By Cohen, Ariella

The year of the owner-occupied home has arrived, as far as Mayor C. Ray Nagin is concerned.

A whopping $106 million out of Nagin's proposed $1.16 billion 2009 budget -- one tenth -- is dedicated to helping New Orleanians buy houses with soft second mortgages, or forgivable loans for homes in parts of the city targeted for recovery. Excluding the $11.2 million tab the Federal Emergency Management Agency is footing to demolish Katrina-damaged properties, the loan represents the single largest expenditure on the budget for the city's Office of Recovery and Development Neighborhood 1 program.

"This is going to push homeownership in our community like never before," the mayor said during a budget address to the City Council last month.

The drive to put more of the city's residents into houses they own is being funded primarily with community development block grants from the U.S. Department of Housing and Urban Development. Unlike traditional federal soft second mortgage programs, the city programs will provide loans to people who need money for renovation of existing homes as well as first-time homebuyers earning more than 80 percent of the area median income of $32,000.

The program, which still must undergo a few final bureaucratic hurdles, offers as much as $65,000 at a zero percent interest rate for people buying in "housing opportunity zones" in Gentilly, the 9th Ward, Lakeview, Central City, Treme and the 7th Ward. Loans are only collected on if the recipient sells the property or refinances the first mortgage before the second mortgage is forgiven.

Realtors say the incentive is coming just in the nick of time.

"In this market, buyers need as many options as possible," said Sunny Shannon, assistant vice president of Eustis Mortgage.

Yet even before the programs complete all the necessary approvals, there are concerns that the state of the credit market could hamper success. The housing opportunity zones where the loans are being offered are largely concentrated in lower-income areas, where many who owned homes before Katrina bought at a time when it was possible to secure a loan with a spotty credit record. Securing the same loans now is impossible because of the changes made in the wake of the mortgage crisis.

"And if you can't get a first mortgage, the city can't give a second mortgage," said Mtumishi St. Julien, director of the Finance Authority of New Orleans. "We are making the best program in the state, but that doesn't mean we can help everyone."

Credit: Ariella Cohen

(Copyright 2008 Dolan Media Newswires)

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