Arizona is ready to spend more than $121 million in federal housing funds

Arizona is ready to spend more than $121 million in federal housing funds to help people buy homes in neighborhoods blighted by foreclosures.

The money arrived in April under the Neighborhood Stabilization Program put in place last year, before the 2009 economic-stimulus package. The goal is to help people of modest means buy foreclosure homes, fix them up and stop the overall slide in home values.

Two months into the program, no one in Arizona has closed on a home yet. Several have qualified, however, and hundreds more have applied.

The program took shape last fall when Arizona cities submitted applications explaining how and where they would use stabilization money. Phoenix received the largest share: $39.5 million. Other cities with money to offer include Mesa ($9.7 million), Glendale ($6.2 million), Avondale ($2.5 million) and Chandler ($2.4 million).

Most of Arizona's federal money is being spent in communities in the Valley, which has witnessed a record 65,000 home foreclosures in the past 18 months. The Neighborhood Stabilization Program is expected to help people purchase thousands of foreclosure homes in the Phoenix area. People living in and taking care of those homes are expected to help revitalize the Valley's neighborhoods hit hardest by foreclosures.

Potential buyers must plan to live in a home they purchase. Investors and second-home buyers cannot participate.

Beyond that restriction, terms and the process to qualify and buy a home vary from city to city. Some cities can offer $20,000 or more to a buyer for a down payment, closing costs and repairs. To obtain money, applicants must work with a housing counselor and complete a course in budgeting and homeownership. In some cases, the participating city determines which properties are available under the program; in others, buyers shop on their own.

Arizona housing advocates say some lenders have been reluctant to sell foreclosure homes for less money than they could potentially get from investors. But hopes are still high among home buyers and cities that the money will be used to help revitalize neighborhoods. Under the terms of the program, the money must be spent by early 2011.

"The money is here. Let's spend it. We are already three months into an 18-month deadline," said John Smith, president of Housing Our Communities, a Valley non-profit that is working with Avondale and Mesa on their Neighborhood Stabilization programs. "If we make some mistakes along the way, we'll fix them."