NAHRO's CD Edge

Welcome to NAHRO's CD Edge, our free e-newsletter focused on federal community development programs.

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In This Issue:

Coming Soon: NAHRO's Coverage of the President's FY 2009 Budget Proposal
HUD Posts FY 2008 CPD Formula Allocations; CDBG Revisions Coming?
HUD Convenes Industry Task Force on Foreclosures
New HOMEfires Addresses Mortgage Assistance

NAHRO members will also soon be able to access NAHRO's FY 2009 Community Funding Reports. These reports are based on the President's budget request and provide estimates of FY 2009 formula grant allocations for all CDBG, HOME, ESG, and HOPWA entitlement communities and state programs.

NAHRO members: Stay tuned to NAHRO's Direct News for more information. Direct News is NAHRO's members-only email service providing breaking news and information on federal housing and community development programs.

• $1 billion in emergency Community Development Block Grant funding, with priority for local governments to expend significant portions of this funding for activities that create and preserve jobs, housing counseling, and other programs to ameliorate the impact of the current housing crisis.

• $800 million in supplemental public housing operating subsidy to ensure responsible transition to asset management; and

• $500 million in public housing capital funding with the condition that it be expended within 12 months of receipt.
  

NAHRO members can view the letter here.

NAHRO and others have continued to highlight a potential role for additional housing and community development provisions within the final stimulus legislation. In recent days, NAHRO has also responded to a number of inquiries from Congressional staff seeking information to support the addition of CDBG funding to either the stimulus package or future legislative vehicles.

In a related development, Senate Banking Committee Chairman Dodd (D-Conn.), in a letter to Senate Majority Leader Harry Reid (D-Nev.), recommended that the stimulus package include $10 billion in CDBG funding to support the purchase, rehabilitation, and resale of foreclosed housing. Senator Barbara Boxer (D-Calif.) has also recommended that the final stimulus bill include $10 billion in CDBG funding "to help maintain vacant properties, fight vandalism and crime, and purchase foreclosed homes."

NAHRO members: For NAHRO's earlier coverage of the economic stimulus, see our January 25 Direct News.

HUD previously posted FY 2008 allocations for CPD formula programs, including CDBG, HOME, ESG and HOPWA, on January 18.

NAHRO members: Stay tuned to NAHRO's Direct News for more information on this developing story.

Officials stressed that given current resource constraints, CPD efforts in this area will stress education. Much of the discussion focused on the need to increase awareness of HUD's Housing Counseling Assistance Program, which is funded under the HOME program account but administered by the Federal Housing Administration. Congress appropriated $50 million for this program for FY 2008.

HUD officials also discussed the special National Foreclosure Mitigation Counseling Program created by the Congress under the FY 2008 consolidated appropriations bill. As part of this program, which is being administered by NeighborWorks America, an expedited competition for up to $130 million in housing counseling funding is currently underway. The application deadline is February 8. This program is separate and apart from HUD's regular Housing Counseling Assistance Program. (NAHRO members: For more information on the NeighborWorks America housing counseling competition, see NAHRO's January 30 Direct News .)

CPD officials are working to develop a list of eligible CDBG activities that grantees may choose to undertake in order to "help borrowers make their payments and obtain counseling to avoid foreclosure." Activities listed in a draft version of a document distributed during the January 30 meeting include:

• Planning activities: CDBG grantees may use administrative funds to collect and analyze data and develop a strategic plan to how serve borrowers and neighborhoods affected by the housing crisis.

• Rehabilitation with refinancing: Grantees may issue loans to households to refinance existing debts on a property that is being rehabbed with CDBG funds in order to make the rehab more affordable.

• Rehabilitation done through a direct loan or grant: Grantees may provide direct loans or grants to homeowners who cannot otherwise afford to rehab their homes due to increasing mortgage payments.

• Interim assistance to help neighborhoods: Grantees can help to improve neighborhoods and maintain property values by paying for landscaping, streetscaping, sidewalks, and more.

• Short term foreclosure assistance: Grantees can make mortgage or rental payments for up to 3 consecutive months to households in the event of a financial emergency.

• Acquisition of vacant/foreclosed properties: Grantees or subrecipients could use CDBG funds to acquire property to rehabilitate and resell at or below fair market rate to low- and moderate-income households.
  

Other highlights of the January 30 task force meeting:

• HUD officials suggested that the Section 108 program could potentially play a role in local efforts to address problems associated with foreclosures. CDBG grantees might consider using Section 108 financing to acquire and rehabilitate abandoned and foreclosed properties to make them available for sale or lease to low- and moderate-income households.

• CDBG and HOME program staff indicated that the use of CDBG and HOME funding for housing counseling should be seen as an action of last resort. Housing counseling is an eligible CDBG activity but counts against the public services cap. Housing counseling is not an eligible HOME project cost, although certain forms of counseling may be provided using HOME administrative funding.

• Many foreclosed homeowner properties are transitioning into the rental market, a development that has driven up rental vacancy rates. This provides an opening for Participating Jurisdictions to consider increasing the amount of HOME funds used to provide tenant-based rental assistance.
  

The new HOMEfires stresses that the ability of Participating Jurisdictions (PJs) to use HOME funds to assist homeowners at risk of default or foreclosure "is quite limited." These limitations are due to the fact that HOME funds may be used only for the acquisition, new construction, or rehabilitation of housing or the provision of tenant-based rental assistance to low-income families. Providing direct financial assistance to homeowners in order to assist them in meeting their mortgage payment obligations is therefore not an eligible HOME activity.

Despite the limited role that HOME funds can play in this area, there are a handful of measures PJs may take. Although post-purchase or foreclosure prevention counseling cannot be paid as a HOME project cost, PJs may use HOME administrative funds to pay for default counseling for HOME beneficiaries. Because HOME administrative funds are capped, this may not be a particularly attractive option for many PJs.

PJs are also able to provide refinancing as a component of certain HOME rehabilitation activities. Refinancing is only permitted when the primary reason for the use of HOME funds is the rehabilitation of housing to correct substandard conditions. The rehabilitated housing must be owner-occupied, and the HOME funds for rehabilitation must be loaned to the homeowner.

The new edition of HOMEfires also discusses actions PJs can take to preserve units as affordable housing resources when HOME-assisted homebuyers face default or foreclosure. These options cannot help existing homeowners retain ownership, but they do enable the PJ to protect its investment in the property.