FANO had promised to send city officials the first 15 files by Dec. 10, but has yet to do so
As the year comes to a close, about 60 New Orleans real estate deals remain stuck in a government-financed homebuyer subsidy program that's sputtered through almost every imaginable obstacle.
View full sizeIn October, Diah Stephenson was trying to sell his house at 10139 Hammond St., but the buyer was having problems getting money from the FANO program. City officials are still waiting for the Finance Authority of New Orleans to send files from its soft-second mortgage program so city staff can review them and approve them for no-interest, forgivable loans. FANO had promised to send the first 15 files by Dec. 10, but has yet to do so. Meanwhile, several investors have canceled deals with buyers through the program, and at least one property owner has been foreclosed upon because of the delay.
The soft-second program showed promise as a catalyst for rebuilding in difficult areas. More than 400 homes were rebuilt and sold to families of modest incomes in 2008 and 2009 thanks to $27.8 million in federal Housing and Urban Development money the state distributed through FANO. Qualified buyers got second mortgage loans of up to $65,000 and as much as $10,000 in closing-cost assistance. The loans become gifts if the recipient stays in the home. More than 100 of the subsidized deals were in eastern New Orleans.
A second $10 million city-financed effort was launched by FANO in April, and there was supposed to be a seamless transition between the state and city efforts. But when new Mayor Mitch Landrieu took office a month later, the program stalled. There were questions about whether FANO was complying with HUD rules. On Nov. 1, a scathing federal audit questioned the way FANO had distributed the money, prompting the Landrieu administration to take a more hands-on approach with approximately 60 files lenders had begun to process when FANO Executive Director Mtumishi St. Julien prematurely announced its availability.
On Nov. 3, Deputy Mayor Cedric Grant promised a resolution for those who had already been waiting for months.
"I'm going to try to move these poor people through as quickly as I can," Grant said at the time.
But weekly meetings between FANO and city leaders have borne little fruit. Some of the files are now so old that they lack sufficiently up-to-date information, such as a current proof of income from the proposed buyer. Other buyers haven't provided an accounting of how much FEMA hurricane recovery money they've received, and that's now considered a duplication of benefits that will reduce the size of their soft-second loan.
Add to that unrelated difficulties that have conspired to slow the process: First, in October, the city's real estate records were lost in a computer crash, hindering the title searches that must be done to clear FANO's files. Then, in late November and early December, another computer crash at City Hall limited what city staff could do. Perhaps most significantly, two of the program's participating lenders -- Dryades Savings Bank and Whitney Bank -- were swallowed up by First NBC and Hancock Bank, institutions that aren't approved to handle the loans.
"The city is continuing to work with FANO to move these soft-second mortgage applications through the process, in a way that will ensure federal dollars are spent appropriately and will get selected applicants into homes as quickly as possible," mayoral spokesman Ryan Berni said. "To hold FANO accountable, the city requires weekly update meetings on the status of applications. We will continue to help FANO resolve issues that are holding up this program."
FANO spokeswoman Terrell Perry did not respond to requests for comment.
Sellers and their real estate agents are fed up with the repeated delays, and some have been unable to keep their deals aloft.
Developer Rainey Soriero, who praised the city for its handling of the FANO situation in the fall, said she's had enough with the constant excuses. She said she severed a deal Dec. 15 with a buyer who was in the pipeline for one of the loans for the last eight months. It was simply too expensive for her to keep paying a note on the house without entertaining other offers.
"I have canceled my contract, absorbed the cost and broken the dreams of a family hoping to be homeowners," she wrote in an e-mail excoriating Kristina Ford, the assistant deputy mayor Soriero had praised in November. "It has cost me thousands, (and) it has cost (the potential buyer) many emotions, not to mention the money she has spent as well."
Real-estate agent Jerome Wilder had four clients who were in line to sell properties through the FANO program. Only two have survived. He thinks Ford and the city are at FANO's mercy.
"I really think FANO is making excuses because every week they say it's going to be another week, every week they say they need more information from the buyers," Wilder said. "Well, my clients' buyers have turned in everything they've asked for. Next thing you know it's going to be another week and we haven't closed yet."
One of Wilder's clients is Charles Marcus, who restored an eastern New Orleans house he lived in before the storm. He fell behind on his construction loan payments as the FANO program hit snags, but he held out hope that the deal would close by mid-December. It didn't, and on Dec. 14, Specialized Commercial Lending filed foreclosure papers.
"I'm really frustrated," Marcus said. "To me it's like you're dealing with people who don't have any sympathy for the people who have to deal with them. I thought when Landrieu got in there that the city would be more sympathetic toward its citizens on things like this. But it seems like no one really cares. It doesn't affect them so they don't care."
David Hammer can be reached at dhammer@timespicayune.com or 504.826.3322.