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 July 28, 2010 Wednesday
FINAL EDITION

SECTION: NEWS; Pg. 1A

LENGTH: 394 words

BYLINE: Gregory Korte

BODY: 

WASHINGTON -- Local governments are at risk of losing more than $1 billion in foreclosure relief funds they can't spend quickly enough.

With use-it-or-lose-it spending deadlines weeks away, cities and counties are scrambling to shore up neighborhoods by buying foreclosed and abandoned properties -- but are often stymied by market forces, federal regulations and a lack of staffing.

The $3.9 billion Neighborhood Stabilization Program, passed in 2008, was intended to help areas hardest hit by the housing crisis buy foreclosed homes and residential properties. In 2009, Congress added $2 billion via the stimulus bill. Last week, President Obama signed into law an additional $1 billion for a third round of spending.

The first $3.9 billion had to be used within 18 months of the states' grant agreements, which were signed in March 2009. The deadlines have forced some communities to shift their focus away from single-family homes and toward multifamily or rental housing to spend the money quickly and meet low-income set-aside rules.

"The need for rentals is really quite high, as folks continue to be foreclosed on," said Mercedes Marquez, assistant secretary of the Department of Housing and Urban Development (HUD).

She said the pace of spending has quickened, but has made clear to local officials that there will be no extensions, and unused funds will go to places that need it more.

State-run programs are having the most trouble, according to a USA TODAY analysis of HUD data, though cities and counties have problems, too.

*In Texas, the state government was working with about 55 local organizations to spend its $102 million. That structure has added a layer of complexity, and the state is pulling back money from some groups, mostly rural, that haven't been able to spend it, said Tom Gouris, the state's deputy executive director for housing programs. About $65 million is at risk.

*Detroit is in danger of losing almost $20 million of its $47 million grant if contracts aren't signed quickly. "We are the last city that needs to take a cavalier approach to spending this much needed money," Council President Charles Pugh said.

*Three places could lose all their money: Puerto Rico ($19.6 million), New Orleans ($2.3 million) and the Virgin Islands ($579,451). "Yes, we're well aware of the deadline," said Pamela Davis, a New Orleans housing official.

LOAD-DATE: July 28, 2010