With the City Budget nearing completion and a July 15 sale of FHA mortgage notes by the federal government looming, time is of the essence to create and finance the Community Reinvestment Fund. As we talked about in an earlier blog post, the Community Reinvestment Fund will be used to initiate a mission-driven purchase of distressed mortgage notes in New York City communities hit hardest by the foreclosure crisis, allowing homeowners to stay in their homes while keeping properties out of the hands of private investors and real estate speculators.

Last week’s NY Daily News article about the sharp increase in completed New York foreclosures further underscores the need to establish the Community Reinvestment Fund with all due urgency. When a foreclosure is completed, the bank will attempt to sell the property at a foreclosure auction. If it does not sell, the foreclosing bank will take title to the property and attempt to sell it on the open market as “Real Estate Owned” (REO) property. According to the article, New York foreclosure auctions have increased by a striking 118 percent from last year.

As we begin to see growing numbers of foreclosed homes on the market, it is essential that we develop a community response to ensure that as many of these homes as possible remain in community hands, and not lost to big investors. Once in place, the Community Reinvestment Fund will be able to intervene before these homes ever go to auction in order to preserve them as affordable housing.

As we have seen elsewhere in the country, the alternative scenario is stark: private investors will buy up available properties with the goal of maximizing rents and profits. This activity is supported by an emerging securitization market investing in foreclosed homes and converting them to rental properties. In such a market, dominated by all-cash investors and rising prices, it is extremely difficult for lower- and moderate-income families to compete — effectively shutting them out of the market to purchase homes in their own neighborhoods. And of course, private equity and hedge fund-backed large-scale investors do not always make the greatest landlords or neighbors; many advocates have expressed concerns about their ability to maintain properties in good conditions for tenants.

Responding to New York City’s affordable housing crisis is as much about preserving lower- and middle-income homeownership opportunities as it is about building new, subsidized affordable rental units. In fact, even though they are not subject to rent stabilization like larger buildings, 2-4 family homes have historically been a source of affordable rental housing in New York City. The Community Reinvestment Fund will provide a powerful tool to ensure that lower- and middle-income homeownership has a future in New York City.

If you support keeping the homes in our middle- and lower-income neighborhoods in the hands of the community, please call or email your Council Member today and ask him or her to support the Community Restoration Fund (Foreclosure Buy-Back Initiative).