Posted: 07/06/2010 2:43 PM
Posted: 07/06/2010 2:43 PM
HUD continues to try to boost Neighborhood Stabilization Program (NSP) efforts in one of the nation's hardest-hit areas by selling foreclosed single-family homes held by the Federal Housing Administration to the Cuyahoga County Land Reutilization Corp. (CCLRC) for prices as low as $100.
The agreement is essentially an expansion of an earlier pilot effort with the City of Cleveland to transfer more than 440 homes at deep discount prices in just over a year.
The extension of the local program is going to be a limited one, through Sept. 30, 2011, as HUD tries to sell an isolated group of FHA-backed properties. The CCLRC can use some of the $41 million in NSP-2 money it already has to buy these homes, as HUD looks to mesh the Real Estate Owned discount sales program with an NSP funding recipient.
The issue to take losses on properties if they sell at the lowest prices is a sticky one for HUD. The department had already provided the CCLRC -- a land bank that includes Cuyahoga County, Cleveland and the Cuyahoga County Metropolitan Housing Authority -- with $41 million in the second round of NSP. HUD spokesman Brian Sullivan says the low purchase prices of homes in Cuyahoga County make a deep discount resell program viable there and would not be a major drain on the Mutual Mortgage Insurance (MMI) fund that backs the properties.
HUD has to be careful in taking potential losses to the MMI fund, which it is relying upon for billions in revenues this year in order to offset some of the proposed fiscal year 2011 HUD budget increase. As such, selling FHA-foreclosed homes in areas such as California and Florida with the worst foreclosure problems would be far more costly than in northeast Ohio.
HUD is giving the CCLRC land bank the first look at properties in the program in order to ensure they are not bought in bulk by investors who are doing little or nothing to improve the properties, Sullivan says. Officials in Cleveland first attracted HUD to the deep discounting idea because of precisely this trouble. If the land bank passes on the properties, they would be available for sale to investors at initial prices.
HUD's first-time offer to the land bank will provide it with options depending upon a property's appraised value. Homes that are appraised at $20,001 and $100,000 will be sold at a 30% discount for an initial five-day period. The discount increases to 50% after 60 days. Homes valued at $20,000 will be sold for as little as $100. In either case, the homes purchased must be located in one of the 47 census tracts the CCLRC identified as problem areas when applying for NSP-2 money.
Info: Mercedes Marquez, assistant secretary, Office of Community Planning & Development, 202/708-2690
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