Lake County looks to help fix local foreclosure glut
Money to acquire foreclosed homes in Lake County could begin to flow soon.
County officials are finalizing the application for $4.6 million in federal funds, part of a nearly $4 billion national allocation approved by Congress in July as part of the Housing and Economic Recovery Act of 2008.
Though details could change, Lake County is proceeding as if it will have access to money to acquire abandoned and foreclosed properties. The properties would be rehabbed and then sold or rented.
An estimated 8,100 foreclosures occurred in Lake County in the last 31/2 years, including 1,900 in the last six months.
Specific properties have not been determined although about $1.7 million, or nearly a third of the allocation, would be targeted for five communities: Mundelein, North Chicago, Round Lake Beach, Waukegan and Zion.
Those communities have been designated as having the greatest need as determined by percentage of foreclosures and homes financed by subprime loans, as well as areas likely to face a significant rise in the rate of foreclosures.
To access the money, the county has to submit a plan describing the need and programs that they money would be used to fund.
"It's kind of like a residential recycling program," said Vern Witkowski, director of the county's community development division.
He emphasized the funds could be used only to acquire properties already in foreclosure, and could not be used to prevent a foreclosure.
The county would acquire the properties from banks at a to-be-determined discount from the current appraised value, and then make them available for sale or rent.
The program, which was created before the $700 billion federal stimulus package, was intended to clear banks of bad debts, Witkowski said.
It also has the two-pronged purpose of decreasing the number of foreclosed homes while providing affordable housing.
Housing programs that use federal money typically require the homes be made available to low or moderate income families who make up to 80 percent of an area's median income, Witkowski said.
In this case, the buyers could earn up to 120 percent of an area's median income. In Lake County, that amounts to $90,500 for a family of four, meaning some middle income people could benefit.
One quarter of the federal funds must benefit households at or below 50 percent of the area's median income, which would be $37,700 for a family of four in Lake County.
Initially, the county would act as a bank. It would own the property and then try to connect new owners with privately financed loans.
The county's application is due Dec. 1. Witkowski said he hopes to learn within 30 days whether the 62-page document was accepted.
"Things may change, but this is going in with what we know," he said.
The county was informed of the grant in late September. Witkowski said the federal government wants the money committed within 18 months and spent within four years.
He estimated the initial batch of funds could finance the purchase of about 20 homes.