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Foreclosure intervention: Keeping families in their homes in times of financial crisis

5/16/2017

Blanca Velez Beauchamp, Executive Director, Puerto Rico Neighborhood Housing Services

Challenge: Due to the current financial uncertainty, high unemployment rates and a devalued real estate market, residents of Puerto Rico have been afraid to invest money or buy houses; 500 families are migrating from the island every month.

Two men and three Latino women stand in front of Puerto Rico NHS's foreclosure prevention building

For the past 10 years, Puerto Rico has suffered an economic crisis. The territory's population is declining at an accelerating pace. The jobless rate is more than twice that on the U.S. mainland, poverty is three times as severe and homes cost less than they did 15 years ago. The Federal Housing Finance Agency index shows that home prices are the lowest since the end of 2000. The same index for the United States as a whole is at a record high.

The number of foreclosures is up 89 percent from 2008, according to data from the Commissioner of Financial Institutions of Puerto Rico. That's a troubling trend because residents used to do whatever it took to avoid losing possession of their home; however, now many are choosing to leave the island in search of steady work and a better future.

When the spate of foreclosures began, local commercial banks and mortgage brokers didn't trust Puerto Rico Neighborhood Housing Services (PRNHS) to help with the growing demand for education and counseling. However, traditional financial institutions also weren't offering options to clients that helped match their mortgage payments with the new financial realities. Conventional banks in Puerto Rico were not interested in learning about loss-mitigation tools or other programs to help families keep their homes. Rather, local banks primarily dealt with mortgage-collection problems through repayment plans and forbearance, with the goal of keeping financial accounts current.

It was no surprise, then, that in the midst of Puerto Rico's mortgage crisis, demand for PRNHS services picked up. Loss-mitigation departments at banks noticed that their clients preferred to have PRNHS as a mediator in payment negotiations. In response, PRNHS created a "Working with Sensibility on the Crisis" workshop for collection and loss-mitigation professionals and real estate representatives. The workshop trains financial professionals to treat clients more humanely and sensibly, and how to provide foreclosure alternatives for distressed homeowners. Through the workshop, PRNHS also has developed alliances with the Puerto Rico Banks Association and Community Reinvestment Act officers, with the goal of easing the effects of collection and loss mitigation on families and communities.

A sign on a building that says Puerto Rico NHS Corp Foreclosure Prevention CenterThe workshop is two hours long and includes actors who role play to demonstrate how to – and how not to – engage clients. We teach participants how to listen effectively and create an atmosphere of mutual respect. The first workshop PRNHS held with the Puerto Rico Banks Association and Community Reinvestment Act officers drew 90 people. (Experience has shown that the ideal size is around 25 people.) Over the last year, PRNHS has held 15 "Working with Sensibility on the Crisis" workshops all over the island, with audiences that include staff of elected officials and government agencies.

Due to our success in helping families retain their homes even under difficult circumstances, government agencies have begun to adopt our approach to foreclosure prevention, as well as request our staff to coach their employees. For two consecutive years, the Puerto Rican government has invited PRNHS to depositions for the resolution of housing and financial disputes.

Our organization has made a difference by protecting many families from losing their homes. Since 2006, PRNHS has expanded our staff and developed in-house expertise in mitigating foreclosure risk. We used the NeighborWorks Ad Council campaign, "Nothing is Worse than Doing Nothing" in Spanish to begin to build trust as an organization independent of any financial institution or government agency. In 2007, PRNHS created the first and only foreclosure prevention center in Puerto Rico that focuses on mortgage intervention. Clients waited in lines around the block, and our staff worked well into the evening to accommodate everyone. Although that degree of enrollment is no longer the case, PRNHS has a steady demand for services.

Financial counselors at our center are familiar with all the phases of Puerto Rico's foreclosure process. Our employees also have been trained and certified by NeighborWorks America in lending, financial counseling, first-time home buying and foreclosure risk mitigation. Many of our clients have never developed a budget, and we are devoting a lot of time to help them to develop this critical skill. We also have started a new program for university students to teach them budgeting skills just as they are becoming adults, with an eye to preventing foreclosures and helping them achieve a better financial future.

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