Responding to the Foreclosure Crisis in Appalachia: A Policy Review and Survey of Housing Counselors

Abstract

Existing research on the foreclosure crisis tends to focus on national trends or on metropolitan areas. Few studies focus on rural areas, and none look at Appalachia in particular. Existing research on rural housing issues suggests that rural communities face unique challenges in the wake of the foreclosure crisis due to capacity constraints, lack of qualified counselors in rural areas, and lack of funding availability. This study investigates the impact of existing policies upon Appalachian communities and households—analyzing whether communities suffering from widespread foreclosures lack the governmental and nonprofit resources necessary to adequately utilize funding and other resources to respond to the crisis. This paper presents findings from a survey of housing counselors serving the Appalachian region, which suggests that lack of directed federal funding is preventing counseling agencies from getting distressed homeowners aid in a timely manner or helping them to make modifications to their mortgages. I conclude with policy and planning recommendations designed to target assistance to these and other rural and distressed communities suffering from foreclosures.

Keywords:

• counseling
• foreclosure
• rural
• nonprofit sector
• predatory lending

Notes

^1. The Appalachian Regional Commission designates as “distressed areas” those census tracts in at-risk and transitional counties that have a median family income no greater than 67% of the U.S. average and a poverty rate 150% of the U.S. average or greater. Designations are revised annually using the latest five-year estimates from the American Community Survey (http://www.arc.gov/appalachian_region/CountyEconomicStatusandDistressedAreasinAppalachia.asp).

^2. The NSP data have a number of disadvantages. Most problematic is the utilization of estimates, rather than actual recorded statistics. These estimates are based largely on population trends, which means that the NSP estimates are going to be most accurate for counties with higher populations, and least accurate for those with lower populations. This could pose a problem for analyzing rural areas. However, the author of this study could not find a source of freely available data that was methodologically superior, and thus utilizes the NSP data for the purposes of this analysis.

^3. The Urban Institute granted permission to reuse the survey for the purposes of this study. The Urban Institute report (Hendey, 2010) provides results from two surveys: (1) The housing counseling organization survey, designed to “capture general information on structure, funding, geographic reach, and capacity of agencies providing foreclosure prevention counseling … The survey also asked about the number and type of clients that had been served in the past, and to whom and how any marketing and outreach was done. Finally, counselors were asked to evaluate the importance of a set of strategies and challenges to obtaining successful counseling outcomes” (p. 5); (2) a “survey of legal aid organizations covering topics similar to the housing counseling organization survey, including funding, geographic reach, and capacity … client demographics and successful scenarios for avoiding foreclosure [as well as] foreclosure scams” (p. 5).