GAO Raps HUD Discounted Sales Program

Nonprofit housing groups are selling Federal Housing Administration-foreclosed homes at prices that exceed the agency guidelines, according to an audit of the Department of Housing and Urban Development's discounted sales program.The General Accounting Office blamed the pricing on lax monitoring by HUD and raised questions about the costs and benefits of the program. "Assuming that nonprofits and homebuyers would incur the same rehabilitation costs, GAO estimates that 76% of the homebuyers would have spent less purchasing the properties through HUD's regular [sales] process and paying for the rehabilitation work themselves," the report says. But FHA Commissioner John Weicher disagreed with this assumption, arguing that the average homebuyer does not have the access to financing that the nonprofits possess or their capacity to ensure that needed repairs are completed at a reasonable cost. HUD agreed to increase its monitoring, but not to curtail the discounted sales program, which sold 1,226 homes in 2002. Sen. Wayne Allard, R-Colo., requested the GAO report.