January 18, 2011; Source: The Charleston Post | By our read, The Charleston Post’s (linked to above) use of misleading terminology to describe a South Carolina nonprofit's program has put the organization in an awkward position.
The nonprofit Family Services gets federal money to provide counseling assistance to homeowners facing foreclosures and counseling to first-time homebuyers. It also purchases foreclosed properties in the inventories of banks and servicers, fixes them up, and resells them. The Post article called this "home-flipping," which is not what Family Services is doing.
Flippers are the speculators you read about in the papers and see on TV looking to acquire properties at foreclosure sales, slap some paint and minimal cosmetic improvements on the properties, and "flip" them to new unsuspecting buyers. Flippers are speculators, but the nonprofits that are picking up the distressed properties that no one wanted and putting them back onto the markets aren't flippers unless they happen to be disreputable and disrepute can be found anywhere.
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An entire federal program, the Neighborhood Stabilization Program, exists to help nonprofits acquire, rehab, and resell foreclosed properties. Is it a conflict for a nonprofit to provide first-time homebuyer counseling and to provide foreclosure mitigation counseling while another division of the organization picks up foreclosed properties for repair and resale? Is it unusual for nonprofits to do homebuyer/foreclosure counseling and to acquire, rehab, and resell foreclosed properties? According to a NeighborWorks America spokesperson, NeighborWorks gives grants for both of these purposes to many organizations around the nation.
The functions are so common around the nation that this brouhaha about "flipping" feels like a trumped up controversy, perhaps a for-profit developer unhappy that Family Services used a federal grant – available in this case only to nonprofit affiliates of NeighborWorks – to acquire one property that had been foreclosed on by Chase Home Lending and made available to the nonprofit at a deep discount.
Maybe The Charleston Post ought to remember that the Neighborhood Stabilization Program isn't just a real estate development program; it is federal support to both acquire and rehab foreclosed homes that could otherwise turn into blighted eyesores and to make sure that the properties are made available at affordable prices to eligible low- and moderate-income purchasers. Interested only in the fast buck, flippers don't do that.—Rick Cohen