Localities Firming Up Foreclosure Aid Plans

Proposals Due Soon On Use of $22 Million

The massive housing bill that passed Congress this summer will deliver $22 million to the Washington region's jurisdictions, and local governments must decide in the next few weeks how to spend that money to erase the blight of abandoned and foreclosed homes.

Officials are considering whether to buy properties and resell or rent them to low-income residents or help people hoping to buy the houses. Or jurisdictions could buy blocks of abandoned properties, demolish the homes and hold the land until housing markets improve.

Approved in July, the $3.92 billion measure includes grants to Virginia, Maryland, the District and several hard-hit localities, such as Prince George's and Prince William counties.

Local governments must submit plans for their grants to the U.S. Department of Housing and Urban Development by Dec. 1 and then commit the money in the 18 months after approval -- an exceptionally short timeline for large, new and complicated federal programs.

The local grants provision of the new Neighborhood Stabilization Program was the most controversial of the housing bill, which also included rescue plans for Fannie Mae and Freddie Mac and a program to help 400,000 homeowners facing foreclosure refinance their mortgages.

President Bush opposed the program but dropped a veto threat over the issue, paving the way for the intense local discussions on how to spend the new money.

Unlike programs that help families that have fallen behind on loan payments, the new grants assist communities where home values have fallen because of foreclosed and abandoned houses.

"The grass grows tall. The swimming pools become fetid. They become magnets for crime. A foreclosed home by its very nature will indirectly impact property values of surrounding homes," said Brian Sullivan, a HUD spokesman. "When a home is abandoned, it can really have an almost viral effect on the surrounding homes."

Maryland Housing and Community Development Secretary Raymond A. Skinner said yesterday that the state will decide in the next weeks which local governments will receive a portion of the $26.7 million that has been allocated to Maryland. Local governments that received their own grants can apply to the state for more.

"It's a great opportunity to work with our local partners to deal with foreclosed properties so they are not a continuing eyesore and blight in our communities," Skinner said.

Prince George's, which HUD estimated has had a foreclosure rate of 5.6 percent during the past 18 months, has been awarded $10.88 million directly through the federal program, the largest grant of any local government in the region. There, a vigorous debate has emerged over how to best spend the dollars.

Officials with the county's housing department have proposed buying 40 foreclosed homes, rehabilitating them and then selling them to residents in the low to middle income range.