In January of 2009, during the height of the economic crisis, federal officials steered nearly $6 million to the City of Santa Ana to buy and restore foreclosed homes and provide down payment assistance to borrowers.
Santa Ana’s top housing official is happy with the results.
Yet since then, only five homes have new families, and only two borrowers have been helped. Five other properties are currently in escrow.
“We have approximately half our funds spent and I believe we are ahead of the game,” said Shelly Landry-Bayle, Housing Manager for the Santa Ana Community Development Agency. “So far, we are very satisfied with our progress.”
Some in Washington obviously agree with Landry-Bayle. In January, the city was given another $10 million from the U.S. Housing and Urban Development’s Neighborhood Stabilization Program.
But a local economist and a Santa Ana realtor think otherwise.
“They could have taken that money, dropped it from an airplane over Santa Ana and it would have helped more people,” said Donald Booth, Professor of economics at Chapman University.
[quote]The housing bust has clobbered Santa Ana. At some points in recent years the city has been home to as many as 1,500 foreclosures. The federal money is to be used to buy up foreclosed homes and multi-unit buildings, then refurbish and resell them so previously stable neighborhoods don’t become blighted. A smaller portion is set aside for down payment assistance.
“I think the program is too little too late,” said Phil Schaeffer, a Santa Ana realtor who has worked in the community for 20 years. “The impact on the foreclosure situation has been negligible.”
To date, Santa Ana has spent $3.1 million of its grant funds, according to HUD spokesman Brian Sullivan. The city has thus far provided Voice of OC with an accounting of $3 million of that spending. The money has gone, among other things, toward purchasing the homes, rehabilitation and administrative costs.
Also part of the $3.1 million in total spending was $1.4 million spent on the acquisition and rehabilitation of a 14-unit, low-income housing complex on Durant St. Rehabilitation of the housing complex is not yet complete.
Finally, $108,797 in developer fees was paid to ANR Industries, the Santa Fe Springs-based contractor that won the city bid to do the work.
Sullivan said Santa Ana is ahead of the curve compared to other cities involved in the program. However, Sullivan acknowledged, because the cities take out mortgages on the properties they purchase and refurbish, they have to compete with private investors for loans from banks.
Private investors are not bound by contingencies required by the program such as a 1 percent loan discount for the borrower and strict environmental regulations. “The bank asks itself, ‘who do I want to sell the house to? An investor that comes to me with cash, or a community that has all these obligations?’” Sullivan said.
At the rate the program is going now, it would take 10 years for Santa Ana to wipe out 10 percent of the foreclosure problem, Booth said.
In addition to the small number of properties fixed up, there has been confusion over responsibility for repairs that have been done by ANR Industries.
In at least one case, ANR Industries sold a condominium unit even though damage was obviously visible on the exterior of the home. An unsightly scar blemishes the stucco wall near the window facing the neighborhood, and the wooden fencing around the patio remains unpainted.
George Jordan, Vice President of ANR Industries, said exterior repairs like stucco damage and wooden fencing are typically the responsibility of the Homeowners Association.
“We always seek to correct as many of the issues as possible,” Jordan said. “We don’t always have the liberty to make those repairs.”
The HOA for this property, South Coast Terrace, has been struggling financially and halted any piecemeal property repairs, according to Board of Directors Member Wallace Rodecker. But Rodecker said ANR Industries could have made the repairs if it wanted to.
The down payment assistance portion of the program has also shown few results. Landry-Bayle said just two borrowers have taken advantage of the down payment assistance leg of the federal program. Obligations attached to down payment loans made through the program – complex terms for a borrower to negotiate for on his own – have stifled interest, Landry-Bayle acknowledged.
“It’s a little hard for someone with no experience negotiating discounts with banks to do so,” Landry-Bayle said. Despite the limited impact across the city, families that have moved into the refurbished homes said the program has made a difference in their lives.
Anthony Malfavon, 34, bought a home through the program and was ecstatic about what he called a piece of the American dream.
“I just feel truly blessed,” Malfavon said.
But experts like Booth and Schaeffer remain skeptical.
“You could have taken all that money and distributed it to 100 people and gotten them all nice homes,” Booth said. “So far, it looks like a complete waste.”
This story was produced by HealthyCal partner Voice of OC, a new online news site covering Orange County that will go live in March.