Stable Home Ownership in a Turbulent Economy

The study examined mortgage delinquency and foreclosure rates among the owner-occupants of resale-restricted houses and condominiums in community land trusts (CLTs) across the United States and compared CLT results to rates of delinquency and foreclosure among the owner-occupants of conventional market-rate housing reported by the Mortgage Bankers Association’s National Delinquency Survey (MBA). The study also explored practices and policies of CLTs that may help to explain their better performance.

• An electronic survey was administered to 216 CLTs in the spring of 2011, of which 96 completed the survey. The subsample used to examine delinquencies and foreclosures included 62 CLTs that had a total of 3,143 owners of resale-restricted homes with outstanding residential mortgages at the end of 2010.
• 1.30% of the mortgage loans held by CLT homeowners were seriously delinquent (defined as loans at least 90 days delinquent or in foreclosure proceedings) at the end of 2010, compared to a delinquency rate of 8.57% of mortgage loans in the conventional market reported by the MBA.
• 0.46% of the mortgage loans held by CLT homeowners were in foreclosure proceedings at the end of 2010, compared to a foreclosure rate of 4.63% reported by the MBA among the owners of market-rate homes.
• Mortgages in the CLT sample are all held by low-to-moderate income homeowners, while mortgages in the conventional market are held by owners across all incomes. Consequently, the differentials between CLT and MBA rates would have been greater if low-to-moderate income owners in the MBA sample could have been isolated for comparisons.
• While the rate of seriously delinquent mortgages reported by the MBA increased from the end of 2008 to 2009, with a slight decrease from the end of 2009 to 2010, serious delinquency rates steadily declined every year between 2008 and 2010 in mortgages held by CLT homeowners.
• While the rate of foreclosure proceedings reported by the MBA climbed every year from 2008 to the end of 2010, the foreclosure proceedings rate among CLT homeowners declined every year.
• The annual rate of completed foreclosures during 2010 among CLT homeowners was 0.42%, far below the foreclosure rate in the conventional market.
• 82% of CLT homeowners who were seriously delinquent during 2010 either sold their home with the assistance of the CLT or maintained home ownership throughout 2010 through the receipt of financial assistance and counseling from the CLT.
• While the affordability offered by the CLT model to low-to-moderate income households who enter home ownership helps to explain the low rates of delinquency and foreclosure in CLTs, the stewardship activities and policies of CLTs also contribute to these superior outcomes. Many CLTs oversee loan acquisition, educate and support their homeowners during both the pre-purchase and post-purchase periods, interact and intervene with mortgage lenders, and intervene with homeowners at risk of foreclosure.