It's now easier to get down payment assistance to buy foreclosed homes in Modesto, thanks to a federal rule change.
The city's Neighborhood Stabilization Program, launched with much fanfare in the spring, is supposed to help low- and middle-income families buy houses. But a requirement imposed by Washington lawmakers essentially made it impossible to spend the money.
To access the funds, the original federal law required that buyers persuade banks to sell foreclosed houses at 15 percent below their appraised value.
Foreclosed houses are selling so fast, however, that plenty of buyers are willing to pay the full appraised value or more. So none of the $8.1 million in federal funds granted to Modesto has been spent.
"Our people keep getting outbid," said Rebecca Blanco, an administrative analyst for the city agency that oversees the program.
Modesto buyers weren't the only ones having trouble making the program work, so the law has been changed.
Now program funds can be used to buy foreclosed homes as long as they're priced 1 percent or more below their appraised value.
Blanco is convinced that will make it much easier to find eligible properties.
Lots more foreclosed homes are expected to hit the resale market next month, Blanco said, so she expects there won't be as many buyer bidding wars.
For eligible families and investors that can negotiate a qualified sales price, Modesto has lots of money to help them buy a home. The money -- which will be loaned at extremely low interest rates -- can be used for down payments, closing costs and the rehabilitation of foreclosed properties.
Besides the money it has received, Modesto has applied for an additional $25 million from the federal program. That extra money could arrive in the winter.
Eligibility for the program is fairly broad. For example, families of four earning up to $71,500 can qualify for money.
Bee staff writer J.N. Sbranti can be reached at email@example.com or 578-2196.