A federal program to rehabilitate and sell houses acquired by the government through mortgage default or foreclosure was announced this week by the Department of Housing and Urban Development.
The effectiveness of the pilot project, to begin next month in Chicago and Cleveland, will help determine if the program should be extended nationwide, said Geno C. Baroni, a HUD assistant secretary.
The program had been sought by National People's Action, a Chicago-based citizens' group.
Baroni said HUD would work with the citizens group to repair and sell about 100 houses in the Roseland neighborhood of Chicago and up to 75 homes in Buckeye Woodland and Union-Miles in Cleveland.
"We hope that this program will lay the ground-work for further programming in this area," he told reporters.
Gale Cincotta, chairwoman of the citizens' group, said she hoped HUD would agree to add Decatur County, Ga., to the list of participants in the near future.
The National People's Action said it has found that more than 22,000 families around the country may lose their homes because they have been unable to meet their mortgage payments.
Cincotta said the foreclosure problem dates back to the 1974-75 recession when many people were temporarily laid off and were unable to make mortgage payments.
Many mortgage companies refused to accept partial payments and would return checks a day or so late an assess late charges, she said.
The federal program is needed to improve neighborhoods with high concentrations of vacant homes and to help HUD reduce its stock of properties, many of which it obtained when homeowners defaulted on Federal Housing Administration-insured mortgages.
The government held 23,971 such properties at the end of April, according to HUD figures. Detroit ranked first, with 4,573 HUD-held homes. Chicago was second with 3,316, and Cleveland was 12th, with 486.
Baroni said estimates on the cost of the pilot prorgam were not immediately available.
HUD officials said it would involve HUD-supervised rehabilitation of homes, resale with either FHA-insured or conventional mortgages and counselling for families.
Efforts will be made to get the cities to co-ordinate neighborhood improvement projects with the housing effort, they said. And neighborhood organizations will be asked to keep an eye on the houses during the rehabilitation process.
Using figures obtained through the Freedom of Information Act, National People's Action found that as of February, more than 57,000 families were in default on their FHA-insured homes, and more than 22,000 were faced with FHA foreclosure.