Enterprise

New law means students in country illegally now must pay out-of-state tuition

The Indianapolis Star, Aug. 31, 2011

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A new reality

Last year, students who were illegally in the country paid in-state rates at Indiana colleges.
This year, they’ll pay out-of-state rates because of a new law.

By Andrew Scoggin

She thought if she ignored it, maybe it would go away.

But after signing into her student account at Indiana University-Purdue University Indianapolis, there it was — an electronic affidavit asking Sayra Perez to verify whether she was in the country legally.

“When I saw it, it felt really bad,” said Perez, an undocumented U.S. resident who was born in Mexico and has lived here since she was 5. “It was like, oh my goodness, I can’t believe they’re really doing it.”

That affidavit will more than triple Perez’s tuition costs because she’s no longer eligible for instate rates. She’s among about 300 undocumented students — out of about 340,000 enrolled in Indiana’s seven public colleges — who have declared their status and will be required to pay the higher out-of-state rate because of changes in state law.

House Bill 1402 and Senate Bill 590, adopted in the last General Assembly, take away in-state tuition eligibility from students “not lawfully present” in the country; the Senate bill also\ eliminated any state or local aid or scholarships for these students.

The laws are necessary, supporters say, because undocumented students divert resources from legal residents.

With college classes starting up this week across Indiana, it’s now adjustment time not only for undocumented students such as Perez, but for the universities as well. For some state colleges — particularly Indiana University and Ivy Tech Community College, which previously allowed undocumented students to pay in-state tuition — it means making changes to their policies.

For undocumented students, it means figuring out a way to pay tuition rates significantly higher

than what they paid last year.

“Considering that a lot of these kids are first-generation college kids, even paying in-state tuition is a problem for some,” said IU-Bloomington spokesman Mark Land. “These kids are being put in a challenging spot.”

Indiana is one of six states, and the most recent, to bar undocumented students from getting the resident tuition rate. Others include Arizona, a state known for its strict anti-immigration laws.

Twelve states, including Texas, California and Illinois, allow undocumented students to get instate tuition under certain requirements, such as graduation from a state high school and a certain number of years of residence in the state.

The rest don’t have laws specifically mentioning tuition for undocumented students, although a 1996 federal law generally prohibits states from allowing them to pay in-state rates. However, that position has been weakened by court rulings declined for review by the U.S. Supreme Court.

Ann Morse, director of the Immigrant Policy Project with the National Conference of State Legislatures, said legislative supporters of undocumented students often argue that the state has already made an investment in the student and should continue to do so. All children are eligible for a K-12 education, regardless of legal status, according to a 1982 Supreme Court decision.

On the other side, Morse said, opponents say undocumented students take open spots and financial aid away from U.S. citizens. Undocumented students are not eligible for federal financial aid, according to federal law.

Rep. Mike Karickhoff, R-Kokomo, was a co-sponsor of the House bill that took away in-state tuition eligibility from undocumented students. He cited the example of his son-in-law, originally from Costa Rica, who paid out-of-state costs to go to Purdue.

“There are kids in our state that want to go to college,” Karickhoff said. “The resources are limited. They should have to be a legal resident of the state.”

Indiana, with a population of about 6.4 million, was home to an estimated 120,000 illegal immigrants as of 2009, according to the Pew Hispanic Center. That’s out of an estimated 11.1 million nationally.

Before the immigration laws went into effect July 1, Indiana’s seven public colleges had been left to make their own judgments about in-state tuition eligibility requirements.

Under certain stipulations, IU, Ivy Tech, the University of Southern Indiana and Vincennes University allowed undocumented students to get resident-rate tuition.

Purdue, Ball State University and Indiana State University did not.

In the past, IU required students to establish Indiana residency for at least a year to receive the in-state rate, regardless of legal status, Land said.

IU now requires students to sign an online affidavit, under penalty of perjury, as to whether they are in the country legally. Purdue and Ivy Tech are also using their student portals to verify students’ status.

Of about 100,000 students in the IU system, an estimated 100 have declared themselves as undocumented so far, Land said. For those students, that’s a difference of about $20,000 in tuition payments a year.

“The presumption is that people understand the penalty for not telling the truth, and they’ll do the right thing,” Land said. “And that’s what we’re counting on.”

Students do not have to provide any documentation on the affidavit at Indiana, nor do the about 120,000 students on Ivy Tech’s campuses statewide.

Land said IU would not go “searching for people.”

“We’re not immigration agents. We’re not the police,” he said. “If it had been brought to our attention that someone had lied . . . then we would take the appropriate action.”

Erick Gama, an undocumented IU-Bloomington junior from Indianapolis, understood the risk. He signed the affidavit, declaring himself as undocumented.

After all, the 20-year-old already had a misdemeanor on his record. He was one of five students arrested in May while protesting the new immigration laws at the Indiana Statehouse.

Erick and his twin brother, Uriel, will go part time for at least the fall to save money. Erick said his parents are trying to sell their house so the brothers can go full time again, allowing Erick to finish his interior design degree by May 2013.

“We’re going to get a degree; we’re going to graduate. What do we do after?” Erick said. “We can’t really work.”

Perez, who paid her way through her freshman year at IUPUI working a fast-food job, also faces much higher costs. Last year, her tuition bill for a full class load was $3,200; this year she will pay about $4,500, taking only two classes.

“I just want to go to school; is that that bad?” said Perez, who also was arrested at the Statehouse protest. “Do you know how many kids don’t want to go to school?”

But college students born in the U.S. also strain to pay for school. Emily Alford, 19, Pleasant View, took out about $16,000 in loans last school year.

“Everybody should have an education, but there are those struggling like me,” said Alford, an IU-Bloomington sophomore. “I feel like saying it should all be fair is immature, but helping out those who . . . pay their taxes and are citizens should come first.”

Perez would remind detractors that her family does contribute to the tax base. Her mom, who has a visa and is in the country legally, owns their house and pays property taxes, Perez said.

“It just feels really bad that there are people who think that we don’t deserve to be here,” Perez said. “It’s not like that. I have a job; I pay taxes.”

It’s too late for Perez to return to Mexico, she said. It’d be a whole different world from when she was 5 years old.

The DREAM Act, an acronym for Development, Relief and Education for Alien Minors, would\ provide a path to citizenship for students like Perez. The bill was introduced in 2001 and was most recently reintroduced in May in the U.S. Senate.

For now, Perez will work her $7.50-an-hour job to go toward paying for her biochemistry degree.

Perez’s mother helps her pay for some of the costs, though her mom also doesn’t see the point — she’ll have a hard time getting a job without legal status, after all.

Still, Perez said, she has dreams.

“I want to make my mom proud.” Perez said. “I want to show her it was worth it. I don’t want to let myself down.”

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Trapped: Mobility among homeowners slows

HousingWire Magazine, April 2012

Trapped – Mobility among homeowners slows

By Andrew Scoggin

Here’s the blueprint.

Get married; buy a house. Have a few kids; get bigger house. Watch kids leave; move into a smaller place and maybe retire in the process.

Matt Torricelli, 51, followed that timeline, like so many others did and even more hope to do. He married his wife, Tiliana, and shortly thereafter bought his first house. Then they moved from Pasadena, Calif., to northern Los Angeles County to raise their two children.

With their children now 23 and 17, Torricelli is looking to downsize from a four-bedroom, three-bath home to something smaller.

Just one caveat — he hasn’t found a buyer since putting the house on the market in early November.

“It’s bad timing for us,” Torricelli said. “We’ve already had to drop the price a couple times. We’re not getting a lot of showings.”

Torricelli joins an increasing number of people staying put, whether they’re underwater or simply waiting for the housing market to recover. But these Americans, specifically repeat buyers, make up a much bigger portion of the home-purchasing populace than do first-time purchasers.

Problem is, housing policy hasn’t really addressed repeat buyers, according to Geoff Smith, executive director of the housing institute at DePaul University.

“If you’re talking about strategies to help the market recover, that’ll be one aspect of the broader market,” Smith said. “At some point, you also have to look at the demand side, and I think right now demand is being driven by first-time homebuyers.”

THE REPEAT BUYER

Of the 78% of home sales considered primary residences from July 2010 to June 2011, repeat buyers made up 63%, according to the National Association of Realtors. Spokesman Walt Molony said that level remains consistent since 2003, aside from the tax-credit surge of first-time homebuyers in 2009 and 2010.

The best way to identify move-up or repeat buyers focuses on where they are in their life cycle, Smith said, rather than trying to identify by price level. He said this “housing arc” links with that common thread of family size and aging, a broad brush of the typical middle-class experience.

But much of the attention, especially regarding federal and state policy, mostly ignores these people caught in the middle of that process, DePaul’s Smith said. Too much focus is put on the supply side of the housing equation, particularly how to best deal with a continued influx of distressed and real estate owned properties. That includes any discussions involving REO-to-rental programs.

NEW COMPLICATIONS

Repeat buyers who already have a home have a trickier time getting back on the market. The next home purchase is now a step complicated by real estate realities, according to Los Angeles real estate broker Stephen Shapiro. Formerly, homeowners assumed the built-up equity and subsequent sale of a property would allow another, more expensive purchase.

“Unless you bought your house a long time ago, it’s not worth more than what you paid 2005 onward,” Shapiro said.

What’s not appreciated “is the extent to which people are going to hold onto their homes longer,” said Gary Painter, a real estate professor at the University of Southern California. Lower inventory levels reflect as much, which he said further limits housing choices for repeat buyers, who are unlikely to purchase foreclosed properties.

“I think a lot of people are just waiting to see how the market will recover,” Painter said.

Other evidence shows Americans are becoming increasingly immobile, and it has nothing to do with their exercise habits.

Fewer people moved last year than since the U.S. Census Bureau started measuring geographic mobility after World War II. Just 11.6% of U.S. citizens changed residences in 2011, with the 35 million movers at levels seen in the early 1960s.

William Frey, a senior fellow at the Brookings Institution, said this trend continues a long-term decline in mobility caused by an aging population, as he said younger people, mostly those 18 to 25, make up roughly 40% of the mobile population.

But Frey, also a professor in population studies at the University of Michigan, said the housing and economic crises exacerbated the slowdown, with people drowning in debt. Underwater homeowners — numbering about 11.1 million in the fourth quarter— account for nearly 23% of all mortgaged properties, according to CoreLogic.

“People aren’t able to finance a home where they’re able to find a job,” Frey said. “It’s not easy for them to move. It’s not easy to buy a home later.”

The housing bubble that’s trapped so many homeowners also drove migration patterns in certain areas, Frey said. Huge population growth in places like Las Vegas and Phoenix, motivated in part by housing availability, helped to drive the local economy. The population of those two metropolitan areas rose 24.8% and 28.9%, respectively, from 2000 to 2010, according to census data.

The subsequent housing collapse continued to affect mobility nationally, albeit in a different way. The historic rise in foreclosures likely contributed to a slight uptick in the number of people who moved, Frey said. It hit a previous low of 11.9% of the population in 2008 before climbing to 12.5% in both 2009 and 2010.

Neal Weichel, a real estate agent outside Los Angeles, said when clients come to him to sell a house, 90% of the time it’s based on necessity or a strong desire to leave.

“Either they really, really want to move, or they have to move,” Weichel said. “It’s not the people who say, ‘A bigger house would be nice.’

PROSPECTIVE BUYERS

Lenders, it would seem, are looking to better identify potential movers, a sort of targeted marketing more associated with social media companies and huge search engines.

Researchers at San Diego-based DataQuick are working on a new measure to figure out when someone might look to upgrade, or downsize, from their current home. Randy Wussler, a vice president at the data firm who heads many of its projects, said the company always looks for new trends and ways to make their database more digestible.

He said client demand drove the new project.

“What they’re looking for is, what are those tipping points?” Wussler said. “Every time we’ve gotten into this conversation, it’s for business development. They’re looking for leads.”

Many triggers could push someone to make a move, Wussler said, as well as different combinations of those events. A newborn baby could elicit a home purchase, though hindrances like bad credit and loan-to-value ratios could also prevent one.

Wussler said he’d like to tell clients which households, by the number of bedrooms and baths, to target for an upcoming move. But DataQuick’s property database can’t do all the work required, he said.

“It’s a good place to start, but we can’t do it on our own,” Wussler said. “We’ve got to go beyond what we do normally.”

That includes partnering with demographic databases and consumer credit companies to parse out people unqualified under tightened lending standards. Wussler said DataQuick finalized an agreement with credit bureau TransUnion, but not yet with any demographic firms.

The new measure was in its preliminary stages in late February, with a target launch sometime this spring.

“Anything you can do to get things going and move things along faster, the better off we’re going to be,” Wussler said. “The fact that we’re not there … maybe the folks that have the ability to move up don’t have the inclination.”

ANOTHER OPTION

Instead, some homeowners redirect that inclination toward their current dwelling.

In late 2011, a home-remodeling index compiled by Buildfax hit the highest point since its inception seven years earlier. Joe Emison, vice president of research and development, said Buildfax gathers permit data from major metropolitan areas.

Not all projects get permits, and some states require multiple permits for one project, Emison said, so instead the company tracks the number of projects under way.

Emison cautions the Buildfax index isn’t macroeconomic, but as people stay in their homes for longer, more seem to be making renovations to their current home instead of leaving for a new property.

“That avenue (to move) has really shut down for many people,” Emison said. “What we see with the rise in remodeling, we see our economy is starting to recover.”

People aren’t spending quite as much as during the housing bubble, Emison said, despite the increase in projects. The average spending amount on these undertakings has fallen to roughly $11,000 from a high of $12,600 in 2006.

The composition of remodeling projects changed as well. Bathroom projects nearly doubled as percentage of all projects, to 16% from 8.1%, since 2006, with a similar uptick in garage remodeling to 15.5% from 8.9%.

There’s a baseline of remodeling that naturally has to happen as a house ages, Emison said, regardless of any economic downturns.

“People need to do that type of repair, and they do find the money to do that,” he said.

Emison said some look to the Buildfax index as a predictor of sorts for home improvement stocks, such as Home Depot and Lowe’s. The two companies’ stocks have risen 29% and 10%, respectively, over the past 12 months. Profit at the companies rose 32% and 13% in the fourth quarter.

WHEN’S THE TURNAROUND?

A lack of confidence, inaccessibility to credit and depreciated home prices don’t mean people have changed their minds about homeownership, DePaul’s Smith said.

“That path is still the goal for most people,” Smith said. “I’m not so convinced that

there’s a huge cultural shift.”

Instead people are stuck in their respective place in the housing lifecycle or have opted out of it for now. Young adults, uncertain of their resale options, might decide to rent instead of buying their first home, Smith said.

Eventually, USC’s Painter said some homeowners will simply move and take their losses on their present home.

That’s Torricelli, the down-on-his-luck seller, who already cut the sale price on his home to $650,000, below the $680,000 he paid just two years earlier. He thinks he’ll eventually get a buyer, but he and his family may need to wait it out a bit longer.

“I don’t even want to think about if I’ve got to lower it again,” Torricelli said. “I just want to get the thing sold and get out of there.”

Continued job growth could also trigger people to move, Painter said. When people move longer distances, most commonly it’s because of newfound employment, according to the Census Bureau.

“Once that happens, you’ll start to see the market churn a little bit more,” Painter said.

Frey said as the financial industry and job market clear up, that’ll likely open the door to more movement. The all-time-low geographic mobility rates don’t signal the end of American migration, Frey said.

“We have a history of being a mobile country,” Frey said. “That’s still part of making your way in the world is moving, and I think that’s going to happen again.”

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The Blight Fight

HousingWire Magazine, June 2012

The Blight Fight

By Andrew Scoggin

 

The quaint house on Idaho Avenue hadn’t changed much since Frances Espinoza last saw it.

The grass in the small front yard wasn’t quite overgrown, but still unkempt. A tan, out-of-place piece of siding patched the outside wall beneath the left-front window, and a cluster of roofing shingles did the same under another window on the right.

Cracks in the white paint revealed the ash-colored, wooden skeleton of the house.

“They haven’t really done anything to it,” Espinoza said. “You can see there’s a lot of problems.”

“They” meaning mortgage servicers.

The industry has long known of problems with vacancy and blight, even before the latest housing collapse. Behind-the-scenes responses — including code enforcement and neighborhood outreach — have met varying degrees of success. Yet the NFHA’s recent complaints bring new, unflattering attention to the issue.

Problems with vacant homes are epidemic in many cities’ minority neighborhoods, the NFHA said. After roughly nine months inspecting 1,000 homes, the NFHA said it found homes located in predominantly minority neighborhood weren’t in as good of shape or marketed as well as those in mostly white neighborhoods.

“It’s the same pattern,” NFHA CEO Shanna Smith said. “You find that they don’t put for sale signs up in communities of color. They’re not maintaining the lawn, cleaning the trash.”

But many within the mortgage and housing industry contest the NFHA’s findings, saying they make don’t make decisions of whether to clean up or repair a property based solely upon where it’s located.

The NFHA accused Wells Fargo and U.S. Bancorp, through Department of Housing and Urban Development complaints, of discriminatory practices in their maintenance of real estate owned properties — complaints of wrongdoing that both Wells and U.S. Bancorp strongly deny. The NFHA said more complaints could come against other mortgage servicers and property managers, as part of an investigation funded by Fannie Mae and HUD grants.

The dilemma of managing vacant REO properties puzzles and presents problems for many, including the asset holders.
“The banks and servicers are looking for answers, too,” said Cary Sternberg, a senior vice president at Bank of America, though not speaking on behalf of the company. “But the answers have to be reasonable, and the answers have to make financial sense along with upholding their community responsibilities.”

THE INDUSTRY REACTS

For their part, the NFHA’s Smith said her group wanted to use this study and the HUD discrimination complaints, under the Fair Housing Act, as a way to get Wells Fargo and U.S. Bancorp to the table, regardless of whether the alleged discrimination is intentional. A complaint simply means HUD will investigate the dispute, and the two parties will sit down for talks to try and reconcile any allegations.

If that process fails, HUD may choose to file a lawsuit, or the NFHA could sue on its own.

“If somebody wants to fight, that’s fine,” Smith said. “That could take years to get a solution, and it’s just better for the neighborhood if we could get something done quickly.”

Spokespeople for Wells Fargo and U.S. Bancorp said the companies hadn’t yet received specific information on which of their properties were involved in the NFHA study.

“We don’t have a good sense of exactly what it is that we’re dealing with,” Wells Fargo spokesman Tom Goyda said. “It’s really impossible to respond specifically to this point.”

Both banks also point to their frequent status as a trustee on a loan that has been pooled and sold into a mortgage security. In these cases, the banks said the responsibility to maintain a foreclosed, vacant property would fall on someone else — typically the mortgage servicer responsible for managing the loan. But neither said race or location are taken into account when they make decisions regarding property maintenance.

The NFHA left open that possibility in its report.

“Wells Fargo conducts all lending and servicing activities in a fair and consistent manner, without regard to race,” Wells spokesman Goyda said.

Others in the industry responded similarly. Alan Jaffa, CEO of Safeguard Properties, said the property preservation company doesn’t discriminate in its practices. He said Safeguard wouldn’t work with a company that would attempt to instruct them to ignore or neglect certain neighborhoods.

Freddie Mac, meanwhile, said it doesn’t have preservation and marketing policies that apply to some neighborhoods and not others. “A lot of people always ask, ‘So how do you decide when to repair a home?'” said Eric Will, who directs REO sales for Freddie Mac’s HomeSteps program. “We don’t have any blanket policies that say, in this neighborhood, we don’t do repairs.”

DISPARATE IMPACT CLAIMS

Discrimination, on its surface, has a sharp social connotation. It suggests a conscious decision made to undercut someone based on their race, ethnicity or other characteristics.

“In my experience, it’s never blatant like that,” said Espinoza of the North Texas Fair Housing Center.

Legally speaking, “blatant” discrimination is characterized as so-called disparate treatment, wherein someone deliberately discriminates against another party. But in a disparate impact claim—such as that alleged by the NFHA—a plaintiff can claim discrimination even when there’s no intent to discriminate, according to Chris Willis, a lawyer with Ballard Spahr.

Willis, who represents lenders in consumer financial services cases, said policies can be race neutral on the surface, but can still have an unintentded, unequal impact on parts of the population. Apartment landlords made this argument recently in a lawsuit against the city of St. Paul, Minn., after ramped-up code enforcement regulations drove rents higher at affordable housing complexes.

The new regulations, landlords argued, crowded out low-income and minority tenants. The case made it all the way to the U.S. Supreme Court, but the city dropped its appeal because it feared a decision in its favor could undermine civil rights.
Ballard Spahr’s Willis called the NFHA’s REO claim novel, but thought it might make for a difficult fair housing argument.

“I would say that’s a little bit of a stretch,” Willis said.

Undaunted, the NFHA’s Smith said the maintenance of only certain properties does fall under the Fair Housing Act. Failing to maintain a vacant property not only impacts the value of the home next door, but could also endanger the tax base in the area, meaning schools and other property-tax-supported services could suffer, she said.

THE NFHA INVESTIGATION

The housing crisis has clearly taken its toll on the nation’s minority populations. In a study by the Center for Responsible Lending, researchers found that Latino and African-American borrowers are twice as likely to have lost their home to foreclosure than whites. And even among good-credit borrowers, blacks and Latinos were three times as likely to receive a subprime loan between 2004 and 2008.

Bank of America, acting on behalf of defunct lender Countrywide, paid $335 million late last year to settle a Justice Department lawsuit regarding discriminatory lending practices.

In nearly every city the NFHA looked at for its own vacant property maintenance study, it said African-American and Latino neighborhoods scored lower than white neighborhoods, findings that the NFHA said remained even among newer properties.
In Dallas, the house on Idaho Avenue, in a mostly African-American community, received a score of 75—deemed a “C” and slightly above the average 74.1 rating for all similar neighborhoods in the city. (Neighborhoods were rated on a 100-point scale.)

It’s unclear what exactly happened to the home and when it became vacant in a state largely known within the mortgage industry for its speedy foreclosure process. Dallas County records show that the deed on the house transferred from an individual owner to Bank of America Home Loans Servicing on May 17, 2010. The home came under the auspices of HUD on March 14, 2012, according to an agency spokesman.

Bonnie Jones, who has lived next door to the Idaho Avenue property since 1992, guessed the home had sat vacant since sometime in 2009. The last owner, the 81-year-old said, stripped the house of much of its valuables when he left, taking bathroom fixtures, the air conditioner and even the flowers outside.

The property had also deteriorated considerably since it became vacant. The lining on some windows had rotted beneath the black, iron bars that covered them. A pole in the middle of the front yard lacked the lamp that formerly sat atop it.

SENSITIVITIES EXPLAINED

Banks and mortgage servicers have more than just a civic duty to do right, said Sternberg, a long-time asset manager for mortgage servicers. They have to strike a balance between that and their responsibility to their stockholders and investors, inevitably concerned only about the corporate bottom line.

The NFHA has “one agenda, and that’s not to say the agenda is bad,” Sternberg said. “The issues that are involved are very sensitive.”

In certain situations, if an REO property is located in an area with a high vandalism risk, Sternberg said it might make more sense not to make a repair. That to him isn’t a case of disparate impact, but rather sound business logic.

“It doesn’t make sense to continually fix a window to have it broken [again],” Sternberg said.

Blight leads to further problems, and not just for the neighbors. Properties become a tougher sell and are harder to keep up to code according to Eric Miller, executive director of the National Association of Mortgage Field Services, an industry trade group.

Ultimately the neighborhood a property is located in comes along with any home purchase, Miller said. And with 18.5 million vacant homes nationwide, according to the Census Bureau, odds are pretty good that many neighborhoods across the U.S. have multiple vacant homes.

“If there are other properties that are blighted in that area … that investment could be potentially watered down,” Miller said. “There are certain areas you’re not going to prevent damage from occurring.”

That makes it increasingly important to maintain a relationship with a local city’s code enforcement team, said Rob Behrend, head of REO sales for Homeward Residential, formerly American Home Mortgage Servicing. The code officer’s uncertainty over the home’s actual servicer can delay needed repairs.

“That code violation could take a month before it gets to me,” Behrend said.

Often county or city records give the wrong contact information, a common complaint from code officials, according to Michael Halpern, director of community initiatives at Safeguard. Vendors, including Safeguard, offer access to a liaison system that facilitates contact between servicers and local municipalities.

The goal, Halpern said, is to maintain full transparency on both ends. He said Safeguard is even trying to reach out directly to elected officials.

But vandalism isn’t a just problem in blighted neighborhoods, Freddie Mac’s Eric Will said. He said in at least one suburb, people targeted the government-sponsored enterprise’s homes and stole heating and air-conditioning units.

In some communities, with consultation from brokers, Will said Freddie Mac will avoid posting signs on a vacant home in the hopes of deterring would-be burglars.

“You don’t have to be concerned about vandalism just in inner-city, urban neighborhoods,” Will said.

Low-value homes can also present an economic quandary, according to Sternberg. With the cost of repairs needed to bring an REO property up to a lendable standard, the margin might not be enough to outpace the lower sale price if sold as-is to an investor.
From an economic perspective, it can be hard to fault a lender for making a decision to leave a property as-is, said Brian Hurley, president at New Vista Asset Management. The company promotes homeownership for minorities, as well as households with low-to-moderate incomes.

Hurley said if no one makes an investment in blighted neighborhoods — which often have strong racial and ethnic correlations — the ruin doubles upon itself. Most people, he said, understand the long-term costs of this process.

“Someone has to be accountable to step up to the plate and say, ‘I’m going to stop the cycle,'” Hurley said. “I think institutions understand that there is a great desire on the part of America at large to see them do the right thing.”

FREDDIE SETS AN EXAMPLE

The National Fair Housing Alliance’s complaints of disparate impact hinge, in part, on whether it can demonstrate other practices can achieve the same business ends, Willis, the lawyer, said.

But many of the changes companies could make are already in place elsewhere, the NFHA said, often citing Freddie Mac as a good example in its investigation. The mortgage giant has developed a mutual relationship of sorts with the NFHA, trading information back and forth.

“We want our homes to look as good or better than other homes in the neighborhood,” Freddie Mac’s Will said. “Our goal is not to sell homes at deep discounts because that hurts communities.”

A number of measures, Will said, can help stave off REO blight. Freddie prefers to contract with local vendors in the community, he said, and give them authority to make emergency repairs — even without prior consent from Freddie Mac itself.

The GSE also wants its listing brokers to make a point of reaching out to neighbors, typically posting contact info in case of a problem with the property.

“I don’t think these things are necessarily rocket science,” Freddie Mac’s Will said. “It’s about effectively managing your portfolio of loans.”

Of course, Freddie’s biggest investors — the federal government and the American taxpayer — might have different priorities than those of large, public financial institutions. But Sternberg said no lender or servicer would ever tell a preservation vendor not to keep a house up to code.

“I just don’t believe that there’s any bank or servicer in the country that’s knowingly doing that,” Sternberg said. “They’re doing everything to be a good citizen with the constraints that they have.”

Pure, bottom-line economics don’t always translate to homeownership on the other end of an REO sale. Community advocates, like the NFHA, would prefer to see a home go to an owner-occupant, as ownership rates fall to pre-bubble lows.

The declining trend in homeownership has been especially tough for African-American and Latino households, according to Census Bureau data. While roughly 73.5% of white households owned a home in the first quarter of 2012, blacks and Latinos saw significantly lower shares of 43.1% and 46.3%, respectively.

Add that onto the adverse effect of the housing crisis and lost equity on minority populations’ wealth. Pew Research Center reported median wealth fell by more than half for African-American and Latino households from 2005 to 2009, but dropped by just 15% among whites.

Household wealth, particularly in middle-income, minority communities, is dominated by families’ investment in their homes, New Vista’s Hurley said.

The NFHA’s investigation frequently cited what it believes is a lessened effort to actively market REO properties in minority neighborhoods, making fewer homes available for possible owners.

“We don’t want to have our communities devastated by absentee landlords, absentee investors who are not taking care of the home,” NFHA’s Smith said.

Back in Dallas, however, luck changed for the home on Idaho Avenue. Shortly after HUD took it over, a for-sale sign appeared in the front yard.

“This is the first time anybody’s taken interest in it since it became vacant,” said Bonnie Jones, the next-door neighbor.
At an asking price of $20,000, Bonita Foucher, the listing agent, received a number of inquiries on the home. Within three weeks, she got a signed contract.

Foucher said she couldn’t say much about the buyer, other than that it’s an owner-occupant like most of the other homes up and down Idaho Avenue.

“We used to have all-time highs for homeownership for Latinos and African- Americans and whites,” Smith said. “If we’re going to start a recovery, we need to have properties in good shape.”

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