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Mortgage holders receive a present

December 30, 1998|By BRYN MICKLE

MARTINSBURG, W.Va. - Brian Smallwood couldn't believe his eyes when he opened his mail on Christmas Eve.

When Smallwood, of Charles Town, W.Va., saw the check made out to him for $4,275, he said he thought it was some sort of scam.

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But for Smallwood and 1,731 other West Virginia homeowners, the holiday present was no joke.

The West Virginia Housing Development Fund mailed out an estimated $4.5 million in rebate checks during December to people who had used the development fund to get low-interest home loans.

Marty Gargano, deputy director of the Housing Development Fund in Charleston, W.Va., said the multi-million dollar windfall came from U.S. Treasury bonds the fund had sold between 1986 and 1988 in order to offer first-time and low-income home buyers lower interest rates. A portion of the payments from the homeowners were funneled back into the bond program.

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The bonds had increased in value over the years and the Development Fund found itself with a big profit when the decision was made to refinance the bonds this year, Gargano said.

The Development Fund got back $1.25 on every $1 of the $16 million it had invested, he said.

Under federal regulations, if the housing development fund makes money, it has two choices.

"We could either give the money to the Internal Revenue Service or we could give it back to the people who got the loans," Gargano said.

"We decided to give it back to the people," he said.

Gargano said 246 people got checks for $4,275 and 676 homeowners got checks for $3,367. Checks made out for $1,459 were sent to 810 people across the state, he said.

Gargano said many groups and agencies give any surplus bond money back to the government because of the difficulty in processing checks and tracking down addresses. The Development Fund opted to do the extra work, he said.

"We're really proud of it," he said.

In the Eastern Panhandle, 78 checks were mailed out to Berkeley County residents and 60 checks went to Jefferson County addresses, Gargano said. Fifteen checks were sent to Morgan County.

Gargano said his office has spent a lot of time this week fielding phone calls from recipients who were unsure about what to make of the checks.

While some callers wanted to make sure there were no strings attached, Gargano said, others just wanted to say thanks.

Roseann Booth, of Berkeley Springs, said she thought there was some mistake when she saw the check for $3,367.

"I was afraid we would have to send it back," she said.

Booth plans to try to convince her husband to use the money as a down payment on a new truck.

Gargano cautioned people not to expect future checks.

The federal government changed the laws in 1990 so that surplus money from bonds sold after the 1980s goes straight to the IRS.

And, of course, the IRS will still get a portion of this year's money.

Along with each rebate check, the Development Fund sent out a letter informing people the money is taxable and the amount will have to be included on 1998 tax returns.

The Housing Development fund is an independent state entity. It does not get state funding but is authorized by the state legislature.

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