The participation of the South Carolina city of Charleston in a federal program designed to stabilize neighborhoods severely affected by the foreclosure crisis will be the focused of a study commissioned by the Federal Reserve Banks of Cleveland and Richmond.
The focus of the study will be the $7.4 million received by the Lowcountry Housing Trust early in 2009 from the national government. The fund is intended to be used to buy distressed properties on foreclosure and pre foreclosure listing on neighborhoods with high foreclosure rates.
Under the program, about 71 foreclosed houses are scheduled to be purchased, rehabilitated and rented or sold at affordable prices.
The money for the initiative is part of the $4 billion Neighborhood Stabilization Program which was created by the U.S. Congress last year in an effort to alleviate the growing foreclosure crisis. Included in the Congress’ allocation is another $2 billion intended for the initiative this year.
For the study, the Federal Reserve Bank has partnered with Virginia Tech’s Metropolitan Institute and the National Vacant Properties Campaign. The study will examine the difference that the initiative has made in small communities, including the challenges it presents.
Aside from Charleston, the study will also focus on other areas, including Fayette County in Pennsylvania, Front Royal, Winchester and Strasberg in Virginia and Cleveland in Ohio. The goal of the study is to help small neighborhoods improve their stabilization programs.
It also aims to develop several recommendations to be used for future government policies that will help address high foreclosure rate problems in some communities.
Local representatives of for-profit and non-profit groups that buy foreclosure houses shared the challenges that they are facing. They said that some lenders prefer to sell foreclosure properties to groups of investors in bulk instead of in small numbers to developers who have federal money.
Furthermore, the groups said that some banks focused on short sales rather than foreclosures. They said that the federal funds are not available for short sale deals.
On their part, developers are also facing difficulty finding houses that may be eligible for the program. They said that instead of posting foreclosure signs, many troubled properties carry for-sale signs that are not eligible for the program.
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