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Buyer-aid program brings frustration

A federal program designed to stabilize communities hit hard by foreclosures has left one Medford couple at their wits' end trying to find a lender so they can buy a house.

"It is a very unstable program," said Jaymi Bowers, a 26-year-old mother of two. "I want the public who is trying to use this program to know what they are in for."

Bowers and her 29-year-old husband, Matthew, received approval from the federal government to buy a foreclosed home under the Neighborhood Stabilization Program that assists families with the down payment. The Bowerses were the first family to qualify under Medford's version of the program on Sept. 4.

They discovered that lenders are reluctant to loan through this program because it has changed frequently, it requires more paperwork and the federal government pays a substantial amount of the down payment.

The city of Medford has received $459,260 in federal neighborhood stabilization funds to divvy out in the next two years. The funds may be used for the purchase price of a foreclosed home, all in an effort to keep homes occupied and prevent neglect and neighborhood blight often associated with foreclosures.

Nationwide, about $4 billion is available through the program. Oregon's share is about $19.6 million.

Another Medford resident, Tom Ellis, was the first neighborhood stabilization grant recipient in Oregon in July. He was awarded about $50,000 to put toward the purchase of his home or to make home repairs and upgrades. Ellis was part of the state's test version of the program, while the Bowerses are part of a program administered in Medford.

Karen Cooper, who is a broker for American Pacific Mortgage Banker and represents the Bowerses, said the program is frustrating for her clients and everyone else involved.

"They've felt like they've been stuck through a ringer, and so have I," she said.

"There have been so many changes that I don't think the underwriter knows what is up."

In February, the program allowed for the paying of repairs on a foreclosed house before the sale was concluded. "That's gone now," she said.

To qualify for the program, a family of four would have to earn a maximum of 120 percent of the Jackson County median income, or $66,500, she said.

Lenders are wary of families that earn about $50,000 because they may be at risk of defaulting on their mortgages if one of the wage earners is laid off.

Despite the difficulties for the Bowerses, Cooper said she believes most of the paperwork has been completed. If the sellers agree to extend the contract and make repairs to the house, the Bowerses could close in about a week, she said.

They would like to buy a small north Medford home for $165,000 that was built in 2002 and is now owned by a bank. To qualify for the loan, they had to have a good credit score; theirs is 790. Jaymi Bowers is a beauty consultant and her husband works for a landscaping company.

Bowers said her beef is not with the federal stimulus program but with lenders leery of providing loans under it.

"None of them wanted to work with the Neighborhood Stabilization Program," she said.

Her husband said the program is great for people to get into if they've got the patience. He said they will have to come up with $2,800 to qualify with the federal program kicking in about $38,000.

"It's a program that's really good, but it's not working," he said.

Judi Robinson, senior loan officer with People's Bank, said the new loans are more difficult to process and haven't been well received by banks and lending institutions.

"Investors are a little bit shy of them," she said. "Some of them just want to throw their hands up."

The down payment contributed by the federal government is considered a "silent second," which is owed when the house is sold, which scares some investors, she said.

Despite the problems, Robinson said the federal program is generally good and she thinks lenders should get on board with it to ease the foreclosure mess.

Robinson, who is currently processing two of these types of loans, describes the program as a creative way to help solve the problem, though it has had a few snags.

A year into the program, the government is just now making the forms available online, she said. Also, the Federal Housing Administration doesn't yet have all the answers that lenders might need, Robinson said.

It also can take an extra month to process the loan, which can be a problem, Robinson said.

"It's not an easy product to put together," she said.

Jaymi Bowers said many people trying to take advantage of the Neighborhood Stabilization Program might panic and give up, but she recommended patience.

Though she has been disappointed before, she said that signs indicate she may get her loan.

"It looks like it's going to go through," she said.

Reach reporter Damian Mann at 776-4476, or e-mail dmann@mailtribune.com.

From left, Julia, 5, Nathan, 3, Jaymi and Matthew Bowers visit a foreclosed Medford home they're trying to purchase under the Neighborhood Stabilization Program. - Bob Pennell