More money has arrived to help clean up the excess inventory of real estate owned by banks. Nearly $8 billion has been recently allocated to help prevent or eliminate foreclosed properties.
Another $1 billion was awarded Wednesday through the U.S. Housing and Urban Development’s Neighborhood Stabilization Program. HUD said the funds “provide targeted emergency assistance to state and local governments to acquire, redevelop or demolish foreclosed properties.”
It’s the third round of funding from grants established through the Neighborhood Stabilization Program. One round, for $3.92 billion, was provided through the Housing and Economic Recovery Act of 2008. The American Recovery and Reinvestment Act of 2009 appropriated another $2 billion.
The latest round is provided for under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The funds will go to all states along with a number of counties and local communities. Allocation was based on key indicators for the distribution formula outlined by Congress which factors in funding needs for the 20 percent of neighborhoods that are most distressed.
Among other factors considered by HUD in allocating the grants are the foreclosure rate, subprime share and the delinquency rate. HUD also considers the causes of defaults and REOs, the level of home price declines from peak levels and increases in unemployment.
“Like those earlier rounds of Neighborhood Stabilization Program grants, these targeted funds will be used to purchase foreclosed homes at a discount and to rehabilitate or redevelop them in order to respond to rising foreclosures and falling home values,” HUD said. “Today, 95 cents of every dollar from the first round of Neighborhood Stabilization Program funding is obligated — and is in use by communities, buying up and renovating homes, and creating jobs.”
The latest grants can be used to acquire land and property and can also be utilized to demolish or rehabilitate abandoned properties. In addition, states and cities can use the funding for downpayment and closing cost assistance to low- to moderate-income borrowers.
The First Look program announced last week is another avenue that the latest funds will be used for. That program gives local governments up to two weeks to exclusively evaluate and bid on properties in targeted neighborhoods before the homes reach public auction.
HUD noted that the state and local governments can use funds to create “land banks” that assemble, temporarily manage and dispose of vacant land. This strategy is designed to stabilize neighborhoods and encourage re-use or redevelopment of urban property.
The housing agency promised more guidance on the latest round of funding within the next few weeks. Among the requirements are counseling for families receiving homebuyer assistance.
HUD said an additional $1 billion was allocated according to the Dodd Frank act for an Emergency Homeowners Loan Program that provides up to 24 months in mortgage assistance to borrowers at risk of foreclosure who have experienced a substantial reduction in income due to involuntary unemployment, underemployment or a medical condition. Details of this program are also planned for release in the coming weeks.
