HUD agrees to sell foreclosed houses to Cuyahoga County land bank

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HUD agrees to sell foreclosed houses to Cuyahoga County land bank

July 2, 2010 [Sandra Livingston, The Plain Dealer]

CLEVELAND, Ohio — The federal housing agency has agreed to offer the worst of its foreclosed local properties to the Cuyahoga County land bank in a deal forged after the agency was blasted for ending a similar agreement with the city of Cleveland.

The deal with the U.S. Department of Housing and Urban Development could effectively keep the most dilapidated HUD homes in the county out of the hands of negligent owners. And the land bank could demolish the houses that can’t be salvaged to reduce neighborhood blight.

“I’m very happy with the way it turned out,” said Gus Frangos, president of the land bank, which is formally known as the Cuyahoga County Land Reutilization Corp. “HUD has now agreed to refrain from the practice of indiscriminately selling low-value properties, which promotes unwholesome speculation in real estate markets.”

He expects that at least 80 percent of the homes the land bank takes from HUD may need to be demolished.

HUD officials said during an interview Thursday that the agency crafted the program to meet the needs of Cuyahoga County, which was hit early and hard by a foreclosure crisis that continues to batter the region.

oth Cleveland and the county have “many lower valued properties that they are choosing either to demolish or rehabilitate,” said Vicki Bott, HUD’s deputy assistant secretary for single family housing. She said it was important to have a program that gave them first dibs at a reasonable price to purchase properties and have control over the direction of their community.

And she said that while HUD may have received slightly more money by selling in a different venue, “we do believe that by helping these communities financially, we help the overall housing market and that’s supporting HUD generally.”

Under the agreement HUD homes in the county valued at $20,000 or less will be offered exclusively to the land bank for $100 during a first look period.

The land bank can likewise get first crack at homes valued between $20,001 and $100,000 and purchase them at a 30 percent discount. If those homes go to the market and don’t sell after 60 days, the land bank could seek to buy them at a 50 percent discount.

The land bank will primarily focus on acquiring homes valued at $20,000 or less, to get them off the market. And HUD expects it could offer eight to 10 such properties to the land bank each month.

HUD said a nearly $41 million neighborhood stabilization grant that it’s giving to a local consortium led by the land bank, could help with demolition or rehab work.

“This is a victory for Cuyahoga County,” U.S. Sen. Sherrod Brown said in a statement. “As we work to rebuild our communities devastated by the housing crisis, it’s critical that our efforts aren’t undermined by out-of-state speculators. A local response to the housing crisis is in the best interest of Ohio communities and our nation’s economic recovery.”

Brown and U.S. Reps. Dennis Kucinich and Marcia Fudge had urged HUD to reach an agreement with the land bank.

Last week The Plain Dealer reported that local officials were frustrated and baffled that in late March HUD ended a similar program with the city — which had resulted in the transfer of about 440 properties — before agreeing to a new countywide program with the land bank.

HUD said Thursday that the agreement had expired and was to be folded into the broader program — despite an earlier statement from a city official that HUD unilaterally ended the deal in a move the city found shocking and disappointing.

HUD also said it told the city that until the land bank deal was in place it could submit bids on the online listing site — but didn’t indicate the city could still get the low-value properties for $100 during a limited time period.

To local officials that indicated the city would have to compete with other bidders for derelict properties.

“We believed that these options substantially changed the relationship between HUD and Cleveland,” said John Wilbur, Cleveland’s assistant director for community development, in an email.