Title
Resolution to Approve Contracts with the Housing Bureau for Seniors and the Washtenaw County Treasurer for a Mortgage and Tax Foreclosure Revolving Loan Fund ($80,000.00 General Fund Reserves, $10,000.00 AAHTF) (8 Votes Required)
Memorandum
The Office of Community Development (OCD) is requesting that City Council approve $15,000 in FY 09 General Fund Reserves and $10,000 in FY 09 Ann Arbor Housing Trust Funds to the Housing Bureau for Seniors for a Mortgage and Tax Foreclosure Revolving Loan Fund and $65,000 in FY 09 General Fund Reserves for a Mortgage Counselor. The OCD is collaborating with the Tax and Mortgage Foreclosure Taskforce which includes the Washtenaw County Treasurer's Office, Legal Services of South Central Michigan, MSU Extension, the Housing Bureau for Seniors and numerous other local non-profits, private lenders and realtors to address the current mortgage foreclosure crisis.
On February 19, 2008 City Council approved a resolution (R-08-0092) to allocate funds to Legal Services of South Central Michigan and the Washtenaw County Treasurer as described below. MSU Extension will continue to house the Mortgage Counselor, however, the Washtenaw County Treasurer's office will be the employer to minimize the administrative burden on MSU Extension.
Washtenaw County had 1,433 mortgage foreclosure first insertions in the legal news and 703 sheriff's sales in 2006, and 2,194 first insertions and 1,151 sheriff's sales in 2007. Michigan has one of the highest foreclosure rates in the nation. Fannie Mae has written off a greater volume of loans in Michigan than any other state. As homes are vacated and people move out of state, the housing values drop. The tax impact on local municipalities is dramatic. Since 1996, Washtenaw County's annual taxable value growth has been 5% to over 8%. The 2008 taxable value growth is expected to be 0% or negative. The City's 2008 taxable value is also expected to stagnate at 0%. In 2007, 40% of the mortgage foreclosure first insertions were also tax delinquent.
Michigan communities that have studied the impact of mortgage foreclosure have found that foreclosed homes cost between $22,000 to $258,000 to the community. A foreclosed home costs the homeowner, the lien holder, the municipality and the neighborhood housing values. They have also shown that it only costs $670 to $1,435 dollars to save a home through programs like the one in Washtenaw County.
Ann Arbor does not have a comprehensive response to the mortgage foreclosure problem, but does work with low-income homeowners on utility shut-off grants and payment plans, poverty tax exemptions, annexation fee waivers, and homeowner loans for sidewalk repairs and housing rehabilitation.
The Foreclosure Taskforce members provide education, counseling, advocacy, legal services and emergency loan services (see attached list of activities). The community need is overwhelming the capacity of these agencies. In 2007, the County Treasurer, Legal Services, MSU Extension and the Housing Bureau for Seniors spent over $542,000 on mortgage foreclosure prevention and intervention activities. In July 2007, the OCD worked with the County Treasurer and County Board of Commissioners to create a more comprehensive program to address mortgage foreclosures and created a new position of Mortgage Counselor housed at MSU Extension and paid for by the County as well as a revolving loan fund. The County Treasurer is also approaching private lenders, MSHDA and municipalities to provide funding to increase the capacity of these services. As additional funds are secured, additional counselors will be hired to meet the demand.
The OCD is requesting City Council approval of $160,000 in support of these services. The funding will be a combination of City General funds and Ann Arbor Housing Trust Funds from the current fiscal year and FY 09. The following budget is proposed to increase this capacity:
Intake Services Treasurer $20,000 FY 08 General Fund Reserves
Legal Services LSSCM $40,000 FY 08 AAHTF
Education & Supplies Treasurer $10,000 FY 08 AAHTF
Mortgage Counselor MSU/Treas $65,000 FY 09 General Fund Reserves
Revolving Loan Fund HBS $15,000 FY 09 General Fund Reserves
Revolving Loan Fund HBS $10,000 FY 09 AAHTF
TOTAL $160,000
The Intake Services will be supervised and housed at the Washtenaw County Treasurer's office. The services will primarily be provided by University social work interns. The additional Mortgage Counselor will be housed at MSU Extension as a County employee and will work one-on-one with residents. The revolving loan fund will be used to help people who are in a crisis, but have the ability to keep up with their loan payments after a work-out plan. It is important to note that the City has contributed funds to a tax foreclosure revolving loan fund at the Housing Bureau for Seniors for over 20 years. Legal Services of South Central Michigan will provide legal advocacy and loan reviews to residents. The Education and Supplies budget will be used for marketing, education, printed materials and travel expenses.
The Office of Community Development will be evaluating the impact of these services over the next year and is requesting that Council budget a second year of funding for FY 10 that mirrors the budget above. A separate resolution will be sent in FY 10 budget with updated statistics and financial information.
On January 22, 2008, the Housing and Human Services Advisory Board reviewed and recommended Council approval of $195,000 to support the services above using City general funds. After reviewing the budget with Councilmember's Greden, Rapundalo and Teall, the budget was revised to $160,000.
The Office of Community Development recommends Council approval of $25,000 to the Housing Bureau for Seniors and $65,000 to the Washtenaw County Treasurers Office for mortgage foreclosure prevention and intervention services for FY 09.
Staff
Prepared by: Jennifer Hall, Housing Manager
Mary Jo Callan, Community Development Director
Reviewed by: Jayne Miller, Community Services Administrator
Body
Whereas, Mortgage foreclosures are a serious and growing problem in all parts of Washtenaw County, including the City of Ann Arbor;
Whereas, Mortgage foreclosures have increased from 1,433 in 2006 to 2,194 in 2007 in Washtenaw County;
Whereas, Mortgage foreclosures in the City of Ann Arbor average about 20 per month;
Whereas, Twenty-seven percent of the mortgage foreclosures initiated in Washtenaw County, in which it was possible to establish an age, were individuals aged 55 and older;
Whereas, Mortgage foreclosures have been driven historically by individual setbacks such as job loss or illness;
Whereas, Mortgage foreclosures are now exacerbated by increasing rates of lending practices which put homeowners in unaffordable or inappropriate loan products;
Whereas, The current real estate market has limited the viability of selling one's property to avoid foreclosure;
Whereas, Mortgage foreclosure can lead directly to homelessness for the former owner and family members;
Whereas, Foreclosed properties often sit vacant and are at higher risk for arson, vandalism and other crime;
Whereas, Foreclosures depress property values for neighbors and communities and ultimately reduce assessed values and property tax revenue;
Whereas, There is an urgent need for individual mortgage foreclosure prevention counseling and intervention and community financial literacy education;
Whereas, The Washtenaw County Treasurer's office in collaboration with the Office of Community Development, MSU Extension, Legal Services of South Central Michigan, the Housing Bureau for Seniors and the Mortgage and Tax Foreclosure Taskforce have created a comprehensive response to the community need;
Whereas, This program has succeeded in preventing mortgage foreclosures but is overwhelmed by the need in the community; and
Whereas, The Office of Community Development is requesting that City Council approve the following funds for FY 07/08 and FY 08/09:
Intake Services Treasurer $20,000 FY 08 General Fund Reserves
Legal Services LSSCM $40,000 FY 08 AAHTF
Education & Supplies Treasurer $10,000 FY 08 AAHTF
Mortgage Counselor MSU/Treas $65,000 FY 09 General Fund Reserves
Revolving Loan Fund HBS $15,000 FY 09 General Fund Reserves
Revolving Loan Fund HBS $10,000 FY 09 AAHTF
TOTAL $160,000
RESOLVED, That the Mayor and City Council approve a $25,000 contract with the Housing Bureau for Seniors using $15,000 in FY 09 General Fund Reserves and $10,000 in FY 09 Ann Arbor Housing Trust Funds for a Mortgage and Tax Foreclosure Revolving Loan Fund;
RESOLVED, That the Mayor and City Council approve a $65,000 contract with the Washtenaw County Treasurer using $65,000 in FY 09 General Fund Reserves for a Mortgage Counselor housed at MSU Extension;
RESOLVED, That the Mayor and City Council appropriate $80,000 from the General Fund Reserves to the Office of Community Development General Fund budget to allow implementation of these contracts;
RESOLVED, That the Mayor and City Clerk are hereby authorized and directed to execute contracts with the Housing Bureau for Seniors and Washtenaw County Treasurer consistent with this resolution subject to approval as to substance by the City Administrator and approval as to form by the City Attorney with funds to be available until expended without regard to fiscal year; and
RESOLVED, That the City Administrator, or his designee, is authorized to take necessary administrative actions and to execute any documents necessary to complete this transaction and to implement this resolution.