The U.S. Department of Housing and Urban Development (HUD) has made changes to one of its foreclosure programs to speed up the process by which communities purchase and rehabilitate foreclosed properties.
HUD will change how it defines foreclosed and abandoned under its Neighborhood Stabilization Program to include properties in mortgage default and uninhabitable homes with lingering code violations. The program was created last year to help communities acquire, renovate and then re-sell foreclosed and abandoned homes.
HUD officials hope the expanded definitions will increase the reach of the program by allowing more properties to qualify and removing existing barriers caused by market conditions.
The changes come after HUD reported that communities have spent less than half of $4 billion available under the Neighborhood Stabilization Program.
A year after the Neighborhood Stabilization Program started, about a third of more than 300 local governments given the help have barely made a dent in their funds, according to a recent HUD report.
Local officials have said they’ve been stymied by the program’s rules, and in many cases, outbid by cash investors when trying to buy foreclosures. Under HUD rules, grant recipients must pay 1 percent less than the appraised value of any property.
"The original [program] rules this administration inherited through language from the 2008 legislation limited the impact of the Neighborhood Stabilization Program and we’ve heard that clearly from our partners on the ground," said HUD Secretary Shaun Donovan. "The rules needed to be more flexible so our local partners can put taxpayer dollars to work quickly to stabilize neighborhoods hard-hit by foreclosure. It is my goal to make HUD the kind of federal partner that listens and responds to the needs of communities, so that we can work together to rebuild our neighborhoods and our economy."
HUD previously defined the term foreclosed to apply only to properties where the foreclosure process was completed. Local communities suggested this narrow definition was not a good fit for market conditions since many properties were lingering in the foreclosure process and beyond the reach of the Neighborhood Stabilization Program, according to HUD.
Properties will now be eligible for program assistance if any of the following conditions apply: The property is at least 60 days delinquent on its mortgage and the owner has been notified; or the property owner is 90 days or more delinquent on tax payments; or under state or local law, foreclosure proceedings have been initiated or completed; or foreclosure proceedings have been completed and title has been transferred to an intermediary aggregator or servicer that is not a Neighborhood Stabilization Program grantee, subrecipient, developer or end user.
