Why This Matters
During times of significant stress, homeowners might be unable to make their mortgage payments. If loss mitigation strategies are not sufficient, missed payments are likely to push the property into foreclosure, an outcome that can have adverse consequences for the property, its displaced occupants, and the vibrancy of the community where the property is located.
These findings carry great importance amid concerns of an economic recession. Historically, a recession is characterized by homeowners’ reduced ability to meet their mortgage obligations. And delinquency risk is often greatest among historically marginalized communities.
What We Found
Distressed property buyers can negate some of these outcomes by purchasing these properties. Nonprofit buyers, in particular, are more likely to sell the distressed properties they purchase to households seeking to become homeowners. But recent program-level data suggest that nonprofits are experiencing challenges purchasing distressed properties, limiting their purchase activity. New data suggest that financing challenges are a key barrier, a challenge disproportionately felt by nonprofits that have less financial capacity but are more likely to serve low-income communities and communities of color. By addressing these financing frictions, the positive impact of nonprofit buyers of distressed properties can be assured.
How We Did It
The Urban Institute performed its analysis based on two categories of data. The first category included publicly available data and was used to contextualize the distressed property purchase landscape. The second category was data sourced by a survey conducted by the National Community Stabilization Trust and supported by the Robert Wood Johnson Foundation.
The questions in the survey focused on barriers to distressed property acquisition, including sources of capital and the lack of properties. The questions also focused on the role of technical assistance, which most often consists of legal assistance, and requested comparative information on activity today compared with activity 10 years ago. The results of this report compare the experiences and outcomes of nonprofit buyers and mission-focused for-profit buyers.
