Survey: CLTs Lower Foreclosure Risk

Posted under Industry News on March 17, 2009

Homeowners in community land trusts are less less likely to lose their homes to foreclosure than owners of market-rate homes, according to a survey conducted by the Lincoln Institute of Land Policy and the National CLT Network.

The survey looks at 230 CLTs in 45 states, with respondents represented 1,930 CLT homeowners among 85 CLTs in 32 states, including Washington, D.C. According to a news release issued this week, the new data show 2008 closing with a slight 0.52 percent foreclosure rate among CLT homeowners nationwide, compared to the 3.3 percent foreclosure rate among market-rate homeowners announced earlier this month by the Mortgage Bankers Association.

Its clear that community land trusts significantly lower the risks of owning a home, said Roger Lewis, executive director of the National CLT Network, in the statement.

Among 1,930 CLT homeowners represented in the survey—about 60 percent of CLT homeowners nationwide—only 1.4 percent were behind 90 days or more on mortgage payments at the end of 2008.

In all, 1.9 percent of CLT homeowners had loans either in foreclosure or at least 90 days behind on payments, compared to MBA data showing between 3.7 and 23.1 percent for market-rate homeowners.

Moreover, the combined percentage of 1) market-rate homes in foreclosure and 2) homeowners at least 30 days behind on their mortgage payment on Dec. 31, 2008 was the highest ever recorded, according to MBA records dating back to 1972.

Lewis credited the lower foreclosure rates to a lack of “too-good-to-be-true” financing in CLTs.

Among the benefits of CLT homeownership is front-end guidance to help homebuyers acquire safe loans—and support for homeowners struggling to pay their mortgages.

Theres added support in CLTs because of the unique, long-term relationships between CLT organizations and homeowners, said Lewis. Often, CLTs can provide help even before homeowners miss a mortgage payment. That kind of early action is key to saving homes.

Owned by nonprofits, CLTs are models of affordable housing that lease the land to individuals who own the buildings on the land—typically purchased at below-market rates. Roughly 200 towns throughout the U.S. either operate or are in the process of forming CLTs. Over 6,000 homes across the country are in land trusts. About half of those homes are owned by individuals, and half are owned by CLT organizations and operated as rental housing. This model benefits current and future homeowners. In exchange for purchasing homes at below-market prices, homeowners agree to limit the price of their homes when they sell, keeping them permanently affordable to future buyers while providing a fair return to the seller.

Over half of survey respondents already have received, applied for or will apply for Neighborhood Stabilization Program funds from the 2008 Housing and Economic Recovery Act. CLT organizations will use those funds to purchase foreclosed or abandoned homes and expand affordable homeownership opportunities in their communities and help stabilize neighborhoods, according to the survey statement.