Lenders Agree to Give Communities First Crack at Foreclosures

In an effort to stabilize neighborhoods with high foreclosure rates, bank-owned properties in certain targeted areas will be offered for sale first to state and local governments, along with selected nonprofit organizations before they are made available to private investors.

The goal is to make such properties available to agencies or groups that will rehabilitate, rent, resell or demolish them, rather than to private parties who may allow them to stand vacant as speculative investments.

Called The National First-Look Program, the initiative is an agreement between the nation’s largest mortgage lenders and the U.S. Department of Housing and Urban Development (HUD). The program will be available to communities participating in HUD’s Neighborhood Stabilization Program (NSP).

"This groundbreaking agreement will help rebuild neighborhoods that have been struggling with blight and declining home values due to foreclosures," said HUD Secretary Shaun Donovan. "Local communities will now get an exclusive option to buy foreclosed properties in targeted neighborhoods so they can turn the homes into affordable housing or, in some cases, tear them down. This agreement helps us level the playing field to give communities a better chance to stabilize these neighborhoods."

Lenders participating in the program represent approximately 75 percent of the U.S. mortgage market. Participating institutions include Bank of America, Chase, Citi, Wells Fargo, GMAC, U.S. Bank, Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA).

HUD’s Neighborhood Stabilization Program was created in 2008 to address the housing crisis by providing communities with the resources to purchase and rehabilitate vacant homes. To date, the program has directed approximately $6 billion to local and state governments and nonprofit organizations for neighborhood stabilization efforts.

The First Look Program is modeled after an FHA pilot program in which NSP grantees have an opportunity to purchase at a discount foreclosed properties owned by HUD before those properties are made available to investors. The program will be operated through the National Community Stabilization Trust, a nonprofit entity created in conjunction with the NSP to facilitate the transfer of distressed properties to communities and nonprofit groups working to stabilize neighborhoods.

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