A revolving loan fund has been established to acquire foreclosed properties. Some of the country’s biggest mortgage companies are working with the new venture.
The National Community Stabilization Trust was recently founded by six sponsoring nonprofit organizations, an announcement today said. The venture was funded with a $250,000 planning grant and a $3 million working capital loan from the John D. and Catherine T. MacArthur Foundation. In addition, the Ford Foundation made a $200,000 planning grant and a $500,000 operating support grant.
The trust serves as a middleman between financial institutions and municipalities. More than 80 cities — including Chicago, New York and Los Angeles — are already working with the trust.
“In practice, communities seeking to acquire multiple properties in a targeted area have had to negotiate separately with a dozen or more separate financial institutions,” the statement said. “Now communities have another option — dealing with the Stabilization Trust to get access to these properties from multiple financial institutions in a more predictable and cost effective manner.”
Bank of America, Chase and Citi — as well as Fannie Mae and Freddie Mac — are working with the trust. Other participating firms include GMAC ResCap, Saxon Mortgage and Wells Fargo.
The institutions will give communities that are participating in the trust a first look at newly foreclosed properties before they go on the market. The process will reportedly include cost savings, an expedited closing process and a dramatic reduction in the amount of time a foreclosed property remains vacant.
Today’s statement also indicated that the Stabilization Trust has established REO Capital Fund — an affiliated, revolving loan fund that will provide low-interest loans for the acquisition and renovation of previously foreclosed properties. The Ford Foundation has committed to a $50 million loan for the fund.
“Through a combination of public, private, and philanthropic investment, the Stabilization Trust hopes to build its REO Capital Fund in order to leverage over $1 billion in new financing,” the news release said.
