County has $5.22M to spend on foreclosed homes

Federal program is meant to spur homeownership

By Al Everson
BEACON STAFF WRITER

posted Jun 8, 2009 - 8:26:39am

Using federal funds, Volusia County is now ready to begin dealing with the foreclosure crisis.

The County Council June 4 approved a plan that effectively makes the county a major player in the market for homes already repossessed or abandoned.

“It certainly is a program that is needed to get some people back into homeownership, but I’m not sure I want the county to get into the real-estate business,” Council Member Pat Northey said.

The county has received $5.22 million under the Housing and Economic Recovery Act of 2008, and has a relatively short time to spend the funds.

The funds come from the U.S. Department of Housing and Urban Development.

“We have an 18-month window to spend the money,” Community Assistance Director Ed Jasper said.

He presented details of the Neighborhood Stabilization Program to the council.

Jasper said the lion’s share of the grant — 60 percent — must be spent to buy homes in targeted areas identified by the U.S. Department of Housing and Urban Development as having a high risk of foreclosure.

The primary target areas are DeLand, Edgewater, Holly Hill and Orange City. Secondary target areas are DeBary, Lake Helen, Ormond Beach and South Daytona.

One city conspicuous by its absence from the target list is Deltona, which has its own Neighborhood Stabilization Program (NSP). Deltona, with an estimated 10 percent of its homes in some phase of foreclosure, received $6 million in NSP dollars.

The county, and Deltona, may use the money either to buy foreclosed and vacant homes and resell them to eligible buyers, or help first-time home-buyers buy and rehabilitate foreclosed homes.

Prospective buyers in the program must qualify for assistance in the deal, and any housing purchased with the funds is subject to county approval.

The homes — single-family dwellings, town homes or condominiums — must be listed for sale at no more than $189,750. Prices will be determined by professional appraisals.

In addition, the homes must be unoccupied and owned by the lender. Jasper said the county will seek to buy the foreclosed homes at a discount, perhaps as much as 15 percent.

“The home must have been foreclosed as a result of the sub-prime market,” Jasper said.

None of the grant funds may be used to help distressed homeowners avert the loss of their homes.

Buying a foreclosed home may be like buying a used car.

“We suspect a large percentage of these homes will need rehab and repair,” Jasper said.

Many homeowners in default on their mortgages ripped out items, such as appliances or fixtures, after they received foreclosure notices. The costs of rehabilitating and repairing foreclosed homes may be paid from the grant.

First-time home-buyers may qualify for financial assistance based on their income in relation to the median income of the area and the price of the home. Assistance may be given to households with an income equal to 120 percent of the area’s median income.

“How do we determine the median income, because that number has been slipping and sliding?” Council Member Jack Hayman asked Jasper.

Jasper said the numbers will be determined by the federal government.

“The median income has not been going up,” he added.

Figures compiled by the county’s Community Services Division put the median income in the county at $52,300 for a four-person household; $47,085 for a three-person household; and $41,830 for a household of two.

As for selling the homes it buys and fixes for future owners, Jasper said the county will deal with local real-estate brokers. The County Council may select one realty firm in West Volusia and another in East Volusia. Real-estate agents that sell a county-owned home to a qualified purchaser will receive a commission for the deal.

The county hopes it will be able to spend most of the money with people who want to buy and fix a foreclosed home that they pick out themselves.

“Hopefully, we will have more of the buyer walk-ins than the county getting in the real-estate business,” Jasper said.

To discourage speculation and “flipping” a house bought with NSP funds for a big profit in a rebounding market, the program includes a new feature known as “shared appreciation.”

The new owner must give up all of the profit he may receive if the home is sold within two years of its purchase.

If the owner sells the home at a profit between three and five years after buying it, the county will get 50 percent of the profit.

As well as allocating 60 percent of the NSP grant for promoting homeownership, Volusia County may use 25 percent of the monies for rental assistance.

Another 5 percent may be used to demolish old or run-down homes to make way for redevelopment, and the remaining 10 percent is to be used to administer the program.

— al@beacononlinenews.com

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