Los Angeles, a city which had over 21,000 homes in foreclosure listings in the last two years, received $33 million from the federal Neighborhood Stabilization Program to repair houses selected from foreclosure listings and then sell them or rent them out to low-income families.
Some housing advocates criticized the formula used to divide the $6 billion federal funds for the stabilization program because it allocated much higher funding to big cities like Cleveland and Los Angeles. But Los Angeles officials argue that even if the city spends all the allocation in buying houses from foreclosure listings and then rehabilitating them at about $100,000 per house, the city can buy only about 330 houses with the $33-million funding.
Shaun Donovan, former chief of New York Housing Division and recently appointed U.S. Housing Secretary, visited Los Angeles recently and toured some houses in foreclosure listings. Los Angeles contributed thousands of foreclosed units to make California foreclosures the highest foreclosure figures in the nation in 2008 and in the first months of 2009. More than 25 percent of the country’s total foreclosures occurred in California.
Among the foreclosed homes visited by Donovan is a duplex across the home of Daniel Lubiano in the southern part of Los Angeles. The house has been in foreclosure for about a year and the tenants left the property dirty and vandalized. Lubiano hopes the property would be bought and occupied so his neighborhood will restore its previous condition as a safe and livable place.
Mercedes Marquez, head of Los Angeles’ housing agency, said her agency will choose buyers who will really live in the rehabilitated properties, and not investors.
The duplex across Lubiano’s home was bought in August 2006 for $470,000 with a 100-percent loan-to-value financing from Washington Mutual at a flexible interest rate. The duplex was sold for only $60,000 in 2001. Anthony Chatman, the realtor contacted by the bank, planned to sell it for $179,000 through foreclosure listings. But he is now negotiating a sale with the city so it could be rehabilitated under the stabilization program.
To make the home acquisition and rehabilitation more efficient, Marquez said her agency set up a nonprofit agency in partnership with Maryland-based low-income housing developer Enterprise Community Partners to find foreclosure properties, either in foreclosure listings or from other sellers, and then make bids.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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