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Fannie, Freddie to discount blighted homes in Chicago, Cook County

Qualified nonprofit groups could get discounts on Fannie, Freddie vacant homes

Fannie Mae and Freddie Mac are embarking on an ambitious pilot program designed to remove thousands of vacant, foreclosed homes from their books and repair neighborhoods throughout Chicago and suburban Cook County.

The two agencies, which own more foreclosed properties than anyone else, are expected to announce Wednesday they will offer qualified nonprofit groups and their developers an option to buy foreclosures, often at a discount, before the properties are publicly listed for sale. The program will initially include about 3,800 single-family homes, condominiums and two- to four-flats but that number will fluctuate as Fannie and Freddie take possession of properties at the end of the foreclosure process.

The worst of the blighted properties will be offered for as little as $1, with a major contribution to cover the cost of demolition. Other residences that can be salvaged, rehabbed and returned to the market could also be sold at a discount, but generally the discounts will not exceed 20 percent of market value.

Also Wednesday, the agencies are expected to announce they are undertaking another loan modification effort in Cook County, to help seriously delinquent borrowers who have homes valued at $250,000 and less.

A similar two-pronged effort to repair the damage wreaked by the nation's housing crisis was begun in Detroit last year, but officials of the Federal Housing Finance Agency, which oversees Fannie and Freddie, don't consider the Detroit program a benchmark, given that city's state of disrepair. However, if the Chicago-area pilot makes inroads, it could be replicated in other hard-hit housing markets.

"The goal here is to get these properties in our portfolio sold sooner rather than later and to get them into the hands of these partners, who are doing good work in a community," said Eric Will, a senior sales director at HomeSteps, Freddie Mac's foreclosed homes sales unit.

The initiative has been months in the making but is no slam-dunk and local housing organizations, briefed on the program Tuesday, say its success largely will depend on a few key factors tied to its execution. Chief among them are the price tags attached to the properties. Home prices have improved in the broader market, and if foreclosures are priced higher than local organizations think they are worth, the discounts don't make them any more attractive. Also, organizations will have to be strategic in their choices and concerted in their efforts so they can work in areas where the purchases will make a difference and where consumers want to buy renovated homes.

And then there's the homes left out: Fannie Mae and Freddie Mac own another 1,300 properties in Chicago and Cook County that are listed for sale publicly. Those properties are not part of the program and carry no discounts. The existence of some of those unwanted, boarded-up eyesores owned by Fannie and Freddie, as well as the thousands of foreclosures held by banks, may limit a potential turnaround in some communities.

Still, local groups are optimistic, saying it's a start.

"Fannie and Freddie are the largest single holder of properties in Cook County," said Bridget Gainer, Cook County commissioner and chairwoman of the Cook County Lank Bank Authority. "We don't want to buy a house here, a house there. You want to have all the houses on a block. Up until now, when you've had access to only a portion of that portfolio, it's harder to be strategic."

Under the Enhanced First Look program, nonprofit organizations that are qualified as buyers by the National Community Stabilization Trust will have 12 days to express interest in and negotiate a price for a vacant, foreclosed home that Fannie Mae or Freddie Mac take possession of at the end of the foreclosure process. If no one steps forward, the home will move to both agencies' First Look programs, which means they are listed with real estate agents and offered for sale for 20 days to owner-occupants before offers from investors are considered.

A searchable map will show the addresses of properties expected to be available to nonprofits after repairs are made, they are vacated or the home completes the foreclosure process. Currently, the stabilization trust has 22 vetted community buyers in the Chicago area that work with 39 nonprofit and for-profit developers, and it hopes more will step forward.

"The key here is time is not our friend," said Craig Nickerson, president of National Community Stabilization Trust. "A foreclosed property has a viral, contagious effect on a neighborhood. It's incumbent on us to move quickly and find a buyer."

Chicago Neighborhood Initiatives, a community development group working in the city's Pullman neighborhood and a pre-qualified buyer, expects to be among the potential buyers combing the map for acquisitions. If the program works as planned, David Doig, the group's president, thinks the effort will get some hard-hit communities over the hump and into recovery mode.

"An effort to get these properties back into productive use is important psychologically, for the community, for the neighbors from a crime-safety standpoint," Doig said. "When these things just sit on the market, they inevitably get vandalized and trashed and it becomes all that more expensive to rehab them. The more we can save in acquisition, the more we can put into rehab and keep it affordable."

The pilot program comes as Fannie and Freddie are taking other steps to whittle their portfolio. The two entities also are conducting bulk sales of nonperforming loans.

mepodmolik@tribpub.com

Twitter @mepodmolik

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