AUSTIN, Texas -- It's a tale of dreams gone awry.
When Congress created Resolution Trust Corp. in 1989 to clean up the savings and loan mess, it decided to set aside thousands of foreclosed houses and apartments as low-cost housing for low-income people.
The notion was elegant in its simplicity: housing for the needy, thanks to the savings and loan crisis. The government could provide decent shelter without spending a dime on new public housing. And the working poor, at long last, could own a home at a price they could pay.
It has not worked out like that. Virtually everyone agrees that the program has fallen short of its goals, though how far short is in dispute.
"It's an unmitigated disaster," said Richard Jordan, a former board member of the Texas Housing Authority and a real estate investor. "The government had the unprecedented opportunity to disperse people into single-family detached homes and it hasn't. Why? Because the program stinks."
Mr. Jordan is not alone in his view. Members of Congress and advocates of affordable housing say the government has failed almost completely to exploit an important and rare opportunity.
Resolution Trust acknowledges that thus far only a small portion of the houses in the program have gone to the poor. But officials insist they have labored to devise policies to tackle an extremely difficult task, and they say that such a program cannot be established overnight.
Stephen S. Allen, the corporation's head of affordable housing, said that under the circumstances "what we have accomplished has been remarkable."
At any rate, thousands of inexpensive homes that could have gone to low-income buyers under the program have, in fact, been siphoned off and bought by investors.
Middle-class buyers, who could otherwise afford housing, have been flocking to take advantage of bargain prices. And the working poor who could benefit the most from this program have been virtually shut out by, among other things, a lack of mortgages for them.
The program's critics contend that the Bush administration, which fiercely opposed the program when it was initially set up by Congress, has actively tried to scuttle it through policies that discriminate against the poor.
Among them was a program that offered bigger discounts and better financing to sophisticated investors than to low-income buyers. Some of these policies have changed, housing advocates say, but the basic problems still exist.
"This has been a tremendous lost opportunity," said Frank H. Shafroth, director of federal relations for the National League of Cities in Washington. "Something wonderful could have happened to a lot of families in America. But it didn't."
Rep. Bruce F. Vento, D-Minn., who was chairman of a special congressional task force on Resolution Trust, said he was disappointed. "The administration and the RTC had to be dragged kicking and screaming into the affordable-housing program," he said. "They have a basic reluctance to implement the law."
Mr. Allen of Resolution Trust said the expectations of the critics were unrealistic. "You can't help lower-income people buy when you have a mandate to return the maximum dollars to the government," he said, "and it's a conflict. So it's an ongoing challenge for us to reach our target market."
To carry out the program, Resolution Trust has hired an impressive array of bureaucrats with a long history of service to the poor.
But they find themselves caught between the agency's conflicting goals: Selling real estate at top dollar to reduce the cost of the savings and loan bailout for all taxpayers, and selling small houses at affordable prices. The agency is working at the juncture of social policy and quick real estate sales, and money ++ talks.
Under the program as set up by Congress, a 90-day window was created in which low-income buyers and non-profit organizations have the exclusive chance to buy Resolution Trust properties appraised at less than $67,500. If there are no takers, the houses are offered on the open market.
As of the end of April, 17,372 houses and 489 apartment complexes with 65,097 individual apartments have fallen within these guidelines.
This represents $1.6 billion in real estate, or 10 percent of Resolution Trust's entire portfolio. And more housing will be added as the agency continues to take over insolvent savings and loans.
Besides social policy, there are strong economic incentives behind the affordable housing program. The government estimates that it costs $18.25 a day, or about $6,600 a year, to carry a foreclosed house. At the same time, new public housing costs anywhere from $60,000 to $100,000 a unit.
In one fell swoop, the government could lop off hundreds of millions of dollars in real estate carrying costs and provide new public housing on the cheap. And, since the houses already exist, there are none of the "not in my back yard" problems that often arise when new public housing projects are planned.
"If you believe the government should intervene to help low and moderate families, this should be the way," said Rep. Barney Frank, D-Mass., and advocate of the program. "It's the lowest per-unit cost to the government."
But sales so far have been agonizingly slow. Only 2,500 houses had been sold by May 1 and, by the end of that month, 13 apartment buildings had been sold. Critics contend that few of ++ the houses have actually gone to low-income people.
At the same time, 3,300 houses and 174 apartment complexes have passed through the 90-day window unsold. In Texas, where nearly half the affordable properties are, brokers say many of these have since been snapped up by investors eager to take advantage of the prices, which for houses taken as part of savings and loans failures are substantially lower than those on the general real estate market.
And an additional 3,998 houses appraised at less than $67,500 never even got into the program and were sold to other buyers because of a rule, only recently changed, that excluded houses of savings and loans associations the government had declared insolvent but had not yet seized. These houses instead were offered by the government on the open market.
Such numbers take on real meaning for DeeDee Cyphers, a single mother of three in Austin who is stretching to make ends meet on the $19,000 she earns as a senior accounting clerk for Travis County.
Ms. Cyphers is one of the people the program is intended to benefit. But, as with many like her, it has failed to reach her. "It's like the American dream is not coming true for the working poor," she said.
One day, a fellow employee showed Ms. Cyphers a flier for the Resolution Trust program. Intrigued, she got a list of properties and, with a broker, found a $26,000 house in a neighborhood she fell in love with.
Her offer was accepted and a "sold" sign sprouted by the house. At night, she would drive by just to look. "It wasn't a mansion but it was cute," she said, "a nice place to raise my kids that wasn't trashed with drugs."
Even more attractive to her was the monthly mortgage payment of $308, significantly less than the $425 she struggles to pay in rent.
But Ms. Cyphers got turned down at the bank. This happened even though she had the down payment, had held the same job for five years and was applying under a special program of the Texas Housing Authority, which issued bonds specifically to provide mortgage money to local banks for low-income buyers of agency properties.
But the bank, in this case Guaranty Federal Savings, and not the housing authority makes the final credit decision. And the bank did not like the fact that seven years ago, when Ms. Cyphers and her former husband were laid off, they returned a leased car to a dealer who wanted the payments instead of the car. The dealer (( obtained a judgment against her.
For Ms. Cyphers, this disappointment turned into "heartbreak," in her words, when she learned recently that Resolution Trust was planning to give away to non-profit agencies up to 3,000 houses it said it could not sell. Some of these are in bad shape but can certainly be fixed up.
"The RTC is trying to give away houses and here I want to pay for one," she said. "I think they should try to help the working poor who are trying to get back on their feet. The houses are supposed to be affordable -- to help the people out. If I were rich, I wouldn't need the RTC."
Much of the program's poor showing has been attributed by critics to restrictions in the initial law and to implementation policies of Resolution Trust's Oversight Board, whose members include Alan Greenspan, chairman of the Federal Reserve, and Jack F. Kemp, Housing and Urban Development secretary.
The board allowed the agency to make big discounts in all properties except those in the affordable-housing program until just three months ago when Congress halted the practice by threatening to withhold the agency's funds. The effect was that people were buying houses outside the program cheaper than the poor could get them within the program during the 90-day period.
And seller financing had been offered by the agency to buyers of all other properties -- except in the affordable-housing program, where Resolution Trust two years later is beginning to develop a limited program of financing for low-income buyers.
"There was just an ideological objection to helping poor people," Mr. Frank said. The Bush administration, he charged, "felt that poor people were a pain and they don't need them."
Not so, say members of the administration and the Oversight xTC Board. "We've been pro-active in affordable housing," said Peter H. Monroe, president of the board. "In terms of the dollars the RTC will collect from real estate, maybe 1 percent will come from residential affordable real estate."
Alfred A. DelliBovi, undersecretary for Housing and Urban Development, said, "I can assure you there has been no foot-dragging by the administration to carry out this law."
Critics acknowledge that some of the flaws in the program have been corrected but say the low-income citizens who were to have been given preference are still for the most part missing out.
Nowhere are the problems of the program more apparent than in Texas, where real estate prices have fallen so drastically that nearly every house that falls into the the agency's hands meets the affordable-housing guidelines. And, nearly half of all affordable houses to be sold by the agency are in Texas, where the Texas Housing Authority estimates that 60,000 people are homeless.
In Dallas, there is a two-year waiting list for public housing.
Potential buyers and non-profit organizations said in interviews that accurate information on what houses were available had been almost impossible to get. The bidding process is described as a nightmare of paperwork that discourages real estate brokers from even showing properties.
Before putting down a $500 earnest-money deposit on a house in the program, a prospective buyer must fill out a 25-page form. Until recently, the agency's real estate contract was 45 pages long instead of the standard three pages.
More important, mortgage financing for low-income people has been hard to come by, despite the housing authority's bond issue, which raised $142 million to fund 8.35 percent mortgages through banks that would lend to low-income buyers of Resolution Trust houses.
So far, only 384 such loans have been made, leaving the agency with $122.5 million in unused mortgages. This comes despite a telephone hotline that has been getting nearly 800 calls a day, newspaper and radio ads and a mailing to more than 14,000 homes.
"The consumer is tearing down our door," said Richard H. Garza, former acting executive director of the authority. "Every time we put out a news release our telephone lines go haywire."
Much of the problem is that low-income people are not perceived as good credit risks. "If a low-income buyer has anything shaky on his credit record, he gets tossed out," said Elizabeth Wolff, head of the Dallas office of the Association of Community Organizations for Reform Now, a non-profit agency. "Only the squeaky clean can qualify."
Clearly, mortages for low-income groups have been a big part of the problem. Resolution Trust was authorized by Congress to help provide such financing but so far has done little. The banks, for their part, have been quick to turn down low-income applicants on the ground that they present greater risk than others.
But housing advocates argue that lending to big investors is often chancier, as illustrated by the savings and loan crisis. At any rate, if the housing program is to work, the process of getting mortgages will have to be made easier for those with low incomes.
"I was naive to think that this program could work for the low income," said Skip Beaird, executive director of the Housing Resources Association, a non-profit Austin agency. "We get 60 calls a day from people excited that there might be something for them. But there isn't."