Owning a home is the primary means by which low-income Americans seek to build long-term assets and increase their financial worth. Homeownership strengthens neighborhoods by increasing stability, keeping capital in the community, attracting outside investment, and raising property values. Yet maintaining a home presents special challenges for a low-income household. Limited savings and low equity render low-income homeowners vulnerable if income or expense fluctuations lead to mortgage delinquencies. High maintenance and energy costs drive housing costs upward for low-income homeowners because they tend to live in older or less sound homes.
Low-income homeowners are often targets of consumer scams. Predatory home equity lenders drain assets from low-income neighborhoods by foreclosing on high-rate loans, made primarily to elderly and minority borrowers. Other lenders convince homeowners to repeatedly refinance their mortgages, adding costly fees to each transaction. And unscrupulous home repair contractors will overcharge for shoddy work, starting but not completing the repairs, even after receiving full or partial payment.
As more low-income people buy homes through first-time homebuyer programs, housing advocates need to learn strategies for sustaining their clients’ homeownership over the long-term. In response, NCLC has developed educational materials, advocate protocols, and workshops for homeowner advocates across the nation. Our goal is to help homeowners enforce their legal rights, avoid scams, and truly experience the "American Dream" of homeownership.
Homeownership Among Low-Income Americans
Nationally, 39% of households with incomes below the federal poverty level own their own homes (In 1999, the Federal Poverty Level was defined as $13,880 for a family of three.)
Fifty-eight percent of older Americans who fall below the federal poverty level are homeowners.
There are more than 5 million low-income homeowners in the United States.
Initiative Priorities
Stopping Home Equity Scams
Home improvement scams and deceptive lending practices are among the most frequent problems experienced by low-income homeowners. In many communities they lack access to traditional banking services and rely disproportionately on finance companies and other less regulated lenders. Often in desperate need of home repairs, (e.g. roof replacement, structural reinforcements), unsophisticated homeowners fall prey to unscrupulous home improvement contractors who promise easy access to credit. Many of these loans have inflated interest rates, outrageous closing costs, and unaffordable repayment terms. When borrowers default on the loans, either because they are unable to meet the high carrying costs or in reaction to shoddy or incomplete workmanship, they face foreclosure.
NCLC has successfully used a wide range of consumer law defenses to combat predatory lending practices. By teaching homeowners, nonprofit counselors, and attorneys about applicable consumer protections, many homes have been saved.
Foreclosure Prevention
Foreclosure prevention strategies are vital to sustaining homeownership for low-income families who have less savings to buffer unforeseen expenses or loss of income. Using a unique collaboration of counseling agencies, legal services and volunteer attorneys, and lenders, NCLC has developed a model foreclosure prevention program in Massachusetts which provides counseling, advocacy, and foreclosure alternatives to keep people in their homes.
In just five years, NCLC has helped more than 1,000 Massachusetts families save their homes from foreclosure. We have administered programs with Freddie Mac and the Massachusetts Housing Finance Agency (MHFA). The project also received support from the Fannie Mae Foundation and The Hyams Foundation.
Utilities Issues
High maintenance and energy costs drive housing costs upward for low income homeowners. When they are unable to afford to heat the home or perform routine maintenance, the property may fall into disrepair and actually depreciate in value. Energy costs comprise the second largest housing expenditure for low income homeowners - between 10 and 15 percent of monthly income. Yet according to the U.S. Department of Energy, few low income homes have even the most rudimentary of conservation or weatherization measures. In working toward the goal of long-term shelter affordability, NCLC has championed conservation improvements and energy-efficient mortgages.
NCLC National Trainings
NCLC conducts regular workshops on foreclosure prevention counseling for housing
counselors and attorneys. In 1999 NCLC taught the course "Preserving the
American Dream" in Philadelphia, Boston, Chicago, New Orleans, Oakland, and
Washington, D.C. Courses include a two-day session for beginning and intermediate
level counselors, a new one-day course for counselors with substantial experience,
and a half-day session on how to counsel new homeowners before they experience
mortgage trouble, as well as ways to fight mortgage discrimination. Funding
for these trainings was provided by the U.S. Department of Housing and
Urban Development (HUD), which awarded the contract to NCLC in partnership
with the Neighborhood Reinvestment Corporation (NRC).
Publications
NCLC’s book, Surviving
Debt, explains how low and moderate income consumers can preserve their
homes (and other essential assets) in the face of significant consumer debt
problems. The book helps consumers prioritize their debts in order to focus
the maximum possible resources on maintaining their homes and provides five
chapters of materials for consumers to help themselves when their homes are
threatened due to financial problems.
