NCST Property Acquisition Program Guide

Transcription

1 NCST Property Acquisition Program Guide Updated

2 NCST Property Acquisition Program Guide Overview of Community Buyer Eligibility Requirements & Guidelines for Program Participation Table of Contents Frequently Used Terms...2 I. About the National Community Stabilization Trust...3 II. About the NCST Property Acquisition Program Guide...5 III. Buyer Eligibility Guidelines...7 Eligible Community Partners:...7 Proof of Funds and Eligible Funding Sources:... 9 IV. Program Participation Standards and Requirements Purchase Volume and Capacity Requirements Geographic Acquisition Areas for Buyer Entities V. Property Holding, Acquisition, and Disposition Methods Property Selection Chain of Title Disclosure Property Holding and Maintenance Rehabilitation Timeline Rehabilitation Standards Permissible Disposition Methods VI. Program Reporting and Participation Monitoring Open Record Standards Program Participation Monitoring Compliance Notices Ineligible Resale or Reassignment of Title (Property Flipping) VII. Community Buyer Applications and Onboarding Appendix I: Guide to Post Closing Reporting Appendix II: NCST Donation Program Guidelines NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 1

3 Frequently Used Terms LOCAL HOUSING PROVIDER A state or local government entity, non-profit housing organization or affordable housing developer, or community-based entity that focuses on the development or provision of residential housing. COMMUNITY BUYER An organization that has fulfilled eligibility requirements and received approval from the National Community Stabilization Trust to participate in its Property Acquisition Programs. TARGET AREA The geographic area(s) approved by the National Community Stabilization Trust for a Community Buyer that define the boundaries in which a Community Buyer will be eligible to receive First Look, Donation or other types of property listings as part of the NCST Property Acquisition Programs. FIRST LOOK Property Acquisition Program through which Community Buyers can purchase newly available REO properties in approved Target Areas from participating financial institutions, before those properties are listed for sale on the open market. REO SELLERS Financial Institutions that participate with the National Community Stabilization Trust to list and transfer REO properties through its Property Acquisition Programs to approved Community Buyers. NEIGHBORHOOD STABILIZATION PROGRAM (NSP) Federal program administered by the U.S. Department of Housing and Urban Development (HUD), established for the purpose of stabilizing communities that have suffered from foreclosures and abandonment through the purchase and redevelopment of foreclosed and abandoned homes and residential properties. More information. HUD FORECLOSURE RISK SCORE - The HUD-calculated risk scale used to predict whether or not a neighborhood has a high or low risk for foreclosed and abandoned homes. Local markets are assessed on a scale from 0 to 20, based on numbers of foreclosures, vacancy, abandonment, and other such factors. More information. IDENTITY OF INTEREST - The Stabilization Trust uses the HUD definition of identity of interest for the purposes of resale restrictions for its programs. Identity of interest means any relationship (generally based on family ties or financial interests) between (a) the seller and property purchaser (prospective owner), (b) the owner and/or general contractor and the subcontractor, material supplier or equipment lessor, or (c) the owner and the lender, which would reasonably give rise to a presumption that the parties to the transaction may operate in collusion in establishing the purchase price of the property, the cost of the rehabilitation work, or the terms of the financing. NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 2

4 I. About the National Community Stabilization Trust The National Community Stabilization Trust (the Stabilization Trust or NCST) is a national non-profit intermediary organization that provides innovative programs and services to state and local governments, non-profit housing organizations, other housing providers, and financial institutions to spur the productive reuse of foreclosed and vacant properties in order to stabilize neighborhoods hard hit by the housing crisis. The Stabilization Trust is dedicated to solving two primary obstacles to neighborhood revitalization: Access to foreclosed and abandoned property from financial institutions in a predictable and efficient manner, and Access to flexible interim financing for property acquisition and renovation. The Stabilization Trust works with community-based organizations serving more than 400 communities across the nation. The organization was created in 2008 by Enterprise Community Partners, Housing Partnership Network, Local Initiatives Support Corporation (LISC), National Council of La Raza (NCLR), National Urban League, and NeighborWorks America. The Stabilization Trust has maintained a partnership with the U.S. Department of Housing and Urban Development (HUD) since 2010 to administer the HUD National First Look Program to support state and local Neighborhood Stabilization Program (NSP) grantees. The Stabilization Trust also works with many Non-NSP community-based housing providers that meet eligibility requirements and are not utilizing NSP dollars. Non-NSP funded organizations should carefully review the requirements and participation standards contained in this Guide. Services Provided The Stabilization Trust facilitates the transfer of properties between participating financial institutions ( REO Sellers ) and eligible local housing providers ( Community Buyers ). The Stabilization Trust also provides direct services to Community Buyers to support property transactions. These services include, but are not limited to: Establishing standard pre- and post-purchase procedures for Community Buyers and REO Sellers; Making available REO Seller listings for community buyers through a no-cost, easily accessible technology platform; Coordinating price offers between Community Buyers and REO Sellers for the acquisition of REO properties; Facilitating communications between Community Buyer and REO Seller during real estate transactions; and Providing assistance with coordinating transaction closings between Community Buyer and REO Seller. Exclusions The Stabilization Trust does not engage in the following activities through its Programs: Take title to any properties during property transfers that it facilitates Typically act as a retail broker for individual real estate transactions Upon acquisition and development of a property, become involved in resale transactions with subsequent end users/homeowner-occupants for properties NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 3

5 Programs: First Look: The First Look Program provides Community Buyers the opportunity to purchase newly available REO properties in target neighborhoods from select financial institutions, before those properties are listed for sale on the open market. First Look properties are offered to community buyers immediately after completion of the foreclosure process by a financial institution when the property enters the seller s REO inventory. There are two primary benefits of the First Look Program. First, Community Buyers have the opportunity to purchase the property for neighborhood stabilization purposes before the property is more broadly marketed. Second, because there will be a quick and certain sale as part of the targeted revitalization effort, a concession or discount price is typically offered by the seller. Donation Properties: Through the NCST Donation Program, participating financial institutions make available REO properties for donation to eligible organizations. Donation properties may be one- to four-unit single family properties or vacant land, are typically conveyed on a property by property basis, and will consist of very lowvalue to no-value properties, and, in some circumstances, properties with market value to accomplish specific community objectives. Next: About the NCST Property Acquisition Program Guide NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 4

6 II. About the NCST Property Acquisition Program Guide The Stabilization Trust partners with local housing providers that serve neighborhoods affected by high levels of foreclosure and abandonment or provide affordable housing in other low- to moderate-income communities. Local housing providers that are considering an application to the Stabilization Trust should have a commitment to revitalizing communities through property acquisition and rehabilitation and providing opportunities for quality affordable homeownership or rental housing. The purpose of this Guide is to define the eligibility requirements and program participation standards for organizations that seek to obtain distressed REO or donated property through the National Community Stabilization Trust. With a significant growth in the number of prospective buyers of REO and donated property, an expansion in the funding sources being used for this purpose, and a variety of development and disposition strategies being undertaken at the local level, the Stabilization Trust is establishing clearer requirements for participation. Put simply, the goal of requirements described herein is to ensure that NCST First Look and donation programs are achieving the right objectives related to stabilizing distressed communities. This Guide is organized into two sections that cover the following information: To be eligible to participate with the Stabilization Trust (become a Community Buyer ), local housing providers must meet Buyer Eligibility Guidelines that pertain to organization type and permissible sources of funds. Once qualified, Community Buyers must adhere to Program Participation Standards and Requirements for the NCST Property Acquisition Programs that define allowable geographies in which properties may be acquired and requirements for property selection, holding, and end disposition. Types of Property Transactions Covered by Guide Requirements The requirements contained in this Guide do not apply to all Community Buyers that participate in First Look or Donation property transactions through the Stabilization Trust. Specifically, the participation requirements included in this Program Guide DO NOT apply to: Work undertaken by HUD Neighborhood Stabilization Program (NSP) grantees or their sub-recipients on NSP-funded properties. In most instances, similar property rehabilitation projects directly administered and funded (partially or in total) by state or local government entities using public funds to which use and income eligibility restrictions already apply. NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 5

7 This Program Guide will apply to properties purchased in most other scenarios, when organizations both public and private - are purchasing properties through the Stabilization Trust and the funding source for the acquisition is not NSP or does not include another type of public subsidy. At-A-Glance: When Does the NCST Property Acquisition Program Guide Apply? When a property is purchased by. Direct NSP Grantee using NSP Funds in HUD-designated NSP target areas is it Covered by the Guide? NO Government or Quasi-Government Entity, or a Non-profit organization acting as a NSP-sub recipient or a Nonprofit or For-Profit contractor, acquiring or rehabbing properties with NSP funds in HUD-designated NSP target areas NO Government Entity or Non-profit or For-profit organization using other similar public funding (ex. CBDG, HOME or State or Local Jurisdiction Funding) for a state or local government administered and supported neighborhood stabilization program. NO Any Non-Profit organization previously acting as an NSP grantee or sub-recipient purchasing properties with non-nsp or other similar public funding, inside or outside of HUD-designated NSP target areas. YES Non-profit organization using private capital or other forms of capital in a neighborhood stabilization program not administered and supported by a state or local government. For-profit organization, working in partnership with a state or local government or nonprofit organization, using private capital or other forms of capital for unsubsidized acquisitions in any NCST-approved distressed target market YES YES Next: Buyer Eligibility Guidelines NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 6

8 III. Buyer Eligibility Guidelines To be eligible to participate as a Community Buyer in the NCST Property Acquisition program, a local housing provider will submit an application to the Stabilization Trust and must meet Buyer Eligibility Guidelines contained in this section that pertain to organization type and permissible sources of funds. Once an applicant local housing providers has been qualified as a Community Buyer, Program Participation Standards and Requirements apply that define allowable geographies in which properties may be acquired and requirements for property selection, holding, and end disposition, as covered in the next section. Eligible Community Partners: The following entities are eligible to become NCST Community Buyers: Government or Quasi Government Entities; Non profit housing development organizations, as designated by IRS 501c3 status, with established community presence and demonstrated experience with property acquisition and rehabilitation. Additional conditions apply. For-profit entities working in collaboration with a Neighborhood Stabilization Program (NSP) grantee or NCST-approved non-profit housing development organizations. Additional conditions apply. Additional Eligibility Specifications for Non-Profit Organizations: Housing-Related Mission: Non-profit organizations must have a primary mission that directly relates to affordable housing or to community revitalization through housing-related activities. The applicant organization must also have established housing-related services or programs that will actively contribute to its proposed local neighborhood stabilization activities. o Examples of eligible non-profit organizations include Community Development Housing Organizations (CHDOs), Community Development Corporations (CDCs), and other non-profit housing providers that develop and/or manage single-family affordable housing. Non-profit organizations with comparable experience in affordable multifamily development or green development will also be considered. Demonstrated Experience with Acquisition and Rehabilitation: Non-profit organizations must be able to demonstrate the financial and administrative capacity to purchase, rehabilitate, and resell homes and document at least two years of direct experience with real estate project development as an organizational entity. In addition, if a non-profit applicant will be contracting any substantial portion of the work associated with property acquisition and renovation to a third-party entity (for-profit or nonprofit), the developer entity must have at least two years of experience with property acquisition and NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 7

9 renovation. The experience of a third party developer entity is not considered a substitute for the housing services or project development experience requirement of the non-profit applicant. Community Presence: In addition to experience requirements, the Stabilization Trust requires that a non-profit organization seeking to become a Community Buyer maintains an established physical office in reasonable geographic proximity to the communities in which it proposes to acquire properties. In absence of a physical office, Community Buyers may qualify if they demonstrate a clear history of direct involvement in the geography, which may include prior experience providing services in collaboration with organizations physically located in targeted geographies. Additional Eligibility Specifications for For-Profit Organizations: There are three partnership structures under which for-profit organizations may be eligible to participate in NCST Property Acquisition Programs: 1) Direct relationship with a local Neighborhood Stabilization Program (NSP) effort. This applies to forprofit housing developers that can document a sub-contractor relationship with state or local NSP grantees or provide similar written confirmation of contracted services to an NSP grantee relating to acquiring distressed properties specifically for a local NSP effort. In this structure, requirements in this guide will not apply to NSP-funded acquisitions. 2) Existing relationship with a community-based non-profit housing development organization. The Stabilization Trust permits the participation of for-profit organizations that provide services to support the acquisition and renovation of properties that are conducted in direct coordination with a community-based non-profit. This partnership structure should be defined in an executed Memorandum of Agreement or similar contractual document that identifies the division of roles and responsibilities between for-profit and non-profit partners in local efforts and outlines the services provided by the for-profit entity in the community at the behest of the non-profit organization. The Stabilization Trust will review the partnership structure between for the for-profit and non-profit entity. In addition, the non-profit organization must meet the housing-related mission and community presence requirements as stated above. 3) The NCST Strategic Development Partner (SDP) Program. In select markets, the Stabilization Trust has established Strategic Development Partnerships between local municipal entities or non-profit organizations that lead established and coordinated neighborhood stabilization programs (e.g. the direct NSP grantee for a jurisdiction) and specific Real Estate Developer/Investor entities that are highly experienced and well-capitalized and have a proven track record of successful acquisition, rehabilitation, and disposition of residential properties at scale. Entities that seek to participate in the NCST Strategic Development Partner Program will be subject to a vetting and approval process based on a number of factors, including historical presence and capabilities within a given market, number of Strategic Developer Program participants assigned in a particular market, and willingness and capacity of a local jurisdiction or non-profit program to accept SDP participants. NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 8

10 Proof of Funds and Eligible Funding Sources: As part of the eligibility review process and in order to be approved as a Community Buyer, an applicant Local Housing Provider must demonstrate that they have access to sufficient sources of funding to acquire properties. The Stabilization Trust permits a range of capital sources for financing for the acquisition and the development of properties. Community Buyers may use federal funding including Neighborhood Stabilization Program (NSP) funds, CDBG, or HOME funds; state, or local public funding or grants; disaster relief funds; program income from such federal programs; philanthropic funding, or other public and private sources to purchase properties through the Stabilization Trust. The Stabilization Trust reserves the right to review sources of capital used by Community Buyers to acquire properties through NCST Acquisition Programs. Community Buyers using private capital (debt or equity) will be asked for proof of funds (i.e., commitment letter) and terms and conditions of all lines of credit, and upon request by NCST, furnish background information on private capital providers. The Stabilization Trust does not typically view conventional or FHA mortgage financing as an acceptable form of acquisition financing for the purchase of properties through its Acquisition Programs. Long term financing that facilitates renovation as part of the conveyance of the property to a prospective occupant may be eligible. Examples of this may include lease-purchase programs or programs that leverage FHA 203(k) financing. Application Process: Local Housing Providers that seek approval as a Community Buyer must complete the Stabilization Trust s application process, as outlined in Community Buyer Applications and Onboarding. The Stabilization Trust reserves the right to decline the participation of any local housing provider that cannot demonstrate that all Buyer Eligibility Guidelines are met during its the application process. In the event a local housing provider s application is declined, the Stabilization Trust will consider appeals through an internal Appeals Board. All determinations made by the Appeals Board are considered final. Next: Program Participation Standards Requirements NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 9

11 IV. Program Participation Standards and Requirements Eligible organizations (Community Buyers) must adhere to participation standards and requirements for the NCST Property Acquisition Programs (First Look and Donation). Additional requirements apply for the Donation Program. Purchase Volume and Capacity Requirements The Stabilization Trust does not maintain minimum or maximum property purchase volume requirements for participating Community Buyers. However, once participation in the program has commenced, Community Buyers must demonstrate capacity to purchase properties on an ongoing basis and apply a high standard of rehab to properties acquired. New Community Buyers will be asked to submit a plan that designates an acquisition volume target over a sixmonth period and demonstrate sufficient resources for carrying out the proposed activities. Community Buyers can temporarily deactivate their participation with the Stabilization Trust during interim periods when acquisitions will not be actively considered, due to capital or capacity constraints. Community Buyers that perform significantly below their projected acquisition targets or are consistently unable to meet transaction timelines are subject to review for future program participation. Geographic Acquisition Areas for Buyer Entities To participate in the First Look program, Community Buyers must be able to articulate a clear, geographically targeted acquisition strategy and focus stabilization efforts in markets with demonstrated need. Buyer entities will designate Target Areas, geographic acquisition areas defined by street-level boundaries in which properties will be made available by the Stabilization Trust. These target areas must directly correspond with the eligible Community Buyer s Community Presence. Generally, target areas must be geographies where foreclosures, property abandonment, and accelerated depreciation in property values (compared to other local market areas) have had a demonstrable negative impact, and/or be geographies that are considered to be blighted, as defined by state or local law. This includes, but may not be limited to: HUD NSP designated areas; or Based on the HUD foreclosure risk scale, other geographies that HUD has scored 14 to 20 or meet the HUD-defined state minimum score for NSP funding, whichever is lower. At the discretion and written confirmation of a state or local government, NSP grantee, or approved state or local land bank, the Stabilization Trust will allow for other distressed market areas to be designated as target areas on a case by case basis. Such areas may be metro or non-metro low and moderate income (LMI) markets, NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 10

12 designated disaster areas, or areas defined by government as special community and economic development projects. In the event a Community Buyer is utilizing a specific funding source (e.g. public and philanthropic dollars) that limits activities to purposes that may not directly coincide with the above geographic restrictions, the Stabilization Trust will evaluate whether the public purpose of Community Buyer s program reasonably correlates to the scope of the Stabilization Trust s stated mission and charitable purpose. Examples of this may include funding to provide housing for underserved segments such as homeless, disabled, seniors, etc. that is limited to a specific population or purpose but not restricted to a geographic boundary. Community Buyer Prioritization in Shared Target Areas The Stabilization Trust can accommodate the participation of multiple Community Buyers in the same geographic area. However, the Stabilization Trust reserves the right to limit the participation of new Community Buyers in target areas where there will be substantial overlap with existing active Community Buyers. In markets where multiple buyer entities participate and target areas overlap, the Stabilization Trust will implement a priority system to allocate properties: o 1st Priority Community Buyers utilizing Neighborhood Stabilization Program (NSP) grants o 2nd Priority Non-profit Community Buyers or their direct designees o 3rd Priority Strategic Development Partner Program Buyers In select markets, the Stabilization Trust requires new Community Buyers to participate with an established NCST Community Coordinator to view and transact on properties. Community Coordinators oversee multiple Sub-Buyers in specified geographic areas and act as a single point of contact with the Stabilization Trust to coordinate the distribution of properties to participating Sub-Buyers based on local capacity and program goals. V. Property Holding, Acquisition, and Disposition Methods Property Selection Within designated First Look target areas, the Stabilization Trust requires that Community Buyers only pursue the acquisition of properties of accessible value. Accessible value can be defined approximately as: When the fair market value of a property at acquisition is within the reasonable purchase range for a low-, moderate-, or middle income (LMMI) homebuyer using conventional financing products; and When the sales price of the property post-rehabilitation will be within the reasonable purchase range for a low-, moderate-, or middle income (LMMI) homebuyer (up to 120 percent of Area Median Income (AMI)) using conventional mortgage financing products. See also Permissible Disposition Methods. Based on the post-rehabilitation value and holding costs, the property can be leased at an affordable rental rate for a low- to moderate-income family, at or below 80 percent of AMI. NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 11

13 Chain of Title Disclosure Community Buyers are required to provide full disclosure to the Stabilization Trust on the legal entity or entities that will be taking title to properties acquired through the First Look or Donation Program. This is a requirement of REO Sellers participating with the Stabilization Trust. Therefore, it is necessary information for the Stabilization Trust to have on file for each Community Buyer. Managing Chain of Title In general, the Stabilization Trust and its participating REO Sellers expect Community Buyers to remain on title through the end-disposition of properties. However, if the program structure of a Community Buyer requires a modification to this, the Stabilization Trust must be notified of, review, and pre-approve any third party entity working on behalf of a Community Buyer if that entity will be introduced into the chain of title prior to the final disposition of the property. Community Buyers should ensure the Stabilization Trust has the upfront, necessary documentation on these third party providers prior to the acquisition of properties. This includes entities that will take direct title to properties at initial closing with the REO Seller or third party entities to which title will be conveyed after closing but prior to the final disposition of the property. Examples: A subsidiary, holding company, or trust wholly owned or partially owned by the Community Buyer that has been formed for the purpose of holding real estate. Any third party non-profit or for-profit developer partner that will complete rehabilitation work and facilitate the end use of the property. In addition, funding agreements with private capital providers cannot require that title to properties will be transferred to a capital provider(s) after closing with the Stabilization Trust. Property Holding and Maintenance Community Buyers are responsible for the security and maintenance of properties upon closing. During holding periods, Community Buyers are expected to provide ongoing stewardship of properties such that properties will not impose additional blight or create health or safety hazards in the neighborhood. Community Buyers are responsible for maintaining properties to a standard that will not violate local codes. This may include, but not be limited to, securing structures, keeping property lot free of debris, regularly maintaining property lots including grass mowing, or leaf or snow clearance, etc. Community Buyers are responsible for any code violations and fines assessed by local authorities for lack of property maintenance. In the event local authorities cite a property for ongoing deferred maintenance, Community Buyers are expected to promptly remediate any code deficiencies. NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 12

14 Rehabilitation Timeline Community Buyers are expected to make best efforts to commence rehabilitation work on properties as soon as circumstances allow. In general, REO Sellers participating in NCST Acquisition Programs request that rehabilitation work on properties commence within 60 days of closing. The Stabilization Trust and its REO Seller Partners fully recognize that exceptions to this will exist, due to local permitting timelines, geographic seasonality, market feasibility, or capital requirements. Please see Property Holding and Maintenance and Post- Closing Reporting for additional guidance on managing and reporting on properties that will have longer redevelopment timelines. Rehabilitation Standards Community Buyers must apply a reasonable standard of repair to properties acquired through the NCST Acquisition Programs prior to the end disposition and re-occupancy of a property. The minimum standard considered reasonable in most cases will require the Community Buyer to rehabilitate the asset to FHA Housing Quality Lending standards or local building codes, whichever is more rigorous. Each applicant must describe or reference in its Community Buyer application what rehabilitation standards it will apply for NCST purchased homes. All Community Buyers, non-profit and for-profit, must ensure renovation work on all property acquired through NCST Acquisition Programs is under warranty for a term of at least one-year or the minimum term requirements for the state, whichever is greater. To ensure the safety and soundness of renovation work for occupants of the properties post-rehab, Community Buyers must ensure that their contractors will remedy any defect due to faulty material or workmanship and pay for all damage to other work resulting therefrom, for a term consistent with requirements stated above. Contractors shall also furnish all manufacturers' and suppliers' written warranties to owner upon resale of property, as applicable based on the end-disposition of the property. This requirement does not apply for work undertaken by NSP grantees or their sub-recipients on NSP-funded properties and for similar property rehabilitation projects directly supported by state or local government entities using public funds. Permissible Disposition Methods The Stabilization Trust uses the term disposition strategy to define the allowable reuses or end-uses for properties made available by participating financial institutions through NCST Acquisition Programs. Properties that Community Buyers acquire through the NCST Acquisition Programs must meet qualified end uses that are consistent with neighborhood stabilizations needs, based on the prevailing market conditions in a locality. The end use of properties must provide a clear benefit to the community and occupants upon reuse or repurposing. NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 13

15 The Stabilization Trust approves end-use disposition plans at the program level for Community Buyers, prior to properties being made available through NCST Acquisition Programs. Qualified end uses may include, but are not limited to, affordable and sustainable occupancy (homeownership or permissible alternative), demolition, and/or land banking. This section contains more detail on these end-uses. Homeownership The Stabilization Trust maintains a national goal that the primary disposition strategy for properties acquired through its programs is affordable homeownership. When homeownership is the intended end-use: Properties should be sold to income-eligible homebuyers upon the completion of rehabilitation work. o End homebuyers must have incomes within 120% of local area median income. Community Buyers commit to sourcing income-eligible homebuyers for First Look properties for a minimum period of 60 days ( minimum marketing period, or homebuyer priority period ). Community Buyers may utilize other community partners to market available properties to LMMI homebuyers, including local housing counseling agencies or other outlets to reach eligible homebuyers. In the event a Community Buyer surpasses the minimum marketing period for a property without identifying a qualified homebuyer and the expeditious resale of the property continues to remain unlikely, the Stabilization Trust expects the Community Buyer to follow an approved, predetermined alternative end-use strategy that will provide a clear benefit to the community and/or end occupants upon property repurposing or reuse. Permissible Alternatives to Homeownership: Alternative disposition strategies to homeownership must ensure the affordable and sustainable reoccupancy of properties by income-eligible families and/or the reduction of blight in neighborhoods. Examples of permissible alternative disposition strategies that achieve this goal include, but may not be limited to, the following: leasepurchase, short term affordable rental, long-term affordable rental, housing for special populations such as veterans and military families, first responders, or short-term or long-term disaster relief housing. The Stabilization Trust considers alternative disposition strategies to homeownership as Exceptions. Alternative end-disposition strategies are approved for Community Buyers on the basis of geography-specific economic factors or other local market conditions for targeted geographic areas, or other stated program goals tied to preexisting economic or community revitalization plans in the locality. In these cases, the Stabilization Trust will expressly pre-approve alternative end of the strategies for the Community Buyer at the organizational level, prior to properties being made available through First Look or other NCST Acquisition Programs. NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 14

16 To request a program exception from the Stabilization Trust, Community Buyers will complete a Program Exception Form prior to the commencement of acquisition activities. Community Buyers must also request property-specific exceptions, in the event an alternative to homeownership must be pursued after the expiration of the minimum marketing period on an individual property basis. The Stabilization Trust must receive the request for the property-specific exception prior to a title transfer for the property. Other Permissible End-Uses: Demolition and Reuse Community Buyers should pursue the demolition properties as appropriate, when the poor or deteriorated condition of a property renders redevelopment for occupancy economically infeasible. In the event a property is demolished, the Community Buyer is expected to facilitate an end-use for the vacant land that is consistent with neighborhood stabilization goals and will not contribute to additional blight within the community. Allowable reuses for vacant land may include, but not be limited to: Affordable Housing Construction: the preferred disposition strategy for vacant land is the redevelopment of the land with newly constructed affordable homeownership or rental housing for income eligible families (at or below 120% AMI). Community Green Space: Vacant land may be re-conveyed to non-profit or civic groups for reuse as community recreational or green space, including community gardens, playgrounds, or to promote green open space in urban neighborhoods. Vacant land may also be re-conveyed to owners of directly adjacent property. Land Banking/ Land Assembly/ Long Term Hold: If Community Buyers will defer the redevelopment of vacant land parcels for future construction or resale, the property or vacant lot must be secured and regularly maintained so that it will not become hazardous or impose blight on the surrounding neighborhood. Community Buyers will be expected to provide a description of how the land will be reused and the expected timeline on upon which reuse will occur. Program Participants will also be asked to re-certify the status of vacant land on a semi-annual basis until redevelopment commences or resale takes place. Marketing and Maintenance Community Buyers will be asked to provide a marketing plan for sourcing and qualifying income-eligible homebuyers or tenants or maintenance and preservation plans for demolitions and landbanking, as applicable. Vacant Land Lots Land lots that are acquired as vacant parcels through the First Look program cannot be resold by Community Buyers for program income. The Community Buyer should directly facilitate the reuse of the land for a purpose that meets the goals and requirements of this program. This could include transfer of the land lot to a third- NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 15

17 party development partner that will utilize the lot for a purpose that is consistent with the allowable uses as stated above. Different requirements apply for vacant lots that are acquired as donation properties. Please review the requirements for donation properties for more details. Donation Properties Additional Requirements Organizations that receive donation properties (Donation Program Participant) must fulfill requirements that are set forth by the Stabilization Trust and the financial institution that is providing the donation property (Donor). There are a number of different requirements for donation properties versus First Look properties. The list below is an abbreviated summary of these requirements. Please see Appendix II, NCST Donation Program Guidelines, for full set of requirements. The financial institution Donor will define available property types and property locations. Donation properties may not be available in all geographic markets. For-Profit entities are not eligible to receive donation properties. The Donation Program Participant must have an established local presence where donation properties are accepted, to ensure properties can be inspected, managed and maintained on an ongoing basis until end-disposition. Donation Program Participants must hold title to a donation property until an acceptable disposition has been applied to the asset, as pre-approved at the program level by the Stabilization Trust. End uses must be consistent with specified program goals of the financial institution Donor or be preapproved by the Stabilization Trust. The Stabilization Trust maintains a national goal that properties be used as affordable homeownership opportunities for income-eligible homebuyers with incomes within 120% of local area median income, as property conditions and local market economics allow. Donation Program Participants will adhere to the same post-rehab homebuyer sourcing requirements that apply to First Look properties when properties are resold to owner occupants. (See above - Permissible Disposition Methods) Based on the condition of donation properties, Community Buyers can pursue alternative that include but may not be limited to the following: demolition, lease-purchase, long-term affordable rental, housing for veterans or first responders, community greening strategies, disaster relief. Donation Recipients are subject to the same Post-Closing reporting requirements that apply to First Look properties. (See above Post Closing Reporting) NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 16

18 VI. Program Reporting and Participation Monitoring The Stabilization Trust monitors the adherence of Community Buyers to program goals and guidelines on behalf of the financial institutions that participate in NCST Property Acquisition Programs as REO Sellers or Donors. Open Record Standards As program administrator, the Stabilization Trust must comply with open record standards with the participating financial institutions in the Donation Programs. As a condition of participation, Community Buyers are expected to operate with the same open record standards. This means that Community Buyers should be operationally prepared to make readily available information related to the acquisition and redevelopment of any property transferred through the Program, including cost of renovation work, hiring practices and labor costs, occupant sourcing and qualification, revenue and income, marketing information, etc. Community Buyers should also be prepared to produce recent photographs of properties upon request. The Stabilization Trust does not make information collected from Community Buyers publicly available; it is collected and analyzed for the sole purpose of monitoring performance and participation of individual organizations and assessing the effectiveness and overall impact of Stabilization Trust programming. Program Participation Monitoring In addition to general tracking of Program Participants timing and ability to complete property transactions, the Stabilization Trust monitors program compliance through a combination of resources: post-closing reporting, title tracking, and site visits. Post-Closing Reporting: After closing on a donation property, Program Participants are expected to provide the Stabilization Trust with regular information on the status of properties. The requirement to provide post-closing reporting on a property begins 30 days after initial closing, and Program Participants are required to report on property status once every 30 days thereafter, until the property has been fully redeveloped and/or converted into an acceptable end-use. REOTrack Reporting System Community Buyers are provided with free access to the REOTrack, the online reporting system of record for all NCST Property Acquisition Programs, including Donation Programs. Every Community Buyer organization is assigned with an individual REOTrack portal, which contains the cumulative record of all property acquired through the Stabilization Trust. Community Buyers use REOTrack to report to the Stabilization Trust on the progression of work completed on all properties acquired, including where properties fall within various stages of redevelopment. This keeps the Stabilization Trust up-to-date on how redevelopment work is progressing on properties and the end-disposition or final results of properties when redevelopment work has been completed. NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 17

19 Community Buyers must log into REOTrack once every 30 days to report on the redevelopment stage of each property. Stages in redevelopment include the following categorizations: Rehab not started, rehab in process, rehab complete/for sale, rehab/resale completed, or other reuse completed. In addition to categorizing the redevelopment stage for each property, Program Participants will provide additional detail during each stage: scope of rehab work and timeline, cost estimates, and at final disposition, end-occupant demographic information. Please review the complete Guide to REOTrack Post-Closing Reporting for more information on required data. Title Tracking Using public data bases and resources, the Stabilization Trust records information on the transfer of title for properties acquired through both First Look and the Donation Programs. For up to three transfers of title, the Stabilization Trust tracks the entity or person to whom title is transferred, resale date, and recorded resale price. The purpose of this title tracking is to perform an independent validation of the information self-reported by Program Participants through REOTrack and to ensure that property reuse meets program guidelines and standards. As a condition of participation, Community Buyers are required to provide the Stabilization Trust with up-todate information on Sub-Buyers and other program partners that will be part of the redevelopment of properties and to which a transfer of title will occur. The Stabilization Trust reserves the right to require Community Buyers to provide information on any entity or person that is introduced into the chain of title for a property acquired through the Donation Program, based on information recovered through title tracking or by other means. Please Chain of Title disclosures for more information. {LINK} Site Visits The Stabilization Trust may elect to make site visits to Community Buyers to inspect acquired through the NCST Acquisition Programs. The Stabilization Trust will determine whether a site visits is necessary based on a combination of factors: at certain property acquisition thresholds (ex. at 10 or more properties); based on postclosing reporting; upon commendations or concerns from local stakeholders in the community; at the request of participating financial institution partners; or to generally discuss program strategy and accomplishments. Program Participants will receive pre-notification of a site visit. Onsite visits may include Stabilization Trust staff or a designated representative of the Stabilization Trust, and are generally meant to validate the quality and scope of redevelopment work completed on properties. As applicable, the Stabilization Trust may engage additional third parties in onsite property reviews, including representatives from local government housing and community development agencies, the U.S. Department of Housing and Urban Development, non-profit organizations affiliated with the Sponsors of the Stabilization Trust, or locally based non-profit or private developers, property managers, or real estate professionals. NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 18

20 Compliance Notices The Stabilization Trust will determine whether a Community Buyer is appropriately adhering to the program standards detailed in this Guide based on Buyer-reported post-closing information and quality assurance reviews or property inspections completed by a contracted third party or Stabilization Trust staff. Failure to meet program requirements may result in the Stabilization Trust electing to temporarily suspend or permanently discontinue the access of a Community Buyer to new property listings. This includes failure to provide appropriate post-closing documentation. In the event the Stabilization Trust determines there is a significant disconnect between program requirements and the practices of a Community Buyer, the Stabilization Trust reserves the right to temporarily suspend access for the Community Buyer to its programs, at which time the Stabilization Trust will provide guidance to the Community Buyer in writing on program deficiencies that require correction before property access will resume. If a Community Buyer remains unable or unwilling to meet program requirements on an ongoing basis, the Stabilization Trust can elect to permanently discontinue access to properties. Ineligible Resale or Reassignment of Title (Property Flipping) There is no generally accepted definition in the industry for property flipping. For the purposes of the NCST Property Acquisition Programs (First Look and Donation), property flipping refers to the practice by which a property is acquired through the Stabilization Trust is quickly resold in a very short time period to a third party for a substantial profit. Often, properties are sold in as-is condition after acquisition, or the property is resold with only minor cosmetic improvements. Additionally, transactions are may not be open market sales, such that in advance of the initial acquisition of the property from the Stabilization Trust, the Community Buyer has preidentified a known third party as an outlet for the property for the purpose of generating a profit. For the purposes of the Stabilization Trust s programming, property flipping is not permitted for several reasons. Because properties that Community Buyers acquire through the Stabilization Trust are sold with a pricing concession (First Look) or sold at a nominal price (Donated) by participating financial institutions, Community Buyers must ensure that the resale of property: Facilitates an end use that is consistent with neighborhood stabilization goals; and Is not in conflict with the charitable purposes of either the National Community Stabilization Trust or the non-profit Community Buyer that is acting as seller on a resale transaction. Resale Restrictions The Stabilization Trust prohibits Community Buyers from reselling properties acquired through its programming entities for the sole purpose of realizing a profit. Community Buyers should not participate in resale transactions that are inconsistent with the goals of the program, wherein resale of a property acquired through Stabilization NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 19

21 Trust programming will not yield a tangible benefit to the community, such as the reduction of blight, or the availability to end-occupants of safe and habitable affordable homeownership or rental housing. As outlined in this guide, Community Buyers have a different range of permissible end uses and resale restrictions for properties acquired through First Look versus properties acquired as Donations. To determine if property flipping has occurred as it relates to the separate programs, the Stabilization Trust will consider the following factors: a) the type of entity to which the property was resold; b) the level of renovation work completed on the property prior to resale; c) the relationship between parties in the resale transaction; and d) whether the end use of the property is consistent with program goals. Guidance for First Look Properties The Stabilization Trust prohibits Community Buyers or their designated sub-buyers from reselling properties acquired through the First Look program for the sole purpose of realizing a windfall profit without providing tangible benefit to the community or end-occupants. Generally, all resale transactions must be to owner occupant homebuyers. (See section for more detail) Unless program circumstances dictate otherwise, properties should be marketed openly and fairly, through a multiple listing service (MLS) for a period of at least 60 days, to owner occupant homebuyers. This rule is applicable to all First Look properties, except in cases where the Stabilization Trust has granted the Community Buyer programlevel approval of an alternative disposition strategy where reassignment of title to a non-owner occupant entity is reasonable and appropriate in furtherance of program goals. (See Permissible Alternatives to Homeownership section for more detail). If a First Look property is resold within 60 days of initial acquisition and the Community Buyer realizes any substantial financial gain on sale, whereby the resale price of the property is greater than 20 percent above the Community Buyer's acquisition cost, the Community Buyer must also verify that there has been sufficient, legitimate renovation, repair, or rehabilitation work completed on the property to substantiate the increase in value. When program circumstances require, Community Buyers may participate in a resale transaction for a First Look property with a third party non-owner occupant entity if it is consistent with the goals of the program, wherein resale will yield a tangible benefit to the community, such as the reduction of blight, or the rehabilitation and subsequent reuse of the property leads to safe and habitable affordable homeownership or rental housing for income eligible end-occupants. The Stabilization Trust should be notified when an alternative disposition strategy to homeownership is pursued, and reserves the right to request documentation on the third party entity. (See Sections on Permissible Alternatives to Homeownership and Chain of Title Disclosures). If a Community Buyer participates in a resale transaction in furtherance of any of these goals with a non-owner occupant third party entity, the following guidelines apply: NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 20

22 Community Buyers should only participate in resale transactions with third party entities that have been established and are operated in accordance with applicable state and federal law. This includes including limited liability companies, corporations, trusts, and other real estate holding entities. The Community Buyer and third party entity should have a pre-established agreement on how properties will be utilized upon resale and the reuse of properties by the third party entity should be consistent with the stated goals of this program. There should be no collusion or inappropriate agreement, including profit sharing agreements, between a Community Buyer and third party entity. The Community Buyer should not share an identity of interest with any third party entity to which donation properties are resold. Similarly, Community Buyers should not participate in resale transactions to owner occupants with whom there is an identity of interest. Additionally, Directors, trustees, officers, employees, consultants, and their family members are not eligible to occupy, purchase, or lease properties. Guidance for Donation Properties Donation properties may be reused for a number of purposes to reduce blight in the community, provide safe and habitable shelter for special populations, or create affordable homeownership or rental opportunities for income eligible families. Donation properties may also be resold for the purpose of generating program income for a non-profit organization that will fund other programmatic activity that is directly related the acquisition and rehabilitation of foreclosed and abandoned housing, removal of blight in neighborhoods, or the provision of housing for income eligible families or special populations. If a Community Buyer participates in a resale transaction of a donation property with a non-owner occupant entity, it must be in furtherance of one or more established goals of the program. As a measure against property flipping, the Stabilization Trust holds Community Buyers to the following guidelines for resale transactions on donation properties: Community Buyers should only participate in resale transactions with third party entities that have been established and are operated in accordance with applicable state and federal law. This includes including limited liability companies, corporations, trusts, and other real estate holding entities. The Community Buyer and third party entity should have a pre-established agreement on how properties will be utilized upon resale and the reuse of properties by the third party entity should be consistent with the stated goals of this program. There should be no collusion or inappropriate agreement, including profit sharing agreements, between a Community Buyer and a third party entity that is party to a resale transaction for a donation property acquired through Stabilization Trust. NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 21

23 The Community Buyer should not share an identity of interest with any third party entity to which donation properties are resold. Similarly, Community Buyers should not participate in resale transactions to owner occupants with whom there is an identity of interest. Compliance and Recourse In the event the Stabilization Trust or any of its financial institution partners determine that a Community Buyer has been involved in reoccurring or premeditated property flipping, the Stabilization Trust reserves the right to immediately discontinue the participation of that Community Buyer in all property acquisition programs. The Stabilization Trust may also suspend or terminate the participation of a Community Buyer at the explicit request of one or more of its financial institution partners for property flipping violations. Next: NCST New Buyer Onboarding NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 22

24 VII. Community Buyer Applications and Onboarding In order to become approved as an eligible Community Buyer, the Stabilization Trust requires interested local housing providers to complete an application process. Following application approval, eligible Community Buyers complete onboarding and training requirements to begin active program participation. All Applicants are expected to return all requested materials to the Stabilization Trust fully completed and in a timely manner in order to be considered. The chart below, titled New Buyer Roadmap to Program Implementation, outlines the steps required to become an active Community Buyer. Timeline Step 1: Community Buyer Pre-Qualification Questionnaire The Stabilization Trust will provide interested local housing providers with a Pre-Qualification Questionnaire to determine basic structure and goals of applicant organization. Once an applicant has completed the Community Buyer Pre-Qualification Questionnaire, the Stabilization Trust will determine whether the applicant is eligible to submit a full application to participate in the NCST First Look Program and/or Donation Program. Interested organizations can requests for the Pre-Qualification Questionnaire to newbuyer@stabilizationtrust.com Step 2: REO Acquisition Program Application For prospective Community Buyers that will be moving forward with a NCST First Look or Donation Program application, a subsequent, more in-depth REO Acquisition Program Application will be sent for completion. This part of the application process will require Applicants to submit completed Application form with additional NCST Property Acquisition Program Guide Buyer Eligibility Requirements and Program Participation Guidelines 23