REGION: County gets federal funds to ease foreclosure crisis

Program will allow agency to buy and resell foreclosed homes

By CATHY REDFERN - Staff Writer | Wednesday, October 22, 2008 8:59 PM PDT ∞

RIVERSIDE ---- The county will receive $48.5 million in federal grant money to boost the local housing market, largely by buying and selling foreclosed homes, county officials announced this week.

About $10 million of the grant will be used to strengthen an existing county program assisting first-time home buyers, officials said, but the bulk will go toward creating a program for buying, renovating and reselling foreclosed homes.

The county Board of Supervisors on Tuesday directed its Economic Development Agency to return with a plan outlining the specific uses of the funds before Dec. 1, the deadline for filing the plan with the U.S. Department of Housing and Urban Development.

"The funding is a tremendous help," said Tom Freeman, spokesman for the Economic Development Agency. "It's not the end of our problems, but it's the beginning of the end of them."

The next step is identifying where the money should be spent, he said.

The federal Neighborhood Stabilization Program dictates that priority should be given to areas with the greatest percentage of foreclosures, those with the highest percentages of homes financed by subprime mortgage-related loans and those likely to face a significant rise in foreclosures.

Riverside County received the third largest grant in the country, after Miami-Dade County and Chicago, said Brian Sullivan, a HUD spokesman.

Nationally, $3.92 billion was distributed to states hit particularly hard by the housing crisis, under the Housing and Economic Recovery Act of 2008. The act was signed by President Bush on July 30.

The Riverside County share is available to unincorporated areas and to cities for which the county administers their federal Community Development Block Grants, Freeman said. Those include Temecula, Murrieta, Lake Elsinore and Canyon Lake.

One local Realtor said it will help, especially if used to strengthen residents' purchasing power.

"It's a nice chunk of money, but not a huge amount relative to the county's total foreclosure problem," said Gene Wunderlich, chairman of the Southwest Riverside County Association of Realtors. "But it's good to be on the receiving end of some of the public money that is being doled out, and it's bound to help."

The effect the money will have on the area will depend on how the money is used, he said.

"I think it's probably best to use it with first-time home buyers. As affordable as prices are, it's really an opportunity for a lot of folks to get into the market who haven't done so before."

Realtors have seen more potential buyers over the past six months or so, but some have had difficulties getting loans, he said.

"The best thing they can do is to try to stimulate the purchase side of the equation right now,." Wunderlich said. "One thing you don't want is for the county to buy up a bunch of houses and just sit on them."

The county is working with the community to decide the best way to use the money, Freeman said.

The grant has been divided into four pieces, with $9.7 million to enhance the first-time home buyers program; $21.9 million to buy and sell properties; $12.1 million for special housing projects; and $4.8 million for program administration, county officials said.

Specifics of the special housing projects remain to be decided, Freeman said, but it will include some oversight of lending practices.

"It will include an effort to ensure that we are watching how the lending institutions sell bundled mortgages and some ability to guide the destiny of those homes," he said. "We get one bite of that apple and we want to do it right."

The entire grant must be spent so that it benefits those with annual incomes less than 120 percent of the area median income, which is $53,300 for a family of four, county officials said.

Additionally, at least 25 percent of the grant funds must be used to house those who earn less than 50 percent of the median income.

The county's First Time Homebuyers Program is reserved for those who earn less than 80 percent of the area median income, and the grant will provide more than four times the program's budget for this year, Freeman said.

For those homes the county buys and needs to rehabilitate, county officials say they plan to use green-building methods to increase the sustainability and appeal of neighborhoods.

Supervisors Jeff Stone and John Tavaglione will serve on a committee to oversee the grant program, Freeman said, and the funds should be available in January. The component allowing the county to buy new homes is brand-new, he added.

"The board is taking a lot of input from the community, from business leaders and others," he said. "It's a pretty significant program."

Visit www.rivcoeda.org.

Contact staff writer Cathy Redfern at (951) 676-4315, Ext. 2621, or e-mail credfern@californian.com.