| Communities in Action
SAN JUAN, TX
Program aids county in buying, selling foreclosed homes
By Jared Janes | The Monitor
February 05, 2010
Robert Calvillo believes a federally funded program to purchase foreclosed homes will eventually make an impact in neighborhoods filled with abandoned properties.
But so far, the executive director of Affordable Homes of South Texas is only concerned about making it through the red tape and paperwork.
Calvillo’s agency has just begun to spend its share of money awarded to Hidalgo County a year ago through the Neighborhood Stabilization Program. The program is intended to help the county purchase and resell foreclosed, abandoned homes to prevent them from becoming sources of blight in their neighborhoods.
“There was a lot of confusion and a lot of delays in really getting started,” said Calvillo, who expects rules and regulations to be loosened in a second round of funding. “We are now just barely scratching the surface of getting the money out the door where it’s supposed to be.”
How much of a dent the first round of funding will make in a deteriorating housing market remains to be seen.
The $2.8 million grant from the U.S. Department of Housing and Urban Development is expected to fund the purchase of 30 to 35 foreclosed properties in a county where there were almost 400 foreclosures last month alone.
Other federal programs have dealt with similar delays. A loan modification program was expected to help 3 million to 4 million homeowners through 2012 with reduced mortgage payments, but only 66,000 borrowers had accepted permanent modifications in the program’s first nine months.
In Hidalgo County, about 1 in every 104 housing units is in foreclosure, according to statistics from the Federal Reserve Bank of Dallas. The rate is better than those in the major metropolitan areas of the state.
But foreclosures are evident in neighborhoods hit the hardest where vacant homes have overgrown lots and are tagged by gangs, Calvillo said. Distressed homeowners who want to prevent their houses from meeting the same fate have few places to turn.
“There’s really limited resources for families that have nowhere to go,” he said. “They’re dealing with a lender in California to make a payment arrangement on a 1-800 call. It’s not easy.”
RULES AND REGS
Calvillo’s struggles to spend his agency’s share of the federal money can be blamed, ironically, on investors.
Because federal rules require properties purchased through the Neighborhood Stabilization Program to be bought at a discount from the county’s appraised value, the available foreclosed properties are bought up by investors at the regular rate. Those investors then rent the houses out or flip them for a profit.
Lenders haven’t been receptive to the county’s efforts to purchase foreclosed homes at a discount, said Steve de la Garza, who oversees the federal program for Hidalgo County. Environmental reviews required under the federal guidelines have also prevented sales in cases where lenders simply wanted to get the properties off their books.
The county split distribution of the program into two groups: Proyecto Azteca, a self-help housing organization, would buy foreclosed empty lots for the lowest-income group and move prefabricated homes onto the land.
Affordable Homes of South Texas would purchase foreclosed homes for families. The agency has managed three such purchases so far, but the program’s requirements make finding other properties a challenge.
With the clock winding down for the agency to use its share of the funds, it’s also now looking to purchase vacant properties, limiting its effect on the housing inventory in the county.
“Our initial objective was trying to get rid of whatever foreclosed homes were out there,” De La Garza said. “It’s not going as well as we initially wanted.”
MANY DELAYS
The county’s foreclosure rate last year — pegged by CNNMoney.com as the fastest-growing rate in the nation — was more than 600 percent higher than in 2007.
More foreclosures are on the way with 4.8 percent of the county’s homeowners at least 90 days delinquent on their mortgages.
Efforts to help homeowners refinance have stalled mainly because they don’t qualify under the federal formulas, said U.S. Rep. Henry Cuellar, D-Laredo. Nationally, more than 850,000 homeowners have received temporary loan re-modifications under a federal foreclosure prevention program, but only 66,000 of those have been approved as permanent modifications.
“We’ve got to get that process moving a lot faster,” Cuellar said. “The longer we delay, the more people there are out there who are losing their homes.”
Cuellar said community banks’ ability to help homeowners has been hampered by pressure from federal regulators who are intent on keeping more banks from going under.
In this year alone, 16 community banks across the country have failed.
But Cuellar said the real solution to addressing the continual stream of foreclosures is getting the economy back on track.
“It goes back to: People don’t have a job,” he said. “They’re not going to be able to pay for their houses. It’s all tied into the economy.”
A HOME
Alma Solis knows nothing about who owned the foreclosed lot in Donna where her home will be placed.
The single mother qualified in November for a home from Proyecto Azteca, a San Juan-based agency that helps families build homes at its construction yard.
Proyecto Azteca purchased the empty lot for Solis using about $11,000 in funds from the Neighborhood Stabilization Program.
Its quiet streets in a good city neighborhood make it perfect for her four children, Solis said. The four-bedroom house will give them more room to play than the apartments where she has lived in the past.
Like other Proyecto Azteca families, Solis has spent time at the construction yard putting her “sweat equity” into the house.
Her mother and her brother accompany her on trips to work on the house, but she leaves her young children with family to prevent them from getting hurt at the site.
“I do drive by and let them know this is going to be our house,” she said. “They’re like, ‘Mom, when are they going to finish the house?’ and I tell them, ‘Pretty soon.’”
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Ediberto Orta, left, applies bathroom fixtures to the wall of a home Thursday along with Gabriel Qintanilla at Proyecto Azteca in San Juan.(photo by: Joel Martinez)