Foreclosure Purchase Plans May Fall Through In California

August 28th, 2008

The $4 billion foreclosure plans may fall through in California. The county officials are unsure whether they have the infrastructure to utilize the funds.

The Congress saw in the plan a way to ease the foreclosure problem and allow for affordable housing. Keeping this in few the fund was created to purchase, repair and then sell off the foreclosed houses. But real estate specialists and economists are now expressing doubts about the viability of the plan because it will place the government in a competitive role with lenders and house owners who have been trying to sell off the foreclosed units in a gloomy housing market.

According to The Times, California already has a surfeit of affordable housing units. California stands first in line to benefit from this fund – it being one of the top ranking states affected by foreclosures. Of the leading 12 counties in California, only Sacramento has need of affordable housing units according to DataQucik and California Association of Realtors. Kerry Vandell of Center for Real Estate, Irvine opined that these are just experiments. One does not find out that it is nothing more than that until it is reduced to a non-producing spent force.

The local governments as yet know very little about the details of the plan although they are expected to play a pivotal role in this foreclosure rescue programme. Answering to queries by The Times, officials from 12 California having the worst concentration of foreclosed houses said that none of them had lobbied for the bill and many wondered whether they had the staff to manage the funds effectively. Stephen Pelz the director of housing authority in Kern County skeptically comments that the Congress was drawing attention more on their concern for the foreclosure issue rather than finding a practical solution. They were motivated by a need to show that funds were being allocated for the foreclosure crisis before the elections. Perhaps that is why not much time and energy was spent on consultations.

The hotly debated clause was about purchasing the foreclosed houses. It invited the veto threat of the President who contended that this $4 billion tantamounted to a bail out of the banks and other financial bodies that made erroneous lending decisions. But Bush dropped the objections after a safety net of $25 billion was thrown for saving Fannie Mae and Freddie Mac. The bill targets to save about 400,000 foreclosure victims by allowing for refinancing into low cost government backed loans.