While Congress is pushing legislation that will spend billions of taxpayer dollars aimed at delivering foreclosure relief, we must move on a parallel path with solutions that stop the spiral of housing depreciation that is undermining local neighborhoods. Leading consumer advocacy groups estimate that about two million homes will be lost to foreclosure between now and 2010. Foreclosures are the single greatest cause of home price depreciation. If this is allowed to play out, it will further erode home values in America’s neighborhoods and threaten our nation’s banking and financial services industries. For certain, our minority communities will bear the greatest impact and will be the last to recover.

Problems can sometimes be opportunities turned inside out. As housing prices once soared in many regions of the country, experts worried how first-time buyers could keep pace and enter the market. The truth is, they couldn’t. But now that prices have fallen to more affordable levels this glut of empty homes can be the fresh start a new era of buyers needs. For this to happen, lenders and servicers MUST change the way they manage and sell foreclosed homes, which now favors investors. This begins with updating an old business model to serve the current needs of a struggling market by adopting a new set of best practices. This should include:

• Foreclosure resale policies that favor owner occupants. Studies have proven that communities that are owner-occupied are healthier, have less crime and more stable property values. Typically owner-occupants are also more willing to pay a fair market price for a property in which they plan to live for years – a huge plus for ailing lenders that can stabilize property values;
• Marketing outreach and education that creates awareness about available properties among minority and low- to moderate-income buyers. Minorities will represent the majority of first-time homebuyers over the next decade. The inventory of foreclosure properties is exactly the affordable housing that can help the next era of buyers erase the disproportionate losses suffered by people of color during this debacle;
• Mortgage products that facilitate the sale of foreclosures to homebuyers. The credit crunch in the aftermath of the subprime mortgage foreclosure crisis has made it more difficult for many buyers to get affordable loans. Central to the success of this strategy is the availability of mortgage products that enable first-time buyers to purchase these properties. Without this access to credit, investors with cash will continue to scoop up deals that could perpetuate the same speculator impact on neighborhoods.

With the acquisition of Countrywide, Bank of America will hold one of the nation’s largest portfolios of foreclosed properties. At the same time, through the acquisition of Bear Stearns, JP Morgan Chase will acquire EMC Mortgage, another major source of foreclosures. This puts these mega financial institutions in unique position to drive a new trend to use these assets as homeownership opportunities in underserved and minority communities.

By stabilizing property values that will ultimately slow down the pace of foreclosures, we can help minimize losses facing financial institutions, restore the tax base of communities and rebuild confidence in the real estate market. The industry can either approach the situation with the same old way of thinking or embrace the opportunity here to foster meaningful recovery and long-term change. By leveraging foreclosures as a way to create housing opportunities for first-time homebuyers, we can not only affect the stability of the nation’s financial systems but also determine the fate of America’s neighborhoods.