Earlier this week, HUD decided to block government foreclosure home purchases in Ohio and Michigan. In both states, local governments were going to purchase HUD properties for $1 under a special program. The communities would then restore the homes or, as is more likely in these cases, bulldoze and rebuild.
Now, HUD is reconsidering the foreclosure purchases. The Cleveland Plain Dealer reports:
“A HUD spokesman said that HUD wants to make sure the program’s requirements and intentions were followed. That could include the goal of strengthening communities as well as making sure HUD got “a maximum return” on property sales to help support the FHA insurance funds, according to the HUD memo.
Another issue apparently will be reviewed: the purported hoarding of $1 houses. Wayne County, Mich., alone has tried to buy about 1,000 $1 houses as it attempts to remove blight, according to the Chapman firm. Cities in the area, including Detroit, complained that the county was overly aggressive, saying they, too, want a chance to buy $1 houses within their borders.”
Should HUD discontinue the programs in these areas, there will be a massive amount of inventory available to investors. However, no one seems to be particularly interested in buying up foreclosure homes in areas such as Detroit. Dozens of homes in the city are already listed at less than $5,000 and there have been few takers.
See also: HUD Foreclosure Guide