REAL ESTATE MARKET
Fairfax May Offer Deal On Foreclosed Homes
Tuesday, May 20, 2008
Fairfax County is developing a program to allow as many as 100 first-time home buyers to purchase foreclosed houses at cut rates to bolster the county's affordable-housing efforts and help prevent the region's mortgage crisis from causing neighborhood decline.
Dubbed the Silver Lining program, county housing officials have proposed spending as much as $6.4 million over two years to help such middle-income professionals as teachers, police officers and firefighters afford the region's housing. With county loans, qualified buyers would be able to purchase the properties directly from participating banks at below-market prices and be eligible for low-interest mortgages.
"This is good for workforce housing, good for neighborhoods and good for individual families who will benefit," said Gerald E. Connolly (D), chairman of the county Board of Supervisors. "We're stabilizing the plummeting price of homes and also helping stabilize neighborhoods."
Although Fairfax has not been hit nearly as hard by foreclosures as neighboring Prince William and Loudoun counties, the number of foreclosures has risen dramatically as a result of the subprime mortgage crisis -- from 198 in 2005 to 4,527 in 2007. Most of the foreclosures are clustered in Springfield, Herndon, Centreville and the Route 1 corridor. The situation has raised concerns about depressed property values, a decline in maintenance and higher rates of crime, including vandalism.
Connolly, who introduced the idea of converting foreclosed properties into workforce housing earlier this year, said the county's program could become a national model. Congress is considering several proposals to use federal funds to help purchase foreclosed properties. And a similar proposal will be considered today in Prince William, where county staff will present a program to supervisors that would make low-interest loans available to county employees to encourage them to buy houses there.
Connolly said the money would come from an existing effort that spends $22.7 million a year to preserve affordable housing. It would not require additional revenue, he said.
Not all board members favor the idea. Supervisor Pat S. Herrity (R-Springfield) said the government should not be in the business of buying private property, particularly during an economic downturn that has pinched county tax receipts and led supervisors to tighten spending and raise taxes.
"I don't understand the board's fascination with buying private property," Herrity said. "There's turnover in foreclosed homes. They're not all vacant. Some have been sold. Some have been fixed. The government shouldn't be involved."
A draft report prepared by the county Department of Housing and Community Development notes that foreclosed houses in Fairfax are selling, but it is unknown how many are being sold to people who move in and how many are being sold to investors only to remain vacant.
The effect of foreclosures on surrounding neighborhoods and the county overall is real and measurable, according to the report. Citing the Center for Responsible Lending, the report notes that foreclosed properties with subprime loans in Fairfax lost an average of $5,545 in value. It also states that as many as 65 properties around a foreclosed property lose value. With about 3,000 properties in that category, that means declines in property values could envelop entire communities. It also means that the county's housing stock has lost more than $1 billion in real property value.
In addition to the Silver Lining initiative, the housing department has proposed buying foreclosed properties identified as abandoned or blighted. The county would fix them up and sell them to first-time buyers and nonprofit organizations or rent them through the county's rental program.
Other pieces of the proposal include providing low-cost loans to homeowners to help keep up appearances and keep foreclosed properties safe and providing counseling to homeowners in distress to help prevent foreclosure.
Supervisors will take up the proposal at the end of the month.
Staff writer Kristen Mack contributed to this report.