Foreclosure relief comes too late

    At first glance, Tuesday’s announcement that $39 million in federal funds will be available to help redevelop foreclosed properties throughout the state seemed like a great idea.

    After all, the funds are intended to be used to stabilize neighborhoods and stem the decline of values of neighboring homes. The effort is part of the Neighborhood Stabilization Program (NSP) within the U.S. Department of Housing and Urban Development (HUD).

    "Foreclosures have a devastating impact on neighborhoods and the state’s economy and we must do all we can to not only prevent foreclosures but also help rehabilitate impacted neighborhoods," said Gov. Jim Doyle. "These Neighborhood Stabilization funds will allow us to take our statewide foreclosure efforts to an even higher level."

    The NSP grant can be used to acquire land and property; to demolish or rehabilitate abandoned properties; and/or to offer down payment and closing cost assistance to low- to -moderate income homebuyers.
    The program also seeks to prevent future foreclosures by requiring housing counseling for families receiving home buyer assistance.

    The grant was a part of a $3.92 billion announcement by HUD that went out to all states and to communities hardest hit by foreclosures.

    That’s all fine and good. However, I think the fluidity and the depth of the nation’s financial crisis is perhaps rendering the practical applications of some of the government’s programs futile and obsolete.
    The NSP was designed to help people qualify for loans to move into homes that already have been foreclosed upon.

    Think about that for a moment. Isn’t that a bit like installing a security system after the home has been robbed? Or installing sprinklers after the home has been burned?

    Or installing a sump pump system after the home has been flooded? Or installing a fence around a barn after the horses have all run out?

    One other point. In current market conditions, good luck trying to find a bank that will provide a mortgage to a homebuyer who needs federal assistance to make a down payment or cover the closing costs.

    Perhaps a better use of federal resources may be in helping people stay in their homes in the first place. Perhaps the funds could be used to help homeowners buy out their subprime mortgages early and get into traditional, stable, more manageable, 30-year, fixed-rate mortgages.

    Perhaps that would provide some real relief on Main Street.


    Steve Jagler is executive editor of Small Business Times.

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