Keeping families in their homes: Staving off foreclosures to prevent displacement

Wayne Meyer, President, New Jersey Community Capital

Challenge: New Jersey has the highest rate of homes in foreclosure. Many organizations, including New Jersey Community Capital (NJCC), offer financing and support for the development of affordable housing to help displaced families. But could NJCC help homeowners affected by the foreclosure crisis avoid needing affordable housing in the first place?



New Jersey Community Capital was founded in 1987 to meet the capital needs of New Jersey-based community development groups. The organization’s mission is to transform at-risk communities through strategic investments of capital and knowledge. With offices throughout New Jersey, NJCC provides innovative financing and technical assistance to critical community development efforts that strengthen neighborhoods and support low-to-moderate income populations. Since our inception, we have considered safe, healthy housing the bedrock of community development.

NJCC responded to the foreclosure crisis by launching ReStart, an innovative home preservation program, in December of 2012, with the purchase of 261 underwater mortgages split between the Newark region in New Jersey and the Tampa region in Florida. ReStart is our model for providing hundreds of families who are facing foreclosure a second chance to fulfill the dream of successful homeownership and economic stability.

The mechanics of ReStart work like this: We work with our private investors to purchase pools of distressed mortgages from Federal Housing Administration auctions at a steep discount, then offer homeowners the opportunity for one-on-one counseling and principal reduction to protect them from displacement. Meanwhile, we also work with local organizations to rehab vacant properties in the pool into affordable housing.

By the spring of 2016, we purchased 778 mortgages in Florida and New Jersey, resulting in 127 mortgage modifications. That is 127 families who are able to stay in their homes. Through the implementation of ReStart, we have learned how early intervention - foreclosure prevention and vacant property rehabilitation - can prevent negative long-term community consequences associated with concentrated vacancy, abandonment and blight.

Richard and Jacqueline are just one of ReStart’s success stories. Richard works at a delivery company and his wife, Jacqueline, teaches high school Spanish. By 2005, the couple had saved enough to buy their first home, a duplex in Linden, NJ. The economic downturn hit the family hard, landing Richard and Jacqueline in a seven-year nightmare of predatory scammers and false promises. By 2014, they were ready to cut their financial losses and sell the Linden home.

Then Richard and Jacqueline learned from a local housing counseling organization that their mortgage had been purchased through ReStart. They were eligible for a modification and their payments would drop from over $4,000 per month to under $2,500. Richard and Jacqueline made their reduced mortgage payments through the required trial period and closed on a permanent modification. It took nearly a decade, but the couple finally feels hopeful again. Most importantly, Richard and Jacqueline - with assistance from ReStart - were able to stay in their home and in their community.

While ReStart has been largely effective at keeping families in their homes, not all families who participate are successful at making lowered mortgage payments, despite intensive financial counseling. These families receive support to transition to a stable housing situation, such as a lease-to-purchase agreement in their current home or affordable rental housing.

ReStart has enabled us to keep families in their homes, stabilize communities and rehabilitate vacant properties into affordable housing, but our work is not done. We continue to acquire pools of mortgages and work on a fee-for-service basis for other mortgage pool purchasers to manage their foreclosure prevention process for them. 

Our success with ReStart in such diverse markets as New Jersey and Florida show that the program can serve as a national model for revitalizing distressed communities and jumpstarting housing markets across the country.