Unexpected foreclosure help causing unexpected headaches

Local officials are getting their first whiff of a direct benefit from the federal bailout of Fannie Mae and Freddie Mac - and getting a little lightheaded.

Congress buried about $4 billion in the Housing and Economic Recovery Act of 2008 specifically to assist state and local governments in addressing problems with abandoned or foreclosed homes. But only in recent days have Illinois communities learned they only have a few weeks to show how they will use $119.4 million coming directly to them. If they don't figure out a plan by Dec. 1, Kane, DuPage, Lake and McHenry counties risk having all the help earmarked for them funnel back to state officials to use for their own foreclosure plans.

Illinois is targeted for $172.5 million in assistance. The U.S. Department of Housing and Urban Development has identified 13 specific communities in Illinois with enough foreclosure problems to receive help.

Now those communities are scrambling to put the plans, structure and staff in place in time to get the money.

Kane County officials are under a hiring freeze but said they may need to hire up to four new people to administer and oversee the funds. In part, that's because the funds have a number of restrictions on them.

The money can be used to buy abandoned and foreclosed homes, create landbanks of foreclosed properties, demolish blighted structures or redevelop demolished or vacant properties. The end result of that activity must be the creation of "affordable housing." That means the property becomes affordable to someone (whether buying or renting) whose income is 120 percent (or less) of the local average. If the property purchased is already "affordable housing" then whatever happens the property must remain affordable to people whose incomes are 50 percent (or less) of the average in the area.

In other words, local governments can't necessarily use the money to go around and buy up every foreclosed property in the area. The institutions that hold the mortgages on those properties must also be willing to take a possible loss by selling at a price below the market-appraised value.

All those factors and more had heads spinning on the Kane County Development Committee Tuesday morning when officials first learned they had about $2.6 million of help coming.

"Way too much information; not enough time," said committee Chairman Catherine Hurlbut, of Elgin. "I thought this was good news. Now I don't know what it is."

With public comment and voting requirements needed to get the spending plan in place to send off for federal approval, the county only has about a week to pull something together for county board members to vote on.

"It's more government, more red tape," said committee member Bill Wyatt, of Aurora. "It's highly complex, and they are giving us no time. That's a red flag."