The city of Kokomo Wednesday moved ahead with plans to redevelop foreclosed homes with the aid of federal stimulus money.
Mishiwaka-based consulting firm Mecca Companies Inc. was selected to administer a $2.18 million program to purchase and rehab up to 30 foreclosed properties.
“For a city to be strong, its neighborhoods must be strong,” Kokomo Mayor Greg Goodnight said in a statement. “This program will strengthen our community, while preventing blight, reducing crime and providing an affordable option to potential home buyers.”
City officials said they plan to sell 19 of the 30 homes purchased, and to allow the other 11 to be developed into rental units.
Federal guidelines state the homes for sale must go to families earning no more than 120 percent of the area median income, and that the rentals must serve those earning no more than 50 percent of the median income.
No more than 10 percent of the funding will go to Mecca to administer the program.
“The idea is to get rid of the subprime mortgages and replace them with regular mortgages that stabilize the neighborhoods,” city community specialist Jerry Meiring said when the program was first announced.
To qualify for the rehab program, a home must be foreclosed, it must have been vacant for at least 90 days, and it must sit within the designated stabilization area, Meiring said.
More than three-quarters of the city of Kokomo is considered part of the stabilization area, so the foreclosed homes may be purchased from a wide range of locations.
Foreclosure rates and the condition of the foreclosed homes were both factors in setting the stabilization area, which broadly speaking, encompasses everything inside the city limits apart from the south side. City officials said Wednesday the program will be tailored toward the northern two-thirds of the city.
“This area is experiencing the highest rates of foreclosure, subprime mortgages and risk of home abandonment,” city officials said.
The Stabilization Program grants can be used to acquire property, to demolish or rehabilitate abandoned properties, and to offer down payment and closing cost assistance to low- and moderate-income home buyers.
City officials said Wednesday they expect to make some of the funding available for down payment assistance, in the form of a forgivable “soft” second mortgage.
Additionally, “land banks” can be created to assemble, manage and dispose of vacant land for the purpose of stabilizing neighborhoods and encouraging re-use or redevelopment of urban properties.
More than a third of homes for sale in Howard County are coming on the market through foreclosure.
The Howard County Sheriff Department has handled an average of about 67.5 home foreclosures per month so far this year. That is about 10 percent more than last year’s average of about 61 foreclosures per month.
In previous years, before the bottom dropped out of the housing market, Howard County would see about 10 foreclosures per month.
Buyers interested in the Neighborhood Stabilization Program will be required to complete pre-purchase counseling.
Each home is expected to be sold for somewhere around $65,000, and some of the money may be made available to help qualified homeowners with closing costs. The rehabbed homes must be sold for a maximum of 1 percent less than fair market value, he added, and the city will inspect the homes before they can be sold, Meiring said in August.
“We’re trying to target homes that will be a little easier to rehab, and won’t require a whole lot more investment,” Meiring said. “We want to keep the costs down for the buyer.”
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