This is the true story of a rental property in Newark, a nice house that had two nice tenants. Today it's vacant, in need of a total rehabilitation and stands as a monument to the subprime mortgage crisis.
In 2001, this house was an abandoned two-family that was foreclosed, and ultimately title was transferred from the lender to the US Department of Housing And Urban Development (HUD). (We can assume this happened because the foreclosed mortgage was originally bought through a government-backed program with the Federal Housing Administration).
HUD sold the property to an individual that rehabilitated it. That owner did a good job, making this house that was built in the early 1950's into a modern, comfortable affordable rental property, The house traded hands two more times, with the price increasing until the last owner paid $300,000. That last owner financed the purchase through a subprime mortgage, obtained through a mortgage broker. Ultimately the owner could not afford the mortgage and the property was foreclosed by the lender.
In November of 2007, I met the tenants of this property in the Water and Sewer Department office in Newark City Hall. It turned out that these two women were single moms who received Section 8 rental assistance. They were paying their portion of their rent to the water department so that the water would not be turned off. After the foreclosure, the new owners had not taken any steps to manage the property.
After talking with these ladies, I learned that they liked living in the house, like being neighbors and the one woman would be interested in buying the building. There are special programs that allow Section 8 vouchers to be used toward the purchase of a home.
I wrote to the attorney that handled the foreclosure for the lender to suggest the following:
· We would interview this woman to see if she would qualify for a mortgage and how much she could afford to pay for the property;
· We would run her through our first time home buyer and landlord courses (we are a HUD certified housing counseling agency); and
· We would work with the buyer from contract to loan commitment to closing.
At that time, we estimated that she could comfortably afford a purchase price of $250,000. I never received any response on our proposal.
The tenants ultimately vacated the building, which was left improperly secured. Vandals broke in to the building, and it now needs a complete rehabilitation. The property was listed for approximately $89,000. It went under contract at no more than that amount. After the manager, broker and attorney get paid, the lender will be lucky to realize $80,000.
A loss of approximately $165,000 to the lender, not including the lost interest payments from the unnecessary six month delay. A loss of a secure home for two women who could have successfully transitioned to homeownership. A loss to the neighborhood of a stable, well-maintained property.
No happy ending here.
In 2001, this house was an abandoned two-family that was foreclosed, and ultimately title was transferred from the lender to the US Department of Housing And Urban Development (HUD). (We can assume this happened because the foreclosed mortgage was originally bought through a government-backed program with the Federal Housing Administration).
HUD sold the property to an individual that rehabilitated it. That owner did a good job, making this house that was built in the early 1950's into a modern, comfortable affordable rental property, The house traded hands two more times, with the price increasing until the last owner paid $300,000. That last owner financed the purchase through a subprime mortgage, obtained through a mortgage broker. Ultimately the owner could not afford the mortgage and the property was foreclosed by the lender.
In November of 2007, I met the tenants of this property in the Water and Sewer Department office in Newark City Hall. It turned out that these two women were single moms who received Section 8 rental assistance. They were paying their portion of their rent to the water department so that the water would not be turned off. After the foreclosure, the new owners had not taken any steps to manage the property.
After talking with these ladies, I learned that they liked living in the house, like being neighbors and the one woman would be interested in buying the building. There are special programs that allow Section 8 vouchers to be used toward the purchase of a home.
I wrote to the attorney that handled the foreclosure for the lender to suggest the following:
· We would interview this woman to see if she would qualify for a mortgage and how much she could afford to pay for the property;
· We would run her through our first time home buyer and landlord courses (we are a HUD certified housing counseling agency); and
· We would work with the buyer from contract to loan commitment to closing.
At that time, we estimated that she could comfortably afford a purchase price of $250,000. I never received any response on our proposal.
The tenants ultimately vacated the building, which was left improperly secured. Vandals broke in to the building, and it now needs a complete rehabilitation. The property was listed for approximately $89,000. It went under contract at no more than that amount. After the manager, broker and attorney get paid, the lender will be lucky to realize $80,000.
A loss of approximately $165,000 to the lender, not including the lost interest payments from the unnecessary six month delay. A loss of a secure home for two women who could have successfully transitioned to homeownership. A loss to the neighborhood of a stable, well-maintained property.
No happy ending here.