Florida to Get $541 Million in Foreclosure Funds

More than $540 million in federal grants will be given to Florida state and local governments to buy wrecked property and assist low-income residents purchase Florida foreclosures.

U.S. Housing and Urban Development Secretary Steve Preston announced Friday that the state of Florida will receive $541 million in new federal foreclosure funds to prevent further home loan defaults and fight the damage caused by the rising number of abandoned properties.

The funds, “called community development block grants” must be used by State and local governments to buy property, restore abandoned homes and offer assistance to low-to-middle-income home buyers in form of down payment. The grant may also be used to create “land banks” buy and then sell distressed properties. President Bush signed a massive housing and economic recovery package in July which is where these grants originated. They are targeted at salvaging the real estate market with tax credits for first-time home buyers; additional resources for foreclosure prevention counseling; and up to $300 billion to refinance at-risk homeowners into low-cost, government-backed loans.

Miami-Dade County, badly affected by the recent overload of foreclosures, will receive more than $62 million. This the largest share of funds. The city of Miami and Miami Gardens will get roughly $12 million and $6 million and Broward County is eligible for nearly $18 million. An additional $91 million will be given to the state's housing program to assist in Florida foreclosure prevention.

HUD based the distribution of funds on a formula that calculated the number and percentage of foreclosures as well as the proportion of subprime loans, mortgage defaults and delinquencies. As of June 30, with 6% of all mortgages in default, Florida had the highest percentage of foreclosures in the country, representing some 200,000 properties. According to the Mortgage Bankers Association, more than 1.1 million borrowers nationally were in foreclosure at the end of the second quarter. As the economy weakens, number are predicted to rise over the next year Preston said in a statement, ''To those areas trying to recover from the effects of foreclosure and declining property values, help is on the way''. ``Clearly, the intent is to put this money to work in communities with the highest need and to have a meaningful impact.''

The city plans to disperse 50% of the grant money in an equity-sharing program with low-income buyers. The program would help home buyers with 50% of the purchase price of a Florida foreclosure. Should the homeowner sell within a certain number of years, the city would then share in any profits from appreciation.

Another 25% of the money will go toward buying destroyed and abandoned homes. The city would then redo the properties or demolish them to build new affordable housing.

Rental assistance for low-income residents will be provide using the remainder of the grant money.

The plan still needs City Commission approval. In the next two weeks HUD is expected to release further details of how the money can be used.

Contributed by MLR Realty