HUD Archives: News Releases

HUD No. 01-129
Contact: Adam Glantz
(212) 264-8000 ext. 3158
Carol Abrams, NYC HPD
(212) 863-5176
Groundbreaking - view the photograph
For Release
December 19, 2001


WASHINGTON - In an unprecedented partnership, Department of Housing and Urban Development Secretary Mel Martinez and New York City Mayor Rudolph W. Giuliani today announced a five-year plan to save affordable housing for 1,500 families that have fallen prey to unscrupulous lenders and nonprofit organizations in Manhattan, Brooklyn, Queens and the Bronx. In addition, HUD and New York City will invest nearly $168 million to rehabilitate more than 500 properties as part of the City's overall revitalization efforts in these neighborhoods.

The comprehensive plan specifically addresses the 514 multi-family properties that were sold under HUD's 203(k) mortgage insurance program. The properties were sold to 54 non-profit organizations in 1998 and 1999, generally at inflated prices. Most of the properties involved are currently in or at risk of default. Under this plan, HUD will acquire these properties upon foreclosure and work with the City's Department of Housing Preservation and Development (HPD) to restore, market and sell the properties through programs modeled after successful existing city programs.

"HUD's and the City's priority is to revitalize these areas while maintaining a market that does not put the housing beyond the reach of middle- to low-income renters and property owners," explained Martinez. "We believe this comprehensive, community-oriented approach can accomplish both while repairing 2,200 housing units, which help more than 1,500 families currently living in the properties to keep their homes throughout this process."

"Today's announcement signals the start of a new partnership with the federal government where, together, the City of New York will help preserve one of its most precious resources - affordable housing," said Mayor Giuliani. "We saw the devastating effect these neglected buildings were having on communities across the City where we had made significant investments in housing. So we reached out to the new administration at HUD and found common ground to resolve this issue. Together we will preserve hundreds of buildings that will house future generations of New Yorkers."

Key components of the plan include:

  • HUD and HPD expect to repair 2,200 dwelling units with this joint plan;
  • HUD would commit $130 million in development funds and $7.7 million in anticipated sales proceeds to fully rehabilitate the properties to meet New York's housing code;
  • HPD will leverage $30 million in private sector development funds. The city also intends to provide $95 million in tax abatements to purchasers and developers;
  • HUD will pay for any relocation expenses for families required to move during renovation;
  • The City will provide rental assistance for families; and,
  • HUD and HPD will utilize four existing City housing programs to revitalize the homes.

The four existing City housing programs are:

Neighborhood Entrepreneurs Program (NEP) (164 Properties NEP and NRP combined)

Under this program, a non-profit housing development fund company purchases and rehabilitates both occupied and vacant residential buildings. During construction, locally based companies, selected through a competitive request for qualifications, manage the operation and rehabilitation of the buildings on behalf of the sponsor. When construction is completed, these locally based companies purchase and manage rehabilitated buildings as rental housing. This program prevents the displacement of existing legal tenants and creates additional affordable units.

Neighborhood Redevelopment Program (NRP) (164 Properties NEP and NRP combined)

Community-based not-for-profit organizations are selected through a competitive request for qualifications and form housing development fund companies or partnerships that then purchase and rehabilitate city-owned residential buildings and operate them as rental housing. This program prevents the displacement of existing legal tenants and creates additional affordable units.

Neighborhood Homes (172 Properties)

Community-based non-profit organizations selected through a competitive request for qualifications form partnerships or not-for-profit corporations that purchase and rehabilitate small one-to four family residential buildings for resale to owner-occupants.

Homeworks Program (178 Properties)

Sponsors under this program are selected through a competitive request for proposals purchase and rehabilitate small vacant one-to four family residential buildings for resale.

This plan, as outlined above, will transform properties neglected by those who abused the Federal Housing Administration's (FHA) 203(k) mortgage insurance program. Two years ago, HUD began uncovering evidence that unscrupulous lenders, appraisers, developers and not-for-profit groups were looting mortgages insured under this program. HUD's findings were referred to HUD's Inspector General (IG) for criminal investigation. The IG, the U.S. Attorney for the Eastern District of New York, the New York State Attorney General and the Manhattan District Attorney have announced criminal indictments against dozens of individuals involved in the fraudulent mortgage activity with others still to come.

The 203(k) program was designed to enable homebuyers to finance the cost of purchase and rehabilitation through a single mortgage. This program may also finance the rehabilitation of an existing home. "Aside from additional monitoring, we have added a number of rigorous checks and controls which should prevent this kind of fraudulent activity," said Martinez.

The Department has implemented new procedures to prevent abuse through more aggressive lender monitoring and requiring all participating non-profit organizations to undergo a rigorous certification process. This process has effectively reduced the number of participants in the mortgage insurance program dramatically. HUD is also limiting the number of properties any non-profit participant can own to 10.

HUD will oversee the execution of the plan and ensure concerns are promptly addressed.



Content Archived: March 26, 2010