9
HUD First Look program gives communities first dibs at foreclosed properties
A foreclosure sign in front of a home in Miami Beach, Fla.
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF STORY
Kai Ryssdal:There's some kind of sad irony to be had in this next story. Or maybe it's more a case of whether we'll ever learn from our mistakes. The number of foreclosed homes has been growing, as you know. Not far behind, though, are professional investors, buying those homes and flipping them. That's been making it tough for communities to do their own housing initiatives to make things right again.
So now HUD, the Department of Housing and Urban Development, is launching a new program. It'll guarantee local governments and nonprofits a better chance at buying distressed properties. Bank of America and Wells Fargo -- no strangers to foreclosures themselves -- have signed off on the deal as well.
Marketplace's Stacey Vanek Smith has more.
Stacey Vanek Smith: Under the First Look program, banks will give local governments and nonprofits first dibs on buying foreclosed properties.
Sarah Greenberg is with NeighborWorks America, a nonprofit housing group.
Sarah Greenberg: The foreclosure crisis has created a lot of vacant properties that are piling up in communities, dragging down property values and having a negative impact on the surrounding neighborhood.
The federal government has pledged about $7 billion to the effort. More than 100,000 homes could be sold in some of the country's hardest hit areas. Many of those areas have become playgrounds for speculators. The National Association for Realtors found investors accounted for about a fifth of all home sales in July. But Greenberg says private investment won't be enough to turn these neighborhoods around.
Greenberg: Many times an investor is looking for a quick investment opportunity. So they may purchase the property and do some very minimal improvements, but they won't necessarily bring it up to code or to the standard of the neighborhood.
Greenberg says nonprofits and local government will make new properties energy efficient and will subsidize lower income families into homes. Those types of investments can strengthen a neighborhood, says Adam Wiener with online realtor Redfin.
Adam Wiener: It becomes a much more consistent, stable and predictable model for home prices.
So what's in it for the banks, who may be selling to a lower bidder? UCLA real estate professor Stuart Gabriel says, they're getting something out of it, too.
Stuart Gabriel: Often times, sales fall out of contracts. And in this particular case, you would have contracts constructed at likely very near market prices by reliable borrowers.
Gabriel says it's likely many banks also own houses in the area and they're happy to see prices stabilize.
In Los Angeles, I'm Stacey Vanek Smith.
The organization I work for has working with with the First Look program for over a year now in Michigan. The issue of these foreclosed is very complex and from the comments I've seen very misunderstood. Yes, many mortgage brokers committed outright fraud and put people into homes they could not afford. When these properties are foreclosed then communities have to deal with the abandoned properties. I think what the story did not cover is the Neighborhood Stabilization Program (NSP) gets money to cities where nonprofit, landbanks, and yes some for-profit developers are acquiring these properties for homeownership. NSP gets the properties renovated, back on the tax rolls, and provides enough downpayment subsidies for new homeowners to buy them with mortgages they can afford. Some properties are beyond repair and the house is acquired and demolished with the plan to put something else there in the future.
Are the banks losing something? Yes. They are writing down the values of the first mortgages they have on their books as they dispose of the assets. Some folks may not see it that way. They see it as a bailout and maybe it is. I think people want to see money taken out of the pockets of these financial institutions. Perhaps new banking regulations will prevent this from happening again, but I think some listeners have to understand this foreclosure crisis is creating a real mess in cities in the US and we have to sort it out with programs like First Look.
As for "investors" getting cut out of the the process, many properties we receive are not bought and eventually put on the market. First Look really means we have a few days for someone to acquire. After those few days the restrictions come off and investors can make an offer.
To date we have facilitated the transfer of about 100 properties throughout the state especially to LandBanks, nonprofits, and for-profit homeownership developers. It's a small start on a very big problem but we're slowly expanding it to more cities.
Pure Bureaucratic B.S.! After bidding 100% of asking (300k) the bank foreclosed and trashed the place (toilets gone, all appliances, etc.) Tthen Fannie Mae got it, put it on the market for 199k, we re-offered the 300k but a First Look candidate offered the asking (199k) and gets the property. I ask you, what are they doing with taxpayers money?
I would like to see a home-purchase incentive package that only applied to the purchase of existing, occupied homes. The benefits as I see them: (1) people who are trying to sell their homes to move for a job elsewhere would be helped, and the employers looking for workers would be helped by this improved mobility of the workforce; (2) people trying to sell their homes because they can't afford the mortgage would be helped to get out before the bank foreclosed, because the incentives would be targeted to their existing, occupied houses; (3) it would encourage banks to look at foreclosure as an action of last resort, because a foreclosed home would no longer be occupied, and thus wouldn't be eligible for the incentive; (4) new home sales could even get a boost, because those selling their homes would be better able to buy another home, which could very well be a new home. No new laws would be needed, no restrictions on banks or mortgage companies, just a differently targeted incentive. (Yes, I know that one weak link is the difficulty getting a loan and a sale for a house that is worth more than its mortgage. The incentive might have to include additional "features" that help overcome this.)
Foreclosures depress the economy and create a vicious cycle : 1) Home prices fall - often below the homeowners' equity in the properties. 2) This causes more people to walk away. 3) Growth and jobs in the economy decline leading to reduced demand for housing. Expectations decline. 4) GOTO (1) **In this sense, a RASH of FORECLOSURES IS LIKE A BANK RUN - it can escalate and lead to a "SINK HOLE" (inverse bubble).** Solution Approach : 1) DIRECTLY INTERVENE (not via "cooperative" programs secondhand through banks). a) Consider a blanket FORCED moratorium on foreclosures for a year. This will help the housing sector recover and avoid deflation in housing prices. It will also save jobs and homes. b) Consider a limited moratorium on foreclosures for a year (Ex : for people who lost their job, or had high medical bills from illness, or for people earning under the median wage in their region, and/or only for a non-investment homes). (c) Alternatively, Consider FORCED principle reductions on morgages of 10 % for the first 100,000 - 200,000 of morgage value in areas where average home prices have fallen more than 20 % from their highs. 2) Consider CAPPING interest rates nationally at 15 % (1500 basis points) above treasuries. Do not allow banks to adjust **the spread** that they charge customers on existing debt. This will prevent what has become LEGAL USUARY. **Currently, the lower interest rates that have been made available to banks have not successfully "trickled down" to much of the economy - particularly to the poor and middle class - many of whom were deemed "subprime" even before the crash. But without these people, any economic recovery will be weak at best. The government should ACT DIRECTLY TO HELP THE MIDDLE CLASS - NOT VIA BANKS ACTING AS voluntary MIDDLE-MEN : the lower rates, the anti-foreclosure programs and other good government ideas are FAILING to have suitable effect because the banks -acting as intermediaries - prefer to minimize and DELAY the "trickle down" of such benefits. This creates a public-good/ prisoner's dilemma for the economy as a whole. 3) Consider making Inflation Adjusted GROWTH in GDP per capita as the new goal of federal economic policy. Currently, the Fed focuses too much on controlling inflation. This is REDISTRIBUTIVE, (and regressive), and may be against the broader national interest. In fact, a bout of inflation - with growth and a weaker dollar - might be just what we need to bail the U.S. out of its current hole. It is much better to have 15 % nominal growth with 10 % inflation than 0 % inflation and 0% growth. (If you don't think that this sort of thing is possible, take a look at the stunning growth in economies like India and Brasil). FEDERAL ECONOMIC POLICY PRIORITY SHOULD EXPLICITLY Address this : Real growth may come *through* higher inflation. This reevaluation of economic policy to prioritize real growth over inflation concerns is particularly important given certain agencies' considerable independence from (and perhaps indifference to) the rest of society.
I find it odd that the HUD has fund to create a progeam like this and fails to find funds needed to address the loan origination channels Lenders purposely used to generate fraudulent loans, in which the Lenders know that the income and assets of the Borrower's were falsified in Violation of every State and Federal "Bank Fraud" laws! Most took the loans they couldn't afford because the Broker's told them that they would refinance shortly thereafter and reduce their payments. To naive to see the con, Borrower's took it believing in the Broker's!!! All the while the only thing the Brokers/Lenders wanted was to close the loan knowing these loans were designed to go into default and eventually foreclose. Chase, Aurora, Deutsche were notorious for this. Look at some of your loan applications and see if the employment, income or assets are the same as that which you submitted?
Then call HUD and tell them what a great job their doing to cover up their lack of supervision!!!
Talk about not learning from mistakes... This story has it completely backwards. The HUD rules that give resident owners first option to purchase make failing neighborhoods worse. When a distressed home is sold to the typical home owner, that new owner will not have the skills or money to restore the house. To save money they will try to do the work themselves. After they realize they in over their heads they will abandon the house, and the foreclosure process starts all over again.
If instead an 'evil' investor buys the house, then they will hire skilled carpenters, roofers, electricians, and plumbers who would otherwise be out of work. They'll get the job done quickly, and get it done right, all the while stimulating the local economy. The eyesore is transformed into the nicest house on the block, and the neighbors' property values go up. Everybody wins.
Did u get my msg about bailing us out? Duh...bail us out! We're conscientious invest prop owners who pay their mort. Yes, we're minorities...we pay! if we want to refi, i'm sure the closing costs would hurt..oh yea hurt, we have to replace the roof since it has outlived its 3 yr expectancy, per Citizens. This is our story, if u choose to follow...our prim home mort is w/Wells Fargo. Wells Fargon, take me away!
Listening to this story...I really feel you are missing something that is so deep about this. I have a client, I am a Certified Senior Advisor and healthcare professional.
I am trying to help her keep her home. She has been trying to get a TARP moidification loan since May and is not able to get it processed. She has a 6.5% interest rate and just wants to have what she deserves. Her credit score right now is 700+...but for how much longer. I checked the website on Making Housing Affordable and the only place to call is a HUD hotline...their response...the banks are 4-6 months behind...
I am appalled, first of all these banks need to hire more processors, period!
But to your story, women like my client are losing their homes because the BANKS wont hire processors...so they follow the rules...and lose their houseand these pariahs steal them.
Let's take on these banks to get their modification rates down to one week!!! We gave them money...use it to save our homeowners!
Hope you get the crazy logic...the story moved me to give you what is really a good story!!!
