Deadline looms to use grants on foreclosures

April 2, 2010 at 12:00a.m.

Associated Press

LEHIGH ACRES, Fla.

With a use-it-or-lose-it deadline just months away, communities have spent less than half of $4 billion available under a federal program to redevelop abandoned and foreclosed properties.

Some city, state and county officials say they’ve been stymied by confusing and ever-changing federal rules for the money, awarded in the midst of the nation’s foreclosure crisis.

A year after the Neighborhood Stabilization Program started, about a third of more than 300 local governments given the help have barely made a dent in their funds, according to a recent U.S. Department of Housing and Urban Development report.

As of March 16, only 38 percent of the grant money had been “obligated,” meaning a municipality has a formal contract at a specific address in place — say, a contract to buy a foreclosed home. Governments must commit the money to projects by September, or it’s gone.

Some communities have used their money to buy, renovate and resell homes to low- and moderate-income families. Others demolished eyesores or bought multifamily apartment buildings and rented them out. Some used nonprofits to manage the program.

But local officials in other areas say they’ve been stymied by the rules, overwhelmed by starting a new program and, in many cases, outbid by cash investors when trying to buy foreclosures. Under HUD rules, grant recipients must pay 1 percent less than the appraised value of any property.

“We’re competing with the marketplace for foreclosed properties,” said Kurt Bressner, the city manager of Boynton Beach, Fla., which as of mid-March had spent only $11,000 of its $3 million grant. “By the time the properties end up in the listings, they’re gone.”

Boynton Beach was one of nearly 100 municipalities that had obligated less than 25 percent of its grant money as of mid-March. The state of Florida — which received $91 million — lags behind all but three other states in using the money.