2012 HOME program amended
A 2012 HOME Program amendment was approved at Wednesday night’s Common Council meeting by a vote of 14 to 2. Alderpersons Steve Bostrom and Kevin Mathewson voted against the amendment. Also, it had been previously approved at both the HOME Commission and the Finance Committee meetings earlier in the evening.
Alderperson Steve Bostrom wanted to know if the advice of the Federal Housing Administration (FHA) or a local lending institution was sought prior to proposing these changes. Mike Maki, city planner, said yes. “Eighty percent (80%) is required for a first mortgage. If the city offered 40%, that would help more families qualify for a loan.”
Bostrom stated that, one of the problems of the recent real estate market has been the loose lending practices. “Usually, the allowable number for second mortgages is not higher than 20%. Otherwise, it’s considered a non-conforming loan. It may work in this instance, but what about others? Extending that much credit which doesn’t get paid down for such a long period of time could be a problem.”
Maki then gave a short history. “The Department of Housing and Urban Development (HUD) wants to get people into affordable housing units. The city is not building more homes. Five years ago, we didn’t have the problems that we have today. There weren’t enough houses to sell. Now, all cities that deal with home funds, they all have big inventories of homes. They’ve tightened up the restrictions. It’s really hard to get qualified for a first mortgage, even with good credit. HUD has also put constraints on income caps. It’s a good starting point in getting houses sold. We are trying to change the program to get people in the homes and sell off the inventory.” Alderperson David Bogdala agreed that we need to get the houses on the market and people in the homes.
Alderperson Daniel Prozanski stated that “the Common Council has been hard on the HOME program. They want to get rid of the stock, they’ve wanted to use real estate agents. We’ve run into snags, requirements that the HUD put on us. Conventional financing is only going to work for a very narrow group of people. By changing the second mortgage requirements, which is at our discretion, we can offer more, and possibly move the homes, which is something we all want. We don’t collect any tax revenue by letting 21 houses sit. Also, these are homes we have to maintain.”
Maki said that the proposed home rule was changed for the 2012 funding because HUD has a new requirement for new housing. If a buyer is not found within six months, it reverts over to a rental home. Bogdala wanted to know if this was not an option for new homes, and Maki said that we can for 2012 and 2013. HUD is providing this new requirement. However, the city has restricted locally how we can use the money. There would have to be an amendment to the ordinance if we wanted to change it.
Bostrom wanted to know what limitations we were under in adjusting the price of the home. Maki replied that, if we lower the price of the home, the price is established by appraisal. If we sell the home at less than the appraised value, it becomes part of the subsidy. It would be added on to the affordability period, placing a lien on the property. The buyer would have to repay the money back to the city to be used for additional projects.
Maki also said that, they don’t want to depress the neighborhood further. Short sales have harmed the neighborhood, and they don’t want to continue the trend. “We’re trying to beef up the neighborhood,” he said.
Bostrom applauded the city on a creative approach, but he stated that he felt it was the wrong approach. “Instead of artificially inflating the value of the home, we should be lowering it to where the market is. That’s just basic Economics 101. I think we’re opening up a can of worms.”
The vote was 14 to 2 in favor of making the proposed change.