Michigan, ranked sixth in RealtyTrac's list of states with the highest foreclosure rates in 2008, will use its $253 million federal funding to rehabilitate neighborhoods battered by private and government foreclosures. The funds, allocated to Michigan under the Neighborhood Stabilization Program, will help housing nonprofits repair properties in private and government foreclosures and then sell them to low-income families.

The funds will also help distressed families, such as Melissa Klingler's, afford down payments and closing costs. Klingler, a mother of 5 young children aged 1 year to 14 years, has been looking for a house in her Waterford area for the past couple of years. The program, which could provide her with a $28,000 home loan to pay the down payment for a $115,000 house, has given her and her children much hope.

Waterford is one of at least 4 communities that received special allocations for remediating private and government foreclosures. Waterford got $2 million, Warren got $5.8 million and the others, Sterling Heights and Southfield got $2.4 million and $3.2 million respectively. These allocations were separate from the money given to counties and to the city of Detroit, which got an allocation of $47 million. The counties of Wayne and Macomb got $26 million and $9.8 million respectively.

Klingler is also fortunate because Waterford local officials decided to spend the money to directly assist families in their down payments and closing costs. In neighborhoods like those in Wayne County and in the city of Detroit, housing officials have decided to help low-income families through nonprofits and developers.

While Waterford will spend about 71 percent of its allocation to help around 100 families with their down payments, Wayne County and the others will spend their allocation to fund selected developers to rehabilitate neighborhoods hit by private and government foreclosures.

Bob Vallina, head of Waterford's community development program, said prospective homeowners must have good credit records. He said that only 15 applicants of the 69 families who filed applications were qualified. Accepted applicants are also required to attend homeowners counseling workshops.

Detroit will spend its allocation to clean up private and government foreclosures in nine neighborhoods that include Herman Gardens, Brightmoor and Osborn. These are the areas with the highest number of private and government foreclosures throughout the city.

Response to all the programs had been overwhelming. According to Karry Reith, head of the Oakland County Community and Home Improvement unit, more than 400 families have filed their applications for the downpayment aid program. Qualified families can get up to $100,000 or up to 49 percent of the home's purchase price in assistance.

Meanwhile, Wayne County has received proposals valued at $70 million from developers. Since the county can spend only the $26 million allocation for rehabilitating private and government foreclosures, housing officials need to find ways to leverage the funding, according to Wayne County's senior executive Jill Ferrari.