HUD Funds Taking Longer to Reach Housing Markets
State and local governments drew up plans to spend 37.9% of the $3.92bn granted through the Neighborhood Stabilization Program first-round of awards (NSP1), according to data from the US Department of Housing and Development (HUD), sparking assessment of some programs struggling to get the funds in action. HUD awarded the grants to assist low- to moderate-income homebuyers with down payments or closing costs. Some programs use the funds to buy-up and rehabilitate foreclosed property left vacant. According to HUD, all grant agreements were signed in March 2009, setting an 18-month deadline for these housing chapters to obligate the funds. As of March 16, $1.48bn of those funds has been obligated to a specific program – or 37.9%. More than $637m has actually been spent. States received a minimum $19.6m amount under the NSP1. Other grants went to county and municipal housing agencies. HUD reviewed and signed grants to 309 plans. HUD began a risk assessment of the plans to see how much of the grants have been obligated. Congress wanted to see the money get to the market quickly according to HUD, and has placed personnel in some offices needing assistance to implement the program. The Community Development Commission of the County of Los Angeles (LACDC) received $16.8m in NSP1 funds. It obligated 63% of the funds – one of the highest percentages in the country - to its Housing Economic Recovery Ownership (HERO) program. Through HERO, the county allocated $10.5m to help first-time homebuyers purchasing the vacant, abandoned or foreclosed properties. Families earning up to 80% of the county median income are eligible for second trust deed financing of $75,000 or 25% of the purchase price. HERO also provides assistance for higher wage earners and tenants. The county will also fund up $25,000 for rehabilitation cost. Currently, 50 closed escrow under HERO and another 16 are in escrow. “LA County’s NSP1 program has been very successful due to our efforts to align buyers with identified lenders. The property is rehabbed after the close of escrow, which is unique, ”said Sean Rogan, executive director of the Community Development Commission of the County of Los Angeles. But according to HUD, competition and limitations are hurting NSP1. Many programs using the funds to buy-up the foreclosed homes are meeting tough competition from investors coming into the area with cash for the lenders. The state of Illinois, for example, received $53.1m in NSP1 funding and, according to HUD data, obligated 1% of it. To solve NSP1 limitations, HUD expanded its definition of “foreclosed” properties to include homes more than 60 days or more behind on the mortgage. “Abandoned” properties include any home standing vacant for at least 90 days after foreclosure. The state of California received the most at $145m and obligated 47% of the funds. Ohio followed with $116m and obligated 35%, and Texas received $101m, obligating 6.2%. Write to Jon Prior.