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Lawmakers scramble for Merced foreclosure funds

WASHINGTON -- California lawmakers say the Bush administration shortchanged Merced in a new foreclosed-housing grant program.

But Department of Housing and Urban Development officials say they are simply being efficient and playing by the rules Congress set.

Now, the two sides are figuring out who gets the money, and when.

On Sept. 26, the Department of Housing and Urban Development announced it was spreading $3.9 billion among all 50 states and numerous cities, including Stockton, Modesto and Fresno. The grant money will help distressed communities buy foreclosed properties, fix them up and sell them.

Foreclosure problems of equal or greater magnitude likewise haunt the city and county of Merced. Nonetheless, neither city nor county were included in the new grant allocations.

"I'm very disgusted and disappointed with the HUD folks," said Rep. Dennis Cardoza, D-Merced. "They did not do this correctly."

With a lobbying flurry, California lawmakers and state officials have been challenging the HUD grant allocations ever since they were announced. On Thursday, Cardoza spoke with Lynn Jacobs, secretary of California's Department of Housing and Community Development, about the problem.

"She says she will do everything in her ability to get Merced (funding)," Cardoza reported.

HUD officials, in turn, stress that cities like Merced, Los Banos and others passed over in the first round can still pick up federal dollars that will be distributed by the state. In some cases, moreover, officials contend Congress itself limited the funding.

Asked about Merced County, one HUD official Thursday cited the language of the law authorizing the $3.9 billion grant program.

This official, speaking on condition of anonymity because he was not authorized to speak to the press, said the bill language indicates that only "entitlement communities" under an existing community development block grant program can receive funding. Merced County is not currently deemed an "entitlement community." Administration officials and California lawmakers also dispute over how to count foreclosures.

The Californians cite figures from RealtyTrac, which pegged the state's overall foreclosure rate at 13 percent. HUD officials, though, use a Mortgage Bankers Association delinquency survey that put California's delinquency rate at 6.7 percent California's two senators, Democrats Dianne Feinstein and Barbara Boxer, and most of the state's House members wrote HUD on Monday to complain about the California funding in general and the Merced shortfall in particular. Lawmakers are also trying political bank shots.

Cardoza, for instance, said he discussed the issue with House Speaker Nancy Pelosi. Pelosi, in turn, reportedly had a word with a Massachusetts Democrat who chairs the powerful House appropriations panel that funds HUD.

The $529 million allocated to California overall amounts to about 13 percent of the total funding, which the lawmakers note is less than was given Florida. By HUD's formula, though, Florida has the worst foreclosure problem.

Forty-five California cities and counties were awarded individual grants, ranging from $2.3 million for Visalia to $48 million for Riverside County. In addition, the state will receive $145 million that it can distribute among other communities."To make Merced wait, that doesn’t make sense,” Cardoza said.

Federal officials took into account the number and percent of foreclosures, subprime loans and defaulted or delinquent loans. Under the department’s funding formula, cities such as Merced, Los Banos and Turlock would receive less than $2 million. This fell below the threshold set for individual grants.

“HUD believes that a grantee must receive a minimum amount of $2 million to have adequate staffing to properly administer the program effectively," the department states on its Web site.

The new grant program was part of a larger housing bill, which also includes a "“Hope for Homeowners" program that provides mortgage assistance to those in danger of foreclosure. This program provides new, fixed-rate 30-year mortgages; for more information, see