Neighborhoods across the country are riddled with empty bank-owned homes and unoccupied foreclosures that erode neighboring property values and open the door for blight and, in some cases, criminal activity.
[IMAGE] It's already a challenge for lenders to put these properties back into the hands of responsible homeowners, and the situation is only expected to get worse. Foreclosures are on the rise again, further adding to already engorged REO inventories, market demand is waning, and the homebuyer pool is shrinking.
The nation's glut of vacant REO properties took center stage in Washington Wednesday. ""HUD announced"":http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-187 a new nationwide REO ""First Look"" program, in partnership with the nation's largest mortgage lenders, and it was the first of a ""two-day summit"":http://www.federalreserve.gov/events/conferences/2010/reovpsns/default.htm hosted by the Federal Reserve to examine the community impacts of foreclosed and vacant properties.
HUD Secretary Shaun Donovan called the _National First Look Program_ an Ã¢â‚¬Å“unprecedented agreementÃ¢â‚¬Â that will allow state and local governments, and nonprofit organizations first crack or first right of refusal to purchase foreclosed homes from top lenders before the banks make these properties available to private investors.
HUD says the institutions participating in the program represent 75 percent of the REO marketplace. They include: Bank of America, Chase, Citi, Deutsche Bank, GMAC, Nationstar Mortgage, Ocwen Financial Corporation, Saxon Mortgage Services, U.S. Bank, and Wells Fargo, as well as Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA).[COLUMN_BREAK]
These companies have agreed to give communities participating in HUD's ""Neighborhood Stabilization Program"":http://www.hud.gov/offices/cpd/communitydevelopment/programs/neighborhoodspg/ (NSP) an exclusive opportunity to purchase their bank-owned properties in targeted neighborhoods ahead of non-owner occupant speculators, so these homes can either be rehabilitated, rented, resold, or demolished.
HUD says its NSP grantees often find themselves competing with private investors for REO properties, which can hinder their efforts to stabilize neighborhoods with high foreclosure activity.
Under the new program, NSP participants will be immediately notified when a property becomes available and will have 24-48 hours to express interest in pursuing a specific property. The _First Look_ period will then last approximately five to 12 business days. If no NSP purchase is made, then the home can be listed on the open market.
The participating lenders have also agreed to allow NSP purchasers to buy their REO properties at a 1 percent discount off the appraised value. Congress has allocated $7 billion to the NSP program to help nonprofits and municipalities purchase the homes.
A few streets over from the ""NeighborWorks America"":http://www.nw.org office where Secretary Donovan unveiled the new First Look program, the Federal Reserve commenced its two-day summit aimed at helping communities and practitioners better understand the barriers, practices, and local variables that play into neighborhood stabilization and the disposition of REO property.
""A foreclosure not only hurts the person who loses their home, it hurts their neighbors and their communities,"" said Federal Reserve Governor Elizabeth A. Duke, one of the summitÃ¢â‚¬â„¢s featured speakers. ""As delinquencies and foreclosures continue to increase, we must think creatively and focus our research, outreach, and community development efforts on ways to help these communities recover.""
In conjunction with the event, the Federal Reserve has published an ""extensive volume of papers"":http://www.clevelandfed.org/Community_Development/publications/REO/REO_WEB.pdf that explores regional market differences and presents perspectives from various industry players involved in REO disposition.