Can We Improve FHA Foreclosures?

by Peter G. Miller
September 17th, 2007

I spent much of last week in Dallas to attend the Five Star Default Servicing Conference. This is a meeting of several thousand people who deal in bulk real estate sales, purchases and REOs — real estate owned by lenders after default.

One of the more interesting comments concerned HUD, the ultimate owner of FHA-financed properties that have been defaulted. The argument was made that HUD could get a lot more for these properties — and thus reduce claims on FHA insurance pools — if only HUD would fix up and repair properties before selling.

There would, of course, be a cost to such prep work, but presumably that expense would be off-set with more demand and higher sale prices.

As well, there’s another opportunity here. Imagine how many people could be trained to fix homes. When you look at all the properties owned by state, local and federal agencies which languish and could be fixed up, it’s a shame we don’t take more of them, bring up to code, make ‘em attractive and then sell them at market value — or less. We’d improve neighborhoods, pay real dollars for real work and teach skills that could be widely used.

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