South Carolina might have missed out on hundreds of thousands of federal dollars to help homeowners avoid foreclosure because a state agency chose not to apply for it.
As the economic crisis took hold, federal lawmakers made $410 million available to state agencies and nonprofit organizations that negotiate lower mortgages on behalf of homeowners in financial trouble. Often, these services are free.
The S.C. State Housing Finance and Development Authority, whose board is largely appointed by Gov. Mark Sanford, chose not to apply for the money during each of the three waves of funding. A spokesman said the decision was made to avoid duplicating services.
The decision left nonprofit Family Services Inc. of North Charleston as South Carolina's sole applicant for the funds. And regional nonprofits, on average, got far less because they had to compete against more organizations drawing from a smaller pot of money.
The money was distributed in a way that allowed state housing agencies to compete for larger sums. By contrast, nonprofit organizations affiliated with NeighborWorks America, a network of roughly 240 groups, had to share 15 percent of the total grant.
In all, 35 state housing authorities received foreclosure counseling money. Often, regional nonprofits in those states also applied for separate funding.
For example, Georgia got $1.8 million through its housing authority and an additional $460,402 through its local nonprofit groups. North Carolina got $4.9 million through its housing authority.
To date, South Carolina has received $1.7 million for foreclosure prevention efforts from the pool. More money could have been allocated had the state housing agency also applied.
"We had hoped that the housing authority and Family Services would work together because we did want to see the largest body of dollars come in together," said Bernie Mazyck of the South Carolina Association of Community Development Corporations. "We had hoped the highest amount that was possible would come, and of course, we didn't see that."
A spokesman for NeighborWorks, which administers the funds, was unable to say how much money South Carolina's housing agency would have received. The award amounts were not predetermined.
Housing agency spokesman Clayton Ingram said he doesn't believe the state lost out on foreclosure funds as a result of the decision. He said the state agency decided not to apply because Family Services already planned to ask for funds.
"Ultimately, we would have been serving the same constituents," he said.
The governor appoints all but one of the nine board members at the agency, which provides below-market mortgages to low-income home buyers. Sanford spokesman Ben Fox emphasized that the agency felt it wasn't best to compete "head-to-head" with another group for funds.
"Our administration has consistently warned of the danger of duplication in state government services," he said Tuesday.
U.S. Rep. Jim Clyburn, D-S.C., majority whip in the U.S. House of Representatives, called that logic flawed.
"That's almost like saying we won't open a high school on this side of town because" one exists on the other side of town, he said. "You're supplementing, not duplicating."
Clyburn added: "This is what causes South Carolina to be where it is today. ... For the public sector to walk off the field like this, it's going to leave a lot of people in the lurch."
NeighborWorks officials are expected to announce the third round of funding next week. Family Services said it has already spent about one-fourth of the $1.3 million it has requested to meet current demand for foreclosure counseling services.
"We're seeing folks who would never have reached out and asked for help," said Debbie Kidd, who oversees the agency's foreclosure counseling. "We're seeing a more upscale clientele than the low- to moderate-income folks. We're seeing folks who have lost high-paying jobs."
Family Services counselors are working with 1,581 homeowners across the state. Nearly half of their cases are in the Charleston area.
"We don't want to think about what will happen when we run out of money," Kidd said.