City's HRA loans going fast
Woodbury's Housing and Redevelopment Authority has already used almost 50 percent of its loan budget for 2011.
Residents have taken advantage of the four loan programs, especially the foreclosure purchase, which has been the most popular since the city began lending in April of 2009.
HRA loans are available to help bridge the financial gap for some homeowners seeking to buy foreclosed properties, a first home, upgrades or energy-efficient projects.
The four areas have a total budget of about $440,000 for 2011. Since January, 10 loans valued at a total of $215,400 have been issued, mostly in the foreclosure purchase program.
"At this point in time last year, we had only issued four loans in the first two months of the year," said Karl Batalden, city housing specialist and associate planner. "So we're definitely ahead of the pace."
The months of January and February, which are typically slow in the real estate market, were surprisingly busy, he added.
"There is just that much more knowledge and comfort with the program," Batalden said.
Lenders are also becoming more comfortable with the HRA's foreclosure purchase, which allows for $25,000 deferred loans at a 3 percent interest rate.
This year, of the10 loans issued, six were used to buy foreclosed properties, two were first time homebuyers, one was a home improvement loan and one was a "Woodbury Goes Green" loan.
The HRA loans assist the city's efforts to get vacant, foreclosed properties occupied again and avoid the possibility of declining home values in some neighborhoods.
"The last thing you want with a foreclosure situation is having a property that becomes a scar on the neighborhood," Batalden said.
Since 2003, foreclosure rates in Woodbury have been on the rise, going from 30 eight years ago to 421 in 2009, then dropping to 333 properties in 2010.
"We really want to do as much as we can to get those houses back into ownership status," Batalden said, adding, "We've been able to work very assertively with the banks that are buying these properties as a sheriff's sale."
The program's low interest rate and loan structure has made it attractive for borrowers, resulting in 36 loans at a total of $897,373 issued since the launch of the program in April 2009.
"This is not a down payment assistance program, this is not a grant ... these are loans that we're issuing to families that are able to afford a house," Batalden said.
In the other three areas, over the last two years, 17 first-time homebuyers borrowed a total of $417,940, while two home improvement grants were issued at a total of $23,939. About $10,000 was used to fund two energy-efficient projects.
Although almost half of the funds allocated for this year's loans have been used, Batalden said he can't predict if the city will run out of money before year's end.
"We had a very strong performance in January and February, but I think there is no way to necessarily tell what will happen in the other months of the year," he added.
None of the loans are currently delinquent but Woodbury City Council, a board that governs the HRA, adopted a policy at last Wednesday's meeting that details the procedures to be taken in the event of a delinquent loan.
The policy states that if a payment is not received on the due date, HRA's servicing agreement with the Community Reinvestment Fund (CRF) requires a collection letter be sent requesting payment 15 days after the due date and every two weeks thereafter.
If the payment is not received after 30 days of delinquency, CRF will attempt to contact the borrower by phone to request payment. Once 90 days is reached, borrowers would be at pre-collection status.
Batalden told the council that entering into a foreclosure status should be the last resort, however. The policy will follow standard guidelines in Minnesota regarding foreclosures by advertisement although staff recognizes HRA loans are most commonly in second position.