WASHINGTON – Sept. 17, 2008 – The Foreclosure Prevention Act, which passed in July, allocates $4 billion to cities and states that have been hardest hit by the surge in foreclosures over the last year. Recipients will be able to use the money – which is an addition to the usual funding for the Community Development Block Grant (CDBG) program – to buy foreclosed properties to stabilize property values. Now, the U.S. Department of Housing and Urban Development (HUD) is devising a formula for distributing the funds for communities in need.
The help comes just in time for cities like Cleveland, which, in 2007, demolished nearly 1,000 abandoned properties, a 400 percent increase over the number demolished in 2006, according to Mayor Frank Jackson. The city also saw a 78 percent increase over the last two years in the number of vacant and abandoned properties it had to clean up, from 27,000 in 2005 to 48,000 in 2007. “The funds expended by the City of Cleveland to abate the nuisances caused by vacant and abandoned property, the increased public safety risk, as well as the money spent to help its residents prevent foreclosure, are monies that are being diverted from other services that the city could be providing its residents,” Jackson wrote in his report.
The Washington-based National League of Cities (NLC) is pleased with the bill’s passage, says Mike Wallace, NLC’s senior legislative counsel. “The bill is very beneficial to cities,” he says. “Now, we’re working with HUD and other stakeholders … to make sure this rollout goes as smoothly as possible because of the really tight time frame that Congress has given HUD to turn this money around.”
When the bill was signed into law on July 30, HUD was given 60 days to determine how to disburse the funds, and the first grants should go out 30 days after the formula is announced. HUD is seeking reliable data on the nation’s entire housing market to determine communities’ shares of the $4 billion. “As far as I know, there’s no single data that covers 100 percent of the housing market across the country,” Wallace says.
HUD requires that cities and states submit their plans for the money, similar to the CDBG process, Wallace says. However, by late August, the specifics of that process had not yet been determined. “The bill gives HUD wide latitude in terms of additional regulations and requirements, so we just want to make sure that the funding allows cities to do what the bill intended to do, and that there’s no additional regulations that would prove prohibitive to cities accomplishing their goals of purchasing these homes and returning them to market, or making them rentals, or doing whatever they want to do with them,” Wallace says.
Florida, Nevada, California, Ohio and Michigan also are likely to be prime recipients, Wallace says. “Those are states that have well-documented problems with these subprime mortgages and foreclosure rates,” he says. “To be a player with this funding, you really have to get the ball rolling now, because there’s such a quick turnaround time in terms of distribution of the funds,” he says.