Friday, February 1, 2008

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Detroit

City's plan to put foreclosed homes to use

February 1, 2008

By ZACHARY GORCHOW and GRETA GUEST
FREE PRESS STAFF WRITERS

Hit by a deluge of foreclosures in the past three years, the City of Detroit said it has found a tool to get some of the houses back into use.

A pilot program that city officials expect to launch soon would take advantage of a federal rule that allows cities to buy homes for $1 after owners default on loans from the Federal Housing Administration and if the federal government cannot sell the houses within six months. The houses would become available in eight months.

There are 400 to 500 such houses available in Detroit at any time.

Douglass Diggs, Detroit's director of planning and development, said this week that the city would serve as a middleman between the U.S. Department of Housing and Urban Development and nonprofit groups that could buy the houses for $2,000 each. The $2,000 would cover the city's cost to administer the program, he said.

Diggs said Detroit had 10,000 foreclosures in 2007, when the tax- and mortgage-delinquent cases are taken together. That is on top of roughly 12,000 foreclosures from 2005 and 2006 combined.

"We think it's a model that could be the beginnings of making a significant dent," he said.

The city put out its request for proposals from nonprofit groups in mid-December, and 27 responded by the Jan. 7 deadline. Diggs said he expects that the city will have a list of finalists in the next few days.

The finalists would have to prove nonprofit status, have home-ownership counseling services, experience with construction or property rehabilitation and financing.

The Local Initiatives Support Corp., or LISC, a national affordable-housing group, is helping the city review applicants and plans to offer financing.

Mitchel Alexander, LISC program officer, said the national organization draws its funding from local foundations, banks and HUD.

If the program is successful, Diggs said he hopes banks will want to offer financing.
"It is our goal to qualify as many nonprofits as we can," Diggs said.

Once the finalists are chosen, the city will aim to process 100 properties, Diggs said. The nonprofit would have six to 12 months for renovations and then 90 days to find a buyer. If no buyer can be found, the nonprofit could offer a rent-to-buy option.

"This program has the potential to improve one of the most important problems in the city," Alexander said. "This will help us stabilize the neighborhoods."

Contact ZACHARY GORCHOW at 313-222-6678 or zgorchow@freepress.com , and GRETA GUEST at 313-223-4192 or gguest@freepress.com .

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