Nonprofit builders can tap new fund
Goal is to help soften effect of foreclosures on neighborhoods
Nonprofit developers can borrow from a new $20 million pool to buy foreclosed properties in Massachusetts neighborhoods most plagued by foreclosures, Governor Deval L. Patrick said yesterday.
Community housing groups have pushed Patrick to create such a program, arguing that vacant buildings are eyesores, havens for crime, and a downward force on the values of surrounding homes.
The loan pool will allow those groups to buy properties that might otherwise sit vacant indefinitely. Most of the properties are likely to be rented as affordable housing, to subsidized tenants, at least until the real estate market improves.
"This will give nonprofit agencies the resources they need to secure properties quickly, make vacant buildings homes again, and help stabilize neighborhoods," Patrick said.
In general, nonprofits apply for funding to buy a property. The process can take months. Ann Houston, executive director of Chelsea Neighborhood Housing Services, said her group has been trying to buy several foreclosed properties, but it lacks the flexibility to negotiate effectively with mortgage companies.
"You have to be prepared to acquire immediately, so there is not time to make an offer and then round up funding," she said. The new funding, available on short notice, "would be enormously helpful," Houston said.
The $20 million will come from the Massachusetts Housing Partnership, a nonprofit funded by state-mandated contributions from banks, and the Massachusetts Housing Investment Corporation, a nonprofit funded by voluntary contributions from many of the same banks. No state money will be used.
But the program is unlikely to yield immediate results. Many mortgage companies that own foreclosed homes have proved difficult to reach or to work with, sometimes because they are in various stages of collapse. Also, the program will not fund the major renovations needed on many foreclosed properties. And it will not pay for rental subsidies.
In addition, $20 million is a modest sum. At $200,000 per home, it would fund the purchase of 100 homes - about 6 percent of the homes foreclosed in Massachusetts in January and February.
The Department of Housing and Community Development, which will manage the loan pool, did not return phone calls seeking comment.
Those involved in shaping the program said it should be viewed as a first step, and that discussions were ongoing about providing additional funding.
"This is a critical piece, but I think you won't see a lot of activity for two to four months, until some of the other pieces of the puzzle are put into place," said Joe Kriesberg, president of the Massachusetts Association of Community Development Corporations.
He also said the nonprofits would likely share the reluctance of other potential buyers to take a loan and buy a property before it was clear whether local real estate prices were starting to stabilize.
Binyamin Appelbaum can be reached at bappelbaum@globe.com.
