Editor's note: This article has been corrected from its original version. The income limits for very-low-income and low-income households have been adjusted to reflect current regulations.
The government's economic stimulus package appears certain to pump new funds into federal housing programs already at work in a six-county area of Northwest Colorado that includes Routt County. The trick will be helping low-income buyers qualify for housing programs that weren't designed with a resort community in mind.
"We're what's not considered usual," J. Randy Morton told a Steamboat audience Feb. 4. "Condos are not the norm for rural areas."
Morton works for the Craig office of USDA Rural Development. He was speaking at a lenders' forum hosted by the city of Steamboat Springs.
The Rural Development office helps administer funds intended to make it easier for low-income households in rural areas to qualify for a home loan, typically with very little down payment required.
However, Morton and his colleagues are finding it difficult to match Steamboat's affordable housing stock - primarily condominiums - with their program guidelines.
The problem is that most of the entry-level condos in Steamboat are either in older resort projects or in new projects where fewer than half of the units have been sold.
The federal guidelines for two USDA lending programs never anticipated helping families purchase homes in condominium projects where some units are managed as nightly vacation rentals. Or in other cases, projects where affordable housing units are the first to sell in a building devoted primarily to expensive second homes.
Neither product is a good fit with federal guidelines.
The encouraging news is that Morton is much more optimistic than he was two weeks ago about the availability of funding for USDA Rural Development's guaranteed and direct housing assistance programs. Just this week, he received e-mail communications from the state office confirming the agency anticipates receiving a "substantial" increase in funding under the stimulus package President Barack Obama signed in Denver on Tuesday.
"We actually have a concern as to whether we can loan this amount of money without increasing our staff" on a national basis, Morton said.
Morton acknowledged he was deliberately pessimistic when he spoke to a gathering of bankers, mortgage lenders and developers in Steamboat this month about the outlook for having enough money to lend in Northwest Colorado between this spring and the end of the fiscal year Sept. 30.
That's because by law, his agency is required to devote 40 percent of its monies to the direct assistance program for very-low-income households. It provides 100 percent loans with no down payment to qualifying families. A household of four in Routt County cannot earn more than $60,550 a year to qualify. The maximum loan amount is $269,600.
The highest demand in recent months, however, has been for the loan guarantee program that supports local banks making home loans to low-income households - $87,050 for a family of four in Routt County, Morton said. The share of money for that program had all but dried up for this year before the signing of the stimulus package this week.
USDA Rural Development's guidelines make it difficult to offer assistance for the purchase of condominiums in mixed-use projects where there is either a component of nightly rentals or commercial activity, Morton's colleague P.J. Howe said.
"As we go into a process, if we become aware there are nightly rentals, we shy away from it," he said.
Morton suggested Steamboat's affordable housing program had been designed without a sufficiently clear understanding of how they would interface with federal housing programs.
"We're targeting a lower income strata," Morton said. "Mixed-use projects are not permissible. It adds extra complexity for getting (loans and loan guarantees) approved."
That was unwelcome news to Paul Franklin on Feb. 4. He is the developer of The Olympian in downtown Steamboat Springs. He has three affordable units under contract in his new building, but he has been unable close on all but one of them. A single market-rate unit in The Olympian has closed.
"It would be good if City Council could see they've created a real tough situation for developers. The only buyers who can fit are those eligible for FHA loans, but FHA won't lend because they aren't 51 percent sold."
The lending process in Steamboat has been further complicated by the fact USDA Rural Development has constraints similar to those being imposed by lending giants Fannie Mae and Freddie Mac, which prevent them from making loans for the purchase of brand new condominiums where less than 50 percent of the overall units have been sold. At USDA Rural, the threshold increases to 70 percent in the case of its loan guarantee program.
The difficulty it has had assisting condo sales in Steamboat doesn't mean the Craig office of the USDA Rural Development isn't succeeding in helping low income families acquire homes in Routt County. Morton said that just this week, he helped a family purchase a three-year-old home on a wooded lot in Stagecoach for $256,000.
With a subsidized interest rate, their monthly mortgage payment of $700 is less than the rent they had been paying on another home.
Since the beginning of the fiscal year on Oct. 1, Morton said, his office has made three loans in Routt County with an aggregate value of $697,750 through its direct program. Another seven loans with a combined value of $1.537 million have been backed by Rural Development's housing guarantee program.
The key for buyers hoping to qualify for his agency's programs, Morton stressed, is avoiding bad credit ratings.