INDIAN RIVER COUNTY — A divided County Commission approved an amendment today that will make it easier for buyers to purchase homes renovated and offered for sale by the county.
Bob Keating, Director of the Community Development Department, said the county has purchased and renovated 19 homes for resale under the Neighborhood Stabilization Program Community Development Block Grant Housing Assistance Plan and sold four of them.
The Neighborhood Stabilization Program, or NSP, is a HUD program administered through the state and county that provides financial assistance and incentives for low and moderate-income families to purchase homes in neighborhoods impacted by foreclosures and other fallout from the real estate recession.
Under the program, government funds are used to bridge the gap between the amount of money a buyer can borrow and the cost of a home. That money can include closing costs and down payment assistance and is structured as a second mortgage with deferred payments.
According to Keating, the assumption has been that buyers will get FHA mortgages for homes the county is offering for sale. FHA mortgages require a 3.5 percent down payment and under current rules buyers must come up with half of that amount, or 1.75 percent of the home’s purchase prices.
The amendment changes the down payment amount buyers must pay from 1.75 percent of the purchase price to a flat $500.
“Lenders strongly support the change,” Keating told the commission, because it makes easier for buyers to qualify for home loans and because it enables them to get conventional instead of FHA loans, which gets rid of the need for mortgage insurance, an additional cost that might prevent some buyers from being able to afford a home.
There is a domino aspect to the amended financing plan: If a buyer can come up with a $500 down payment, he can qualify for the NSP assistance, which counts as a substantial down payment, and qualify for a conventional loan that does not require insurance.
Commissioner Gary Wheeler objected to the change. He said the county is in effect creating artificial mortgages because there is no interest on the percentage of the purchase and closing costs the government provides and because the debt is forgiven after 15 years if buyers stay in the home.
“It is time for people to start taking care of themselves,” he said, adding that the amendment might lead to higher taxes and “a loss of freedom.”
He also objected to the income cutoff element of the program, which he said limits eligibility to those making less than $70,000 a year.
“If someone is making $70,000, they don’t qualify for the program but their taxes are subsidizing a purchase for someone making a $1,000 less,” he said. “I got a problem with that.”
Board Chair Bob Solari agreed with some of Wheeler’s points about problems with government assistance to homebuyers but said he saw the amendment as a mere tweak to a useful program already in operation. He also said he knew someone who had purchased a home with government assistance and had been much benefited by it.
Wheeler and Commissioner Wesley Davis voted no on the amendment. Commissioners Peter O’ Bryan, Joseph Flescher and Solari voted yes, approving the change as recommended by county staff.