Real Estate Today: Predators overlook most of JP

March 21, 2008
By

DAVID TABER

Foreclosures hit some pockets

Despite an up-tick in the first months of 2008, Jamaica Plain has so far been spared the cold touch of the mortgage foreclosure crisis, and the foreclosures it has seen have not been concentrated in low-income areas.

According to listings from the Warren Group, publisher of Banker & Tradesmen, 34 foreclosure petitions—the first step in foreclosure proceedings—were filed in JP in 2007. As of March 12 of this year, 20 petitions have been filed for JP addresses. If that trend keeps up, close to 100 properties would be involved in foreclosure proceedings by the end of the year.

Foreclosures occur when property owners default on their mortgages and lenders move to repossess their property.

The rate of foreclosures in JP still lags behind rates for some of Boston’s hardest-hit neighborhoods. Already this year, 150 petitions to foreclose have been filed in Dorchester, 41 in Mattapan and 33 in Roxbury.

There are some pretty obvious explanations for JP’s relative stability. For one thing, homeowners here have so far have not seen their equity—the value of their property—deteriorate.

State Rep. Jeffrey Sánchez said property in JP, which has maintained its value in recent years, can be compared to “what in the stock market is considered a ‘defensive stock’. While stocks are tanking in other parts of the city and state, JP is still pretty strong.”

And it makes sense, demographically. According to the city’s Department of Neighborhood Development’s (DND) report, “Foreclosure Trends 2006”, the majority of the population of central JP is white and earns about the area median income (AMI), making it an unlikely stomping ground for predatory lenders.

But it also appears that Jackson and Egleston Squares—sections of northeastern JP with low-income and minority populations similar to neighborhoods struck with the problem—have not experienced significantly more foreclosures than central JP.

One place where foreclosure proceedings do appear to be concentrated is in properties belonging to brothers Roger and Douglas Smith. Over one-third of the properties with foreclosure petitions are connected to them or Phillip Tracy Jr., a lawyer they are associated with. They are rental properties that have been heavily mortgaged over the years, and it is unclear whether their plight can be connected to the foreclosure crisis.

It does appear, however, that sub-prime lending—the issuance of loans at higher than normal rates to borrowers who have or perceive themselves to have poor credit—has had some effect on JP. In addition to the 20 foreclosure petitions that have been filed, eight foreclosure auctions had been scheduled by mid-March.

Auctions are the last step in foreclosure proceedings. Between petitions and auctions, excluding the Smith brothers’ properties, the Gazette was able to identify 13 properties as mortgaged by sub-prime lenders.

The only significant geographic concentration of foreclosures is in the Brookside neighborhood. Eight properties in that area have gone through foreclosure proceedings in 2008. And three properties in a row on Jess Street, a short dead-end street near the Brewery Complex, are in different stages of foreclosure.

Reverse-Redlining

The 2006 foreclosure trends report describes the Jackson and Egleston Square sections of JP as “low/moderate income census tracts”—where more than 51 percent of households earn less than 80 percent of area median income (AMI). They are also both less than 25 percent white/non-Hispanic, the report says.

Despite demographic similarity to other neighborhoods allegedly targeted by predatory lenders, these neighborhoods may not have been hotspots for sub-prime loan peddlers simply because they are in JP, said Virginia Pratt, a foreclosure counselor at the Egleston Square-based nonprofit Ensuring Stability through Action in our Community (ESAC).

“One thing is that a lot of minority neighborhoods have really been targeted for sub-prime loans,” she said.

The alleged targeting of low-income minority neighborhoods by sub-prime lenders is described by some as “reverse-redlining”. The term “redlining” was coined in the 1960s to describe banks’ conscious choices not to invest in minority neighborhoods.

Reverse-redlining can be defined as a “deliberate attempt to market products that are very risky to people who do not understand them,” Pratt said.

Ensuring Stability

Another possibility for why the Egleston and Jackson areas seem to have escaped the onslaught of the foreclosure crisis is JP’s long history of activism around housing issues.

Community development corporations Urban Edge and the Jamaica Plain Neighborhood Development Corporation (JPNDC), along with advocacy organizations like ESAC, City Life/Vida Urbana and other organizations, have been part of a decades-long focus on housing and home ownership issues on the north side of JP.

“There has been a concerted, focused effort in this area…We have used every possible means to stabilize home ownership in the areas where we work,” Mossik Hacobian, president of Urban Edge, said.

This includes various types of homebuyers’ classes and counseling resources offered and promoted both by the City of Boston and various nonprofits.

Hacobian was circumspect about taking credit for the Egleston/Jackson area’s seeming stability, saying only that he hopes the efforts have been successful.

JPNDC spokesperson Chris Ney said he questioned the validity of organizations taking credit for a phenomenon “that is a function of market trends.”

But state Rep. Liz Malia, who represents Egleston Square as well as sections of Roxbury and Dorchester, said there may be some truth in it.

In particular, “some parts of Dorchester are not near a square [commercial center] or a community group that is working,” she said.

JP has “a better information network” than other areas, she said. As an example, she noted that homebuyer information is prominently displayed at three local community health centers—Martha Eliot, Brookside and Dimock.

Hacobian also noted that, in a large part because of development projects undertaken by Urban Edge and the JPNDC, and a high concentration of public housing in the area, a higher proportion of the housing stock on the northeast side—about 30 percent as opposed to about 19 percent citywide—is designated as affordable.

The majority of that is rental housing, he said, and that focus may have insulated the area.

“There has been a concerted effort in the last 10 to 20 years to tout the value of home ownership…There have been nationwide public relations campaigns about homeownership being the goal,” he said. The reasoning, he said, has been that homeowners are generally perceived as having a bigger stake in their communities.

But Jamaica Plain may be reaping the benefits of “recognizing rental is a good option early,” he said.

Potential evictions?

While tenants in subsidized housing likely have secure living situations, there are some potentially worrying signs for other renters in the area.

Pratt said the few JP cases she has dealt with so far have been investment properties.

Property owners trying to repay “loans based on multifamily [residence] incomes are most of what we see here,” she said.

The Gazette’s analysis of Warren Group statistics confirmed that, along with a handful of condominium units, most of the foreclosures JP has seen in 2008 are multi-family homes.

In other neighborhoods, JP-based City/Life Vida Urbana has been waging highly publicized campaigns to halt tenant evictions at rental properties that have been foreclosed on. The Gazette has only heard of one foreclosure-related eviction in JP so far, at 9 Jess St.

Wells Fargo Bank now holds the deed to that two-family house formerly owned by Ronald Calia. Last year Calia defaulted on a mortgage issued by sub-prime lender Option One Mortgage.

Both Calia and his former tenant, Donna Coyle, who had lived at 9 Jess St. for 15 years, were able to rent other apartments in the neighborhood, Coyle said.

As far as foreclosures on rental properties are concerned, the Smith brothers who this year had nine foreclosure petitions issued, and last year had 12, have far and away the most property in play.

The sales histories show deeds for heavily mortgaged properties changing hands multiple times between the Smith brothers and Tracy over the years.

Roger Smith was convicted of arson and insurance fraud in 1981 after eight properties he owned caught fire. He spent 18 months in prison. According to Gazette archives, Smith was building his real estate holdings again by 1994. That year, he received over $700,000 in mortgages from area banks.

Smith purchased many of his properties at foreclosure auctions.

In 1994, Tracy described the negative publicity his client was receiving as an “ugly monster…raising its head to bite him again.”

Messages left at a number listed for Tracy requesting comment for this article went unreturned.

While the number of foreclosure petitions issued for these properties is daunting, tenants can take some comfort in the fact that no auctions have been scheduled.

Often, foreclosure experts say, property owners are able to avoid foreclosure even after a petition is issued by renegotiating the terms of their mortgage or catching up with their payments.

In these cases, the issuance of a petition is announced, but it is not followed up with an auction announcement.

Jess Street

While JP has been spared the brunt of the foreclosure crisis, one would not necessarily know it from looking at Jess Street.

Besides 9 Jess St., at least two of the eight houses on Jess Street, a small side street that dead-ends off Porter Street at the Brewery Complex, are facing foreclosure.

Nine Jess Street is enough of an eyesore, according to neighborhood residents, that last month 12 of them signed onto a letter asking Wells Fargo, which holds the deed to the property, to take action.

According to the letter, the foundation of the house is giving way, there is a large sinkhole in the backyard, and the front and back yards are filled with rubble and debris.

“There are several young children in our neighborhood who play next to the premises and run through the yard…these children are still clearly at risk of bodily injury, because nobody lives at the property and it is not fenced or secured,” the letter says.

Coyle, a former tenant at 9 Jess who is now living in a rented apartment on Porter Street, wrote and circulated the letter. Since it was sent a sign was posted on the property identifying New England Property Solutions of Braintree as the party responsible for the property’s upkeep. There have been no improvements to date, she said.

Calls from the Gazette to New England Property Solutions went unreturned.

Jim Sydney, an agent with Burton Real Estate, is trying to sell the property next door at 11 Jess so the owner of that property can avoid foreclosure, he said.

“Nine Jess Street doesn’t help. The outside is a little untidy, I don’t know if someone is dumping stuff there or not,” Sydney said.

He said 11 Jess St. has been on the market for 90 days. “In a good market that’s a long time. In a bad market it’s not,” he said.

When the Gazette informed Sydney that the owners of 7 Jess St. had, in late January, also been served with a petition to foreclose, he let out a sigh. “That can’t be doing very much for the market,” he said.