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If county helps pay for home, don't flip it

By ANDREW SKERRITT
Published December 11, 2005

The real estate boom certainly has a trickle-down effect.

With housing prices skyrocketing, many homeowners have been trying to cash in.

And that includes buyers on the low end. Some in Pasco County have been making a profit subsidized by taxpayers. That's a different kind of welfare.

Participants in the county's home buyers assistance program have been reselling their homes too fast.

Pasco County officials think it's time to talk profits and penalties.

"We've noticed that as we get payoff checks, they're owning the property for less than a year," said George Romagnoli, who manages the Pasco County program.

Pasco, like Hernando and Citrus, gets state money to help low-income families. Housing officials in Hernando and Citrus haven't seen much if any flipping in their low-income homeownership programs. But that doesn't mean all is well.

Predatory lenders, attracted by the healthy equity in the Habitat for Humanity homes, have been courting low-income homeowners, said Jerry Steele of the Citrus County organization. While it is becoming increasingly difficult to find affordable housing in places like Citrus and Pasco, there is no shortage of money to help low-income home buyers.

At the start of the year, Romagnoli was talking about having $3.5-million he was trying to lend. A family of four that makes less than $61,440, for example, can qualify for $10,000 toward an existing home or $14,000 toward a new one.

Properties are appreciating at 25 to 35 percent a year, sometimes even more, Romagnoli said.

To accommodate the rising housing prices, Pasco County upped the limits on the homes that can be bought through the program: $150,000 for an existing house; $180,000 for a new house.

The average interest-free loan is around $25,000, Romagnoli said.

But unlike the typical mortgage, the homeowners don't have to repay the zero percent loan every month. They can repay the money when the house is sold.

All the money that's repaid goes into the county housing trust fund to serve as loans for other low-income home buyers.

With the quick rate of repayment, that means more money is available for other low-income home buyers. For the fiscal year ending in September, the county collected $4.1-million, Romagnoli said.

But some of the turnaround times have been scandalous.

For example, Romagnoli's office has been getting loan payoffs from people who bought houses in May 2004, January 2004 and even as recently as March.

"They haven't lived in it very long. It defeats the purpose for us to get paid back so quickly," Romagnoli said.

The purpose of the program is to provide homeownership and to stabilize neighborhoods.

"The incentive is for them to stay in the house and stay in the neighborhood," Romagnoli said. "That's the purpose of the zero percent loan."

Sounds like a lot of those folks have been staying up late watching those no-money-down real estate infomercials.

Imagine getting a $20,000 loan for a down payment, then reselling the $100,000 house for $160,000. You repay the lenders and walk away with the profit.

"It's an abuse of the system," Romagnoli said. "Being in a house for less than five years doesn't stabilize the neighborhood."

Pasco County says no more.

Beginning Jan. 1, those who get interest-free loans will be penalized if they sell those properties within a certain number of years.

If a family buys a house with county help and sells it within three years, they will have to share half the profit with the county. If they sell the house four years later, they get to keep a greater share of the profit.

Sounds fair enough.

Andrew Skerritt can be reached at 813 909-4602 or toll-free at 1-800-333-7505, ext. 4602. His e-mail address is askerritt@sptimes.com

[Last modified December 11, 2005, 02:15:36]