WASHINGTON -- Sometimes the cops turn out to be the robbers.

Take Stacey Sims, an officer in the Prince George's County, Md., police department who has pleaded guilty to making a false statement to the Department of Housing and Urban Development in connection with the popular "Officer Next Door" program.

Under the program, which is designed to help promote redevelopment by encouraging law enforcement officers to become owners in economically distressed neighborhoods, policemen are offered Federal Housing Administration-foreclosed houses at half their fair market values.

Officers who receive the FHA discount must live in the property as their primary residence for at least three years after the purchase. And that's where Sims -- and apparently dozens of other officers -- went wrong.

Eight months after he moved into his Forestville, Md., home, the 29-year-old cop moved back out. He leased the house to someone else and began collecting rent.

Many home buyers do that. After living in their homes for a while, they move elsewhere and rent the old place. But they fail to notify their lenders, who still believe they have a mortgage on a primary residence.

In some instances, buyers outright lie about their intentions to live in the property to obtain a lower rate interest than they could as investors.

In Sims case, though, not only was he getting a house at 50 cents on the dollar, taxpayers were picking up the difference.

And when HUD asked him to certify that he was still living in the house, he admitted in court late last month, he falsely said that he was. Now he faces up to two-years in prison, a $250,000 fine and the loss of his job.

He's not alone, either. The Justice Department has won nine felony convictions and 15 indictments involving the program and a similar one for teachers. And the HUD Inspector General's Office, citing a "high risk of noncompliance and abuse," says 70 others are under investigation.

As a result, HUD Secretary Mel Martinez has suspended both programs for 120 days beginning April 1 so oversight can be strengthened.

Sec. Martinez said he stands by the programs, which he called "well intentioned" and "proven winners for their communities."

"The vast majority of officers and teachers who buy houses through these programs play by the rules," he stressed.

Since HUD created the officer and teacher programs in 1997 and 2000, respectively, some 6,000 cops and educators in 41 states and the District of Columbia have purchased houses at half-off. If the houses were acquired with an FHA-insured mortgages, HUD also reduced the downpayment to $100.

Nevertheless, the suspension is likely to be a stumbling block to federal legislation that would allow policemen, teachers, firefighters and other public servants to buy houses with FHA-insured mortgages for only 1 percent down.

As an added incentive to keep public servants in their communities, the bill also would waive the 1.5 percent up-front FHA insurance premium if the buyer remains in the house for at least five years.

A similar measure passed the House last year but was waylaid in the upper chamber by Sen. Phil Gramm, R-Texas, who thinks the FHA's programs should be open to anyone who wants to buy a house. Now, the powerful lawmaker has more ammunition.

HUD's policeman and teacher next door programs also were praised by spokesmen for Fraternal Order of Police, the National Education Association and the American Federation of Teachers.

"It's a program designed to help police officers buy homes and to help communities become safer," said FOP President Gilbert Gallegos. "But until we prevent further fraudulent abuses in the program, neither of these goals can be met." AFT President Sandra Feldman said HUD is "taking a reasonable step" to make sure the programs function properly.

For more articles by Lew Sichelman, please press here.

Published: April 2, 2001

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