Ludwig Center for Community and Economic Development Offers Ideas to Obama Administration for Addressing Mortgage Foreclosure Crisis
• Hold properties and convert to rentals where appropriate to preserve housing values, minimize taxpayer losses, and prevent further erosion of the housing market;
• Consider pre-foreclosure strategies to reduce the number of homes going into foreclosure, even if that means incurring federal debt to do so;
• Decentralize operations to allow tailoring to individual housing markets, based on detailed market data, and to address significant regional obstacles to disposition;
• Partner with neighborhood-based leadership, resources, creativity, and initiative; and allow displaced homeowners to return to former homes.
“The mortgage foreclosure crisis has reached almost every neighborhood in the country,” said Ray Brescia, visiting clinical associate professor of law and director of the Ludwig Center. “It represents perhaps the biggest community development challenge of our generation. The Ludwig Center’s faculty, associated scholars, and students are tackling a number of policy challenges presented by the foreclosure crisis and we’re committed to continuing our engagement in the months ahead.”
According to Brescia, “The Center’s response to the Obama Administration’s call for ideas examines three historic examples of government responses to distressed real estate crisis situations: the Great Depression’s foreclosure crisis, the savings and loan bailout, and the catastrophic New Orleans flooding caused by Katrina-related levee failures. We cite at least ten lessons drawn from these historic precedents.”
John Marshall, Ludwig Fellow at the Center, utilized his experience working in New Orleans in drafting the response: “Much has been written and said about the poor governmental response to Katrina, but there are lessons learned from the successful programs and the challenges overcome in the post-Katrina recovery that could help chart a course toward effective policy responses to the national foreclosure crisis.”
Elizabeth Kelly, a third-year Yale Law student who also participated in preparing the response, offered the following observation: “It is essential that the federal government take into account local needs and priorities in crafting a national strategy to deal with both the properties it owns, as well as the broader foreclosure crisis gripping the nation. Watching this crisis unfold during my time in law school, and working to craft some solutions to it, has been a formative experience for me.”
The full text of the Ludwig Center’s response may be found here.
The Ludwig Center works at the intersection of law, policy, entrepreneurship, economics, and social innovation to research and design creative, testable, and scalable solutions to community development challenges at the local, national, and global levels. An integral part of the Ludwig Center is its clinical program which involves students in direct work on behalf of clients. One area of focus over the past four years has been addressing the foreclosure crisis in New Haven and then taking what has been learned from that work and informing policy on the local, state, and federal levels. That work has led to the Center’s involvement in a second response to the Request For Information. Prepared on behalf of its client, the Opportunity Funding Corporation in Washington, D.C., the response addresses potential models to limit the number of REO properties (i.e., properties owned by banks after foreclosure) by restructuring and refinancing pre-REO notes.