WASHINGTON May 13 The federal government is
pushing to eradicate a long-standing symbol of Detroit's massive
economic deterioration: the abandoned house.
On Tuesday, the regulator of government-controlled Fannie
Mae and Freddie Mac announced a pilot
program that will begin in coming weeks in Detroit to keep
families in their current homes through loan modifications,
match distressed properties with non-profit organizations for
resales and assist in building demolition.
Federal Housing Finance Agency Director Mel Watt said
borrowers who owe more than their home's market value could see
"deeper loan modifications" than currently available through a
program for refinancing loans owned or guaranteed by Fannie Mae
or Freddie Mac.
Severely delinquent loans may be transferred to non-profits
to find alternatives to foreclosure and non-profits could buy
foreclosed properties or take them as donations, as well,
according to a fact sheet.
Years of steep declines in the city's employment and
population combined with the national housing crisis to turn
Detroit into a near ghost town of empty homes and vacant lots.
Many homeowners in the city are "underwater" on mortgages,
meaning they owe more than their houses are worth.
Now as the city prepares to exit the largest municipal
bankruptcy in U.S. history, it is working to stabilize its
Currently Las Vegas, Jacksonville, Orlando, Chicago and
Tampa all have higher rates of underwater mortgages than
Detroit, according to the Haas Institute at the University of
California at Berkeley. At the same time, bank-owned
foreclosures were down 51.9 percent in March from the same month
in 2012, according to RealtyTrac.
Nonetheless, 28 percent of owner-occupied homes in Detroit
have mortgages in negative equity compared to 19 percent for the
United States as a whole, according to Zillow.
Representative John Conyers, a Democrat from Michigan,
quickly responded to the FHFA announcement with a letter to Watt
asking that Freddie Mac and Fannie Mae go further.
Conyers requested a six-month moratorium on foreclosures of
mortgages where borrowers had been current on their loan
payments before Detroit started its bankruptcy proceedings last
"While FHFA actions including a short-term moratorium on
foreclosures and longer-term loan modifications would not be a
panacea, they would go a long way toward stabilizing the city's
housing market, which would, in turn, facilitate the rebuilding
of the tax base, easing the city's persistent cash flow
problems," Conyers wrote.
As the city's state-appointed emergency manager lobbies the
state legislature this week for help in exiting bankruptcy,
Detroit's political leaders are expanding an online housing
On Monday Mayor Mike Duggan announced Detroit would increase
the number of homes on its auction web site each week to 14 from
five, after the first auction last week met strong demand. The
houses in that auction, which were each abandoned for at least
three years, fetched bids ranging from $30,000 to $42,100, he
The city aims to sell 400 vacant homes by the end of 2014,
according to City Council President Brenda Jones.
(Reporting by Lisa Lambert in Washington; Additional reporting
by Hilary Russ in New York; Editing by Cynthia Osterman)