Housing Series: HUD and Fannie Mae

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Stacy Pugh is parked next to a weedy piece of land in Slavic Village. When the land still had a house, Pugh tried to acquire it for the Slavic Village Development Corporation because it was near an area being targeted for significant public and private investment.

Stacy Pugh:I went and looked at the house and I invited a city inspector. They immediately condemned the house. The foundation was caved in. The ground was literally just flooding into the house.

Fannie Mae ended up with the house after it went into foreclosure and listed it for sale locally and online. Pugh asked Fannie Mae to donate the house. The CDC had money for demolition, but not to buy. Fannie Mae has to answer to stockholders, so it would not donate the property.

Stacy Pugh:So they sold it on the internet to some guy in Florida who's name is Stevenson Mathieu.

Stevenson Mathieu: I paid $2000 for that property. I have,how do you say it, bad credit.

Stacy Pugh: And no way to finance the repairs that he claimed he was going to do to the property.

Stevenson Mathieu: I thought if I buy a property and then with that property I could actually try to repair my credit.

Stacy Pugh: This is in a very important area for us so we decided to file a lawsuit.

Stevenson Mathieu: I didn't want to cause any trouble so I told them, 'Hey, I would donate the property to them.'

Stacy Pugh: In court, he pulled out the keys to the house and just handed them to me. We were like, OK...

In the end, Pugh got what she wanted but the city of Cleveland had to pay to demolish the house, the nonprofit paid legal fees and a guy from Florida was out $2000 dollars, not including the gas money he spent to show up in court in Cleveland. Just a few weeks ago, Pugh asked Fannie for a property again in the same part of her neighborhood slated for investment. No deal. Fannie Mae sold it online to another investor for $2000.

Gabrielle Harrison: That is a very good example of I guess I would now say our old process.

Gabrielle Harrison is vice president of Real Estate Owned sales at Fannie Mae.

Gabrielle Harrison: If I can sell the property to an owner occupant or to a local nonprofit who clearly is there in the community and has a long term relationship with the community that would be best for the community and also potentially lead to a better outcome overall by helping to stabilize those property values.

Harrison says Fannie Mae will now let cities have first dibs at its property and offer them at a reduced price. The federal department of Housing and Urban Development has a similar program that allows cities to purchase foreclosed houses for a dollar. HUD's Laurie Maggiano, says the agency is constantly trying to balance its goals of maximizing its return on foreclosed properties and preserving neighborhoods.

Maggiano: We can't sell every property for a dollar even if the acquiring entity would do wonderful and good things for the community. Because that then would mean that we would not have any return to the insurance funds and it would jeopardize the health of the fund and our ability to insure low interest loans.

HUD and local developers sometimes clash when trying to decide whether a foreclosed house should be demolished. Alana Meyers-Kiousis has a condemned HUD house 15 feet away from hers in Cleveland's Detroit-Shoreway neighborhood. She wants it demolished but cities cannot knock down federal property.

Alana Meyers-Kiousis: We were actually willing to pay for the demolition ourselves just to get the thing down and turn it into a green space at our expense.

HUD says it needs to make sure for itself that properties Cleveland condemns are not salvageable. Ron O'Leary is at Cleveland's Department of Building and Housing.

Ron O'Leary: I understand HUD's perspective. They look at these properties as assets the same as any property owner would. Sometimes they I think have a different view of what the value of that asset is versus what we think the value is.

The issue is not going away. The city of Cleveland is currently working to demolish a thousand properties a year and some of those are owned by HUD. Mhari Saito, 90.3.

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