HUD tightens controls on program that sells police, teachers half-price homes

Sunday, August 5th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ Federal officials are demanding repayment of about $1.2 million from 54 police officers and teachers who defrauded a program that helped them buy houses in return for living in poor, crime-ridden neighborhoods.

Federal housing officials also say they have tightened controls on the program, which was suspended for four months because of fraud and mismanagement. The program resumed last week.

``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,'' Housing Secretary Mel Martinez said.

The Officer Next Door/Teacher Next Door program allows police and teachers to buy homes in poor areas at half-price. The Department of Housing and Urban Development controls the home sales because previous owners had defaulted on government-backed loans.

The idea was to improve poor neighborhoods by deterring crime, strengthening ties with police and schools and providing role models for other residents.

About 5,700 police officers and 1,500 teachers have bought half-price homes since the program began in 1997.

But an audit by HUD's Office of Inspector General found that up to one in five home buyers had broken program rules. At least 10 officers have pleaded guilty to defrauding the program and 14 more have been indicted.

Jorge A. Ramirez, an officer for the Dallas Area Rapid Transit Police Department, was convicted April 5 of lying to HUD. His indictment said Ramirez lived rent-free in an apartment complex in exchange for providing security when he was supposed to live in his discounted home.

The audit, first reported by The Associated Press in March, said HUD's poor record-keeping and oversight made the problem worse. Participants are supposed to live in the homes for at least three years, but many broke the rules by selling the homes, renting them to tenants or leaving them abandoned, the audit said.

Auditors found that 23 of 108 home buyers in their sample had broken the program's rules by not living in the discounted house, getting improper discounts of more than $730,000. The audit said that HUD officials did little to track whether participants were living in their half-price homes.

Now, a HUD information center in Oklahoma City will coordinate record-keeping for the program, agency officials say. The agency will run background checks on potential buyers and check to see if program participants are really living in their homes.

The agency also will enforce a requirement designed to prevent participants from selling their discounted homes before their 3-year term is up. That rule requires HUD to hold a second mortgage on the home for the amount of the discount, so the owner would have to pay off that second mortgage if he or she sold the home too early.

The audit also criticized HUD for having vague guidelines for what neighborhoods qualified as ``distressed areas'' eligible for the program. Some officers in Miami, for example, got half-priced homes in a gated community with a lake, swimming pool and tennis courts, the audit said.

HUD plans to use census data and computer mapping programs to ensure that the half-price homes are really in poor neighborhoods.