Domestic Partnership

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AS THE JUNE SON shone on the white siding of 205 Macon Street, officials from the federal and city housing agencies took an hour to celebrate a precious event: a successful collaboration. The U.S. Department of Housing and Urban Development is slashing the number of vouchers that help poor families stay housed and is seeking to auction off its foreclosed apartment buildings, against the objections of New York housing officials. But the reclamation of homes left wrecked through abuse of HUD’s 203(k) loan program has been a far friendlier partnership.

HUD regional director Marisel Morales and city Housing Preservation and Development commissioner Shaun Donovan took turns at the podium to welcome Norleen Noble, an administrator at Brookdale Hospital, to her new Bedford-Stuyvesant home–one of the first 203(k)s to be rebuilt and sold. “Most homes are either overpriced or in bad condition,” Noble said as a gaggle of community development professionals toured her new digs. “This is perfect–wonderful.” Noble bought the three-family building for $310,000 through the city’s Neighborhood Homes program. Attractive details like turned-wood banisters are just the surface of what’s special–like an increasing amount of moderately priced housing, 205 Macon is engineered to minimize fuel consumption.

Prior owners of 205 Macon had a different kind of green in mind. In 1999, a company called All Boro Foreclosure Advisory purchased what was then a vacant wreck for $25,000 from an estate. That same day, a Long Island company, MWBD, picked it up from All Boro for $95,000. Just four days later, MWBD sold the property to Word of Life, a Brooklyn church authorized to borrow money from HUD to rehabilitate decrepit buildings. The price: about $205,000. Word of Life borrowed $311,800, insured by the federal government. When Word of Life failed to keep up on the mortgage, HUD foreclosed. By then, the building had no roof, and the back wall had crumbled.

The same story, with different players and variations, was repeated hundreds of times in Manhattan and Brooklyn. Under pressure from local politicians, HUD agreed to pay $168 million and work with the city and private developers to fix up the damage and create solid housing at reasonable prices. Noble’s home is the first of 10 that Pratt Area Community Council will be fixing and selling in Bed-Stuy.

Everyone wants this to be a happy ending. To prevent further fraud, says spokesperson Adam Glantz, HUD has more than doubled the size of the staff monitoring federally backed home loans for the northeast, and it’s limiting nonprofit developers to 10 loans apiece. But two years after the Manhattan DA and federal prosecutors first brought charges, there’s little to deter determined crooks. Thirteen of the speculators involved in the 203(k) fraud have pleaded guilty, and some face federal sentences of up to 30 years. But so far, only two defendants have received penalties from Manhattan DA Robert Morgenthau. One is Samuel Stith, who helped broker Harlem deals that netted tens of millions of dollars. Stith recently got five years’ probation and a $5,000 fine. –Alyssa Katz

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