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Step Aside, Florida. It's California's Turn.

by Indy, published

There's not nearly as much housing help as the $4 billion the Bush Administration delivered in September. Of the $731 million President Obama handed out this time, though, at least California got the lion's share.

Both rounds were part of the Department of Housing and Urban Development's Neighborhood Stabilization Program; Thursday's funding was part of this year's stimulus bill. The program was created last year to help states and some local communities buy, renovate, sell or develop foreclosed or abandoned homes.

The new round, which Obama announced Thursday during a trip to California, includes $145 million for statewide programs.

An additional $21.7 million goes to local governments, much of that to the City of Modesto and Stanislaus County in the hard-hit Central Valley. It's probably not mere coincidence that the $15.7 million infusion of stimulus money helps give Blue Dog Rep. Dennis Cardoza political cover in the core of his district.

The money is no political gift, though. According to February statistics from RealtyTrac, Modesto's foreclosure rate is the fourth-highest in the nation. California continues to lead the states, with foreclosures increasing 51 percent over the previous year and 5 percent over the previous month.

It's nice that an administration finally recognizes those statistics.

In September, HUD data evaluated California's risk that homes would be abandoned as "low" and Florida's as "medium" in deciding to award Florida $541 million and California $529 million.

California officials were baffled and outraged.

"Frankly, it is beyond us how California -- which has nearly twice the amount of foreclosure filings than Florida -- could receive less assistance. This makes no sense, and is totally unacceptable," Sens. Dianne Feinstein and Barbara Boxer wrote then-HUD Secretary Steve Preston.

The September calculations for "abandonment risk" were based on U.S. Postal Service vacancy information and federal data on high-risk loans. The scores did yield interesting results.

Alabama, with only a 3.6 percent foreclosure rate over the 18 months previous, was considered a "high" abandonment risk, while California, with a 6.7 percent foreclosure rate, was deemed a "low" risk. Florida's foreclosure rate was placed at 8 percent - the California senators dispute that figure, which was based on Mortgage Bankers Association National Delinquency Survey and not actual filings - and called a "medium" risk.

Criticism of the program didn't end with concerns about the formula. Since the first round was delivered, concerns have popped up in many states about lack of guidelines for how the money should be spent.

In classic examples of NIMBY-ism that balks when neighborhoods shift away from owner-occupied, some people have said they'd rather see abandoned properties razed than rented.

It probably won't allay NIMBY concerns, but HUD does allow the money to be used to help low and moderate income buyers with down payments and closing costs.

There's also a provision to prevent subprime-loan shivers from running down you spine: All buyers receiving help will have to undergo financial counseling, and the financing must be from an institution that agrees to follow sound lending practices.

The less than $700 million California has received in both rounds is a drop in the bucket when it comes to solving the state's foreclosure crisis. But it at least offers some hope to people who would like to see their neighborhoods look less like ghost towns.

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