Neighborhood Groups Plan HUD Protests: Foreclosures on Rise -

Tom Boland (wgcp@earthlink.net)
Wed, 3 Feb 1999 10:04:19 -0800 (PST)


FWD  Wednesday January 27, 1999

Press Release

SOURCE: National Training and Information Center

FORECLOSURES ON THE RISE ACROSS U.S.

NEIGHBORHOOD GROUPS COAST TO COAST PLAN HUD PROTEST

CHICAGO -- A rise in foreclosures on single-family home mortgages in
inner-city neighborhoods across the U.S. is leaving families homeless and
contributing to neighborhood decay.

More than 76,000 families lost the homes they purchased with
government-insured mortgages through the Federal Housing Administration in
1998, according to new foreclosure data recently obtained from HUD, the
FHA's parent agency. This is an increase of nearly 4,500 families over the
previous year. Over the past two years FHA foreclosures have increased by
25 percent.

A coast-to-coast ad hoc coalition of community-based organizations from
home loan counselors to grassroots neighborhood groups plan a day of
demonstrations to highlight the onset of a foreclosure crisis and to
protest government policies aggravating the problem on Wednesday, January
27. Vigils for foreclosure victims, demonstrations at regional offices of
the Department of Housing and Urban Development, and other activities are
planned.

Homeless families with ruined credit are one cost of flawed FHA policies.
Ravaged neighborhoods are another. Every foreclosed family leaves behind an
abandoned building that in lower-income urban neighborhoods can stand
vacant and empty for years, becoming a target for vandals and crime.

While abandoned HUD homes become drughouses and havens for prostitution and
other crimes, taxpayers support their supposed upkeep, as the federal
government spends about $10,000 a year for each vacant HUD home it owns.
Currently there are more than 40,000 of these HUD homes, resulting in a
cost to taxpayers of $1 million a day. Many of them are literally
government- subsidized crime hot spots.

``Abandoned buildings and families with no homes and ruined credit are part
of the program at HUD under Secretary Andrew Cuomo,'' says Gale Cincotta,
executive director of the National Training and Information Center, a
27-year- old Chicago-based resource center for neighborhood groups that
researches national housing policy. ``Requiring pre-purchase home
inspections would stop many foreclosures, but Cuomo has refused to change
the program to solve the problem.''

The FHA, a government program designed to help more Americans become
homeowners, has seen foreclosures rise despite the strongest economy in 25
years and a decrease in the market share of FHA loans in recent years.

Recent studies have shown evidence of racial steering in which minorities
are more likely to receive FHA-backed than conventional loans. FHA loans in
urban areas are from four to five times more likely to go into foreclosure
than conventional loans in the same geographical areas. They are also
slightly more costly over the life of the loan to the borrower.

The spike in foreclosures corresponds exactly with changes in how FHA
insures loans in its guaranteed loan program. Before the increase began,
FHA randomly assigned appraisers to value properties sold with its
insurance. A 1996 policy change authorized by Cuomo allowed lenders to
select their own appraisers.

The old system, a ``rotation panel,'' insulated appraisers from pressure by
lenders -- who have been shown in hundreds of cases in numerous cities to
overvalue homes at lenders' behest. Current FHA policy, called ``Lender
Select,'' requires no inspections before home purchase and allows lenders
to select their own appraisers.

Neighborhood groups are pushing Cuomo to implement mandatory pre-purchase
inspections using a rotation system and to create a new mortgage assistance
program.

Inspections would expose structural defects such as faulty wiring,
plumbing, or furnaces, leaking roofs, and cracked foundations -- all common
problems in the older single-family homes sold with FHA-backed mortgages in
urban neighborhoods.

When families are forced to pay for unforeseen repairs such as these, they
typically strain their household budgets to the breaking point -- resulting
in foreclosures. Likewise, an assistance program would protect homeowners
in financial difficulty through no fault of their own.

    Participating Cities

    Chicago, IL                        Indianapolis, IN
    Syracuse, NY                       Cleveland, OH
    Philadelphia, PA                   Boston, MA
    Buffalo, NY                        San Diego, CA
    Rochester, NY                      New York (Queens), NY
    Cincinnati, OH

SOURCE: National Training and Information Center

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