Arizona gets $121 million to fight foreclosure problem

Arizona will receive $121 million in federal funds to ease neighborhood blight in areas affected by home foreclosures, the U.S. Department of Housing and Urban Development said Friday.

That's more than state officials expected for Arizona's share of the $3.9 billion in so-called neighborhood-stabilization funding authorized in July's federal housing bill.

The Arizona Department of Housing will receive $38 million to buy foreclosed-on homes, rehabilitate them and sell or lease them to residents.

Phoenix received even more money. It will have nearly $40 million to address foreclosure-related blight.

Eight other county and municipal governments will receive funds, too.

The federal money, although not nearly sufficient to buy and clean up all foreclosed-on properties, could improve the situation in some neighborhoods and return many unwanted homes to a safer and more marketable condition.

"Arizona communities need substantial help in fighting the effects of foreclosure, and this funding will do a great deal," Gov. Janet Napolitano said Friday in a statement. "I'm glad that the federal government has taken action on this problem and that Arizona has received a healthy share of resources to deal with the pressing effects that foreclosures are having on our communities."

The recent surge in foreclosures has left neighborhoods littered with abandoned residential properties as would-be homeowners vacate in anticipation of bank foreclosure. The residents who remain are concerned about health issues, crime and property-value declines as a result of the abandoned homes.

1 goal: Rehabbing, selling

Until HUD releases the rules under which states must use the money, it's difficult to speculate on the best way to spend it, Arizona Housing Director Fred Karnas said.

Those rules are expected to be issued Monday, he said.

The most likely scenario would be a revolving fund that grants money to buy and rehabilitate homes and then receives the proceeds once those homes are resold.

Federal officials already have decided that at least 25 percent of those homes must provide shelter for residents at or below 50 percent of the median family income, which in Arizona is $32,000 a year.

Because it's unlikely such families could afford to buy a home, Karnas said, it's possible the rehabbed homes could be turned into low-income rental housing.

Still, HUD officials have not yet made it clear where proceeds from each home sale or lease would go, whether it is to the city or non-profit agency selling or leasing the home, the state or the federal government.

Ariz. is 9th on the list

The $121 million constitutes about 3 percent of the federal pot, placing Arizona ninth on the list of states receiving the most cleanup money.

Florida ranked first with $541 million, followed by California ($530 million) and Michigan ($264 million). Arizona ranks third in the nation in terms of foreclosures per capita. Nevada, which has the nation's highest foreclosure rate, received just $72 million.

Karnas said federal officials considered population in addition to the number of foreclosures and subprime loans, which is why Arizona received less than some other states.

"Nevada, despite them being Number 1, got about $50 million less than we did," Karnas said. "I think you'd always like to get more; I think you can debate the methodology in a variety of ways."

Still, Karnas said, the $121 million was about $20 million more than state officials had expected based on preliminary information about the methodology.

Every state received at least $19.6 million as part of the federal blight-mitigation plan. Those with a greater risk of residents abandoning their homes received more, including most states in the Southwest, Rust Belt, Mid-Atlantic and Southeast.

For most states receiving more than the minimum, HUD divided the money into state and local funds.

In Arizona, the list of local governments to receive foreclosure-cleanup money is interesting primarily because of the communities not included on the list.

Areas hit hard by foreclosures such as Pinal County, Buckeye and Queen Creek will not receive money directly from the federal government, while Pima County, Surprise and others will get an allotment.

Karnas said that HUD officials took money that would have gone to smaller communities and combined it with the Department of Housing allocation, adding that the state agency will redistribute those funds in the geographic areas where they are most needed.