Localities Firming Up Foreclosure Aid Plans

At a hearing this week, the County Council expressed deep skepticism about the idea, worrying that 40 home purchases would do little to address a gaping problem.

The county's Association of Realtors has recommended offering loans for down payments to residents willing to buy homes. The group estimates that the small loans could help more than 700 families -- potentially removing hundreds of vacant homes from bank ownership.

"It's pretty simple math," said Michael A. Graziano, director of government affairs for the association. "If we could leverage $10.8 million to upward of 700 households, we felt that would be a huge impact to cleaning up these vacant properties."

James Keary, a county spokesman, said officials are "considering significant modifications" to the plan based on input from the council, which is scheduled to discuss it again Thursday.

Prince William has been awarded $4.1 million. Elijah Johnson, director of the county's Office of Housing and Community Development, said the Board of Supervisors is considering plans to provide potential homebuyers with closing costs, down payment assistance and rehabilitation help. Funds will also be used for nonprofit organizations that want to create homeownership or rental plans.

In Fairfax County, housing officials have suggested to the Board of Supervisors that most of Fairfax's $2.8 million grant be used to provide second loans to potential homebuyers who are able to obtain one loan to cover a portion of the cost of a house now owned a bank.

In Montgomery County, officials hope to use the money to address a long-standing lack of affordable rental properties. Rick Nelson, director of the county's department of housing and community affairs, said Montgomery's $2.07 million grant would probably go toward buying seven houses, which would then be rented to low to middle income residents.

Nelson said resale of the properties would make little sense in Montgomery because the federal rules require that if new residents sell homes purchased through the program within 20 years, any profits gained on the sale would have to be returned to the government.

"It just kills any reason to go into homeownership -- I can't understand the rationale for it," he said.

Sullivan, the HUD spokesman, said Nelson's interpretation of the law would probably be correct in Montgomery, where high home prices mean the government's investment in each home will be high. Elsewhere, some new homeowners might be able to build equity.

In the District, a preliminary plan for $2.8 million should be completed by Thursday, and a hearing on the proposal will be held Nov. 20 at the Urban League, said Sean Madigan, a spokesman for Deputy Mayor Neil O. Albert.

Many of the 308 states and localities awarded federal money through the new program are debating whether to use the funds to finance home purchases by individuals or to buy properties and rehabilitate them, said Andrew Jakabovics, associate director of the economic mobility program at the Center for American Progress and an early proponent of the program.

He suggested the latter option might help governments target funds more effectively at neighborhoods eroding because of abandoned properties.

"I think in terms of this intent of the program, the county has it right," Jakabovics said of the discussions in Prince George's.