MODESTO — Modesto businessman Steve Kellogg wants to buy his 66-year-old mom a condo so she'll have a home of her own in her final years.
But he ran into a series of roadblocks when he tried to pay cash for an 816-square-foot ground-floor condo listed for $45,000.
The problem? The condo is part of the city of Modesto's Neighborhood Stabilization Program, a U.S. Department of Housing and Urban Development initiative designed to help communities ravaged by the real estate and foreclosure crisis.
Modesto has received more than $33 million in NSP funding in the past few years to in part purchase, rehab and resell foreclosed homes. Modesto also has used NSP funding for apartments for seniors and former foster youth.
The condo Kellogg wants to buy for his mother, Betty, comes with a myriad of fine print and rules and regulations, but the biggest hurdle is that the program was set up for buyers who take out mortgages. HUD made no provisions for cash buyers.
Steve Kellogg and the Kelloggs' real estate agent, Tony Savage of Matel Realtors, said they tried for about three weeks to get city officials to understand that Steve Kellogg wants to give his mom the money to buy the condo.
But they reached a breakthrough late last week when Savage and Betty Kellogg met with city officials.
"I think we are a go on it," Savage said about buying the condo. "I think we are 90 percent a go on this. This was frustrating for them (city officials), too."
City officials are guardedly optimistic after speaking with HUD officials, said Mary Otten, acting deputy director of parks, recreation and neighborhoods, the city department that administers the NSP program.
Otten said part of the problem is that the Kelloggs are the program's first cash buyers, and the Kelloggs and Savage thought that because it was a cash deal Betty Kellogg would not have to meet the program's guidelines.
Otten said HUD put those guidelines in place to ensure that people who buy NSP homes have an adequate income to meet their monthly expenses.
Betty Kellogg's only income is the roughly $1,000 a month she receives from Social Security, which is too low to qualify for the condo. But Steve Kellogg pays his mom's apartment rent and other living expenses and will continue to help her financially if she buys the condo.
Otten said the city could have done a better job by meeting with the Kelloggs and Savage much sooner. She said city staff should have been more proactive once they realized the Kelloggs and Savage were not familiar with the NSP program.
"We can always do better," Otten said.
The Kelloggs are relieved that progress is being made.
The condo is in a complex at Sherwood and Woodrow avenues in north Modesto, behind the Target store on McHenry Avenue.
Steve Kellogg owns Modesto-based Flooring Liquidators, which has 11 Central Valley stores. He said his mom fell in love with the condo once she saw it. The condo has been completely rehabbed from floor to ceiling, including new tile and carpet, dual pane windows, new doors and appliances, and two-tone paint.
"It's small and just right for me, you know, retired," Betty Kellogg said. "Everything is set real nice."
The Neighborhood Stabilization Program has been a benefit for the Northern San Joaquin Valley, said Byron Bogaard, chief executive officer of the Central Valley Association of Realtors, which has more than 1,600 members in Stanislaus and San Joaquin counties.
But he said the federal program comes with constantly changing and strict guidelines that local governments must follow. "They are very black and white regulations," Bogaard said. "They don't do very well with gray."
Bogaard said local officials are reluctant to deviate from the rules because of the consequences from HUD.
"There are so many rules and regulations," he said. "The people administering it are just trying to do their best. And when it comes to a judgment call, sometimes they are not willing to stick their necks out there."
Otten said Modesto could face fines or be barred from applying for HUD grants if HUD auditors determined that the city had not followed NSP guidelines.
Bee staff writer Kevin Valine can be reached at email@example.com or (209) 578-2316.