Neighborhood Stabilization Program (NSP2)

What is the Neighborhood Stabilization Program (NSP)?

The Neighborhood Stabilization Program (NSP) provides assistance for the redevelopment of abandoned and foreclosed homes and residential properties in order that such properties are returned to productive use or made available for redevelopment purposes.

NSP has five eligible uses of funds:

• Establishment of financing mechanisms for purchase of foreclosed homes
• Purchase and rehabilitation of abandoned or foreclosed homes
• Land banking of foreclosed homes
• Demolition of blighted structures
• Redevelopment of vacant or demolished property

What is the difference between NSP and NSP2?

NSP was initially established by the Housing and Economic Recovery Act of 2008 (HERA). The HERA version of NSP (NSP1) provided $3.92 billion in funding for emergency assistance to states and local governments.

NSP2 represents the American Recovery and Reinvestment Act (ARRA) additional $2 billion in NSP funding but makes several fundamental alterations to the original program:

• NSP2 is a competitive funding program as opposed to the formula funded NSP but makes several fundamental alterations to the program.
• NSP2 is available to non-profit organizations  as well as states and local governments.
• NSP is considered to be a component of the Community Development Block Grant (CDBG) program and basic CDBG requirements govern the NSP program.
• ARRA funding will also provide $50 million of the $2 billion for NSP technical assistance (NSP TA) to improve the capacities of NSP1 and NSP2 communities to swiftly carry out high-performing, compliant neighborhood stabilization programs.

What is the City of Delray Beach doing to obtain NSP2 funding?

The Delray Beach/Boynton Beach NSP2 Consortium is proposing to apply for $20 million in NSP2 funding.  An application will be submitted to the U.S. Department of Housing and Urban Development (HUD) by the July 17, 2009 deadline. To view the public comment advertisement, click on the link: http://mydelraybeach.com/MailingLists/view_newsletter_frame.asp?ID=1118

What is the Delray Beach/Boynton Beach NSP2 Consortium?

The Delray Beach/Boynton Beach NSP2 Consortium consists of the named cities (Delray Beach serving as the lead agency), the Delray Beach Community Redevelopment Agency, the Boynton Beach Community Redevelopment Agency, the Delray Beach Housing Authority, the Delray Beach Community Land Trust, the Boynton Beach Faith Based Community Development Corporation and the Delray Beach Community Development Corporation.  In addition, the Consortium is partnering with Habitat for Humanity which maintains a significant and powerful relationship with both municipal partners as well as each of the Consortium’s partners.

Each member of the Consortium is committed to continuing its goal of developing and ensuring sustainable communities through NSP2 funding.    

Further, the Consortium is committed to ensuring that this funding is utilized as a “Single Integrated Program” rather than a collection of disparate programs.  Its concept, which the Consortium maintains significant and successful experience in implementing, will create and promote a strong multi-cultural and multi-income community through “good” (feasible continued affordability) home ownership.  The goals and objectives of this program are aggressive, but achievable, and include, but are not limited to, continued affordability standards, optimize economic activity and jobs, community outreach, performance accountability and monitoring, leveraging funds, removing destabilizing influences and utilizing green building/rehab standards.

How will the Delray Beach/Boynton Beach NSP2 Consortium utilize NSP2 funds? 

Funds will be utilized in accordance with program requirements to stop the decline in targeted neighborhood home values.  All NSP2 funds must provide benefit to persons whose income does not exceed 120% of the area’s median income and at least 25% must be used for the purchase and redevelopment of foreclosed and vacant homes that will be used to house individuals and/or families whose incomes do not exceed 50% of the area’s median income.  The targeted neighborhoods meet the threshold score mandated by HUD, which is based on the estimated number and percentage of foreclosures as well as a combination of the estimated foreclosure rate and vacancy rate.

Strategy #1 - Low Interest Fixed Rate First Mortgage Loans

Strategy: Low Interest 30-year Fixed Rate First Mortgage Loans 
Budget: $12,000,000
Average Cost Per Unit: $160,000
Min. # of units to be assisted under Strategy: 70 units

Summary: The Delray Beach/Boynton Beach NSP2 Consortium (DBBBC) will implement a “Local Housing Trust Fund” to provide first mortgage assistance utilizing NSP2 funds.  The DBBBC will provide first mortgages to prospective purchasers at an interest rate that will not exceed four percent (4%) - fixed Annual Percentage Rate (APR). Mortgages will be provided in the form of a thirty (30) year, fixed rate, conventional loan that are to be paid monthly. All mortgages will be serviced through a federal credit institution (i.e., federally insured banks and/or credit unions) that have been prequalified by the DBBBC through a formal RFP process.  All housing units acquired under this strategy will be required to be located within the NSP2 target geographies.

Maximum Award:  First mortgage loans shall not exceed $185,000.  The maximum sales price of the home should not exceed $250,000.   ___________________________________________________________________

Strategy #2 - Purchase Assistance/Soft Second Mortgages

Strategy: Purchase Assistance/Soft Second Mortgages
Budget:  $3,550,000 
Average Cost Per Unit: $46,000 
Min. # of units to be assisted under Strategy: 75 units

Summary:  This strategy provides soft second mortgages to HUD “income eligible” households towards principal loan reduction, rehabilitation costs (if applicable) and closing costs for the purchase of foreclosed and/or abandoned properties.  Assistance will be provided to HUD “income eligible” households in the form of a zero percent (0%) interest rate, forgivable deferred loan.  Soft second mortgages will be offered on a sliding scale up to a maximum of $85,000 to establish an affordable mortgage balance/monthly payment for each homebuyer. All housing units acquired under this strategy will be required to be located in the NSP2 target geographies. Affordability Periods for soft second mortgages are as follows:

Soft Second Mortgage - Amount Per Unit     Affordability Period
Under $15,000                                                         5 years
$15,001 - $40,000                                               15 years
$40,001 - $85,000                                               30 years

Maximum Award: The maximum award will be limited to $85,000 per eligible family.  In addition, NSP2 soft second mortgages may not exceed the first mortgage loan amount and the maximum sale price should not exceed $250,000.   ___________________________________________________________________

Strategy #3 - Land Buy Down Subsidy

Strategy: Land Buy Down Subsidy
Budget:  $2,550,000
Average Cost Per Unit:  $85,000
Min. # of units to be assisted under Strategy:  30 units

Summary: The Delray Beach/Boynton Beach NSP2 Consortium (DBBBC) will implement a “Land Buy Down” assistance program to provide subsidies to the Delray Beach Community Land Trust (CLT), a member of the DBBBC.  This strategy allocates a zero percent (0%) interest rate, deferred payment loan(s) to the CLT to reduce the purchase principal on foreclosed and/or abandoned units held in the CLT in perpetuity.  All subsidy awards will be provided at closing, thus simultaneously transferring ownership of land into the Trust and providing a home to the eligible homebuyer.  This strategy allows for exceptional affordability and guarantees the unit will remain affordable within the Consortium’s target areas in perpetuity.  Assistance will be provided to each eligible CLT property on a one (1) time basis.  The subsidy award will be excluded from the homebuyer’s original purchase price in the re-sale formula and will only appear as a “land cost buy-down” to maintain the unit’s affordability in perpetuity.

Maximum Award:  The “Land Buy Down” subsidy shall not exceed $85,000 per unit.  The maximum sales price of the home should not exceed $250,000.   ___________________________________________________________________

Strategy #4 - Rent to Own Homeownership

Strategy: Rent to Own Homeownership
Budget:  $800,000 
Average Cost Per Unit: $160,000
Min. # of units to be assisted under Strategy: 5 units

Summary: The Delray Beach/Boynton Beach NSP2 Consortium (DBBBC) will implement a “Rent to Own Homeownership” strategy to provide clients of the Delray Beach Housing Authority with home ownership opportunities.  The DBBBC will provide first mortgage loans to the Delray Beach Housing Authority at an interest rate that will not exceed one and five tenths percent (1.5%) - fixed Annual Percentage Rate (APR). Mortgages will be provided in the form of a thirty (30) year, fixed rate, conventional loan that are to be paid monthly.

This strategy will allocate funds to provide first mortgage assistance to the Delray Beach Housing Authority to purchase units and rent them to HUD “income eligible” households. Ultimately, the purchased units will be transferred from the Housing Authority to the HUD “income eligible” households upon completion of agreed rental term.  The length of each rental/ownership term will be determined by the Housing Authority.  All mortgages will be serviced through a federal credit institution (i.e., federally insured banks and/or credit unions) that have been prequalified by the DBBBC through a formal RFP process.  All housing units acquired under this strategy will be required to be located in the NSP2 target geographies.

Maximum Award:  First mortgage loans made to the Housing Authority shall not exceed $185,000.  The maximum sales price of the home should not exceed $185,000.   ___________________________________________________________________

NOTE:  Each proposed financial strategy proposed by the DBBBC will incorporate an educational element.  Educational components may include, but are not limited to, attending a minimum of 8 hours housing counseling by a HUD certified housing counselor prior to closing and/or require completion of an additional 40 hours of post-purchase, financial literacy counseling.
Have the NSP2 proposed target areas been identified?

Based on HUD’s mandatory criteria, the Delray Beach/Boynton Beach NSP2 Consortium has identified neighborhoods in the following census tracts: 65.02, 66.04, 66.05, 67.00, 68.01, 68.02, 69.06, 57.01, 57.02,   61.00,   62.01, 58.09, 60.03, and 60.02.

The proposed target areas are within the corporate limits of the City of Delray Beach and the City of Boynton Beach, thus they fall under the ordinances, codes, policies and regulations of our respective communities. 

Are maps available that display the proposed target areas?

Two (2) maps are available that designate the proposed target areas.  Select the links below to view:

City of Delray Beach NSP2 Proposed Target Area Map (1440kb pdf)

City of Boynton Beach NSP2 Proposed Target Area Map (680 kb pdf)