HANDS, a nonprofit housing developer in Orange, N.J., has embarked on a pilot program to acquire the mortgages of 47 properties (91 units) in New Jersey from one lender. HANDS signed a mortgage loan purchase agreement with the lender in December 2008.
HANDS is raising $6.5 million for the 91-unit purchase and carrying costs from New Jersey Community Capital (NJCC) and other organizations. Most of the properties are vacant and are located in Essex County. HANDS plans to acquire title to the properties and sell them to community development corporations for rehabilitation and sale to first-time homebuyers. A major goal is neighborhood stabilization.
Based on the pilot program, HANDS, NJCC, and other participants are attempting to create a public purpose entity that would acquire between 1,000 and 1,500 properties in northern New Jersey. The entity is known as the Community Asset Preservation Company (CAPC).
HANDS and the lender signed a memorandum of understanding in March 2008. The lender agreed not to market the mortgages and to provide information to enable HANDS to assess the properties; HANDS agreed to a 60-day due diligence period that enabled it to enter into the December 2008 agreement.
Robert Zdenek, president of NJCC, said that some properties will be sold at market rate, while others will be using limited subsidy funds. Zdenek said that to his knowledge HANDS’s purchase of mortgages would be the first portfolio purchase of distressed properties by a CDC or CDFI in the U.S.