure crisis, both true.

We’re familiar with the first story. In Massachusetts and across the country, the foreclosure crisis continues to decimate families, and communities. The response from loan servicers has ranged from marginally improved at best, to anywhere from woefully inadequate to counter-productive at worst. The programs initiated by the federal government have been too little and too late and too reliant on the voluntary participation of lenders.

According to data provided by the Warren Group to the Boston Globe, the number of homeowners in Massachusetts who lost their properties to foreclosure in April, 2010 (1,372) is 80% more than the number from April of 2009 (764), and the number of foreclosure petitions (the first step in the foreclosure process) jumped 21% compared to April of 2009. Furthermore, lenders are getting more efficient at foreclosure, reducing the time it takes to complete a foreclosure from 9.2 months in October, 2008 to 4.6 months in November 2009.

But there is another story, hidden under the grim headlines of the first story. Nonprofit counseling agencies across the Commonwealth are helping prevent foreclosure, and when necessary they are helping people transition to new housing so they can land on their feet.

During calendar year 2009, according to data collected by MACDC through its GOALs Survey, MACDC Members counseled 5,200 households at risk of foreclosure. The same members reported that, by the end of calendar year 2009, 31% (1,590 households) had achieved a positive outcome (averting foreclosure) by the end of the year. Since it can take many months for these situations to be resolved many of these 5,200 households will eventually achieve a positive outcome in 2010. Furthermore, the percentage of families in Massachusetts achieving successful outcomes within the same year increased from 24% in 2008 to 31% in 2009.

Some of this success is likely attributable to the Obama Administration’s Home Affordable Modification Program (HAMP) that was introduced in early 2009. Despite significant problems with HAMP in moving borrowers from temporary to permanent loan modifications, by February, 2010, over 4,000 Massachusetts families had received permanent loan modifications under the program.

The positive impact of foreclosure prevention counseling is further demonstrated by data on the National Foreclosure Mitigation Counseling Program (NFMC). The most recent findings from an Urban Institute analysis of NFMC showed that homeowners who sought counseling after a foreclosure filing were 1.6 times more likely to get out of foreclosure, and avoid a foreclosure sale, than homeowners not assisted by counseling.

The experience of MACDC members bears out the positive impact of this counseling. Juan Bonilla, the Director of Homeownership Programs at Lawrence Community Works (LCW), tells a story of an elderly man who was not aware until days before his home was to be foreclosed that there was assistance available. With LCW’s help he got the auction postponed and later submitted the documents necessary for a loan modification, which LCW expects to be successful. There was a woman whose lender gave her a trial modification, and at its completion insisted she enter another trial period at a higher interest rate and payment, because the lender mistakenly calculated that her income had increased 25%. Because of the intervention and the persistence of the LCW counselors, both homeowners remain in their homes. Since 2007, LCW has provided foreclosure prevention assistance to approximately 400 families in the region, and 59% of these families have achieved positive outcomes.

At the Neighborhood of Affordable Housing (NOAH) in East Boston, Counselor Smita Das tells the story of a single mother of two young children. After losing her job, she was unable to pay the two mortgages on her triple-decker. With NOAH’s helped she received a trail modification under the HAMP program, and then a permanent modification that lowered the combined monthly payment on her mortgages from $4,500 to just over $2,800.

Michele Morris of Valley CDC in Northampton highlights an important reason for counselors’ success in helping homeowners in crisis: the ability to develop a positive working relationship with the loan servicer’s staff. Homeowners may typically vent their frustration by treating the loan servicer’s staff as an adversary, which is not conducive to getting the family’s loan prioritized and getting the complex servicing errors untangled.

The moral of this story is clear. With all the challenges associated with loan modifications and foreclosure prevention counseling, it remains the fastest and most cost effective method of assisting families facing foreclosure, preserving family wealth, avoiding displacement, and stabilizing neighborhoods. Our frustration and anger about the on-going foreclosure crisis should not obscure the important success that nonprofit organizations are having day after day, one family at a time. We need to dramatically increase support for counseling, not throw in the towel in despair.

Photo by Lolita Parker Jr.

There is something inspiring about bringing people to the State House.  As a professional lobbyist I can, at times, take for granted the grand and inspiring dome sitting atop Beacon Hill.  I can find the process of watching bills or the annual budget go through the legislative process to be frustrating.

Yet on Tuesday, April 6th the stunning Hall of Flags filled with people, posters, PowerPoint displays on laptops, brochures and good food.    CDCs from around Massachusetts were represented by board members, staff, community leaders, and more than a dozen youth leaders.  Over 200 people from 38 member organizations came to meet with at least 38 legislators and aides to talk about the importance of ongoing foreclosure relief, fully supporting small business technical assistance and the role of CDCs in neighborhoods and regions throughout the Commonwealth. We also made a strong push for funding summer jobs for youth, with Makeila Layne, Dorchester Bay Youth Force from Dorchester Youth Force speaking to the crowd about the importance of those programs.

I heard people marvel at how beautiful the building is and I reminded them it is their building, they pay for it and the salaries of those working in it.  People talked about how welcoming their Senator or Representatives were.  Leaders brought their communities into the State House and the State House welcomed them.

Photo by Lolita Parker Jr.

Senator Harriette Chandler of Worcester, who was introduced by North High School Sophomore Jasmine Garcia, spoke of the importance of CDCs in her district and the pride she had in sponsoring bills that strengthen resources for CDCs.  Representative Linda Dorcena Forry of Boston spoke of how CDCs build up communities including her own.  EOHHS Secretary Greg Bialecki announced that he was doubling the Small Business Technical Assistant grants for CDCs and other non-profits so their funding was secure through the end of FY11.

And yet, as the lap tops were put away, the tables broken down, and the Great Hall of Flags became a large empty space I was reminded of the power that comes from bringing community leaders into the State House to make their case. My job will be a little bit easier now as I continue to lobby on a daily basis, but more importantly, I am convinced that our event will help build momentum for passing the legislation and budget items that our members and our communities need.

Be sure to enjoy MACDC’s first ever Lobby Day video.  It was compiled and edited by MACDC’s own Jay Rosa using video shot by various folks and the photographs of Lolita Parker, Jr.

The other day I read about a new report by New York State Comptroller Thomas DiNapoli (with the help of the New York Council of Nonprofits) that found that 87 percent of nonprofit contracts with state government (of more than $50,000) were not approved prior to the nonprofits’ beginning their work. On average, new contracts were approved nine months after the contract start dates and renewals were five months late on average.  New York State is essentially relying on nonprofit organizations being so committed to their mission that they will risk their financial health to continue providing services without contracts. Indeed the entire system appears to depend on this commitment. 

The only thing about this report that might surprise CDC and non-profit leaders is the fact that a state agency finally documented the problem.  All mission-driven organizations confront this challenge all the time – how to balance money with mission. We must often complete substantial work on a project or program before receiving a fee or reimbursement and those payments rarely cover the full cost of delivering the service. Cash flow becomes a chronic challenge and organizations are unable to build up a health reserve fund. The resulting impact on fiscal health can be severe as the Non Profit Finance Fund recently documented in a report on CDC Fiscal Health that was completed as part of the Community Development Innovation Forum.  

Reversing these trends is a primary goal of the Community Development Innovation Forum. We have recently re-activated a group of stakeholders to develop recommendations for how the real estate development finance system can be reformed to better enable non-profit developers to achieve their missions in a financially sustainable manner. 

In the meantime, I have some very good news to report about a recent policy decision that moves us in the right direction. On April 6, at MACDC’s annual Lobby Day, Massachusetts Secretary of Housing and Economic Development Greg Bialecki, announced that he would forward commit $600,000 in FY 2011 funding for the small business technical assistance program so that he could double the size of recent grants to CDCs and other nonprofits and extend the term of their contracts by 6 months. By providing greater funding certainty and stability, the state will strengthen its organizational partners, promote longer term planning, enhance professional and program development and help leverage more private and federal money – without costing the state any extra money. 

 The Secretary’s announcement was in response to problems this program has had in past years when uncertainty about the state budget would cause substantial delays in the RFP and subsequent funding decisions. Groups sometimes had to wait several months into the fiscal year before learning whether they were going to be funded again and at what level.

 Secretary Bialecki’s creative solution was made possible by a generous commitment from Mass Development to provide $600,000 in funding to the program in FY 2010 and now FY 2011. Since these funds are not contingent on legislative approval of the state budget in June, the Secretary had the flexibility to think outside the box and create a solution that will benefit the state, the grantees and most importantly the small businesses that this program seeks to support. Now that is the type of Innovation that is worth celebrating!