PHOENIX (AP) — The Obama administration's top housing official touted the government's efforts to stabilize neighborhoods hard hit by foreclosures during a visit to Phoenix neighborhood on Thursday.
U.S. Housing and Urban Development Secretary Shaun Donovan visited two homes bought out of foreclosure, rehabilitated and put back on the market for sale to families by a nonprofit group awarded federal funds.
Efforts of groups such as Chicanos Por La Causa in cities across the U.S. are helping stop blight and home price declines triggered by vacant and foreclosed homes like those that had been prevalent in the South Mountain neighborhood where Thursday's event was held, he said.
"When a foreclosure sign goes up on this house, it drops in value," Donovan said. "And so does the house next door and across the street."
The Phoenix home where Donovan spoke was bought out of foreclosure for just over $80,000 and Chicanos Por La Causa spent about $21,000 to fix it up.
A buyer has already agreed to pay $94,000 for the home. The group uses some of its $33 million in federal Neighborhood Stabilization Program grant to pay for the difference.
The government has poured nearly $7 billion into the program under both the Obama and Bush administrations.
The federal government is also poised to expand a program that helps homeowners who owe more than their home is worth to refinance at today's much-lower interest rates. President Barack Obama announced the expansion of the Housing Affordable Refinancing Plan last month, with details due out later this month.
Donovan, in an interview with The Associated Press, said the government will remove the cap for refinancing mortgages held by Fannie Mae and Freddie Mac from the current 125 percent. The goal is to help homeowners free up an average of $2,500 a year they now spend on higher interest rates, thereby allowing people breathing room and an incentive not to walk away from their "underwater" homes.
The government will also ease rules for appraisals and other requirements to make it easier for people with those mortgages to refinance.
Donovan said the hope is that the federal action will set a model that conventional mortgage holders like banks can use to prevent foreclosures.
Donovan also urged Congress to act on Obama's American Jobs Act proposal, but reiterated that the administration would use executive authority to make the moves it can even without the legislation.
"We need Congress to move," he told those at the event. "We need them to get back to work so we can get back to work."
Rep. Ed Pastor, D-Arizona, said critics who object to the government trying to help solve the foreclosure crisis are off the mark.
"The private sector has not done it, that's the problem. If you had the financial institutions lending money for these types of projects, I think you would have the private sector getting involved. It'd be great to have the private sector, but they're not stepping up right now, for various reasons, so now you need the public sector to be able to do it."
- Chicanos Por La Causa
- Housing and Urban Development Secretary Shaun Donovan