Yuma misses out on funding to deal with foreclosure crisis

  PHOENIX - Arizona is getting an extra $121 million in federal help to deal with the foreclosure crisis, but little, if any, of that money may go to the Yuma area.

  Yuma has not been hit as hard by the crisis as other communities in the state, according to a formula used to distribute the funding, so it will not benefit in the distribution of funding.

  The funding is not designed to help people stay in their homes. Instead, the cash will help the state buy up houses where the homeowners have defaulted and left. Then the state can fix them up and resell them - creating more cash for more purchases - or simply tear them down if they can't be repaired.

  The dollars, part of the federal Housing and Economic Recovery Act of 2008, are not being divided up along normal funding formulas: While larger cities and counties will get their own allocations, the money that otherwise would go to the smaller ones is rolled up in the $38 million being given to the state Housing Department. And that agency will decide where the money is most needed.

  State Housing Director Fred Karnas said the funds were divided up based on formulas used by the U.S. Department of Housing and Urban Development to determine the areas most hard hit. On top of that, HUD decided to give his agency the share that would go to the smaller communities.

  For example, he said, neither Yuma nor Flagstaff are getting their own allocations. Nor is there an obligation for his department to spend their share of the money in that area.

  He said it appears that the housing situation in Yuma and Flagstaff is nowhere as severe as other areas of the state. And in the case of Flagstaff, he said, most of the foreclosures are of second homes.

  By contrast, he said, there are severe needs in communities like Queen Creek and Maricopa and in much of Pinal County.

  Maricopa County is getting its own allocation of nearly $10 million, with about the same amount for Mesa. Glendale is in line for $6.2 million, with $2.4 million each for Chandler and Avondale and $2.2 million for Surprise. Pima County will get $3 million, with $7.2 million for Tucson.

  Karnas said the federal law requires the funds to go toward "neighborhood stabilization.''

  "The goal is really to try to purchase homes in neighborhoods that are particularly hard impacted, rehabilitate those homes and make them available for sale to folks that earn 120 percent of median income or below,'' he said. Karnas said that cutoff for Arizona is about $65,000 a year for a family.

  And 25 percent of the money has to be earmarked for low-income families.

  The idea behind such programs is to keep large areas from having so many vacant and rundown homes that it drives down the value of adjacent properties. That can have a cascading effect as these homeowners then find their houses are worth less than what they owe.

  Karnas said some of the funds will be used to buy up homes in good condition but that already are in foreclosure. He said that doesn't necessarily mean paying the banks or mortgage companies that now hold title the price they want.

  One option, he said, would be to try to cut a deal with a lender to make a "bulk purchase'' of homes on their books, with the idea of getting a discount. And Karnas said he would have people knowledgeable in the area of foreclosure involved to ensure the state did not get taken.

  "We have to be thorough in our analysis of the market and try to make these dollars go as far as they possibly can,'' he said.

  Karnas said if the homes are habitable, they can be sold off to those who meet income restrictions, with the state or local governments providing down payment assistance. He said that helps "recycle'' the funds which then can be used to buy up more properties.

  In some cases, though, the homes may be too far gone to save.

  Karnas said grant funds can be used to demolish these abandoned homes and even to "bank'' those vacant lots for future sales when the market recovers.

  The federal funding comes two weeks after Karnas' agency decided to divide up its state funds to put more emphasis on helping people in mortgage trouble stay in their homes and to aid others in buying their first house.

  That includes $3.5 million for "eviction and foreclosure prevention,'' a $1 million boost from the prior year.

  He said that is "short-term emergency money,'' designed to help those who, with just one month in mortgage money, can avoid foreclosure. Karnas said funds will not be spent on those who already are three or four months behind in payments.