Overland Park returns foreclosure money

Seldom does a city give back almost $1 million to Uncle Sam and feel good about it.

But the Overland Park City Council moved unanimously and with no regrets to relinquish just under $700,000 in Housing and Urban Development money aimed at relieving foreclosure problems.

While city officials say they appreciate the intention of the stimulus program, it seems the residential real estate marketplace is turning over such properties quickly enough that federal help is not needed.

After receiving the money through a HUD Neighborhood Stabilization Program grant, the city set up a Land Bank to administer the local program and identify qualifying foreclosure properties. Over the last six months, no houses met both HUD and Overland Park criteria.

Councilman Terry Goodman said the criteria were not an obstacle. The lack of purchase candidates stemmed more from market forces.

“There was adequate demand in the market for those properties at closer-to-market prices than we were willing to pay,” Goodman said.

Had the city found distressed single-family foreclosure properties, it planned to buy them and either fix them up or demolish them and build new houses in their place.

The city had until Jan. 15 to let HUD know whether it intended to continue the program and spend most of the $700,000 by Sept. 15. If prospects for accomplishing that looked dim, cities were asked to give up their shares so the money could be redistributed to other Kansas communities.

“We had a great deal of difficulty locating appropriate properties, and we didn’t feel there was much probability of us (using the money) in the time remaining,” Goodman said.

The city identified about 20 properties for consideration, but none of them ultimately met the various criteria or were snatched up before the city got seriously involved.

Olathe and Johnson County received $1.9 million each in NSP money, and both have decided to hold on to the money. No other cities in the county are involved in the program, but the county program covers all communities.

“We have no intention of returning our Neighborhood Stabilization funds, and we are pursuing identifying houses to purchase for that program,” said Stacy Copeland, director of housing services for Johnson County.

The county has purchased three houses so far and is negotiating for two more, Copeland said.

One of the houses bought through the county program is in Overland Park, but Copeland explained that the county program’s criteria and aims are different from and not as restrictive as the city’s.

The county has not limited consideration to distressed properties. While it intends to rehabilitate houses it obtains, the county will not buy any houses to demolish and rebuild.

“What (Overland Park) was doing is much more challenging,” Copeland said. “I respect the city for returning the money so it could be used by the county or wherever the state deems it best be used.”

Once a house is bought and rehabilitated through the county program, it is put up for sale. Under the Olathe program the houses can be sold or rented.

Neither the county nor city sells the houses for more than it cost to buy and renovate them. In fact, the sales prices are adjusted on a sliding scale depending on buyer income, so houses usually are bought for less than they cost the program, Copeland said.

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