Foreclosure funds still on the way
The next step is for the money to arrive.
The grants Kent County and the city of Grand Rapids applied for have been approved, and roughly $10 million from last summer's Housing and Economic Recovery Act is on the way to buy, rehabilitate and resell foreclosed homes here.
Linda Likely, director of the county's Community Development Department, said she hopes to have those dollars by the end of the month. Kent County is getting $3.9 million from the Department of Housing and Urban Development to buy foreclosed properties in Grandville, Kentwood, Wyoming, Plainfield Township and Gaines Township.
Areas within those municipalities were selected because each has a high concentration of foreclosures, a high percentage of homes that were financed through sub-prime mortgages, and have been projected as likely to face a significant rise in the rate of foreclosures.
"What we estimate with that amount of money, we ought to be able to do at least 30 homes," Likely said.
The county will spend about 70 percent of its $3.9 million on buying and rehabbing those houses. Another 18 percent will go to doing the same for rental units. The remainder of the dollars will go toward stabilizing those neighborhoods.
Likely said the county is looking for partners in the process and is asking nonprofit and for-profit developers for proposals. Once those are in, her department will assign a score to the proposals and choose developers.
But before anything can happen, the county has to negotiate sale prices with respective mortgage holders. HUD requires that an eventual purchase price has to be discounted by at least 15 percent from a home's appraisal.
"Until we know exactly which houses, when we go in and make an assessment with who our partners will be, we'll do the funding. But when we go in and make an assessment, that's when a negotiation will begin," said Likely.
"We're kind of looking at some agencies nationally and statewide who do that. So we're hoping that we will be able to get a bigger bang for our buck working with them, but that's not something that is solid yet," she added.
The county will fund those selected developers, or agencies, as Likely called them, and they will rehab the properties and then sell the homes. Kent County will not become a homeowner.
The city will receive about $6.2 million in federal funds later this month. Connie Bohatch, who directs the city's Community Development Department, told the Business Journal she hopes to raise another $1 million from other sources and add that money to the federal dollars.
With $7 million in hand, Bohatch said the city would spend about $5.8 million to buy and hold foreclosed homes. Another $800,000 would go to a program to help buyers with down payments, and $80,000 would be set aside for demolishing houses that are beyond repair.
"We will identify specific properties and then we will have to negotiate a sales price with a banker or whoever holds the property," said Bohatch. "A developer would then hold the property, but we've built in carrying costs."
Congress allocated $3.92 billion last summer to be distributed for municipalities to restore residential properties.
Kent County commissioners will get the latest update on the foreclosure situation this week when Kim Spring, head of a countywide foreclosure task force, speaks to the board about the most recent report on the matter. That study comes from the Dyer-Ives Foundation and the Grand Rapids Community Foundation and was released late last month. Possibly the most startling statistic contained in the report is that, on average, 10 home foreclosures occur in the county daily.
The report also revealed that foreclosure rates in the county ranged from 5.1 percent in Kentwood to 9 percent in Grand Rapids. Outlying communities, such as Cedar Springs, Sand Lake and Kent City, had higher rates. But some southeast side and west side Grand Rapids neighborhoods had rates that ranged from 13 percent to 20 percent.
While foreclosures were up last year, housing prices fell. The average sale price in 2008 was $122,837, the lowest in 10 years and 25 percent lower than in 2006 when the average was $163,266. The sale price was down because nearly 70 percent of all the homes sold in the Grand Rapids area were in foreclosure.
The study calls for a comprehensive and research-based strategy to combat the problem — one that needs unified leadership commitments from the cities, townships and the county to develop a plan that will support the efforts being undertaken throughout the community.
The plans developed by the city and the county are five-year efforts.
Foreclosure rates rise
Foreclosure rates rise
The foreclosure rate in Kent County rose by 28.7 percent from January through June of last year from the same six-month period in 2007, and both big and small municipalities were affected. Some had increases higher than the county average.
Source: Dyer-Ives Foundation & Community Research Institute at Grand Valley State University, February 2009