Relief funding to purchased foreclosed properties may be rescinded if states don’t spend it in time
Many areas of the U.S. that received federal funding to help alleviate rising foreclosures are at risk of losing it if they don’t spend the funds quickly enough, according to USA Today.

With more than $1 billion at stake, localities are struggling to bypass inadequate staffing, a down market and federal obstacles to purchase the foreclosed properties the funds are intended for before the “use it or lose it” deadline arrives, the newspaper said. Through a wave of legislation and funding, more than $6.9 billion has been allocated toward foreclosure relief.

The first round gave states 18 months to spend the $3.9 billion allotted through the Neighborhood Stabilization Program in 2008. In 2009, $2 billion was added through stimulus funds. The final $1 billion was recently released by the Obama administration. In order to meet the tight deadlines, states are turning away from purchasing single-family homes and moving instead to multi-family properties and rental housing to stabilize neighborhoods, the newspaper said.

“I don’t know if it’s exactly the way Congress envisioned it – that single-family homes be recovered out of foreclosure,” San Bernardino Community Development and Housing Director Mitch Slagerman told USA Today. “My only concern is if the houses are purchased don’t go back to homeownership when the market rebounds, then we haven’t really stabilized the neighborhood at all.”

High rates of mortgage loan defaults have the power to cripple entire neighborhoods as homebuyers, small businesses and corporations are less likely to invest in the area. The federal government is taking continuous strides to both help individuals and entire neighborhoods avoid the ramifications of foreclosure.

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