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» VISIT US ONLINE @ DSNEWS.COM 75 COVER STORY INDUSTRY INSIGHT INDUSTRY INSIGHT INDUSTRY INSIGHT suitable. Every success is a huge step forward for these families. Brennan pointed to research funded through a How Housing Matters initiative that showed that kindergarten readiness depends upon where kids grow up. If they come from broken communities where foreclosures abound and live in poor-quality homes, they are at a disadvantage in school. Local governments have a lot to gain by getting these communities back into shape and back to generating tax revenue. Stronger communities attract businesses, deter crime, and bring in new residents. Under the right conditions, the local construction economy can benefit as funds become available to bring substandard properties up to code and make them suitable for families. is brings new jobs into the community and generates permit income. It can also provide healthy returns to investors who put their money toward these projects. No one benefits when blight takes over neighborhoods, as it has nationwide since the crash. THE QUESTION OF CAPITAL ere are a number of problems we face in distressed communities, especially in the inner cities. e most significant of these is a lack of funds. While the government, nonprofit organizations, banks, and other investors are putting money into projects here, it's mostly for tax benefits, to meet CRA requirements, or out of charity. at's not the best model for any business. Real estate, whether it's located in a gated community in a wealthy neighborhood or in the center of a nearly abandoned urban neighborhood, should always be viewed as an asset. Like any asset, it should be preserved, protected and, if necessary, enhanced to increase its value. But that takes capital. To attract capital to the inner cities, investors would need access to better information about how their funds were being invested. Today's community-based organizations do not have the technology to offer this kind of reporting, even though it is available today. To make it work, they would need software that could act as a hub to pull all of the partners together, track the work they do together in a fully compliant manner, and then report back with full transparency. Technology development is our particular area of expertise. We know that good real estate disposition software could easily empower a nonprofit organization—or any party to the transaction for that matter—by providing easy access to critical information about properties in blighted communities. It would transform them from charities to legitimate real estate business partners who have real opportunities to share with investors, construction companies, and community governments. is software exists today and was instrumental in helping the nation's mortgage loan servicers move hundreds of thousands of properties back into the market after foreclosure. It is now allowing those working to save these communities to attract funding, hire and manage rehabilitation companies and then work with real estate agents to sell these properties back into the market. A NEW KIND OF PARTNERSHIP Last year, an industry veteran embarked on a campaign to create a new kind of consortium that would focus on this specific problem. Donald Maxwell is Managing Partner at M2 and former Director of Fannie Mae's National Property Disposition Center. He has decades of experience in moving real estate off investors' balance sheets and back into the ownership of families in pursuit of the American Dream. Maxwell has in mind a method for changing the way distressed real estate in inner cities is rehabilitated and sold. If he's right, it could open up opportunities for everyone in the value chain. His immediate hope is that it will attract outside investment into the real estate business in service both to the investors' bottom lines and to blighted communities. "From our perspective, this is a great opportunity for individual real estate investors to participate in the rebuilding of our communities and earn a good return while doing it," Maxwell said in a press release when his program was announced last October. "is new approach accomplishes two things. First, it allows nonprofits to make more money with their services by having scale and access to the funding required to acquire these properties from sellers, like so many cities that currently own them. Secondly, it puts more people who deserve to be homeowners into homes of their own." Anyone who doesn't think that these community-based organizations should make money on their work doesn't understand the complexities and the challenges involved in what they do. e revenue they could earn by working with individual investors to buy up, rehabilitate, and then sell properties back into the market would increase their ability to serve their communities in every possible way. But it's not just revenue that Maxwell's plan offers these organizations. For the first time, community-based organizations will have the power and the connections required to heal neighborhoods. If used correctly, the new platform could even make these organizations self-sufficient. REBUILDING TOGETHER e mortgage business is cyclical, but so is the real estate business as a whole. We need to think about the default, foreclosure, and REO disposition business and the opposite side of the loan origination coin. is is especially true in these communities where blight has rendered much of the available real estate untenable. A partnership that brings together individual investors, nonprofit community- based organizations, home construction and rehabilitation companies and new homebuyers could change the way real estate is viewed in our most disadvantaged neighborhoods. Instead of a "project," we have investments. Instead of a handout, we can offer opportunities. Instead of working hard to help families from going over the edge, we can offer them a fair chance at the American Dream. But it requires technology. Maxwell and his company M2 have been working with Exceleras, and the model we have created can be used by anyone in the industry. e result is a complete default and asset management solution that will allow nonprofits to manage real estate, giving them the power to acquire, rehabilitate, and sell homes in order to rebuild their communities. M2 is currently operating pilots with its new platform in Michigan, Texas, and Georgia. Maxwell said the system is working and the new model may soon be expanded to other communities across the country. As Brennan points out in her January 5 article, "A fresh look shows the potential for problem properties to be restored or reenvisioned to create safe and decent housing while improving quality of life for the existing low-income population. But all paths require a committed leader willing to look beyond the present conditions, engage in partnerships across agencies and sectors, and amass and experiment with new tools as he or she writes a new playbook for restoring vacant properties and revitalizing neighborhoods." We couldn't agree more.

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