In a major change in policy, the Department of Housing and Urban Development has decided to sell thousands of government-owned homes to local governments for $1 a throw. The homes can then be sold or rented to first-time buyers or to groups that will use them to provide such services as child care or job training centers.

The idea for is local communities to use the houses as catalysts for neighborhood revitalization by attracting new residents and business to their areas. But a year ago, HUD opposed legislation to create a similar giveaway program on the grounds that it would cost the Federal Housing Administration $3 billion in lost revenues.

Now, though, HUD says the initiative won't cost taxpayers a dime because the FHA returns about $1.5 billion a year to the U.S. Treasury. And while it is true that the giveaway could even save the agency money by cutting carrying costs, HUD's new "Good Neighbor Policy" will cost something because the government actually incurs a loss on every property it can't resell at a price high enough to recover its investment.

No reason was given for HUD's change of heart. But Sec. Andrew Cuomo said the program "will build better futures for hundreds of communities and thousands of families across the nation."

"It will help reverse decades of decline in our cities by revitalizing neighborhoods, attracting new residents and promoting home ownership," he said.

Under the Good Neighbor Policy, single-family houses acquired in foreclosure by the FHA will be eligible for sale if, after six months of trying, the government has been unable to unload them at or near market prices. In cases where it is not feasible to rehabilitate houses that are in extremely deteriorated condition, the houses will be demolished and the vacant lots also will be sold for a buck.

The first property to be sold, a three-bedroom house, will go to Columbus, Ohio, the home district of Rep. John Kasich, R-Ohio, who Cuomo credited with coming up with the idea for the plan.

"I hope there can be more instances when Members of Congress and officials from the Executive Branch can work together to develop and implement ideas like this one that achieve a common ground," said Kasich, who is chairman of the House Budget Committee.

HUD currently has about 3,000 houses in inventory that meet the program's criteria, and additional dwellings will be made available every month. But the vast majority of FHA foreclosures are resold within the allotted six-month holding period. Over the last six months, for example, the FHA has sold about 39,000 houses.

The agency currently insures about 6.7 million mortgages, promising to pay off lenders in the event that borrowers can't or won't pay them back as promised.

When someone fails to make his payments, lenders, on behalf of the FHA, first try to keep them in their homes and avoid foreclosure. But if forbearance and other alternatives don't work, the lender forecloses and conveys the house back to the FHA in exchange for a payment equaling the loan's balance.

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Published: March 6, 2000

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.