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March 29, 2001
HUD TEMPORARILY HALTS SALES OF DISCOUNTED HOMES TO OFFICERS AND TEACHERS
WASHINGTON - The U.S. Department of Housing and Urban Development in coordination with the National Fraternal Order of Police, National Education Association and American Federation of Teachers announced today that it is imposing an immediate 120-day suspension of home sales under its Officer Next Door and Teacher Next Door programs after uncovering numerous instances of fraud by homebuyers.
"The vast majority of officers and teachers who buy houses through these programs play by the rules," HUD Secretary Mel Martinez said. "Both programs are proven winners for the communities. Officers and teachers get homeownership opportunities, young people get excellent role models who live nearby and communities grow stronger and healthier."
Gilbert G. Gallegos, National President of the Fraternal Order of Police, which represents more than 293,000 law enforcement officers in every region of the country, was also quick to praise the officers program that the FOP helped to develop.
"The Officer Next Door program underscores what we in law enforcement have always known -- having a stable, consistent police presence in a community is a powerful deterrent to crime," Gallegos said. "Criminals simply cannot flourish in a neighborhood where the police and the community are bound together in the interest of the common good. It's a program designed to help police officers buy homes and to help communities become safer. But until we prevent further fraudulent abuses of the program, neither of these goals can be met."
"NEA is pleased to continue to lend its wholehearted support to this program to provide affordable housing to teachers," said Bob Chase, NEA president, which represents 2.6 million members. "The adjustments suggested by the Secretary will help ensure that the program is accessible to even more teachers. This is just one of the many ways that the federal government and NEA can work together to attract and retain good teachers."
"Teachers make good neighbors and having them in the community helps the children who live and learn there," said Sandra Feldman, president, American Federation of Teachers. "Secretary Martinez is taking a reasonable step to make sure that this innovative and positive program functions properly."
Martinez directed senior HUD officials to review the programs' guidelines and make whatever changes are necessary to ensure that these well-intended programs do what they were designed to do. "The oversight measures simply need strengthening," he added.
The suspension will begin 12:01 a.m., on April 1 and last through July 31. HUD will honor all sales contracts it has signed on properties offered for sale prior to April 1.
HUD's announcement comes on the heels of nine felony convictions and 15 indictments involving the purchase of homes under the programs. In addition, in February, HUD's Office of Inspector General reported that both programs were vulnerable to fraud and that management controls were inadequate.
Through the programs, officers and teachers can buy HUD-owned, single family homes at a 50 percent discount in certain designated revitalization areas. The homes are FHA-insured houses on which the owners have defaulted.
Since HUD created the officer and teacher programs in 1997 and 2000, respectively, approximately 6,000 police officers and teachers in 41 states and the District of Columbia have purchased the homes.
To be eligible, law enforcement officers and teachers must be employed full-time and agree to make the homes their sole residence for three years after purchase. In addition, teachers must work in the areas in which the homes are located.
To make the properties even more affordable, HUD reduced the down payment to $100 if the home was purchased with an FHA-insured mortgage. The homes could be purchased directly from HUD or through a real estate broker. If a broker is used, the discount is reduced by any broker or agent commission.
Bidding on other FHA foreclosed properties by the general public is not affected by this suspension, Martinez said. Sales under HUD's other discount programs will also continue.