It’s into this vacuum that City Life stepped, along with two strategic partners: the Harvard Legal Aid Bureau and Boston Community Capital, a local nonprofit lender. Collectively, the three groups make up the sword and the shield — attack with blockades, rallies, and media attention while defending with legal representation and financial assistance for the homeowner.
Harvard Legal Aid is a student-run law firm dedicated to helping low-income Boston-area residents. The organization’s strategy for dealing with foreclosures is simple: Dig through the chain of titles on a home in search of legal problems or sloppy transactions that took place as mortgages changed hands before landing in Wall Street securities. If lenders didn’t follow the law when securitizing the mortgages or when filing for foreclosure — for example, the widely reported incidents of mass robo-signings — the foreclosure process can be invalidated, and the eviction stopped. Some critics write these tactics off as merely searching for technical errors to nullify a process that justly holds borrowers accountable for their actions, but David Grossman, the faculty director of Harvard Legal Aid Bureau, says such mistakes by the banks are actually symptomatic of a dangerously flawed system. “The whole securitization mess is what got us where we are now, and that is what we are going after,” he says. “These aren’t just clerical errors. The whole thing was built on fraud, recklessness, and incompetence. That is what we are trying to expose.”
But while the Harvard students are sometimes able to stop evictions, at least temporarily, and the City Life protests and blockades can cause embarrassment for the bank or home investors, it’s the third leg of the effort, Boston Community Capital (BCC), that provides a long-term solution.
As it works with homeowners facing foreclosure, City Life examines their cases and occasionally decides to refer certain people to BCC, a 27-year-old nonprofit lender that provides grants to foster community development. If BCC then determines that the homeowner is a good credit risk, it will approach the mortgage holder and offer to buy the home in question at the current market price — typically less than the amount of the underlying loan, but higher than what the mortgage holder can expect to get for the property by foreclosing on it and selling it at auction. Banks are often gun-shy about cooperating with BCC, because they fear that everyone with a home will start demanding reduced mortgages. But if the mortgage holder and BCC can come to an agreement on price, the nonprofit buys it, then turns around and issues a new mortgage to the homeowner, allowing the family to permanently remain in the house.
The sword-and-shield alliance is clever in that it provides a financial lifeline for people who’ve been buried by the collapse of the real estate market, while also giving BCC leverage in its negotiations. “One of the biggest problems we have when we try to negotiate with banks is getting them to pay attention to us and our offer,” explains Jessica Brooks, BCC’s vice president of development and communications. “Lenders are more likely to respond to us when they are feeling the pressure City Life exerts, and they know the papers have been called to the scene of a protest.”
One irony is that although BCC works with borrowers that other lenders are unwilling to touch these days, it conducts far more due diligence than the mainstream banks ever did during the real estate boom. It will not just give money to anyone with a pulse. BCC examines the terms of the homeowner’s previous loan, looks into why he got in trouble in the first place, and determines what he can realistically pay each month. It’s a thorough process, and Meacham estimates that fewer than half of the applicants referred by City Life get approved for new mortgages — which are 30-year loans with a fixed interest rate of around 6.38 percent. BCC also tacks on about 25 percent to the price, with the surplus used to cover any defaults in the program. And to keep anyone from making a quick buck by getting the property on the cheap in a bad economy and then selling it at a profit when the market recovers, BCC takes a percentage of the appreciation when a house is eventually sold. To date, BCC has made 88 loans, which have kept more than 135 families in their homes. (Many of the properties are two- or three-deckers.) So far, just one borrower has been sent a foreclosure notice.