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Officials in Livonia, Michigan are considering whether to sell the foreclosed properties that the city purchased to Livonia Public Schools. Livonia Career Technical Center students will renovate or foreclosed properties remodel the repo homes for sale.

The idea to sell the foreclosed homes acquired by the city to Livonia Public Schools was proposed by councilman John Pastor during a study session. He pointed out that his proposal will serve as the city’s exit strategy for the distressed properties on its inventory.

He explained that foreclosed houses have already undergone bankruptcy, homeowners have released them and banks disposed them through an home auction or sale, adding that the city of Livonia might as well make use of them. He said that schools can remodel the foreclosure homes and sell them for a profit.

Livonia Public Schools administrator of communications Donna McDowell said that students are working on foreclosure properties owned by the city as part of the programs of the Livonia Career Technical Center. But she added that there was no discussion at the school board about buying city-owned homes.

Meanwhile, Pastor developed the idea of selling bank foreclosure homes to schools while the city council was reviewing the proposed acquisition of three tax-repossessed houses and a foreclosed house by the U.S. Department of Housing and Urban Development (HUD).

The Housing Department of the city would pay about $26,733 for the three tax-repossessed houses and $1 for an HUD-foreclosed home, in addition to paying for closing costs under the Community Development Block Grant and similar federal funds.

The city council will decide on the property acquisitions on August 10. Councilman Brian Meakin has proposed a support resolution while the opposing resolution was made by Councilman Joe Laura.

If the planned purchase would push through, the city would have a total of 42 houses on its inventory. The purchases will be made by the Livonia Housing Department using federal funds to help in their renovations.

Housing Director James Inglis said that about $1.45 million has been allocated to the city until late 2010. But the city’s initiative to buy bank owned houses did not initially receive the approval of members of the council. Both council members Joe Laura and Tom Robinson opposed buying three foreclosure houses while Laura Toy, president of the council, recommended that the city create an exit strategy.

Inglis said that the goal of the initiative is to stabilize neighborhoods by buying foreclosure properties using federal grants.

More Long Island homes bought with nonprime loans are entering foreclosed home listings faster than in other parts of New York, based on a study carried out by the Government Accountability Office.

The study found that subprime loans, option adjustable-rate mortgage loans and alternative documentation loans originated by banks from 2000 to 2007 on Long Island and which are still on bank books totaled 69,654 as of March. Out of these loans, 28.1 percent or 19,572 loans are already in default by at least 90 days or are already on their way to foreclosed home listings.

According to GAO, the average default rate for the 5.2 million nonprime home loans across the country was 23 percent as of March.

Long Island?s Second Congressional District, which includes Suffolk and Islip, had the third highest delinquency rate in the state, with 33 percent. The Fourth Congressional District, which includes southwest Nassau and Hempstead, had the fifth highest delinquency rate, with 30.5 percent.

Representative Carolyn McCarthy of the Fourth Congressional District said that the entry of many homes into repossessed home is one of the most distressing results of the economic crisis.

Housing analysts said that Long Island had higher delinquency rates and distressed foreclosure home growth rates than many other places in New York because of financial industry layoffs, expensive housing and job losses in other sectors.

Based on the GAO report, the housing boom enticed many people to take out subprime loans, which were made for borrowers with poor credit records, and Alt-A loans, which were given to people who could not produce enough financial documentation because they were self-employed.

The GAO also found that 92 percent of all nonprime loans on Long Island which have become delinquent were taken out during the four-year period from 2004 to 2007.

The worst types of home loans that were made during those 4 years were the hybrid adjustable-rate loans. These loans assigned very low rates for the first couple of years and then reset to their higher fixed rates after the teaser period lapsed. GAO said these loans were prevalent in the subprime market, putting 38 percent of borrowers into delinquency as of March, ten percentage points above the delinquency rate for all subprime loans.

Option ARMs caused a delinquency rate of 30 percent, 13 percentage points above the rate for all Alt-A loans.
In the coming months, these delinquencies caused by nonprime loans will put more houses into foreclosed home listings on Long Island.

Both Pasco County and Pinellas County in Florida have jointly applied for a total of $50 million federal grant for the second round of the Neighborhood Stabilization Program. Pasco originally plans to use the federal money to buy and rehabilitate properties on foreclosure listing.

In the first round of the federal funding program, Pasco applied and received a total of $19.5 million which it had difficulty in using to purchase properties on repo foreclosure listing. However, this did not stop the county from taking another shot for the federal funding under the Neighborhood Stabilization Program 2.

The federal funding is based on an area’s vacancies, foreclosures and subprime loans. The number of foreclosed homes in Pasco is increasing faster than how the community development office spends the money.

Community development director George Romagnoli said that the county had spent almost $1.5 million, which is more than the amount spent by any local government in Florida. He said that the county has 10 nonprofit organizations that are purchasing properties on foreclosure listing.

He added that except for three, the rest of the counties in Florida are qualified for the federal funding, with Pinellas posting nearly 50 percent in foreclosure rate increase.

Pasco had difficulty in how to spend the first round of federal funding it received. Last October, county commissioners revised their spending plan by allocating about $6.5 million for homebuyer assistance, an increase from the original proposal of $4 million.

Under the original proposal, the county would spend the funding to purchase and rehabilitate foreclosure homes and then sell them. Commissioner Michael Cox decided to restructure the spending plan, giving emphasis on providing down payment assistance.

In restructuring the plan, Cox explained that the original amount of $16 million intended for purchasing and renovating distressed properties could grow to $436 million if it will be used to help potential buyers acquire properties.

However, Romagnoli noted that the effort of the local government to direct the funding to down payment assistance had been unsuccessful because banks refused to approve loans to at-risk borrowers eligible for the county’s grant.

A review of the program is in the offing but for the meantime, Romagnoli wants a portion of the funds to be allocated to purchase foreclosure houses. So far, Pasco County and its partners have purchased nearly 35 properties on foreclosure listing.

The city of Worcester in Massachusetts bore the brunt of the foreclosure crisis by having the highest number of properties on foreclosed homes list in the state in the first half of this year. The city also had the highest number of foreclosure filings.

The Federal Home Loan Mortgage Corp. or Freddie Mac, one of the government-controlled home mortgage financial institutions, has added new incentives for potential buyers of properties on forclosure listings.

The foreclosure market in Ohio was given a breather for the moment with the flattening of repossession rates. However, industry experts warned that the continuing problems in the home lending market may force forclosure listings to go up again.

The average price for homes sold in Birmingham in June would have been more than $220,000 if foreclosure listing prices in June did not average at a low of $80,273, according to real estate analysts in Alabama.

A summary of foreclosed home search results across the country indicates that foreclosures persist in many areas because of high unemployment rates. However, some housing markets are recovering, with upticks in average sale prices and volumes of home sales.

The increasing number of bank owned homes foreclosures in Illinois is taking their toll on some cities that have to shell out money to keep these abandoned and vacant properties from becoming blights to neighborhoods.

Major banks managed most home loans that became bank foreclosure property in Wisconsin. Last May, one in every 731 houses in the state was in some kind of foreclosure proceeding. In 2008, the state?s foreclosure rate rose to 25,547 or 21 percent.