Michael Corkery reports:

A Centex home in Chino, Calif. (photo via Centexhomes.com)

Never underestimate the creativity of the nation’s largest home builders in finding ways to put buyers into houses.

The latest project: “monetizing” the first time home-buyer tax credit that’s part of the recently enacted housing legislation, says Centex Corp.’s chief executive Tim Eller.

The problem with the $7,500 credit is that it can only be claimed after a home buyer files his or her taxes, which may not coincide when they are buying a house and need the cash. “We don’t have a solution yet, but we’re looking at ways to monetize that tax credit early,” Mr. Eller told analysts and investors during a conference call Wednesday.

Perhaps the builders could mimic tax preparers that offer to front people their tax return. But that puts builders in an awkward and risky position of floating buyers until they can claim their credit from the government.

There are other issues that make the tax credit seem pretty limited in its ability to provide a needed shot in the arm to the housing market. Buyers, for example, have to pay back the credit over 15 years or sooner if they sell their house and pocket a profit.

In the end, the credit “saves the buyer at most just a few hundred dollars a year,” M.I.T economics professor William Wheaton said in a recent research note. “This seems like a very small amount to influence the decision of anxious new buyers waiting on the market’s sideline.”

Rep. Richardson’s former Sacramento home (Associated Press)

Congress has turned its attention to solving the foreclosure crisis even as one of its members has lost a home in a foreclosure auction.

The Sacramento home of Rep. Laura Richardson was sold in a public auction two weeks ago for $388,000. The Southern California Democrat bought the house for $535,000 with no money down in January 2007 and owed nearly $575,000 to Washington Mutual when the mortgage was sold earlier this month at a significant loss to Red Rock Mortgage Inc.

Rep. Richardson, a former Long Beach city council member, bought the home after winning a seat in California’s state assembly. She maintains her primary residence, a four-bedroom home, in her Long Beach district. Months later, Rep. Richardson ran in a hard-fought election for the congressional seat, which was vacated when the late Rep. Juanita Millender-McDonald died from cancer. To fund that campaign, Rep. Richardson lent herself more than $75,000 and stopped making payments on the Sacramento home around the same time.

The story was first reported by the Capitol Weekly, a Sacramento publication.

Rep. Richardson denied the report in a written statement Wednesday, “The residential property in Sacramento California is not in foreclosure and has NOT [emphasis hers] been seized by the bank,” she said: “I have worked with my lender to complete a loan modification and have renegotiated the terms of the agreement — with no special provisions. I fully intend to fulfill all financial obligations of this property.”

The terms of that agreement were not specified, and Richardson’s office did not return a call seeking clarification.

James York, the Sacramento broker who bought the three-bedroom, 1.5-bathroom home, rejected the idea that the home hadn’t been seized. The sale of the home was announced in March. “She’s walked away from the property,” he said. “I would be happy to resell her the home for the $535,000.”

Richardson didn’t vote on the housing rescue deal that passed the House of Representatives two weeks ago and in a statement attributed her absence to her father’s funeral. But Richardson did vote last fall in favor of the Mortgage Forgiveness Debt Relief Act, which passed and prevents the federal government from charging income tax on debt forgiven as a consequence of foreclosure. –Nick Timiraos

Nick Timiraos reports on Congress

Rep. Dennis Kucinich in a presidential debate in Las Vegas last year. (Getty Images)

Democrats called on President Bush to sign a House bill that would provide $15 billion in federal funds for communities to mitigate the effects of the housing crisis during a hearing Wednesday on the impact of foreclosures on communities. Rep. Dennis Kucinich began the first of two days of hearings to call attention to the “largely unrecognized … and totally blameless victim — neighborhoods.” The Ohio Democrat and former Cleveland mayor heard made the case that concerns about creating a moral hazard — or rewarding risky behavior — were countered by the fact that neighborhoods weren’t at fault for the impending foreclosure boom.

Several economists and housing experts were sympathetic to that view, but others urged caution. “I am very concerned about a moral hazard issue there and I find myself very much torn,” said Alan Mallach, a senior fellow at the National Housing Institute. The housing economist warned against indiscriminate federal handouts to communities that didn’t have the resources to address them: “If you gave money to many cities, they would not be able to spend it responsibly.” Representatives from other distressed regions — including Dayton, Ohio, and Buffalo, N.Y. — joined Kucinich at the hearing. Rep. Michael Turner, the former mayor of Dayton, insisted that federal assistance be targeted towards the hardest-hit cities.

Other witnesses offered constructive solutions for cities looking to brace themselves for not only a spike in foreclosures but also the corresponding decrease in tax revenues and strain on social services that the crisis could bring to bear. Doug Leeper, a code enforcement manager from the San Diego suburb of Chula Vista, Calif., touted an ordinance enacted last fall by the city that holds lenders responsible for upkeep on foreclosed homes and requires them to post on the homes the name of a contractor that neighbors can call if the property falls into disrepair.

Mr. Leeper said that over 200 cities have inquired about the measure and that the California state assembly is considering a similar measure for the entire state. Daniel Kildee, who runs the Michigan state land bank and serves as treasurer of Genesee County, Mich., addressed the challenges and opportunities that the crisis presented to land banks. Mr. Kildee said that in Flint, the land bank has been frustrated by the number of lenders who sell in the private market foreclosed properties that have value while turning over upside-down homes to the city. “Those lenders have passed that problem onto us,” Mr. Kildee said. “We’re willing to accept it, but we’d like to accept it with the same ability to go to those servicers and say, ‘There are assets in our community that you own that we’d like to talk to you about.’”

Others highlighted the dangers that the foreclosure crisis presented to renters as well as owners. In New York City, some 60% of foreclosures last year came in multifamily properties, including dwellings with two-to-four units and larger apartment buildings, said Vicki Been, a New York University law professor who co-directs the university’s Furman Center for Real Estate and Urban Policy. Those foreclosures threatened to displace some 15,000 tenants. Committee members and panelists agreed that the foreclosure problem threatened higher costs for municipalities by depriving communities of tax revenue for schools and other social services. Rep. Kucinich repeatedly chided the White House for not taking a more aggressive stance in promising federal relief for cities and promised to investigate the root causes of the subprime crisis, which he said had stemmed largely from greedy investors and hedge funds.