Improving System to Maintain and Sell HUD Homes

The Department of Housing and Urban Development is awarding contracts to 23 companies to serve as asset managers and 32 other firms to serve as field service managers under the third generation of its management and marketing program, known as M&M III.

The new contracts are intended to reduce risk, increase sale prices and accelerate the pace of reselling HUD's inventory of foreclosed FHA homes.

Under prior agreements, M&M contractors were responsible for both maintenance and marketing of the department's real estate-owned.

The recent change separates those functions, which require significantly different skill sets, thereby increasing the effectiveness of the department's asset disposition program.

"These new contracts epitomize FHA's continuing effort to reduce risk, increase net returns, decrease holding times and improve efficiency in the resale of its inventory of foreclosed properties," said HUD secretary Shaun Donovan.

"It is critically important that FHA successfully and efficiently sell its inventory of these properties and these contractors will help us do that."

Since 1999, HUD has been outsourcing the disposition of its foreclosed FHA inventory under the M&M contracting process. After conducting extensive research into market-based best practices, HUD developed its new M&M III disposition structure to streamline its operations, capitalize on the expertise of potential vendors and provide flexibility in a changing environment.

Under M&M III, the functions of maintaining and selling the property have been separated. The field service managers will be responsible for property maintenance and preservation and the asset managers will be responsible for the sale of the homes.

HUD's current inventory of foreclosed FHA property is approximately 44,000. That is up from the usual average level of 35,000 to 40,000.

"This new system will help HUD deal with this challenge," said Donovan.

There will be multiple field service manager and asset manager contractors in most areas. This is expected to foster competition among the contractors thereby improving responsiveness, reducing risk and increasing net returns to the agency.

Each contractor will establish an office within its awarded geographic area. These awards are projected to create 1,200 new professional jobs nationwide.

HUD's Homeownership Centers in Atlanta, Denver, Philadelphia, and Santa Ana, Calif., will be responsible for the direct oversight of the new contracts within their respective jurisdictions.