In 2009, the Great Recession ushered in an epidemic of mortgage foreclosures. Recognizing that low-income urban communities would be hardest hit, we crafted a novel response: Stabilizing Urban Neighborhoods (SUN). SUN wrote new affordable mortgages for homeowners facing foreclosure — mortgages with principal amounts based on the home’s actual market value. The plan kept people in their homes, as homeowners. It was enthusiastically embraced.
But we found that it was one thing to devise the plan, another to implement it. We thought hard about the design of the program so that it would benefit borrowers, but also be fair to their neighbors and ensure participation from banks and other lenders who held the existing mortgage on the properties.
Still, because ours was a risky and untested model, capitalizing the initiative was a challenge; no one would lend to us. We found the answer in a shared appreciation mortgage, which enables SUN to serve borrowers while mitigating financial risk to the program. Homeowners share a portion of the appreciation gained between the start of the SUN mortgage and a future sale or refinancing with SUN; this became the key to convincing mortgage lenders to work with us.
Now, ten years later, there is much to be proud of: We have stabilized more than 1,100 families in 7 states. Almost all SUN borrowers pay in full and on time. And new regulations — spurred in part by our work — govern the mortgage industry, preventing the predatory lending that so characterized the early years of this century.
Not only do SUN borrowers avoid the burden of mortgages they can’t afford, they are strengthening their own balance sheets. Indeed, over 200 SUN borrowers have cleaned up their credit, repaid their SUN mortgages, and are returning to the residential mortgage market where they can increase their savings through the lower interest rates available to those with good credit. That is the long-term power of the SUN program — and the outcome of which we are most proud.