Homebuying Program to Trim Number of Bank Foreclosed Houses

by Peter Vernon on States

The Illinois Housing Development Authority has offered short-term loans that are interest free to help buyers make home purchases, and at the same time address the growing number of bank foreclosed houses in Illinois.

The program involves offering as much as $6,000 to potential homebuyers to be used as down payments. Earlier this year, the Obama Administration launched an initiative to give first-time homebuyers $8,000 federal tax credit if they buy properties by December 1 of this year.

Under the state’s initiative, Illinois will offer advances to finance buyers who want to make home purchases through the Home Start Loan Program. Those eligible will receive an interest-free home loan to be used as down payment when they avail of the Federal Housing Administration-guaranteed fixed-rate loan through certified lenders.

The zero-interest loan will have a maximum amount of $6,000 or 3.5 percent of the total purchase price of the property. But for the loan to remain without interest, it must be paid before June 30, 2010.

Illinois has allocated $50 million to help potential homebuyers. Government officials hope that if the program becomes a success, there will be fewer foreclosure homes in the state.

Illinois is one of the states in the country with high foreclosure rate in the first six months of this year. The number of bank foreclosed houses in the period rose by 29 percent, twice as much as the total national increase.

From January to June, 69,000 properties received foreclosure filings, an increase of 29 percent from the same period last year and 19.2 percent from the last six months of 2008. In June, foreclosure filings jumped by 32.4 percent compared with the same month last year, but declined by 1.3 percent from the previous month.

All in all, 10,796 homeowners received notices of defaults, auctions and foreclosures last month or one per 486.

Meanwhile, Freddie Mac and Fannie Mae are also competing for a chance to sell some foreclosed homes in their inventory. So far, Freddie Mac has about 30,000 foreclosure properties in its inventory. It has launched a sales promotion that involved a free home warranty for two years.

The total number of filings for bank foreclosed houses in the country rose by 9 percent the first two quarters of this year, with one out of 84 homeowners in danger of losing their properties to foreclosure.