Foreclosure King: Best Thing for Distressed Neighborhoods Is Homeowners

"This is bringing back up the neighborhood. It's making the houses better and easier for people to get 'em before they tear 'em up," Moody said. "I want somebody to get them before they strip 'em all out. It's much easier."

Moody said this will provide housing for his family and his in-laws.

"This way is better. Just like I can go in and fix the house any way I want," Moody said. "The other house, I made the whole house into one. Took out the kitchen and converted it. I put my kids upstairs and me and my wife had downstairs. I took out one room. You do what you want to do at the price that you're getting it for. To me, it's winning."

To Barnes, winning is simple changes that can keep houses from falling into disrepair. He wonders why Fannie Mae and the banks aren't -- or can't -- do what he's doing.

"There should be some in-between ground on giving the house away, or renegotiating with the people," he said. "I don't know if Fannie Mae can do that."

Fannie Mae says it can't.

"Our business model is really financial. We are not a real estate investor," said Stacey Stewart, senior vice president of Fannie Mae. "It often makes more sense to sell them in a bulk sales process, to an investor or to a state or to a nonprofit that can really take on those properties, bring them back up to a place ... that is appropriate for sale or rent to a new family or homeowners."

Stewart said that by selling houses to people like Barnes, Fannie Mae is working to keep the houses occupied. But is it better to work to keep the original owners in their houses in the first place? Fannie Mae has recently ramped up efforts to do that.

"We have a number of different things we're doing to help many families stay in their homes," Stewart said. "From restructuring their mortgages so that their payments over time can be more affordable, and families can afford to pay them over time, to reviewing any properties that are going to foreclosure."

To Detroit resident Nadine Miller, these arguments are all academic. She pays about $300 a month for a house she bought from the Barnes/McWhorter partnership. And because of Barnes' and McWhorter's incentive program -- refer a friend and get a month free -- she won't have a mortgage payment for a year.

McWhorter said he wants more people like Miller; a homeowner is always the solution.

"You're more involved in the neighborhood if you own the house versus a renter," he said. "A renter is typically in the mindset of just passing through. I had an opportunity where we sold a house that we were renting; a homeowner bought the house and put a new roof on it. Suddenly they care."

Barnes admits this business has been very good to him, but he's worried because there's such an alarming avalanche of business now. And, he said, human nature being what it is, as soon as the United States is out of this crisis, people will go right back to their old ways.

"We're a society of indulging," he said. "Unless somebody says you can't, we'll do it. If you give somebody a credit card, we're going to max it. You tell us we're going to get an equity line on our house for a million -- give us a little time, we'll have it maxed. That's the way we are. I don't know what to do about it. I really don't. But this will happen again 20 years from now."

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