VOL. 124 | NO. 152 | Wednesday, August 5, 2009
Stimulus Money To Return Foreclosures To Marketplace
By Bill Dries
Part of the latest dose of federal stimulus money to arrive in Shelby County predates the Obama administration.
This week at the Frayser Community Development Corp., office, home and mortgage lenders as well as leaders of the various CDCs across the county gathered to mark the awarding of almost $27 million in federal funding. The money from the U.S. Department of Housing and Urban Development comes from Washington through the Tennessee Housing Development Agency and other state agencies.
It’s targeted at foreclosed homes and the impact they’ve had on neighborhoods across the city. Hickory Hill and Frayser have been the hardest-hit sections of Memphis.
The Neighborhood Stabilization Program is to buy and rehabilitate such homes through the CDCs, which will then work with banks and other financial institutions as well as prospective homeowners.
Shelby County got a quarter of the $72.5 million awarded to Tennessee under the 2008 legislation.
“It was before the country knew what Memphis already knew – that we were in a world of trouble,” said John Gemmill, director of the HUD Memphis office. Gemmill said the CDCs will have many accountability requirements to meet and they will have a short time to jump through the hoops.
“This money has to get out fast,” he said.
Filling the gaps
Last month, the city of Memphis sent out a call for property appraisers to begin evaluating residential properties for redevelopment. That will include foreclosed homes in 10 Shelby County ZIP codes where the toll of foreclosures is most evident.
“Ideally a new homeowner will go into that home,” said Emily Trenholm, executive director of the Community Development Council of Greater Memphis. “If not it will be purchased and perhaps (become) a rental. But the objective is to bring homeowners back into the community and to get vacant and abandoned properties reoccupied. People talk about foreclosure in terms of the individual. But they’ve had a devastating impact on the neighborhoods. … This program is focused on the property.”
Rather than compete against each other for smaller portions of the federal funding, the local CDCs banded together for a unified approach that will focus on properties with the greatest and quickest impacts on turning a blighted area around.
The THDA portion of the funding includes $2.5 million for Habitat for Humanity of Greater Memphis and $2.4 million for United Housing Inc., the nonprofit agency that specializes in homebuyer counseling, as well as $1.7 million for the Frayser CDC and just more than $1 million for the Cooper Young Development Corp.
The CDCs are still in the process of buying some of the properties and have acquired others.
“I’m hoping they’ll be bought in blocks,” said Keith Turbett, community development manager of Sun Trust Banks Inc. “That’s what I’ve been talking to some CDCs about and moving on from there. That way they can make a real impact on a neighborhood.”
Sun Trust owns some of the foreclosed properties that might be part of the federally funded effort.
“We have been talking to United Housing Inc. and some others about those properties,” Turbett said. “It’s not a whole lot in Memphis right now. But we do have a few that we’ll make available for the program.”
The monthly average of foreclosed homes in Shelby County has dropped, based on yearly totals, according to real estate information company Chandler Reports, www.chandlerreports.com.
Some of that drop may be because it’s more difficult to get a mortgage. U.S. Steve Cohen, D-Memphis, said the federal money is also having an impact.
“The actions of your federal government are working,” said Cohen, who then put in a plug for health care reform efforts being pushed by the Obama White House and congressional Democrats at the August congressional recess. “If we can’t get a grip on health care in this country … it will be the next great economic crisis.”
Turbett said Sun Trust, like other financial institutions, hopes to see a pickup in its mortgage business if a recovery is really at hand. But Turbett warned that a recovery won’t be a return to the same lending conditions as before the national recession. That’s why counseling available through the CDCs is crucial to the effort to return foreclosed homes to homeownership.
“It’s sort of a catch-22 because the credit standards have gone up in terms of how you can get a mortgage these days,” he said. “There’s a lot more documentation. It’s probably more so the way it should have been before we got into this problem. The credit standards have risen and so we are looking for a better qualified borrower.”