New Jersey community development org buys nearly 200 HECM properties in HUD sale

The sale, announced in April, is designed to bolster housing supply in pursuit of fulfilling a pledge by President Biden

New Jersey Community Capital, which describes itself as “the state of New Jersey’s largest community development financial institution (CDFI),” announced this week that it has purchased 169 non-performing Home Equity Conversion Mortgage (HECM) loans from the U.S. Department of Housing and Urban Development (HUD), marking the first transaction of its kind to be completed at this scale with collaborating nonprofits.

In April, HUD announced that it would be holding a competitive bid HUD-held vacant note sale on June 8, made up entirely of properties that were secured by HECM loans in which there was no heir or non-borrowing spouse (NBS). The news of the sale came on Thursday June 9, one day after the scheduled sale took place.

“Never before has a transaction of this magnitude been executed to convert pending foreclosures into affordable housing across the country,” said Bernel Hall, President and CEO of New Jersey Community Capital. “We are truly seeing an evolution in the interactions between HUD and nonprofits in the nonperforming loan (NPL) market.”

When it announced the sale in April, HUD specified that it was being made in an effort to fulfill promises of the Joe Biden administration in relation to the generally limited housing supply across the country. HUD described this sale as the first-ever HUD-held single-family note sale exclusively for mission-driven non-profits and units of state and local government.

“Nonprofit participation in transactions such as this is essential to creating vibrant, equitable communities, especially as we confront a national housing crisis,” Hall said. “We are grateful for the collaboration with our partners and look forward to working with more mission-aligned nonprofit and for-profit institutions to create quality affordable housing across the country.”

The purchased loans are secured by one-to-four unit vacant properties. The organization also described what it intends to do after the acquisition.

“The partners will seek to take title to the properties and sell them to nonprofit affordable housing developers or directly to low- and moderate-income (LMI) owner-occupants,” New Jersey Community Capital said of its intentions. “Most of the properties are expected to be sold to local affiliates or members of the partner nonprofits.”

The NPLs in the sale have an outstanding collective loan balance of $37.1 million, and are secured by vacant properties across 32 states.

In September of 2021, the White House described the president’s commitment to using “every tool available in government to produce more affordable housing supply as quickly as possible, and to make supply available to families in need of affordable, quality housing – rather than to large investors,” the White House announcement in September said.

The sales based on properties that were previously secured by a reverse mortgage will play a big role in the White House’s attempt to make good on those promises, according to the April announcement of the sale.

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