Prince William County Fights The Foreclosure Flood
Tuesday, May 20, 2008SUSIE GHARIB: The head of Fannie Mae predicts home prices will fall as much as 25 percent from their highs, nationally. Fannie CEO Daniel Mudd gave the grim forecast while speaking at the company's annual meeting in New Orleans. He says the key to the housing recovery is time, but he did not specify how much time would be needed for a turnaround.
PAUL KANGAS: The White House said today it's too early to tell if President Bush will support the Senate's new bi-partisan housing bill. The administration is reviewing the legislation and is encouraged by parts of the bill which create what it calls a robust regulator for Fannie Mae and Freddie Mac. Crafted by Senators Chris Dodd and Richard Shelby, this bill lets the government insure $300 billion in refinanced loans through the Federal Housing Administration. The president didn't want taxpayers footing the bill for those refinancings. The Senate plan would tap Freddie and Fannie for the money.
GHARIB: While the president and lawmakers wrangle over the housing bill's details, states and counties are moving ahead with plans to address their own foreclosure problems. Prince William County for example has the highest foreclosure rate in Virginia. The county's government is looking at ways to lower it as Stephanie Dhue reports.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: There are 5,500 bank-owned homes for sale in Prince William County, Virginia, just over 4 percent of the county's homes. Prices here have fallen 28 percent in the last year. To help address rising foreclosures, the county is considering a plan to offer its 14,000 employees low interest mortgages. County supervisor Corey Stewart says the plan addresses two problems.
COREY STEWART, CHAIRMAN, PRINCE WILLIAM COUNTY: There could be a couple of thousand employees who would be interested and from our perspective, that's great. That would take a significant chunk out of the foreclosure problem that the county is now facing and it would also allow our employees to stay and live inside the county as well as work there.
DHUE: To pay for the plan, the county would shift $50 million in investments it already holds to banks that agree to make discounted mortgages. Stewart says it's a win-win for the banks and Prince William.
STEWART: The county would continue to receive a 3 to 4 percent rate of return on those investments and at the same time, the bank would turn around and make the loans to county employees.
DHUE: Foreclosures are costly for communities. The Center for Responsible lending estimates when a home is foreclosed on, every home within an eighth of a mile loses 1 percent of its value. The center's Eric Halperin says where foreclosures are concentrated the costs snowball.
ERIC HALPERIN, CENTER FOR RESPONSIBLE LENDING: The people who bear those costs are the neighbors who live near the foreclosures and the county and city and state governments that have to provide services to those communities and see their property tax values go down, so then they have less money for police, less money for firefighters, less money for schools, so it puts an incredible stress on local government.
DHUE: Across the U.S., foreclosures could send the local tax base down by as much as $356 billion in the next two years. To help stem those losses, nine states have already committed $450 million in funds to help borrowers avoid foreclosures. Thirty one states have passed laws to limit predatory lending. Kil Hu says many states have also set up a task force to find solutions to the problem.
KIL HUH, PROJECT MANAGER, PEW CENTER ON THE STATES: States recognize that it has a toolbox at its disposable and they are trying to figure out what are the right tools to address their specific foreclosure challenge.
DHUE: Meanwhile, right next door to Prince William County in Fairfax, there's a proposal to have the county buy foreclosed properties to make affordable housing for the county's teachers, police officers and firefighters. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
