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HousingWire: HUD defends NSP funds' effect on blight

March 2, 2011
In The News


State and local governments and nonprofits project that the first two rounds of the Neighborhood Stabilization Program will fund the rehab or demolition of 100,000 homes abandoned after foreclosure.

Speaking before a House subcommittee hearing Wednesday, Mercedes Ma?rquez, assistant secretary for community planning at the Department of Housing and Urban Development launched a defense of all three rounds of NSP spending, outlining the direct effects the program will have on blighted neighborhoods across the country.

Republicans filed a series of bills in February aiming to terminate several foreclosure prevention programs, claiming the price tags are far greater than the effect. One of the targets is NSP.

In July 2008, the Housing and Economic Recovery Act cleared HUD to grant $3.9 billion through the first round of NSP. The American Recovery and Reinvestment Act of 2009 provided another $2 billion through NSP2, and the Dodd-Frank Act in July 2010 cleared another $1 billion through NSP3.

Grantees can use the money to rehab these vacant properties and resell them, giving owner-occupants up to two weeks to evaluate and bid on the properties ahead of investors. Ma?rquez said HUD expects that this "First Look" program will cut the REO process, which takes between 75 and 85 days in half.

"To be clear, NSP is not a foreclosure prevention program but rather a tool to help communities across our nation address and mitigate the negative effects that vacant, abandoned and blighted properties have upon neighborhoods and property values," Ma?rquez said.

As of Feb. 28, 57.2% of the NSP1 grants have been spent to this effort, but HUD did not give an update on how much of NSP2 or NSP3 has been spent. HUD obligated grantees the full NSP2 funds on Feb. 11, 2010.

HUD is currently in the process of reviewing and accepting action plans from those receiving money through NSP3, and it expects to obligate the funds by March 31.

"The total appropriation for NSP has been $7 billion, a relatively small amount in the context of the problems that have arisen in the housing markets over the past four years," Ma?rquez said. "There were 1.7 million foreclosures completions between April 2009 and December 2010 and we expect NSP will impact 100,000 properties in the nation's hardest-hit markets."

She added that NSP grantees reported more than 36,000 properties are either under construction or rehab. This makes up 20% of the properties repossessed by lenders in NSP-targeted areas.

"We believe these efforts will have 'a multiplier effect' that could have a profound impact on our local, regional and national housing markets alike," Ma?rquez said. "By investing NSP dollars the other units in the neighborhood will be more likely to be acquired by the private sector because the area is stabilizing."
Rep. Maxine Waters (D-Calif.), who helped develop NSP, said she would not support any bill that would strip these programs away.

"To get rid of NSP is going backwards," Waters said. "It goes into these areas where you have all these boarded up homes, driving down the value of the homes that are being kept up in the neighborhood, increasing cost to the cities for fire departments and police departments who have to take care of the crime going on in these vacant properties."

But House Republicans are set on trimming programs that they say only delay the housing recovery at a cost to taxpayers.

"In an era of record-breaking deficits, it's time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners," said Rep. Spencer Bachus (R-Ala.), chairman of the committee. "These programs may have been well-intentioned but they're not working and, in reality, are making things worse."

Rep. Judy Biggert (R-Ill.) said these programs were put up in haste, executed poorly and have done little to restore stability.

"We need to break down barriers that have delayed the housing recovery, including expensive and ineffective government programs that have failed to help homeowners," Biggert said.

Rep. Gary Miller (R-Calif.) said he can't support a program that "just gives away" $7 billion.
"A program like this should have been used to make sure the foreclosures are rehabbed and resold and then that money given back to the federal government," Miller said.

Still, Ma?rquez said that if the bill terminating NSP is passed, the $1 billion through NSP3 would be rescinded, which would only set back progress that has begun.

"To rescind the final $1 billion in NSP funding at this time would stall that progress and remove critically needed investments from the hardest hit housing markets in the country," Ma?rquez said.