The Department of Housing and Urban Development has cancelled a contract under which it sold foreclosed homes worth up to $30,000 to a Cleveland-based land bank for $100 each, saying it can get more for the homes on the open market.
The Cuyahoga County Land Bank — a non-profit formed in 2009 to fight foreclosure-related blight by acquiring properties rehabbing or demolishing them — has acquired about 850 properties as part of HUD’s National First Look Program, The Plain Dealer reports.
About one-third of those homes were in good enough to shape to rehab, and the rest were torn down at a cost of $10,000 each or marked for demolition, the group’s COO, William Whitney, told the paper.
Although the land bank was actually losing money in the deal, Whitney said, the program benefited the community by preventing flippers from buying homes that were beyond salvage, and reselling them to unsuspecting buyers who would end up abandoning them and leaving them vacant for years.
HUD spokesman Brian Sullivan told the Plain Dealer that HUD remains committed to "helping combat and reverse the effects of neighborhood decline," but also needs to protect the Federal Housing Administration’s Mutual Mortgage Insurance Fund, which is $16.3 billion in the red.
With housing markets improving, Sullivan said HUD is looking for better returns on its stock of foreclosed homes — most of which were purchased by buyers using FHA-backed loans.
Rep. Dennis Kucinich, an Ohio Democrat, sent a letter to HUD this month warning that it was "absolutely the wrong time to leave these properties to the fate of the market with flippers and speculators who are still only too willing to make money on real estate turnover without adding value that our communities still desperately need."