New state program offers first-time buyers bargains on foreclosed homes

First-time home buyers will be able to purchase foreclosed houses in Stanislaus, San Joaquin and Merced counties at discount prices and with reduced-rate loans, thanks to a state loan program launched Monday.

California's new Community Stabilization Home Loan Program is expected to help 800 to 1,000 families purchase vacant bank-owned properties. Nearly 100 homes in the Northern San Joaquin Valley are eligible for the program, and more are expected to be added each week.

Gov. Schwarzenegger said the $200 million program will "pump up" the region's economy, which has been reeling from escalating foreclosures and declining home values.

"This program will not only make it easier for families to purchase their first home, but will also help stabilize neighborhoods that have homes sitting empty," Schwarzenegger said. "No one single effort can solve our nationwide housing crisis, but together these measures make an important difference in California's neighborhoods."

The California Housing Finance Agency will manage the program, which is funded by bond money.

So far, four lenders have agreed to participate by agreeing to price selected foreclosed properties at least 12 percent below their estimated values.

Some of those homes have been deeply discounted.

Example: A four-bedroom house built three years ago at 424 Fusco Ave. in Modesto originally sold for about $490,000, and it's been listed for $270,000 since being foreclosed. First-time home buyers now can purchase the 2,888-square-foot house for $237,600.

"This actually is a really nice house," said Chad Costa, a ReMax Executive broker who specializes in foreclosed property. Costa said he was surprised that Wells Fargo Bank, which owns the home, had reduced it so much.

A property Costa is trying to sell for CitiMortgage is at 243 Angora St. in Patterson. Its previous owners borrowed more than $493,000 on the home in the spring of 2005, then lost it to foreclosure. The 3,312-square-foot house had been priced at $229,900, but now it's listed at $198,000 for participants in the Community Stabilization Home Loan Program.

Costa questioned the fairness of reducing home prices so drastically for first-time buyers rather than for everybody.

The state program, however, is restricted to those who haven't owned before and who meet certain income limits. The buyers also must live in the homes as their primary residences.

For those who qualify for the program, not only can they buy homes at bargain prices but they'll also get low-interest, fixed-rate loans with favorable terms. Currently, those 30-year loans offer a 5.5 percent interest rate.

"We want to fill up these empty houses," said Schwarzenegger, explaining how vacant houses drag down the value of entire neighborhoods, hurt the economy and promote crime.

Bee staff writer J.N. Sbranti can be reached at jnsbranti@modbee.com or 578-2196.