Politics & Government

California cities, counties to get federal money to help buy foreclosed homes

WASHINGTON -- Sacramento, Modesto and Fresno will be getting new federal funds to help buy up foreclosed homes, the Bush administration announced Friday.

The money is part of a new $3.9 billion program that also spans other Central Valley cities stricken by the home mortgage crisis. Communities can use the grants to rehabilitate neighborhoods laid waste by widespread foreclosures.

"We worked hard to get the money to the communities where it made the most sense," Housing and Urban Development Secretary Steve Preston said Friday morning.

Cities and counties alike will get money. The city of Fresno, for instance, will receive $10.9 million, while Fresno County will receive $7 million.

"We're very excited about it," said Gigi Gibbs, Fresno County's community development manager. "We had actually been hearing that we might not get anything, so we're very happy."

Gibbs said county officials will soon meet with their counterparts from some of the county's smaller cities including Kerman and Reedley to plan how to spend the funds.

All told, 45 California cities and communities were designated to receive individual grants. Separately, the state will receive $145 million that can be distributed among smaller communities that didn't secure their own designated grants.

Cities including Merced, Madera and Turlock, for instance, could still be in line for funds distributed by the state even though they didn't make the cut for a direct federal grant.

"Considering that Merced County has one of the highest foreclosure rates in the nation, it's both surprising and disappointing that it was left off ... (the) list of California communities eligible for the direct allocation of funds," said Mark Hendrickson, director of governmental affairs for Merced County.

Hendrickson added that county officials "will remain hopeful" that future funds may be available through the state.

The money can be spent in several ways. Communities can buy land, demolish or fix up abandoned homes and assemble properties into "land banks" for better management. They can also provide closing-cost and down-payment assistance for low- and moderate-income homebuyers.

The money will be distributed once communities provide their plans, probably before Dec. 1. The communities will then have 18 months to spend the federal grants.

"We'll be able to go in and make a difference," Gibbs said.

Even so, California's two Democratic senators, Dianne Feinstein and Barbara Boxer complained the Bush administration had shortchanged the state. They noted that although California is receiving a total of $529 million, this is only 13 percent of the national funding total. California accounts for 25 percent of national foreclosures; Florida has fewer foreclosures but is getting more money.

"This makes no sense, and is totally unacceptable," Boxer and Feinstein wrote in a letter sent to HUD late Friday afternoon.

Congress established the $3.9 billion neighborhood stabilization program as part of a larger housing bill signed by President Bush on July 30. The Bush administration had originally resisted the idea, denouncing it as essentially a "costly bailout" for business.

"The principal beneficiaries of this type of plan would be the private lenders, who are now the owners of the vacant or foreclosed properties, instead of struggling homeowners who are working hard to stay in their homes," the White House Office of Management and Budget declared May 6.

But Bush soon relented, and HUD officials have since been devising the formula for allocating the community development block grants. Officials considered the number of foreclosures, defaults and sub-prime mortgages for each region, among other factors.

Central Valley cities are at the heart of the foreclosure crisis and so will be receiving a relatively large share of the funds. Stockton's foreclosure rate of 12.3 percent, for instance, leads the state and is nearly twice the California average. HUD officials on Friday also cast the risk of home abandonment in Stockton as "high."

Consequently, Stockton is now slated to receive $12.1 million, while San Joaquin County will get an additional $9 million.

Other Central Valley city and county funding levels include:

-- The city and county of Sacramento will receive a total of $31.8 million.

-- Modesto and Stanislaus County will receive a total of $17.8 million.

-- Fresno and Fresno County will receive a total of $17.9 million.

The Department of Housing and Urban Development news release can be found at http://www.hud.gov/news/release.cfm?content=pr08-148.cfm

The complete list of California cities and counties receiving funds can be found at http://www.hud.gov/offices/cpd/communitydevelopment/programs/neighborhoodspg/states/ca.xls