News Wire: City of LA Programs Takes A Hit

The mortgage crisis is steadily running its course through the economy and arguably has left not one sector or industry unscathed or at least threatened. And from where there is weakness, there is opportunity. Potential home buyers across the nation have realized a true "buyer's market" - defined by lowering interest rates, falling home prices, and motivated sellers. Finally, it seemed, that there was hope for the low and moderate income families to get a taste of good ol' American pie. Government-backed subsidy programs aimed at first-timers increased in popularity. We've even seen their funds being depleted due to a rise in loan reservation requests. For some time I have questioned the mortality of these types of assistance programs and recently posed the question on Zillow.com. Are these government-backed programs (as good as they are) going to be around forever? My guess was, quite possibly not. And now my fears have been affirmed. Yesterday I was alerted that the City of LA Down payment assistance programs (except for one) have been canceled. That's right folks, the most generous program of them all is calling it quits and shifting their focus away from first-time home-buyers and towards existing homeowners caught up in the mortgage mess.

Here's an excerpt of the letter they sent out:

Dear Los Angeles Housing Department (LAHD) Homeownership Program Partner:

Re: Important Announcement Regarding LAHD 2008 - 2009 Homeownership Budget and Programs

The City of Los Angeles has approved its Consolidated Plan Budget for the 2008-2009 Program Year (April 1, 2008-March 31, 2009). The Low-Income Purchase Assistance Program budget has been significantly reduced from the current year's allocation. Additionally, decreased funding is anticipated for LAHD’s Moderate-Income Purchase Assistance Program.

As a result of the reduction of LAHD’s Homeownership Program budgets and the current foreclosure crisis (approximately 5,235 foreclosures occurred in the City in 2007), LAHD will redesign its Homeownership Programs to utilize its limited resources in a post-foreclosure/neighborhood stabilization strategy to mitigate the negative effects of foreclosures on the City’s neighborhoods.

Consequently, LAHD is canceling the Reservations Waiting Lists for both the Low and Moderate Income Purchase Assistance Programs and will no longer accept reservation requests. Please notify your borrowers and real estate partners of the unavailability of LAHD Low and Moderate Income Homeownership Program funds.

Despite the unavailability of funds and cancelation of the waiting lists for the Low and Moderate Income Purchase Assistance Programs, LAHD has two other Homeownership Programs currently available for eligible first-time homebuyers: Mortgage Credit Certificate Program (MCC) and the American Dream Downpayment Initiative (ADDI) Program.

...Just as I was alerting colleagues and friends the feasibility of buying right now with the help of these programs. If this is any sign to what will happen to these types of programs in general, then we are in for a true series of unfortunate events.

So, what's going to happen? It looks like we still have seen the worse of the housing bubble burst. Experts still forecast prices to continue to drop. Though this will buy homebuyers more time and save them more money, there may not be as much assistance available. With any luck, next time around LAHD will have re-allocated their budget in favor first-time homebuyers...while prices are still favorable. Let us cross our fingers.

In the mean time, I will be researching for other types of programs.