HUD funds to help new home buyers

By Joe Schoenmann

Tuesday, Oct. 21, 2008 | 4:20 p.m.

If your home is in foreclosure, the $72 million infusion of Department of Housing and Urban Development money coming to Nevada isn't going to do you any good.

Restrictions force local governments to use the money — part of the Housing and Economic Recovery Act signed in July — to assist new buyers of foreclosed homes.

That was part of the message delivered this morning to the Clark County Commission by Mike Pawlak, a management analyst in the Department of Finance.

Every state received a minimum of about $19 million. Clark County’s portion of Nevada's $72 million is about $23 million. Las Vegas gets $15 million, North Las Vegas gets $7 million and Henderson about $3 million.

The state received a direct allocation of $24 million, and it’s up to them to decide how to divvy up that money to the rest of the state.

Pawlak said Clark County accounts for about 12,000 of the state’s 12,800 foreclosed homes, so Las Vegas, North Las Vegas and Henderson "are going to try to convince the governor and the state that the needs are greater here, and Southern Nevada should get a substantial piece of that money."

Even then, Pawlak warned commissioners, the money will only be used for very specific uses. HUD requires that the money be targeted to areas where foreclosed homes were purchased with sub-prime loans.

It also outlined restrictions on eligibility, which Pawlak said means that neighborhoods with homes valued more than roughly $250,000 probably won't benefit.

Finally, HUD requires that the county be able to show that it obtained a 15 percent average discount across the aggregate of homes that were bought with county assistance.

"It does require that the holders of those foreclosed properties are willing to take that additional haircut," Pawlak added.

If many of these homes are chosen in one area then, won’t that drive down the property values of homes that aren’t foreclosed upon?

Pawlak said his office is "sensitive to that possibility" and has already "talked about not drawing our neighborhood boundaries too narrowly, because we wouldn’t want that to happen."

HUD requires the county’s plan describing how it will spend the money to be submitted by Dec. 1.

Pawlak anticipates that the plan will include downpayment assistance for qualified homebuyers. The county won’t be playing mortgage banker, he added, but will likely use organizations that already operate down-payment assistance programs.

Overall, Pawlak said the result of developed plans will be “very positive.”

“The point of this is to try to restimulate the purchase of these vacant houses, so that it can improve neighborhoods and encourage other people to buy homes in those neighborhoods,” he said.