According to Boonslick Regional Planning Commission Executive Director Steve Etcher, funds have been applied for through the new Neighborhood Stabilization Program, established by Title III of the federal Housing and Economic Recovery Act enacted earlier this year. The Act allows states to target funding to areas of need based on the number of foreclosures, subprime mortgages, mortgage delinquencies and mortgage defaults. Etcher said final approval of the grant applications is expected to take place sometime in February. Officials from the Department of Housing and Urban Development (HUD) will make the decision. "This program is a totally new concept," said Etcher. "It is designed to stabilize the home market by taking foreclosed properties and providing the funding to purchase and rehabilitate them to attract new low- and middle-income buyers." About $42.6 million has been set aside for residents of the state of Missouri and will be distributed in local communities throughout the state. The funding is a result of a federal bailout program designed to rescue Freddie Mac and Fannie Mae lending programs. Of that amount, roughly $23.5 million was designated as Tier 1 funding for Missouri municipalities. To be eligible for a Tier 1 grant, Etcher said a city must meet three criteria: A percentage of foreclosed loans higher than the countywide average, a large percentage of high-cost loans, and an above average unemployment rate (defined as greater than 6.1 percent in Fiscal Year 2008). "Both Truesdale and the part of Warrenton south of Interstate 70 meet those guidelines," Etcher observed. A total of 86 communities throughout the state are expected to receive Tier 1 grants. Another $4.2 million will be disbursed later for Tier 2 funding and about $10.7 million will be distributed for Tier 3 funding. That tier may impact the city of Wright City. The state is allowed to deduct a 10 percent administration fee from the $42.6 million total. The funding will be used to purchase homes in which the original owner has defaulted on the mortgage and the property has been foreclosed by banks or other financial lending institutions. New borrowers can purchase a home appraised at up to 120 percent of the county's median income level. A new borrower's house payment amount may not exceed 30 percent of the family's total monthly gross income, Etcher said. "There is quite a bit of flexibility," said Warrenton Mayor Greg Costello. Etcher said the Boonslick Regional Planning Commission initially applied for grants of about $1.86 million on behalf of the city of Warrenton and about $1.3 million on behalf of the city of Truesdale. Warrenton is expected to receive grants totaling $500,089. The city of Truesdale, meanwhile, is eligible to receive grant funding in the amount of $308,398. "It's a fantastic program I think," said Truesdale Mayor Murray Bruer. "The main thing is we're going to capture these homes and sell them reasonably. They are reasonably priced." Bruer added the appeal of the program was to help reduce the number of vacant homes in a community. "In any neighborhood, you don't want to see an empty home," Bruer observed. "Let's face it, that can cause crime. We will try to control that." Because of the high demand for Tier 1 funding around the state, Etcher said the amount of grant money he originally applied for was reduced to have an impact on more communities. "But we'll still be able to impact about four or five homes in Warrenton and perhaps that many in Truesdale," Etcher said. Etcher stressed the bailout program was not designed to be a moneymaking proposition for any municipality. "The price paid for a home will be the ceiling price when it is resold," said Etcher. "These cities don't need to be in the housing business," Etcher said. "Each city will set up a policy committee which will oversee the purchase and resale program," he said. "That way the committee can recommend buyers to the city who have been qualified under the program." Yet each city will benefit, he added, because grant funds used in the program prior to the year 2013 will be reinvested to finance additional development within the municipality. That money will become available after banks approve conventional mortgage financing for the new home buyers. Etcher said typical illustrations of that development would be infrastructure improvements such as sewer, water or highway projects or to finance construction of new low-income housing. After the year 2013 remaining grant funds will revert back to the U.S. Treasury. Etcher said Boonslick Regional would help administer the grants until the time when they can be converted to conventional, fixed rate home mortgage loans. "The good thing is that each city will realize a significant impact in reducing the number of vacant homes it has on the market currently," he noted. "It should help stabilize the housing market in both areas."