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Partnership boosts homebuying power amid foreclosures in Federal Way
A city partnership will furnish aid to low- and middle-income households so that they can purchase foreclosed homes and properties in Federal Way.
The city is on track to receive $651,688, stemming from the Housing and Economic Recovery Act of 2008.
By being invited to take this funding, there's good indication that Federal Way has a significant foreclosure problem, human services manager Lynnette Hynden said.
The city chose to establish a partnership with the state housing commission to make financing mechanisms available to homebuyers — rather than the city purchasing foreclosures itself, then rehabilitating them before selling the structures, Hynden said.
The chosen option could place up to 14 buyers into homes. The more homes that are occupied and maintained, the better it is for the neighborhoods where they are located, she said.
"The narrow intent of this is to stabilize the neighborhoods from a declining market," Hynden said.
The funds will be handed out by the Washington State Department of Community, Trade and Economic Development through the Neighborhood Stabilization Program. A partnership between Federal Way and Washington State Housing Finance Commission was established to issue the money. Local real estate agents will be involved in selling the homes.
The state evaluated all Washington cities, but only offered the money to cities most in need and able to utilize at least $500,000 in funding, Hynden said. The Web site www.foreclosure.com lists 1,175 Federal Way properties in active foreclosure. Most of these are listed in the 98003 and 98023 zip codes.
Prospective buyers will go through a screening process conducted by the Washington State Housing Finance Commission. The process ensures that buyers are financially stable enough to purchase a home.
The money could be issued in various forms, but providing eligible homebuyers with money for a down payment on a property will allow them to leverage other financing mechanisms, Hynden said.
"It really puts that person in a successful place to be able to not only establish and maintain that foreclosure, but ride out the economic downturn," Hynden said. "We don't want to set someone up to fail."
The program could be especially attractive to first-time homebuyers, she said. Many in this population are also eligible for other state financing assistance, such as tax rebates and housing finance commission opportunities. The latter includes the House Key Homeownership Program, which offers fixed interest rates on mortgages.
A quarter of the $651,688 must go toward helping low-income households earning 50 percent or less of the area median income — about $40,000 annually in Federal Way.
No more than 5 percent of the money is to be used for administration of the program. The rest of the funding will be available to low- and moderate-income households making up to nearly $80,000 annually, Hynden said.
"The bulk of the access to this program is for the good, strong, working middle class," she said.
Only foreclosed upon properties fit the state requirements. These must be located in one of Federal Way's census tracts that are identified as high-risk for foreclosures based on information provided by HUD's Department of Policy Development and Research. These tracts include the 98023 and 98003 zip codes.
The Washington State Housing Finance Commission will administer and track the funding, but will not be responsible for selling the foreclosed upon homes.
Federal Way Mayor Jack Dovey requested at a March 17 city council meeting that local Realtors will be aware of the funding and have the necessary information available to help connect prospective homebuyers with the commission. He expressed a desire to support local businesses as well as future homeowners.
Federal Way plans to let the state know it will accept the funds by April. Come October 2009, the city is expected to distribute 50 percent of the funding. By April 2010, 100 percent of the money should be doled out, according to the program's summary.
"If we don't see anything (from the state) by June 1, I assure you we'll be aggressively going to find out why," Hynden said.
Those interested in the program should contact the Washington State Housing Finance Commission at (206) 464-7139 or (800) 767-4663. For more information, visit the commission's Web site at www.wshfc.org/index.htm.