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County faces loss of $1 million in federal funds to help home buyers

Friday, September 20, 2013 by Mark Richardson

Travis County stands to lose almost $1 million in federal Community Development Block Grant funds because a subcontractor failed to spend all of the money during the current fiscal year.

 

County staff told Commissioners that the U.S. Department of Housing and Urban Development, which issued the grant, reported that $909,925 was not spent in a timely manner by the county’s Homebuyer Assistance Program. HUD regulations require the county to spend a minimum percentage of annual grant funds or risk having those funds withheld in future years.

 

Sherri Fleming, County Executive for Health and Human Services, explained that HUD will have to decide if the county could have spent the money as allocated but failed to do so.

 

“At this juncture, the decision by HUD is whether or not our inability to spend the money was in or out of our control,” she said. “We believe that our inability to spend it was out of our control. Our task at this point is to do those things that are within our control to come into compliance.”

 

Fleming said that HUD expects the county to have no more than 1.5 times its annual grant balance on hand with 60 days left in the fiscal year. However, Travis County had 2.38 times that amount on hand when federal officials performed a timeliness test in August.

 

The county’s Homebuyer Assistance Program – which helps first-time homebuyers within certain income guidelines with down payments – is the cause of the problem, according to Fleming. In past years, the county handled the program in-house through its Housing Finance Corporation and has always been in compliance the HUD guidelines.

 

But during the past year, due to retirements and other factors, the county decided to subcontract the program, and that’s when the problem began. County officials say the non-profit agency that handled the program had 11 home applications ready to close in April, but all 11 were rejected by the FHA for funding. Only one of the 11 deals could be completed with conventional financing. The county has notified the non-profit, identified in county records as HomeBase Texas, that its contract will not be renewed.

 

County Judge Sam Biscoe, Fleming and other county officials met with HUD recently and explained this situation, and they hope it will take those circumstances into account in deciding whether to continue the grant. Meanwhile, staff is recommending that the Homebuyer Assistance Program be abandoned in favor of other programs that are working to bring Travis County back into compliance.

 

That prompted Pct. 1 Commissioner Ron Davis to comment that the county’s failure to succeed in the program hurts the people who need it the most.

 

“I really think one portion of this endeavor – in my mind – outweighs the other,” he said. “When we talk about a person getting a home for the first time… to have home ownership in something we have taken dear to heart  when we hear folks say ‘I’d like to have the American Dream, I’d like to own a home.’ One of these programs is almost a million dollars just to do that. If I’m a person out there struggling and they want to buy a home, and there’s money available, then I want to say ‘Yes, Travis County is able to help you.”

 

Davis criticized county staff for not monitoring the program more closely and notifying commissioners soon enough so action could be taken to solve the problem.

 

One short-term solution suggested by staff was to shift the funds over to the county’s Owner-Occupied Home Rehabilitation Program, which helps low-income homeowners make necessary repairs.  County officials have laid out a plan to do just that and bring Travis County back into compliance. Then the county might avoid losing a portion of its CDBG grant for a funding cycle.

 

Travis County officials say they expect HUD’s response in the next couple of months.

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