BY JIM BARON

PROVIDENCE —Neighborhoods in Pawtucket, Central Falls, Woonsocket, Cumberland, West Warwick, East Providence and five other communities are in line to get a piece of $19.6 million in federal funds to acquire and redevelop foreclosed and abandoned properties, provide down payments for first-time homebuyers and demolish blighted properties.

Gov. Donald Carcieri said Wednesday that approximately 200 affordable housing units will be created by the Neighborhood Stabilization Program, funded through the federal Housing and Economic Recovery Act of 2008, spearheaded in part by Sen. Jack Reed. 
The idea, Carcieri told reporters at a Statehouse press conference, is to target the money to specific neighborhoods that are in danger of going downhill because they contain a large number of foreclosed properties.
“This couldn’t have come at a better time,” Carcieri said, “the effects of foreclosure on our neighborhoods, in terms of changing the whole nature, the whole look — the kind of issues that happen when places are empty and foreclosed, the vandalism, all that has a depressing effect on other housing values in the neighborhood and changes the whole character.”
“This effort is critical,” Reed agreed. “It’s not just the loss of a housing unit, a home in a community, it has a cascading effect. As one home is foreclosed the value of other homes begin to decrease almost automatically.
“In order to reverse this,” the senator said, “the thought was we would give the state and localities specific funds to go in, to acquire foreclosed homes, to renovate them if we have to, to help people buy these hopes and not only to help put people in homes but help these neighborhoods stabilize as a basis for recovery.
He called the program “a strong step to try to help neighborhoods by ensuring that homes that are foreclosed do not stay there, contribute to blight, stay there as an opportunity for mischief, but be put back in good use so families can live” in them.
Reed said even once the program is implemented, there is more to do in terms of keeping people in their homes. He said he is working toward having the next round of funding focus on foreclosure prevention.
Richard Godfrey, director of Rhode Island Housing, said he could think of only one time where the housing business was as difficult as it is now: in 1933, in the middle of the Great Depression, when, he said, 50 percent of homes were in foreclosure.
“We’re not there yet, Godfrey said, “but some days it seems like that.”
Providence, the community hardest hit by the foreclosure crisis, is slated to get nearly half of the funds available for the program, $9.5 million. Pawtucket is in second place with $2.5 million targeted for its hardest-hit neighborhoods. Other amounts for local communities include $1 million for Woonsocket; $908,000 for Central Falls; $399,000 for West Warwick; $263,000 for East Providence and $127,000 for the Valley Falls section of Cumberland.
Funding levels for each community were determined by the percentage of the state’s total foreclosures that occur there.
The state and localities will take 10 percent off the top, $1.96 million for administrative costs.
Godfrey said the program will allow the state and municipalities to “revitalize neighborhoods, buy properties out of foreclosure, rehab them, get them into the market and, just as importantly, help people to buy those homes.
He said Rhode Island’s economy was hit “faster and harder” than other parts of the country by the housing crisis, but “I think we will emerge faster and stronger” as well.
Ironically, Godfrey said, Rhode Island is in relatively good shape because it has a housing shortage. In other parts of the country there is a plethora of unsold homes built during the housing boom that burst a year ago. In those states, those homes will have to be purchased before recovery can begin.
“In Rhode Island,” he said, “we still have more people who need homes than have homes.”
In the Ocean State, Godfrey said, it is still possible for a developer to buy rental property cheaply, renovate and make money on still-high rents they can demand.
Money from the program, he said, “must be used for foreclosed properties. Other properties are not eligible.” And it has to be spent in a neighborhood where there has been an impact from foreclosures.
“The goal of this program was not to spread the money widely,” Godfrey said, “it was to target it into certain neighborhoods. As the applications come in for funding, we will want to see where we can make the biggest impact on neighborhoods. We will give priority to developments which can return properties to productive use the fastest.”
One class of victim in the foreclosure crisis is the renter who kept current with rent payments and was a good tenant, only to be evicted because the landlord did not make mortgage payments and the bank foreclosed on the property.
Reed said that on Tuesday, Fannie Mae, the government sponsored enterprise that supports the mortgage market, agreed to allow tenants in foreclosed properties to stay in their homes as long as they keep up rental payments, but Deutsche Bank, a major player in the mortgage industry, announced it would not allow tenants to stay.
“We would like to see other financial institutions step up and do that also,” Reed said. “We are leading by example at the moment and when we go back in January there might be ways to address this issue.”
One problem, Reed said, is that the way mortgages were packaged, securitized and sold, it is difficult to determine who has the ownership rights to make such decisions on a specific property.