PHOENIX (AP) — The five states hardest hit by the foreclosure crisis have been given only weeks to plan how to spend $1.5 billion in federal funding announced by the Obama administration last month.
Guidelines issued under the U.S. Treasury Department’s Fund for Hardest Hit Housing Markets on March 5 gave housing finance agencies in California, Arizona, Florida, Nevada and Michigan just six weeks to come up with plans on how to spend their share of the money.
The rush could be problematic for the states, especially because Treasury is seeking “innovative” measures to help families facing foreclosure. But some experts have been urging the administration to try the approach, believing it will be helpful and that it can be done quickly.
“This is long overdue, allowing the use of more innovative techniques,” said Ken Rosen, a real estate professor at University of California at Berkeley’s Hass School of Business.
The guidelines give wide leeway to the state Housing Finance Agencies charged with doling out the money to design programs tailored to their region’s circumstance. The money can be spent, for example, to help families who can’t pay their mortgages because of job losses, unable to refinance because plunging home values have left them “underwater,” or to give relief from second mortgage payments.
California’s Housing Finance Agency, for example, is looking at areas of the state that have been hardest hit, like the Central Valley and Inland Empire area southeast of Los Angeles, spokesman Ken Giebel said. The agency is getting the most cash, $700 million.
It will have to start from scratch with plans on how to help unemployed homeowners, for instance, and how to get the money from the federal government to the state government to the actual underwriter.
“None of this stuff is in writing, it’s all up in the air right now,” Giebel said.
Rosen suggested allowing the value of a home that is worth less than the homeowner owed to be written off, replacing that amount with a second mortgage that wouldn’t have to be paid off unless the home rose enough in value.
The homeowner would then share in the profits, providing an incentive to stay in the home. He also said programs to allow the unemployed to forgo payments for a year, with those payments wrapped into a second mortgage, would be helpful.
“There’s a lot of innovative ideas and I’m hoping we have a lot of smart people in each state who know them; I know we do in California,” Rosen said. “So I think there’s plenty of time.”
Florida is getting the second-largest share at $418 million.
Cecka Rose Green, communications director for the Florida Housing Finance Corporation, said her agency is just starting to review the Treasury requirements, but has put a team together and is reviewing programs other agencies are using. They’re looking at plans that have helped in other states and will likely cherry-pick the best.
“I think we’re taking those important first steps but we’re not close to getting any details of a plan out,” she said Friday.
Michigan is getting $154.5 million, Nevada $103 million and Arizona $125 million.
Arizona’s housing agency is also just getting started on a proposal and hasn’t identified how it might spend the money.
I don’t mean to be too “in your face” with this, and I know it’s completely inappropriate but I’m just going to say it anyway! Whhhhhaat the heck has Obama been smoking these days? There, I got it off my chest!