Agency offering deals on foreclosed homes

Teachers, first responders looking for a house can get one at half the price

FRED KELLYfrkelly@charlotteobserver.com

Charlotte's teachers, police officers and firefighters can now buy foreclosed houses at a discount under a federal program intended to improve neighborhoods hit by vacancies and flagging property values.

The U.S. Department of Housing and Urban Development is posting pictures on its Web site of houses it will sell for half the listed price.

Charlotte-Mecklenburg Schools teachers received an e-mail advertising eight houses listed between $33,000 and $187,000 that they could buy for $16,500 to $93,500.

The effort, already in place in cities such as Denver, Chicago and Houston, is a response to Mecklenburg County's growing foreclose rate, the highest in the state.

Federal officials contacted Charlotte leaders in May about joining the Good Neighbor Next Door program after the number of foreclosures in the county jumped to 7,162 last year from 4,414 in 2002, a 62 percent increase.

"When you put an upstanding, contributing citizen in these neighborhoods, it's like planting a seed," said Brian Sullivan, a HUD spokesman. "It can turn a neighborhood around.

"The program comes with rules: Buyers must live in the houses for at least three years. Some of the houses also will cost thousands of dollars to repair.

One house recently listed for $120,000 needed a new gas furnace, an air-conditioning unit, a sink and light fixtures. That would cost at least another $10,000, city officials said.

Also, discounts are common on foreclosures. Such properties often sell for 60 percent of their listed price, said Mike Jaffa, president of Graham Investment, which lends money to developers.

Additionally, Jaffa said, the homes frequently are in crime-ridden neighborhoods.

He recalled a police officer who purchased a home near uptown through another discount program. The home sat across from a drug house.

"They tried to run her out of there," Jaffa said. "Later, she helped bust the drug dealers. As far as I'm concerned, she earned every penny of the discount."

Supporters say Good Neighbor Next Door is popular nationwide. Since the program started in 1997, HUD has sold more than 13,000 foreclosed houses at the discount.

Federal officials acknowledge that in some cases people have abused the program. Buyers purchased homes but used them as investments or rented them out instead of living there.

HUD offers mortgage insurance to lenders to help homebuyers obtain loans. If a borrower defaults, the agency pays off the loan and takes ownership of the house. HUD then tries to sell the properties. Houses that do not sell quickly often wind up in the Good Neighbor Next Door program, Sullivan said.

City leaders say foreclosures can destabilize neighborhoods by lowering property values and creating eyesores and targets for vandals.

Charlotte officials blame the trend on high numbers of risky subprime loans to homebuyers with spotty credit, on predatory lending and on liberalized finance laws.

Richard Woodcock, city deputy director of neighborhood development, said the program will provide needed affordable homes to low-paid professionals who may not otherwise be able to purchase a home.

New teachers, for example, struggle to pay for housing, officials said. A starting teacher in Charlotte-Mecklenburg Schools makes roughly $32,000 a year."

A lot of teachers live two or three to an apartment," said Mary McCray, president of the Charlotte-Mecklenburg Association of Educators. "For us to maximize our dollars, we need to become homeowners. We want our standard of living to match our professional degrees."