Community Builder Leads
Effort to Save FHA Projects
Community Builder Fellow David Balcers
efforts to preserve a scarce affordable housing resource in Milwaukee, WI
protected hundreds of lower-income families from losing their homes. When
the Wisconsin HUD Office learned that Community Development Corporation of Wisconsin (CDCW) was experiencing
severe financial difficulties, staff acted quickly to save three apartment
buildings insured by HUDs FHA.
In February of 1999, CDCW, a Milwaukee non-profit corporation that owned
and managed more than 700 units of low income housing, announced its intention
to file for bankruptcy at the end of the month. CDCWs portfolio of
properties included three FHA-insured apartment buildings that housed 206
families. The challenge facing the Wisconsin HUD office was to prevent the
potential foreclosure of these FHA properties, with mortgages totaling $3,040,000.
"Our first reaction was that we needed a lot of information, and
we needed it fast," said Community Builder Fellow David Balcer. "I
had known the Director of CDCW for a number of years, so he was willing
to come in to see us and explain the situation." Dave, along with Senior
Community Builder Del Reynolds and staff from the Office of Community Planning
and Development (CPD) and Office of Housing, met with CDCWs Executive
Director a few days later.
Armed with the information provided at this meeting and gathered from
other sources, Dave used his mortgage lending experience to prepare an analysis
of CDCWs real estate holdings and financial arrangements. Meanwhile,
HUD Housing staff intensified monitoring of the FHA properties to ensure
that project funds were not used improperly and CPD staff assured compliance
with CDBG and HOME regulations.
Working closely with the Wisconsin HUD Chief Counsel and the Housing
and CPD Directors, Dave developed an overall strategy to protect HUDs
interests. "One of our concerns was that the residents not be harmed
by CDCWs problems. The best way to protect the residents was to work
with CDCW on transferring their properties to responsible owners,"
Two non-profit organizations were identified to take over the FHA/HUD
properties. The properties were successfully transferred within an eight
Reflecting on the transaction, Chief Counsel Jerry Beitz said, "What
was really helpful was that David managed a solution which protected our
interests with such ease and speed. His rapport with the parties was invaluable,
something we would not have possessed without him." Joe Bates, Multifamily
Program Center Director, added "It was nice to see HUD resolve a potential
problem like this with such finesse."
Del Reynolds summed it all up as follows:
"This is an excellent example of collaboration among Community Builder
Fellows and Public Trust Officers. Their teamwork prevented the costs of
having HUD projects go in to bankruptcy court and avoided claims on the
FHA mortgages. Daves experience as a former banker and non-profit
manager made it possible for us to move quickly to protect the interests
of the residents, the community, and the insurance fund."