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Affordable housing in Sussex County may come from an unexpected source – foreclosed homes. As the inventory of foreclosed homes rises – about 40 to 50 are added each month – a new program could put homebuyers in some of those houses.
Under the federal Housing Recovery Act of 2008, the county could receive from $4 million to $6 million to purchase homes that have already gone through a sheriff’s sale. Money will be also be available to repair homes prior to resale and to help with down payments and closing costs, said William Lecates, director of the county’s community development and housing department.
The Neighborhood Stabilization Grant program will provide nearly $4 billion to all states and particularly to hard-hit areas trying to respond to the effects of high foreclosures.
The homes, purchased from banks, will be sold below appraised value and in the $200,000 range to county residents making between $27,000 and $64,000 per year for a family of four.
On Tuesday, Oct. 21, Sussex County Council unanimously voted to support the program.
Brandy Bennett, county housing coordinator, said foreclosures have increased 58 percent over last year with western Sussex County as the hardest hit area. The program also targets areas with job loss.
Once again, western Sussex tops the list with the recent announcement of the layoff of 400 of the 500 employees at the Invista Seaford Nylon Plant, the former DuPont Co. The 69-year-old, 750-acre plant, which once employed more than 4,600 workers, is shutting down its nylon carpet fibers division.
Lecates said the county will partner with the Sussex County Association of Realtors (SCAOR), Habitat for Humanity, First State Community Action Agency, U.S. Department of Agriculture Rural Development, Diamond State Land Trust and Milford Housing Authority to submit a request for proposal to apply for funding.
Ruth Briggs-King, SCAOR executive vice president, said the program provides a unique opportunity to put deserving people in empty houses. “And it’s not just for low-income people, but for average, hard-working Sussex Countians,” she said.
The county can use the grant to acquire land and property; demolish or rehabilitate abandoned property; and/or offer down payment and closing cost assistance to low- to moderate-income homebuyers.
Under the program, prospective homebuyers would have to obtain their own mortgages. All participants in the program must take home-ownership counseling classes.
Bennett reminded council that the program was not designed to stave off foreclosure. “Unfortunately this is not for prevention, only for post-sheriff’s sale,” she said.
“But we can get some affordable housing out of it for people who will have mortgages not over their heads,” Lecates said.
Bennett said the ever-growing inventory of foreclosed homes possible for purchase in the program includes 179 between January and September that have been bought back by banks. She said all homes over $300,000 have been taken out of the inventory, leaving the average outstanding debt at just over $175,000. She said about 30 percent of the grand total are second homes.
“We have to buy the houses at a discount price from the appraised value, but we think it will be in the bank’s best interest to negotiate,” she said.
Bennett said the grant contains 65 pages of regulations so she is still formulating the details of how the program will be administered.
Considering that the average house purchased under the program will be from $175,000 to $200,000, with the maximum grant of $6 million, the county will be able to purchase 30 to 35 homes.
Bennett said the foreclosure rate is not subsiding anytime in the near future. For the first time in county history, there will be a sheriff’s sale in December. “We have not hit bottom and not seen the worst yet,” she said. “The number of foreclosures we see now could double by the time we get the money.”
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