Idaho mulls state's share of subprime relief bill

Idaho's share of federal cash meant to alleviate pain from the nation's subprime mortgage crisis could top $140 million, with the bulk going to provide funding for low- and moderate-income borrowers or to help rescue those whose interest rates from adjustable-rate mortgages have risen and exceed their budgets.

Congress passed the Housing and Economic Recovery Act of 2008 in late July, and a month later officials in all 50 states are assessing just how much money is likely headed their way.

Idaho Housing and Finance Association President Gerald Hunter said this cash infusion could bolster the state's housing and construction economy. Though the subprime malaise hit states including California, Nevada and Florida much harder than it did Idaho, where foreclosure rates have risen but still trail the national average, Hunter said there's always a chance for situation here to intensify.

"Since we don't know where markets are going, it makes a lot of sense to try and make some of these stimulus investments today, in hopes of staving off negative market conditions in the future," said Hunter, who oversees the 36-year-old agency created by the Idaho Legislature to expand affordable housing. It operates independently from the state.

In March, 16.5 percent of Idaho's subprime adjustable-rate mortgages were past due, while the figure was nearly 20 percent nationwide, according to figures provided by Hunter's agency. By comparison, only 1.6 percent of conventional loans in Idaho were delinquent, lower than the 2.5 percent national average.

Even so, the housing slump has left its mark here, as Idaho unemployment including out-of-work roofers, plumbers, drywallers and masons rose to 4.1 percent in July following 37 months under the 4 percent mark.

"Do we need the funding in Idaho? We could certainly use it," Hunter said. "There is some concern about where Idaho is going next."

Across the nation, the housing bill - signed by President Bush into law on July 30 - includes an estimated $15 billion in housing tax breaks. All homeowners who do not itemize their income taxes can deduct between $500 and $1,000 from their 2008 federal taxes. Anyone buying a first home between April 9, 2008, and July 1, 2009, will receive up to $7,500 in federal income tax credits.

In Idaho, the state will receive an allocation of an additional $100 million so that an additional 750 people will be able to get Idaho Housing and Finance Association-financed mortgages. The agency already directs about $200 million to single family home loans.

The additional cash will for the first time also help homeowners struggling to make payments on high-interest mortgages they got between 2002 and 2008 to transform their loans into government-backed, 30-year fixed-rate mortgages

In addition, homeowners living in Idaho neighborhoods stricken by foreclosures, where oft-new but vacant properties are overtaken by weeds in overgrown yards, may see improvements. Some $20 million to $38 million could be headed to the state to benefit the hardest-hit communities to buy and fix up already-foreclosed property at a discount.

Though the rules are still being hammered out in Washington, D.C., Hunter said he's confident the cash will be limited to rescuing neighborhoods that are legitimately in distress, not go to save irresponsible speculators who got into financial hot water at the height of the housing boom and now want the government to bail them out.

"The resources are to be targeted to pick up foreclosed properties. In effect, it may be a bank that may own the property," Hunter said. "My understanding is, these dollars aren't being targeted to rescue delinquent borrowers."

Idaho is also due to receive an additional $143,000 to expand foreclosure counseling and $600,000 to help create and rehabilitate affordable rental housing that's growing ever-more scarce, among other provisions of the federal legislation. There's also another $3 million in grants for states to produce, preserve and rehabilitate rental housing or housing for home ownership.

"There's no question these dollars will be put to use," Hunter told The Associated Press, adding that only qualified people with adjustable-rate mortgages will qualify for new loans with better terms. "That doesn't mean all those folks under financial duress will qualify."

The agency's toll free number for Housing Counseling 1-877-888-3135.

On the Net:

Idaho Housing and Finance Association http://www.ihfa.org