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Lingering impact: Report on 2016 foreclosure trends

December 08, 2017

Lingering impact: Report on 2016 foreclosure trends

December 08, 2017

Introduction

Homes provide shelter, but they are often a long-term investment and source of financial security, as well. Similarly, housing and foreclosure trends tell us a lot about local and regional stability and vitality. 2016 statewide trends indicate that while foreclosure filings continue to decrease, the areas hit hardest by the financial and housing crisis still need attention and services. This report reviews the 2016 data and includes policy recommendations to reduce Ohio’s foreclosure rates to early 1990s levels.

Lingering impact:  Report on 2016 foreclosure trends

Foreclosures in Cleveland, Photo by Louisa Thomson, via Flikr

FORECLOSURE FILING RATE FELL BY 3.75 PERCENT IN 2016

There were 38,963 new foreclosure case filings across Ohio in 2016, according to data collected by the Supreme Court of Ohio. [1] This equates to one foreclosure filing for every 132.5 housing units in the state.[2] It is 1,516 fewer filings than in 2015, and less than half of the 89,000 foreclosure filings in 2009. In 54 of 88 Ohio counties, the number of new foreclosure filings decreased between 2015 and 2016. Still, the number of annual foreclosures remains well above levels seen in the 1990s, prior to rapid growth of subprime lending and the onset of the housing crisis. Figure 1, below, shows that while current foreclosure rates are down significantly from the 2009 high, they remain almost 2.5 times above the 1995 level, when 15,975 foreclosure cases were filed.

Lingering impact:  Report on 2016 foreclosure trends

Frank Ford, a senior policy analyst at the Western Reserve Land Conservancy’s Thriving Communities Institute, says that in Cuyahoga County, this trend indicates that the big decreases are tapering off. Ford argues that many of the hardest hit areas have not seen the recovery expected and will require more intensive intervention. Ford also notes that while this slowed decrease is not currently a major concern, the trend bears close watching to ensure that the rates do not go back up over the next few years.[3]

The need for additional resources is especially evident in cities such as Dayton (Montgomery County), where hardest hit areas remain vacant and blighted due to a lack of demolition funding.[4] The federal Hardest Hit Fund, administered through the state’s Neighborhood Initiative/Stabilization Program, provides homeowners with mortgage assistance to allow them to stay in their homes. A significant share of the funding has gone to tearing down vacant blighted housing.[5] Despite Dayton residents’ concern, the city has run out of dollars from the Hardest Hit Fund and cannot apply for more funding to demolish many of the blighted and foreclosed homes, thus making housing and land use rehab less likely.

OHIO’S 10 LARGEST COUNTIES MAKE UP 60 PERCENT OF FORECLOSURE FILINGS

Lingering impact:  Report on 2016 foreclosure trends

Sixty-one percent (23,826) of the state’s 38,963 filings occurred in Ohio’s 10 most populated counties. Most of these counties saw a rise in foreclosure rates from 2015. As Table 1 indicates, the number of filings increased by 8 percent in Stark County, more than 9 percent in Lucas County, and nearly 10 percent in Mahoning County. Notably, the number of filings Franklin County, the state’s most populous, rose over 5 percent. However, this number (4,031) is still almost half as many as the 7,702 filings in 2012. Cuyahoga, Montgomery and Butler counties saw a decrease in filings. Summit County had the largest decrease, with a 22 percent drop following a large increase in 2015. Yet, as Figure 2 shows, the number of filings remains well above levels 20 years ago.

Lingering impact:  Report on 2016 foreclosure trends

Lou Tisler, director of the Housing Counseling Network at the National Community Reinvestment Coalition in Washington, D.C., suggests that areas that serve the most vulnerable and immobile populations – families and senior citizens with limited assets and incomes – are the most likely to see persistent or increasing rates of foreclosure.[6] Indeed, in their most recent report on foreclosures in Cuyahoga County, Kathryn Hexter and Molly Schnoke of Cleveland State University write, “[Cuyahoga] County’s eastern communities with high percentages of African American homeowners were among the first to experience the devastating effects of the wave of unsustainable mortgage financing and refinancing and are still among the last to see an end to the crisis...”[7] The authors noted that while there was a decline of foreclosures in the suburbs, there was a large increase in rates in the poorer, central urban areas (Cleveland and East Cleveland).[8]

In Lucas County (Toledo), suburban areas have also seen stronger regrowth while the hardest hit urban areas have the most complicated “intractable properties”— homes and buildings with complicated legal or financial status, such as liens or multiple mortgage lenders.[9] Lucas County saw an increase in the total number of foreclosure filings in 2016, following a large decrease in 2015. This is likely because the city of Toledo constitutes a larger share of the population and housing in Lucas County than other central cities in Ohio counties. When Toledo trends fluctuate, the number more significantly impacts countywide statistics.

Summit County saw the largest decline in foreclosure filings of any of the biggest counties. In some areas in Akron, home values are higher than they were pre-recession.[10] However, this significant decline in filings followed a big increase in 2015 and might reflect a stronger and more targeted investment in foreclosure resources in the area. Regional efforts to stabilize and grow the central urban area, such as the Akron 2050 plan, might have played a significant role in foreclosure and blight reduction in the Summit County region.

FORECLOSURE DENSITY: THE TOP 10 COUNTIES

Lingering impact:  Report on 2016 foreclosure trends

The foreclosure density rate is an important measure of stability, especially in shrinking counties/states. For every 1,000 people in Ohio, there were more than three (3.35) foreclosure filings in 2016. Several counties maintain higher levels of foreclosure density, well above the mean. As Table 2 highlights, Mahoning County had 5.6 foreclosure filings for every 1,000 residents in 2016, the highest such rate in the state. Richland County, the hardest hit county in 2014 and 2015, comes in at a close second, lagging by only .03 percent (5.57).

Nine of 10 of the counties with the worst foreclosure density rates in 2016 rates were on the 2015 list, as well. Table 3, below, notes that the largest increase was Mahoning County (up from No. 7 in 2015 to No. 1 in 2016) and the largest decrease was Summit County (down from No. 4 in 2015 to No. 10 in 2016). These counties vary significantly in population, from under 40,000 (Coshocton and Jackson) to over 1.2 million (Cuyahoga) and range in median income from over $50,461 in Ashtabula to $69,216 in Summit.[11] This income and population variation reinforces the notion that suburban growth can mask urban, central city decline. The income difference also emphasizes the fact that foreclosure rates are impacted by several factors and can be the result of larger systemic issues.[12]

Lingering impact:  Report on 2016 foreclosure trends

AN ALTERNATIVE VIEW: THE FORECLOSURE PROCESS AS A LAND-BANKING TOOL

Often, foreclosure filings tell the story of a property that has seen a significant disinvestment – foreclosures usually occur because the building owner can no longer afford to pay the mortgage. However, sometimes unpaid taxes cause a foreclosure filing. That can have the same unfortunate result as a mortgage foreclosure. But such tax foreclosure filings can also represent a county-wide attempt to funnel already vacant and delinquent homes through the land bank and revitalization process. Ford noted that, “land banks can use the foreclosure process to gain title to abandoned homes that need to be demolished.”[13]

Western Reserve Land Conservancy has played a key role in supporting the creation of land banks across the state. There are currently 46 county land banks in Ohio and dozens more at the city level. At the recent Ohio Land Bank Conference in September 2017, several panelists and presenters noted that, if land banks leverage their relationships and resources, vacant properties can be expedited through foreclosure and then used as a tool for economic regrowth. Ford also suggests that using the tax foreclosure process to rehabilitate homes and neighborhoods encourages counties to find more creative and sustainable methods to ensure housing stability. For example, in neighborhoods where small numbers of remaining homeowners feel stuck amongst dense clusters of abandoned properties, land banks can work with the city to repossess, demolish and reuse the space in a way that is more responsive to community needs. Additional state investments could enable existing land banks and housing development entities to expand on the good work being done to restore neighborhoods.

Recommendations

We recommend additional steps to reduce Ohio’s foreclosure rates and battle the blight and economic distress foreclosures can cause.

Increase federal and state support for foreclosure prevention and housing stability:

a) Reduce or eliminate proposed federal budget cuts to vital programs. Three such programs are threatened in the federal budget for the year that began October 1. The HOME Investment Partnerships Program, Community Development Block Grants and Section 4 program provide states and localities with flexible funding to tackle housing insecurity. The state needs an increase in these federal dollars, already reduced from years past, to tackle the problem of housing insecurity head-on.[14]

b) Increase funding for the Ohio Housing Trust Fund, and replicate local funds to target dollars. The statewide trust fund was established in the 1990s, when Ohio voters approved a constitutional amendment designating housing as a public purpose, and is the primary way the state invests in affordable housing and assists homeless people.[15] In the 2017 fiscal year the fund allocated $42 million to support homeowners, renters, families and senior citizens – slightly more than the year before, but down from $73 million in the pre-recession year of 2004-05 and $53 million in 2013. Local funds, such as the Affordable Housing Trust for Columbus and Franklin County, are tackling these issues in specific, hard-hit neighborhoods, and these local trust funds should be replicated in other communities to supplement and leverage state trust fund dollars. Increased state and local resources would assist low-income homebuyers, defray counseling costs for families facing foreclosure and expand permanent housing for homeless people, emergency home repair, accessibility modifications and other affordable housing investments. They would also enable housing rehabilitation and home weatherization to reduce utility costs.

A statewide coalition sought additional funding for the fund in the FY 2018-2019 State Budget, first through general revenue and then through an increase in the county recorder fee that supports the fund. However, the Ohio legislature ignored this request in the final budget.[16] The Home Matters to Ohio coalition continues to encourage the legislature to reconsider the way it funds housing resources.

Restore local government funding:

Prolonged vacancy results in property deterioration and increased risk of fire. Local governments in hard-hit communities often face serious fiscal stress. Municipalities must spend more on policing and fire suppression, temporary assistance for displaced residents, and maintenance.[17] These increased demands on local governments come at a time when revenues are constrained. Local governments are working with $1 billion less in 2017 than they had in 2010 (adjusted for inflation) due to cuts in state aid and elimination of local tax sources.[18] To enable communities to address increased needs and restore the physical blight created in the past two decades, the state should:

a) Restore revenue sharing through the Local Government Fund, which has been cut in half (hurting cities, villages, townships and counties).

b) Reinstate an Estate Tax on Ohio’s wealthiest estates – those over $1 million in value – and direct the revenues to local government. In the past, this money was often used for capital costs such as police fleets and fire trucks, taking pressure off a community’s general fund.

Provide flexible state support for efforts to provide mortgage assistance and foreclosure counseling and to address neighborhood blight:

a) Increase federal and state foreclosure counseling and prevention programs. A quick online search for Ohio prevention resources finds several agencies and programs dedicated to foreclosure prevention, but most of the results drive consumers to the same limited and shallow pool of resources. Housing counseling programs, such as the federally funded NeighborWorks program, are not available everywhere in Ohio. Existing housing counseling infrastructure should be strengthened and expanded.

b) Federal dollars from the U.S. Treasury’s Hardest Hit Fund are used by the Ohio Housing Finance Agency (OHFA) in two ways: to stabilize property values by removing and greening vacant and blighted properties to help prevent future foreclosures, and for assistance to homeowners. More than 5,000 blighted homes have been demolished, with thousands more in process. OHFA’s Save the Dream Ohio (SDO), which helped more than 24,000 Ohioans keep their homes before money ran out in 2014, was re-introduced in September 2016 and since then, over 469 homeowners have received assistance.[19] With just $20.2 million remaining out of the $433.7 million in federal dollars allocated, [20] the SDO program will need additional resources to better serve the neediest populations. Additional resources, flexible in nature, could be used not only for mortgage assistance and targeted demolition but also housing rehabilitation, depending on which is more appropriate for a property and a neighborhood.

Increase support for consumer protection and resource navigation services

Those without financial resources may need help navigating the foreclosure process, beyond the programs stated above. The Consumer Financial Protection Bureau (CFPB) and Ohio Legal Aid provide important resources to those at risk of losing their homes.

a) Between December 2011 and April 2017, over 20 percent of Ohio complaints to the CFPB were mortgage-related.[21] The CFPB has several initiatives to help consumers stay away from loans they can’t afford, set rules for mortgage servicers and protect borrowers facing foreclosure.[22] Yet, the CFPB has been under attack from all three branches of the federal government.[23] Richard Cordray recently stepped down as the director of the CFPB, but the agency must continue to be a strong, independent defender of consumer rights- not one that caters to the interests of the financial services industry.

b) Legal Aid services are extremely useful to homeowners facing foreclosure, helping keep families in their homes. During and after the Great Recession, Ohio’s Legal Aid services lost a significant share of their funding and despite more recent improvement, staffing remains well below previous levels. Legal Aid services broadly need greater continuous financial support from the state to provide foreclosure assistance.

Though foreclosure levels are down from their peak, Ohio is still coping with the damage from the foreclosure crisis. Tens of thousands of homeowners still face foreclosure each year, far more than in the not-so-distant past. Foreclosed homes too often become vacant and abandoned, sapping vitality from communities. They don't bring in property taxes, so communities and school districts have far fewer resources to support struggling families while troubled and sometimes lead-filled properties are left behind.[24] Much important work has been done to cope with 15 years of elevated foreclosures. We need an assertive policy approach that restores our neighborhoods to ensure that the next generation can build wealth and thrive with the stability that safe housing provides.

Appendix: Foreclosure data by county

Lingering impact:  Report on 2016 foreclosure trends

Lingering impact:  Report on 2016 foreclosure trends

Lingering impact:  Report on 2016 foreclosure trends

Lingering impact:  Report on 2016 foreclosure trends

Lingering impact:  Report on 2016 foreclosure trends


[1] Ohio Supreme Court, Policy Matters Ohio review of filings in U.S. district courts. Numbers include both tax and mortgage foreclosures, but not tax foreclosure filings at county boards of revision for vacant abandoned properties. Data received by Zach Schiller, May 4, 2017 in response to records request.

[2] American Fact Finder, U.S. Census Bureau, Table B25001. Retrieved by: Hannah Lebovits; Retrieved on: 10/17/2017. Table can be found at: https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=CF

[3] Comments made during phone interviews between author and Mr. Ford, June 12, 2017 and November 21,2017.

[4] Frolik, Cornelius, “Vacant houses will likely be sticking around longer in Dayton, and here’s why,” The Dayton Daily News, Aug. 11, 2017. Retrieved from: http://www.mydaytondailynews.com/news/local/vacant-houses-will-likely-sticking-around-longer-dayton-and-here-why/ZVGbIjXL7o9qlbmzMcqsaL/

[5] Ibid.

[6] Comments made during phone interview between author and Mr. Tisler, June 14, 2017

[7] Hexter, Kathryn W., Schnoke, Molly, “Responding to Foreclosures in Cuyahoga County 2016 Update: Tenth Annual Report January 1 - December 31, 2016”, Urban Publications, May 25, 2017. Retrieved from: http://engagedscholarship.csuohio.edu/cgi/viewcontent.cgi?article=2494&context=urban_facpub

Lingering impact:  Report on 2016 foreclosure trendsLingering impact:  Report on 2016 foreclosure trends[8] Ibid. The authors found an increase in the overall number of foreclosures in the county because their data, unlike the Ohio Supreme Court data used in this report, include tax foreclosures handled through the county Board of Revision. These can be used only for vacant properties and allow for them to be transferred to the county land bank, a positive result. Most of these foreclosures were in the city of Cleveland, contributing to the higher rate there.

[9] Chavez, Jon, “Area foreclosures up from a year ago, bucking trend” The Toledo Blade, May 16, 2017. Retrieved from: http://www.toledoblade.com/Real-Estate/2017/05/16/Toledo-area-foreclosures-up-from-a-year-ago-bucking-trend.html

[10] Armon, Rick, “Home property values are up for first time since 2005 in Summit County,” Akron Beacon Journal, July 26, 2017. Retrieved from: https://www.ohio.com/akron/news/local/home-property-values-are-up-for-first-time-since-2005-in-summit-county

[11] American Fact Finder, U.S. Census Bureau, Table DP03. Retrieved by: Hannah Lebovits; Retrieved on: 10/17/2017. Table can be found at: https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_15_5YR_DP03&prodType=table

[12] Kingsley, G. Thomas, Smith, Robin, Price, David, “The Impacts of Foreclosures On Families and Communities” The Urban Institute, May 2009, Retrieved from: https://www.urban.org/sites/default/files/publication/30426/411909-The-Impacts-of-Foreclosures-on-Families-and-Communities.PDF

[13] Tax foreclosures can be handled through the regular judicial process, and those are included in the data reported by the Ohio Supreme Court used in this report. However, as noted above, they also can be handled by county boards of revision. Those cases are not included in the Supreme Court data. This trend was discussed in an earlier Policy Matters Ohio report, which can be accessed at: https://www.policymattersohio.org/research-policy/pathways-out-of-poverty/consumer-protection-asset-building/housing-foreclosures/home-insecurity-2015

[14] Information from phone interview between author and Emily Lundgard, state and local policy director at Enterprise Community Partners, August 28, 2017; additional information gleaned from the Organize! Ohio Brown Bag event on the “State's Role in Rebuilding Ohio Cities,” September 13, 2017

[15] Patton, Wendy, “Budget Bite: The Housing Trust Fund,” Policy Matters Ohio, April 7, 2017. https://www.policymattersohio.org/research-policy/quality-ohio/revenue-budget/budget-bite-the-housing-trust-fund

[16] Home Matters to Ohio Coalition letter, “Ohio Legislature Releases Final Budget, State Trust Fund Remains As-Is,” July 5, 2017. Retrieved from: https://www.housingonline.com/2017/07/05/ohio-legislature-releases-final-budget-state-trust-fund-remains/

[17] GAO Report, “Vacant Properties: Growing Number Increases Communities’ Costs and Challenges” November 2011. Retrieved from: http://www.gao.gov/new.items/d1234.pdf

[18] Patton, Wendy, Shakesprere, Jessica, “Budget Bites: Local Government” Policy Matters Ohio, March 2017. Retrieved from: https://www.policymattersohio.org/files/research/local-gov-budget-bite-final.pdf

[19] Moses, Molly, “Hardest Hit Funds Allows OHFA To Continue the Fight Against Foreclosure and Blight,” OHFA Press Release, April 25, 2017. Retrieved from: http://ohiohome.org/research/documents/OHTF_EconomicImpactFinal.pdf

[20] Presentation by Holly Swisher, Ohio Housing Finance Agency, Organize! Ohio Brown Bag event on the “State's Role in Rebuilding Ohio Cities,” September 13, 2017

[21] See https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201706_cfpb-Monthly-Complaint-Report-50-State.pdf

[22] See https://www.consumerfinance.gov/know-before-you-owe/ and https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-expands-foreclosure-protections/ and https://www.consumerfinance.gov/about-us/blog/weve-updated-our-mortgage-servicing-rules-provide-greater-protections-mortgage-borrowers-and-other-homeowners/

[23] Kaplinsky, Alan and Michael Guerrero, opinion contributors, “The CFPB is under siege by all three branches of government,” The Hill, Feb. 17, 2017. Retrieved from: http://thehill.com/blogs/pundits-blog/finance/320141-the-cfpb-is-under-siege-by-all-three-branches-of-government

[24] Ibid.

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