CUOMO, COMMUNITY GROUPS LAUNCH CITYWIDE CAMPAIGN TO CREATE AFFORDABLE HOUSING

NEW YORK, NEW YORK – Hundreds of homes in New York City that have been targeted by unscrupulous lenders and not-for-profits will be rehabilitated by the U.S. Department of Housing and Urban Development and sold to reputable community-based, not-for-profits and moderate-income homebuyers under an agreement announced today by HUD Secretary Andrew Cuomo.

The agreement announced today is between HUD and a consortium of not-for-profit organizations in Harlem and Brooklyn that, with HUD financial assistance, will rehabilitate and then re-sell or rent the properties at affordable prices.

"Now that HUD and federal, state and local law enforcement agencies have broken the back of this criminal conspiracy and have begun to bring the conspirators to justice," said Cuomo, "it’s time for HUD and some of New York City’s best and most experienced not-for-profits to take possession of these properties, fully rehabilitate them and, ultimately, use them to expand the supply of affordable homeownership and rental units available to those who want their piece of the American Dream."

"I am pleased that HUD is taking steps to return these properties to productive use," said Manhattan District Attorney Robert M. Morgenthau. "I also appreciate HUD’s assistance during my Office’s continuing investigation into the misuse of HUD funds."

Under the Citywide plan:

• HUD will take possession of the homes once they complete the foreclosure process.
  
• Consortium partners and participating not-for-profits will manage and rehabilitate the properties under HUD’s direction.
  
• HUD will pay the cost of full rehabilitation of each property.
  
• HUD will protect all current tenants and offer them long-term affordable leases.
  
• The not-for-profits will sell unoccupied properties to owner-occupants with incomes of no more than 150 percent of the median income and sell occupied properties to not-for-profits at a discount sufficient to insure that tenants pay no more than 30 percent of their income for rent.
  
• Net proceeds from the sale of each property will return to the Federal Housing Administration, an agency within HUD.

Almost 20 months ago, HUD lender monitors began uncovering a ring of unscrupulous lenders, appraisers, developers and not-for-profit groups who were looting mortgages insured by the Federal Housing Administration, under its innovative acquisition and rehabilitation program. The findings were referred by FHA in 1999 to HUD’s Inspector General for criminal investigation. Recently, the IG, the U.S. Attorney for the Eastern District, the New York State Attorney General and the Manhattan District Attorney have announced criminal indictments against several dozen individuals involved in the fraudulent activity.

Most of the properties currently are in the foreclosure process which, in New York State, can take anywhere from 12 to 18 months for completion, or longer in the case of contested foreclosures. Because they were FHA-insured, once foreclosed, the properties will come into HUD’s inventory of homes. Today’s agreement is intended to provide an efficient and effective mechanism by which the properties will be quickly rehabilitated and preserved as long-term and sustainable affordable housing..

Since the revenues of the FHA Insurance Fund come entirely from FHA mortgage insurance premiums paid homeowners with FHA insurance, no taxpayer funds have been at risk as a result of these fraudulent activities and no taxpayer funds will be used to finance the activities of today’s agreement.

Under the agreement announced by Cuomo today, HUD will partner with the New York City Group – a consortium that includes not-for-profit organizations such as the Abyssinian Development Corporation, East Brooklyn Congregations, the Community Preservation Corporation and The Enterprise Foundation – to completely rehabilitate more than 400 properties to standards consistent with City of New York housing programs. Rehabilitation costs will be borne by FHA. Net proceeds from the sale of the properties will be returned to FHA.

To expand the supply of affordable housing in the neighborhood, currently-occupied properties will be sold at a discount to not-for-profit organizations identified by the Group. Current and new tenants will be offered long-term leases at rents no greater than 30 percent of their incomes and, consistent with prior HUD practice, current tenants will retain the right to residency in the property. The costs of any temporary relocation made necessary by rehabilitation of the property will be borne by HUD.

If a property is vacant, the Group has agreed to sell the property to owner-occupants with incomes no greater than 150 percent of New York’s median income.

In advance of this plan, HUD has ordered all current holders of mortgage notes for these properties to take "any and all actions necessary" to maintain the physical condition of the properties and the well-being of the tenants between now and the time the properties come back into HUD’s inventory of homes.

HUD has established similar partnerships with not-for-profit organizations and city governments in Rochester, Los Angeles, Cleveland, Miami and Chicago to expand the supply of affordable housing in revitalizing neighborhoods.

The not-for-profit groups that comprise the New York Group have extensive housing experience. The Abyssinian Development Corporation has spurred development of more than 1,000 housing units as well as a 65,000 square-foot shopping center in Harlem. The Community Preservation Corporation, a private mortgage lender supported by 94 banks and insurance companies, has extended over $1.9 billion in public and private financing for housing rehabilitation and works closely with both New York State and New York City housing programs. The Enterprise Foundation has leveraged some $3.4 billion in financing which, to date, has created more than 107,000 affordable homes across the country. East Brooklyn Congregations, through their Nehemiah homes project, has been responsible for the construction of more than 2,300 single-family homes in New York City.