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Billion Dollar Federal Rescues from Main Street to Wall Street
Urban Land Institute Fall Meeting
Ali Solis, Vice President, Public Policy & Industry Relations
October 29, 2008
The Enterprise Mission
Enterprise’s mission is to see that all low-income people in the United States have the opportunity for fit and affordable housing and to move up and out of poverty into the mainstream of American life.
How We Do It
We advise, finance and assist in the construction and rehabilitation of affordable housing and economic development projects.
We create community development models and policies that can be replicated.
What We’ve Accomplished
More than $9 billion in equity, loans and grants invested since 1982.
More than 240,000 affordable homes created.
Investing $1 billion in equity, loans and grants annually.
Foreclosure Crisis – Why we care
Unprecedented Housing Crisis:
Foreclosures have increased by 71% since last year
1.2 million REOs by the end of 2008
Enormous impact on entire communities
40.6 million homes in neighborhoods surrounding foreclosed homes will suffer price decline
$352 billion total decline in property values
Localities will lose $4.5 billion in property taxes and other local tax revenue
Housing and Economic Recovery Act of 2008
HERA provides 3 major new sources of affordable housing and community development funding:
1. Neighborhood Stabilization Funds $3.92 billion in one-time emergency grants to states and cities
$180 million in counseling through NeighborWorks America
2. Housing Trust Fund $150 - $350 million per year in block grants to states to finance affordable
housing
3. Capital Magnet Fund $75 - $200 million per year in competitive grants to CDFIs and qualified
nonprofits to finance affordable housing, economic and community development
Allocation of NSP Funds
Allocation Formula - Grants were targeted to approximately 300 cities, counties, and states based on:
Number and percent of foreclosures Subprime loans Loans in default Loans delinquent
Local Priorities - States and local governments are required to give priority to areas with the greatest need.
Allocation Example: Florida
Palm Beach County $27,700,340
Orange County $27,901,773
Jacksonville-Duval $26,175,317
City of Miami $12,063,702
Miami-Dade County $62,207,200
44 Other Florida Cities and Counties
$294,174,969
State of Florida $91,141,478
Total FL Allocation: $541,364,779
Eligible Uses of NSP Funds
Establish financing mechanisms for purchase and redevelopment of foreclosed homes
Purchase and rehabilitate properties that have been abandoned or foreclosed
Establish land banks for homes that have been foreclosed
Demolish blighted structures
Redevelop demolished or vacant properties
Regulations on NSP Funds
Discount requirement Purchases of foreclosed homes must be at a discount from the current
market appraised value
Resale restriction Resale of rehabbed homes and redeveloped properties must be equal
or less than the cost to acquire and rehabilitate No profit is allowed Developer Fees are permitted
Ineligible activities Foreclosure prevention Demolition of non-blighted structures Purchase of properties no abandoned or foreclosed upon
Regulations on NSP Funds
Income targeting All funds must be used for families whose income does
not exceed 120% AMI
At least 25% must be used to purchase and redevelop housing for families below 50% AMI
Reinvestment of profits For the first five years, states and communities must
reinvest all profits into additional eligible redevelopment activities
NSP: An Opportunity for Developers
Local municipalities need a lot of help to address the magnitude of this crisis
Limited capacity on the part of non-profits
Joint venture partnerships needed
Big need for expert scattered site asset managers
NSP: An Opportunity for Developers
Developer’s Fee is permitted under HUD NSP But no profit may be earned on the sale of a rehabilitated home Program revenue must be reinvested for eligible uses
HUD encourages funds to be used for Green rehabilitation Includes energy efficiency and conservation improvements
Funds may be used for non-residential uses Example: public parks, commercial uses Must still adhere to income requirements
Accessing NSP Funds
Tight timeframe: Action Plan due to HUD December 1, 2008 All funds must be obligated within 18 months of receipt and spent
within 4 years
Opportunities for builders will vary depending on how local or state government chooses to implement NSP
Contact local government, county or state NSP funds will be distributed through Community Development Block
Grant (CDBG) grantees NSP grantees are required to post their action plan on their websites
HUD NSP Website
http://www.hud.gov/offices/cpd/communitydevelopment/programs/neighborhoodspg/
Useful Resource for: Local allocation amounts FAQs Training webcasts Federal Register Notice
Goals of a Community Stabilization Strategy
Keep residents in their homes
Restore market confidence
Prevent and eliminate blight
Preserve property values
Renovate and sell/rent vacant properties
Create land banks for obsolete properties
Reduce holding periods of REOs by lenders/servicers
Target communities to stop downward cycle
Successful Community Stabilization Initiatives
Good data and mapping critical
Precise geographic targeting
Sustain at-risk owners through workouts
Demolish obsolete & blighted properties
Renovate and sell/rent vacant properties
Provide quality counseling
Vacant land banking/reutilization
Public/private partnerships with flexible subsidies to fill development gaps
Enterprise City & State Partners on the Foreclosure Crisis
Atlanta Baltimore Cleveland Columbus Dallas District of Columbia Los Angeles NYC Rochester State of Mississippi
Enterprise’s Role in Target Communities
Leveraging Public Funds through Innovative Financing
Property Valuation Assistance Program Design Expertise Integration with Local Efforts Assistance to state/local government partners on
developing NSP Action Plans Experience with REO-Rehab-Disposition Programs Access to REO Properties through National
Community Stabilization Trust
Concentration Example: Cleveland
Cleveland Foreclosure Response Pilot
3-Year Pilot Plan impacting on 750 homes in six Cleveland neighborhoods:
Help 300 families at risk of foreclosure stay in their homes
Demolish 300 obsolete, blighted structures
Redevelop 150 vacant homes for homeownership,
lease/purchase or rental housing (60-120% AMI)
Cleveland
Cleveland Foreclosure Response Pilot
Partners: Neighborhood Progress, Cleveland Housing Network, City of
Cleveland, 6 CDCs
Development costs total $21 million including: Demolition resources: $1.2 million in CDBG REO Redevelopment: $1.5 million in CDBG soft seconds ($10,000
per homeowner) $4.5 million in gap funding from OHFA
Enterprise’s Role: Technical assistance in the creation of this pilot program $1 million in pre-development and acquisition financing $200,000 grant from program reserves
Remaining Challenges
Production capacity – need to ramp up quickly
$3.92 billion – great start, not nearly enough
Timely access to discounted REOs in bulk
Untangling REOs from complicated financing pools
New Innovation: Community Stabilization Trust
National Community Stabilization Trust (NCST) Coordinates the purchase and disposition of REO
properties from lenders, loan servicers, investors
Lead partner organizations: Enterprise The Housing Partnership Network The Local Initiatives Support Corporation NeighborWorks America
New Innovation: Community Stabilization Trust
Goal of NCST: Effectively link financial institutions with local housing
providers Support local programs to stem decline in communities
NCST Key Activities: Transfer of foreclosed properties to localities Provide financing to support local efforts Organize and facilitate local collaborations Advocate for programs, policies and resources
National Community Stabilization Trust
Growing participation in NCST property acquisition programs from leading national financial institutions and federal agencies:
Wells Fargo JPMorgan Chase Citigroup Freddie Mac Fannie Mae Bank of America/Countrywide GMAC HUD/FHA FDIC
For Further Information
Ali SolisVice President, Public Policy and Industry Relations
202.842.9190
Thank You!