Selling Off Delinquent Properties : HUD Plan’s a Hit Amid a Few Boos
Suppose a federal bureaucrat working somewhere outside of Washington took his bosses at their word and launched an innovative, aggressive program to cut federal spending and increase revenues without new taxes. Everybody would stand up and cheer, right?
That’s not the way things have worked out for Grady Maples, who runs the regional headquarters here of the Department of Housing and Urban Development. “It’s frustrating, frankly,” said the long-suffering regional administrator. “We’re doing what Washington tells us to, holding down spending and replenishing the fund, and what do we get? Flak.”
As the federal housing honcho for this economically ailing segment of the energy belt, Grady Maples has become the largest homeowner in the Rocky Mountain West. HUD is taking title each month to hundreds of houses and condominiums that went into foreclosure when owners could no longer keep up the mortgage payments.
High-Powered Effort
With thousands of properties in his portfolio running up tens of millions of dollars in annual maintenance costs, Maples launched a high-powered campaign last winter to sell the holdings on the local real estate market. By HUD standards, the effort has been a smashing success. Since January, Maples’ region has broken records for federal home sales and earned the government more than $200 million from private buyers.
But it has also earned flak. “I wrote a letter basically calling on HUD to cease and desist,” said Rep. Dan Schaefer, a Republican from the Denver suburbs. “We’ve got to get them to stop this,” chimed in Chuck Shinn, president of the Denver Homebuilders Assn. “The business community is really upset.”
The HUD flap here along the spine of the Rockies exemplifies the dictum of Rep. Morris K. Udall (D-Ariz.) that “everybody wants to balance the federal budget, but not on his own block.” The critics argue that HUD’s highly visible drive to unload homes at bargain prices has glutted the housing market across the mountain West. That has infuriated homeowners--who can see the market value of their houses falling--and hurt businesses engaged in building, selling and financing new homes.
Seen Exacerbating Problems
Schaefer argued that the federal sales effort will exacerbate HUD’s troubles. “I know we’ve got a budget problem,” he said. “But when they dump these houses and devalue the housing market, that’s just going to lead to more foreclosures, and HUD will have more properties in its lap.”
HUD’s unpopularity extends beyond homeowners and business people. Local activists for the homeless have angrily demanded that the agency turn some of its empty houses into shelters for the poor. After a couple of unemployed mothers moved into a HUD home as squatters, Maples agreed to make some of his properties available to the homeless. That decision, in turn, has outraged people living near the empty homes; they don’t want shelters for the homeless in their neighborhoods.
These myriad difficulties stem from one of the government’s most popular programs: the Federal Housing Administration fund. FHA insurance guarantees mortgages, giving home buyers lower interest rates than they could get without government backing.
Since the collapse of the domestic energy industry, large numbers of homeowners in energy-producing states have lost their homes through mortgage foreclosure. When that happens on an FHA home, the bank or mortgage company gets its money back from FHA, and HUD acquires title to the house. “The banks are getting off just fine, but the guy who lost his house and HUD both take it on the chin,” Schaefer said.
Spotty Nature of Economy
The pattern of HUD home ownership today reflects the spotty nature of the national economy. As of July 31, HUD’s New England office had a total of 13 foreclosed homes on its hands; the New York region had 510, and the Kansas City office serving the central Midwest had 1,000. Here in Denver, Grady Maples’ region owns 10,807 empty houses, and it is acquiring, involuntarily, nearly 1,000 new properties each month.
The burgeoning totals have placed the local HUD people under intense pressure from the agency’s budget office to sell houses. Each sale reduces the government’s carrying costs (about $5,000 per year per house) and brings in money to replenish the FHA fund.
Maples, an energetic 73-year-old presidential appointee, brought to the challenge the aggressive sales techniques he learned in his pre-government years as a Datsun dealer. He held pep rallies for his sales people and divided the “Property Disposition” office into furiously competitive teams. He offered to sell any FHA house for $500 down and gave special price cuts to quick buyers. He promised real estate brokers up to twice their normal 6% commission for handling certain houses.
HUD has become the biggest real estate advertiser in newspapers throughout the region, fattening Sunday editions with a big insert, the HUD Home Source, bearing the motto “HUD Sweet Home.” The insert lists hundreds of houses, with a suggested price for each. But local real estate agents say HUD houses almost always go for less than the asking price.
Something Out of a Dream
For home buyers accustomed to tight housing markets elsewhere, HUD’s listings here look like something out of a dream. A recent Denver HUD Home Source offered page after page of three- and four-bedroom homes--many on good-sized lots in desirable suburbs--for less than $70,000.
“What they’re doing is . . . depressing the market across the board,” said Shinn of the home builders’ group. “When the government has a grain surplus, it holds the excess in warehouses. But here, they’re dumping the product and destroying the market for everybody else who wants to sell a house. . . . We’ve told Congress this has to stop.”
“We wish we were not in the real estate business,” Maples responded. “And we have no desire to impair the market. But until headquarters in Washington instructs me to refrain from selling properties, I will honor the mission.”
