Coalition seeks to facilitate Neighborhood Stabilization Program
Although the Housing and Economic Recovery Act of 2008 allocated $3.92 billion to the Neighborhood Stabilization Program (NSP) to fund efforts to save property values in neighborhoods ravaged by foreclosures, local governments and other grant recipients have run into obstacles to using the money quickly. The Washington-based National Community Stabilization Trust (NCST) has been working with local government NSP grantees and other housing providers to facilitate the transfer of foreclosed properties from financial institutions into their hands. Since forming in 2008, NCST programs have been used by more than 115 NSP grant recipients who use the money in more than 250 communities.
Competition with cash speculators — out-of-town investors who purchase foreclosed properties sight unseen and invest little in improvements that would help the surrounding neighborhood — have been a big problem for NSP grant recipients, says NCST President Craig Nickerson. To address the problem, NCST formed a Real Estate Owned (REO) Property Acquistion program, featuring “First Look,” a public-private partnership with the Department of Housing and Urban Development, which administers NSP, that offers selected state and local governments and non-profit housing organizations a right of first refusal to purchase foreclosed properties at discounted prices before they are made available to the private market. Several mortgage lenders participate in the program. The NCST tested the program in early 2009 in Minneapolis and St. Paul, moving more than 230 foreclosed and abandoned properties through their acquisition program in the first year.
Philadelphia, which has received $20 million in NSP grants, struggled to acquire properties from banks during the first six months of the NSP program in part because of competition from speculators, says Terry Gillen, executive director of Philadelphia’s Redevelopment Authority. The speculators did not have the same requirements to remediate homes that NSP grantees did, so it was simply easier for banks to sell to them, Gillen says. Since participating in the First Look program, however, Philadelphia has been given more access to lenders, and, as a result, more houses for possible purchase. “We have about 70 now in the pipeline, most of which are in the process of rehabilitation,” Gillen says.
NCST’s REO Property Acquisition Program offers other tools for NSP grantees, such as REO Match, a web-based mapping and property transfer tool that enables NSP grantees to look at entire blocks of properties from multiple sellers in one view. REO Match helps buyers strategically select properties in an area that will best restore a neighborhood and track them through the various stages of the purchase process. A third component, the REO Capital Fund, offers flexible financing to local governments and housing providers for neighborhood stabilization efforts and provides short-term financing before awards of NSP funds.
Nickerson says it is important to note that when it comes to the foreclosure crisis landscape, what worked yesterday may not work tomorrow, and NSP grantees should look at buying properties before they become REO. “When a mortgage goes into default on a note, it can be literally years before a servicer can take possession of the property. In two or three years, that property might be a shell of what it once was,” he says.
Read more information on NCST’s programs.