By Bob Christie
Phoenix — The five states hardest hit by the foreclosure crisis have been given only weeks to plan how to spend $1.5 billion in federal money announced by the Obama administration last month.
Guidelines issued under the U.S. Treasury Department’s Fund for Hardest Hit Housing Markets on March 5 gave housing finance agencies in California, Arizona, Florida, Nevada and Michigan just six weeks to come up with plans on how to spend their share of the money.
The rush could be difficult for the states, especially because Treasury is seeking “innovative” measures to help families facing foreclosure. But some observers have been urging the administration to try the approach.
“This is long overdue, allowing the use of more innovative techniques,” said Ken Rosen, a real estate professor at University of California at Berkeley’s Hass School of Business.
The guidelines give wide leeway to the state housing finance agencies charged with doling out the money to design programs tailored to their region’s circumstance. The money can be spent, for example, to help families who can’t pay their mortgages because of job losses; to aid people unable to refinance because plunging home values have left them owing more on their property than the property is worth; or to give relief from second mortgage payments.
California’s Housing Finance Agency, for example, is looking at areas of the state that have been hardest hit, such as the Central Valley and Inland Empire area southeast of Los Angeles, spokesman Ken Giebel said. The agency is getting the most cash, $700 million.
It will have to start from scratch with plans on how to help unemployed homeowners, for instance, and how to get the money from the federal government to the state government to the actual underwriter.
“There’s a lot of innovative ideas and I’m hoping we have a lot of smart people in each state who know them; I know we do in California,” Rosen said. “So I think there’s plenty of time.”
Florida is getting the second-largest share at $418 million.
Cecka Rose Green, communications director for the Florida Housing Finance Corp., said her agency is just starting to review the Treasury requirements, but has put a team together and is reviewing programs other agencies are using. They’re looking at plans that have helped in other states and will likely cherry-pick the best.
“I think we’re taking those important first steps but we’re not close to getting any details of a plan out,” she said.
Michigan is getting $154.5 million, Nevada $103 million and Arizona $125 million.
Like other states’ officials interviewed for this article, Arizona Department of Housing spokeswoman Kristina Fretwell said there was no doubt that Arizona would get an application in by the April 16 deadline. Treasury will then spend several weeks reviewing the proposals, with a goal of getting the first cash to homeowners by summer.
The new program announced by President Barack Obama in February is meant to get more help to states where housing prices have declined by at least 20 percent.
“The biggest reason and rationale for the timeline is the urgency of the issue,” Treasury spokeswoman Andrea Risotto said. “We want to try to get relief out to these homeowners as quickly as we can.”