Loan programs help nearly 200 buy foreclosed houses

Minneapolis, Brooklyn Center offer up to $10,000 for closing costs or down payments; loans are forgiven if the buyer stays five years.

By JIM ADAMS, Star Tribune

Last update: October 28, 2009 - 10:56 PM

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Buyers interested in the Minneapolis foreclosure loan program can go to livemsp.org.

For the Brooklyn Center, program go to cityofbrook lyncenter.org and follow the prompts for the ReNew program.

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Forgivable-loan programs aimed at helping lower-income home buyers have put nearly 200 participants into foreclosed houses in Minneapolis and Brooklyn Center, officials say.

Both cities have offered up to $10,000 for closing or down payment costs to eligible participants who buy foreclosed homes. The interest-free loans are forgiven if the buyer lives in the home for five years.

In Minneapolis, 147 participants have bought homes this year in foreclosure-ridden neighborhoods, mostly in the north, northeast and south-central parts of the city, said Cheris Shoquist, city foreclosure project coordinator.

About 50 others have bought foreclosed homes across Brooklyn Center since that city's program began in March, said Gary Eitel, community development director.

The Brooklyn Center City Council received an update on the program this week and decided to continue it. The program has an unusual source of funds: $1 million from new taxes generated by a commercial tax increment financing district. Other cities have inquired about the novel-funding source, said Mayor Tim Willson.

"We think the program is pretty sound," Willson said. "It's an excellent opportunity for new people to come in. Anything we can do to entice first-time home buyers to take advantage of these programs is good for Brooklyn Center."

Minneapolis allocated an additional $500,000 to its program after the first $500,000 was snapped up last year by 50 home buyers. At that time, the program had no income limits.

Funds added in Minneapolis

The second installment allowed buyers to have up to 120 percent of the metro-area median household income of $81,000. The city added another $1.5 million from a grant from the Federal Home Loan Bank, Shoquist said. She said buyers also may be eligible for up to $8,000 per home from the Pohlad Family Foundation.

"We are on our way to restoring healthy housing markets and bringing families into our neighborhoods impacted by foreclosures," Shoquist said.

In Brooklyn Center's case, special state legislation passed in 2008 allows the city to pay for the program by tapping 15 percent of new property taxes generated in a tax increment district. The city limits its ReNew Loan program to lower-income, first-time buyers.

The League of Minnesota Cities tried unsuccessfully this year to get similar legislation passed so other cities could tap tax increment funds for housing, said Hue Nguyen, a league lobbyist. She said that legislators were receptive, however, and that the league hopes to get the measure passed in the coming session.

The ReNew Loan program provides up to $10,000 to each eligible buyer for closing fees or down payments on vacant homes that the seller has registered with the city. Single buyers or couples can have up to the metro median household income; families of three or more can have up to 115 percent of the median income.

Almost 100 fewer are vacant

The city's goal was to get 100 vacant houses occupied, and almost half of the $1 million available has been spent. The city's registry of vacant houses has dropped from 404 in January to about 300 in October, said Vickie Schleuning, assistant city manager.

Eitel noted that foreclosed home sale prices have increased by more than $10,000 since ReNew began. The average sales price of homes for the first 25 loans approved was about $92,300. He said 27 of 83 home loan applications have been denied or withdrawn.

Housing sales have jumped in Brooklyn Center this year. Through September, the number had more than doubled to 519 homes from 252 at that time last year, said Jeff Allen, research manager for the Minneapolis Area Association of Realtors. He said Brooklyn Center had the biggest percentage jump of any metro area city with more than 50 home sales.

Jim Adams • 612-673-7658

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