What is the Neighborhood Stabilization Program?
Before HAMP, HAFA, and the handful of housing programs brainstormed by the Obama administration, there was the NSP. The so-called Neighborhood Stabilization Program was actually conceived by the Bush administration in 2008, as a preemptive solution to the then-imminent foreclosure crisis. As part of the Housing and Economic Recovery Act, it allocated $4 Billion for the program, and the Obama administration recently added another $2 Billion.
What exactly is the NSP? According to the Department of Housing and Urban Development (HUD), which is charged with administering the program, it “provides grants to every state and certain local communities to purchase foreclosed or abandoned homes and to rehabilitate, resell, or redevelop these homes in order to stabilize neighborhoods and stem the decline of house values of neighboring homes.” Rather than try to directly avoid foreclosure (by making mortgages more affordable for at-risk borrowers), the NSP attempts to mitigate foreclosure indirectly by attacking the glut of unsold, undesirable homes. In addition to making a dent in the foreclosure crisis, NSP is also intended to stimulate employment (i.e. contractors must be hired to renovate the homes) and revitalize neighborhoods that have been ravaged by foreclosure and have become hot-spots for crime.
State and local governments must first identify the properties, purchase, and renovate them (using funds from their local budgets). Then, the homes are sold (at market value) to qualifying families, which pay for the properties presumably through mortgage loans that they qualified for and obtained independent of NSP. If there is a disparity between the market value of the home and the amount that the local government spent to buy it and fix it up, that shortfall (up to $80,000) can potentially be covered by NSP grant money. As long as the buyer remains in the home for 20 years, the grant is “forgiven” by the government. If the home is re-sold in the interim, however, the grant must be repaid as though it were a secondary mortgage. (This is intended to discourage speculation).
Presumably, all of the NSP funds have already been allocated to specific state and local governments. However, it will take time for these funds to actually be deployed towards the purchase and rehabilitation of actual properties. If you want to participate in this program in any capacity (whether as a taxpayer/voter, contractor, borrower, etc.), you can view a breakdown of fund allocation by state and locality, and browse a list of grantees.