Los Angeles Gears Up to Repair Foreclosed Properties

by Simon Lindsay on cities

When the new housing legislation is implemented in October, California will be receiving a federal grant that could amount to as much as $1.2 billion. This money will be used to buy and rehabilitate foreclosure homes in areas hardest hit by the foreclosure crisis such as Los Angeles.

Foreclosure filings in this city have actually soared by 300 percent since the mess in the mortgage industry erupted. In many neighborhoods, these abandoned houses are being considered to be the reason why home values have been declining and home sales activities have been sluggish.

According to the local officials, subprime mortgages are not the only ones defaulting. This could be attributed to the rising inflation rate, unemployment and generally weak economy. And because home values have plunged, many homeowners found themselves with mortgage debts which are larger than the present values of their homes.

To make matters worse, lending guidelines have been tightened due to the rampant predatory lending practices. This resulted to potential buyers getting discouraged and growth in the inventory of foreclosures for sale.

It is yet unclear how much of the $1.2 billion will be granted to Los Angeles. In any case, local officials are already preparing the criteria that will be used in determining which distressed property will be bought. But for sure, the vacant homes will be prioritized since they are the ones which are responsible for driving down home market values in many neighborhoods.

With regard to this, local officials are hoping that things will turnaround by the beginning of next year. Considering that California is among the states with the highest foreclosure rates in the nation, it is not surprising that the state government is getting worried about the effects of such crisis in their local economy and residents. Any federal assistance is most likely appreciated.