SEATTLE – January 29, 2008 – Mayor Greg Nickels today announced a new pilot program aimed at helping Seattle families facing foreclosure keep their homes and get back on their feet.
The Foreclosure Prevention Program will combine stabilization loans, preforeclosure counseling and repayment plans to help low-income families in danger of losing their homes.
“We haven’t seen the same level of foreclosure as other cities, but the numbers are rising,” Nickels said. “Whether a family has lost a job, gotten sick or was the target of predatory lenders, our goal is to help them hang on to the home they have and avoid the terrible disruption and loss that a foreclosure can bring.”
Under the program, the city will provide a total of $200,000 through two nonprofit organizations – Solid Ground and the Urban League – for stabilization loans to low-income Seattle homeowners at risk of foreclosure. The loans, up to $5,000 each, will be coupled with counseling funded through other sources.
Rather than being forced into a sale by the mortgage holder and thus forfeiting their equity, borrowers will be allowed two options through loans and mortgage counseling. They can avoid default and work through a repayment plan to stay in their home, or gain enough time to sell their homes on their own terms.
The initial investment will assist at least 40 low-income homeowners with funds revolving over time to assist more homeowners at risk of foreclosure. To qualify for the program, household income must be below 80 percent of median. For example, a family of two earning up to approximately $48,000 would be eligible for the program; the limit is approximately $60,000 for a family of four.
Though not as severe as many areas of the country, mortgage foreclosures are on the rise locally. The foreclosure rate in King County increased 26 percent in 2007 from 2006, while the national rate increased by 75 percent during the same period.
“While Seattle is not experiencing foreclosures at the same rate as many other cities around the country, we have seen a dramatic increase in recent years,” said Cheryl Cobbs, executive director of Solid Ground. “And considering that subprime loans will continue to reset over the next several years, it is imperative that we assist struggling homeowners now while creating a program we can expand in the future if need be.”
It is estimated that a home foreclosure costs the homeowner, lender, federal government, municipal government and neighborhoods combined up to $73,000.
“Loan foreclosures have a negative impact not only on homeowners and their families, but businesses and communities alike,” said James Kelly, president and CEO of the Urban League of Metropolitan Seattle. “If we can keep individuals and families in their homes, the entire community benefits.”
A 2004 study by Freddie Mac found the combination of stabilization loans plus counseling reduces foreclosures by 80 percent among all borrowers and by 68 percent among low-to moderate-income borrowers.
Foreclosures generally can be attributed to one of two causes – the loan type, as with subprime and adjustable rate mortgages, or one-time adverse life events, such as illness or job loss. According to Freddie Mac, 43 percent of those requesting foreclosure counseling identified job loss or wage reduction as the primary cause.
While Seattle has a lower percentage of subprime mortgages than some other regions of the country, they remain a problem and are more prevalent in low-income communities and communities of color. A 2002 study found that in the Seattle metropolitan area, 40 percent of loans to African-Americans, 28 percent of loans to Hispanics, and 26 percent of loans to Native Americans were subprime.
Homeowners in need of assistance should contact Solid Ground or the Urban League directly to see if they qualify:
• Urban League: 1-800-368-1455
• Solid Ground Mortgage Hotline: (206) 694-6766
Open Monday, Wednesday and Thursday from 10:30 a.m. to 4:30 p.m. All screenings and appointments must go through the hotline. Counselors are not able to take walk-in appointments.
Visit the mayor’s Web site at www.seattle.gov/mayor. Get the mayor’s inside view on efforts to promote transportation, public safety, economic opportunity and healthy communities by signing up for The Nickels Newsletter at www.seattle.gov/mayor/newsletter_signup.htm
