Stimulus puts Eugene man in house

EUGENE — Eugene native Justin Turcotte, at 27 years old, is about to hit the stimulus jackpot.

He's got a good teaching job. He's got a good credit score, although he hasn't saved much money.

Now, the federal government aims to shower him with a $37,000 loan free of interest and montly payments so he can afford a three-bedroom rambler in the neighborhood where he grew up.

When the deal is complete, Uncle Sam will ice the cake by giving the young man an additional $8,000 for being a first-time home buyer.

Turcotte's mother is thrilled. She likes the fireplace. His co-workers are no less enthused. They want to hold a New Year's housewarming party there.

Turcotte is buying his house through the federal Neighborhood Stabilization Program, a program the stimulus package put money into.

It's a generous program for select home buyers — not necessarily first-time home buyers — who want a repossessed house in census tracts that the federal government labeled distressed. Locally, that's parts of West Eugene and most of Springfield.

Cities the size of Eugene and Springfield are allowed to design how their own stabilization program will work.

Springfield's program, which was launched in late September, is designed to spread the $227,000 in stabilization money the city's got to the maximum number of home buyers — as many as 15 or 20 families.

While other jurisdictions allow a home buyer to get as much as $50,000, Springfield gives its participants $10,000 to $35,000 apiece. "The more income you make, the less funds you'll get," Springfield housing specialist Kevin Ko said.

Springfield can make a lot of stabilization loans because it has a large swath of foreclosed housing stock, compared with cities such as Eugene, Ko said.

The federal government requires that participating home buyers in Eugene and Springfield earn no more than 120 percent of the area median income, which is $68,650 for a family of four.

Buyers must attend an eight-hour ABCs of Homebuying class.

Also, they have to obtain plain vanilla, 30-year, fixed rate loans for the portion of the purchase not covered by the federal loan. No subprime or other exotics will qualify.

The federal loan doesn't come due until the home buyer sells the house, as long as the sale is five years after the original deal. Buyers who sell earlier pay a penalty.

The Springfield stabilization program will help cover down payments and closing costs.

Buyers are on their own to negotiate the cost of any needed repairs with the banks that own the foreclosed properties.

Eugene, meanwhile, plans to lavish larger sums on fewer house buyers. The subsidy can be used for down payment and closing costs, and necessary repairs and additional energy upgrades, such as new windows and insulation.

"They really want to spend the money," Ko said. "They have a limited pool of homes and a lot more money to spend than we have. We have a lot of homes and a little money to spend. We're in the reverse position. We want to spread the money as widely as we can."

The Eugene program, which started in August, has $300,000 to spend on aiding foreclosure deals. The city expects to help six to 12 home buyers, housing officer Bob Briscoe said.

Buyers will have to find repossessed houses within five census tracts that include small parts of Whiteaker, Trainsong, River Road and Bethel.

"We can't be like Springfield," Briscoe said. "I wish we had more money and a bigger area, but we don't. That's the way it is."

If a house buyer owes too much in debt to meet debt-to-income ratios for a higher mortgage, the Eugene program can even reduce the principal on a potential loan.

In Eugene, that helps, said mortgage planner Casey Lown of Alpine Mortgage Planning.

"In a place like Eugene, there just aren't any $100,000 houses that anyone would want to live in," he said.

Paying for repairs turns out to be a sticky problem for Eugene officials.

The federal government requires a painstaking 26-step process to use stabilization money for repairs, and that's scared away lenders.

"Not as many lenders are offering those type of loans, so you get a bottleneck in terms of supply and demand," Lown said, adding the closings can drag on for 90 days. "There's a lot more work that goes into it."

Repair problems torpedoed Eugene's first foray into the stabilization program, Briscoe said.

After $60,000 in needed repairs, the first house would not meet loan-to-value ratios required by the lender.

Nationwide, in fact, the program got off to a slow and clunky start with midstream changes in federal guidelines and lenders declining participation.

Siuslaw and Summit banks have stepped forward locally. Other banks have yet to commit.

The banks have to accept the government's second mortgage on the property.

"There's still a lot of anxiety about the program both on the lenders' side and on our side. It's still so new that every day we're getting new forms to fill out," Ko said.

Statewide, only about 10 house sales have been completed under the 16-month-old stabilization program. The count includes one deal in Springfield, closed the week before Thanksgiving, and none so far in Eugene.

"I have three more (offers) in the works, sitting on my desk, mainly waiting for the lenders to say, 'Yeah we'll participate in the program,'" Ko said.

The federal government set a September 2010 deadline for completing negotiations on all the purchases under the program.

Turcotte hopes to be one of the lucky few closing in December under the program on a house on North Clarey Street just off Highway 99 on a classic 1970s subdivision cul-de-sac.

The house had been repossessed in September. The former owner paid $194,000 at the height of the local housing boom in September 2006.

Turcotte will pay a bit over the $140,000 asking price, he said. Without the $37,000 federal loan provided by the neighborhood stabilization program, he couldn't have afforded the house.

He's hoping the deal will close on Dec. 15, leaving him 10 days to paint, shampoo the carpet, move in furniture and hang strings of gaily colored lights.

"Merry Christmas. You own a house. Yay," he said.

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Information from: The Register-Guard, http:www.registerguard.com

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