Foreclosure Purchase Program

Federal foreclosure-purchase program may fall flat in California. The $4-billion plan may harm homeowners in the state who are trying to put up for sale. Several county governments are uncertain whether they have the staff to utilize the financial support.

The foreclosure-purchase program – included in the landmark housing bill sign by President Bush last month – face rising suspicions among real estate expert and economists, who spot out that the government, will now be contending with lenders and private homeowners who have been struggling to put up for sale in a depressed market.

What’s more, an analysis by The Times shows that the California communities are with the most foreclosures – and therefore they are likely to be first in line for the federal aid – they already have a relatively sufficient supply of reasonable housing.

Out of the top 12 counties in California with the highest foreclosure rates, only Sacramento County has an equally towering need for reasonable housing, according to report from MDA DataQuick and the California Assn. of Realtors.

“I’m not sure this is the most cost-effective use of these funds,” said Kerry Vandell, director of the Center for Real Estate at UC Irvine. “Sometimes an experiment like this is just that, an experiment. And you don’t find out until later that it doesn’t really work out too well.”

The Times contacted housing officials in the 12 California counties with the highest concentration of foreclosed properties. Most of them said they had not lobbied for the bill, and a number of people wondered whether they even had the staff to put together and use the funding appropriately.

“There was a sense that they needed to put some money toward the problem and do that fairly quickly before the election,” Pelz said. “That’s probably why there wasn’t as much of a consultative process as there might have been had they had more time to put something together and really vet it out.”

The purchase-program was a fiercely contested stipulation of the housing bill. President Bush threatened a veto over the matter, claiming the $4 billion would be a bailout for banks and others who ended up in bad lending decisions.

“These empty homes are creating nesting places for criminals,” Waters said. “Later I discovered that this was a result of the subprime meltdown.”

In California, for example, most of the foreclosed homes are in areas such as the Central Valley, the Inland Empire and the Antelope Valley, locales known for their huge stock of low-cost housing.

If anything, these areas are fitting more reasonable because of foreclosures, and sales have chosen up in large part because of the ease of use of these homes at a discounted price.

“Those foreclosures are being purchased at a very rapid rate, and they are going to families who have been previously price-excluded out of the market,” said Mark Boud, a consultant who runs Real Estate Economics in Irvine.