Neighborhood Stabilization Program

Neighborhood Stabilization Program

Neighborhood Stabilization Program What is the Neighborhood Stabilization Program? NSP was funded in 3 rounds to provide assistance to state and local governments to address the negative effects of abandoned and foreclosed housing: NSP 1: $3.92 billion formula allocation to states and local governments in 2008 NSP 2: $2 billion in competitive funds to state and local governments, nonprofits and consortia in 2009 NSP 3: $1 billion in formula funds to state and local governments in 2010 250 local governments (cities and counties) and all 50 states funded

NSP1 a total of $3.92 billion allocated to all states and particularly hard-hit areas trying to respond to the effects of high foreclosures. funding provided through HUD's Community Development Block Grant (CDBG) Program under the Housing and Economic Recovery Act of 2008. 309 grantees including the 55 states and territories and selected local governments Each state received a minimum award of $19.6 million grantees that received direct awards were selected based on greatest need factors (e.g. highest rate of foreclosures, subprime mortgages, abandoned homes, etc.) with a minimum grant threshold of about $2 million Under NSP1, grantees had 18 to obligate funds and 4years to spend the grant amount

NSP1 in OHIO 23 Grantees (State, Cities and Counties) $258,089,179 in grant funds allocated 100% committed to projects 74.5% or $192,342,206.21 has been drawn

NSP2 NSP2 was established to stabilize neighborhoods whose viability has been and continues to be damaged by the economic effects of properties that have been foreclosed upon and abandoned NSP funds authorized by Title XII of Division A of the American Recovery and Reinvestment Act of 2009, (the Recovery Act) provided grants to states, local governments, nonprofits and a consortium of public and or private nonprofit entities on a competitive basis. $1.93 billion in NSP 2 grants awarded to 56 grantees nationwide, including 33 consortiums at the regional level and 4 national consortiums Selected based on foreclosure needs in their selected target areas, recent past experience, program design and compliance with NSP2 rules

NSP2 in OHIO 7 Grantees (State, Cities, Counties, and Consortia) $159,149,094 in grant funds allocated $86,160,400 or 54% obligated to projects $35,415,545 or 22% has been drawn

NSP3 authorized by the Dodd Frank Wall Street Reform & Consumer Protection Act (Dodd-Frank Act) of 2010 provided an additional $1 billion for the Neighborhood Stabilization Program, awarding grants to 270 states and selected local governments Funds allocated by a formula based on number of foreclosures and vacancies in the 20% of U.S. neighborhoods (Census Tracts) with the highest rates of homes financed by a subprime mortgage, delinquent, or in foreclosure. The minimum grant amount is $1 million for non-state grantees, and every state received a minimum of $5 million. Expenditure deadlines - 50% at 2 years; 100% at 3 years Implication: grantees must choose projects likely to be underway quickly & must develop systems that allow for rapid review, underwriting and approval of projects, homebuyers, applications 7

NSP3 in OHIO 19 grantees (State, Cities and Counties) $51,789,035 in grant funds allocated 7% obligated to projects 1% expended

Target Areas Projects must be located in area of greatest need based on: Percentage of home foreclosures Number of homes with sub-prime loans Areas likely to see rise in rate of foreclosures May also include other local factors Areas defined by grantee in Action Plan Target areas also defined in agreements with subrecipients, state recipients and developers Funded activity types also described in Action Plan

Administration Many options for administration & development: Agency staff Subrecipients Developers Contractors Contractors must be procured; subrecipients & developers do not need to be procured All partners must be under written agreement with grantee

Administration Paying for admin & delivery costs: Grantees & subrecipients can charge admin costs up to 10% of grant plus 10% of program income Grantees & subrecipients can also charge program delivery costs Cannot earn profit or developer fee Developers & contractors only charge actual project costs can include soft costs such as appraisal, market study, permits, architectural, builder s general requirements or overhead, fees, etc. Assess all costs for eligibility, reasonableness & tie to NSP Timesheets required for labor costs

Property Types Only 3 possible property types eligible: Foreclosed: 60 days delinquent under Mortgage Bankers of America delinquency calculations and owner notified Property owner 90 days or more delinquent on tax payments Foreclosure proceedings initiated or completed Foreclosure proceedings complete, title transferred to intermediary that is NOT an NSP grantee, subrecipient, contractor, developer or end user

Property Types Abandoned: Mortgage/tax/tribal leasehold no payments 90 days Code inspection determines not habitable and no corrective action within 90 days Subject to court-ordered receivership/nuisance abatement or state definition of abandoned Vacant Unoccupied structures or vacant land that was once developed When property meets both foreclosed & either abandoned or vacant definitions, grantee must treat as foreclosed Only blighted properties may be demolished with NSP Funds

Eligible Uses 5 eligible uses available Uses can be combined in a project Uses described in Action Plan Use A: Financing mechanisms for purchase and redevelopment of foreclosed upon homes and residential properties Use B: Purchase and rehabilitate homes and residential properties that have been abandoned or foreclosed upon, in order to sell, rent, or redevelop

Eligible Uses Use C: Land banks for homes and residential properties that have been foreclosed upon Must operate in specific defined area Properties must have an eligible 10-yr reuse plan Use D: Demolish blighted structures NSP2/NSP3 can use 10% of grant unless waived Use E: Redevelop demolished or vacant properties Under NSP2/NSP3, all must be related to housing

Ineligible Uses Foreclosure prevention Transitional housing and public facilities Allowed only under NSP1 Demolition of non-blighted structures Acquisition of property or structures that are not abandoned, foreclosed or vacant

National Objectives All NSP activities must meet a national objective Low/moderate/middle income (LMMI) = 120% of median Use LMMI housing national objective, area benefit or limited clientele, depending on activity

National Objectives LMMH (housing benefit): A single-unit structure must be occupied by LMMI household In a duplex, one unit must be occupied by an LMMI household For structures with three or more units, 51% of the units must be occupied by LMMI households LMMA (area benefit): use for some demolition and land bank activities LMMC (limited clientele benefit): Use for special needs projects

Low Income Targeting 25% of NSP award amount must create housing for low-income residents at or below 50% of area median income (AMI) Use of initial award and NSP program income both count toward meeting the set-aside requirement 25% requirement applies to original grant amount and program income Shelters, group homes do not count

Acquisition Requirements Several acquisition requirements apply: If foreclosed: Must do appraisal less than 60 days before final offer Must buy at 1% discount Does not apply to abandoned or vacant units Tenants must receive tenant protection notice Property owner must receive voluntary sale notice Tenants may be covered by URA

Property Standards NSP imposes mandatory safety, quality, and habitability standards for new construction and rehabilitation Must comply with local codes, laws and requirements NSP includes mandatory green rehabilitation and new construction standards Must meet energy star standards Grantees may impose additional requirements

Additional Federal Requirements Several key other federal requirements may apply to NSP projects: Environmental review URA and tenant protections Davis Bacon labor standards Lead based paint Fair housing and equal opportunity, including Section 504 handicapped access requirements Applicability depends on project & entity NSP3 must also comply with vicinity hiring requirement

Grantee Financial Management NSP Grants are tracked in the Disaster Recovery Grant Reporting System (DRGR) Expenditures Program Income Project Information # of units Amount of funding per project Activity progress

Affordability Period Different approaches for homebuyer and rental For each homebuyer, up front, grantee must select compliance approach during affordability period HOME rules are safe harbor Under $15,000 => 5-yr affordability period $15,000-$40,000 => 10-yr affordability period Over $40,000 or rehab involving refinancing => 15-yr affordability For new construction or acquisition of newly constructed housing => 20-yr affordability period Can use alternate approach but must get HUD approval Home affordability periods are minimums Homebuyer assistance: 2 options: resale or recapture Cannot mix them, one or the other If no direct subsidy to homebuyer, grantee must select resale

Affordability Period Rental: Affordability period dictates compliance period Covers: Rents must remain affordable as defined by grantee Incomes Occupancy for assisted units must continue to meet national objective If unit counted toward 25% low income set aside, unit must remain available to households < 50% AMI Tenant income verified at turn over Sale during affordability period must maintain restrictions

What Works Network with other local grantees and share what works If goal is neighborhood revitalization, funds must be specifically targeted to a few limited areas Neighborhood revitalization also requires wide range of leveraged funds/initiatives Careful Underwriting Create partnerships with lenders Effectively competing against investors requires use of special programs (FHA First Look), relationships with lenders Partners & staff often need capacity building arrange for training & TA Need to think now about end use and sale of property

What s Next Project Rebuild The Next Generation of the Neighborhood Stabilization Program (NSP) Project Rebuild proposes a $15 billion allocation: $10 Billion for formula allocation, $5 Billion for competition Since 2008, HUD has disbursed nearly $7 B through NSP in three separate rounds to mitigate the impacts of foreclosure. Project Rebuild will continue NSP s successes, but with important modifications broadens eligible uses to allow commercial projects and other job creating activities, capped at 30% funds will be targeted to areas with home foreclosures, homes in default or delinquency, and other factors determined by HUD, such as unemployment, commercial foreclosures, and other economic conditions.

NSP Resource Exchange The NSP Resource Exchange is a one-stop shop for the information and resources needed by NSP grantees, subrecipients and developers to purchase, rehabilitate, and resell foreclosed properties. Resources by Topic: Program Requirements and Rules, Program Design, Program Administration, Grant Management, Project Financing, Financial Management, Other Federal Requirements, and Construction. Resources by Audience: NSP1 Grantee, NSP2 Grantee, NSP3 Grantee, Nonprofit, Developer, and Other. Resources by Type: Training Materials, Sample Procedures, Templates and Checklists, HUD Notices, HUD Guidance, HUD Federal Register, Frequently Asked Questions, Reports, NSP Toolkits, Webinars, NSP Policy Alerts, and Other

NSP Resource Exchange http://hudnsphelp.info/