Connecticut State Department of Housing

HUD Neighborhood Stabilization Program (NSP) Requirements Summary of Notice Published in the Federal Register

The Housing and Economic Recovery Act of 2008 (HERA) became law on July 30, 2008. On September 29, 2008, HUD released a Notice outlining the procedures under which the new Neighborhood Stabilization Program (NSP) for foreclosed or abandoned properties will operate. The Notice was effective immediately.

Key Elements of the Notice:

  • Requires formula grantees to submit an application to HUD (in the form of an amendment to their CDBG Annual Action Plan) by December 1, 2008, that outlines how they will distribute and use funds and meet income targeting and long term affordability requirements.
  • Requires grantees to obligate all funds within 18 months of grant receipt and spend all funds within 48 months of grant receipt.
  • Spells out eligible program activities, including administration and planning (up to 10% of the grant) and the cost of preparing an application.
  • Spells out income targeting (all assistance must benefit persons or areas with incomes not exceeding 120% of AMI and 25% of spending must benefit households at or below 50% of AMI) and minimum long term affordability standards.
  • Requires NSP-assisted homebuyers to complete homebuyer education and use mortgages that comply with federal standards if non-traditional.
  • The Notice encourages grantees to carry out NSP activities in the context of a comprehensive plan to stabilize and strengthen neighborhoods.

Allocations

As required by HERA, HUD devised a formula to allocate funds based on state and local shares of foreclosed and vacant homes, subprime and delinquent mortgages. To ensure targeting to areas of greatest need, HUD limited direct allocations to those localities owed at least $2 million under the formula and allocated the balance to the State to assist all high-need locations. No CT Cities received a direct allocation from HUD.

Pre-Grant Process

DOH had to submit an Annual Action Plan "substantial amendment" to HUD by December 1, 2008. HUD conducted an expedited review for completeness and consistency with NSP requirements and CT was among the first states approved. HUD sent the NSP grant agreement to DOH on March 9, 2009. DOH signed the grant agreement the same day and returned it to HUD. This started the 18 month deadline to commit NSP funds.

Citizen Participation – The proposed Action Plan Amendment was published via usual methods and posted on the DOH’s website for no less than 15 calendar days of public comment. The Final Action Plan amendment, along with a summary of citizen comments, was posted on DOH’s website at the time it was submitted to HUD.

State Distribution of $25,043,385

DOH had the option to use its NSP grant to carry out program activities directly (e.g. hire staff, procure contractors) or to provide loans and grants through sub recipients. The distribution to other jurisdictions was based on need (e.g. high foreclosure rates, etc.), as is required by HERA, see distribution below.

State of Connecticut Total NSP Budget by Recipient

Tier 1 Recipients

Admin

Acquisition and Rehab

Financing Mechanisms

Land Bank

Demolition of Blighted Structures

Redev- vacant or demo

DOH

$626,085

$0

$0

$0

$0

$0

$626,085

Bridgeport

$279,300

$2,886,000

$1,500,000

$300,000

$300,000

$600,000

$5,865,300

Hartford

$130,550

$1,128,000

$695,000

$0

$168,000

$620,000

$2,741,550

Meriden

$85,000

$1,367,950

$100,000

$0

$232,050

$0

$1,785,000

New Britain

$84,850

$1,297,000

$200,000

$0

$150,000

$50,000

$1,781,850

New Haven

$154,500

$2,815,110

$210,000

$0

$32,445

$32,445

$3,244,500

Stamford

$145,478

$2,017,200

$706,872

$0

$40,000

$0

$2,909,550

Waterbury

$166,000

$1,500,000

$1,220,000

$0

$500,000

$100,000

$3,486,000

Tier 2 Recipients

Norwich

$43,000

$792,850

$32,000

$0

$0

$0

$867,850

New London

$43,000

$674,850

$150,000

$0

$0

$0

$867,850

Danbury

$43,600

$824,250

$0

$0

$0

$0

$867,850

Overall Totals

$1,801,363

$15,303,210

$4,813,872

$300,000

$1,422,495

$1,402,445

$25,043,385

Eligibility and Allowable Costs:

  • 10% of the NSP grant (and 10% of any program income) can be used for general program administration and planning costs and State technical assistance. DOH decided to limit admin to 2.5% for DOH and 5% for the sub recipient communities.
  • Eligible activities are spelled out in the notice and include:
    • Financing mechanisms for the purchase and redevelopment of foreclosed upon homes and residential properties, such as soft seconds, loan loss reserves and shared-equity loans.
    • Purchase and rehabilitation of residential properties for sale, rent or redevelopment (can include disposition, relocation and homebuyer counseling).
    • Establishing land banks.
    • Demolishing blighted structures.
    • Redeveloping demolished or vacant properties.
  • Ineligible activities include foreclosure prevention activities.

Contents of NSP Application/Action Plan Substantial Amendment:

  • Needs – summary information identifying geographic areas of greatest need. A state must discuss in terms of entire state. In discussing needs of entitlement jurisdictions, it can restate or link to that jurisdiction’s Consolidated Plan.
  • Proposed distribution funds to assist areas of greatest need (based on need factors it chooses as well as the required statutory factors of areas with the greatest percentage of home foreclosures, highest percentage of homes financed by a subprime mortgage, and identified by the State as likely to face a significant rise in the rate of home foreclosures)
  • Proposed Uses of Funds:
  • Definition of blighted structure under state or local law, affordable rents and continued affordability, housing rehabilitation standards
  • Performance measures to be use d(e.g. units of housing to be acquired, rehabilitated or demolished for households at or below 50% AMI, at 51-80% AMI and at 81-120% AMI)
  • Homebuyer Requirements: Each NSP-assisted homebuyer must complete at least 8 hours of homebuyer counseling from a HUD-approved agency before obtaining a mortgage.

Performance Measures

It is estimated that between 325-400 households will be served with the initial funding.

  • 80-100 units of housing will be acquired & rehabilitated for households that are 50% of AMI and below.
  • 80-100 units of housing will be acquired & rehabilitated for households that are between 51-80% of AMI.
  • 165-200 units of housing will be acquired & rehabilitated for households that are between 81-120% of AMI.
  • 80-100 units will be demolished. For demolished properties, 40-50 will enter land bank programs.
  • No significant redevelopment activity is anticipated.