August 3, 2001

HUD Resumes Sales of Discounted Homes to Officers and Teachers

Washington — The U.S. Department of Housing and Urban Development announced today that it is resuming its Officer Next Door and Teacher Next Door home sales programs after taking a number of corrective measures to prevent homebuyer fraud.

HUD suspended the programs on April 1 following nine felony convictions and 15 indictments involving police officers who purchased homes. The HUD Inspector General also released a report criticizing the programs' management controls.

The programs offer police officers and teachers a 50 percent discount on HUD-owned, single family homes in certain designated revitalization areas. The homes become available to HUD after homeowners default on their FHA-insured mortgages.

"Both programs are proven winners for the communities. Officers and teachers get homeownership opportunities, young people living nearby get excellent role models and communities grow stronger and healthtier," said HUD Secretary Mel Martinez. "While most of the officers and teachers who purchase houses through these programs play by the rules, there is no doubt we needed to implement more aggressive monitoring and tighten controls in the program."

Martinez highlighted the following corrective actions taken during the three-month suspension:

* HUD staff involved in the OND/TND sales process have completed a "top-to-bottom" review of program procedures;

* HUD's contracts with closing agents across the country have been modified to require that the Department will hold a secured note on each property sold, helping to ensure that its occupancy requirements by program participants are fully enforceable;

* HUD will increase the number of periodic site visits to selected properties to ensure that program participants are residing in the properties;

* HUD's National Servicing Center in Oklahoma City has been designated the coordinating office for OND/TND sales records, compliance monitoring, administrative actions and Inspector General referrals;

* Outside contractors will assist in program compliance monitoring using computerized checks of public and private databases and establishing a web-based system to screen program applicants;

* A training video outlining program requirements will be required viewing for all OND/TND purchasers; and,

* In addition to criminal convictions and indictments of program violators, HUD is taking administrative action, including demanding repayment of discounts, against 54 program participants.

Martinez expects that heightened program controls will greatly reduce or eliminate future program abuse, and that ongoing investigations by HUD's Inspector General may result in additional charges being filed against some individuals who purchased homes before the stronger management controls were implemented.

"By working together with our Office of Inspector General, we can ensure the integrity of these programs and preserve an important affordable housing tool for families living in vulnerable neighborhoods," Martinez said.

"We are extremely gratified that Secretary Martinez has reinstated this important program," said Gilbert G. Gallegos, national president of the Grand Lodge, Fraternal Order of Police. "The Officer Next Door program has a positive impact on public safety, and strengthens the ties between America's law enforcement officers and the communities that they are shown to protect and serve."

"The escalating teacher shortage requires school systems to employ innovative approaches to attract and retain teachers, and this is especially true in low-income, urban neighborhoods," said Sandra Feldman, president, American Federation of Teachers. "The Teacher Next Door program is a creative and practical way to entice teachers to the communities where they are needed most. Schools are cornerstones on the community and this program will help deepen the bonds between neighborhood schools and communities throughout the country, while strengthening teacher recruitment efforts."

Since HUD created the officer and teacher programs in 1997 and 2000, respectively, approximately 6,000 police officers and teachers in 41 states and the District of Columbia have purchased the homes.

To be eligible, law enforcement officers and teachers must be employed full-time and agree to make the homes their sole residence for three years following the purchase. In addition, teachers must work in the areas in which the homes are located.

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