ALEXANDRIA, Va.—NCUA’s role as homeowner—and landlord—for 800 properties in Florida is finally coming to an end.
The housing bust that hit Cape Coral and Lehigh Acres on Florida's southwest coast in 2007 left the agency with more homes on its hands than it ever imagined handling pre-recession. Two out-of-state credit unions that speculated in Florida real estate—Norlarco CU in Colorado and Huron River Area FCU in Michigan—made a large number of loans for homes in both markets, loans that failed and eventually led to the failure of both credit unions and, ultimately, NCUA’s ownership of the properties.
NCUA recently told CUToday.info that is has only one home left, and expects that home to sell before the close of the second quarter.
“It has been a long road,” acknowledged Don Klein, deputy to the president of NCUA's Asset Management Assistance Center (AMAC), which has had the responsibility of managing, repairing, selling and renting the Florida homes. “I think we successfully executed our strategy here, effectively disposing of these assets over a five- to six-year period.”
800 Homes
AMAC saw the number of the Florida homes it had to manage reach a high of 800 in the first quarter of 2008 and drop to 300 during 2012. During 2013, AMAC sold 74 homes followed by another 121 last year.
“Looking back, I think we have done a very good job of maximizing the value of the assets we had here,” said Klein.
Maximizing those assets meant AMAC had to nearly double staff—to 76—and learn new skills. Much of the new hires were people with property management backgrounds, and the agency had to find ways to work more closely with outside resources to manage all the foreclosed homes.
Not all of the additional staff remain today, with a large portion of the outside contractors to manage the properties off the books with the homes sold, said Klein.
A key to eventually selling the homes, and offsetting holding costs, was AMAC instituting a rental program that at its height had more than 200 homes being rented.
“Today, all those rental homes have been sold,” said Klein. “Having that program not only helped us keep holding costs down, it also allowed us to avoid costs related to vandalism that often happens with vacant homes.”
Like in many empty subdivisions across the country during the recession, NCUA ran into issues with thieves stealing copper material from air conditioning units and from inside homes. The agency also encountered issues with Chinese drywall, which has been cited as a danger to health.
Never A Handyman
During 2008-2009, portions of the country hit hard by recent hurricanes had to import drywall from China. The defective drywall caused air conditioning units and copper pipes in homes to corrode, increasing costs to repair foreclosed homes and impairing financials' ability to rent or sell the properties. Some homes across the country had to be bulldozed.
While repair work was sometimes needed, NCUA never got into the business of rehabbing homes or being a handyman, said Klein. AMAC had to learn quickly how to work closely with contractors to improve a home's condition and get it ready for sale. If a home was in poor condition following foreclosure, Klein said AMAC’s goal was to sell it as quickly as possible.
With vandalism and Chinese drywall issues subsiding, the last two years became have been a much easier time for selling homes in Florida, said Klein, who noted that in 2011-12, when many banks were not lending in the market, the agency also facilitated a loan program to assist some buyers.
“Not only are buyers’ balance sheets in better shape the last two years, but home prices started coming back,” said Klein, who said the pace of sales quickened.
Hard To Manage Long Distance
Looking back, Klein said a key to the agency reaching its goals to sell virtually all of the Florida homes by the close of 2014 was learning and being open to new ideas.
“You had to learn to be flexible—maybe that meant taking on a new rental program, where you took a brand-new home and rented it out, suddenly not having a new home anymore,” said Klein. “But with 800 homes, you have to take some managed risk.”
The other thing that helped AMAC was getting local property managers to supervise and assist with good decisions,” Klein said. “Having those local people made a huge difference, as you can’t effectively manage properties from 1,000 miles away.”