Neighborhood revitalization groups in the Baltimore area will get the first crack at buying some foreclosed properties under an expansion of a federal program designed to stabilize communities and limit real estate speculation.

The Neighborhood Stabilization Initiative gives community nonprofits a window of time to snap up properties being foreclosed on by lenders Fannie Mae and Freddie Mac — before those properties are available to the public.


"Giving local community buyers an exclusive opportunity to purchase these properties at a discount … is an effective way to give control back to local communities and residents who have a vested interest in stabilizing their neighborhoods," said Melvin L. Watt, director of the Federal Housing Finance Agency, which runs the program.

The program was launched in Detroit last year and later expanded to Chicago. Baltimore and 17 other metro areas will join under the latest expansion announced Tuesday. The Baltimore area is defined as Baltimore City and Baltimore, Howard, Anne Arundel, Carroll, Harford and Queen Anne's counties.

Metro areas were selected based on having a high number of foreclosed properties available — at least 100 properties worth $75,000 or less that were foreclosed on by Fannie Mae and Freddie Mac. While those low-value homes will be the target of the program, nonprofits will be able to buy homes worth up to $175,000.

In addition to getting an exclusive 12-day window to buy properties, community groups will pay a slightly discounted price, reflecting that Fannie Mae and Freddie Mac will avoid having to pay to market the homes and keep them maintained.

"The types of groups who will buy these properties will be organizations that have been working hard to stabilize and revitalize their communities," said Julie Gordon, vice president of the National Community Stabilization Trust, a nonprofit that helps the federal government run the program.

Gordon said community groups can put the homes in the hands of residents who can build wealth and stabilize neighborhoods — a better option than having the properties sold to investors and private equity firms.

The Maryland-based Home Free USA plans to use the program to buy up homes in West Baltimore to renovate and resell, said Harry Sewell, executive director of the nonprofit's Move Up Maryland initiative.

"If we can get these properties at a slight discount, or at the right price point, we can in turn sell them at a price point that allows working families to take advantage of it," Sewell said.

Home Free USA counsels homebuyers and helps them find homes, and also buys and renovates homes. The group's work in Baltimore has been focused in neighborhoods such as Poppleton, Franklin Square, Pigtown and Coppin Heights.

Saving money on buying foreclosed properties — and getting a chance to buy them before investors — can help keep the final price down for the rehabilitated properties, Sewell said. If his group has to spend too much on acquisition and renovations, the final price could be too high.

"You can really help keep properties that have been totally rehabilitated affordable for community residents," Sewell said.

Groups such as Home Free USA say homeowners are more likely to maintain their homes and participate in the community than out-of-town landlords who rent to transient tenants.

Baltimore has grappled with the problem of vacant and abandoned homes for years, as the city's population has shrunk. The city has an estimated 16,000 vacant properties.

As part of Mayor Stephanie Rawlings-Blake's goal to increase Baltimore's population by 10,000 families, the city has pushed a Vacants to Value program that aims to reduce the number of vacant homes. Such properties can be eyesores attracting crime and dragging down property values, officials say.


Since 2010, more than 1,600 homes have been demolished and more than 2,500 have been renovated or are being renovated through Vacants to Value, according to the city.

Sewell said the Neighborhood Stabilization Initiative can work with Vacants to Value and other homeownership incentive programs in the city. If Vacants to Value is renovating houses on a block, his group might be able to buy foreclosures on the same block.

"Baltimore has done a lot to help itself in terms of formulating Vacants to Value and the down payment and closing cost assistance programs," Sewell said. "This would be a great complement to what the city has already started."

The federal initiative could also help suburbs such as Dundalk, where the community has been hit by the loss of industrial jobs at Bethlehem Steel, GM and other companies.

"Dundalk has historically been a community with a very high rate of homeownership. We want to try and encourage that to continue because homeowners are more likely to be willing to invest in their homes, enhance the curb appeal of their homes. They're going to stay longer than a renter will stay," said Amy Menzer, executive director of the Dundalk Renaissance Corp.

One of Dundalk Renaissance's homeownership programs involves buying, renovating and reselling homes. Currently, the group buys homes on the market or auction. Getting a chance to buy Fannie Mae and Freddie Mac foreclosures before private investors would help, Menzer said.

She said her group sometimes is pitted against private investors who buy up 20 or more properties at one time — an attractive prospect for the bank that's trying to unload foreclosed properties.

"Having an opportunity to at least have first dibs would be great," Menzer said.

It's not clear how many homes will be for sale to community groups through the program, as that's dependent on how many properties will be foreclosed on by Fannie Mae and Freddie Mac going forward. The program starts Dec. 1 in Baltimore.

In October, there were 551 foreclosure sales and 88 short sales involving various lenders in the Baltimore metro region, which represents 21.6 percent of all sales, according to RealEstate Business Intelligence, a subsidiary of MRIS.

The number of foreclosure sales and short sales in the city — 179 — declined compared to October of last year, the first such year-over-year decline since 2013. But the numbers remain well above levels seen before the real estate market crash.

Baltimore Sun reporter Natalie Sherman contributed to this article.