HUD Archives: News Releases

HUD To Re-Evaluate Revitalization Demonstration Program
Seeks to Boost Accountability

WASHINGTON - The Department of Housing and Urban Development today announced it will conduct a full review of the Asset Control Area Demonstration Program, a two-year old trial program designed to sell foreclosed homes to local governments and nonprofit organizations at discounted prices.

This action follows a recent report by HUD's Inspector General that questioned the program's effectiveness. The report found violations in several cities. It noted that some ACA operations had been turned over to for-profit developers, some homes were sold at prices higher than permitted in the program, and other homes were sold without rehabilitation. The report recommended instituting tighter controls.

An internal HUD task force will gauge the program's effectiveness, prepare a program risk assessment, and develop formal program regulations. The task force is scheduled to complete its work within six months. Congress originally mandated that regulations be issued by October 2000.

"The goal of this program is to open the door of homeownership to low-to-moderate income families and that is our goal as well," said HUD Secretary Mel Martinez. "To that end, we're going to insist on accountability and results. This program review will continue until there is no doubt it produces positive results for communities throughout America."

The ACA program was created in 1999 under the previous Administration, and has operated in 16 communities around the country. All but two of the agreements expire before the end of April 2002. ACA Agreements reached in Prince Georges County, MD and Harvey, IL are scheduled to expire this summer. While the review is continuing, expiring agreements will not be renewed.

"The operations of our ACA partners should not be affected by the review process," said Assistant Secretary for Housing, John C. Weicher. "They can continue to rehabilitate and sell the 1,000 homes they now own." In the first two years of the program, ACA partners sold a total of 742 homes nationally. The properties HUD has been holding back for sale to the ACA partners will be released for sale through HUD's normal property disposition program. Qualifying nonprofits, including the ACA partners, will have the opportunity to purchase these properties at the normal 30% discount inside revitalization areas.

The following areas have signed ACA agreements with HUD. All but two have expired or will expire by the end of April 2002:

HUD has taken similar corrective action in the recent past to ensure program integrity and success. Today's action is similar to last year's suspension of a program designed to benefit police officers and teachers after uncovering several instances of fraud by homebuyers. HUD instituted numerous corrective measures before resuming discounted home sales under the Officer Next Door and Teacher Next Door programs. In a March 2002 Inspector General review of the Officer Next Door and Teacher Next Door programs following HUD's implementation of new controls, the OIG found no instances of potential program requirement violations.

In addition, last December HUD entered into an unprecedented partnership with New York City to save affordable housing for 1,500 families that fell prey to unscrupulous lenders and nonprofit groups. An internal review showed several weaknesses in the Federal Housing Administration's (FHA) 203(k) Program. As a result, HUD implemented new checks and procedures to prevent abuse through more aggressive lender monitoring and requiring all participating non-profit organizations to undergo a rigorous certification.

HUD is the nation's housing agency committed to increasing minority homeownership, creating affordable housing opportunities for low-income Americans, supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at www.hud.gov.

The OIG Report is available on the Internet.

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Content Archived: April 9, 2010