Upgrades on foreclosed homes help improve neighborhoods
Torrey Warship had never owned a home - until the mortgage foreclosure crisis.
Through a federal program to renovate foreclosed homes, the 34-year-old public works laborer bought his first house in Waukegan, Ill., for $138,000. He moved his family out of an apartment and into a two-story, two-bedroom, 2Â½-bath home in a "nice and peaceful neighborhood."
"I'm loving it," he said. "If it wasn't for that [program], I wouldn't have been able to get it."
Warship is one of a small number of new homeowners benefiting from the Neighborhood Stabilization Program, which helps to buy, renovate and sell foreclosed, abandoned homes.
The program doles out federal money to local governments, which help nonprofit organizations or municipalities buy the abandoned, foreclosed homes in targeted areas. The agencies - and in some cases cities - rehab and sell the homes. Prospective buyers must meet income limits.
Experts say the program is meant to help combat the blight of empty, deteriorating homes that can drag down a neighborhood's property values.
The effort has been slow to take off since Congress approved funding in 2008. And critics say the number of homes salvaged is paltry compared with the number of problems. For example: In Lake County, where Waukegan is located, 20 homes are set to be renovated. But the county saw more than 11,000 default filings in 2010, according to RealtyTrac, an online foreclosure market.
As a result, the U.S. Department of Housing and Urban Development said last week that it will provide technical assistance to speed the process.
Since the federal stabilization program was launched, Congress has allocated $7 billion, some of it through President Barack Obama's economic stimulus package.
A study by the Furman Center for Real Estate and Urban Policy found that foreclosed properties can lower nearby property values and tax revenues and can lead to vandalism and break-ins. The center recommended targeting transitional neighborhoods, where one or two restored homes will have more impact, rather than severely distressed areas.
Some officials say it's more important to target the worst properties.
For instance, the city of Elgin, Ill., used $2 million to buy 12 properties in four neighborhoods. It demolished one building and, with Habitat for Humanity, is rehabbing the rest. The purchase price ranged from $59,000 to $92,000 for each property, while rehab costs ranged from $178,000 to $249,000, said Sarosh Saher, a senior planner with Elgin.
Rich Sharga, vice president for RealtyTrac, thinks the program has a chance to succeed.
"Of all the programs bandied about, this is the one that probably has the most potential for making some real inroads," Sharga said. "A lot of these properties are ones nobody wants to buy. It's really a way to begin the healing process for the most devastated markets."