Targeting NSP Funds

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Targeting NSP Funds

• Todd Richardson
• HUD Office of Policy Development and Research

2
Overview

• Targeting Requirements in NSP
• HUDs NSP Allocation Formula
• Statewide allocation
• Within-state allocations
• Local NSP Targeting
• Other Resources

3
Overview (2)

• WWW.HUD.GOV/NSP
• HUDs Formula Methodology
• NSP Grantee Data Resources
• http//www.huduser.org/publications/commdevl/nsp.h
  tml

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Targeting Requirements - HUD

• For emergency assistance with redeveloping
  abandoned and foreclosed homes to States and
  units of general local government with the
  greatest need, as such need is determined in the
  discretion of the Secretary based on
• the number and percentage of home foreclosures in
  each State or unit of general local government
• the number and percentage of homes financed by a
  subprime mortgage related loan in each State or
  unit of general local government and
• the number and percentage of homes in default or
  delinquency in each State or unit of general
  local government. (2301(b)(3))

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Targeting Requirements - Local

• The statute also provides direction to grantees
  that they should give priority emphasis in
  targeting the funds that they receive to those
  metropolitan areas, metropolitan cities, urban
  areas, rural areas, low- and moderate-income
  areas, and other areas with the greatest need,
  including those--
• with the greatest percentage of home
  foreclosures
• with the highest percentage of homes financed by
  a subprime mortgage related loan and
• identified by the State or unit of general local
  government as likely to face a significant rise
  in the rate of home foreclosures. (2301(c)(2))

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Two Questions

• Why does the total amount allocated to Florida
  exceed the total amount allocated to California?
• Why do some communities with tremendous
  foreclosure problems not get direct allocations?

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Statewide Allocation

• Evaluated multiple data sets for information on
  foreclosures, subprime loans, defaults/delinquenci
  es
• Good news generally, high rate of foreclosure
  related problems in one data set equaled
  similarly high rate of foreclosures in other data
  sets.
• Bad news the data sets were not a perfect
  match none had 100 coverage, with varying
  levels of state and regional coverage.
• Most complete data set for all variables required
  by statute was Mortgage Bankers Association
  National Delinquency Survey

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Statewide Allocation (2)

• MBA National Delinquency Survey Data
• Statewide data only
• Only reflects 70 of active mortgages in US, so
  HUD adjusts its mortgage counts to prevent
  potential bias due to coverage problems by
  adjusting counts of mortgages with Census
  American Community Survey (ACS) and Federal
  Reserve Home Mortgage Disclosure Act (HMDA) data.
• USPS Vacancy Data in HMDA High Cost Census Tracts
• Calculate a measure of abandonment risk

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Statewide Allocation (3)
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Statewide Allocation (4)
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Statewide Allocation (5)
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Statewide Allocation (6)
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Within State Allocations (1)

• Universe of eligible grantees we calculated
  grants for are the 1,201 cities, counties, and
  nonentitlement state balances that got funded
  under the CDBG program in 2008. Statute directed
  us to allocate funds to communities as defined
  under Section 102 of the CDBG statute.
• State governments all funded 19.6 million off
  the top of the statewide allocation.
• Needs based allocation made from remaining
  dollars, with a minimum grant amount of 2
  million required to get a direct grant.

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Within State Allocations (2)

• Public Data Reflecting Most of the Underlying
  Variance Between State Foreclosure Rates
• Falling home prices from the Office of Federal
  Housing Enterprise Oversight (OFHEO.GOV) as of
  June 2008 compared to 2000 to 2008 peak.
• Home Mortgage Disclosure Act data on High Cost
  Loans from the Federal Reserve (FFIEC.GOV) for
  2004 to 2006.
• Local Area Unemployment Rate data from the Bureau
  of Labor Statistics (BLS.GOV) as of June 2008.

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Within State Allocations (3)

• Model 18 Month Foreclosure Rate
• -2.211
• - (0.131 Percent decline in home value)
• (0.152 Pct of loans high cost)
• (0.392 Pct unemployed in place or county)
• Number foreclosures model foreclosure rate
  estimated number mortgages in jurisdiction (based
  on HMDA and ACS data)
• With a pro-rata adjustment to match aggregate of
  model number of foreclosures and mortgages to
  statewide numbers.

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Within State Allocations (4)

• The needs based sub-allocation formula is
• (Statewide allocation - 19,600,000)
• Local model number foreclosure starts
  
• Statewide total number of foreclosure starts
• Local vacancy rate in tracts with high rate high
  cost loans
• Statewide vacancy rate in tracts with high rate
  high cost loans
• Pro-Rata Adjustment

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Why no funding for Merced City?

• Merced City is an entitlement
• Estimated 12.2 foreclosure start rate (much
  higher than state average of 6.7)
• But, relatively small number of foreclosures
  relative to state total, 1,260 estimated
  foreclosure starts 0.3 of all foreclosures in
  state.
• And only 0.12 of its addresses were both vacant
  and in tracts with high rates of high cost loans
  (compared to a state average of 0.23).
• Result was a grant of 1.2 million. Less than the
  2 million minimum grant threshold so rolled into
  state grant.

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Why no funding for Merced County?

• Merced County is NOT an entitlement under the
  regular CDBG program. Thus a grant was not
  calculated.
• Had a grant been calculated, it certainly would
  have been well above 2 million.
• Excluding Merced City, it had 13 foreclosure
  start rate over the past 18 months and
  represented approximately 1.1 percent of all the
  foreclosure starts in California. It also showed
  the balance of the county having a vacancy rate
  in tracts with high cost loans nearly 3 times
  higher than the state average.

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Local NSP Targeting

• All funds must serve households less than 120
  Percent of Area Median Income
• You can meet this requirement by targeting funds
  to neighborhoods where more than 51 of persons
  are less than 120 percent of Area Median Income.
  Block Groups meeting this requirement are posted
  on the web.
• 25 of funds must go to serve individuals or
  households less than 50 percent of Area Median
  Income
• Area benefit DOES NOT APPLY for this group. You
  can only meet this requirement by providing
  direct assistance to a person or household with
  income less than 50 of Area Median Income.
• Must target to greatest needs due to foreclosure
  crisis.

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Local NSP Targeting (2)

• Get the biggest bang for your buck.
• Establish goals
• Identify neighborhoods with a problem
• HUDs predicted risk data on HUD website (on
  same file with area benefit information)
• Local data on bank and tax foreclosures
• Local data to show if a home is vacant, such as
  water utility data
• Develop a Strategy for Immediate Impact
• Use flexibility under land banking activity to
  maintain abandoned properties you have not yet
  acquired (legal authority to maintain properties
  must be local, but NSP funds can be used to pay
  for the maintenance under certain circumstances)
• Prioritize neighborhoods for different uses of
  funds
• Preservation neighborhoods acquire and resell
• Opportunities for mixed income affordable housing
  acquire and rent
• Shrinking neighborhoods acquire or swap and
  demolish

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Other Resources

• HUD.GOV
• HUDUSER.ORG
• http//www.newyorkfed.org/mortgagemaps/
• LISC.ORG
• Enterprise Community Partners (enterprisecommunity
  .org)
• National Vacant Properties Campaign
  (vacantproperties.org)
• KnowledgePlex.org / DataPlace.org