Monday, January 18, 2010

Foreclosure crisis:Cincinnati solution Bulldozer, Indianapolis 25K Incentive

As I reported yesterday on my blogpost Hamilton County and Cincinnati are receiving 24 million in NSP monies. The Cincinnati solution is largely demolition based with some new construction and will impact neighborhoods like Avondale and Price hill composed of mostly historic properties. These would be replaced with vinyl sided new construction aimed at low to moderate incomes. So Historic blocks will be replaced with 'new blocks" where the homes will have no character and certainly will be devoid of walnut woodwork, shutters, fireplaces with rookwood and batchelder tile. The same usual suspects of developers will no doubt do the work and more and more of Cincinnati's past will be eroded. The "good ole boy network of Cincinnati politics" will have funneled millions of dollars into the pockets of the same developers and demolition contractors who contribute heavily to certain individual's reelections.
Our neighboring State of Indiana has taken a novel approach with the same NSP monies. Encourage people to come in and buy those homes, fix them up and live in them. Indianapolis has offered additional incentive and the net result is monies are those same monies are being spent to encourage home ownership while retaining the historic housing stock.

The program works like this:

IHCDA will offer up to $15,000 (not to exceed 20% of purchase price) to assist home buyers with the acquisition and/or rehabilitation of a foreclosed residential property located within an area of greatest need.

These funds may be used in conjunction with the IHCDA First Home product, FHA, VA, USDA, or prime fixed rate product. No adjustable rate or subprime mortgage products will be allowed for the purchase of these homes.

Home buyers may use these funds for closing costs and down payment assistance related to the purchase of a foreclosed home or residential property that will be used as the primary residence.

To be eligible for rehab funds a residential structure must not meet local building code and therefore is unable to be purchased in its present condition.

Buyers may use both acquisition and rehabilitation assistance in the purchase of a home, but the combined assistance may not exceed $15,000.

These funds will be in the form of a zero-interest, non-amortizing, second mortgage loan. These funds do not have to be repaid as long as home buyers use the home as a principal residence for at least ten years. If the home buyer sells the home within the first five years, the subsidy is repayable to IHCDA on a shared net proceeds basis. If the home buyer refinances within the first five years, the entire subsidy is repayable to IHCDA. After year 5 and through year 10, the home buyer will retain 20% in equity of the award amount per year.

This funding will be available to home buyers that are at or below 120% of area median income and who intend to occupy the home themselves.

Home buyers will be required to participate in 8 hours of pre-purchase education provided by an IHCDA certified counselor.

IHCDA will be coordinating with lenders/servicers, Fannie Mae, Freddie Mac and HUD to list foreclosed properties on a centralized Web site. Visit and click on the Market Stabilization Program link to determine if a foreclosed property is in an eligible neighborhood. Lenders will be required to sell the properties listed on the site at a discount that meets or exceeds NSP guidelines.

An additional incentive is being offered in Indianapolis:

Federal Home Loan Bank of Indianapolis's Program:

The Federal Home Loan Bank of Indianapolis’s (FHLBI) Neighborhood Stabilization Assistance (NSA) program is offering matching grants of up to $10,000. The main qualification for the NSA program is that the home buyer must have already secured IHCDA funds. Once IHCDA funding is secured, proceed by contacting an FHLBI member financial institution

In short Cincinnati has the wrong approach and we need to encourage this type of program in Ohio.


Rick said...

I think there are too many "conditions" on that Indiana program. There should be no income limitations. I mean, the point is to get the stuff inhabited. Who cares what their income is. I would simplify the whole thing. But anyway, here's my story.

I participated in a similarly designed program in covington KY back in the early 1990's. I bought a vacant historic home that was producing nearly zero tax income for the city and county, as it had a value of around only$20,000. After rehabbing it, and living in it for 15 years, and with similar grant recipients buying vacant properties along my street, that same home sold for well over $200K.... a huge increase to the local tax base!

There's even more good news. That money that was loaned to me at 0% got paid back when I sold the home. Now, the city can reuse those funds to turn more properties around! I can't believe any community wouldn't use these funds in this manner to stabilize neighborhoods, and create long term tax income. Talk about leverage!!!!!

Instead, it looks like Cincy will simply give away this money to demolition contractors, destroy their history and their neighborhoods, and end up with ever more budget shortfalls because they are so short sighted. Next, they will raise the tax rate on the remaining property owners in their best effort to push them out of the city boundaries as well! IDIOTS IDIOTS IDIOTS!!

My point is, a program like this, instead of demolition, can be a wonderful development tool. It's proven, it works, and it really can leverage that $24million into a long term income stream via re-inhabited properties.

Paul Wilham said...

I am sure the income restrictions were due to the fact it was federal money.There are alaways "strings' attached.

I am currently trying to convince some doners to start a Historic FLIP program in our neighborhood to acquire foreclosures or condemend property , stabilize it then resell to owner occupants with preservation coveneants I am trying to convice some banks to provide the "owner restoration phase" financing.

Our big battle is stopping the city from bulldozing everything. They are so shortsighted!

Thanks to several people restoration efforts property values are starting to rise. The trick is to get the cheap property into the hands of a restorer rather than a slumlord.