Merced County and its cities are eligible for up to $7 million to buy up foreclosed homes and demolish ones that have become eyesores, the state announced last Friday.</p><p>Los Ba&#241;os' portion is the largest in the county at $1.67 million. </p><p>The money is part of a $3.9 billion Neighborhood Stabilization Program package passed by Congress during the summer. </p><p>Merced County has led many lists chronicling the foreclosure crisis. Local leaders urged the state to give them a fair amount. </p><p>The county's foreclosure rate, 12.5 percent, ranks as the highest in California. Federal agencies reckon that 5,913 homes within the county have gone into foreclosure. An estimated 2,200 of them are from Los Ba&#241;os, according to local officials. </p><p>Merced County and its cities asked for a combined $30 million in foreclosure aid funding two weeks ago. Los Ba&#241;os requested $7.2 million.</p><p>"I'm happy we got something. I was hoping for more," Mayor Tommy Jones said. </p><p>California's Department of Housing and Community Development is tasked with dividing up $100 million in foreclosure aid given to the state. Eligible cities and counties can spend the next week trying to convince the state to give them more funding before it sends the final plan to the federal government.</p><p>Redevelopment Agency Manager Elaine Post said Los Ba&#241;os officials will form a plan for applying for the money. The city has to decide if it is going to apply separately or as a group with the rest of Merced County. Monday morning Post said her reading of HCD's decicision indicates the city has to apply by itself. </p><p>The municipalities that receive foreclosure aid have 18 months to spend the money. Post said she does not expect to receive the funds until April, giving Los Ba&#241;os a very short window for disbursing the money.</p><p>City officials are leaning toward setting up a model similar to its Home loan program. Money will be loaned to homeowners interested in buying a foreclosed home. The money will be only a portion of what is needed to buy the home. Homeowners will have to seek out lending institutions or pursue other methods of getting the rest of the money. </p><p>Post said people who make up to 120 percent of the state median-income guidelines will be eligible to receive home loans. This year California set the median-income level for a family of four at $43,050. That means, if the 2008 numbers are used, a family of four with an income up to $51,660 would be eligible for a loan. However, Post said, she does not know if the state is going to use the 2008 median income guidelines or the ones that will be set in 2009. </p><p>While the money will help the foreclosure problem, it's far from a solution, as homes continue to go back to the banks.</p><p>"This is true everywhere: It's a drop in the bucket," Merced County Association of Government spokeswoman Candice Steelman said.</p><p>The key, she explained, is trying to stretch the money as far as possible so home values stabilize and the number of vacant homes decrease.</p><p>One option that's been considered, she said, is having Habitat for Humanity refurbish foreclosed homes rather than build new ones. Jones proposed that idea to Habitat Westside earlier this month at a City Council meeting. The local habitat group said it was definitely an option members were discussing. </p><p>A congressman and officials throughout the county have spent weeks trying to not be left out of the second wave of foreclosure funding.</p><p>The U.S. Department of Housing and Urban Development -- based on a formula of number of foreclosures, high interest rates and foreclosures per capita -- gave $384 million directly to cities and counties throughout the state that it believed needed help immediately. </p><p>Merced County's absence from the list sparked angry letters from Rep. Dennis Cardoza, D-Merced, to HUD. Despite his fist-shaking, nothing changed.Cardoza feels a little better about the state's plans.</p><p>"This money is not nearly sufficient to address the foreclosure crisis throughout the Central Valley. However, this is a significant step forward and I was pleased to see Merced County at the top of the list after it was unfairly overlooked in federal allocations," Cardoza said last Friday in a statement. "I will continue to do all I can to bring resources to the Central Valley to stabilize the housing problem."</p><p>Last month, the county saw 315 more homes fall into foreclosure. Just under 500 houses were sold.</p><p>Reporter Scott Jason can be reached at (209) 385-2453 or sjason@mercedsun-star.com.</p><p>Reporter Corey Pride contributed to this article.