**ACQUISITION & RELOCATION**

> **What are the parameters of authority for an NSP grantee that is
> acquiring properties before receiving its grant award?**
>
> A grantee can start incurring costs prior to receiving its grant award
> beginning September 29, 2008. If a grantee wants to start incurring
> costs beyond general planning and administrative costs, the grantee
> needs to comply with the provisions of 24 CFR 570.200(h) of the
> Entitlement regulations---most notably the environmental review
> requirements. A grantee must also identify these pre-award costs in
> the substantial amendment to its action plan which it is developing
> for NSP funding.

*Posted 10/31/08* **Can NSP grantees use NSP funds to provide down
payment assistance and cover closing costs for families purchasing
foreclosed properties rather than acquiring property directly?**

> Yes. Providing down payment assistance and closing costs to buyers are
> eligible under Eligible Use A. However, limiting your homeownership
> assistance activities to down payment and closing cost assistance may
> create additional challenges for you to meet the other program
> requirements such as stabilizing target areas of greatest need,
> ensuring that properties are vacant prior to purchase, and ensuring
> that properties assisted with NSP funds meet the housing habitability
> standards.
>
> **If a mortgage lender requires that funds be allocated for operating
> reserves as a condition of the lender approving a mortgage for a
> multifamily housing project, can NSP funds be used for the operating
> reserves?**
>
> Yes, NSP funds can be used for operating reserves if the NSP grantee
> can demonstrate that such a requirement is consistent with industry
> practices and the dollar amount of the required reserves is consistent
> with local industry standards.
>
> **Can an NSP grantee perform a neighborhood-wide appraisal to
> determine the current market assessed value of properties that are
> being considered for acquisition?**
>
> No. NSP grantees must have an appraisal done on each separate property
> purchased with NSP funds. It may be possible to have one appraiser
> perform appraisals on multiple properties, but the appraisals must
> identify a value for each property. In other words, an \"appraisal\"
> that indicates that the median value of all 3-bedroom houses in the
> neighborhood is \$75,000, the median value of 2-bedroom houses is
> \$68,000, etc. would not be acceptable.
>
> **Do NSP grantees need to identify the specific properties they intend
> to acquire with NSP funds in the substantial amendment to the action
> plan?**
>
> No. The substantial amendment is submitted well in advance of program
> implementation and there are too many unknown factors that impact
> property acquisition making it nearly impossible for an NSP grantee to
> know specific properties they plan to acquire. For example, NSP
> grantees will not know what properties will be on the market several
> months from now or which properties are the best uses of NSP funds.
>
> **If an NSP grantee incurs eligible costs through a failed acquisition
> of an abandoned or foreclosed property are the incurred costs still
> eligible?**
>
> Generally, yes. HUD recognizes that an NSP grantee may investigate the
> acquisition of some properties and incur costs before acquiring it
> (such as the cost of an appraisal or a title search), but then decide
> that the acquisition is not feasible. In such a case, HUD would
> support an NSP grantee that chooses to walk away from a property that
> looks to be problematic, rather than getting bogged down and losing
> valuable time when the 18-month obligation requirement is drawing
> near. For drawdown and reporting purposes, a grantee can allocate the
> project delivery costs of property acquisitions (or considering
> purchasing) across all properties under the acquisition eligibility
> category.

[]{.mark}

*Posted 10/31/08* **If the former owner is still living in a property,
as a tenant, in a lender-foreclosed property, would the NSP grantee be
required to pay relocation in order to acquire the property?**

> In the situation where you have a home that "has been foreclosed upon"
> (required by NSP), the former-owner who is still in the property is
> usually no longer an owner (State law is going to dictate here). The
> former owner may be a tenant, if the new owner (the lender) has
> allowed them to stay under a lease agreement...or, they may not be a
> legal occupant and may be subject to a pending eviction (again, state
> law will dictate here). So, grantees need to be very careful about
> determining an "occupant's" status and entitlements. An unlawful
> occupant (see 49 CFR 24.2(a)(29)) who is displaced for an NSP-funded
> acquisition will not be entitled to relocation assistance and
> payments. However, a lawful occupant displaced for an NSP-funded
> acquisition will generally be eligible for relocation assistance and
> payments under the URA.

*Posted 10/31/08* **What if a grantee wants to purchase a property under
NSP that is occupied by the former-owner (who is now a tenant under a
lease agreement with the lender), and intends to rehabilitate and
re-sell the property to the former-owner/current-tenant? Would the
tenant be eligible for relocation assistance during rehabilitation? What
if they were not able to purchase the property at a later date?**

> If the grantee does not intend to permanently displace a legal tenant
> during the acquisition and rehabilitation of a property, the grantee
> can provide the tenant with a Notice of Non-displacement (see Handbook
> 1378, page 2-4, D and the sample guide form in Appendix 4). You will
> find our Handbook on the web at
> [[www.HUD.gov/relocation]{.underline}](http://www.hud.gov/relocation)
> . If you require a legal tenant to move temporarily for rehabilitation
> of the property, you must pay temporary relocation costs (see page
> 2-8, paragraph 2-7 of the Handbook).
>
> Pitfalls: Are you sure that the rehabilitation work will be completed
> in less than a year (maximum time for temporary relocation)? Do you
> know what the sales price will be based on the NSP rehabilitation
> requirements? Are you sure that the tenant will be financially capable
> of purchasing the property after the rehabilitation is done and you
> are ready to sell the property to them?
>
> If the tenant is not financially capable of purchasing the property at
> the end of your proposed "lease to own" agreement, will you allow them
> to continue to rent or will you require them to move (pursue
> eviction)? There are "eviction for cause" standards in the URA at 49
> CFR 24.206. The issue may become what provisions relating to down
> payment or other program eligibility requirements are stated in the
> lease agreement and whether failure to meet those terms by some
> specified point in time would be considered "material" and is the
> nature of the breach "serious" or "repeated" and would be considered a
> basis for eviction under local law.
>
> It is quite possible that evicting or requiring a non-purchasing
> tenant to move for failure to meet the purchase requirements of your
> NSP program may make them eligible for relocation assistance. It is
> critical that you properly structure your "lease to own" agreement and
> program in accordance with federal, state, and local law and that you
> adequately pre-screen rent-to-own homebuyers before entering into an
> agreement with them. This may be a very risky program design.
>
> **There is confusion about whether NSP funds can acquire any "real
> property" or only "homes and residential properties". Can the NSP
> funds be used to rehabilitate foreclosed properties that are not
> residential when those activities will further neighborhood
> stabilization, such as a community grocery store?**
>
> Yes, under Eligible Use E, a grantee may acquire [demolished or
> vacant]{.underline} properties (including vacant structures) that are
> not residential for redevelopment. As noted in the question, these
> must generally be located in targeted areas of greatest need and
> support the activities in the area that are acquiring, repairing, and
> selling foreclosed or abandoned houses. Eligible Uses A, B, and C are
> limited to homes and residential properties.
>
> **If an NSP grantee or subrecipient purchases a vacant foreclosed home
> with NSP funds and uses other private financing for the
> rehabilitation, can the LMA national objective be used, meaning the
> home could be sold to a household over 120% AMI (provided that the
> home is located in a low-mod area in accordance with the LMA/LMMA
> national objective)?**
>
> No, this is not allowed in the NSP program. While it is true that the
> LMMI neighborhood will benefit indirectly from the acquisition and
> rehabilitation of a vacant home, the NSP Notice is clear that the
> primary beneficiary must be an LMMI household. As in the CDBG program,
> all housing rehabilitation activities must meet the national
> objectives as housing, not area benefit. The NSP Notice specifically
> states that an activity meets the HERA national objective if the
> activity "provides or improves permanent residential structures that
> will be occupied by a household whose income is at or below 120% of
> area median income".

*Posted 11/7/08* **If a non-profit wants to open a homeless shelter and
they buy the property for the shelter before NSP funding is available,
would the property still be considered vacant? If so, can a non-profit
own a piece of property that is vacant and redevelop it?**

> A nonprofit can undertake a public facility under 24 CFR 570.201(c),
> as part of Eligible Use E (Redevelopment). Under that regulatory
> provision, a nonprofit can own or operate a public facility provided
> that its services are available to the general public.
>
> From the question, HUD assumes that the grantee or the nonprofit
> entity intends to use some source of funds other than NSP funds to
> acquire the property. Ownership of the property has no bearing on
> whether it is vacant, under Eligible Use E. A vacant property is one
> on which the land and/or buildings are vacant (unoccupied). If there
> are no structures on the property, then the vacant property can be
> redeveloped (a homeless shelter built on it) under Use E. If there are
> blighted structures on the property, the grantee or nonprofit could
> use other funds to demolish those structures; the property would then
> be vacant and can be redeveloped under Use E. If, however, the grantee
> or the nonprofit wishes to also use NSP funds to demolish any
> structures on the property, the demolition itself must be eligible
> under use D, and thus the buildings must be blighted. The grantee and
> the nonprofit should be aware that their acquiring the property with
> other funding may have implications regarding the applicability of
> Environmental and Uniform Act requirements, since NSP funds are
> clearly envisioned for eventual use in this project.

*Posted 11/7/08* **We are considering a rent to own program, where the
property is first rented to an income qualified family while we work
with them to save a down payment and get their credit improved. If
something happens where it becomes necessary to evict the tenant later,
will we have to pay relocation benefits?**

> Under the URA, a person who is evicted for cause (see 49 CFR 24.206)
> is not eligible for relocation assistance. The complicating factor
> here might be what is behind the question---do they anticipate
> evicting the tenant because at some point in time the tenant may be
> unable to fulfill the purchase requirements or are they anticipating
> that the tenant may become delinquent on the rent (which would clearly
> fit the eviction for cause requirements)?

*Posted 11/7/08* **Can NSP funds be used to refinance existing mortgages
and prevent foreclosure?**

> No. NSP funds may not be used to refinance existing mortgages and
> prevent foreclosure. The program was designed to stabilize communities
> through acquisition and redevelopment of properties that have already
> been foreclosed or abandoned. NSP grantees should design activities
> based on the eligible activities listed in the NSP Notice.

*Posted 11/7/08* **URA regulations require grantees to send a letter to
the sell(Bank) regarding the occupancy and other conditions 60 days
before closing. Does this requirement apply to NSP? Can the appraisal be
completed by the lender holding the property or must the acquiring
entity order the appraisal?**

> The NSP Notice requires that the buyer obtain an appraisal that is
> issued within 60 days from the date of the final offer. We realize
> that the initial offer may not comply with the purchase discount
> requirements so multiple offers may be made before a final purchase
> price is agreed upon. There is no time limit for "closing" an
> acquisition under NSP.
>
> The Agency must comply with 49 CFR 24.103 of the URA, which requires
> that the Agency order and obtain the appraisal.

*Posted 11/7/08* **If a jurisdiction institutes a lease-purchase
program, will the grantee be required to relocate the tenant if he/she
does not qualify to purchase the property at the end of the lease
term?**

> Assuming this is a new tenant\--who was not in the property at the
> time of the Initiation of Negotiations (ION) for acquisition,
> demolition, rehabilitation or conversion of a lower income unit for an
> NSP-funded project---someone the URA would consider a "subsequent
> tenant": if before the tenant agreed to occupy the unit, they were
> provided with a Move in Notice (see 24 CFR 570.606(b)(2)(ii)(B)) that
> advised them they were occupying an NSP-funded project for a
> lease-to-own program and that if they were unable to meet the
> eligibility requirements to become an owner within the program's time
> limit that they would not be eligible for relocation assistance under
> either the URA and/or section 104(d) (see Appendix 29 of Handbook 1378
> for a sample Move in Notice) that neither the URA nor 104(d)
> [relocation payments may be an issue]{.underline}. The key is that the
> tenant know the possibility that they could be displaced BEFORE they
> move in (so they could choose not to move in if they did not want to
> take the chance and agree to the terms of the project).
>
> This brings to mind the eviction for cause standards in the URA 49 CFR
> 24.206. The issue may become what provisions relating to downpayment
> or other program eligibility requirements are stated in the lease and
> whether failure to meet those terms by some specified point in time
> would be considered "material" and is the nature of the breach
> "serious" or "repeated" and would be considered a basis for eviction
> under local law.
>
> It is quite possible that a non-purchasing tenant may be made eligible
> for relocation assistance for failure to meet the homeownership
> requirements at a later date if they were evicted or asked to leave
> for failure to meet the requirements.

*Posted 11/13/08* **What is the Initiation of Negotiations (ION) date
for NSP (the date on which a tenant-occupant becomes eligible for
relocation assistance and must be issued a Notice of Eligibility)?**

> If the tenant is displaced as a result of privately undertaken
> rehabilitation, demolition, or acquisition, NSP uses the definition of
> ION found at 24 CFR 570.606(b)(3) of the CDBG regulations: The date of
> the execution of the loan or grant agreement between the grantee (or
> State or state recipient, as applicable) and the person owning or
> controlling the real property. Otherwise, the definition found in the
> URA at 49 CFR 24.2(a)(15) is applicable.

*Posted 11/13/08* **Must a recipient of NSP funds (grantee, subgrantee,
non-profit organization, individual homebuyer, etc.) who will use NSP
funds to acquire foreclosed property under the voluntary acquisition
provisions of the Uniform Act (URA) provide written notice to the owner
(bank, mortgagee, etc.) that it will not acquire the property if
negotiations fail to result in agreement and inform the owner in writing
of what it believes to be the fair market value of the property?**

> Yes. The URA acquisition requirements apply to [anyone]{.underline}
> who uses NSP funds (or any Federal financial assistance) to acquire
> property including any Agency, non-profit, or individual homebuyers
> who use federally-funded downpayment or other financial assistance. To
> meet the requirements at 49 CFR 24.101(b)(1)-(5) (commonly known as
> the URA voluntary acquisition requirements), the owner of record must
> be notified in writing that Federal financial assistance will be used
> in the transaction and that if agreement cannot be reached through
> negotiation, that the acquisition will not take place. Further, under
> the NSP, an appraisal of foreclosed property must be made to determine
> the current fair market value 60 days prior to making the final offer
> and the owner must be advised that, under NSP, the acquisition price
> must be at a discount from the fair market value (the offer price
> should reflect the discount proposed by the buyer). There are specific
> URA voluntary acquisition requirements that must be met depending on
> whether or not the buyer has the power of eminent domain and will not
> use it (see 49 CFR 24.101(b)(1)(i)-(iv)) or if the buyer does not have
> the power of eminent domain (see 49 CFR 24.101(b)(2)). Any acquisition
> under possible threat of eminent domain, cannot be considered a
> "voluntary acquisition" (even if the seller is willing to negotiate).
> HUD has developed a number of sample guideforms to assist NSP grantees
> in meeting these requirements.  The guideforms and other information
> and resources are available on the NSP Acquisition & Relocation
> Resources page at:
> <http://www.hud.gov/offices/cpd/library/relocation/nsp/index.cfm>

*Posted 11/13/08* **On page 58331, the NSP Notice requires the use of
the URA appraisal process. Does that mean that grantees must do both an
appraisal and a review appraisal?**

> No. The Notice specifies that the URA appraisal requirements of 49 CFR
> 24.103 must be used in the valuation of NSP funded "foreclosed upon"
> properties. The URA review appraisal requirements of 49 CFR 24.104 are
> not required, nor is an appraisal review required. However, NSP
> grantees and subrecipents may choose to adopt an appraisal review
> process and URA appraisal review requirements for NSP funded
> acquisitions if they so choose.

*Posted 11/13/08* **Must appraisers meet all state certification
requirements and be FIRREA certified or could knowledgeable grantee
staff perform this function?**

> Persons performing appraisals of NSP funded acquisitions of
> "foreclosed upon" properties must meet the appraisal qualifications of
> 49 CFR 24.103(d). All persons performing such valuations
> [must]{.underline} be qualified to perform an appraisal, even if they
> are on staff. The regulations at 49 CFR 24.103(d)(2) only require
> contract "fee" appraisers to be state licensed or certified. Staff
> appraisers are not required to possess such qualifications, however,
> they must be qualified. In most circumstances, staff appraisers
> possess a state appraisal license or certification, even though they
> are not required to do so by regulation.

*Posted 11/13/08* **Can NSP funds be used to provide financial
assistance to relocate a tenant from an area defined as "greatest need"
in a grantee's action plan, if the tenant must move but is not displaced
by an NSP-funded acquisition or other activity?**

> No. NSP cannot be used to provide financial assistance to persons not
> displaced by an eligible NSP activity.

*Posted 11/13/08* **How do we define "project" under NSP for the purpose
of complying with the URA?**

> The URA regulations define "program or project" at 49 CFR 24.2(a)(22).
> There is no alternative definition provided under NSP.

*Posted 11/13/08* **If there were tenants in the property when the
lender/servicer completed foreclosure and the lender/servicer completes
the eviction process prior to initiation of negotiations for the sale of
the property to a locality that uses NSP funds to acquire the property,
does the locality need to comply with the 12-month look-back provision
of the URA?  **

> There is no 12 month "look back" period in the URA statute or
> regulations. Any legal occupant who is evicted for the purpose of
> evading a relocation obligation may be eligible for assistance. The
> URA does address "Eviction for Cause" at 49 CFR 24.206.
>
> Under section 104(d), HUD looks at "vacant occupiable" lower-income
> dwelling units that have been occupied within 3 months before the
> execution of an agreement for one-for-one replacement purposes and we
> would see this as a reasonable timeframe for any NSP grantee to
> consider when approaching an owner about purchasing a foreclosed
> property under this new program (for some level of assurance that the
> owner did not evict a legal occupant in order to sell the property as
> vacant to the grantee). However, a grantee must use due diligence when
> approaching any owner about purchasing property with Federal funds,
> particularly if the property is currently occupied or may have been
> recently occupied, to assure that the project does not influence the
> owner's decision to evict an occupant and cause their displacement in
> order to participate in the grantee's program.
>
> Where an owner either evicts a tenant in order to sell a property as
> "vacant" to an Agency for a HUD-funded project, HUD will usually
> presume that the tenant was displaced "for the project." In such
> cases, the Agency would be responsible for finding the displaced
> tenant and providing appropriate relocation assistance, unless the
> Agency can prove that the tenant's move was not attributable to the
> project (see HUD Handbook 1378, Chapter 1, paragraph 1-6 J.1,
> regarding evictions for additional guidance).
> <http://www.hud.gov/offices/adm/hudclips/handbooks/cpdh/1378.0/1378chp1CPDH.pdf>

*Posted 11/13/08* **The NSP Notice states that the 104(d) one for one
unit replacement requirements are waived. Are the 104(d) relocation
requirements also waived? It is likely that many NSP activities will
involve demolition or conversion so 104(d) might well be triggered.**

> No, as stated in the Notice, HUD is not specifying alternative
> requirements to the relocation assistance provisions at 42 U.S.C.
> 5304(d). The 104(d) relocation assistance provisions of 24 CFR 42.350
> are applicable to NSP funded projects and have not been waived.
> Additionally, NSP funding recipients must also comply with the 104(d)
> Residential Anti-displacement and Relocation Assistance Plan (RARAP)
> requirements of 24 CFR 42.325, which also have not been waived.

*Posted 11/13/08* **If the grantee buys properties under NSP and allows
a tenant to move in to a property prior to sale, rehab or demolition
under eligible activities (B) or (D), would that tenant be entitled to
relocation assistance if they are later required to move out? If yes,
can this requirement be mitigated by using the "move-in notice" prior to
when the tenant signs their lease? Note that this issue could include
both residential and commercial tenants if the grantee allows these
tenants to occupy the acquired site.**

> If a new residential-tenant (who was not in the property at the time
> of the Initiation of Negotiations (ION) for acquisition of a property
> for an NSP-funded project\--someone the URA would consider a
> "subsequent tenant") were provided with a Move in Notice that complies
> with 24 CFR 570.606(b)(2)(ii)(B) prior to leasing or occupying the
> property (see Appendix 29 of Handbook 1378 for a sample Move in
> Notice), then neither the URA nor section 104(d) relocation payments
> would be applicable. The key is that the tenant be fully informed of
> the possibility that they could be displaced for the planned project
> BEFORE they move in (so they could choose not to move in). This same
> principal could be applied to non-residential tenants who receive a
> Move in Notice based on the URA definition of "persons not displaced"
> under 49 CFR 24.2(a)(9)(ii)(B) and (C) since the non-residential
> tenant would have moved in after ION and be fully informed of the
> pending project. We do not see how this could apply to an activity
> funded under D of the NSP notice (demolish blighted structures), as
> any property that is blighted would not seem to be suitable for
> occupancy.

*Posted 11/13/08* **Normally under the URA, if a grantee is purchasing
all or substantially all of the properties in a target area, those
purchases must be considered to be "involuntary". Under NSP, if a
grantee is buying all or substantially all of the abandoned or
foreclosed properties in a targeted area (for example for a land bank or
an area of greatest need), would those acquisitions be considered
"involuntary" and if yes, would the URA involuntary sale rules apply or
would the NSP Notice text on page 58339 mean that the voluntary process
would be followed?**

> The URA does not use the terminology "target area." We believe this
> question relates to "voluntary" acquisition requirements which must be
> fulfilled under 49 CFR 24.101(b)(1)(ii). While a grantee may be
> planning to purchase all of the abandoned or foreclosed properties in
> a targeted area, it is unlikely that this purchase will encompass all
> property located in an area (some properties will not be abandoned or
> foreclosed or for sale) and not all such properties may ultimately be
> acquired by the grantee if agreement cannot be reached. Unless this
> acquisition is being made under the threat of eminent domain or for a
> specific designated purpose with defined boundaries that are limiting
> (such as construction of a multi-family housing project or a community
> center or park on a site defined as two specific blocks), we do not
> see that purchasing foreclosed properties for a land bank that has no
> specific end-result planned for the property at the time of the
> acquisition or make acquisitions of foreclosed properties that are
> randomly available in a specific zip code or neighborhood subject to
> the involuntary requirements. The acquisition of abandoned properties
> for a land bank is not an eligible use of NSP funds under (C) of the
> NSP notice.

*Posted 11/13/08* **A bank has foreclosed on a property and a tenant in
the property is forced to move as a result. There are no Federal funds
involved in a purchase of the property or reuse. The tenant doesn't know
what to do and doesn't have immediate funds to find another place. Can a
city use NSP funds to provide relocation assistance (security deposit,
first month's rent, etc.)?**

> The tenant is not eligible for URA assistance or payments, nor may NSP
> funds be used to assist this tenant (since they were not displaced by
> the NSP program). However, the City could develop a program using CDBG
> funds to provide optional relocation assistance (see 24 CFR
> 570.606(d)).

*Posted 11/13/08* **If NSP funds are combined with other federal funds
in a project, including CDBG or HOME, would the NSP rules apply or the
standard URA and 104(d) rules, including one for one replacement of
units?**

> It is possible that both would apply. The answer would depend on the
> nature of the project and the use of funds. If NSP funds are used to
> purchase a foreclosed property, then the acquisition is subject to the
> NSP requirements (appraisal, discount, etc.). If HOME funds are used
> for rehabilitation of this foreclosed property into rental housing
> affordable to low-moderate income persons, then the HOME rules on
> income eligibility, HOME rents, affordability period, etc. are
> applicable. If CDBG funds are used for demolition to convert a
> low-moderate income dwelling unit that was on this NSP-acquired
> property into a park, then the one for one replacement requirements of
> section 104(d) are applicable (even if NSP was used for acquisition of
> the property).

*Posted 11/13/08* **The section 104(d) one-for-one replacement
requirement for lower income dwelling units demolished or converted has
been replaced in NSP by a disclosure of the units affected and reporting
on new low- and moderate-income units created. Could a jurisdiction
count any affordable units produced under the NSP program toward meeting
its one-for-one replacement requirement under another project funded
with either CDBG or HOME?**

> Yes. An affordable unit created with NSP-funds may be counted as a
> replacement unit against a grantee's one-for-one replacement
> obligation created as a result of the use of CDBG or HOME funds for
> another project, provided the NSP unit meets the requirements of 24
> CFR 42.375(b).

*Posted 11/13/08* **This is a multi-part question:**

1.  **If the grantee buys property for the purposes of a land bank under
    eligible activity (C) and allows tenants to move into the units
    pending their final use, would that tenant be entitled to relocation
    assistance if they are later required to move out? The issue with
    this eligible activity is that grantees have 10 years to re-use the
    property so it could presumably be many years later that someone
    would be asked to move out once a final use is determined.**

> If no person was displaced by the acquisition of the property for the
> land bank, then the URA is not applicable at the time of the
> acquisition. If the grantee allows a tenant to move into the acquired
> property prior to a planned federally-funded re-use project, the
> tenant-occupant is not eligible for relocation assistance as a result
> of the original acquisition (see 49 CFR 24.2(a)(9)(ii)(B)). However,
> the tenant-occupant may be eligible for relocation assistance if they
> are made to move for a planned re-use project that is funded with
> federal financial assistance.

2.  **Further, the source of funds for the re-use of the property may
    not be NSP or other federal resources. If the re-use of the property
    is paid by state, local or private funds and the tenant is then
    asked to move out, would their move be considered to be caused by a
    "federal project" and thus would the URA be triggered at that
    point?**

> A tenant who is required to move for a planned re-use project that is
> not federally-funded, would not be subject to the URA (however, such a
> move may be subject to state or local relocation requirements).

3.  **The issue for grantees will be keeping track of the status of
    these properties over time as they are re-used. Note that this issue
    could include both residential and commercial tenants if the grantee
    allows these tenants to occupy the land banked structures.**

> Any low- or moderate-income property assisted with NSP funds is
> subject to the alternative reporting requirements in the notice (see
> section K).

*Posted 11/20/08* **If a home is purchased and rehabilitated with NSP
funds:**

> **Is there a minimum threshold for reselling the home?**
>
> No. There is no minimum price threshold so long as the sale of the
> home conforms to the NSP affordability requirements.
>
> **Does the buyer's purchase discount count against the 50% limitation
> on direct assistance to homebuyers?**
>
> The 50% limit applies to down payment assistance. Other means of
> writing down the purchase price such as purchase price discounts, soft
> second mortgages, etc. do not count against the down payment
> assistance cap.

*Posted 11/20/08* **Does NSP trigger Davis Bacon requirements when the
funds are used solely for down payment assistance or closing costs?**

> No. Davis Bacon applies only when rehabilitating or constructing 8 or
> more units.

*Posted 12/01/08* **Can a property be purchased through a short sale
using NSP funds?**

> Short sales are typically used to prevent a foreclosure. Owners use
> the proceeds of short sales to settle outstanding obligations with
> lenders. As such, the title to the property remains in the hands of
> the homeowner until the sale is executed. Accordingly, a short sale
> property would not meet the definition of a "foreclosed upon" property
> provided in the NSP Notice.

*Posted 12/23/08* **We are negotiating with private lenders and GSEs
regarding negotiated purchase prices for foreclosed properties. The city
will not actually acquire the properties, but will provide financing
assistance to homebuyers to purchase the homes from the title-holder or
a nonprofit will purchase the properties. One GSE has agreed to sell
houses for \$100 (for houses under \$20,000) or 50% of the appraised
value (for those above \$20,000); another GSE has agreed to sell for \$0
(for houses under \$20,000) or a negotiated discount (for those above
\$20,000). The purchaser will be charged \$350/property in closing
costs. Do NSP requirements mandate that we have current appraisals if we
are using NSP funding to cover transaction costs, despite the fact that
the properties themselves are being sold for \$0 therefore eliminating
any discrepancy in value that would necessitate a refreshed appraisal?**

> HUD agrees that there is a de minimus nominal acquisition cost below
> which it is not necessary to obtain an appraisal. For example, if a
> property is being donated or "sold" for zero, or if the sale price is
> less than the average market cost of an appraisal, HUD agrees that an
> appraisal is not needed. However, if the negotiated purchase price is
> established as some percentage of the property value, then the grantee
> must obtain a current appraisal upon which to base this determination
> of current market appraised value.

**ACTION PLAN AMENDMENTS**

> **What is HUD's expected turn-round time for reviewing and approving
> NSP grantees\' action plan amendments?**
>
> []{.mark}
>
> The Secretary of HUD has stated that HUD will review and approve
> amendments as quickly as possible. The absolute deadline for
> completing the action plan amendment review process is February 13,
> 2009.

*Posted 10/31/08* **Does the requirement to amend the local
jurisdiction's plan refer to the one-year action plan, or the 5-year
consolidated plan?**

> The amendment that NSP grantees are required to submit refers to a
> substantial amendment to the 2008 action plan. Instructions and
> guidance on completing the amendment are located on the NSP website
> under the heading "Required Submissions for Eligible NSP Grantees."

*Posted 02/02/09* **If the NSP activities identified in our action plan
amendment are not approved or change what should we do?**

> If there are any problems with the action plan amendment submitted by
> the state, HUD will notify the state as quickly as possible to address
> the issue. If the NSP activities identified in an approved action plan
> amendment happen to change, the NSP grantee must allow for a *15-day
> public comment period* before submitting a new action plan amendment
> to HUD.

**AFFORDABILITY REQUIREMENTS**

*Posted 11/7/08* **How does HUD define "continued affordability" and how
long do NSP grantees have to monitor NSP-funded activities?**

> As stated in the NSP Notice, Grantees shall ensure, to the maximum
> extent practicable and for the longest feasible term, that the sale,
> rental, or redevelopment of abandoned and foreclosed-upon homes and
> residential properties under this section remain affordable to
> individuals or families whose incomes do not exceed 120 percent of
> area median income or, for units originally assisted with funds under
> the requirements of Section 2301(f)(3)(A)(ii), remain affordable to
> individuals and families whose incomes do not exceed 50 percent of
> area median income. 
>
> HUD will consider any grantee adopting the HOME program standards at
> 24 CFR 92.252(a), (c), (e), and (f), and 92.254 to be in minimal
> compliance with this standard and expects any other standards proposed
> and applied by a grantee to be enforceable and longer in duration.

**DEMOLITION**

*Posted 11/7/08* **Can NSP funds be used for demolition of abandoned
properties regardless of whether they have been foreclosed or not?**

> Yes, this may be eligible under eligible use D, provided the
> structures meet a local definition of "blighted".

**DISTRIBUTION OF FUNDS**

> **How can residents in my community access NSP funds to combat the
> foreclosure crisis we are facing?**
>
> Please be advised that NSP grants are only distributed to designated
> NSP grantees---state agencies and local governments. [HUD does not
> make grants directly to individuals or nonprofit
> organizations.]{.underline} Each grantee will have to determine how
> best to allocate its NSP grant so long as it complies with the
> eligible uses described in Title III of the Housing and Economic
> Recovery Act of 2008. When NSP grantees submit their action plan
> amendment to receive their NSP allocation, they will indicate how they
> plan to manage the funds. Local governments & states can distribute
> funds to other local governments, to nonprofits and other governmental
> entities, and can carry out activities directly. In some cases, NSP
> grantees may choose to manage their grants collaboratively with other
> NSP grantees or contract out to a private organization. Individual
> citizens or nonprofits should check with their local government or
> state to find out how they may receive assistance. Further, HUD will
> post contact information for each NSP grantee as soon as the
> information becomes available

*Posted 10/31/08* **An Urban County has four cooperating cities which
participate in its CDBG program. Several NSP-related questions arise.**

1.  **Can the County fund only in the unincorporated part of the
    County?**

> The NSP funds must be targeted to areas of greatest need. If those are
> all in the unincorporated part of the county, then it can fund only in
> those areas.

2.  **Can the County fund projects in cities that are not its urban
    county partners?**

> Yes, subject to the "greatest need" requirement and with an agreement
> between the county and the non-partner cities. The county must also
> document compliance with section 570.309 of the CDBG regulations. This
> section requires urban counties to determine that such an activity is
> necessary to further the purposes of the HCD Act and that reasonable
> benefits will accrue to residents within the jurisdiction of the
> grantee.

3.  **Can any city within the urban county (cooperating or not) apply to
    the state and receive NSP state funding?**

> Yes, as long as the state's rules allow it, any city could apply, as
> could the urban county itself.

*Posted 11/7/08* **Can a participating city that is a member of an urban
county, request NSP funds from both the county and the state, as long as
the funds received from the state and the county are not used on the
same project/activity?**

> Any city or town that receives funds from a county NSP grantee as a
> participating jurisdiction in a county\'s program may also receive
> funds from the state. It is up to a state as part of its program
> design to decide whether it wishes to fund a city or town directly or
> to channel funding through the county for use in the city or town.

**DRGR**

*Posted 11/20/08* **When entering information into DRGR, where do I put
the NSP grant amount that has been allocated to an activity?**

> When adding activities into DRGR use the field called "Total Budget,
> Disaster Recovery Grant," to put the NSP grant amount that has been
> allocated to an activity field and **do not** use the "Other Funds"
> field for NSP grant information. The distinction is crucial because
> NSP funds cannot be drawn down unless they are properly identified in
> DRGR.

*Posted 02/06/09* **In the DRGR system, where do I enter land banking
activities?**

> We recently added activity types called Land Banking-Acquisition (NSP
> Only) and Land Banking-Disposition (NSP Only). Please choose the
> applicable activity type when adding or editing activities.

*Posted 02/06/09* **How do I enter activities in DRGR that do not match
our action plan?**

> We recommend that grantees break out local programs whenever there is
> a different national objective, activity type or responsible
> organization administering the activity. NSP grantees should select
> the DRGR activity type that is most applicable to the NSP activity
> category being implemented.

*Posted 02/06/09* **How do NSP grantees track the 25% low-income
set-aside as a separate activity in DRGR?**

> In DRGR, grantees should select *NSP Only-LMMH-25% Set-Aside* under an
> activity's national objective to track activities that meet the 25%
> low-income set-aside requirement as a separate activity. All other
> activities should be tracked with *NSP Only-LMMI* or *NA-Admin* for
> their national objective. Please note, the LMI, SB and UN national
> objectives are not applicable to NSP and should not be used for this
> program.

**ELIGIBLE-USE SCENARIOS**

> **Can an NSP grantee offer NSP funding to a person whose home has been
> foreclosed in order to buy back the same home or another home? Can a
> nonprofit purchase a foreclosed home and sell it back to the original
> owner whose home was foreclosed?**
>
> Nothing would prevent a grantee from taking these actions so long as
> the person receiving the NSP assistance meets the income
> qualifications. However, it is up to the grantee to decide whether
> this is an appropriate use of their funds.
>
> **Can NSP funds be used to redevelop a public facility (Eligible Use
> E) that will be owned and operated by a nonprofit (For example,
> turning a vacant library into a homeownership center owned and
> operated by a nonprofit organization)?**
>
> Yes. Public facilities can be owned and operated by nonprofit
> entities. 24 CFR 201(c) provides the regulatory parameters for public
> facilities. It explains that nonprofit entities may acquire title to
> public facilities so long as these facilities are open for general use
> by the general public during normal hours of operation.

*Posted 10/31/08* **Can clients eligible to participate in the Section 8
Homeownership program also participate in financing provided through the
NSP? For example:**

1.  **Can a Section8 Homeownership client purchase a property that was
    acquired with NSP funding and made available for sale by a
    subrecipient?**

2.  **Can a Section 8 Homeownership client apply for NSP financing to
    acquire a home and then pay the mortgage with the Section 8
    Homeownership Voucher?**

> Yes, persons with downpayment assistance, participants in
> lease-purchase programs, and Sec. 8 homeownership voucher holders may
> use those mechanisms to purchase an NSP home, whether from a
> subrecipient or directly from the unit of government. Additionally,
> prospective purchasers may receive financial assistance from the NSP
> program, through such means as downpayment assistance, to purchase
> houses that have been acquired with NSP funds. The grantee must ensure
> through its underwriting that such forms of dual assistance do not
> overly subsidize the purchase, but they are allowed.
>
> **New construction is an eligible activity under NSP, does the new
> construction have to follow the CDBG requirements and be done under 24
> CFR 570.204 by a Community-Based Development Organization?**
>
> HUD does not have any specific restrictions on doing new construction
> of housing beyond the normal CDBG program requirements. New housing
> construction does not have to be done by a CBDO to be eligible under
> the NSP program.

*Posted 11/7/08* **If a municipality completes a tax foreclosure on a
property and keeps it vacant waiting for the market to rebound, would
such a property be eligible for NSP funding?**

> This could be eligible under eligible use C as part of a land bank or
> it could be eligible under eligible use B if the municipality is
> rehabilitating homes that will be sold, rented or redeveloped for
> income eligible individuals.

*Posted 11/7/08* **Would such an activity still be eligible if the
properties had been foreclosed and vacant versus foreclosed and
operating under this scenario?**

> No, eligible use B [does not]{.underline} require NSP assisted homes
> to be vacant. It only requires that they be abandoned or foreclosed.
> Please see NSP Notice for definitions of abandoned and foreclosed.

*Posted 11/7/08* **Do the resale/recapture provisions apply to
properties assisted with NSP funding?**

> Yes. The resale recapture provisions to ensure continued affordability
> do apply. In its NSP action plan substantial amendment, a grantee will
> define ''affordable rents'' and the continued affordability standards
> and enforcement mechanisms that it will apply for each (or all) of its
> NSP activities. HUD will consider any grantee adopting the HOME
> program standards at 24 CFR 92.252(a), (c), (e), and (f), and 92.254
> to be in minimal compliance with this standard and expects any other
> standards proposed and applied by a grantee to be enforceable and
> longer in duration (Note that HERA's continued affordability standard
> is longer than that required of subrecipients and participating units
> of general local government under 24 CFR 570.503 and 570.501(b)).

*Posted 11/7/08* **There will be a period of time between acquisition,
rehabilitation, and resale where the NSP grantee will need to maintain
the property (e.g. grass cutting, snow removal, insurance, etc.). Can
the NSP grantee recover those costs from NSP funds as a delivery cost
related to the activity?**

> Yes. Several sections of the NSP Eligible Uses, which are correlated
> with CDBG Eligible Activities on page 58338 of the NSP Notice, and
> excerpted below, allow Disposition. The CDBG regulations specifically
> permit temporary property maintenance as part of Disposition. The only
> constraint for NSP is that you cannot add these costs to the eventual
> purchase price.

*Posted 11/7/08* **Can NSP funds be used to rehabilitate properties
already in the municipality's portfolio that were abandoned, vacant,
foreclosed upon, or subject to tax sale prior to the housing crisis? If
no, what is \"prior to the housing crisis?\" I don\'t see anything in
the NSP Notice to support or negate this use.**

> Yes. NSP grantees may use properties already in portfolio that meet
> the definitions of abandoned or foreclosed in the NSP Notice. Keep in
> mind the following advice from the Guide to NSP Eligible Uses, which
> you can find at this link:
>
> <http://www.hud.gov/offices/cpd/communitydevelopment/programs/neighborhoodspg/nspeligibleuses.doc>

*Posted 11/7/08* **Will a portion of NSP allocations be set-aside for
supportive services?**

> There are no specific set-asides for any kind of use under NSP.
> However, grantees could use NSP funds to support such services in
> certain circumstances. It will depend on the grantee, the housing
> stock, etc. Please see the eligible uses in the NSP Notice for further
> details.

*Posted 11/7/08* **Can a veteran preference of any type be placed on the
housing produced using NSP funds?**

> A veteran\'s preference would not violate section 109
> nondiscrimination requirements or any other NSP/CDBG requirements.

*Posted 12/01/08* **An NSP grantee acquires a home for \$100,000;
rehabilitation costs \$100,000; by NSP requirements the maximum sale
price would be \$200,000. Can the home be resold to an income eligible
individual for \$100,000 in order to comply with the NSP affordability
requirements?**

> The poles between which you are working are maximum homeownership
> assistance payments based on NSP affordability requirements and
> "reasonable costs" determined by OMB Circular A-87. If it costs the
> NSP grantee \$100,000 to subsidize the acquisition and rehabilitation
> costs to make a home comply with the NSP affordability requirements,
> then that would be allowable and not unreasonable. However, if the NSP
> grantee subsidizes the home much further, you would need a solid
> explanation of the reasons to satisfy OMB A-87.

**ENVIRONMENTAL REVIEW**

*Posted 11/7/08* **For a single family home that is being demolished and
rebuilt, what type of environmental review will be required under NSP?
Is a demo/rebuild considered rehabilitation or new construction? If new
construction, will a full Format II be required?**

> The level of environmental review required depends upon the program
> design and project description. The responsible entity should consider
> the use of the categorical exclusion at §58.35(a)(4) which reads:

##### §58.35 Categorical exclusions.

##### Categorical exclusion refers to a category of activities for which no environmental impact statement or environmental assessment and finding of no significant impact under NEPA is required, except in extraordinary circumstances (see §58.2(a)(3)) in which a normally excluded activity may have a significant impact. Compliance with the other applicable Federal environmental laws and authorities listed in §58.5 is required for any categorical exclusion listed in paragraph (a) of this section.

> \(a\) *Categorical exclusions subject to §58.5*. The following
> activities are categorically excluded under NEPA, but may be subject
> to review under authorities listed in §58.5:
>
> (4)(i) An individual action on up to four dwelling units where there
> is a maximum of four units on any one site. The units can be four
> one-unit buildings or one four-unit building or any combination in
> between; or
>
> \(ii\) An individual action on a project of five or more housing units
> developed on scattered sites when the sites are more than 2,000 feet
> apart and there are not more than four housing units on any one site.
>
> \(iii\) Paragraphs (a)(4)(i) and (ii) of this section do not apply to
> rehabilitation of a building for residential use (with one to four
> units) (see paragraph (a)(3)(i) of this section).
>
> "Individual action" as used in §58.35(a) refers to an individual
> approval action about the particular dwelling unit(s) and may include
> new construction, demolition, and/or reconstruction (demolition and
> new construction). However, note that this categorical exclusion does
> not apply to rehabilitation of a building for residential use.
>
> A responsible entity (RE) may apply the categorical exclusion at
> §58.35(a) on an individual application basis, allowing the RE to use
> this categorical exclusion when an individual applicant is submitting
> an application for construction, demolition and/or reconstruction of
> dwelling units. For instance, if the RE designs a program where
> individual applicants will be submitting applications for new
> construction of up to four dwelling units, then each individual
> application may be considered to be categorically excluded per
> §58.35(a)(4)(i). Another example is if the RE designs a program where
> individual applicants will be submitting applications for a project of
> five more housing units on scattered sites when the sites are more
> than 2,000 feet apart and there are not more than four housing units
> on any one site, then each individual application may be considered to
> be categorically excluded per §58.35(a)(4)(ii).
>
> However, it should also be noted that if the program is clearly
> designed and intended to develop a specific block/neighborhood or
> other limited geographic area, then an environmental assessment for
> the program/area will be required.

*Posted 11/13/08* **After an NSP grantee acquires real property with its
NSP funds, are subsequent transfers of real property subject to HUD's
environmental compliance review requirements?**

> All HUD environmental compliance review requirements apply only to
> federally assisted projects. Therefore, as long as the CDBG
> requirements apply to the transfers of title and or the use of the
> property as a result of the transfer, HUD's environmental review
> requirements also apply. For NSP this means that environmental review
> requirements will apply:

1.  When an NSP-acquired or -assisted property is sold to a homebuyer,

> to some other purchaser such as to operate a multi-family building, or
> for a redevelopment purpose, and [no more NSP funds will be
> used]{.underline}; or,

2.  When all NSP funds that have been committed to the property have
    been expended on the property (no more than four years after receipt
    of funds); or

3.  When a land-banked property is dedicated to a permanent use (in no
    more than ten years).

*Posted 11/13/08* **How does the NSP Request for Release of Funds
process apply to a locality receiving both a direct NSP allocation and
NSP funding from the state program?**

> There have to be two separate Requests for Release of Funds from the
> NSP grantee. One would be directed to HUD for the direct NSP
> allocation the locality receives and the other would be directed to
> the State for the NSP State formula funds.

*Posted 11/13/08* **Since land banking is not allowed under the CDBG
program, are there special rules governing how land banking is
assessed?**

> There are no special rules for land banking. However, one must be
> aware of whether land banking the property will result in a change in
> land use. If not, then a compliance review of only related
> environmental laws (§58.5) is required. But if there is a change in
> use, an environmental assessment under the National Environmental
> Policy Act is required too (§58.35(a) (5)).

*Posted 11/13/08* **Are localities receiving NSP funding from the state
program required to participate in the National Flood Insurance
Program?**

> No. Localities receiving NSP funding from the state program are not
> required to participate in the National Flood Insurance Program.
> However, any locality receiving both NSP State formula funds and a
> direct NSP allocation, can only use its direct NSP allocation for
> acquisition or construction (including rehabilitation) of buildings in
> a special flood hazard area (SFHA) if it is participating in the
> National Flood Insurance Program.

*Posted 11/20/08* **If an environmental review and request for release
of funds is completed for a project/activity in a particular location,
is it necessary to perform separate environmental reviews for replicated
projects/activities that take place at the same location?**

> No. HUD regulations (24CFR Part 58.35(b) (7) allow a responsible
> entity that has successfully completed the environmental review, and
> the request for release of funds and certification of compliance
> (RROF) process has been approved by HUD to add supplemental funding to
> the project without performing a new environmental review or RROF if
> the activities, location and environmental conditions have not changed
> from the original review.
>
> HUD regulations 24CFR Part58.35(b) states:
>
> *"Categorical exclusions not subject too §58.5.* The department has
> determined that the following categorically excluded activities would
> not alter any conditions that would require a review or compliance
> determination under the Federal laws and authorities cited in §58.5.
> When the following kinds of activities are undertaken, the responsible
> entity does not have to publish a NOI/RROF to HUD (or the State)
> except in the circumstances described in paragraph (c\] of this
> section. Following the award of the assistance, no further approval
> from HUD or the State will be needed with respect to environmental
> requirements, except where paragraph (c\] applies. The recipient
> remains responsible for carrying out any applicable requirements under
> §58.6."
>
> HUD regulations 24CFR Part58.35(b)(7) describes one such activity. It
> states:
>
> "Approval of supplemental assistance (including insurance or
> guarantee) to project previously approved under this part, if the
> approval is made by the same responsible entity that conducted the
> environmental review on the original project and re-evaluation of the
> environmental findings is not required under §58.47"

*Posted 11/20/08* **Under CDBG environmental regulations, we are
required to complete a formal environmental assessment or EA (per
24CFR58.36) when aquiring/rehabitating/disposing of five or more housing
units that are within 2,000 feet of each other. An EA can take 3-4
months to complete through the FONSI/NOI/RROF/ROF process and may cost
in excess of \$10,000. One of our strategies for the NSP program is to
focus resources on geographical target areas, which could involve
acquiring and rehabilitating owner occupied single units within 2000
feet of each other. Under the NSP guidelines and requirement for
commitment of funds within 18 months, would acquiring and rehabilitating
single units within 2000 feet of each other require an EA?**

> The environmental regulations at 24 CFR 58.35(a)(3)(i) and 58.35(a)(5)
> do not require an environmental assessment when acquiring,
> rehabilitating and/or disposing of five or more existing housing units
> that are located within 2,000 feet of each other. Generally,
> rehabilitation, acquisition and disposition actions are categorically
> excluded from the National Environmental Policy Act (NEPA) and, absent
> extraordinary circumstances (see §58.2(a)(3) for definition of
> extraordinary circumstances), an Environmental Assessment is not
> required.
>
> Rehabilitation of residential buildings (with one to four units) is
> categorically excluded from NEPA, but is subject to review under the
> federal environmental laws and authorities at §58.5 when the density
> is not increased beyond four units, the land use is not changed, and
> the footprint of the building is not increased in a floodplain or
> wetland. (See 24 CFR 58.35(a)(3)). Acquisition or disposition of an
> existing structure is also categorically excluded from NEPA, but
> subject to review under the federal environmental laws and authorities
> at §58.5 provided that the structure will be retained for the same
> use. (See 24 CFR 58.35(a)(5)). In accordance with 24 CFR 58.35(a)(6),
> combinations of categorical exclusions listed in §58.35(a) may be
> combined, allowing for the acquisition, rehabilitation and disposition
> of an existing single family house to be categorically excluded from
> NEPA.

*Posted 11/20/08* **In completing the environmental Appendix A forms, if
we acquire vacant residential structures, rehabilitate and resell them
as residential structures (without any change in the number of dwelling
units) would these actions be considered an increase in residential
density?**

> No. It is HUD policy that where HUD funds are used to rehabilitate or
> reconstruct housing on a site where housing previously existed, 24 CFR
> Part 51, Subpart C does not apply if the number of dwelling units on
> the site is not increased. The responsible entity will need to
> document in the environmental review record that Subpart C does not
> apply because the number of people exposed to hazardous operations is
> not increased. However, if there is an increased number of dwelling
> units on the site, then compliance with 24 CFR Part 51, Subpart C is
> required and the responsible entity must not approve projects located
> at less than the acceptable separation distance from a hazard, as
> defined in §51.201, unless appropriate mitigation measures are
> implemented or are already in place. (See 24 CFR 51.202(a)). The
> acceptable separation distance (ASD) is the distance from above ground
> stationary containerized hazards of an explosive or fire prone nature,
> to where a HUD assisted project can be located. HUD has developed an
> on-line calculation tool to help responsible entities assess the ASD.
> See <http://www.hud.gov/offices/cpd/environment/asdCalculator.cfm>
> Additional guidance on 24 CFR Part 51, Subpart C is available in the
> Department\'s guidebook \"Siting of HUD- Assisted Projects Near
> Hazardous Facilities\" which can be found on-line at
> <http://www.hud.gov/offices/cpd/environment/training/guidebooks/hazfacilities/>
>
> Appendix A refers to recommended format designed to meet the specific
> needs of Region 9. For more information specific to Region 9 forms,
> please contact your Region 9 HUD Environmental Officer. Ernest Molins
> (northern CA, NV, HI and Guam) at 415-489-6731 or
> <Ernest.Molins@hud.gov>. Elizabeth McDargh (southern CA and AZ) at
> 213-534-2578 or <Elizabeth.McDargh@hud.gov>.

*Posted 11/20/08* **We already have CDBG programs in places which have
received environmental clearance (contingent on site specific reviews)
and a Release of Funds from HUD. Certain NSP programs will be the same
as the current CDBG programs. Can NSP funds be considered \'supplemental
assistance\' per 24 CFR 58.35(b)(7), so as not to require another
environmental review and Release of Funds?**

> The environmental review needs to be amended and recertified, as
> appropriate, when there are changes in the scope, magnitude, location
> or environmental circumstances of a proposal. If these factors
> regarding a HUD environmentally approved proposal do not change, then
> the addition of other funds by the same responsible entity will not
> require additional environmental review or certification or clearance.
> However, a determination that the project description (including the
> scope, magnitude, location or environmental circumstances), as
> environmentally approved, has not changed, is required.
>
> In lieu of a Request for Release of Funds/Certification for the new
> NSP funds, the program office may ask the responsible entity to send
> in a copy of this determination and a copy of the first Authority to
> Use Grant Funds issued for the same project.

**FINANCING MECHANISMS**

*Posted 11/7/08* **A grantee wishes to make a loan (the "NSP Loan") to a
non-profit entity (the "Developer") to finance the purchase of
foreclosed upon homes and residential properties for rehabilitation (or
redevelopment) and resale to low- and moderate-income homebuyers. Upon
completion of the rehabilitation (or redevelopment), the Developer will
sell each property to an NSP income eligible homebuyer and take back a
"purchase money mortgage" (i.e., a promissory note secured by a lien on
the property). The payments received by the Developer on the purchase
money mortgages will be used by it in accordance with NSP requirements
to finance the purchase and rehabilitation (or redevelopment) of
additional foreclosed upon properties for subsequent resale to NSP
income eligible homebuyers. The Developer will take back a purchase
money mortgage on each sale. The terms of the NSP Loan may provide for
no interest and no principal amortization until the maturity date, and
may contain such other terms as may be negotiated between the Developer
and the grantee, subject to compliance with applicable NSP requirements.
The NSP Loan terms may also provide for forgiveness of the Developer's
repayment obligations, in whole or in part, upon completion of the
approved activities, as specified in the NSP Loan agreement, in
accordance with NSP requirements.**

*Posted 11/7/08* **Is this activity eligible?**

> The activity can be carried out as a financing mechanism pursuant to
> Section 2301(c)(3)(A) if the grantee provides the NSP funds to the
> Developer as a loan that is evidenced by a promissory note or other
> obligation. The financing mechanism can be used to carry out the
> correlated eligible activities for Section 2301(c)(3)(A) that are
> listed on page 58338 of the NSP Notice published in the *Federal
> Register* on October 6, 2008.

*Posted 11/7/08* **Must the revenue received by the Developer from
payments on the purchase money mortgage be returned to the grantee or
can it be retained by the Developer for similar uses?**

> The NSP Notice provides that revenue received by a private individual
> or other entity that is directly generated by an activity carried out
> pursuant to Section 2301(c)(3)(A) must be provided to the grantee.
> However, since the grantee could immediately use that revenue to make
> another loan to the Developer for a similar activity, the loan
> agreement between the grantee and Developer can provide for continued
> use as described above, subject to compliance with all applicable NSP
> requirements. Grantees are reminded that Section 2301(d)(3) provides
> that, if an abandoned or foreclosed-upon home or residential property
> is purchased, redeveloped, or otherwise sold to an individual as a
> primary residence, then such sale shall be in an amount equal to or
> less than the cost to acquire and redevelop or rehabilitate such home
> or property up to a decent, safe, and habitable condition.

*Posted 11/7/08* **Must the revenue be returned to HUD after five
years?**

> Revenue generated by activities carried out pursuant to Section
> 2301(c)(3)(A) does not have to be returned to the grantee after five
> years.

*Updated 01/23/09* **Given the challenging mortgage market our state
Housing Finance Agency (HFA) would like to create a mortgage revenue
bond loan program that would use prudent underwriting while reaching out
to a lower credit score population with the use of NSP monies to fund a
loan loss reserve for this HFA loan product.**

1.  **What documentation does NSP require grantees to maintain for loan
    loss reserves?**

> HUD expects a grantee to be able to demonstrate that the methodology
> used to determine the interest rate that would be applied to
> individual loans be indicative of the net cost of losses on the loans.
> HUD prefers a methodology that reflects the following approach: the
> interest rate applied to loans should be developed based on estimates
> of future defaults (including timing), recovery rates (including
> timing of recoveries), and other factors (e.g., costs of recovery)
> that would affect the estimates of future losses. The loss rate used
> to determine the amount disbursed into the loss reserve as each loan
> is made should be derived by discounting net cash flows (i.e.,
> losses-recoveries+/- other receipts/disbursements) to the present and
> dividing the result by the net present value of loan disbursements
> over the period that loans will be made. The estimates of future
> losses would normally be based on historical data for comparable
> loans.

2.  **Would at least 25% of the loans covered in the reserve need to be
    under 50% AMI?**

> No, but the use of NSP funds by HFA would be included in the overall
> calculation.

3.  **Would the use of the NSP funds in the loan loss reserve escrow
    account be considered a direct use of NSP funds to each of those
    loans?**

> Yes

4.  **Would the use of these funds in a loan loss escrow require that
    each of the properties in the pool be subject to the Inspections,
    Environmental review, etc , requirements of NSP funds?**

> Yes. If NSP funds are used with respect to any loan, the proceeds of
> that loan must be used in accordance with the requirements that would
> apply if NSP funds had been used directly.

5.  **Is there anything that would prohibit a borrower who uses the HFA
    loan that is backed by the loan loss escrow from using other NSP
    funds for down payment and/or rehab needs, if the NSP funds come
    through another non-profit within the state?**

> NSP funds can be used to supplement financing under private loans so
> long as NSP funds are used in accordance with applicable requirements.

6.  **If there is interest earned on the loan loss reserve fund, it is
    our expectation that the earnings would remain in the loan loss
    escrow and over time provide the credit enhancement to more units.
    Is this acceptable?**

> The methodology described above assumes that the interest earned on
> the loss reserve would be used in conjunction with the initial
> deposited funds to pay losses as they occur. Thus, it is not expected
> that material amounts of interest would be left to carry out
> additional activities.

7.  **Once the program income remittance date passes on July 30, 2013,
    could earnings continue to remain in the growing loan loss escrow
    until all of the loans in the pool have been paid off?**

> Yes. Again, the methodology assumes that funds in the loss reserve
> will be invested and the earnings will be used (in conjunction with
> the original deposit) to pay losses as they occur.

8.  **Would the balance of the loan loss escrow, after all of the loans
    have been paid off, be required to be returned to HUD or could the
    HFA seek a waiver to keep the loan loss fund to continue to be a
    credit enhancement for another generation of loans?**

> If funds remain after all loans are repaid, they should be returned to
> the NSP program accounts and used in accordance with requirements then
> in effect. Note that HUD expects grantees to periodically evaluate
> loss to the loss reserves and adjust the amount in the reserve based
> on actual experience on loans and estimates of future losses.

9.  **If NSP funds are used to finance homes with a 0% interest rate are
    the monthly principal repayments on the loan program income?**

> Yes. The principal repayments received would be used to provide more
> buyers with the same program as funds accrue.

10. **What documentation would be required for HFA to collect from
    program recipients since the NSP funds went to the HFA and not
    directly to the buyer?**

> The HFA would have to document the current market appraised value,
> purchase discount, and income eligibility of the homebuyer.

11. **Is there anything that would prohibit a borrower who uses this HFA
    loan from using any other NSP funds for down payment and/or
    rehabilitation needs, if the NSP funds are from another non-profit
    within the state?**

> No. If other NSP funds are used to supplement the HFA assistance and
> the use of the NSP funds complies with applicable requirements, it is
> possible for a borrower to receive NSP funds for multiple purposes.

*Posted 12/5/08* **Does a servicer of second mortgages derived from
Neighborhood Stabilization Trust funds (CDBG) need to be a HUD approved
servicer?**

> There is no requirement in the NSP Notice regarding qualifications for
> servicers of second mortgages aside from conformance with OMB Circular
> A-87. NSP grantees (cities, states) may impose their own requirements
> in accordance with relevant state and local laws and regulations.

**FORMULA ALLOCATION**

> **How many local communities will receive direct funding from HUD?**
>
> More than 250 local cities and counties received grants as well as all
> 50 states, including Puerto Rico and the District of Columbia. Funding
> is also made available for the four Insular Areas.
>
> **How did you allocate the funding?**
>
> Congress intended this funding be targeted to areas of greatest need
> based on the number and percent of foreclosures, subprime mortgages
> and delinquencies and defaults. Further, Congress also required that
> each state receive at least \$19.6 million. Many states received
> significantly more than this mandatory minimum.
>
> Again, following congressional intent to make sure these funds have
> maximum impact and are targeted to States and local communities with
> the greatest needs, HUD analyzed data from several different sources:

-   The Mortgage Bankers Association *National Delinquency Survey* and
    the Census Bureau's *American Community Survey;*

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-   The Federal Reserve's Home Mortgage Disclosure Act (HMDA) data on
    high-cost loans at greatest risk of default and foreclosure;

-   Office of Federal Housing Enterprise Oversight (OFHEO) on home price
    declines;

-   Unemployment data from the Bureau of Labor Statistics; and

-   U.S. Postal Service data on home vacancies.

> **Why didn't MY community receive a grant\...we have needs too?**
>
> All communities will have access to grants, but Congress was very
> clear that the purpose of this funding was to target those areas with
> the greatest exposure to foreclosures, subprime mortgages,
> delinquencies and defaults. At Congress's direction, we believe we
> have developed a fair and data-driven formula that will do exactly
> that. We also wanted to make certain that this funding will have a
> meaningful impact at the State and local level.
>
> The Housing and Economic Recovery Act of 2008 requires that State's
> must "give priority emphasis and consideration to those metropolitan
> areas, metropolitan cities, urban areas, rural areas, low- and
> moderate-income areas, and other areas with the greatest needs. If
> your state government agrees that certain areas that didn't receive
> direct grants from HUD should get this funding, then it is incumbent
> on your state to target their funds to these areas.
>
> **What will this money do?**
>
> This funding is intended to stabilize neighborhoods. To do this, State
> and local governments can:

-   Buy abandoned or foreclosed homes;

-   Redevelop demolished or vacant properties;

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-   Demolish or rehabilitate abandoned, foreclosed or blighted
    properties;

-   Offer down payment and closing cost assistance to low- to
    moderate-income homebuyers

-   Reuse properties for affordable rental housing

> In addition, these grantees can create "land banks" to assemble,
> temporarily manage, and dispose of vacant land for the purpose of
> stabilizing neighborhoods and encouraging re-use or redevelopment of
> property.

**HOMEOWNERSHIP COUNSELING**

*Updated 02/20/09* **If a homebuyer completed homeownership counseling
prior to obtaining approval to participate in the NSP-assisted homebuyer
program, is additional counseling necessary to comply with the NSP
homebuyer counseling requirement?**

> HUD Headquarters will consider granting an alternative requirement for
> homebuyers who completed homeownership counseling prior to obtaining
> approval to participate in the NSP-assisted homebuyer program on a
> case-by-case basis.

*Posted 02/20/09* **If a homebuyer previously owned a home, would it
still be necessary for the homebuyer to complete homebuyer counseling to
participate in the NSP-assisted homebuyer program?**

> All homebuyers participating in the NSP-assisted homebuyer program
> must comply with the NSP homebuyer counseling requirement regardless
> of whether they previously owned a home or not. However, as stated
> above, HUD Headquarters will consider granting an alternative
> requirement for homebuyers who completed homeownership counseling
> prior to obtaining approval to participate in the NSP-assisted
> homebuyer program on a case-by-case basis.

*Updated 12/5/08* **Does the required homeownership counseling for
purchasers of foreclosed homes count as a public service and is this
activity subject to the 15% public service cap?**

> Homeownership counseling is not explicitly listed as a separate
> eligible activity under Eligible Uses A, C or D. Under Eligible Use B,
> this counseling can be eligible as counseling related to acquisition
> for the purpose of rehabilitation. Housing Counseling is eligible
> under Use E, as a public service; this provision is intended to
> include housing counseling for prospective tenants of redeveloped
> properties. This provision would have limited applicability to
> programs where a grantee/subrecipient wants to sell existing
> residential properties to homebuyers, since Eligible Use E only
> concerns the redevelopment of vacant/demolished properties.
>
> HUD has determined that homeownership counseling required under
> Section II.B.3.b. of the NSP Notice should be treated as an activity
> delivery cost of the homeownership assistance activity itself. Other
> types of housing counseling, such as for prospective tenants, must be
> classified as a public service. Any housing counseling which is
> categorized as a public service must: (a) comply with the statutory
> 15% cap on public service obligations; and (b) must be an eligible
> activity listed in the NSP Notice as corresponding to one of the five
> Eligible Uses.
>
> Grantees are also reminded that Section II.B.3.b. requires that the
> counseling is to be provided by a HUD-approved housing counseling
> agency. Any grantee proposing to use some other entity to provide this
> counseling must request and receive HUD approval for an alternative
> requirement.

*Updated 12/01/08* **Can NSP grantees provide homeownership counseling
directly rather than contracting with a HUD-certified non-profit?**

> No, NSP grantees must contract with a HUD-approved housing counseling
> agency unless the NSP grantee is given HUD approval to use an
> alternative counseling program.

*Posted 12/01/08* **What is the expected format to fulfill the required
8 hours of homebuyer counseling?**

> The homebuyer counseling requirement can be fulfilled using a
> classroom style, individual (one on one) or a combination of both
> formats.

*Updated 02/20/09* **What will homebuyers need to prove they have
fulfilled this requirement?**

> Homeowners will need a certificate from a HUD-approved housing
> counseling agency and NSP grantees will be expected to maintain copies
> of these certificates to demonstrate compliance with this requirement.

**LAND BANKS**

*Updated 12/5/08* **Can land banking include purchasing a foreclosed or
abandoned property that has a structure on it or does the property have
to be vacant land?**

> As stated in the statute "\[NSP funds can be used to\] establish land
> banks for homes that have been foreclosed." Therefore, in order to
> acquire property for land banking purposes, the property must have a
> structure on it.

**25% LOW-INCOME SET-ASIDE**

*Posted 10/31/08* **The HERA legislation requires that 25% of the NSP
funds shall be used for the purchase and redevelopment of residential
properties that will be used to house individuals whose incomes do not
exceed 50% of area median income. My city would like to purchase
residential structures that will eventually be redeveloped by Habitat
for Humanity or similar organizations, but expects that the
redevelopment or rehabilitation will not take place for several years.
Can we assign those units to the subrecipient without being certain of
the date of redevelopment and still count them toward the 25% low-income
set-aside?**

> No. The income targeting requirement is based on actual occupancy. The
> units could be land banked for up to ten years. However, land banking
> is an area benefit activity (LMMA) that would not satisfy the 25%
> set-aside, which must meet the housing national objective. HUD will
> determine at grant closeout whether the 25% below 50% requirement has
> been met. If the houses are not occupied by that time, they will not
> count toward any housing goal.

*Updated 02/03/09* **Is it true that an NSP grantee may use NSP funds to
purchase residential property to be used as a homeless shelter to
provide transitional or temporary housing? Is it also true that these
funds used for this activity will not count towards the 25% set-aside
for very low income households?**

> You may acquire residential property under Eligible Use B or
> non-residential property (Vacant land or vacant structures) under
> Eligible Use E. Under B, you could rehabilitate or reconstruct
> residential housing that is permanent housing (e.g. permanent
> supportive housing). In this case, if you can document that the
> residents are below 50% of area median income it would count toward
> the 25% set-aside.
>
> Under E, redevelopment, you could construct new transitional or
> temporary residential facilities. Most shelters are not considered
> housing, since they are short-term. Similarly transitional or
> temporary residential programs would not be considered housing for
> very low-income households. You could assist with their construction
> as public facilities, but this would not count toward the 25%
> set-aside.

*Posted 11/7/08* **The HERA law requires that 25% of a grantee's grant
must be used for activities that will house individuals or families with
incomes at or below 50% of the area median income. The NSP program also
allows a grantee to use up to 10% of its grant for general
administrative and planning expenses. Is the 25% low income targeting
requirement applied to the entire grant amount, or only to the 90% of
the grant that is not used for planning and general administration?**

> The HERA statutory language in question begins with the language "not
> less than 25 percent of the funds appropriated or otherwise made
> available under this section..." HUD believes that the 25% low income
> targeting provision must be counted against the entire grant amount.
> For example, if a grantee received an NSP allocation of \$4,000,000,
> and uses \$400,000 for planning and general administration, it has
> \$3,600,000 for specific activities. The grantee must ensure that at
> least \$1,000,000 (25% of \$4 million) of its grant is expended for
> housing for individuals and families with incomes at or below 50% of
> the area median income. If it were to only expend 25% of the \$3.6
> million (or \$900,000), it would not be in compliance.

**NSP INFORMATION SESSIONS**

> **When will information on the NSP information sessions be
> available?**
>
> NSP grantees can register for NSP information sessions through the NSP
> website. Registration materials are currently available for the
> following sessions offered in 2008:

-   October 10^th^ in Orlando, FL

-   October 14^th^ in Columbus, OH

-   October 16^th^ in Orlando, FL

**PROGRAM ADMINISTRATION**

> **Will the general administration and planning costs for NSP be the
> same as CDBG (20%)?**
>
> No, the general administration and planning costs for NSP will **not**
> be the same as under the regular CDBG program. HUD is providing an
> alternative requirement that limits general administration and
> planning costs to 10 percent for NSP grants. Additional information on
> this requirement is in the Federal Register Notice under Section G.
> State's direct action, "Requirements."

*Posted 10/31/08* **If an NSP grantee allocates 10% of its NSP
allocation to administrative costs in the Substantial Amendment Plan,
does this constitute an obligation of the funds to meet the 18 month use
requirement, even though the NSP grantee will be spending the funds over
a four-year period?**

> The NSP definitions are derived from 24 CFR Part 85. These definitions
> include the terms "allocation" and "obligation," which have very
> different meanings. Allocating 10% of an NSP grant for general
> administration and planning costs does not necessarily mean that 10%
> of the NSP grant will be obligated to general administration and
> planning costs.
>
> How and at what point funds are obligated for things like personnel
> costs will vary, depending in part on accounting procedures as well as
> the nature of the cost. For example, if an NSP grantee hired a
> consultant to perform NSP eligible activities; there would obviously
> be a signed contract between the NSP grantee and the consultant.
> However, for existing NSP grantee staff, obligating personnel costs
> would be no different from the regular CDBG program; whenever &
> however the staff is assigned this work. See §85.3 definitions of
> obligations & accrued expenditures. Certainly any consultants or
> contract employees that are hired would have to be under contract by
> the 18^th^ month but that should not be a problem for existing staff.

*Posted 11/7/08* **Can the amount of NSP funds appropriated for program
administration automatically meet the LMMH national objective such as
CDBG general administration counts as automatically meeting LMA national
objective?**

> The CDBG rule is based on the assumption that admin costs will be used
> in the same proportion as the remainder of the grant, split among LM,
> slum-blight, and urgent needs national objectives. However, in NSP,
> 100% of the funds must benefit LMMI persons, so it is a moot point.
> See part II E of the attached Notice for further description of ways
> to meet this requirement.

*Posted 11/7/08* **What are the procedures for entering into an
agreement with the state program to administer a portion of our
allocation?**

> NSP grantees have two options. They can either enter into a joint
> agreement with the state, where the state would manage the local
> government's entire allocation or the local government can enter into
> a subrecipient agreement with the state, where the state manages a
> specific activity. Please refer to the Urban County Notice 08-04 for
> further guidance.

*Posted 11/20/08* **Do NSP grantees have to identify expected
expenditures for program administration in the action plan amendments
submitted to HUD for NSP funding or it is presumed that 10% will be
allocated to program administration?**

> All NSP grantees must explicitly identify the expected expenditures
> for program administration in their action plan amendments. HUD will
> not presume that all grantees will budget the full 10% of total NSP
> allocation allowable for program administration.

**PROGRAM INCOME**

> **The Federal Register Notice discussion on program income says that
> the sale of property must be in an amount equal to or less than the
> cost to acquire and redevelop or rehabilitate the home or property,
> but the example talks about a \$25,000 profit. How can there be
> profits if the sale must be in an amount equal to or less than the
> acquisition cost?**
>
> It is true that in some circumstances the sale of a property will not
> generate a profit, but there is a vital distinction. The requirement
> regarding the sale price has to do with selling a property to someone
> for use as their residence (see Notice section J). The example cited
> in the Federal Register Notice question concerns program income
> requirements, and it talks about selling a multifamily building (such
> as a rental property), but the example does not talk about selling
> individual units to individual homeowners; it talks about selling the
> entire building. Nothing prohibits selling a residential building to
> an investor, developer or a nonprofit for a profit.
>
> **If an NSP grantee uses both NSP and CDBG funds to acquire and
> rehabilitate a property, how do you prorate the program income and in
> this situation can profits be generated?**
>
> The proration is based on the amount of NSP and regular CDBG funds
> used. For example, if an entitlement community buys a property for
> \$10,000, rehabilitates it for \$10,000, and then sells it for
> \$22,000 (assuming the sale is not to an individual for use as a
> primary residence). The cost of acquisition and rehabilitation is paid
> with NSP funds (75%) and entitlement funds (25%). The NSP program
> income is \$16,500 (75% of \$22,000) and regular CDBG program income
> is (\$5,500). The profit that is subject to be returned to the
> Treasury is \$1,500.

*Posted 11//7/08* **How long do NSP grantees have to track program
income on NSP-funded activities?**

> As stated in the NSP Notice, program income from NSP-funded activities
> is subjected to limitations and requirements based on the NSP activity
> that generated the program income and on the date the income is
> received. Program income received before July 30, 2013, may be
> retained by the state or unit of general local government if it is
> used for eligible NSP activities. Program income received on or after
> July 30, 2013, must be remitted to HUD for deposit in the Treasury
> unless HUD approves a request to use the funds for other NSP purposes.

**PRORATING NSP FUNDS**

*Posted 11/19/08* **How should grantees apply the statutory requirement
regarding benefiting persons at or below 120% of AMI to multi-unit
housing properties? Does the language in Section 2301(f)(3)(A)(i) of
HERA mean that every unit in a multi-unit housing structure must be
occupied by individuals or households with incomes at or below 120
percent of area median income?**

> Section 2301(f)(3)(A)(i) of the Housing and Economic Recovery Act of
> 2008 (HERA) requires that "all of the funds appropriated or otherwise
> made available under this section shall be used with respect to
> individuals and families whole income does not exceed 120 percent of
> area median income". Paragraph (ii) of this section further provides
> that " not less than 25 percent of the funds appropriated or otherwise
> made available under this section shall be used for the purchase and
> redevelopment of abandoned or foreclosed homes or residential
> properties that will be used to house individuals or families whole
> incomes do not exceed 50 percent of area median income." HUD has
> determined that these requirements shall be applied to NSP-assisted
> housing activities---those that meet the low- and moderate-income
> housing national objective criteria---as follows:
>
> Meeting the 120% AMI targeting requirement:

-   If a structure contains one housing unit, that unit must be occupied
    by a low, moderate or middle income household in order to meet the
    national objective requirements and the NSP income targeting
    requirement.

-   If a structure contains two housing units, at least one unit must be
    occupied by a low, moderate or middle income household.

-   If a structure contains three or more housing units, the proportion
    of units occupied by low, moderate and middle income households must
    be equal to or greater than the proportion of the total project
    development costs borne by NSP funds.  Thus, if NSP funds represent
    50% of the total development costs for a project, then at least 50%
    of the units must be occupied by low, moderate and middle income
    persons upon completion and occupancy.  If NSP funds are the sole
    funding source for a project, then all units must be occupied by
    low, moderate and middle income persons.  If a grantee assists a
    homebuyer to buy a foreclosed fourplex, where the owner will live in
    one unit, and NSP funds represent 60% of the acquisition and
    rehabilitation costs, then 2 of the 3 rental units must be occupied
    by income eligible tenants; but if NSP funds were no more than 25%
    of the total costs, then none of the rental units need be occupied
    by income eligible tenants.

-   Where two or more rental buildings being assisted are or will be
    located on the same or contiguous properties and the buildings will
    be under common ownership and management, the grouped buildings may
    be considered for this purpose to be a single structure.

-   Activities such as acquisition of land, demolition, and installation
    of infrastructure that are undertaken as a precursor to, or
    otherwise support the development of housing, may be considered to
    meet this requirement based on the occupancy of the housing that
    actually results from these activities.

-   If a unit is not initially occupied by the time that a grantee's
    grant is ready for closeout, it cannot be counted as having been
    occupied by an income-eligible household.

-   Where a grantee can demonstrate that NSP assistance only assisted a
    specific unit in a multi-unit structure and not the structure as a
    whole---such as downpayment assistance for a homebuyer to purchase a
    condominium unit---then only that specific assisted unit must meet
    the income eligibility requirements.

*Posted 11/19/08* **How should grantees count multi-unit housing
properties toward the requirement to expend 25% of NSP funds for housing
for persons at/below 50% of AMI? Do the requirements of Section
2301(f)(3)(A)(ii) mean that a grantee can only count expenditures toward
the low-income housing targeting requirement if every unit in a
multi-unit structure is occupied by a low-income individual or
household?**

> Meeting the 50% AMI targeting requirement:

-   In order to be countable toward the low-income targeting
    requirement, the NSP funds must be used for the purchase or
    redevelopment of abandoned or foreclosed homes or residential
    properties. Redevelopment of non-residential properties or
    residential properties that are not abandoned or foreclosed upon
    cannot be counted toward meeting this requirement.

-   In order to be countable toward the low-income targeting
    requirement, the housing must be permanent housing that meets the
    LMMH national objective criteria. Homeless shelters, group homes for
    the developmentally disabled, etc. that are categorized as eligible
    public facilities cannot be counted toward meeting this requirement.

-   If a structure contains one housing unit, that unit must be occupied
    by a low income household (at or below 50% of AMI) in order count
    NSP expenditures for the activity toward the low- income targeting
    requirement. In this case, 100% of the NSP expenditures can be
    counted toward this requirement.

-   If a structure contains two or more housing units, the proportion of
    NSP fund expenditures that can be counted toward the low-income
    targeting requirement is equal to the proportion of units occupied
    by low income households.  If 30% of the units in a multi-unit
    structure are occupied by low-income households, then a grantee can
    count 30% of the NSP funds expended on the project toward the
    low-income targeting requirement.

-   For purposes of this requirement, it is irrelevant whether NSP funds
    are the sole funding source or are combined with other funds.

**PUBLIC FACILITIES**

*Posted 10/31/08* **Can vacant public properties such as a city fire
station be redeveloped under Eligible use E---redevelop demolished or
vacant properties? The facility is located in a low-mod census tract
needing a public facility for neighborhood activities.**

> Simply locating it in an LMMI area is not sufficient in itself. If the
> redevelopment activities support the housing activities in the target
> area than YES it would be eligible.

*Posted 11/7/08* **Can NSP funds be used for homeless shelters and
transitional housing?**

> It is important to differentiate between the between eligibility of
> activities, income targeting requirements and CDBG national objective
> requirements that apply to the NSP program. NSP funds can be used to
> develop homeless shelters or transitional housing. Facilities designed
> to provide shelter for persons having special needs, such as homeless
> shelters and group homes, are eligible as public facilities under 24
> CFR 570.201(c). Any such facilities that are not permanent housing
> would be categorized as a public facility. It is possible to redevelop
> demolished or vacant property for such use under Eligible Use E,
> Redevelopment. Under Eligible Use B, a grantee could purchase and
> rehabilitate residential properties for reuse as special needs
> housing.
>
> For a housing activity to count toward meeting the NSP program
> requirement that 25% of a grantee's NSP funds must be expended for
> activities that benefit households at or below 50% of area median
> income, it must be considered permanent housing and not a public
> facility under 24 CFR 570.201(c); and it must meet the
> low/moderate/middle income housing national objective criterion under
> 24 CFR 570.208(a).

**PUBLIC HOUSING**

*Posted 10/31/08* **Can NSP funding be used to renovate vacant state- or
federally-assisted public housing in NSP target areas?**

> There is no prohibition against this use of NSP funds, but HUD
> encourages grantees to seek funding from the agency that owns the
> property as well.

**PURCHASE DISCOUNT**

*Updated 02/09/09* **The NSP Federal Register Notice addresses the
purchase discounts of 5% and 15% respectively. One is considered an
individual purchase discount (5%) and the other is purchases in the
aggregate (15%). If an individual purchase is just that, the purchase of
a single property in one transaction, how do you define a purchase in
the aggregate?**

> Aggregate purchases for NSP are defined as all foreclosed upon homes
> or residential properties that an NSP grantee purchases with its
> entire NSP grant.

*Posted 02/09/09* **How is the average purchase discount for an NSP
portfolio calculated?**

> The NSP Federal Register Notice states that an individual purchase
> discount can be as low as 5%, but the implications of purchasing
> property at the minimum purchase discount means that other individual
> properties in an NSP grantee's portfolio must be purchased at a
> discount greater than 15% so that the average discount for the NSP
> portfolio does not exceed 15%. See example below.

  -------------------- ------------------ --------------- ---------------
  **NSP Grantee        **Appraised        **Purchase      **Purchase
  Portfolio**          Value**            Price**         Discount**

  House A              \$35,000           \$30,450        13%

  House B              \$100,000          \$93,000        7%

  House C              \$140,000          \$105,000       25%

                                                          

  Total foreclosed                                        
  home acquisitions: 3                                    

  Average purchase                                        
  discount: 15%                                           
  -------------------- ------------------ --------------- ---------------

*Posted 10/31/08* **Purchasing units below the market value could
further bring down the value of the homes in neighborhoods. To avoid
this situation, can NSP grantees purchase homes at full price, with
seller concessions to achieve the same result of paying less than full
price, but the public record shows a market sales price? Likewise when
the home is sold to a homebuyer, can NSP grantees sell it at market
value, offer gifted equity and seller concessions so that the homebuyer
does not pay more than the amount of the total eligible expenses?**

> The HERA legislation requires that homes be purchased at a discount
> below appraised value. It is difficult to understand how such
> concessions could be accurately valued to demonstrate compliance with
> the law. Therefore, HUD does not approve this practice. However,
> appraisers can account for government actions that depress values in a
> market; hopefully this will not present undue problems.
>
> **If a property seller does not agree to a purchase discount, can NSP
> grantees use other local funds to buy down the purchase price, thereby
> creating a purchase discount to comply with the NSP purchase discount
> requirement?**
>
> No. Title III of the Housing and Economic Recovery Act of 2008
> requires that any property purchased in whole or in part with NSP
> funds must be purchased at a discount, regardless of the sources of
> the money.
>
> **How would the purchase discount requirements apply to a bulk
> purchase of properties?**
>
> Arranging to purchase multiple properties in bulk may not have much
> effect on meeting the individual and aggregate purchase discount
> requirements. The individual discount requirement still applies to
> each individual house and an appraisal is required for each house. If
> a grantee made three different bulk purchases of 10, 20 and 7 houses
> each, and then separately bought 4 other houses one at a time, the
> aggregate purchase discount is applied to all 41 houses. However,
> using a bulk purchase arrangement might help the grantee to meet the
> lower, 10% aggregate discount, if those bulk purchase prices were
> determined using carrying costs & other factors identified in the
> notice.

*Posted 11/20/08* **Does the purchase discount apply when an NSP grantee
provides financing to an eligible individual for the purchase of a
home?**

> The purchase discount is required for all foreclosed homes acquired in
> part or in whole with NSP funds by the grantee directly or indirectly
> by individuals receiving NSP funding from the grantee.

**REDEVELOPMENT**

*Posted 11/7/08* **Please clarify how an NSP grantee would redevelop
blighted structures that do not fall under the definition of foreclosed
or abandoned?**

> To the extent that a grantee wishes to use NSP funds for activities
> that are eligible under only one of the five eligible uses, the five
> eligible uses listed in HERA and the NSP Notice can be viewed as
> severable and discrete. However, the provisions of the different
> Eligible Uses become cumulative if a grantee wishes to use NSP funding
> for multiple eligible activities on the same project, and those
> eligible activities are not all categorized under the same one
> Eligible Uses.
>
> Under Eligible Use E, a grantee may use NSP funds to redevelop a
> property that is vacant or has been demolished. Providing NSP funds
> are only used for redevelopment activities listed under Eligible Use
> E, the property need not be abandoned, foreclosed upon or previously
> residential.
>
> If the property to be redeveloped is not vacant or previously
> demolished, NSP funds can be used to demolish structures on the
> property prior to redevelopment, under Eligible Use D. However, in
> order to use NSP funds for demolition, the structures must be
> blighted, but they need not be abandoned and they need not be
> residential.
>
> If a grantee wishes to use NSP funds to purchase and then demolish and
> redevelop a property, then they must qualify the acquisition under
> Eligible Use B. Under Eligible Use B, homes and residential properties
> can be purchased with NSP funds if they are abandoned or foreclosed
> upon; the grantee can rehabilitate, sell, or rent such properties
> under Eligible Use B; the demolition can be undertaken under Eligible
> Use D, and the grantee can redevelop the properties under Eligible Use
> E.
>
> If a grantee wishes to purchase a home and envisions redeveloping the
> property sometime in the future for some presently-unknown use, the
> acquisition can be undertaken under Eligible Use C, Land Banks;
> Eligible Use C can be used only for purchasing and maintaining or
> disposing of foreclosed upon homes; vacant property, abandoned
> property or nonresidential property cannot be purchased under Eligible
> Use C. However, if the redevelopment of the property is imminent, then
> Eligible Use C would not be appropriate, as the grantee's intent is
> clearly not to just buy the property and hold it for some
> indeterminate period for eventual reuse.
>
> If a grantee wishes to use NSP funds to provide financing to another
> entity for that other entity to purchase or redevelop a homes or
> residential properties, that must be undertaken under Eligible Use A;
> the property must be foreclosed upon and must be residential.

*Posted 11/7/08* **Can redevelopment activities be done in an area that
does not have a lot of abandoned or foreclosed properties? One of the
proposed redevelopment projects would call for the purchase of a vacant
multi-unit complex (approximately 270 units of prior LMI housing) from a
for-profit individual in the amount of over \$6million. Would the local
grantee be able to purchase and redevelop it into a mixed income
property?**

> The NSP Notice requires grantees to give priority emphasis and
> consideration to those metropolitan areas, metropolitan cities, urban
> areas, rural areas, low- and moderate-income areas, and other areas
> with the greatest need, but it does not mandate that grantees work
> only in those areas. HUD advises grantees to have a strong rationale
> for undertaking projects outside areas of greatest need. If you have
> determined that your proposed project makes sense, the Notice would
> allow purchase and redevelopment of a vacant multifamily structure
> into a mixed use project.

*Posted 11/20/08* **Does "vacant property" refer to vacant land or
vacant buildings?**

> A vacant property under Eligible Use E can either be vacant land or
> vacant buildings on the land.

*Posted 11/20/08* **Is vacant, undeveloped land eligible to be
redeveloped under Eligible Use E?**

> In order for a property to be \"redeveloped\" under Eligible Use E, it
> must have been previously developed and is now vacant. Raw land would
> not be eligible for redevelopment. It will be up to the grantee to
> demonstrate that the property had been previously developed. Previous
> redevelopment could include vacant buildings or infrastructure
> improvements such as roads, water, sewer, power lines, etc. However,
> land that has been farmland, open space, wilderness, etc. would not be
> eligible for redevelopment. The Department has not imposed any
> specific standard on how long a property has to be vacant in order to
> qualify for redevelopment under Eligible Use E; grantees should
> exercise reasonable judgment in this area. A property that had once
> been a factory and has been idle for 20 years is not going to raise
> any issue. However, reasonable minds might question using NSP funds to
> redevelop a site where the previous development was demolished 100
> years ago and the property has lain fallow ever since.

*Posted 11/20/08* **Can NSP grantees redevelop property that was not
foreclosed upon?**

> Yes, under eligible use E, properties need not be foreclosed in order
> to be redeveloped. NSP only requires that these properties be
> demolished or vacant.

**REGULATORY INFORMATION**

> **Have the NSP regulations been published yet in the Federal Register?
> If so, is it possible to get an electronic copy?**
>
> Yes, the NSP Federal Register Notice is currently available on the NSP
> website. It was also published in the Federal Register on October 6,
> 2008, cited under 73 FR 58330.

**REHABILITATION STANDARDS**

> **Can NSP funds be used to secure abandoned properties and minimize
> vandalism prior to rehabilitation?**
>
> []{.mark}
>
> Yes. Securing property may be eligible as part of the rehabilitation
> costs or as a disposition cost under NSP depending on how your program
> is structured. Keep in mind the definition of \"abandoned property\"
> under the NSP Notice.

**STATE DISTRIBUTIONS**

> **If NSP grantees represent the areas of greatest need within a state,
> does this mean that state programs must allocate all NSP funds to
> these areas? If so, how will NSP grantees mange to obligate both
> direct NSP allocations and the additional funding from state programs
> within the 18-month required timeframe?**
>
> It is true that communities receiving direct NSP allocations represent
> the areas of greatest need as determined by HUD\'s formula allocation
> methodology, but states are not limited to funding those communities.
> In many states there are likely to be other communities that qualify
> for NSP funding despite the fact that they did not receive a direct
> allocation. Each state will have to determine the most appropriate way
> to allocate its NSP funding considering areas of greatest need, as
> well as past performance and capacity to carry out NSP activities
> within the 18-month required timeframe.

[]{.mark}

*Posted 10/31/08* **Are the data sets, down to the block level that were
gathered by HUD going to be released to grantees for the entire state?**

> No, but the data that HUD acquired is available to the Block Group
> level, which should be sufficient to establish areas of greatest need.
> HUD's estimates of income levels and housing conditions are contained
> in those data sets, which are available at:
>
> <http://www.huduser.org/publications/commdevl/nsp.html>

[]{.mark}

*Posted 11/7/08* **The NSP notice stated that HUD will provide a
simplified \"crosswalk\" of NSP and State CDBG requirements for state
grantee administrators. I believe this link is on page 6 of HUD\'s NSP
Instructions for Grantee Submission document on the HUD website, but the
link is bad. How can I able to access this document?**

> There is no longer a need for the crosswalk of NSP/State CDBG
> requirements and this statement should not have appeared in the NSP
> Notice. The original intent of the crosswalk was to advise states
> about the applicable federal regulations (entitlement regulations or
> state regulations) applicable to states when they
> [directly]{.underline} [administer]{.underline} the NSP program. As
> the notice was finalized it was decided that states would be provided
> with the flexibility to use the State CDBG regulations or the
> Entitlement regulations for certain items. The final NSP notice
> "strongly advises" states use the entitlement regulations for
> recordkeeping and subrecipient agreement provisions, etc. See Section
> G "State's direct action" for more information.
>
> The crosswalk that you mentioned on page 6 of HUD\'s NSP Instructions
> for Grantee Submission document on the HUD website is only a visual
> aid to help grantees correlate NSP eligible use activities with
> activities under the regular CDBG program. The website has been fixed
> and you should be able to access it now.

*Posted 11/12/08* **In determining areas of greatest need, can NSP
grantees use estimates in addition to actual numbers? Does HUD have some
guidance about what it considers significant in terms of a threshold for
targeting? For example, what percent of homes foreclosed or number of
sub-prime loans would be considered to be high enough to qualify as an
area of greatest need?**

> The state may use estimated need numbers to target areas of need, but
> the state needs to clearly articulate in their action plan amendment
> how they determined the areas of greatest need and what data sources
> they relied on to make this determination. HUD does not have guidance
> on threshold amounts---each state's situation and needs are different
> and each plan to address the foreclosure crisis will be different, and
> we will defer to the State's judgment as long as it is reasonable.

*Posted 11/12/08* **Can a state hold back a portion of its allocation
for distribution later (e.g. 6 months after the first distribution)
because they are concerned that a high foreclosure rate or other market
changes are expected in certain areas and they want to make sure they
have enough money for those areas?**

> No. The state is expected to submit the Action Plan substantial
> amendment based on the full allocation and the conditions in place or
> expected (see HERA law regarding factor #3---"areas likely to face a
> significant rise in foreclosures") at the present time. A grantee can
> submit an amendment to change the plan if circumstances change from
> what was initially submitted. In addition, a state's substantial
> amendment can provide that the state will hold 2 separate competitions
> (and state the criteria that the funds will be competed on) to account
> for changed conditions. The problem with this approach is that the 18
> month-rule still applies, so the competitions would have to be close
> together in time. In addition, remember, unlike the "regular" CDBG
> program, simply obligating funds to a unit of general local
> government/entitlement or other entity does not address the "use"
> requirements. See the "definitions" section of the Notice.

*Posted 11/12/08* **Can a state set aside NSP funds for rural areas or
other target areas, because they just don't have good data on small
places yet and don't want to get a bunch of applications which warrant
funding under the targeting criteria and then not have enough money?**

> A set-aside is not a good idea. The state should outline, to the
> greatest extent possible, how the funds address the areas of greatest
> need---including rural areas. States can highlight several rural areas
> (thus narrowing the field of potential applicants), then collect
> information from these rural localities to help target NSP funds. For
> example, the state can determine that 5 areas of the state are the
> highest need, and determine that those areas will get 20% of the
> available funding each, and then have a competition within those areas
> to distribute the 20%.

*Posted 11/12/08* **We are concerned that some of the areas of greatest
need may not have the capacity to administer NSP funds. As a result, the
state would have to hire an NSP administrator or administer the areas'
allocated funds at the state level. If an area receiving NSP funding
lacked the capacity to administer the funds it's possible that the state
would have to withdraw the funding and reallocate it. Can HUD offer any
guidance on how states should handle these situations?**

> HUD would not force the state to fund an entity that clearly lacks
> capacity. The State could consider hiring a consultant or awarding
> funds to a regional planning commission or other entity to help
> localities of highest need that lack capacity so they can benefit from
> NSP.

*Posted 11/12/08* **If NSP funds are distributed on an application or
proposal basis for eligible areas with greatest need, can states offer
the entire menu of eligible uses and let the localities apply for NSP
funding based on the activities that best meet their local needs?**

> The state should have a general sense of the specific needs that exist
> in the state and then be able to address those needs with the
> appropriate eligible activity. It is recommended that states first
> identify which localities are eligible to apply for NSP funding. Next,
> states must determine how NSP funding will be distributed amongst
> these localities based on need. Through the process, states will learn
> which eligible uses are most appropriate for a given locality.
> Further, states must determine that localities receiving NSP funding
> have the capacity to administer the funds in a timely manner. Finally,
> keep in mind if a state chooses to have a competition for NSP funding,
> the criteria for selecting localities must be clear and in conformance
> with the NSP Notice.

*Posted 11/12/08* **Do all NSP activities have to start with a
foreclosed property?**

> No, all activities do not have to start with a foreclosed property.
> Please review the five eligible uses listed in the NSP Notice.

*Posted 11/12/08* **What types of redevelopment are eligible under NSP?
Must it be all housing, or can some be commercial or public facilities,
etc.?**

> The main purpose of the NSP program is to redevelop abandoned and
> foreclosed homes. Public facilities are permitted under eligible
> activity "e" to the extent that they support housing. Although
> commercial redevelopment is not an ineligible use of funds, it is not
> the intent of the program, and thus should not be a significant use of
> the state's NSP allocation.

*Posted 11/12/08* **How does HUD define transitional housing for NSP?**

> Non-permanent housing is eligible as a public facility. As this type
> of housing is not permanent it cannot be counted toward the HERA law
> provision that grantees must use 25% of NSP funds to house individuals
> or families whose incomes do not exceed 50% of area median income.

*Posted 11/12/08* **What can be expected in terms of performance
measures for NSP?**

> HUD is still working through these issues and expects to have more
> information soon. We will post the information on our website when it
> becomes available.

*Posted 11/12/08* **What are the required submissions for states to
receive their NSP allocations? If states are distributing NSP funding on
an application basis, how should this be indicated in their submissions
to HUD?**

> The SF 424 and the certifications are required. The substantial
> amendment to the 2008 Action Plan must state how the state will
> distribute its funds to areas of highest need.

*Posted 11/12/08* **We cannot access the DRGR slides on the NSP website.
Please advise.**

> Last week, a new version of the DRGR slides were made available on the
> website (with and without notes) at:

<http://www.hud.gov/offices/cpd/communitydevelopment/programs/drsi/drgrs.cfm>

> States can contact Mark Mitchell if they still cannot access the
> training: <Mark.Mitchell@hud.gov>

*Posted 11/12/08* **If the NSP activities identified in our action plan
amendment are not approved or change what should we do?**

> If there are any problems with the action plan amendment submitted by
> the state, HUD will notify the state as quickly as possible to address
> the issue. If the NSP activities identified in an approved action plan
> amendment happen to change, the NSP grantee must allow for a 15 day
> public comment period before submitting a new action plan amendment to
> HUD.

**TAX LIENS**

*Posted 10/31/08* **According to the NSP Notice "an NSP recipient may
not provide NSP funds to another party to finance an acquisition of tax
foreclosed (or any other) properties from itself, other than to pay the
necessary and reasonable costs related to the appraisal and transfer of
title." Is the NSP recipient the municipality administering the funds or
are the subcontractors of the municipality? If it is the municipality,
then would that preclude down payment assistance to a homeowner who
purchases a HUD \$1 home from the municipality which must be in the
chain of title or a municipal land-bank?**

> The unit of general local government (municipality or urban county) is
> the recipient. Sales at nominal value (One Dollar Houses, for example)
> are acceptable. The recipient may use down payment assistance to
> assist purchasers of tax-foreclosed houses. The concern in prohibiting
> third party purchases on tax-foreclosed properties is that grantees
> will in effect reimburse themselves for the value of the tax lien. HUD
> does not allow units of government to receive funds in this way, which
> would also reduce available NSP funding for other projects.

*Updated 01/23/09* **Can NSP funds be used to pay "back taxes," clear
tax liens or other liens, code enforcement fines, etc. if they are
associated with acquisition costs?**

> Yes, there are some situations where NSP funds could be used to pay
> these taxes, but the options are limited. If title to a foreclosed
> property is held by a private entity and the tax was levied by the NSP
> grantee or another jurisdiction, then NSP funds by be used indirectly
> to clear the tax liens through the acquisition process. For example,
> if the fair market value of a foreclosed property less the NSP
> required purchase discount is valued at \$100,000, and the property
> has a \$10,000 tax lien, the NSP grantee can acquire the property for
> \$100,000. The title company disbursing the funds from the transaction
> will give the seller \$90,000 less any applicable fees and \$10,000
> will be forwarded to the jurisdiction that levied the tax lien. Please
> keep in mind that you have only 18 months to obligate your
> jurisdiction's NSP funds. Therefore, it is important that you be
> careful not to take on acquisitions that may get mired in title or
> other issues preventing timely closing. If a property has title or
> other legal issues associated with it that could delay the
> acquisition, we strongly encourage you to move on to the next
> property.

**TIMELINESS OF USE & EXPENDITURE**

**OF NSP FUNDS**

> **How long do States and local communities have to spend this money?**
>
> Grantees have 18 months to obligate these funds, and four years to
> expend funds. Congress was very clear that this money be put to work
> quickly. In some areas, this level of federal funding will be
> unprecedented, so HUD will help these communities implement their
> programs. Meanwhile, we are actively encouraging local governments to
> coordinate with each other and with their state governments.
> Implementing these programs may require an area-wide or even regional
> approach. We believe it may require state and local planners to put
> their collective heads together to ramp up these programs in a very
> short time frame.
>
> Congress was very clear that there is an urgency to deal with a
> national housing crisis.
>
> **What will happen if grantees don't obligate their funding within 18
> months?**
>
> HUD will recapture the funds.