Congress created the Neighborhood Stabilization Program (NSP) to help cities, counties, and states address the challenges created by the mortgage foreclosure crisis in the nation. The program is administered by the US Department of Housing and Urban Development (HUD), and HUD provides funds to approximately 250 local governments (cities and counties) and all 50 states. The funds are used to purchase, rehabilitate, and resell foreclosed and abandoned homes. NSP is administered as Community Development Block Grant (CDBG) funds. As of July 23, 2010, there have been three rounds of NSP:

NSP1


Division B, Title III of the Housing and Economic Recovery Act (HERA) or 2008—Emergency Assistance for the Redevelopment of Abandoned and Foreclosed is the authorizing legislation for NSP1. The law allocates $3.2 billion in funding with HUD providing grants on a formula basis. NSP1 eligible uses include: financing mechanisms for purchase and redevelopment of foreclosed homes and residential properties; purchase and rehabilitation of homes and residential properties abandoned or foreclosed; land banks; demolition of blighted structures; and redevelopment and demolition of vacant properties.

NSP2


Division A, Title XII of the American Recovery and Reinvestment Act of 2009—Community Development Fund is the authorizing legislation for the second round of funding for NSP. This law allocates $1.93 billion in funding through a competitive application process open to local governments, nonprofits and collaborations. Grantees were selected on the basis of foreclosure needs in their selected target areas, recent past experience, program design and compliance with NSP2 rules. It also includes several major changes to the program. The key changes included:

NSP3


Section 1497 of the Dodd-Frank Wall Street Reform and Consumer Protection Act —Additional Assistance for Neighborhood Stabilization Program is the authorizing legislation for the third round of funding for NSP. The law allocates $1 billion in NSP3 funding (minimum grant size of $1 million for cities and counties). Funds distributed by the formula allocation used for NSP1. It also amends the 25 percent set-aside requirement by removing the restriction that allows only abandoned or foreclosed upon homes or residential properties to be used to meet this requirement. Instead, NSP grantees may also use vacant or demolished property to meet the set-aside requirement as well.

For more information on the specifics of all 3 NSP rounds, click here.

NSP Laws and Federal Notices

The federal notices listed below pertain to NSP. Click here to view the full text of these notices and NSP laws.

NSP1 Federal Register Notice (October 6, 2008)—allocation formula and allocation amounts, list of grantees, alternative requirements, and the waivers of regulations granted to grantees under Title III of Division B of the Housing and Economic Recovery Act of 2008.

NSP2 General Section (December 29, 2008)—HUD's Fiscal Year (FY) 2009 Notice of Funding Availability (NOFA); Policy requirements and General Section to HUD's FY 2009 NOFAs for Discretionary Programs.

NSP2 Notice of Funding Availability (May 4, 2009)—provides information on the NSP 2 application requirements, NSP2 program requirements for all recipients, recommended green elements, application checklists, calculation rubric, and certifications.

NSP2 Notice of Funding Availability (NOFA) Correction (June 11, 2009)—corrections include changes to the geographic threshold requirement, eligible use for land banks, and the required purchase discount.

NSP1 Federal Register Bridge Notice (June 19, 2009)—provides substantive revisions to the October 6, 2008 Notice, primarily as a result of changes to NSP made by the American Recovery and Reinvestment Act of 2009. This Notice also makes a number of non-substantive technical corrections or clarifications to the October 6, 2008 Notice. It includes revisions regarding land banks, activity eligibility, discount requirements, program income, appraisals, loan adherence to sound lending practices, waivers for non-HUD approved counselors, leasing to Section 8 voucher-holders, tenant protections, citizen comment period for Substantial Amendments, removal of job creation national objective, and other program requirements.

NSP2 Notice of Funding Availability (NOFA) Correction (November 9, 2009)—corrects an inconsistency in the NSP2 NOFA regarding when the lead member of a consortium must enter into consortium funding agreements with consortium members; and extends the deadline for submission of such agreements to January 29,2010. This Notice only affects applications for funding that have already been submitted to HUD by consortium applicants.

NSP2 Notice of Funding Availability (NOFA) Correction (January 21, 2010)—corrects the NSP2 NOFA to permit HUD to specify the deadline date for submission of consortium funding agreements in the transmittal letter for the NSP2 grant agreement, which allows the submission deadline to occur after obligation of grant funds.

Notice of Definition Revision to NSP2 NOFA for FY 2009 (April 2, 2010)—advises of changes to the NSP2 definitions for "abandoned" and "foreclosed" property to assist in better targeting NSP2 assistance for the purchase, rehabilitation, or redevelopment of abandoned and foreclosed properties.

Notice of Change in Definitions and Modification to NSP (April 9, 2010)—implements a program change resulting from an amendment to HERA made by the Helping Families Save Their Homes Act of 2009 which change was made retroactive to the date of enactment of HERA. This Notice also advises of changes to the October 6, 2008 Notice's definitions for "Abandoned" and "Foreclosed" property.

Notice of NSP Reallocation Process Changes (August 23, 2010)—provides a description of the applicable corrective actions and recapture process for all NSP1 grantees.

NSP3 Federal Register Notice (October 19, 2010)—provides information on the NSP3 allocation formula and allocation amounts, the list of grantees, alternative requirements, and the waivers of regulations granted to grantees under NSP3.

Congress Revises ARRA Davis Bacon Rules for Certain HUD Programs

A Supplemental Budget bill (H.R. 2346) bill approved by Congress in June 2009 includes a provision (Section 1205) that eases Davis Bacon requirements for certain HUD ARRA-funded programs including CDBG and the Neighborhood Stabilization Program (NSP). It applies the standard CDBG rule for Davis Bacon (exempting projects with less than 8 units), rather than the stricter ARRA requirement.

NSP in Massachusetts

For NSP1, Massachusetts received an allocation of $43,466,030 and the following cities received direct allocations: Boston—$4,230,191, Springfield—$2,566,272, Worcester—$2,390,858, Brockton—$2,152,979.

As the administering agent for the state allocation, the Department of Housing and Community Development (DHCD) selected 39 NSP1 municipalities to receive funds and assistance. DHCD reported that the NSP1 funds assisted 646 units, and of those, 251 units target households at less than 50% of AMI. Click here to view their report.

For NSP2, Massachusetts received an allocation of $21,822,940. DHCD is collaborating with the Massachusetts Housing Partnership and the Massachusetts Housing Investment Corporation on their award of NSP2 funds. Eligible NSP2 cities include: Boston, Brockton, Chelsea, Fall River, Fitchburg, Holyoke, Lawrence, Lowell, Lynn, New Bedford, Revere, Springfield, Taunton and Worcester. Click here to view the NSP2 application and for more information on the Neighborhood Stabilization Loan Fund.

For NSP3, Massachusetts received an allocation of $6,191,000. Click here to view DHCD's NSP3 RFP.

For more information on NSP in Massachusetts, click here.

Other NSP Resources:

Neighborhood Stabilization Program Resource Exchange

This website is a one-stop shop for the information and resources needed by NSP grantees, subrecipients and developers to purchase, rehabilitate, and resell foreclosed properties.

StableCommunities.org

StableCommunities.org is the centerpiece of NeighborWorks® America's Stable Communities initiative, a national response to the local challenges that arise when foreclosed homes remain vacant or abandoned. The purpose of the site is to provide community development practitioners with information and strategies to stabilize and revitalize communities in the wake of the foreclosure crisis. StableCommunities.org provides resources to nonprofit organizations and their public and private partners, including state and local governments, rehab contractors, researchers, funders, and servicers.

Foreclosure-Response.org

Foreclosure-Response.org is a website offering resources intended to help states and localities respond to the foreclosure crisis.

The Challenge of Foreclosed Properties: An Analysis of State and Local Plans to Use the Neighborhood Stabilization Program (NeighborWorks America and Enterprise)

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