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To: Ahda who wrote (3581)	11/16/2001 11:11:59 PM
From: Keith Monahan	Read Replies (3) \| Respond to of 24758

DJ US Audit: Profiteers Abused Discounted Home Sales Program 11/16/2001 Dow Jones News Services (Copyright © 2001 Dow Jones & Company, Inc.) WASHINGTON (AP)--Profiteers took advantage of a federal government program meant to expand homeownership by buying foreclosed homes at a discount and failing to pass on the savings to low-income home buyers, a government audit found. The inspector general for the Department of Housing and Urban Development said in the audit released Friday that the agency's program is so flawed it should be suspended. "The audit disclosed serious problems with HUD's discount sales program, which brings into question the viability of the program," the report said. The eight-year-old HUD effort takes homes whose previous owners defaulted on government-backed loans and sells them to nonprofit organizations and government agencies at steep reductions. HUD offers the buyers discounts of 30% in certain distressed areas and up to 15% elsewhere. In return, the purchasers must resell to low- and moderate-income home buyers and charge no more than 10% above their cost of buying and rehabilitating the properties. By passing on the savings from the HUD discount, the program is supposed to make owning a home possible for many people who otherwise couldn't afford it. But the audit concluded that HUD's lax oversight and vague guidelines allowed profit-hungry enterprises and individuals to benefit instead of disadvantaged potential home buyers. "The discounts provided to the nonprofit agencies were not used in any significant manner to reduce the price of properties for the benefit of low- and moderate-income home buyers," the audit said. "In fact, rather than seeing a reduction in the resale prices...of the properties as would be expected, there was a significant increase." HUD already has moved to strengthen its monitoring of the program, John Weicher, HUD's assistant secretary for housing, said in a response included with the audit. HUD doesn't agree that the program should be suspended, but will conduct a comprehensive review to determine its future, Weicher wrote. He also noted that the number of nonprofits approved to participate in the program - now about 500 - has been reduced to about a fifth of what it was at the start of the audit. The inspector general's office reviewed a sample of 4,000 sales over more than three years, ending in April 2001. During that period, HUD handed out a total of $220 million in discounts on 15,000 properties. In the sales reviewed, the average home buyer paid 30% more than he should have, the audit found. The audit also examined 19 unnamed nonprofit organizations, chosen because they accounted for about 10% of all sales and discounts. Overall, it found that none of the 19 passed on discounts to home buyers and that all but four were created or controlled by entities geared toward profits. It also chronicled abuses such as exorbitant financing fees, shoddy rehabilitation work, greatly increased resale prices and homes going to wealthier families. One organization even used the program to accumulate a large portfolio of rental properties, largely by buying 339 HUD homes at a $3 million discount but never reselling them.