NSP 1 Challenges, Success and Lessons Learned

1
NSP 1 Challenges, Success and Lessons Learned

• Kate Blood
• NSP Program Manager
• WI Department of Commerce

2
Why did we decide to work in housing??

• Given the housing bubble, mortgage crisis,
  escalating foreclosures why do we love working
  in this field??

3
Why affordable housing

• Maybe because permanent housing and the concept
  of home is one of the most stabilizing factors
  in an individuals life

4
Happiness Research

• Global research on happiness has shown that the
  two most critical determinants of happiness
  were
• Stable housing
• Adequate food
• Between housing and food housing was 1
• And thats why what we do is so critical

5
NSP in Wisconsin

• Overview
• Approximately 38,800,000 in NSP 1 funds received
  by Wisconsin Department of Commerce
• These funds were allocated across eight regions
  incorporating all areas of highest need in the
  state

6
NSP distribution of funds

• WHEDA 5,807,600
• Statewide Regional Allocations 27,093,611
• Incentive Allocations 2,000,000
• Administration 3,877,912
• ______________
• TOTAL 38,779,123

7
NSP per activity (changes from 1/09 to 10/09)

• Activity A Financing Mechanisms -
  5,807,600
• Activity B Acquisition/rehab/
• resale (up gt5m) 15,743,611
• rental (down 3m) 7,000,000
• Activity C Landbanking (down 1.25m)
  750,000
• Activity D Demolition (down 600K)
  1,400,000
• Activity E Redevelopment (down 800K) 4,200,000
• Administration 3,877,912

8
NSP timeline in theory

• The Grantees per their contracts agreed to
  complete the housing activities according to the
  following schedule
• On or Before Activity
• 06/30/09 Finalize agreements with partnering
  organizations
• Establish record keeping system
• 09/30/09 Execute grant agreement set-up housing
  activities (obligate funds)
• 12/31/09 Set-up Housing activities and begin
  to expend funds
• 03/31/10 Set-up Housing Activities and expend
  funds
• 06/30/10 Set-up Housing Activities and expend
  funds
• 08/15/10 All funds must be obligated by grantees
  by this date
• 09/30/10 Continue housing assistance activities

9
NSP TimelineReality Check

• Running behind schedule
• Last of the 31 grantees were not in contract
  until 10/9/09
• Documents required to be able to obligate NSP
  funds by grantees are not in for 12 of the 31
  grantees (Tier 1 Environmental Review, MOUs with
  partnering agencies, identification of HUD
  approved homebuyer counseling provider)

10
Progress to Date

• Despite these delays, as of 10/30/09
• Funds have been obligated for 77 housing
  activities (all activity categories except for
  landbanking)
• On average, 51 of the committed housing
  activities for the 2nd quarter ending 12/31/09
  have had funds obligated

11
Progress contd

• As of end of 2nd quarter -9/30/09
• Over 2.5m has been obligated (includes admin
  dollars)
• Of the funds for housing activities 72 has been
  for lt50 CMI households

12
Challenges

• The real estate market is changing daily
• More buyers are entering the market
• Increased competition for foreclosed homes from
  speculators, developers with no NSP restrictions
  (ex. 1 discount)
• Competition can often close with no contingencies
  (ex. appraisal, HQS inspection) and quicker than
  NSP grantees can

13
Challenges Contd

• Changing Demographics
• Grantees are experiencing difficulty in finding
  foreclosures in the census tracts that theyd
  identified almost 11 months ago as their highest
  risk/impact neighborhoods due to
• Shifting demographics of foreclosures (to higher
  tier)

14
Challenges contd

• Demographics of foreclosures has begun to change

15
Challenges contd

• Overall temporary decrease in number of
  foreclosures (due to rules requiring banks to
  consider more people for loan modifications) ,
  and increase overall in home sales prices

16
Challenges contd

• 1 discount from appraisal
• this 1 discount puts NSP grantees at a
  disadvantage in the increasingly competitive
  demand for these foreclosed homes.
• Appraisals in the last 6-9 months are reflecting
  the depreciated value of homes, making REO
  holders increasingly resistant to further
  discount the sales price for NSP bidders

17
Challenges contd

• Difficulty working with some lenders, REO holders
• REOs reluctance to work with Federal funds
• REOs unwillingness to allow contingencies, ex.
  Appraisal requirement, HQS inspection
• Ex. Weve had reports that a HUD contracted
  entity for foreclosures wont allow an appraisal
  prior to 1st (final) offer their sales price is
  based on their appraisal, but may be more than 60
  days old, wont provide date of appraisal to
  prospective buyers
• Extended time to close due to backlog on REOs
  side

18
Challenges contd

• Lean budget for administration and activity
  related soft costs
• NSP is capped at 10 by the HERA guidelines

19
Challenges contd

• Heightened regulatory and monitoring requirements
  per Federal emphasis on transparency
• Some ambiguity in the guidelines for the NSP
  program given its hybrid combination of CDBG,
  HOME and NSP-specific guidelines

20
Challenges contd

• Tight timeline for obligation of funds
• August 15, 2010 all NSP funds must be obligated
  to avoid recapture
• Quarterly housing activity benchmarks for
  grantees must be met to avoid withholding of
  further funding

21
Challenges contd

• Examples of obstacles encountered by grantees in
  getting NSP obligated
• Time delays in getting required documents to
  obligate funds approved by Non-profit boards,
  City Counsel, Mayors, etc.
• Stretching their NSP dollars to meet their
  contracted housing activities with rising sales
  prices

22
Summary

• NSP is a one time opportunity to not only stem
  deterioration of neighborhoods by foreclosures,
  but to bring about catalytic change that can lead
  to revitalization
• Along with the opportunity that this program
  provides, comes certain somewhat arduous
  requirements, documentation responsibilities and
  potential of OIG auditing.

23
Summary contd

• Suggestions
• Balance the competing demands
• Seize the Day!
• when you find a good foreclosure opportunity, act
  boldly AND
• Proceed with Caution!
• Documenting your adherence to the program
  requirements
• 1 discount,
• URA notice to sellers,
• HUD approved home-buyer counseling provider, etc.
• Keep documentation of your policies (ex.
  Affordability guidelines) and apply them
  consistently in all cases
• Call your HUD rep and State NSP grant
  administrator if you have a question and document
  the question/answer

24
Summary contd

• And finally
• when youve just lost a bid for a perfect
  foreclosed home, or youre frustrated at the
  regulatory requirements
• Remember
• You didnt choose the affordable housing because
  it was the easy path

25
Remember

• that you are one of a cadre of committed housing
  advocates, and
• that you are helping to provide and secure the 1
  ingredient of happiness
• stable housing