When the clock ran out on more than 50 Prince George's County families who expected to get federally subsidized mortgages, it ended a dream of home ownership for many of them.
Money available for the subsidies was exhausted a few days before the Sept. 30 deadline. It was awarded on a first-come, first-served basis to applicants from all over the country.
The loans for the Prince George's families had been approved or were in the final stages of approval by a lender and by the regional office of the Department of Housing and Urban Development. But by the time HUD's local office reported the approvals to its headquarters, the money was gone.
The families had hoped to buy town houses which would have been built in the London Woods subdivision of Capitol Heights using money provided under Section 235 of the National Housing Act to pay part of the interest on the loans. The program was designed to help people with moderate incomes purchase homes by insuring their mortgages and paying a substantial portion of the interest.
The new town houses planned for London Woods were to have been priced in the $50,000 range.
Most of the London Woods applicants who missed out on the subsidy probably cannot qualify for more conventional financing, said an officer of Congressional Mortgage Corp. The firm had agreed to make the home loans on the condition that the HUD subsidy was approved, he said.
The 235 program died at the end of the fiscal year, a victim of administration and congressional budget cutting.
It was killed because "it was successful at spending money, but not effective in targeting subsidies for the poor to families who needed it most," said Philip Abrams, HUD assistant secertary for housing. Hereafter, federal help for poor families will be given only in the form of rent subsidies under HUD's Section 8 existing housing program, he said.
An authorization bill awaiting President Reagan's signature would give HUD the authority to continue the 235 program until May 20 if Congress provides the money. However, the HUD appropriations bill, already signed, for the fiscal year beginning this month, contains "zero dollars for housing" Abrams said.
There appears to be only an "outside chance" that Congress will approve supplemental funds for 235 in the postelection session, said another HUD officer.
This is bad news for the town of Capitol Heights and the 50 or so families who believed their loan subsidies were assured.
Eugene Zamer, a management consultant for Capitol Heights, said the town government had "worked hard" to smooth the way for construction in the subdivision, "working with the developer and the mortgage company" on the plans for London Woods. Completed and occupied town houses on the site would be a boost to the town's economic development, he added.
"We've been working on London Woods since 1968, trying to get town houses," said Zamer. "We'll keep working. There are some state programs we may try."
Representatives of the HUD regional office and of the builder, Raleigh Homes of Greenbelt, both said they had believed "plenty of money" was available for the London Woods applicants.
The Raleigh official said "the information we were given was that as recently as the week before the end of the fiscal year Sept. 30 " there was no shortage of funds in the 235 program.
An official at HUD headquarters in Washington said, however, that the builder and regional office workers had no reason to be so confident, adding there may have been "a breakdown in communication." The department's field offices and developers knew the loan subsidies were awarded on a first-come, first-served basis and that "they were never told" there was money to cover all applications, he said.
"They the developers waited until the last minute. It was a fair criteria, and everybody was given the same shot," said the HUD spokesman. He said that a report circulating in Prince George's County that 1,000 subsidies were awarded to Fresno applicants in the last few days of the program was exaggerated.
That California office processed and approved 600 applications during the previous six weeks and another 250 during the week before the deadline.
Faced with a deadline of Sept. 30 to use the loan money or lose it,HUD took back all the unused subsidies -- enough for about 8,000 families -- being held by its regional offices and offered them on a national first-come, first-served basis beginning Sept. 17, said a HUD official.
"Every office was scurrying" to get its applications in, he said. By the time the Washington regional office presented its more than 60 approved applications, nearly all the money was gone, and only 10 subsidies were available.
"There are stories like this coming in from all over the country," the official said. "We heard one story of a man who got married" so that he could get a subsidy, but got his application in too late. He added, however, that the Prince George's families were the largest group narrowly missing out on getting the loan assistance.
Under the 235 program, home buyers must make a down payment of only 4 percent of the home's purchase price, a substantial savings over the more usual 10 to 20 percent. Then, the buyer pays only 4 percent of the interest on the loan; and HUD pays the difference, up to 13 1/2 percent, the maximum rate the lender can charge under that program. (A HUD official said lenders are willing to make loans lower than the current 15 to 15 1/2 percent because the loan is insured by HUD.)
Mortgage amounts are limited -- with those for three-bedroom homes limited to $47,500, for example -- and the buyer's income cannot exceed 95 percent of the median for a family of four in the area where he lives. (The median household income in Prince George's County was $29,167 in 1981.)
The program was reinstated in 1976, after a three-year hiatus, and more than 102,000 subsidies were approved at a cost of more than $300 million since then.