Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

A role for nonprofits in the subprime crisis

Posted by David Kassel on July 21, 2008

Nonprofits have come off looking a lot better in the subprime mortgage scandal than their counterparts in the for-profit banking industry and the federal government, says Rick Cohen of The Nonprofit Quarterly

Cohen maintains that community development corporations (CDCs) and other nonprofit housing development organizations have been careful not to push new homeowners into risky mortgages.  And while the federal government has largely been interested in protecting investors, nonprofit organizations have been busy, trying to help homeowners in trouble. 

Cohen cites the work already done of groups such as Neighborhood Assistance Corporation of America (NACA), which he contends is “among the most aggressive and most successful national nonprofits engaged in refinancing the mortgages of families facing subprime-induced foreclosures.”  In addition, the Center for American Progress in partnership with Enterprise Community Partners has proposed the Great American Dream Stabilization (GARDNS) Fund, to be capitalized by a $10 billion Community Development Block Grant appropriation.  The fund would be used to help low and moderate-income homeowners purchase foreclosed and abandoned properties.

As a January report on the GARDNS Fund plan by the Center for American Progress notes:

…debating whether subprime borrowers were more at fault than unregulated mortgage companies is no more productive than arguing about whether the negligent camper or the neglected forest clearance practices contributed more to the rapid spread of a wildfire-
the first order of business is putting out the fire before it consumes more homes.

Cohen also suggests in “How Foundations Can Heal the Housing Crisis,” that nonprofit charitable foundations will have an increasing role to play in financing the rehabilitiation of abandoned properities across the country due to foreclosures.

Foundations can help now before federal money starts flowing, Cohen suggests, by providing grants to municipalities and nonprofits to begin rehabilitating properties and to manage rental units and rebuild neighborhoods.  Cohen maintains that:

now is the time for them (foundations) – and other organizations with vast tax-exempt endowments – to put billions of their dollars to work as a capital base for groups that are trying to stimulate new investments in financially challenged neighborhoods.

Cohen adds that smaller and medium-sized cities, in particular, that have been hit hard by the property-foreclosure crisis, don’t have access to large foundations with “signficant track records in housing and community-development investment.”

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One Response to “A role for nonprofits in the subprime crisis”

  1. […] organizations, on the contrary, seems pretty unscathed from the woes of subprime […]

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