CLEVELAND, Ohio — Officials at the U.S. Department of Housing and Urban Development have reversed their decision about selling Cuyahoga County properties to speculators and others and will continue to sell to the Cuyahoga Land Bank.
HUD and the land bank reached a nine-month agreement Friday that will enable the county to buy low-valued, foreclosed and vacant properties and keep the blighted homes off the market.
U.S. Senator Sherrod Brown, who acted as a mediator, played a key role in contract negotiations. Cuyahoga Land Bank president Gus Frangos and HUD spokesman Brian Sullivan praised Brown’s efforts to help the two groups reach an amicable agreement.
Under the agreement, the land bank will pay HUD $100 per home for houses appraised below $20,000. The land bank will pay $1,500 per home for houses appraised at more than $20,000 but that price is subject to discounts if the property is in a severely distressed neighborhood — based on economic indicators such as how many other homes in the neighborhood have been foreclosed.
The land bank and HUD initially forged a similar deal in 2009 that contractually ended last December. HUD sent a letter to the land bank in November that they couldn’t afford to continue the arrangement as is and would resume selling its Cuyahoga County properties to speculators and people on the open market.
Under the old agreement, the land bank was paying $100 for homes worth $30,000 or less. Under that deal, HUD was losing at least $2,500 per property on properties costing between $20,000-$30,000, a spokesman in Brown’s office said.
Sullivan said the reason for the letter was the capital reserves known as the Mutual Mortgage Insurance Fund, which supports the Federal Housing Authority’s mortgage insurance program, was $16.3 billion in the red.
“We were taking a loss on homes,” Sullivan said. “The question was, how much of a loss could we afford to take? We never planned to cancel an agreement with the land bank…we were hoping to reach another deal.
After taking a second look because of the FHA’s current financial condition, Sullivan said HUD was able to sign a very attractive deal “which we are very pleased with.”
“It’s a win-win deal, and we can continue our partnership with the land bank and stabilize hard hit neighborhoods in Cuyahoga County.”
Frangos said the land bank is more interested in obtaining homes appraised at less than $20,000 for the purpose of demolishing them and redeveloping the property.
“We’ve been talking with HUD for several weeks at Brown’s urging,” Frangos said. “Our primary focus has always been to get distressed properties off the market and away from buyers using them for flipping, trafficking and other criminal activities.
“When we get these homes off the market, we can preserve the good in these neighborhoods. I’m happy we are back in agreement with HUD.”
The deal was also praised by Jim Rokakis, land bank expert and vice president of the Western Reserve Land Conservancy.
“It’s great news, and a deal that should never have been killed or at least temporarily suspended in the first place,” Rokakis said. “HUD did more harm than good by flipping these properties and not working with the land bank.”
Rokakis also said the city of Chicago is interested in getting a similar deal with HUD. Their land bank program is just getting started, he said.
Brown said the deal goes through Sept. 30 with the idea that HUD can reevaluate its fiscal outlook, which he said HUD hopes will be improved.
“When the contract expired last year, HUD and the land bank weren’t talking to each other,” Brown said. “We got them back to the table, and the winners in this deal are the residents of Cleveland who will see more stable neighborhoods and the housing market better sustained.”