Bush dropped his opposition after Congress agreed to include a potential $25-billion safety net for mortgage giants Fannie Mae and Freddie Mac, which are federally chartered but investor owned. The bill also aims to stave off foreclosure for 400,000 or more homeowners by allowing them to refinance into low-cost government-backed loans.
The purchase program was first championed by U.S. Rep. Maxine Waters (D-Los Angeles). On a 2006 visit to Cleveland, Waters said, community activists drew her attention to neighborhoods dotted with vacant homes and foreclosure signs. Waters said she later talked with people in Riverside and San Bernardino who complained about the same thing.
"These empty homes are creating nesting places for criminals," Waters said. "Later I discovered that this was a result of the subprime meltdown."
Under the legislation, the Department of Housing and Urban Development must devise a plan by Sept. 28 to equitably distribute the funds to local governments. After purchasing the vacant homes, cities and counties would work with private nonprofit and for-profit groups to make any needed repairs and sell or rent them to low- and moderate-income home buyers.
These nonprofit groups, including the New Orleans-based Assn. of Community Organizations for Reform Now and Enterprise Community Partners in Columbia, Md., were among the provision's biggest supporters. An umbrella organization, the National Housing Conference, took out ads targeting members of Congress who were fighting the $4-billion aid package.
"ACORN's interest is in making sure that the cities that are developing plans to use this money put it to good use," said Austin King, the group's Financial Justice Center director.
But King also acknowledged that the dual problems of rising foreclosures and a lack of affordable housing cannot be easily fixed with one spending program.
In California, for example, most of the foreclosed homes are in areas such as the Central Valley, the Inland Empire and the Antelope Valley, locales known for their large stock of low-cost housing.
If anything, these areas are becoming more affordable because of foreclosures, and sales have picked up in large part because of the availability of these homes at discount prices.
"Those foreclosures are being purchased at a very rapid rate, and they are going to families who have been previously price-excluded out of the market," said Mark Boud, a consultant who runs Real Estate Economics in Irvine.
