64322 Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Notices 

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Procedural 

This meeting is open to the public. 

Please note that the meeting may close 

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to the Chairman no later than November 

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advance of the meeting, please submit 

25 copies to the Assistant to the 

Chairman no later than November 12, 

2010. 

The transcript of the meeting, 

including all comments received during 

the meeting, will be posted to http:// 

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For information on facilities or 

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meeting, contact the Chairman as soon 

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Authority: This notice is issued under 

authority of 5 U.S.C. 552(a). 

Dated: October 14, 2010. 

J.R. Caplis, 

Captain, U.S. Coast Guard, Chief, Office of 

Incident Management & Preparedness. 

[FR Doc. 2010–26287 Filed 10–18–10; 8:45 am] 

BILLING CODE 9110–04–P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–5447–N–01] 

Notice of Formula Allocations and 

Program Requirements for 

Neighborhood Stabilization Program 

Formula Grants 

AGENCY: Office of the Secretary, HUD. 

ACTION: Notice of allocation method, 

waivers granted, alternative 

requirements applied, and statutory 

program requirements. 

SUMMARY: This notice advises the public 

of the allocation formula and allocation 

amounts, the list of grantees, alternative 

requirements, and the waivers of 

regulations granted to grantees under 

Section 2301(b) of the Housing and 

Economic Recovery Act of 2008 (Pub. L. 

110–289, approved July 30, 2008) 

(HERA), as amended, and an additional 

allocation of funds provided under 

Section 1497 of the Wall Street Reform 

and Consumer Protection Act of 2010 

(Pub. L. 111–203, approved July 21, 

2010) (Dodd-Frank Act) for additional 

assistance in accordance with the 

second undesignated paragraph under 

the heading ‘Community Planning and 

Development—Community 

Development Fund’ in Title XII of 

Division A of the American Recovery 

and Reinvestment Act of 2009 (Pub. L. 

111–5, approved February 17, 2009) 

(Recovery Act), as amended, for the 

purpose of assisting in the 

redevelopment of abandoned and 

foreclosed homes. Except where 

provided for otherwise, these amounts 

are distributed based on funding 

formulas for such amounts established 

by the Secretary in accordance with 

HERA. 

The additional allocation represents 

the third round of Neighborhood 

Stabilization Program funding and is 

referred to throughout this notice as 

NSP3. HERA provided a first round of 

formula funding to States and units of 

general local government, and is 

referred to herein as NSP1. The 

Recovery Act provided a second round 

of funds awarded by competition and is 

referred to herein as NSP2. The three 

rounds of funding are collectively 

referred to as NSP. As described in the 

Supplementary Information section of 

this notice, HUD is authorized by statute 

to specify alternative requirements and 

make regulatory waivers for this 

purpose. This notice also notes statutory 

issues affecting program design and 

implementation. 

Note: This notice is intended to provide 

unified program requirements for grantees of 

the two formula NSP grant programs, NSP1 

and NSP3. The allocation and application 

information under Section I.A and Section 

II.B below is only applicable to NSP3 grants. 

For NSP1, HUD awarded grants to a total of 

309 grantees including the 55 states and 

territories and selected local governments to 

stabilize communities hardest hit by 

foreclosures and delinquencies. For the 

allocation formula and application process 

for NSP1, please see the October 6, 2008 

Federal Register Notice (73 FR 58330), as 

amended by the June 19, 2009 ‘‘Bridge’’ 

Notice (74 FR 29223), and Appendix A 

attached hereto. For NSP2, HUD awarded a 

combined total $1.93 billion in NSP2 grants 

to 56 grantees nationwide on January 14, 

2010. Funds under NSP2 were distributed by 

competition under criteria described in the 

May 4, 2009 Notice of Funding Availability. 

Where requirements differ between the 

rounds of funding, it is so noted. 

DATES: Effective Date: October 19, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Stanley Gimont, Director, Office of 

Block Grant Assistance, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Room 7286, 

Washington, DC 20410, telephone 

number 202–708–3587. Persons with 

hearing or speech impairments may 

access this number via TTY by calling 

the Federal Information Relay Service at 

800–877–8339. FAX inquiries may be 

sent to Mr. Gimont at 202–401–2044. 

(Except for the ‘‘800’’ number, these 

telephone numbers are not toll-free.) 

SUPPLEMENTARY INFORMATION: 

Program Background and Purpose 

Recipients will use the funds awarded 

under this notice to stabilize 

neighborhoods whose viability has 

been, and continues to be, damaged by 

the economic effects of properties that 

have been foreclosed upon and 

abandoned. In 2008, Congress 

appropriated funds for neighborhood 

stabilization under HERA. In 2009, 

Congress appropriated additional 

neighborhood stabilization funds under 

the Recovery Act. In 2010, Congress 

appropriated a third round of 

neighborhood stabilization funds in the 

Dodd-Frank Act. 

When referring to a provision of the 

first appropriations statute, this notice 

will refer to HERA; when referring to a 

provision of the second appropriations 

statute, this notice will refer to the 

Recovery Act; and when referring to the 

third appropriations statute this notice 

will refer to the Dodd-Frank Act. When 

referring to the grants, grantees, assisted 

activities, and implementation rules 

under the Dodd-Frank Act, this notice 

will use the term ‘‘NSP3.’’ When 

referring to the grants, grantees, assisted 

activities, and implementation rules 

under the Recovery Act, this notice will 

use the term ‘‘NSP2’’. When referring to 

the grants, grantees, assisted activities, 

and implementation rules under HERA, 

this notice will use the term ‘‘NSP1.’’ 

Collectively, the grants, grantees, 

assisted activities, and implementation 

rules under these three rounds of 

funding is referred to as NSP. NSP is a 

component of the Community 

Development Block Grant (CDBG) 

program (authorized under Housing and 

Community Development Act of 1974, 

as amended (42 U.S.C. 5301 et seq.) 

(HCD Act)). 

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Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Notices 64323 

Program Principles 

Programs under NSP should aim to 

integrate the following principles: 

• Retain CDBG distinctive 

requirements. Congress gave HUD broad 

waiver and alternative requirement 

authority, which HUD used in designing 

NSP program requirements. However, 

distinctive characteristics of the CDBG 

program including the objectives of the 

HCD Act, financial accountability, local 

citizen participation and information, 

grantee selection of activities within 

broad Federal policy parameters, and 

income targeting of beneficiaries were 

retained. All of these elements are 

required in NSP1, NSP2, and NSP3. 

• Target and reconnect 

neighborhoods. Invest funds in 

programs and projects that will 

revitalize targeted neighborhood(s) and 

reconnect those targeted neighborhoods 

with the economy, housing market, and 

social networks of the community and 

metropolitan area as a whole. 

• Rapidly arrest decline. Support NSP 

uses and activities that will rapidly 

arrest the decline of a targeted 

neighborhood(s) that has been 

negatively affected by abandoned or 

foreclosed properties. 

• Assure compliance with the NSP 

‘‘deep targeting’’ requirement. No less 

than 25 percent of the funds shall be 

used to house individuals and families 

whose incomes do not exceed 50 

percent of area median income. 

• Ensure longest feasible continued 

affordability. Invest in affordable 

housing that will remain desirable and 

affordable for the longest feasible 

period. 

• Support projects that optimize 

economic activity, and the number of 

jobs created or retained or that will 

provide other long-term economic 

benefits. 

• Build inclusive and sustainable 

communities free from discrimination. 

• Coordinate planning and resources. 

Integrate neighborhood stabilization 

programs with other Federal policy 

priorities and investments, including 

energy conservation and efficiency, 

sustainable and transit-oriented 

development, integrated metropolitan 

area-wide planning and coordination, 

improvements in public education, and 

access to healthcare. 

• Leverage resources and remove 

destabilizing influences. Augment 

neighborhood stabilization programs 

with other Federal, public and private 

resources. Eliminate destabilizing 

influences, such as blighted homes, that 

can prevent programs from producing 

results. 

• Set goals. Set aggressive, but 

achievable, goals for outputs and 

outcomes. 

• Ensure accountability. Ensure 

accountability for all programs, keep 

citizens actively informed, and provide 

all required NSP reporting elements. 

Objectives and Outcomes 

1. Objectives. The primary objective of 

the CDBG program is the development 

of viable urban communities, by 

providing decent housing, a suitable 

living environment, and economic 

opportunity, principally for persons of 

low- and moderate-income. NSP 

grantees must strive to meet this 

objective in neighborhoods that are in 

decline (or further decline) due to the 

negative effects of a high number and 

percentage of homes that have been 

foreclosed upon. The first goal is to 

arrest the decline. Then the grantee 

must stabilize the neighborhood and 

position it for a sustainable role in a 

revitalized community. 

2. Outcomes. Measurable NSP short 

term program outcomes may include, 

but are not limited to: 

• Arresting decline in home values 

based on average sales price in targeted 

neighborhoods, and 

• Reduction or elimination of vacant 

and abandoned residential property in 

targeted neighborhoods. 

The long term outcomes may include, 

but are not limited to: 

• Increased sales of residential 

property in targeted neighborhoods, and 

• Increased median market values of 

real estate in targeted neighborhoods. 

Authority To Provide Alternative 

Requirements and Grant Regulatory 

Waivers 

The Dodd-Frank Act states that, 

except where provided for otherwise, 

assistance shall be provided in 

accordance with the same provisions 

applicable under the NSP2 

authorization. In turn, the Recovery Act 

provides that assistance shall be made 

available as authorized under HERA. 

The Recovery Act authorizes the 

Secretary to specify waivers and 

alternative requirements for any 

provision of any statute or regulation in 

connection with the obligation by the 

Secretary or the use of funds except for 

requirements related to fair housing, 

nondiscrimination, labor standards, and 

the environment (including lead-based 

paint), upon a finding that such a 

waiver is necessary to expedite or 

facilitate the use of such funds. 

The Secretary finds that the following 

alternative requirements are necessary 

to expedite the use of these funds for 

their required purposes. 

Except as described in this notice, 

statutory and regulatory provisions 

governing the CDBG program, including 

those at 24 CFR part 570 subpart I for 

states, and those at 24 CFR part 570 

subparts A, C, D, J, K, and O for CDBG 

entitlement communities, as 

appropriate, shall apply to the use of 

these funds. The State of Hawaii will be 

allocated funds and will be subject to 

part 570, subpart I, as modified by this 

notice. Other sections of the notice 

provide further details of the changes, 

the majority of which deal with 

adjustments necessitated by statutory 

provisions, simplify program rules to 

expedite administration, or relate to the 

ability of state grantees to act directly 

instead of solely through distribution to 

local governments. Additional guidance 

and technical assistance will be 

available at http://www.hud.gov/nspta. 

Table of Contents 

I. Allocations 

A. Formula: NSP3 Allocation 

B. Formula: Reallocation 

II. Alternative Requirements and Regulatory 

Waivers 

A. Definitions for Purposes of the CDBG 

Neighborhood Stabilization Program 

B. NSP3 Pre-Grant Process 

1. General 

2. Contents of an NSP Action Plan 

Substantial amendment or abbreviated 

plan 

3. Continued affordability 

4. Citizen participation alternative 

requirement 

5. Joint requests 

6. Effect of existing cooperation agreements 

governing joint programs and urban 

counties 

C. Reimbursement for Pre-Award Costs 

D. Grantee Capacity and Grant Conditions 

E. Income Eligibility Requirement Changes 

F. State Distribution to Entitlement 

Communities and Indian Tribes 

G. State’s Direct Action 

H. Eligibility and Allowable Costs 

I. Rehabilitation Standards 

J. Sale of Homes 

K. Acquisition and Relocation 

L. Note on Eminent Domain 

M. Timeliness of Use and Expenditure of 

NSP Funds 

N. Alternative Requirement for Program 

Income (Revenue) Generated by 

Activities Assisted With Grant Funds 

O. Reporting 

P. FHA First Look 

Q. Purchase Discount 

R. Removal of Annual Requirements 

S. Affirmatively Furthering Fair Housing 

T. Certifications 

U. Additional NSP3 Requirements— 

Preferences for Rental Housing and Local 

Hiring 

V. Note on Statutory Limitation on 

Distribution of Funds 

W. Information Collection Approval Note 

X. Duration of Funding 

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64324 Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Notices 

I. Allocations 

A. Formula: Allocation. Grants 

awarded under NSP1 were allocated to 

States and local governments according 

to the formula described in Attachment 

A. The Dodd-Frank Act makes available 

an additional $1 billion that is generally 

to be construed as CDBG program funds 

(NSP3) for the communities and in the 

amounts listed in Attachment B to this 

notice. 

B. Formula: Reallocation. 

1.a. Failure to Apply (NSP3). To 

expedite the use of NSP3 funds, the 

Department is specifying alternative 

requirements to 42 U.S.C. 5306(c). If a 

unit of general local government 

receiving an allocation of NSP3 funds 

under this notice (as designated in 

Attachment B) fails to submit a 

substantially complete application for 

its grant allocation by March 1, 2011, or 

submits an application for less than the 

total allocation amount, HUD will notify 

the jurisdiction of the cancellation of all 

or part of its allocation amount and 

proceed to reallocate the funds to the 

state in which the jurisdiction is 

located. 

b. If a state or insular area receiving 

an allocation of funds under this notice 

fails to submit a substantially complete 

application for its allocation by March 

1, 2011, or submits an application for 

less than the total allocation amount, 

HUD will notify the state or insular area 

of the reduction in its allocation amount 

and proceed to reallocate the funds to 

the 10 highest-need states based on 

original rankings of need. 

2.a. Failure to Meet 18-Month 

Obligation Deadline (NSP1). Consistent 

with the August 23, 2010 Notice of NSP 

Reallocation Process Changes (Docket 

No. FR–5435–N–01), HUD will block 

each grantee’s ability to obligate NSP1 

grant funds in the Disaster Recovery 

Grant Reporting System (DRGR) on the 

first business day after the statutory 18- 

month deadline for use of funds. HUD 

will notify the grantee of this action by 

electronic mail. Grantees will not be 

able to obligate grant funds after the 

deadline without requesting and 

receiving permission from HUD, and 

HUD determines that the grantee is not 

high risk consistent with this notice. 

The grantee will still be able to expend 

grant funds obligated before the 

deadline. Receipt and use of any 

program income will also be unaffected. 

b. Grantees that fail to obligate an 

amount equal to or greater than its 

initial grant amount may submit 

information to HUD, for up to 30 days 

following its 18-month deadline, 

documenting any additional obligation 

of funds not already recorded in the 

DRGR system and demonstrating to 

HUD that the obligation occurred on or 

before the 18-month deadline. Before 

the 18-month deadline, each grantee 

should also review its recorded 

obligations and notify HUD within 30 

days following the deadline of any 

necessary adjustments to the amount 

and the reason for such an adjustment. 

For example, the grantee has become 

aware that an obligation amount that 

was previously recorded for an 

acquisition will not proceed, therefore a 

downward adjustment is necessary. 

c. After the deadline, if a grantee 

needs to decrease or increase the 

amount of grant funds obligated to an 

activity, it must first ask HUD to remove 

the DRGR block on changing the amount 

obligated. If the amount of decrease is 

more than 15 percent of the obligation 

for any activity, the grantee must submit 

to HUD a written request that clearly 

demonstrates with compelling 

information that factors beyond the 

grantee’s reasonable control caused the 

need to adjust after the deadline. If HUD 

agrees to grant the request, it will restore 

the grantee’s ability to obligate grant 

funds in DRGR. If HUD does not grant 

the request, the grantee must either 

complete the activity as originally 

obligated or the amount previously 

obligated for that activity will be 

recaptured. HUD may also remove the 

obligations block following risk 

assessment of the grantee or a review of 

some or all of a grantee’s obligation 

documentation. 

d. Before HUD determines the 

appropriate corrective action or 

recaptures grant funds, HUD will review 

the submitted information, consider the 

grantee’s capacity as described in 24 

CFR 570.905 and 24 CFR 570.493, and 

the grantee’s continuing need for the 

funds. 

e. Following the review and 

consistent with the procedures 

described in 24 CFR 570.900(b), HUD 

will proceed to notify the grantee of the 

selected corrective action it is required 

to undertake. 

f. HUD will recapture and reallocate 

up to $19.6 million from any state 

grantee with unused NSP1 grant funds. 

Additional corrective actions may be 

taken related to any amount of unused 

funds greater than $19.6 million. 

g. HUD will reallocate recaptured 

NSP1 grant funds in accordance with 

the reallocation formula described in a 

separate reallocation notice. A grantee 

receiving a reallocation must apply for 

the grant in accordance with the NSP1 

Notice or this notice, as applicable. A 

nonentitlement grantee that is not 

required to submit a consolidated plan 

to HUD under the CDBG program will 

prepare an abbreviated plan. The 

substance of an abbreviated plan must 

include all the required elements that 

entitlement communities provide as 

part of an NSP Action Plan substantial 

amendment as described under Section 

II.B.2 of the NSP1 Notice or this Notice, 

as applicable. 

h. Each grantee must meet the 

statutory requirement to expend 25 

percent of its grant amount for activities 

that will provide housing for 

households whose income is at or under 

50 percent of area median income. This 

cannot occur unless the funds are first 

obligated to activities for this purpose, 

or program income is received and used 

for eligible activities. Therefore, if a 

grantee fails to obligate or record 

program income use of at least 25 

percent of its original grant amount for 

activities that will provide housing for 

households whose income is at or under 

50 percent of area median income, HUD 

may issue a concern or a finding of 

noncompliance. Consistent with the 

procedures described in 24 CFR 

570.900(b), HUD will require as a 

corrective action that the grantee either 

adjust its remaining NSP1 planned 

activities to ensure that 25 percent of 

the original NSP1 formula grant amount 

and program income supports activities 

providing housing to households with 

incomes at or under 50 percent of area 

median income, or make a firm 

commitment to provide such housing 

with nonfederal funds in an amount 

sufficient to offset any deficiency to 

comply with the requirement before the 

expenditure deadline for the NSP1 

grant. 

i. The NSP1 Notice allows each 

grantee to use up to 10 percent of its 

NSP1 grant for general administration 

and planning activities. If HUD 

recaptures funds from a grant, this 

percentage limitation will still apply to 

the remaining grant funds, reducing the 

amount available for administration 

activities. 

3. Failure to Meet Expenditure 

Deadline for NSP3. 

NSP3 grantees must expend 50 

percent of their grants within 2 years 

and 100 percent of their grants within 

3 years. HUD will recapture and 

reallocate the amount of funds not 

expended by those deadlines or provide 

for other corrective action(s) or sanction. 

Further guidance will be issued prior to 

the deadline. 

II. Alternative Requirements and 

Regulatory Waivers 

This section of the notice briefly 

provides a justification for alternative 

requirements, where additional 

explanation is necessary, and describes 

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Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Notices 64325 

the necessary basis for each regulatory 

waiver. This section also highlights 

some of the statutory requirements 

applicable to the grants. This 

background narrative is followed by the 

NSP requirements. While program 

requirements across the three rounds of 

NSP funding are similar, certain 

requirements differ in accordance to 

statutory provisions. 

Each grantee eligible for an NSP grant 

that already receives annual CDBG 

allocations has carried out needs 

hearings, has a consolidated plan, an 

annual action plan, a citizen 

participation plan, a monitoring plan, 

an analysis of impediments to fair 

housing choice, and has made CDBG 

certifications. The consolidated plan 

already discusses housing needs related 

to up to four major grant programs: 

CDBG, HOME, Emergency Shelter 

Grants (ESG), and Housing 

Opportunities for Persons with AIDS 

(HOPWA). A grantee’s annual action 

plan describes the activities budgeted 

under each of those annual programs. 

HUD is treating a state and 

entitlement grantee’s use of its NSP 

grant to be a substantial amendment to 

its current approved consolidated plan 

and 2010 annual action plan. The NSP 

grant is a special CDBG allocation to 

address the problem of abandoned and 

foreclosed homes. Treating NSP3 as a 

substantial amendment will expedite 

the distribution of NSP3 funds, while 

ensuring citizen participation on the 

specific use of the funds. HUD is 

waiving the consolidated plan 

regulations on the certification of 

consistency with the consolidated plan 

to the extent necessary to mean NSP 

funds will be used to meet the 

congressionally identified needs of 

abandoned and foreclosed homes in the 

targeted areas set forth in the grantee’s 

substantial amendment. In addition, 

HUD is waiving the consolidated plan 

regulations to the extent necessary to 

adjust reporting to fit the requirements 

of HERA and the use of DRGR. 

Non-entitlement local government 

grantees receiving NSP3 funds that are 

not required to submit a consolidated 

plan to HUD under the CDBG program 

will prepare an abbreviated plan. The 

substance of an abbreviated plan must 

include all the required elements that 

entitlement communities provide as 

part of an NSP Action Plan substantial 

amendment as described under Section 

II.B.2. 

The waivers, alternative requirements, 

and statutory changes apply only to the 

grant funds appropriated under NSP 

and not to the use of regular formula 

allocations of CDBG, even if they are 

used in conjunction with NSP funds for 

a project. They provide expedited 

program implementation and 

implement statutory requirements 

unique to the covered NSP 

appropriations. 

A. Definitions for Purposes of the 

Neighborhood Stabilization Program 

Background 

Certain terms are used in HERA that 

are not used in the regular CDBG 

program, or the terms are used 

differently in HERA and the HCD Act. 

In the interest of clarity of 

administration, HUD is defining these 

terms in this notice for all grantees, 

including states. For the same reason, 

HUD is also defining eligible fund uses 

for all grantees, including states. States 

may define other program terms under 

the authority of 24 CFR 570.481(a), and 

will be given maximum feasible 

deference in accordance with 24 CFR 

570.480(c) in matters related to the 

administration of their NSP programs. 

Requirement 

Abandoned. A home or residential 

property is abandoned if either (a) 

mortgage, tribal leasehold, or tax 

payments are at least 90 days 

delinquent, or (b) a code enforcement 

inspection has determined that the 

property is not habitable and the owner 

has taken no corrective actions within 

90 days of notification of the 

deficiencies, or (c) the property is 

subject to a court-ordered receivership 

or nuisance abatement related to 

abandonment pursuant to state or local 

law or otherwise meets a state definition 

of an abandoned home or residential 

property. 

Blighted structure. A structure is 

blighted when it exhibits objectively 

determinable signs of deterioration 

sufficient to constitute a threat to 

human health, safety, and public 

welfare. 

CDBG funds. CDBG funds means, in 

addition to the definition at 24 CFR 

570.3, grant funds distributed under this 

notice. 

Current market appraised value. The 

current market appraised value means 

the value of a foreclosed upon home or 

residential property that is established 

through an appraisal made in 

conformity with either: (1) The 

appraisal requirements of the URA at 49 

CFR 24.103, or (2) the Uniform 

Standards of Professional Appraisal 

Practice (USPAP), or (3) the appraisal 

requirements of the Federal Housing 

Administration (FHA) or a government 

sponsored enterprise (GSE); and the 

appraisal must be completed or updated 

within 60 days of a final offer made for 

the property by a grantee, subrecipient, 

developer, or individual homebuyer. 

However, if the anticipated value of the 

proposed acquisition is estimated at 

$25,000 or less, the current market 

appraised value of the property may be 

established by a valuation of the 

property that is based on a review of 

available data and is made by a person 

the grantee determines is qualified to 

make the valuation. 

Date of Notice of Foreclosure. For 

purposes of the NSP tenant protection 

provisions described at Section K, the 

date of notice of foreclosure shall be 

deemed to be the date on which 

complete title to a property is 

transferred to a successor entity or 

person as a result of an order of a court 

or pursuant to provisions in a mortgage, 

deed of trust, or security deed. If none 

of these events occur in the acquisition 

of a foreclosed property (e.g. in a short 

sale), in order to ensure fair and 

equitable treatment of bona fide tenants 

and consistency with the NSP definition 

of foreclosed, the date of notice of 

foreclosure shall be deemed to be the 

date on which the property is acquired 

for the NSP-assisted project. Note: This 

definition does not affect or otherwise 

alter the definition of ‘‘foreclosed’’ as 

provided in this notice. 

Foreclosed. A home or residential 

property has been foreclosed upon if 

any of the following conditions apply: 

(a) The property’s current delinquency 

status is at least 60 days delinquent 

under the Mortgage Bankers of America 

delinquency calculation and the owner 

has been notified; (b) the property 

owner is 90 days or more delinquent on 

tax payments; (c) under state, local, or 

tribal law, foreclosure proceedings have 

been initiated or completed; or (d) 

foreclosure proceedings have been 

completed and title has been transferred 

to an intermediary aggregator or servicer 

that is not an NSP grantee, contractor, 

subrecipient, developer, or end user. 

Land bank. A land bank is a 

governmental or nongovernmental 

nonprofit entity established, at least in 

part, to assemble, temporarily manage, 

and dispose of vacant land for the 

purpose of stabilizing neighborhoods 

and encouraging re-use or 

redevelopment of urban property. For 

the purposes of NSP, a land bank will 

operate in a specific, defined geographic 

area. It will purchase properties that 

have been foreclosed upon and 

maintain, assemble, facilitate 

redevelopment of, market, and dispose 

of the land-banked properties. If the 

land bank is a governmental entity, it 

may also maintain foreclosed property 

that it does not own, provided it charges 

the owner of the property the full cost 

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64326 Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Notices 

of the service or places a lien on the 

property for the full cost of the service. 

Subrecipient. Subrecipient shall have 

the same meaning as at the first 

sentence of 24 CFR 570.500(c). This 

includes any nonprofit organization 

(including a unit of general local 

government) that a state awards funds 

to. 

Use (for the purposes of HERA section 

2301(c)(1)). Funds are used when they 

are obligated by a state, unit of general 

local government, or any subrecipient 

thereof, for a specific NSP activity; for 

example, for acquisition of a specific 

property. Funds are obligated for an 

activity when orders are placed, 

contracts are awarded, services are 

received, and similar transactions have 

occurred that require payment by the 

state, unit of general local government, 

or subrecipient during the same or a 

future period. Note that funds are not 

obligated for an activity when 

subawards (e.g., grants to subrecipients 

or to units of local government) are 

made. 

Vicinity. For the purposes of NSP3, 

HUD defines ‘‘vicinity’’ as each 

neighborhood identified by the NSP3 

grantee as being the areas of greatest 

need. 

B. NSP3 Pre-Grant Process 

Background 

With this notice, HUD is establishing 

the NSP3 allocation formula, including 

reallocation provisions, and announcing 

the distribution of funds. CDBG grantees 

receiving NSP3 allocations may 

immediately begin to prepare and 

submit action plan substantial 

amendments for NSP3 funds, in 

accordance with this notice. (Insular 

areas should follow the requirements for 

entitlement communities.) Nonentitlement local government grantees 

will follow entitlement requirements 

except for the submission of an 

abbreviated plan rather than a 

substantial amendment or as otherwise 

explained in this notice. 

To receive NSP3 funding, each 

grantee listed in Attachment B must 

submit an action plan substantial 

amendment or abbreviated plan to HUD 

in accordance with this notice by March 

1, 2011. 

HUD encourages each grantee to carry 

out its NSP activities in the context of 

a comprehensive plan for the 

community’s vision of how it can make 

its neighborhoods not only more stable, 

but also more sustainable, inclusive, 

competitive, and integrated into the 

overall metropolitan fabric, including 

access to transit, affordable housing, 

employers, and services. HUD also 

encourages grantees to incorporate green 

and sustainable development practices, 

such as the examples in Attachment C. 

HUD encourages each local 

jurisdiction receiving an allocation to 

carefully consider its administrative 

capacity to use the funds within the 

statutory deadline. 

Jurisdictions may cooperate to carry 

out their grant programs through a joint 

request to HUD. HUD is providing 

regulatory waivers and alternative 

requirements to allow joint requests 

among units of general local government 

and to allow joint requests between 

units of general local government and a 

state. Any two or more contiguous units 

of general local government that are in 

the same metropolitan area and that are 

eligible to receive an NSP grant may 

instead make a joint request to HUD to 

implement a joint NSP program. A 

jurisdiction need not have a joint 

agreement with an urban county under 

the regular CDBG entitlement program 

to request a joint program for NSP 

funding. Similarly, any community 

eligible to receive an NSP grant may 

instead make a request for a joint NSP 

program with its state. An NSP joint 

request under a cooperation agreement 

results in a single combined grant and 

a single action plan substantial 

amendment. Potential requestors should 

contact HUD as soon as possible (as far 

as possible in advance of publishing a 

proposed NSP substantial amendment) 

for technical guidance. The requestors 

will specify which jurisdiction will 

receive the funds and administer the 

combined grant on behalf of the 

requestors; in the case of a joint request 

between a local government jurisdiction 

and a state, the state will administer the 

combined grant. (Grantees choosing this 

option should consider the 

Consolidated Plan and citizen 

participation implications of this 

approach. The lead entity’s substantial 

amendment or abbreviated plan will 

cover any participating members. The 

citizen participation process must 

include citizens of all jurisdictions 

participating in the joint NSP program, 

not just those of the lead entity.) 

Given the rule of construction in 

HERA that NSP funds generally are 

construed as CDBG program funds, 

subject to CDBG program requirements, 

HUD generally is treating NSP3 funds as 

a special allocation of Fiscal Year (FY) 

2010 CDBG funding. This has important 

consequences for local governments 

presently participating in an existing 

urban county program, and for 

metropolitan cities that have joint 

agreements with urban counties. HUD 

will consider any existing cooperation 

agreements between a local government 

and an urban county governing FY2010 

CDBG funding (for purposes of either an 

urban county or a joint program) to 

automatically cover NSP funding as 

well. These cooperation agreements will 

continue to apply to the use of NSP 

funds for the duration of the NSP grant, 

just as cooperation agreements covering 

regular CDBG Entitlement program 

funds continue to apply to any use of 

the funds appropriated during the 3- 

year period covered by the agreements. 

For example, a local government 

presently has a cooperation agreement 

covering a joint program or participation 

in an urban county for Federal FYs 

2009, 2010 and 2011. The local 

government may choose to discontinue 

its participation with the county at the 

end of the applicable qualification 

period for purposes of regular CDBG 

entitlement funding. However, the 

county will still be responsible for any 

NSP3 projects funded in that 

community, and for any NSP3 funding 

the local government receives from the 

county, until those funds are expended 

and the funded activities are completed. 

A third method of cooperating is also 

available. A jurisdiction may choose to 

apply for its entire grant, and then enter 

into a subrecipient agreement with 

another jurisdiction or nonprofit entity 

to administer the grant. In this manner, 

for example, all of the grantees 

operating in a single metropolitan area 

could designate the same land-bank 

entity (or the state housing finance 

agency) as a subrecipient for some or all 

of their NSP activities. 

Each NSP3 grantee will have until 

March 1, 2011, to complete and submit 

a substantial amendment to its annual 

action plan or an abbreviated plan. A 

grantee that wishes to submit its action 

plan amendment to HUD electronically 

in the DRGR system rather than by 

paper may do so by contacting its local 

field office for the DRGR submission 

directions. Paper submissions to HUD 

also will be allowed, although each 

grantee must set up its action plan in 

DRGR prior to the deadline for the first 

required performance report after 

receiving a grant. 

HUD encourages grantees, during 

development of their action plan 

amendments or abbreviated plans, to 

contact HUD field offices for guidance 

in complying with these requirements, 

or if they have any questions regarding 

meeting grant requirements. 

Normally, in the CDBG program, a 

grantee takes at least 30 days soliciting 

comment from its citizens before it 

submits an annual action plan to HUD, 

which then has 45 days to accept or 

reject the plan. To expedite the process 

and to ensure that the NSP grants are 

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awarded in a timely manner, while 

preserving reasonable citizen 

participation, HUD is waiving the 

requirement that the grantee follow its 

citizen participation plan for this 

substantial amendment. HUD is 

shortening the minimum time for 

citizen comments and requiring the 

substantial amendment or abbreviated 

plan to be posted on the grantee’s 

official Web site as the materials are 

developed, published, and submitted to 

HUD. 

A grantee will be deemed by HUD to 

have received its NSP grant at the time 

HUD signs its NSP grant agreement (or 

amendment thereof, in the case of a 

state that later receives reallocated grant 

funds). 

Grantees are cautioned that, despite 

the expedited application and plan 

process, they are still responsible for 

ensuring that all citizens have equal 

access to information about the 

programs. Among other things, this 

means that each grantee must ensure 

that program information is available in 

the appropriate languages for the 

geographic area served by the 

jurisdiction. This will be a particular 

issue for states that make grants 

covering regular CDBG entitlement areas 

(or to entitlement grantees). Because 

regular State CDBG funds are not used 

in entitlement areas, State CDBG staffs 

may not be aware of limited English 

proficient (LEP) speaking populations in 

those metropolitan jurisdictions. 

HUD will review each grantee 

submission for completeness and 

consistency with the requirements of 

this notice and will disapprove 

incomplete and inconsistent action plan 

amendments or abbreviated plans. HUD 

will allow revision and resubmission of 

a disapproved amendment or 

abbreviated plan in accordance with 24 

CFR 91.500(d) so long as any such 

resubmission is received by HUD 45 

days or less following the date of first 

disapproval. 

In combination, the notice alternative 

requirements provide the following 

expedited steps for NSP grants: 

• Proposed action plan amendment or 

abbreviated plan published via the 

usual methods and on the Internet for 

no less than 15 calendar days of public 

comment; 

• Final action plan amendment or 

abbreviated plan posted on the Internet 

and submitted to HUD by March 1, 2011 

(grant application includes Standard 

Form 424 (SF–424) and certifications); 

• HUD expedites review; 

• HUD accepts the plan and prepares 

a cover letter, grant agreement, and 

grant conditions; 

• Grant agreement signed by HUD 

and immediately transmitted to the 

grantee; 

• Grantee signs and returns the grant 

agreements; 

• HUD establishes the line of credit 

and the grantee requests and receives 

DRGR access (if it does not already have 

access); 

• After completing the environmental 

review(s) pursuant to 24 CFR part 58 

and, as applicable, receiving from HUD 

or the state an approved Request for 

Release of Funds and certification, the 

grantee may draw down funds from the 

line of credit. 

In consideration of the shortened 

comment period, it is essential that 

grantees ensure that affected parties 

have sufficient notice of the opportunity 

to comment. The action plan substantial 

amendment or abbreviated plan and 

citizen participation alternative 

requirement will permit an expedited 

grant-making process, but one that still 

provides for public notice, appraisal, 

examination, and comment on the 

activities proposed for the use of NSP3 

grant funds. 

Note: HUD believes an adequate and 

acceptable substantial amendment or 

abbreviated plan should be no longer than 25 

pages. A plan should provide sufficient detail 

for citizens and HUD reviewers. Internet 

address links can be provided to longer 

elements that may change, such as detailed 

rehabilitation standards. 

Requirement 

1. General. Except as described in this 

notice, statutory and regulatory 

provisions governing the CDBG program 

for states and entitlement communities, 

as applicable, shall apply to the use of 

these funds. Except as described in this 

notice, non-entitlement local 

government grantees receiving a grant 

directly from HUD shall follow statutory 

and regulatory provisions governing the 

CDBG program for entitlement 

communities. 

2. Contents of an NSP Action Plan 

substantial amendment or abbreviated 

plan. The elements in the NSP 

substantial amendment to the Annual 

Action Plan or an abbreviated plan 

required for the CDBG program under 

part 91 are: 

a. General information about needs, 

distribution, use of funds, and 

definitions: 

i. Each grantee must use the HUD 

Foreclosure Need Web site as linked to 

from http://www.hud.gov/nsp to submit 

to HUD the locations of its NSP3 areas 

of greatest need. On this site, HUD 

provides estimates of foreclosure need 

and a foreclosure related needs scores at 

the Census Tract level. The score rank 

need from 1 to 20, with 20 being census 

tracts with the HUD-estimated greatest 

need. 

ii. The neighborhood or 

neighborhoods identified by the NSP3 

grantee as being the areas of greatest 

need must have an individual or average 

combined index score for the grantee’s 

identified target geography that is not 

less than the lesser of 17 or the 

twentieth percentile most needy score 

in an individual state. For example, if a 

state’s twentieth percentile most needy 

census tract is 18, the requirement will 

be a minimum need of 17. If, however, 

a state’s twentieth percentile most 

needy census tract is 15, the 

requirement will be a minimum need of 

15. HUD will provide the minimum 

threshold for each state at its Web site 

http://www.hud.gov/nsp. If more than 

one neighborhood is identified in the 

Action Plan, HUD will average the 

neighborhood NSP3 scores, weighting 

the scores by the estimated number of 

housing units in each identified 

neighborhood. 

iii. A narrative describing how the 

distribution and uses of the grantee’s 

NSP funds will meet the requirements 

of Section 2301(c)(2) of HERA, as 

amended by the Recovery Act and the 

Dodd-Frank Act; 

iv. For the purposes of the NSP3, the 

narratives will include: 

(A) A definition of ‘‘blighted 

structure’’ in the context of state or local 

law; 

(B) A definition of ‘‘affordable rents;’’ 

(C) A description of how the grantee 

will ensure continued affordability for 

NSP-assisted housing; and 

(D) A description of housing 

rehabilitation standards that will apply 

to NSP-assisted activities. 

b. Information by activity describing 

how the grantee will use the funds, 

identifying: 

i. The eligible use of funds under 

NSP3; 

ii. The eligible CDBG activity or 

activities; 

iii. The areas of greatest need 

addressed by the activity or activities; 

vi. The expected benefit to incomequalified persons or households or 

areas; 

v. Appropriate performance measures 

for the activity (e.g., units of housing to 

be acquired, rehabilitated, or 

demolished for the income levels 

represented in DRGR, which are 

currently 50 percent of area median 

income and below, 51 to 80 percent, and 

81 to 120 percent); 

vi. Amount of funds budgeted for the 

activity; 

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vii. The name and location of the 

entity that will carry out the activity; 

and 

viii. The expected start and end dates 

of the activity. 

c. A brief description of the general 

terms under which assistance will be 

provided, including: 

i. Range of interest rates (if any); 

ii. Duration or term of assistance; 

iii. Tenure of beneficiaries (e.g., 

renters or homeowners); and 

vi. If the activity produces housing, 

how the design of the activity will 

ensure continued affordability; 

v. How the grantee shall, to the 

maximum extent feasible, provide for 

the hiring of employees who reside in 

the vicinity of NSP3 projects or contract 

with small businesses that are owned 

and operated by persons residing in the 

vicinity of such project, including 

information on existing local ordinances 

that address these requirements; 

vi. The procedures used to create 

preferences for the development of 

affordable rental housing developed 

with NSP3 funds; and 

vii. Whether the funds used for the 

activity are to count toward the 

requirement to provide benefit to lowincome persons (earning 50 percent or 

less of area median income). 

d. The action plan narrative should 

specifically address how the grantee’s 

program design will address the local 

housing market conditions. 

e. Information on how to contact 

grantee program administrators, so that 

citizens and other interested parties 

know whom to contact for additional 

information. 

3. Continued affordability. 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) of HERA, as amended, 

remain affordable to individuals and 

families whose incomes do not exceed 

50 percent of area median income. 

a. 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).) 

b. The grantee must require each NSPassisted homebuyer to receive and 

complete at least 8 hours of homebuyer 

counseling from a HUD-approved 

housing counseling agency before 

obtaining a mortgage loan. If the grantee 

is unable to meet this requirement for a 

good cause (e.g., there are no HUDapproved housing counseling agencies 

within the grantee’s jurisdiction, or 

there are no HUD-approved housing 

counseling agencies within the grantee’s 

jurisdiction that engage in homebuyer 

counseling), the grantee may submit a 

request for an exception to this 

requirement to the responsible HUD 

field office, and the HUD field office has 

the authority to grant an exception for 

good cause. The grantee must ensure 

that the homebuyer obtains a mortgage 

loan from a lender who agrees to 

comply with the bank regulators’ 

guidance for non-traditional mortgages 

(see, Statement on Subprime Mortgage 

Lending issued by the Office of the 

Comptroller of the Currency, Board of 

Governors of the Federal Reserve 

System, Federal Deposit Insurance 

Corporation, Department of the 

Treasury, and National Credit Union 

Administration, available at http://

www.fdic.gov/regulations/laws/rules/ 

5000–5160.html). Grantees must design 

NSP programs to comply with this 

requirement and must document 

compliance in the records, for each 

homebuyer. Grantees are cautioned 

against providing or permitting 

homebuyers to obtain subprime 

mortgages for whom such mortgages are 

inappropriate, including homebuyers 

who qualify for traditional mortgage 

loans. 

4. Citizen participation alternative 

requirement. HUD is providing an 

alternative requirement to 42 U.S.C. 

5304(a)(2) and (3), to expedite 

distribution of grant funds and to 

provide for expedited citizen 

participation for the NSP substantial 

amendment. Provisions of 24 CFR 

91.105(k), 91.115(i), 570.302 and 

570.486, with respect to following the 

citizen participation plan, are waived to 

the extent necessary to allow 

implementation of the requirements 

below. 

a. Initial Allocation. To receive its 

grant allocation, a grantee must submit 

to HUD for approval an NSP3 

application by March 1, 2011. This 

submission will include a signed SF– 

424, signed certifications, and a 

substantial action plan amendment or 

abbreviated plan meeting the 

requirements of paragraph b below. (24 

CFR 91.505 is waived to the extent 

necessary to require submission of the 

substantial amendment to HUD for 

approval in accordance with this 

notice.) 

Reallocation. To receive an NSP 

reallocation, a grantee must submit to 

HUD for approval an NSP application 

by the deadline indicated in a 

reallocation announcement. This 

submission will include a signed 

standard Federal form SF–424, signed 

certifications, and a substantial action 

plan amendment or abbreviated plan 

meeting the requirements of paragraph 

B.3.b below. (24 CFR 91.505 is waived 

to the extent necessary to require 

submission of the substantial 

amendment to HUD for approval in 

accordance with this notice.) 

b. Each grantee must prepare and 

submit its annual Action Plan 

amendment or abbreviated plan to HUD 

in accordance with the consolidated 

plan procedures under the CDBG 

program as modified by this notice, or 

HUD will reallocate the funds allocated 

for that grantee. HUD is providing 

alternative requirements to 42 U.S.C. 

5304(a)(2) and waiving 24 CFR 

91.105(c)(2), 91.105(k), 91.115(c)(2), and 

91.115(i) to the extent necessary to 

allow the grantee to provide no fewer 

than 15 calendar days for citizen 

comment (rather than 30 days) for its 

initial NSP submission and any 

subsequent substantial NSP action plan 

amendment, and to require that, at the 

time of submission to HUD, each 

grantee post its approved action plan 

amendment and any subsequent NSP 

amendments on its official Web site 

along with a summary of citizen 

comments received within the 15-day 

comment period. After HUD processes 

and approves the plan amendment and 

both HUD and the grantee have signed 

the grant agreement, HUD will establish 

the grantee’s line of credit in the amount 

of funds included in the Action Plan 

amendment, up to the allocation 

amount. 

5. Joint requests. To expedite the use 

of funds, HUD is providing an 

alternative requirement to 42 U.S.C. 

5304(i) and is waiving 24 CFR 570.308 

to the extent necessary to allow for 

additional joint programs described 

below. 

a. Unit of General Local Government 

Joint Agreements. Two or more 

contiguous jurisdictions that are eligible 

to receive a NSP allocation and are 

located in the same metropolitan area 

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may enter into joint agreements. All 

members to the joint agreement must be 

eligible to receive NSP1 or NSP3 funds, 

and one unit of general local 

government must be designated as the 

lead entity. The lead entity must 

execute the NSP grant agreement with 

HUD. Consistent with 24 CFR 570.308, 

the lead entity must assume 

responsibility for administering the NSP 

grant on behalf of all members, in 

compliance with applicable program 

requirements. The lead entity’s 

substantial amendment to the action 

plan or abbreviated plan will include all 

participating communities. 

b. Joint agreements with a state. Any 

jurisdiction that is eligible to receive an 

NSP allocation may enter into a joint 

agreement with its state. The state shall 

be the lead entity and must assume 

responsibility for administering the NSP 

grant on behalf of the local government, 

in compliance with applicable program 

requirements. The substantial 

amendment to the state’s action plan 

will include any participating unit of 

general local government. 

c. Local jurisdictions receiving 

reallocation funds may enter into joint 

agreements in accordance with 

paragraph B.5.a. or b., regardless of 

whether the local jurisdiction had a 

joint agreement for the original NSP 

allocation. 

6. Effect of existing cooperation 

agreements governing joint programs 

and urban counties for NSP3 (see NSP1 

Notice for parallel language for NSP1 

grantees). Any cooperation agreement 

between a unit of general local 

government and a county, concerning 

either a joint program or participation in 

an urban county under 24 CFR 570.307 

or 570.308, and governing CDBG funds 

appropriated for Federal FY 2010, will 

be considered to incorporate and apply 

to NSP3 funding. Any such cooperation 

agreements will continue to apply to the 

use of NSP3 funds until the NSP3 funds 

are expended and the NSP3 grant is 

closed out. Grantees should note that 

certain provisions in existing 

cooperation agreements that govern 

CDBG funding may be inconsistent with 

parts of HERA, the Recovery Act, the 

Dodd-Frank Act or this notice. For 

instance, set minimum and/or 

maximum allocation amounts may 

conflict with priority distributions to 

areas of greatest need identified in the 

grantee’s action plan substantial 

amendment. Conforming amendments 

should be made to existing cooperation 

agreements, as necessary, to comply 

with NSP statutory requirements and 

this notice. 

C. Reimbursement for Pre-Award Costs 

Background 

NSP grantees will need to move 

forward rapidly to prepare the NSP 

substantial amendment or abbreviated 

plan and to undertake other 

administrative actions, including 

environmental reviews, as soon as 

allocations are known. Therefore, HUD 

is granting permission to states and 

jurisdictions receiving a direct 

allocation of NSP funds to incur preaward costs as if each was a new grantee 

preparing to receive its first allocation of 

CDBG funds. 

Requirement 

HUD is waiving 24 CFR 570.200(h) to 

the extent necessary to grant permission 

to jurisdictions receiving a direct NSP 

allocation under this notice to incur preaward costs as if each was a new grantee 

preparing to receive its first allocation of 

CDBG funds. Similarly, in accordance 

with OMB Circular A–87, Attachment B, 

paragraph 31, HUD is allowing states to 

incur pre-award costs as if each was a 

new grantee preparing to receive its first 

allocation of CDBG funds. NSP grantees 

will be allowed to incur costs necessary 

to develop the NSP substantial action 

plan amendment and undertake other 

administrative actions necessary to 

receive its first grant, prior to the costs 

being included in the final plan, 

provided that the other conditions of 24 

CFR 570.200(h) are met. (For units of 

general local government applying to 

the state (including entitlements not 

receiving a direct NSP allocation under 

this notice), 24 CFR 570.489(b) applies 

unmodified. Units of general local 

government receiving direct NSP 

allocations may incur pre-award costs as 

would an entitlement community.) 

D. Grantee Capacity and Grant 

Conditions 

Background 

In the October 6, 2008 Notice, HUD 

encouraged each local jurisdiction 

receiving an allocation to carefully 

consider its administrative capacity to 

use the funds within the statutory 

deadline. To support this consideration, 

HUD will provide each grantee a selfassessment tool that grantees may find 

useful in better understanding their 

capacity to undertake and manage NSP 

activities. This is essentially the same 

self-assessment tool that is used for NSP 

Technical Assistance purposes and it 

will allow HUD to more rapidly identify 

capacity gaps and technical assistance 

needs and to provide appropriate 

technical assistance. Although HUD 

suggests that every NSP grantee 

complete and submit the selfassessment with its substantial 

amendment or abbreviated plan, HUD 

will require some grantees to complete 

and submit such a self-assessment as a 

special condition of receiving funding. 

Requirement 

For NSP grantees that HUD 

determines are high risk in accordance 

with 24 CFR 85.12(a), HUD will apply 

additional grant conditions in 

accordance with 24 CFR 85.12(b). 

E. Income Eligibility Requirement 

Changes 

Background 

The NSP program includes two lowand moderate-income requirements at 

HERA section 2301(f)(3)(A) that 

supersede existing CDBG income 

qualification requirements. Under the 

heading ‘‘Low and Moderate Income 

Requirement,’’ HERA states that: 

all of the funds appropriated or otherwise 

made available under this section shall be 

used with respect to individuals and families 

whose income does not exceed 120 percent 

of area median income. 

This provision does two main things. 

First, for the purposes of NSP, it 

effectively supersedes the overall 

benefit provisions of the HCD Act and 

the CDBG regulations, which allow up 

to 30 percent of a grant to be used for 

activities that meet a national objective 

other than low- and moderate-income 

benefit. Thus, NSP allows the use of 

only the low- and moderate-income 

benefit national objective. Activities 

may not qualify under NSP using the 

‘‘prevent or eliminate slums and blight’’ 

or ‘‘address urgent community 

development needs’’ objectives. 

Second, this provision also redefines 

and supersedes the definition of ‘‘lowand moderate-income,’’ effectively 

allowing households whose incomes 

exceed 80 percent of area median 

income but do not exceed 120 percent 

of area median income to qualify as if 

their incomes did not exceed the 

published low- and moderate-income 

levels of the regular CDBG program. To 

prevent confusion, HUD will refer to 

this new income group as ‘‘middle 

income,’’ and keep the regular CDBG 

definitions of ‘‘low-income’’ and 

‘‘moderate income’’ in use. Further, HUD 

will characterize aggregated households 

whose incomes do not exceed 120 

percent of median income as ‘‘low-, 

moderate-, and middle-income 

households,’’ abbreviated as LMMH. For 

the purposes of NSP only, an activity 

may meet the HERA low- and moderateincome national objective if the assisted 

activity: 

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• Provides or improves permanent 

residential structures that will be 

occupied by a household whose income 

is at or below 120 percent of area 

median income (abbreviated as LMMH); 

• Serves an area in which at least 51 

percent of the residents have incomes at 

or below 120 percent of area median 

income (LMMA); or 

• Serves a limited clientele whose 

incomes are at or below 120 percent of 

area median income (LMMC). 

HUD will use the parenthetical terms 

above to refer to NSP national objectives 

in program implementation, to avoid 

confusion with the regular HCD Act 

definitions. 

Land banks are not allowed in the 

regular CDBG program because of the 

very high risk that the delay between 

acquiring property and meeting a 

national objective can be excessively 

long, attenuating the intended CDBG 

program benefits by delaying benefit far 

beyond the annual or even the 5-year 

consolidated plan cycles. In the regular 

CDBG program (and in NSP other than 

in an eligible land-bank use), a property 

acquisition activity is dependent on the 

subsequent re-use of the property 

meeting a national objective in order to 

demonstrate program compliance. Given 

this, the HERA direction that assistance 

to land banks is an eligible use of NSP 

funds requires an alternative 

requirement and policy clarification. 

For grantees choosing to assist land 

banks or demolition of structures with 

NSP funds, the change to the income 

qualification level for low-, moderateand middle-income areas will likely 

include most of the neighborhoods 

where property stabilization is required. 

If an assisted land bank is not merely 

acquiring properties, but is also working 

in an area in which other activities are 

being carried out that are intended to 

arrest neighborhood decline, such as 

maintenance, demolition, and 

facilitating redevelopment of the 

properties, HUD will, for NSP-assisted 

activities only, accept that the 

acquisition and management activities 

of the land bank may provide sufficient 

benefit to an area generally (as described 

in 24 CFR 570.208(a)(1) and 

570.483(b)(1)) to meet a national 

objective (LMMA) prior to final 

disposition of the banked property. 

HUD notes that the grantee must 

determine the actual service area 

benefiting from a land bank’s activities, 

in accordance with the regulations. 

However, HUD does not believe the 

benefits of just holding property are 

sufficient to stabilize most 

neighborhoods or that this is the best 

use of limited NSP funds absent a re-use 

plan. Therefore, HUD requires that a 

land bank may not hold a property for 

more than 10 years without obligating 

the property for a specific, eligible 

redevelopment of that property in 

accordance with NSP requirements. 

Note that if a state provides funds to 

an entitlement community, the 

entitlement community must apply the 

area median income levels applicable to 

its regular CDBG program geography 

and not the ‘‘balance of state’’ levels. 

Other than the change in the 

applicable low- and moderate-income 

qualification level from 80 percent to 

120 percent and this notice’s change to 

the calculation at 570.483(b)(3), the area 

benefit, housing, and limited clientele 

benefit requirements at 24 CFR 

570.208(a) and 570.483(b) remain 

unchanged, as does the required 

documentation. 

The other NSP low- and moderateincome related provision, as modified 

by the Dodd-Frank Act, states that: 

‘‘not less than 25 percent of the funds 

appropriated or otherwise made available 

under this section shall be used to house 

individuals or families whose incomes do not 

exceed 50 percent of area median income.’’ 

The Dodd-Frank Act struck language 

in HERA that specified that funds 

meeting the 25 percent requirement 

must be used specifically for the 

purchase and redevelopment of 

abandoned and foreclosed homes or 

residential properties. This means that, 

as of the effective date of the DoddFrank Act, any NSP eligible activity 

used to house individuals or families at 

or below 50 percent area medium 

income may be used to satisfy this 

requirement (i.e., vacant properties that 

are not abandoned or foreclosed may be 

used to meet the requirement as well as 

eligible commercial properties that are 

reused to house individuals and 

families at or below 50% AMI). 

However, NSP1 and NSP2 funds already 

obligated or expended prior July 21, 

2010, do not retroactively satisfy this 

requirement. 

HUD advises grantees to take note of 

this threshold as they design NSP 

activities. This provision does not have 

a parallel in the regular CDBG program. 

Grantees must document that an amount 

equal to at least 25 percent of a grantee’s 

NSP grant (initial allocation plus any 

program income) has been budgeted in 

the initial approved action plan 

substantial amendment or abbreviated 

plan for activities that will provide 

housing for income-qualified 

individuals or families. Prior to and at 

grant closeout, HUD will review 

grantees for compliance with this 

provision by determining whether at 

least 25 percent of grant funds have 

been expended for housing for 

individual households whose incomes 

do not exceed 50 percent of area median 

income. 

HUD is providing a waiver and 

alternative requirement to allow 

grantees to determine low- and 

moderate income benefit on a unit basis 

to allow greater support of mixed 

income housing than the structure basis 

required by 24 CFR 570.483(b)(3). 

(Under the cited regulation, the general 

rule is that at least 51 percent of the 

residents of an assisted structure must 

be income eligible.) Under the unit 

approach, one or more of the units in a 

structure must house income-eligible 

families, but the remainder of the units 

may be market rate, so long as the 

proportion of assistance provided 

compared to the overall project budget 

is no more than the proportion of units 

that will be occupied by income-eligible 

households compared to the number of 

units in the overall project. Under the 

unit approach, the number of incomeeligible units is proportional to the 

amount of assistance provided. Note 

that this approach may only be used if 

the units are generally comparable in 

size and finishes. Based on HUD 

experience, this approach is generally 

more compatible with large-scale 

development of mixed-income housing 

than the structure approach under 

which a dollar of CDBG assistance to a 

structure means that 51 percent of the 

units must meet income requirements. 

For the purposes of NSP, adopting the 

unit basis continues to benefit 

individuals and families whose income 

does not exceed 120 percent of area 

median income by limiting the 

proportion of the funding to the 

proportion of units that are being 

assisted with NSP funds. This approach 

also helps to avoid displacing existing 

over-income tenants in a building being 

treated with NSP. Finally, it promotes 

the type of mixed-income developments 

that experience shows to be more 

successful both economically and 

socially. Therefore, the waiver and 

alternative requirements allow the 

grantee a choice. The grantee may 

measure benefit within a housing 

development project (1) according to the 

existing CDBG requirements, (2) 

according to the HOME program 

requirements at 24 CFR 92.205(d) or (3) 

according to the modified CDBG 

alternative requirements specified in 

this notice, which extend the CDBG 

exception noted above. The grantee 

must select and use just one method for 

each project. 

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Requirements 

1. Overall benefit supersession and 

alternative requirement. The 

requirements at 42 U.S.C. 5301(c), 42 

U.S.C. 5304(b)(3)(A), 24 CFR 570.484 

(for states), and 24 CFR 570.200(a)(3) 

that 70 percent of funds are for activities 

that benefit low- and moderate-income 

persons are superseded and replaced by 

section 2301(f)(3)(A) of HERA. One 

hundred percent of NSP funds must be 

used to benefit individuals and 

households whose income does not 

exceed 120 percent of area median 

income. NSP shall refer to such 

households as ‘‘low-, moderate-, and 

middle-income.’’ 

2. National objectives supersession 

and alternative requirements. The 

requirements at 42 U.S.C 5301(c) are 

superseded and 24 CFR 570.208(a) and 

570.483 are waived to the extent 

necessary to allow the following 

alternative requirements: 

a. for purposes of NSP only, the term 

‘‘low- and moderate-income person’’ as 

it appears throughout the CDBG 

regulations at 24 CFR part 570 shall be 

defined as a member of a low-, 

moderate-, and middle-income 

household, and the term ‘‘low- and 

moderate-income household’’ as it 

appears throughout the CDBG 

regulations shall be defined as a 

household having an income equal to or 

less than 120 percent of area median 

income, measured as 2.4 times the 

current Section 8 income limit for 

households below 50 percent of median 

income, adjusted for family size. A state 

choosing to carry out an activity directly 

must apply the requirements of 24 CFR 

570.208(a) to determine whether the 

activity has met the low-, moderate-, 

and middle-income (LMMI) national 

objective and must maintain the 

documentation required at 24 CFR 

570.506 to demonstrate compliance to 

HUD. 

b. The national objectives related to 

prevention and elimination of slums 

and blight and addressing urgent 

community development needs (24 CFR 

570.208(b) and (c) and 570.483(c) and 

(d)) are not applicable to NSP-assisted 

activities. 

c. Each grantee whose plan includes 

assisting rental housing shall develop 

and make public its definition of 

affordable rents for NSP-assisted rental 

projects. 

d. An NSP-assisted property may not 

be held in a land bank for more than 10 

years without obligating the property for 

a specific, eligible redevelopment of that 

property in accordance with NSP 

requirements. 

e. Not less than 25 percent of any NSP 

grant shall be used to house individuals 

or families whose incomes do not 

exceed 50 percent of area median 

income. 

f. HUD will consider assistance for a 

multi-unit housing project involving 

new construction, acquisition, 

reconstruction, or rehabilitation to 

benefit LMMI households in the 

following circumstances: 

(i)(A) The NSP assistance defrays the 

development costs of a housing project 

providing eligible permanent residential 

units that, upon completion, will be 

occupied by income-qualified 

households; and 

(B) if the project is rental, the units 

occupied by income-qualified 

households will be leased at affordable 

rents. The grantee or unit of general 

local government shall adopt and make 

public its standards for determining 

‘‘affordable rents’’ for this purpose; and 

(C) The proportion of the total cost of 

developing the project to be borne by 

NSP assistance is no greater than the 

proportion of units in the project that 

will be occupied by income-qualified 

households; or 

(ii) When NSP assistance defray the 

development costs of eligible permanent 

residential units, such assistance shall 

be considered to benefit LMMI persons 

if the grantee follows the provisions of 

24 CFR 92.205(d); or 

(iii) The requirements of 24 CFR 

570.208(a)(3) or 570.483(b)(3) are met, 

as applicable. 

(iv) The grantee must select and use 

just one method for each project. 

(v) The term ‘‘project’’ will be defined 

as in the HOME Program at 24 CFR 92.2. 

(vi) If the grantee applies option (i) or 

(ii) above to a housing project, 24 CFR 

570.208(a)(3) or 570.483(b)(3), as 

applicable, is waived for that project. 

F. State Distribution to Entitlement 

Communities and Indian Tribes 

Background 

This notice includes an alternative 

requirement to the HCD Act and a 

regulatory waiver allowing distribution 

of funds by a state to CDBG regular 

entitlement communities and Tribes. 

This is consistent with the provision of 

HERA that specifically sets distribution 

priorities for areas with the greatest 

need, including ‘‘metropolitan areas, 

metropolitan cities, urban areas, rural 

areas, low- and moderate-income areas 

* * *.’’ Therefore, states receiving 

allocations under this notice may 

distribute funds to or within any 

jurisdiction within the state that is 

among those with the greatest need, 

even if the jurisdiction is among those 

receiving a direct formula allocation of 

funds from HUD under the regular 

CDBG program or this notice. 

Requirement 

Alternative requirement for 

distribution to CDBG metropolitan 

cities, urban counties, and Tribes. In 

accordance with the direction of HERA 

that grantees distribute funds to the 

areas of greatest need, HUD is providing 

an alternative requirement to 42 U.S.C. 

5302(a)(7) (definition of ‘‘nonentitlement 

area’’) and waiving provisions of 24 CFR 

part 570, including 24 CFR 570.480(a), 

that would prohibit states electing to 

receive CDBG funds from distributing 

such funds to units of general local 

government in entitlement communities 

or to Tribes. The appropriations law 

supersedes the statutory distribution 

prohibition at 42 U.S.C. 5306(d)(1) and 

(2)(A). Alternatively, the state is 

required to distribute funds without 

regard to a local government status 

under any other CDBG program and 

must use funds in entitlement 

jurisdictions if they are identified as 

areas of greatest need, regardless of 

whether the entitlement receives its 

own NSP allocation. 

G. State’s Direct Action 

Background 

In the State CDBG Program, states 

receiving CDBG funds may not directly 

use the funds for activities, but must 

distribute them to units of general local 

government, which then use the funds 

for program activities. HUD also notes 

the language of HERA section 2301(c) 

that says, in part, that: 

‘‘Any State * * * that receives amounts 

pursuant to this section shall * * * use such 

amounts to purchase and redevelop * * *.’’ 

This clearly speaks to the states using 

funds directly for projects and 

supersedes the HCD Act direction for 

states to only distribute funds to 

nonentitlement areas. Direct use of 

funds by a state may also result in more 

expeditious use of NSP funds. 

Therefore, a state receiving NSP funds 

may carry out NSP activities directly for 

some or all of its assisted grant 

activities, just as CDBG entitlement 

communities do under 24 CFR 

570.200(f), including, but not limited to, 

carrying out activities using its own 

employees, procuring contractors, 

private developers, and providing loans 

and grants through nonprofit 

subrecipients (including local 

governments and other public 

nonprofits such as regional or local 

planning or development authorities 

and public housing authorities). 

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For those activities a state chooses to 

carry out directly, HUD strongly advises 

the state to adopt the recordkeeping 

required for an entitlement community 

at 24 CFR 570.506 and the subrecipient 

agreement provisions at 24 CFR 

570.503. Also, in such cases, as an 

alternative requirement to 42 U.S.C. 

5304(i), the state may retain and re-use 

program income as if it were an 

entitlement community. 

HUD is granting regulatory waivers of 

State CDBG regulations to conform the 

applicable management, real property 

change of use, and recordkeeping rules 

when a state chooses to carry out 

activities as if it were an entitlement 

community. 

Requirements 

1. Responsibility for state review and 

handling of noncompliance. This 

change conforms NSP requirements 

with the waiver allowing the state to 

carry out activities directly. 24 CFR 

570.492 is waived and the following 

alternative requirement applies: The 

state shall make reviews and audits, 

including on-site reviews of any 

subrecipients, designated public 

agencies, and units of general local 

government as may be necessary or 

appropriate to meet the requirements of 

42 U.S.C. 5304(e)(2), as amended, as 

modified by this notice. In the case of 

noncompliance with these 

requirements, the state shall take such 

actions as may be appropriate to prevent 

a continuance of the deficiency, mitigate 

any adverse effects or consequences, 

and prevent a recurrence. The state shall 

establish remedies for noncompliance 

by any designated public agencies or 

units of general local governments and 

for its subrecipients. 

2. Change of use of real property for 

state grantees acting directly. This 

waiver conforms the change of use of 

real property rule to the waiver allowing 

a state to carry out activities directly. 

For purposes of this program, in 24 CFR 

570.489(j), (j)(1), and the last sentence of 

(j)(2), ‘‘unit of general local government’’ 

shall be read as ‘‘unit of general local 

government or state.’’ 

3. Recordkeeping for a state grantee 

acting directly. Recognizing that the 

state may carry out activities directly, 24 

CFR 570.490(b) is waived in such a case 

and the following alternative provision 

shall apply: 

State Records. The state shall 

establish and maintain such records as 

may be necessary to facilitate review 

and audit by HUD of the state’s 

administration of NSP funds under 24 

CFR 570.493. Consistent with applicable 

statutes, regulations, waivers and 

alternative requirements, and other 

Federal requirements, the content of 

records maintained by the state shall be 

sufficient to: (1) Enable HUD to make 

the applicable determinations described 

at 24 CFR 570.493; (2) make compliance 

determinations for activities carried out 

directly by the state; and (3) show how 

activities funded are consistent with the 

descriptions of activities proposed for 

funding in the action plan. For fair 

housing and equal opportunity 

purposes, and as applicable, such 

records shall include data on the racial, 

ethnic, and gender characteristics of 

persons who are applicants for, 

participants in, or beneficiaries of the 

program. 

4. State compliance with certifications 

for state grantees acting directly. This is 

a conforming change related to the 

waiver to allow a state to act directly. 

Because a state grantee under this 

appropriation may carry out activities 

directly, HUD is applying the 

regulations at 24 CFR 570.480(c) with 

respect to the basis for HUD 

determining whether the state has failed 

to carry out its certifications, so that 

such basis shall be that the state has 

failed to carry out its certifications in 

compliance with applicable program 

requirements. 

5. Clarifying note on the process for 

environmental release of funds when a 

state carries out activities directly. 

Usually, a state distributes CDBG funds 

to units of local government and takes 

on HUD’s role in receiving 

environmental certifications from the 

grantees and approving releases of 

funds. For NSP, HUD allows a state 

grantee to also carry out activities 

directly instead of distributing them to 

other governments. According to the 

environmental regulations at 24 CFR 

58.4, when a state carries out activities 

directly, the state must submit the 

certification and request for release of 

funds to HUD for approval. 

H. Eligibility and Allowable Costs 

Background 

Most of the activities eligible under 

NSP are correlated with CDBG-eligible 

activities under 42 U.S.C. 5305(a). This 

correlation reduces implementation 

risks, because it ensures that the NSP 

grants are administered largely in 

accordance with long-established CDBG 

rules and controls. The table in the 

requirements paragraph below shows 

the eligible uses under NSP and the 

eligible activities from the regulations 

for the regular CDBG entitlement 

program that HUD has determined best 

correspond to those uses. If a grantee 

creates a program design that includes 

a CDBG-eligible activity that is not 

shown in the table to support an NSPeligible use, the Department is 

providing an alternative requirement to 

42 U.S.C. 5305(a) that HUD may allow 

a grantee an additional eligible-activity 

category if HUD finds the activity to be 

in compliance with NSP statutory 

requirements. As under the regular 

CDBG program, grantees may fund 

costs, such as reasonable developer’s 

fees, related to NSP-assisted housing 

rehabilitation or construction activities. 

Only NSP1 funds may be used to 

redevelop acquired property for 

nonresidential uses, such as public 

parks, commercial uses, or mixed 

residential and commercial uses. 

Redevelopment activities using NSP2 

and NSP3 funds must be for housing. 

The annual entitlement CDBG 

program allows up to 20 percent of any 

grant amount plus program income may 

be used for general administration and 

planning costs. The State CDBG 

Program is also subject to the 20 percent 

limitation, but within that cap up to 3 

percent may be used by the state for 

state administrative costs and technical 

assistance to potential local government 

program grantees, with the remainder 

available to be granted to local 

government grantees for their 

administrative costs. Because some of 

the costs usually allocated under these 

caps are not applicable to NSP grants 

(for example, the costs of completing the 

entire consolidated plan process), these 

amounts seem excessive to HUD in the 

context of the NSP program. On the 

other hand, HUD wants to encourage 

and support expeditious, appropriate, 

and compliant use of grant funds, and 

to prevent fraud, waste, and abuse of 

funds. Therefore, HUD is providing an 

alternative requirement that an amount 

of up to 10 percent of an NSP grant 

provided to a jurisdiction and of up to 

10 percent of program income earned 

may be used for general administration 

and planning activities as those are 

defined at 24 CFR 570.205 and 206. For 

all grantees, including states, the 10 

percent limitation applies to the grant as 

a whole. 

The regulatory and statutory 

requirements for state match for 

program administration at 24 CFR 

570.489(a)(i) are superseded by the 

statutory direction at section 2301(e)(2) 

of HERA that no matching funds shall 

be required for a state or unit of general 

local government to receive a grant. 

Requirements 

1. Use of grant funds must constitute 

an eligible use under HERA. 

2. In addition to being an eligible NSP 

use of funds, each activity funded under 

NSP must also be CDBG-eligible under 

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42 U.S.C. 5305(a) and meet a CDBG 

national objective. 

3.a. Certain CDBG-eligible activities 

correlate to specific NSP-eligible uses 

and vice versa. 42 U.S.C. 5305(a) and 24 

CFR 570.201–207 and 570.482(a) 

through (d) are superseded to the extent 

necessary to allow the eligible uses 

described under section 2301(c)(4) of 

HERA in accordance with this 

paragraph (including the table and 

subparagraphs below) or with 

permission granted, in writing, by HUD 

upon a written request by the grantee 

that demonstrates that the proposed 

activity constitutes an eligible use under 

NSP. All NSP grantees, including states, 

will use the NSP categories and CDBG 

entitlement regulations listed below. 

NSP-eligible uses Correlated eligible activities from the CDBG entitlement regulations 

(A) Establish financing mechanisms for purchase and redevelopment of 

foreclosed upon homes and residential properties, including such 

mechanisms as soft-seconds, loan loss reserves, and shared-equity 

loans for low- and moderate-income homebuyers.

• As part of an activity delivery cost for an eligible activity as defined 

in 24 CFR 570.206. 

• Also, the eligible activities listed below to the extent financing mechanisms are used to carry them out. 

(B) Purchase and rehabilitate homes and residential properties that 

have been abandoned or foreclosed upon, in order to sell, rent, or redevelop such homes and properties.

• 24 CFR 570.201(a) Acquisition (b) Disposition, (i) Relocation , and 

(n) Direct homeownership assistance (as modified below); 

• 24 CFR 570.202 eligible rehabilitation and preservation activities for 

homes and other residential properties. 

• HUD notes that any of the activities listed above may include required homebuyer counseling as an activity delivery cost. 

(C) Establish and operate land banks for homes and residential properties that have been foreclosed upon.• 24 CFR 570.201(a) Acquisition and (b) Disposition. 

• HUD notes that any of the activities listed above may include required homebuyer counseling as an activity delivery cost. 

(D) Demolish blighted structures .............................................................. • 24 CFR 570.201(d) Clearance for blighted structures only. 

(E) Redevelop demolished or vacant properties as housing.* ................. • 24 CFR 570.201(a) Acquisition, (b) Disposition, (c) Public facilities 

and improvements, (e) Public services for housing counseling, but 

only to the extent that counseling beneficiaries are limited to prospective purchasers or tenants of the redeveloped properties, (i) Relocation, and (n) Direct homeownership assistance (as modified 

below). 

• 24 CFR 570.202 Eligible rehabilitation and preservation activities for 

demolished or vacant properties. 

• 24 CFR 570.204 Community based development organizations. 

• HUD notes that any of the activities listed above may include required homebuyer counseling as an activity delivery cost. 

* NSP1 funds used under eligible use (E) may be used for nonresidential purposes, while NSP2 and NSP3 funds must be used for housing. 

b. HUD will not consider requests to 

allow foreclosure prevention activities, 

or to allow demolition of structures that 

are not blighted. Neither will it allow 

purchase of residential properties and 

homes that have not been abandoned or 

foreclosed upon, except under 

paragraph (E) of the eligible use chart 

above. HUD does not have the authority 

to permit uses or activities not 

authorized by HERA. 

c. New construction of housing is 

eligible as part the redevelopment of 

demolished or vacant properties as 

provided in paragraph (E) of the eligible 

use chart above. 

d. 24 CFR 570.201(n) is waived and 

an alternative requirement provided for 

42 U.S.C. 5305(a) to the extent necessary 

to allow provision of NSP-assisted 

homeownership assistance to persons 

whose income does not exceed 120 

percent of median income. 

e. No NSP2 or NSP3 funds may be 

used to demolish any public housing (as 

defined by Section 3 of the U.S. Housing 

Act of 1937 (42 U.S.C. 1437a)). 

f. For NSP2 and NSP3, a grantee may 

not use more than 10 percent of its grant 

for demolition activities under HERA 

sections 2301(c)(4)(C) and (D), unless 

the Secretary determines that such use 

represents an appropriate response to 

local market conditions. NSP2 and 

NSP3 grantees seeking to use more than 

10 percent of their grant amounts on 

demolition activities must request a 

waiver from HUD. 

4. Alternative requirement for the 

limitation on planning and 

administrative costs. 24 CFR 570.200(g) 

and 570.489(a)(3) are waived to the 

extent necessary to allow each grantee 

under this notice to expend no more 

than 10 percent of its grant amount, plus 

10 percent of the amount of program 

income received by the grantee, for 

activities eligible under 24 CFR 570.205 

or 206. The requirements at 24 CFR 

570.489 are waived to the extent that 

they require a state match for general 

administrative costs. (States may use 

NSP funds under this 10 percent 

limitation to provide technical 

assistance to local governments and 

nonprofit program participants.) 

I. Rehabilitation Standards 

Background 

HERA provides that any NSP-assisted 

rehabilitation of a foreclosed-upon 

home or residential property shall be to 

the extent necessary to comply with 

applicable laws, codes, and other 

requirements relating to housing safety, 

quality, and habitability, in order to sell, 

rent, or redevelop such homes and 

properties. HUD is also imposing this 

requirement for NSP3-assisted new 

construction. This imposes a 

requirement that does not exist in the 

CDBG program. This means that each 

grantee must describe or reference in its 

NSP action plan amendment what 

rehabilitation standards it will apply for 

NSP-assisted rehabilitation. As a 

reminder, grantees are subject to Section 

504 of the Rehabilitation Act of 1973 

and the Fair Housing Act, including 

their respective provisions related to 

physical accessibility standards for 

persons with disabilities. See 24 CFR 

part 8; 24 CFR 100.205. See also 24 CFR 

570.487 and 24 CFR 570.602. HUD will 

monitor to ensure the standards are 

implemented. 

HERA defines rehabilitation to 

include improvements to increase the 

energy efficiency or conservation of 

such homes and properties or to provide 

a renewable energy source or sources for 

such homes and properties. Such 

improvements are also eligible under 

the regular CDBG program. HUD 

strongly encourages grantees to use NSP 

funds not only to stabilize 

neighborhoods in the short-term, but to 

strategically incorporate modern, green 

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building and energy-efficiency 

improvements in all NSP activities to 

provide for long-term affordability and 

increased sustainability and 

attractiveness of housing and 

neighborhoods. At minimum, NSP3 

grantees must have the rehabilitation 

standards required below. See 

Appendix C for examples of green and 

energy-efficiency actions. Additional 

resources related to sustainable and 

energy-efficient construction are 

available on the NSP Resource Exchange 

Web site (http://www.hud.gov/nspta). 

Requirement. For NSP3, HUD is 

requiring that all gut rehabilitation (i.e., 

general replacement of the interior of a 

building that may or may not include 

changes to structural elements such as 

flooring systems, columns or load 

bearing interior or exterior walls) or new 

construction of residential buildings up 

to three stories must be designed to 

meet the standard for Energy Star 

Qualified New Homes. All gut 

rehabilitation or new construction of 

mid -or high-rise multifamily housing 

must be designed to meet American 

Society of Heating, Refrigerating, and 

Air-Conditioning Engineers (ASHRAE) 

Standard 90.1–2004, Appendix G plus 

20 percent (which is the Energy Star 

standard for multifamily buildings 

piloted by the Environmental Protection 

Agency and the Department of Energy). 

Other rehabilitation must meet these 

standards to the extent applicable to the 

rehabilitation work undertaken, e.g., 

replace older obsolete products and 

appliances (such as windows, doors, 

lighting, hot water heaters, furnaces, 

boilers, air conditioning units, 

refrigerators, clothes washers and 

dishwashers) with Energy Star-labeled 

products. Water efficient toilets, 

showers, and faucets, such as those with 

the WaterSense label, must be installed. 

Where relevant, the housing should be 

improved to mitigate the impact of 

disasters (e.g., earthquake, hurricane, 

flooding, fires). 

J. Sale of Homes 

Background 

Section 2301(d)(3) of HERA directs 

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. (Sales and 

closing costs are eligible NSP 

redevelopment or rehabilitation costs). 

Note that the maximum sales price for 

a property is determined by aggregating 

all costs of acquisition, rehabilitation, 

and redevelopment (including related 

activity delivery costs, which generally 

may include, among other items, costs 

related to the sale of the property). 

Requirements 

1. In its records, each grantee must 

maintain sufficient documentation 

about the purchase and sale amounts of 

each property and the sources and uses 

of funds for each activity so that HUD 

can determine whether the grantee is in 

compliance with this requirement. A 

grantee will be expected to provide this 

documentation individually for each 

activity. 

2. In determining the sales price 

limitation, HUD will not consider the 

costs of boarding up, lawn mowing, 

simply maintaining the property in a 

static condition, or, in the absence of 

NSP-assisted rehabilitation or 

redevelopment of the property, the costs 

of completing a sales transaction or 

other disposition to be redevelopment 

or rehabilitation costs. These costs may 

not be included by the grantee in the 

determination of the sales price for an 

NSP-assisted property. 

3. For reporting purposes only, for a 

housing program involving multiple 

single-family structures under the 

management of a single entity, HUD will 

permit reporting the aggregation of 

activity delivery costs across the total 

portfolio of projects until completion of 

the program or closeout of the grant 

with HUD, whichever comes earlier. 

K. Acquisition and Relocation 

Background 

Acquisition of Foreclosed-Upon 

Properties. HUD notes that section 

2301(d)(1) of HERA conflicts with 

section 301(3) of the URA (42 U.S.C. 

4651) and related regulatory 

requirements at 49 CFR 24.102(d). As 

discussed further, section 2301(d)(1) of 

HERA requires that any acquisition of a 

foreclosed-upon home or residential 

property under NSP be at a discount 

from the current market-appraised value 

of the home or property and that such 

discount shall ensure that purchasers 

are paying below-market value for the 

home or property. Section 301(3) of the 

URA, as implemented at 49 CFR 

24.102(d), provides that an offer of just 

compensation shall not be less than the 

agency’s approved appraisal of the fair 

market value of such property. These 

URA acquisition policies apply to any 

acquisition of real property for a 

federally funded project, except for 

acquisitions described in 49 CFR 

24.101(b)(1) through (5) (commonly 

referred to as ‘‘voluntary acquisitions’’). 

As the more recent and specific 

statutory provision, section 2301(d)(1) 

of HERA prevails over section 301 of the 

URA for purposes of NSP-assisted 

acquisitions of foreclosed-upon homes 

or residential properties. 

NSP Appraisal Requirements. Section 

2301(d)(1) of HERA requires an 

appraisal for purposes of determining 

the statutory purchase discount. This 

appraisal requirement applies to any 

NSP-assisted acquisition of a foreclosedupon home or residential property 

(including voluntary acquisitions). As 

noted above, section 301 of the URA 

does not apply to voluntary 

acquisitions. While the URA and its 

regulations do not require appraisals for 

such acquisitions, the URA acquisition 

policies do not prohibit acquiring 

agencies from obtaining appraisals. 

Appendix A, 49 CFR 24.101(b)(1)(iv) 

and (2)(ii), acknowledges that acquiring 

agencies may still obtain an appraisal to 

support their determination of fair 

market value. 

One-for-One Replacement. HUD is 

providing an alternative requirement to 

the one-for-one replacement 

requirements set forth in 42 U.S.C. 

5304(d)(2), as implemented at 24 CFR 

42.375. The Department anticipates a 

large number of requests from grantees 

for whom the requirements will be 

onerous given the pressing rush to 

implement NSP, and several of the 

major housing markets affected by the 

foreclosure crisis have a surplus of 

abandoned and foreclosed-upon 

residential properties. The additional 

workload of reviewing requests under 

42 U.S.C. 5304(d)(3) and 24 CFR 

42.375(d) could cause a substantial 

backlog at HUD and delay NSP program 

operations. Therefore, the alternative 

requirement is that an NSP grantee is 

not required to meet the requirements of 

42 U.S.C. 5304(d), as implemented at 24 

CFR 42.375, to provide one-for-one 

replacement of low- and moderateincome dwelling units demolished or 

converted in connection with activities 

assisted with NSP funds. Alternatively, 

each grantee must submit the 

information described below relating to 

its demolition and conversion activities 

in its action plan substantial 

amendment or abbreviated plan. The 

grantee will report to HUD and citizens 

(via prominent posting of the DRGR 

reports on the grantee’s official Internet 

site) on progress related to these 

measures until the closeout of its grant 

with HUD. HUD reminds grantees to be 

aware of the requirement to have and 

follow a residential antidisplacement 

and relocation plan for the CDBG and 

HOME programs. This requirement is 

not waived for those programs and 

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continues to apply to activities assisted 

with regular CDBG and HOME funds. 

Relocation Assistance. HUD is not 

waiving or specifying alternative 

requirements to the URA’s relocation 

provisions. Those requirements that do 

not conflict with HERA continue to 

apply. HUD is not specifying alternative 

requirements to the relocation 

assistance provisions at 42 U.S.C. 

5304(d). Guidance on meeting these 

requirements is available on the HUD 

Web site and through local HUD field 

offices. HUD urges grantees to consider 

URA requirements in designing their 

programs and to remember that there are 

URA obligations related to voluntary 

and involuntary property acquisition 

activities, even for vacant and 

abandoned property. 

Tenant Protections. The Recovery Act 

included tenant protections applicable 

to NSP grants. First, the Recovery Act 

included a provision applicable to any 

foreclosed upon dwelling or residential 

real property that was acquired by the 

initial successor in interest pursuant to 

the foreclosure after February 17, 2009 

and was occupied by a bona fide tenant 

at the time of foreclosure. The use of 

NSP funds for acquisition of such 

property is subject to a determination by 

the grantee that the initial successor in 

interest complied with these 

requirements. Second, NSP grantees 

may not refuse to lease a dwelling unit 

in housing with such loan or grant to a 

participant under section 8 of the 

United States Housing Act of 1937 (42 

U.S.C 1437f) because of the status of the 

prospective tenant as such a participant. 

Requirements 

One for One Replacement 

Requirements. 

1. The one-for-one replacement 

requirements at 24 CFR 570.488, 

570.606(c), and 42.375 are waived for 

low- and moderate-income dwelling 

units demolished or converted in 

connection with an activity assisted 

with NSP funds. As an alternative 

requirement to 42 U.S.C. 

5304(d)(2)(A)(i) and (ii), each grantee 

planning to demolish or convert any 

low- and moderate-income dwelling 

units as a result of NSP-assisted 

activities must identify all of the 

following information in its NSP 

substantial amendment or abbreviated 

plan: 

(a) The number of low- and moderateincome dwelling units reasonably 

expected to be demolished or converted 

as a direct result of NSP-assisted 

activities; 

(b) The number of NSP affordable 

housing units (made available to low-, 

moderate-, and middle-income 

households) reasonably expected to be 

produced, by activity and income level 

as provided for in DRGR, by each NSP 

activity providing such housing 

(including a proposed time schedule for 

commencement and completion); and 

(c) The number of dwelling units 

reasonably expected to be made 

available for households whose income 

does not exceed 50 percent of area 

median income. 

The grantee must also report on actual 

performance for demolitions and 

production, as required elsewhere in 

this notice. 

Tenant Protections. 

2. The following requirements apply 

to any foreclosed upon dwelling or 

residential real property that was 

acquired by the initial successor in 

interest pursuant to the foreclosure after 

February 17, 2009 and was occupied by 

a bona fide tenant at the time of 

foreclosure. The use of NSP funds for 

acquisition of such property is subject to 

a determination by the grantee that the 

initial successor in interest complied 

with these requirements. 

a. The initial successor in interest in 

a foreclosed upon dwelling or 

residential real property shall provide a 

notice to vacate to any bona fide tenant 

at least 90 days before the effective date 

of such notice. The initial successor in 

interest shall assume such interest 

subject to the rights of any bona fide 

tenant, as of the date of such notice of 

foreclosure: (i) Under any bona fide 

lease entered into before the date of 

notice of foreclosure to occupy the 

premises until the end of the remaining 

term of the lease, except that a successor 

in interest may terminate a lease 

effective on the date of sale of the unit 

to a purchaser who will occupy the unit 

as a primary residence, subject to the 

receipt by the tenant of the 90-day 

notice under this paragraph; or (ii) 

without a lease or with a lease 

terminable at will under State law, 

subject to the receipt by the tenant of 

the 90-day notice under this paragraph, 

except that nothing in this section shall 

affect the requirements for termination 

of any Federal- or State-subsidized 

tenancy or of any State or local law that 

provides longer time periods or other 

additional protections for tenants. 

b.i. In the case of any qualified 

foreclosed housing in which a recipient 

of assistance under section 8 of the 

United States Housing Act of 1937 (42 

U.S.C 1437f) (the ‘‘Section 8 Program’’) 

resides at the time of foreclosure, the 

initial successor in interest shall be 

subject to the lease and to the housing 

assistance payments contract for the 

occupied unit. 

ii. Vacating the property prior to sale 

shall not constitute good cause for 

termination of the tenancy unless the 

property is unmarketable while 

occupied or unless the owner or 

subsequent purchaser desires the unit 

for personal or family use. 

iii. If a public housing agency is 

unable to make payments under the 

contract to the immediate successor in 

interest after foreclosure, due to (A) an 

action or inaction by the successor in 

interest, including the rejection of 

payments or the failure of the successor 

to maintain the unit in compliance with 

the Section 8 Program or (B) an inability 

to identify the successor, the agency 

may use funds that would have been 

used to pay the rental amount on behalf 

of the family—(1) to pay for utilities that 

are the responsibility of the owner 

under the lease or applicable law, after 

taking reasonable steps to notify the 

owner that it intends to make payments 

to a utility provider in lieu of payments 

to the owner, except prior notification 

shall not be required in any case in 

which the unit will be or has been 

rendered uninhabitable due to the 

termination or threat of termination of 

service, in which case the public 

housing agency shall notify the owner 

within a reasonable time after making 

such payment; or (2) for the family’s 

reasonable moving costs, including 

security deposit costs. 

c. For purposes of this section, a lease 

or tenancy shall be considered bona fide 

only if: (i) the mortgagor under the 

contract is not the tenant; (ii) the lease 

or tenancy was the result of an arm’s 

length transaction; and (iii) the lease or 

tenancy requires the receipt of rent that 

is not substantially less than fair market 

rent for the property. See Section II.A 

for the definition of date of notice of 

foreclosure. 

d. The grantee shall maintain 

documentation of its efforts to ensure 

that the initial successor in interest in 

a foreclosed upon dwelling or 

residential real property has complied 

with the requirements under section 

K.2.a. and K.2.b. If the grantee 

determines that the initial successor in 

interest in such property failed to 

comply with such requirements, it may 

not use NSP funds to finance the 

acquisition of such property unless it 

assumes the obligations of the initial 

successor in interest specified in section 

K.2.a. and K.2.b. 

e. Grantees must provide the 

relocation assistance required pursuant 

to 24 CFR 570.606 to tenants displaced 

as a result of an NSP-assisted activity 

and maintain records in sufficient detail 

to demonstrate compliance with the 

provisions of that section. For purposes 

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of clarification, grantees need to be 

aware that the NSP tenant protection 

requirements under the Recovery Act 

are separate and apart from the 

obligations imposed on grantees by the 

URA. The URA applies to any person 

displaced as a direct result of 

acquisition, rehabilitation, and/or 

demolition of real property for a 

federally-assisted project. Eligibility 

determinations under the URA and the 

required notices and relocation 

assistance requirements are separate and 

distinct from the NSP tenant protections 

in the Recovery Act. Grantees cannot 

assume that a person entitled to the NSP 

tenant protections under the Recovery 

Act is also eligible for assistance under 

the URA (or vice versa). Any tenant 

lawfully occupying the property evicted 

by the owner/mortgagor in order to 

facilitate an acquisition under the NSP 

program (including short sales) is most 

likely eligible for URA relocation 

assistance and payments as a displaced 

person. 

3. The grantee of any grant or loan 

made from NSP funds may not refuse to 

lease a dwelling unit in housing with 

such loan or grant to a participant under 

the Section 8 Program because of the 

status of the prospective tenant as such 

a participant. 

4. This section shall not preempt any 

Federal, State or local law that provides 

more protections for tenants. 

L. Note on Eminent Domain 

Although section 2303 of HERA 

appears to allow some use of eminent 

domain for public purposes, HUD 

cautions grantees that HERA section 

2301(d)(1) may effectively ensure that 

all NSP-assisted property acquisitions 

must be voluntary acquisitions as the 

term is defined by the URA and its 

implementing regulations. Section 

2301(d)(1) of HERA directs that any 

purchase of a foreclosed-upon home or 

residential property under NSP be at a 

discount from the current market 

appraised value of the home or 

residential property and that such 

discount shall ensure that purchasers 

are paying below-market value for the 

home or property. However, the Fifth 

Amendment to the U.S. Constitution 

provides that private property shall not 

be taken for public use without just 

compensation. The Supreme Court has 

ruled that a jurisdiction must pay fair 

market value for the purchase of 

property through eminent domain. A 

grantee contemplating using NSP funds 

to assist an acquisition involving an 

eminent domain action is advised to 

consult appropriate legal counsel before 

taking action. 

M. Timeliness of Use and Expenditure 

of NSP Funds 

Background 

One of the most critical NSP1 

provisions is the HERA requirement at 

section 2301(c)(1) that any grantee 

receiving a grant: 

‘‘* * * shall, not later than 18 months after 

the receipt of such amounts, use such 

amounts to purchase and redevelop 

abandoned and foreclosed homes and 

residential properties.’’ 

HUD has defined the term ‘‘use’’ in 

this notice to include obligation of 

funds. 

A further complication is that HERA 

clearly expects grantees to earn program 

income under this grant program. As 

provided under 24 CFR 85.21, 

entitlements grantees and subrecipients 

shall disburse program income before 

requesting additional cash withdrawals 

from the U.S. Treasury. States are 

governed similarly by 24 CFR 

570.489(e)(3) and 31 CFR part 205. This 

requirement is reflected in the 

regulations governing use of program 

income by states and units of general 

local government under the CDBG 

program. This means that a grantee that 

successfully and quickly deploys its 

program and generates program income 

may obligate, draw down, and expend 

an amount equal to its NSP1 allocation 

amount, and still have funds remaining 

in its line of credit, possibly subject to 

recapture at the 18-month deadline. 

On consideration, the Department 

chose to implement the NSP1 use test 

based on whether the state or unit of 

general local government has expended 

or obligated the NSP1 grant funds and 

program income in an aggregate amount 

at least equal to the NSP1 allocation. 

HUD also imposed a deadline for 

expending NSP1 grant funds because 

the intent of these grants clearly is to 

quickly address an emergency situation 

in areas of the greatest need. 

NSP2 and NSP3 grants follow the 

statutory expenditure deadlines 

described under the Recovery Act, 

which provides that grantees: 

‘‘shall expend at least 50 percent of 

allocated funds within 2 years of the date 

funds become available to the [recipient] for 

obligation, and 100 percent of such funds 

within 3 years of such date.’’ 

NSP2 and NSP3 expenditure 

timelines are tighter than under NSP1. 

In the NSP2 NOFA, HUD required NSP2 

grantees to expend their entire grant, 

including program income, within the 

statutory timeframes. Upon reflection, 

HUD has determined that the better 

interpretation would be similar to the 

NSP1 requirement that requires the 

expenditure of grant funds and program 

income in an aggregate amount at least 

equal to the NSP2 or NSP3 allocation. 

HUD is therefore including a revision to 

the NSP2 NOFA program requirements 

in this Notice. If any NSP grantee fails 

to meet the requirement to expend an 

amount equal to its grant within the 

relevant timelines, HUD, on the first 

business day after that deadline, will 

notify the grantee and restrict the 

amount of unused funds in the grantee’s 

line of credit. HUD will allow the 

grantee 30 days to submit information to 

HUD regarding any additional 

expenditure of funds not already 

recorded in DRGR. Then HUD may 

proceed to recapture the unused funds 

or provide for other corrective action(s) 

or sanction. 

Requirements 

1. Timely use of NSP1 funds. At the 

end of the statutory 18-month use 

period, which begins when the NSP 

grantee receives its funds from HUD, the 

state or unit of general local government 

NSP grantee’s accounting records and 

DRGR information must reflect outlays 

(expenditures) and unliquidated 

obligations for approved activities that, 

in the aggregate, are at least equal to the 

NSP allocation. (The DRGR system 

collects information on expenditures 

and obligations.) Grantees receiving a 

reallocation of NSP1 funds must also 

comply with the 18-month use 

requirement. 

2. Timely expenditure of NSP1 funds. 

The timely distribution or expenditure 

requirements of sections 24 CFR 

570.494 and 570.902 are waived to the 

extent necessary to allow the following 

alternative requirement: All NSP1 

grantees must expend on eligible NSP 

activities an amount equal to or greater 

than the initial allocation of NSP1 funds 

within 4 years of receipt of those funds 

or HUD will recapture and reallocate the 

amount of funds not expended. 

3. Timely expenditure of NSP2 and 

NSP3 funds. The timely distribution or 

expenditure requirements of sections 24 

CFR 570.494 and 570.902 are waived to 

the extent necessary to allow the 

following alternative requirement: NSP2 

and NSP3 grantees must expend on 

eligible NSP activities an amount equal 

to or greater than the 50 percent of the 

initial allocation of NSP funds within 2 

years of receipt of those funds and 100 

percent of the initial allocation of NSP 

funds within 3 years of receipt of those 

funds or HUD will recapture and 

reallocate the amount of funds not 

expended or provide for other corrective 

action(s) or sanction. A grantee will be 

deemed by HUD to have received its 

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NSP grant at the time HUD signs its NSP 

grant agreement. 

N. Alternative Requirement for 

Program Income (Revenue) Generated 

By Activities Assisted With Grant 

Funds 

Requirement 

1. Revenue (i.e., gross income) 

received by a state, unit of general local 

government, or subrecipient (as defined 

at 24 CFR 570.500(c)) that is directly 

generated from the use of CDBG funds 

(which term includes NSP grant funds) 

constitutes CDBG program income. To 

ensure consistency of treatment of such 

program income, the definition of 

program income at 24 CFR 570.500(a) 

shall be applied to amounts received by 

states, units of general local 

government, and subrecipients. 

2. Cash management. Substantially all 

program income must be disbursed for 

eligible NSP activities before additional 

cash withdrawals are made from the 

U.S. Treasury. 

3. Agreements with subrecipients. 

States and units of general local 

government must incorporate in 

subrecipient agreements such 

provisions as are necessary to ensure 

compliance with the requirements of 

this section. 

O. Reporting 

Background 

HUD is requiring regular reporting on 

each NSP grant in the DRGR system to 

ensure the Department has sufficient 

management information to follow-up 

promptly if a grantee lags in 

implementation and risks recapture of 

its grant funds. For NSP, HUD is 

waiving the annual reporting 

requirements of the consolidated plan to 

allow HUD to collect more regular 

information on various aspects of the 

uses of funds and of the activities 

funded with these grants. HUD will use 

the reports to exercise oversight for 

compliance with the requirements of 

this notice and for prevention of fraud, 

waste, and abuse of funds. 

The regular CDBG performance 

measurement requirements will not 

apply to the NSP funds. HUD has 

configured DRGR performance measures 

to fit the NSP activities and will provide 

additional guidance on NSP 

performance measures. 

To collect these data elements and to 

meet its reporting requirements, HUD is 

requiring each grantee to report on its 

NSP funds to HUD using the online 

DRGR system, which uses a 

streamlined, Internet-based format. HUD 

will use grantee reports to monitor for 

anomalies or performance problems that 

suggest fraud, waste, and abuse of 

funds; to reconcile budgets, obligations, 

fund draws, and expenditures; to 

calculate applicable administrative and 

public service limitations and the 

overall percent of benefit to LMMI 

persons; and as a basis for risk analysis 

in determining a monitoring plan. 

The grantee must post the NSP report 

on a Web site for its citizens when it 

submits the report to HUD (DRGR 

generates a version of the report that the 

grantee can download, save, and post). 

The Office of Management and Budget 

has established October 1, 2010 as the 

deadline for Federal agencies to initiate 

sub-award reporting in compliance with 

the Federal Funding Accountability and 

Transparency Act (Pub. L. 109–282) 

(FFATA). NSP3 grantees will be 

required to comply with this additional 

reporting requirement. Additional HUD 

guidance on compliance with the 

FFATA requirements is forthcoming. 

Requirements 

1. Performance report alternative 

requirement. The Secretary may specify 

the form and timing of reports provided 

by the grantee under both 42 U.S.C. 

5304(e) (the HCD Act) and 42 U.S.C. 

12708 (NAHA). Therefore, the 

consolidated plan regulation at 24 CFR 

91.520 is waived and the alternative 

reporting form and timing for the NSP 

funds is that: 

a. Each grantee must enter its NSP 

Action Plan amendment or abbreviated 

plan into HUD’s web-based DRGR 

system in sufficient detail to meet the 

NSP action plan content requirements of 

this notice and to serve as the basis for 

acceptable performance reports. 

b. NSP1 and NSP3 grantees must 

submit a quarterly performance report, 

as HUD prescribes, no later than 30 days 

following the end of each quarter, 

beginning 30 days after the completion 

of the first full calendar quarter after 

grant award and continuing until the 

end of the grant. In addition to this 

quarterly performance reporting, 

beginning three months prior to its use 

or expenditure deadline, as applicable, 

each grantee will report monthly on its 

NSP use and expenditure of funds, and 

continuing monthly until reported total 

uses or expenditure of funds are equal 

to or greater than the total NSP grant or 

the deadline occurs. After HUD has 

accepted a report from a grantee 

showing such use or expenditure of 

funds, the monthly reporting 

requirement will end. Quarterly reports 

will continue until all NSP funds 

(including program income) have been 

expended and those expenditures are 

included in a report to HUD, or until 

HUD issues other instructions. Each 

report will include information about 

the uses of funds, including, but not 

limited to, the project name, activity, 

location, national objective, funds 

budgeted and expended, the funding 

source and total amount of any non-NSP 

funds, numbers of properties and 

housing units, beginning and ending 

dates of activities, beneficiary 

characteristics, and numbers of low- and 

moderate-income persons or households 

benefiting. Reports must be submitted 

using HUD’s web-based DRGR system 

and, at the time of submission, be 

posted prominently on the grantee’s 

official Web site. 

c. Additional reporting requirements 

consistent with the Federal Funding 

Accountability and Transparency Act 

will be required for NSP3 Grantees. 

HUD guidance on these requirements is 

forthcoming. 

P. FHA First Look Program 

The Department notes that it is an 

eligible use of NSP grant funds to 

acquire and redevelop FHA foreclosed 

properties. The Federal Housing 

Administration’s (FHA) First Look sales 

method provides NSP grantees 

exclusive access to review and purchase 

newly conveyed FHA real estate-owned 

(REO) properties that are located in their 

designated areas. Grantees will have the 

opportunity to make a purchase offer on 

a property prior to it being made 

available to other entities. NSP grantees 

can purchase these properties at up to 

a 10% discount from the appraised 

value. Further information about First 

Look was published in the Federal 

Register on July 15, 2010 (75 FR 41225), 

and is also available online at: http:// 

edocket.access.gpo.gov/2010/pdf/ 

2010-17335.pdf. 

HUD will provide technical assistance 

on its Web site regarding how these 

programs can effectively interact. 

Grantees may also contact their local 

HUD FHA field office for further 

information. 

Q. Purchase Discount 

Background 

HERA Section 2301(d)(1) limits the 

purchase price of a foreclosed home or 

residential property, as follows: 

Any purchase of a foreclosed upon home 

or residential property under this section 

shall be at a discount from the current market 

appraised value of the home or property, 

taking into account its current condition, and 

such discount shall ensure that purchasers 

are paying below-market value for the home 

or property. 

To ensure that uncertainty over the 

meaning of this section does not delay 

program implementation, HUD is 

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defining ‘‘current market appraised 

value’’ in this notice. For mortgagee 

foreclosed properties, HUD is requiring 

that grantees seek to obtain the 

‘‘maximum reasonable discount’’ from 

the mortgagee, taking into consideration 

likely ‘‘carrying costs’’ of the mortgagee 

if it were to not sell the property to the 

grantee or subrecipient. HUD has 

adopted an approach that requires a 

minimum discount of one percent for 

each foreclosed upon home or 

residential property purchased with 

NSP funds. 

Requirements 

1. Individual purchase transaction. 

Each foreclosed-upon home or 

residential property shall be purchased 

at a discount of at least one percent from 

the current market-appraised value of 

the home or property. 

2. An NSP grantee 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 necessary and reasonable costs 

related to the appraisal and transfer of 

title. If NSP funds are used to pay such 

costs when property owned by the 

grantee is conveyed to a subrecipient, 

homebuyer, developer, or other 

jurisdiction, the property is NSPassisted and subject to all program 

requirements, such as requirements for 

NSP-eligible use and benefit to incomequalified persons. This section does not 

preclude payment of tax liens on 

property that is not owned by the 

grantee or payment of current taxes 

while the property is being redeveloped 

or held in a land bank. 

3. The address, appraised value, 

purchase offer amount, and discount 

amount of each property purchase must 

be documented in the grantee’s program 

records. The address of each acquired 

property must be recorded in DRGR. 

R. Removal of Annual Requirements 

Requirement 

Throughout 24 CFR parts 91 and 570, 

all references to ‘‘annual’’ requirements 

such as submission of plans and reports 

are waived to the extent necessary to 

allow the provisions of this notice to 

apply to NSP funds, with no recurring 

annual requirements other than those 

related to civil rights and fair housing 

certifications and requirements. 

S. Affirmatively Furthering Fair 

Housing 

Nothing in this notice may be 

construed as affecting each grantee’s 

responsibility to carry out its 

certification to affirmatively further fair 

housing. HUD encourages each grantee 

to review its analysis of impediments to 

fair housing choice to determine 

whether an update is necessary because 

of current market conditions or other 

factors. Non-entitlement local 

government grantees must affirmatively 

further fair housing by adopting and 

following procedures and requirements 

to affirmatively market NSP3-assisted 

housing opportunities. This means that 

they will affirmatively market NSP3 

assisted units and carry out NSP3 

activities that further fair housing 

through innovative housing design or 

construction to increase access for 

persons with disabilities, language 

assistance services to persons with 

limited English proficiency (on the basis 

of national origin), or location of new or 

rehabilitated housing in a manner that 

provides greater housing choice or 

mobility for persons in classes protected 

by the Fair Housing Act, and maintain 

records reflecting the actions in this 

regard. 

T. Certifications 

Background 

HUD is substituting alternative 

certifications. The alternative 

certifications are tailored to NSP3 grants 

and remove certifications and references 

that are appropriate only to the annual 

CDBG formula program. NSP1 and 

NSP2 certifications have already been 

submitted to HUD in accordance with 

the requirements of the NSP1 Notice 

and the NSP2 NOFA. 

Requirements 

1. Certifications for states and for 

entitlement communities, alternative 

requirement. Although the NSP3 is 

being implemented as a substantial 

amendment to the current annual action 

plan, HUD is requiring submission of 

this alternative set of certifications as a 

conforming change, reflecting 

alternative requirements and waivers 

under this notice. Each jurisdiction will 

submit the following certifications: 

1. Affirmatively furthering fair 

housing. The jurisdiction certifies that it 

will affirmatively further fair housing, 

which means that it will conduct an 

analysis to identify impediments to fair 

housing choice within the jurisdiction, 

take appropriate actions to overcome the 

effects of any impediments identified 

through that analysis, and maintain 

records reflecting the analysis and 

actions in this regard. 

2. Anti-displacement and relocation 

plan. The applicant certifies that it has 

in effect and is following a residential 

anti-displacement and relocation 

assistance plan. 

3. Anti-lobbying. The jurisdiction 

must submit a certification with regard 

to compliance with restrictions on 

lobbying required by 24 CFR part 87, 

together with disclosure forms, if 

required by that part. 

4. Authority of jurisdiction. The 

jurisdiction certifies that the 

consolidated plan or abbreviated plan, 

as applicable, is authorized under state 

and local law (as applicable) and that 

the jurisdiction possesses the legal 

authority to carry out the programs for 

which it is seeking funding, in 

accordance with applicable HUD 

regulations and other program 

requirements. 

5. Consistency with plan. The 

jurisdiction certifies that the housing 

activities to be undertaken with NSP 

funds are consistent with its 

consolidated plan or abbreviated plan, 

as applicable. 

6. Acquisition and relocation. The 

jurisdiction certifies that it will comply 

with the acquisition and relocation 

requirements of the Uniform Relocation 

Assistance and Real Property 

Acquisition Policies Act of 1970, as 

amended (42 U.S.C. 4601), and 

implementing regulations at 49 CFR part 

24, except as those provisions are 

modified by the notice for the NSP 

program published by HUD. 

7. Section 3. The jurisdiction certifies 

that it will comply with section 3 of the 

Housing and Urban Development Act of 

1968 (12 U.S.C. 1701u), and 

implementing regulations at 24 CFR part 

135. 

8. Citizen participation. The 

jurisdiction certifies that it is in full 

compliance and following a detailed 

citizen participation plan that satisfies 

the requirements of Sections 24 CFR 

91.105 or 91.115, as modified by NSP 

requirements. 

9. Following a plan. The jurisdiction 

certifies it is following a current 

consolidated plan (or Comprehensive 

Housing Affordability Strategy) that has 

been approved by HUD. [Only States 

and entitlement jurisdictions use this 

certification.] 

10. Use of funds. The jurisdiction 

certifies that it will comply with the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act and Title XII 

of Division A of the American Recovery 

and Reinvestment Act of 2009 by 

spending 50 percent of its grant funds 

within 2 years, and spending 100 

percent within 3 years, of receipt of the 

grant. 

11. The jurisdiction certifies: 

a. That all of the NSP funds made 

available to it will be used with respect 

to individuals and families whose 

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incomes do not exceed 120 percent of 

area median income; and 

b. The jurisdiction will not attempt to 

recover any capital costs of public 

improvements assisted with CDBG 

funds, including Section 108 loan 

guaranteed funds, by assessing any 

amount against properties owned and 

occupied by persons of low- and 

moderate-income, including any fee 

charged or assessment made as a 

condition of obtaining access to such 

public improvements. However, if NSP 

funds are used to pay the proportion of 

a fee or assessment attributable to the 

capital costs of public improvements 

(assisted in part with NSP funds) 

financed from other revenue sources, an 

assessment or charge may be made 

against the property with respect to the 

public improvements financed by a 

source other than CDBG funds. In 

addition, with respect to properties 

owned and occupied by moderateincome (but not low-income) families, 

an assessment or charge may be made 

against the property with respect to the 

public improvements financed by a 

source other than NSP funds if the 

jurisdiction certifies that it lacks NSP or 

CDBG funds to cover the assessment. 

12. Excessive force. The jurisdiction 

certifies that it has adopted and is 

enforcing: 

a. A policy prohibiting the use of 

excessive force by law enforcement 

agencies within its jurisdiction against 

any individuals engaged in nonviolent 

civil rights demonstrations; and 

b. A policy of enforcing applicable 

state and local laws against physically 

barring entrance to, or exit from, a 

facility or location that is the subject of 

such nonviolent civil rights 

demonstrations within its jurisdiction. 

13. Compliance with antidiscrimination laws. The jurisdiction 

certifies that the NSP grant will be 

conducted and administered in 

conformity with Title VI of the Civil 

Rights Act of 1964 (42 U.S.C. 2000d), 

the Fair Housing Act (42 U.S.C. 3601– 

3619), and implementing regulations. 

14. Compliance with lead-based paint 

procedures. The jurisdiction certifies 

that its activities concerning lead-based 

paint will comply with the requirements 

of part 35, subparts A, B, J, K, and R of 

this title. 

15. Compliance with laws. The 

jurisdiction certifies that it will comply 

with applicable laws. 

2. Certifications for Non-Entitlement 

Local Governments, alternative 

requirement. 

For non-entitlement local government 

grantees that do not have annual action 

plans to amend, NSP3 is being 

implemented through the submission of 

an abbreviated plan under 25 CFR 

91.235. HUD is requiring submission of 

this alternative set of certifications as a 

conforming change, reflecting 

alternative requirements and waivers 

under this notice. Each jurisdiction will 

submit the following certifications: 

1. Affirmatively furthering fair 

housing. The jurisdiction certifies that it 

will affirmatively further fair housing. 

2. Anti-displacement and relocation 

plan. The applicant certifies that it has 

in effect and is following a residential 

anti-displacement and relocation 

assistance plan. 

3. Anti-lobbying. The jurisdiction 

must submit a certification with regard 

to compliance with restrictions on 

lobbying required by 24 CFR part 87, 

together with disclosure forms, if 

required by that part. 

4. Authority of jurisdiction. The 

jurisdiction certifies that the 

consolidated plan or abbreviated plan, 

as applicable, is authorized under state 

and local law (as applicable) and that 

the jurisdiction possesses the legal 

authority to carry out the programs for 

which it is seeking funding, in 

accordance with applicable HUD 

regulations and other program 

requirements. 

5. Consistency with plan. The 

jurisdiction certifies that the housing 

activities to be undertaken with NSP 

funds are consistent with its 

consolidated plan or abbreviated plan, 

as applicable. 

6. Acquisition and relocation. The 

jurisdiction certifies that it will comply 

with the acquisition and relocation 

requirements of the Uniform Relocation 

Assistance and Real Property 

Acquisition Policies Act of 1970, as 

amended (42 U.S.C. 4601), and 

implementing regulations at 49 CFR part 

24, except as those provisions are 

modified by the notice for the NSP 

program published by HUD. 

7. Section 3. The jurisdiction certifies 

that it will comply with section 3 of the 

Housing and Urban Development Act of 

1968 (12 U.S.C. 1701u), and 

implementing regulations at 24 CFR part 

135. 

8. Citizen participation. The 

jurisdiction certifies that it is in full 

compliance and following a detailed 

citizen participation plan that satisfies 

the requirements of Sections 24 CFR 

91.105 or 91.115, as modified by NSP 

requirements. 

9. Use of funds. The jurisdiction 

certifies that it will comply with the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act and Title XII 

of Division A of the American Recovery 

and Reinvestment Act of 2009 by 

spending 50 percent of its grant funds 

within 2 years, and spending 100 

percent within 3 years, of receipt of the 

grant. 

10. The jurisdiction certifies: 

a. That all of the NSP funds made 

available to it will be used with respect 

to individuals and families whose 

incomes do not exceed 120 percent of 

area median income; and 

b. The jurisdiction will not attempt to 

recover any capital costs of public 

improvements assisted with CDBG 

funds, including Section 108 loan 

guaranteed funds, by assessing any 

amount against properties owned and 

occupied by persons of low- and 

moderate-income, including any fee 

charged or assessment made as a 

condition of obtaining access to such 

public improvements. However, if NSP 

funds are used to pay the proportion of 

a fee or assessment attributable to the 

capital costs of public improvements 

(assisted in part with NSP funds) 

financed from other revenue sources, an 

assessment or charge may be made 

against the property with respect to the 

public improvements financed by a 

source other than CDBG funds. In 

addition, with respect to properties 

owned and occupied by moderateincome (but not low-income) families, 

an assessment or charge may be made 

against the property with respect to the 

public improvements financed by a 

source other than NSP funds if the 

jurisdiction certifies that it lacks NSP or 

CDBG funds to cover the assessment. 

11. Excessive force. The jurisdiction 

certifies that it has adopted and is 

enforcing: 

a. A policy prohibiting the use of 

excessive force by law enforcement 

agencies within its jurisdiction against 

any individuals engaged in nonviolent 

civil rights demonstrations; and 

b. A policy of enforcing applicable 

state and local laws against physically 

barring entrance to, or exit from, a 

facility or location that is the subject of 

such nonviolent civil rights 

demonstrations within its jurisdiction. 

12. Compliance with antidiscrimination laws. The jurisdiction 

certifies that the NSP grant will be 

conducted and administered in 

conformity with Title VI of the Civil 

Rights Act of 1964 (42 U.S.C. 2000d), 

the Fair Housing Act (42 U.S.C. 3601– 

3619), and implementing regulations. 

13. Compliance with lead-based paint 

procedures. The jurisdiction certifies 

that its activities concerning lead-based 

paint will comply with the requirements 

of part 35, subparts A, B, J, K, and R of 

this title. 

14. Compliance with laws. The 

jurisdiction certifies that it will comply 

with applicable laws. 

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64340 Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Notices 

U. Additional NSP3 Requirements— 

Preferences for Rental Housing and 

Local Hiring 

The NSP3 allocation included 

statutory language requiring grantees to 

‘‘establish procedures to create 

preferences for the development of 

affordable rental housing for properties 

assisted with NSP3 funds.’’ HUD is 

requiring grantees to describe such 

procedures as part of their substantial 

amendments or abbreviated plans as 

described in Section II.B. above. 

Grantees also ‘‘shall, to the maximum 

extent feasible, provide for the hiring of 

employees who reside in the vicinity, as 

such term is defined by the Secretary, of 

projects funded under this section or 

contract with small businesses that are 

owned and operated by persons residing 

in the vicinity of such projects.’’ For the 

purposes of administering this 

requirement, HUD is adopting the 

Section 3 applicability thresholds for 

community development assistance at 

24 CFR 135.3(a)(3)(ii). Note: The NSP3 

local hiring requirement does not 

replace the responsibilities of grantees 

under Section 3 of the Housing and 

Urban Development Act of 1968 (12 

U.S.C. 1701u), and implementing 

regulations at 24 CFR part 135, except 

to the extent the obligations may be in 

direct conflict. 

For the purposes of NSP3, HUD 

defines ‘‘vicinity’’ as each neighborhood 

identified by the NSP3 grantee as being 

the areas of greatest need. See section 

II.B.2. Small business means a business 

that meets the criteria set forth in 

section 3(a) of the Small Business Act. 

See 42 U.S.C. 5302(a)(23). 

V. Note on Statutory Limitation on 

Distribution of Funds 

Section 2304 of HERA and 

1479(a)(7)(A) of the Dodd-Frank Act 

states that none of the funds made 

available under this Title or title IV 

shall be distributed to an organization 

that has been convicted of a violation 

under Federal law relating to an election 

for Federal office; or an organization 

that employs applicable individuals. 

Section 1479(a)(7)(B) defines applicable 

individuals. 

W. Information Collection Approval 

Note 

HUD has approval from the Office of 

Management and Budget (OMB) for 

information collection requirements in 

accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501– 

3520). OMB approval is under OMB 

control number 2506–0165. In 

accordance with the Paperwork 

Reduction Act, HUD may not conduct or 

sponsor and a person is not required to 

respond to, a collection of information, 

unless the collection displays a valid 

control number. 

X. Duration of Funding 

The appropriation accounting 

provisions in 31 U.S.C. 1551–1557, 

added by section 1405 of the National 

Defense Authorization Act for Fiscal 

Year 1991 (Pub. L. 101–510), limit the 

availability of certain appropriations for 

expenditure. Such a limitation may not 

be waived. The appropriations acts for 

NSP1 and NSP3 grants direct that these 

funds be available until expended. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance numbers for grants made 

under NSP are as follows: 14.218; 

14.225; and 14.228. 

Finding of No Significant Impact 

A Finding of No Significant Impact 

with respect to the environment has 

been made in accordance with HUD 

regulations at 24 CFR part 50, which 

implement section 102(2)(C) of the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4332(C)(2)). The 

Finding of No Significant Impact is 

available for public inspection between 

8 a.m. and 5 p.m. weekdays in the 

Office of the Rules Docket Clerk, Office 

of General Counsel, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Room 10276, 

Washington, DC 20410–0500. 

Establishment of Formula 

The funding formula set out in 

Attachment B to this notice was 

established by HUD on August 18, 2010. 

Dated: October 13, 2010. 

Mercedes M. Ma ́ rquez, 

Assistant Secretary for Community Planning 

and Development. 

Attachments 

A—Formula Allocation 

B—NSP3 Formula and Allocation of Funds 

C—Recommended Green and Sustainable 

Practices 

Attachment A 

HUD’s Methodology for Allocating the Funds 

for Neighborhood Stabilization Program 1 

(NSP1) 

HERA calls for allocating funds ‘‘to States 

and units of general local government with 

the greatest need, as such need is determined 

in the discretion of the Secretary based on— 

(A) The number and percentage of home 

foreclosures in each State or unit of general 

local government; 

(B) the number and percentage of homes 

financed by a subprime mortgage related loan 

in each State or unit of general local 

government; and 

(C) the number and percentage of homes in 

default or delinquency in each State or unit 

of general local government.’’ 

It further directs that ‘‘each State shall 

receive not less than 0.5 percent of funds’’. 

The allocation formula operates as follows. In 

this formula, the primary data on foreclosure 

rates, subprime loan rates, and rates of loans 

delinquent or in default come from the 

Mortgage Bankers Association National 

Delinquency Survey (MBA–NDS). Because 

the MBA–NDS may have uneven coverage 

from state-to-state in respect to the total 

number of mortgages reported, the total count 

of mortgages is calculated as the number of 

owner-occupied mortgages from the 2006 

American Community Survey increased with 

data from the Home Mortgage Disclosure Act 

to capture the proportion of total mortgages 

made within a state made to investors 

between 2004 and 2006. The first step of the 

allocation is to make a ‘‘statewide’’ allocation 

using the following formula: 

Statewide Allocation = $3.92 billion * 

{[0.70 * (State’s number of foreclosure starts in last 6 quarters) * ...........

National number of foreclosure starts in last 6 quarters ..........................

(Percent of all loans in state to enter foreclosure last 6 quarters) + 

Percent of all loans in nation to enter foreclosure last 6 quarters 

0.15 * (State’s number of subprime loans) * .............................................

National number of subprime loans ..........................................................

(Percent of all loans in state subprime) + 

Percent of all loans in nation subprime 

0.10 * (State’s number of loans in default (90+ days delinquent).* 

National number of loans in default ..........................................................

(Percent of all loans in state in default) + 

Percent of all loans in nation in default 

0.05 * (State’s number of loans 60 to 89 days delinquent).* 

National number of loans 60 to 89 days delinquent ................................

Percent of all loans in state 60 to 89 days delinquent)] * 

National percent of all loans 60 to 89 days delinquent 

(Pct of all addresses in state vacant in Census Tracts where more than 40% of the 2004 to 2006 loans were high cost)} 

Pct of all addresses in nation vacant in Census Tracts where more than 40% of the 2004 to 2006 loans were high cost 

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This formula allocates 70 percent of the 

funds based on the number and percent of 

foreclosures, 15 percent for subprime loans, 

10 percent for loans in default (delinquent 90 

days or longer), and 5 percent for loans 

delinquent 60 to 90 days. The higher weight 

on foreclosures is based on the emphasis the 

statute places on targeting foreclosed homes. 

The percentage adjustments, the rate of a 

problem in a state relative to the national rate 

of a problem, are restricted such that a state’s 

allocation based on its proportional share of 

a problem cannot be increased or decreased 

by more than 30 percent. 

Because HERA specifically indicates that 

the funds are needed for the ‘‘redevelopment 

of abandoned and foreclosed upon homes 

and residential properties,’’ HUD has 

included a variable to proxy where 

abandonment of homes due to foreclosure is 

more likely, specifically each state’s rate of 

vacant residential addresses in 

neighborhoods with a high proportion (more 

than 40 percent) of loans in 2004 to 2006 that 

were high cost. Information on vacant 

addresses is based on United States Postal 

Service data as of June 30, 2008 aggregated 

by HUD to the Census Tract level. The 

residential vacancy adjustment factor reflects 

a state’s vacancy rate relative to the national 

average and cannot increase or decrease a 

state’s proportional share of the allocation 

based on foreclosures, subprime loans, and 

delinquencies and defaults by more than 10 

percent. 

Finally, if a statewide allocation is less 

than $19.6 million, the statewide grant is 

increased to $19.6 million. Because this 

approach will result in a total allocation in 

excess of appropriation, all grant amounts 

above $19.6 million are reduced pro-rata to 

make the total allocation equal to the total 

appropriation. 

From each statewide allocation, a substate 

allocation is made as follows: 

• Each state government is allocated $19.6 

million 

• If the statewide allocation is more than 

$19.6 million, the remaining funds are 

allocated to FY 2008 CDBG entitlement 

cities, urban counties, and non-entitlement 

balance of state proportional to relative need. 

• If a local government receives less than 

$2 million under this sub-allocation, their 

grant is rolled up into the state government 

grant. 

Note that HUD has determined that 

HERA’s direction that a minimum of $19.6 

million be allocated to the state means that 

a minimum grant must be provided to each 

state government of $19.6 million. As a 

result, this approach provides state 

governments with proportionally more 

funding than their estimated need. As such, 

state governments should use their best 

judgment to serve both those areas not 

receiving a direct grant and those areas that 

do receive a direct grant, making sure that the 

total of all funds in the state are going 

proportionally more to those places (as 

prescribed by HERA): 

• ‘‘With the greatest percentage of home 

foreclosures; 

• With the highest percentage of homes 

financed by a subprime mortgage related 

loan; and 

• Identified by the State or unit of general 

local government as likely to face a 

significant rise in the rate of home 

foreclosures.’’ 

For the amount of funds above each state’s 

$19.6 million, the remaining funds are 

allocated among the entitlement 

communities and non-entitlement balances 

using the following formula: 

Local Allocation = (Statewide Allocation¥$19,600,000) * 

[(Local estimated number of foreclosure starts in last 6 quarters) * 

State total number of foreclosure starts in last 6 quarters 

Local vacancy rate in Census Tracts with more than 40% of the loans High-cost)] 

State vacancy rate in Census Tracts with more than 40% of the loans High-cost 

Where: The residential vacancy rate 

adjustment cannot increase or reduce a local 

jurisdiction’s allocation by more than 30 

percent and the estimated number of 

foreclosures is calculated based on a 

predicted foreclosure rate times the estimated 

number of mortgages in a community. 

HUD analysis shows that 75 percent of the 

variance between states on foreclosure rates 

can be explained by three variables available 

from public data: 

• Office of Federal Housing Enterprise 

Oversight (OFHEO) data on change in home 

values as of June 2008 compared to peak 

home value since 2000. 

• Percent of all loans made between 2004 

and 2006 that are high cost as reported in the 

Home Mortgage Disclosure Act (HMDA). 

• Unemployment rate as of June 2008 

(from Bureau of Labor Statistics). 

Because these three variables are publicly 

available for all CDBG eligible communities 

and they are good predictors of foreclosure 

risk, they are used in a model to calculate the 

estimated number of foreclosures in each 

jurisdiction within a state. The formula used 

is as follows: 

Predicted Foreclosure Rate = ¥2.211 

¥(0.131 × Percent change in MSA OFHEO 

current price relative to the maximum in past 

8 years) 

+ (0.152*Percent of total loans made between 

2004 and 2006 that are high cost) 

+ (0.392*Percent unemployed in the place 

our county in June 2008). 

This predicted foreclosure rate is then 

multiplied times the estimated number of 

mortgages within a jurisdiction (number of 

HMDA loans made between 2004 and 2006 

times the ratio of ACS 2006 data on total 

mortgages in state/HMDA loans in state). 

This ‘‘estimated number of mortgages in the 

jurisdiction’’ is further adjusted such that the 

estimated number of foreclosures from the 

model will equal the total foreclosure starts 

in the state from the Mortgage Bankers 

Association National Delinquency Survey. 

As noted above, for entitlement cities and 

urban counties that would receive an NSP 

allocation of less than $2 million, the funds 

are allocated to the state grantee. The District 

of Columbia and the four Insular Areas 

receive direct allocations and are not subject 

to the minimum grant threshold. 

Because this funding is one-time funding 

and the eligible activities under the program 

are different enough from the regular 

program, HUD believes that a grantee must 

receive a minimum amount of $2 million to 

have adequate staffing to properly administer 

the program effectively. In addition, fewer 

grants will allow HUD staff to more 

effectively monitor grantees to ensure proper 

implementation of the program and reduce 

the risk for fraud, waste, and abuse. 

Attachment B 

HUD’s Methodology for Allocating the Funds 

for Neighborhood Stabilization Program 3 

(NSP3) 

NEIGHBORHOOD STABILIZATION PROGRAM (NSP3) FUNDING UNDER DODD-FRANK WALL STREET REFORM AND

CONSUMER PROTECTION ACT

State Grantee NSP3 Grant 

Alaska ......................................................................................... State of Alaska ........................................................................... $5,000,000 

Alabama ...................................................................................... State of Alabama ....................................................................... 5,000,000 

Birmingham ................................................................................ 2,576,151 

Alabama Total ........................................................................ 7,576,151 

Arkansas ..................................................................................... State of Arkansas ...................................................................... 5,000,000 

Arizona ........................................................................................ Avondale City ............................................................................. 1,224,903 

State of Arizona ......................................................................... 5,000,000 

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64342 Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Notices 

NEIGHBORHOOD STABILIZATION PROGRAM (NSP3) FUNDING UNDER DODD-FRANK WALL STREET REFORM AND

CONSUMER PROTECTION ACT—Continued 

State Grantee NSP3 Grant 

Chandler ..................................................................................... 1,332,011 

Glendale ..................................................................................... 3,718,377 

Maricopa County ........................................................................ 4,257,346 

Mesa .......................................................................................... 4,019,457 

Mohave County .......................................................................... 1,990,744 

Peoria City ................................................................................. 1,198,780 

Phoenix ...................................................................................... 16,053,525 

Pinal County ............................................................................... 3,168,315 

Surprise City .............................................................................. 1,329,844 

Tucson ....................................................................................... 2,083,771 

Arizona Total .......................................................................... 45,377,073 

California ..................................................................................... Apple Valley ............................................................................... 1,463,014 

Bakersfield ................................................................................. 3,320,927 

State of California ...................................................................... 7,777,019 

Compton ..................................................................................... 1,436,300 

Contra Costa County ................................................................. 1,871,294 

Corona ....................................................................................... 1,317,310 

Fontana ...................................................................................... 2,695,735 

Fresno ........................................................................................ 3,547,219 

Fresno County ........................................................................... 2,739,766 

Hemet ......................................................................................... 1,360,197 

Hesperia ..................................................................................... 1,785,047 

Imperial County .......................................................................... 1,708,780 

Indio City .................................................................................... 1,092,071 

Kern County ............................................................................... 5,202,037 

Lancaster ................................................................................... 2,364,566 

Long Beach ................................................................................ 1,567,935 

Los Angeles ............................................................................... 9,875,577 

Los Angeles County ................................................................... 9,532,569 

Madera County .......................................................................... 1,659,017 

Merced ....................................................................................... 1,196,182 

Merced County ........................................................................... 2,705,877 

Modesto ..................................................................................... 2,951,549 

Monterey County ........................................................................ 1,284,794 

Moreno Valley ............................................................................ 3,687,789 

Oakland ...................................................................................... 2,070,087 

Ontario ....................................................................................... 1,872,853 

Orange County ........................................................................... 1,004,948 

Palmdale .................................................................................... 2,310,023 

Perris City .................................................................................. 1,342,449 

Pomona ...................................................................................... 1,235,629 

Rialto .......................................................................................... 1,936,370 

Richmond ................................................................................... 1,153,172 

Riverside .................................................................................... 3,202,152 

Riverside County ........................................................................ 14,272,400 

Sacramento ................................................................................ 3,762,329 

Sacramento County ................................................................... 4,595,671 

San Bernardino .......................................................................... 3,277,401 

San Bernardino County ............................................................. 10,438,181 

San Joaquin County .................................................................. 4,398,543 

Santa Ana .................................................................................. 1,464,113 

Solano County ........................................................................... 1,622,757 

Stanislaus County ...................................................................... 4,175,947 

Stockton ..................................................................................... 4,280,994 

Tulare County ............................................................................ 2,845,529 

Vallejo ........................................................................................ 1,744,593 

Victorville .................................................................................... 2,159,937 

California Total ....................................................................... 149,308,651 

Colorado ...................................................................................... Adams County ........................................................................... 1,997,322 

Aurora ........................................................................................ 2,445,282 

State of Colorado ....................................................................... 5,098,309 

Colorado Springs ....................................................................... 1,420,638 

Denver ........................................................................................ 2,700,279 

Greeley ....................................................................................... 1,203,745 

Pueblo ........................................................................................ 1,460,506 

Weld County .............................................................................. 1,023,188 

Colorado Total ........................................................................ 17,349,270 

Connecticut ................................................................................. Bridgeport ................................................................................... 1,215,150 

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Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Notices 64343 

NEIGHBORHOOD STABILIZATION PROGRAM (NSP3) FUNDING UNDER DODD-FRANK WALL STREET REFORM AND

CONSUMER PROTECTION ACT—Continued 

State Grantee NSP3 Grant 

State of Connecticut .................................................................. 5,000,000 

Hartford ...................................................................................... 1,029,926 

New Haven ................................................................................ 1,041,579 

Waterbury ................................................................................... 1,036,101 

Connecticut Total ................................................................... 9,322,756 

District of Columbia ..................................................................... Washington, DC ......................................................................... 5,000,000 

Delaware ..................................................................................... State of Delaware ...................................................................... 5,000,000 

Florida ......................................................................................... Boynton Beach ........................................................................... 1,168,808 

Brevard County .......................................................................... 3,032,850 

Broward County ......................................................................... 5,457,553 

Cape Coral ................................................................................. 3,048,214 

Charlotte County ........................................................................ 2,022,962 

Citrus County ............................................................................. 1,005,084 

Clearwater .................................................................................. 1,385,801 

Collier County ............................................................................ 3,884,165 

Coral Springs ............................................................................. 1,657,845 

Davie .......................................................................................... 1,171,166 

Daytona Beach .......................................................................... 1,127,616 

Deerfield Beach ......................................................................... 1,183,897 

Deltona ....................................................................................... 1,964,066 

Escambia County ....................................................................... 1,210,487 

State of Florida .......................................................................... 8,511,111 

Ft Lauderdale ............................................................................. 2,145,921 

Ft Myers ..................................................................................... 1,539,941 

Hernando County ....................................................................... 1,953,975 

Hialeah ....................................................................................... 2,198,194 

Hillsborough County ................................................................... 8,083,062 

Hollywood ................................................................................... 2,433,001 

Indian River County ................................................................... 1,500,428 

Jacksonville-Duval County ......................................................... 7,102,937 

Kissimmee .................................................................................. 1,042,299 

Lake County ............................................................................... 3,199,585 

Lakeland ..................................................................................... 1,303,139 

Lauderhill .................................................................................... 1,500,609 

Lee County ................................................................................. 6,639,174 

Manatee County ......................................................................... 3,321,893 

Margate ...................................................................................... 1,148,877 

Marion County ............................................................................ 4,589,714 

Martin County ............................................................................. 1,563,770 

Melbourne .................................................................................. 1,257,986 

Miami .......................................................................................... 4,558,939 

Miami Beach .............................................................................. 1,475,088 

Miami Gardens City ................................................................... 1,940,337 

Miami-Dade County ................................................................... 20,036,303 

Miramar ...................................................................................... 2,321,827 

North Miami ................................................................................ 1,173,374 

Orange County ........................................................................... 11,551,158 

Orlando ...................................................................................... 3,095,137 

Osceola County ......................................................................... 3,239,646 

Palm Bay .................................................................................... 1,764,032 

Palm Beach County ................................................................... 11,264,172 

Palm Coast City ......................................................................... 1,375,071 

Pasco County ............................................................................. 5,185,778 

Pembroke Pines ......................................................................... 2,330,542 

Pinellas County .......................................................................... 4,697,519 

Plantation ................................................................................... 1,216,427 

Polk County ................................................................................ 5,443,116 

Pompano Beach ........................................................................ 1,500,572 

Port St Lucie .............................................................................. 3,515,509 

Sanford ....................................................................................... 1,037,697 

Sarasota ..................................................................................... 1,038,811 

Sarasota County ........................................................................ 3,949,541 

Seminole County ........................................................................ 3,995,178 

St Petersburg ............................................................................. 3,709,133 

St. Lucie County ........................................................................ 1,947,657 

Sunrise ....................................................................................... 1,775,162 

Tamarac ..................................................................................... 1,427,857 

Tampa ........................................................................................ 4,691,857 

Titusville ..................................................................................... 1,005,731 

Volusia County ........................................................................... 3,670,516 

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NEIGHBORHOOD STABILIZATION PROGRAM (NSP3) FUNDING UNDER DODD-FRANK WALL STREET REFORM AND

CONSUMER PROTECTION ACT—Continued 

State Grantee NSP3 Grant 

West Palm Beach ...................................................................... 2,147,327 

Florida Total ........................................................................... 208,437,144 

Georgia ....................................................................................... Atlanta ........................................................................................ 4,906,758 

Augusta-Richmond County ........................................................ 1,161,297 

Carroll County ............................................................................ 1,190,390 

Clayton County .......................................................................... 3,796,167 

Cobb County .............................................................................. 2,415,784 

Columbus-Muscogee County ..................................................... 1,128,174 

Dekalb County ........................................................................... 5,233,105 

Douglas County ......................................................................... 1,628,471 

Fulton County ............................................................................. 3,094,885 

State of Georgia ......................................................................... 18,679,977 

Gwinnett County ........................................................................ 2,065,581 

Henry County ............................................................................. 1,217,736 

Macon ........................................................................................ 1,503,897 

Paulding County ......................................................................... 1,372,214 

Savannah ................................................................................... 1,027,553 

Georgia Total .......................................................................... 50,421,988 

Hawaii ......................................................................................... State of Hawaii ........................................................................... 5,000,000 

Iowa ............................................................................................. State of Iowa .............................................................................. 5,000,000 

Idaho ........................................................................................... State of Idaho ............................................................................ 5,000,000 

Illinois .......................................................................................... Chicago ...................................................................................... 15,996,360 

Cook County .............................................................................. 7,776,324 

State of Illinois ........................................................................... 5,000,000 

Lake County ............................................................................... 1,370,421 

Illinois Total ............................................................................ 30,143,105 

Indiana ........................................................................................ Anderson .................................................................................... 1,219,200 

Elkhart ........................................................................................ 1,022,717 

Elkhart County ........................................................................... 1,193,194 

Fort Wayne ................................................................................ 2,374,450 

Gary ........................................................................................... 2,717,859 

Hammond ................................................................................... 1,243,934 

State of Indiana .......................................................................... 8,235,625 

Indianapolis ................................................................................ 8,017,557 

Kokomo ...................................................................................... 1,014,327 

Lake County ............................................................................... 1,613,168 

Muncie ........................................................................................ 1,148,363 

South Bend ................................................................................ 1,708,707 

Indiana Total ........................................................................... 31,509,101 

Kansas ........................................................................................ Kansas City ................................................................................ 1,137,796 

State of Kansas ......................................................................... 5,000,000 

Kansas Total .......................................................................... 6,137,796 

Kentucky ..................................................................................... Commonwealth of Kentucky ...................................................... 5,000,000 

Louisiana ..................................................................................... State of Louisiana ...................................................................... 5,000,000 

Massachusetts ............................................................................ Commonwealth of Massachusetts ............................................. 5,000,000 

Springfield .................................................................................. 1,197,000 

Worcester County ...................................................................... 1,190,994 

Massachusetts Total .............................................................. 7,387,994 

Maryland ..................................................................................... State of Maryland ....................................................................... 5,000,000 

Prince George’s County ............................................................. 1,802,242 

Maryland Total ........................................................................ 6,802,242 

Maine .......................................................................................... State of Maine ............................................................................ 5,000,000 

Michigan ...................................................................................... Dearborn .................................................................................... 1,027,354 

Detroit ......................................................................................... 21,922,710 

Flint ............................................................................................ 3,076,522 

Genesee County ........................................................................ 2,663,219 

Grand Rapids ............................................................................. 1,378,788 

Jackson County ......................................................................... 1,162,482 

Lansing ....................................................................................... 1,162,508 

Macomb County ......................................................................... 2,536,817 

State of Michigan ....................................................................... 5,000,000 

Muskegon County ...................................................................... 1,071,900 

Oakland County ......................................................................... 2,080,700 

Pontiac ....................................................................................... 1,410,621 

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Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Notices 64345 

NEIGHBORHOOD STABILIZATION PROGRAM (NSP3) FUNDING UNDER DODD-FRANK WALL STREET REFORM AND

CONSUMER PROTECTION ACT—Continued 

State Grantee NSP3 Grant 

Saginaw ..................................................................................... 1,242,318 

Southfield ................................................................................... 1,084,254 

St. Clair County .......................................................................... 1,129,355 

Warren ....................................................................................... 1,735,633 

Wayne County ........................................................................... 7,839,293 

Michigan Total ........................................................................ 57,524,473 

Minnesota .................................................................................... Anoka County ............................................................................ 1,226,827 

Hennepin County ....................................................................... 1,469,133 

Minneapolis ................................................................................ 2,671,275 

State of Minnesota ..................................................................... 5,000,000 

St Paul ....................................................................................... 2,059,877 

Minnesota Total ...................................................................... 12,427,113 

Missouri ....................................................................................... Kansas City ................................................................................ 1,823,888 

State of Missouri ........................................................................ 5,000,000 

St Louis ...................................................................................... 3,472,954 

St. Louis County ........................................................................ 2,813,762 

Missouri Total ......................................................................... 13,110,604 

Mississippi ................................................................................... State of Mississippi .................................................................... 5,000,000 

Montana ...................................................................................... State of Montana ....................................................................... 5,000,000 

North Carolina ............................................................................. State of North Carolina .............................................................. 5,000,000 

North Dakota ............................................................................... State of North Dakota ................................................................ 5,000,000 

Nebraska ..................................................................................... State of Nebraska ...................................................................... 5,000,000 

Omaha ....................................................................................... 1,183,085 

Nebraska Total ....................................................................... 6,183,085 

New Hampshire .......................................................................... State of New Hampshire ............................................................ 5,000,000 

New Jersey ................................................................................. Essex County ............................................................................. 1,851,984 

Newark ....................................................................................... 2,018,637 

State of New Jersey .................................................................. 5,000,000 

Paterson ..................................................................................... 1,196,877 

Union County ............................................................................. 1,574,051 

New Jersey Total ................................................................... 11,641,549 

New Mexico ................................................................................ State of New Mexico .................................................................. 5,000,000 

Nevada ........................................................................................ Clark County .............................................................................. 16,156,114 

North Las Vegas ........................................................................ 4,097,147 

Henderson .................................................................................. 3,901,144 

Las Vegas .................................................................................. 10,450,623 

State of Nevada ......................................................................... 5,000,000 

Reno ........................................................................................... 1,973,724 

Washoe County ......................................................................... 1,735,918 

Nevada Total .......................................................................... 43,314,669 

New York .................................................................................... Islip Town ................................................................................... 1,429,561 

Nassau County .......................................................................... 2,116,070 

New York ................................................................................... 9,787,803 

State of New York ...................................................................... 5,000,000 

Suffolk County ............................................................................ 1,501,506 

New York Total ....................................................................... 19,834,940 

Ohio ............................................................................................. Akron .......................................................................................... 2,674,298 

Butler County ............................................................................. 1,327,123 

Canton ........................................................................................ 1,233,756 

Cincinnati ................................................................................... 3,160,661 

Clark County .............................................................................. 1,105,306 

Cleveland ................................................................................... 6,793,290 

Columbus ................................................................................... 4,843,460 

Cuyahoga County ...................................................................... 2,551,533 

Dayton ........................................................................................ 3,115,780 

East Cleveland ........................................................................... 1,068,142 

Euclid ......................................................................................... 1,031,230 

Hamilton County ........................................................................ 1,469,242 

Lorain County ............................................................................. 1,619,474 

Montgomery County ................................................................... 1,145,712 

State of Ohio .............................................................................. 11,795,818 

Richland County ......................................................................... 1,022,278 

Toledo ........................................................................................ 3,591,715 

Trumbull County ......................................................................... 1,143,889 

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64346 Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Notices 

NEIGHBORHOOD STABILIZATION PROGRAM (NSP3) FUNDING UNDER DODD-FRANK WALL STREET REFORM AND

CONSUMER PROTECTION ACT—Continued 

State Grantee NSP3 Grant 

Youngstown ............................................................................... 1,096,328 

Ohio Total ............................................................................... 51,789,035 

Oklahoma .................................................................................... State of Oklahoma ..................................................................... 5,000,000 

Oregon ........................................................................................ State of Oregon ......................................................................... 5,000,000 

Pennsylvania ............................................................................... Commonwealth of Pennsylvania ............................................... 5,000,000 

Puerto Rico ................................................................................. Commonwealth of Puerto Rico .................................................. 5,000,000 

Rhode Island ............................................................................... Providence ................................................................................. 1,309,231 

State of Rhode Island ................................................................ 5,000,000 

Rhode Island Total ................................................................. 6,309,231 

South Carolina ............................................................................ State of South Carolina ............................................................. 5,615,020 

South Carolina Total .............................................................. 5,615,020 

South Dakota .............................................................................. State of South Dakota ............................................................... 5,000,000 

Tennessee .................................................................................. Memphis ..................................................................................... 5,195,848 

State of Tennessee .................................................................... 5,000,000 

Tennessee Total ..................................................................... 10,195,848 

Texas .......................................................................................... Dallas ......................................................................................... 2,356,962 

Dallas County ............................................................................. 1,364,426 

Harris County ............................................................................. 1,925,917 

Hidalgo County .......................................................................... 1,716,924 

Houston ...................................................................................... 3,389,035 

State of Texas ............................................................................ 7,284,978 

Texas Total ............................................................................. 18,038,242 

Utah ............................................................................................. State of Utah .............................................................................. 5,000,000 

Virginia ........................................................................................ Richmond ................................................................................... 1,254,970 

Commonwealth of Virginia ......................................................... 5,000,000 

Virginia Total .......................................................................... 6,254,970 

Vermont ....................................................................................... State of Vermont ........................................................................ 5,000,000 

Washington ................................................................................. State of Washington .................................................................. 5,000,000 

Wisconsin .................................................................................... Milwaukee .................................................................................. 2,687,949 

State of Wisconsin ..................................................................... 5,000,000 

Wisconsin Total ...................................................................... 7,687,949 

West Virginia ............................................................................... State of West Virginia ................................................................ 5,000,000 

Wyoming ..................................................................................... State of Wyoming ...................................................................... 5,000,000 

Insular Areas ............................................................................... .................................................................................................... 300,000 

Total .................................................................................... 970,000,000 

Overview 

The Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010 provided 

an additional $1 billion for the Neighborhood 

Stabilization Program (NSP) that was 

originally established under the Housing and 

Economic Recovery Act of 2008. 

The statute calls for allocating funds to 

States and local governments with the 

greatest need, as determined by: 

(A) ‘‘The number and percentage of home 

foreclosures in each State or unit of general 

local government; 

(B) ‘‘The number and percentage of homes 

financed by a subprime mortgages in each 

State or unit of general local government; and 

(C) ‘‘The number and percentage of homes 

in default or delinquency in each State or 

unit of general local government.’’ 

The statute also requires that a minimum 

of 0.5 percent of the appropriation, $5 

million be provided to each state. 

The Department has determined that for 

NSP3, the states and local governments with 

the greatest need for neighborhood 

stabilization funding are those communities 

that have high numbers of foreclosed and/or 

vacant properties in the neighborhoods with 

the highest concentrations of foreclosures, 

delinquent loans, and subprime loans. The 

basic formula allocates funds based on the 

number of foreclosures and vacancies in the 

20 percent of U.S. neighborhoods (Census 

Tracts) with the highest rates of homes 

financed by a subprime mortgage, are 

delinquent, or are in foreclosure. This basic 

allocation is adjusted to ensure that every 

state receives a minimum of $5 million. The 

net result is that these funds are highly 

targeted to communities with the most severe 

neighborhood problems associated with the 

foreclosure crisis. 

Estimating Greatest Need 

To target the funds to States and local 

communities with the greatest need, HUD 

estimated the number of loans 90 days 

delinquent or in foreclosure for each Census 

Tract in America. This estimate was based on 

a model that was comprised of three factors 

that explain most foreclosures and 

delinquent loans (see note 1): 

• Rate of Subprime Loans. This is 

measured with HMDA data on high cost and 

high leverage loans made between 2004 and 

2007. These data are available at the Census 

Tract (neighborhood) level. 

• Increase in Unemployment Rate between 

March 2005 and March 2010. These data are 

from the BLS Local Area Unemployment 

Statistics, at the city and county level. 

• Fall in Home Value from Peak to Trough. 

Home value data at the Metropolitan Area 

level is available quarterly through March 

2010 from the Federal Housing Finance 

Agency Home Price Index. 

In addition to wanting to capture loans that 

are currently delinquent or in the foreclosure 

process, HUD sought to capture the aggregate 

impact of the foreclosure crisis on individual 

neighborhoods between 2007 and 2010. To 

do this, HUD estimated for each 

neighborhood the number of foreclosure 

starts between January 2007 and March 2010 

as well as the number of foreclosure 

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1This less than the Mortgage Bankers Association 

National Delinquency Survey rate of 9.54 percent 

for March 2010 and slightly more than the McDash 

Analytics rate of 8.39 percent as of July 2010. 

completions between January 2007 and June 

2010 (see note 2). Each neighborhood was 

assigned the larger of the two estimates. 

Finally, HUD has administrative data from 

the United States Postal Service on addresses 

not picking up mail for 90 days or longer. 

These data are very good current indicators 

of neighborhood stress from vacant housing. 

This number is adjusted using Census 2000 

tract level data to remove vacant vacation 

properties from the count. 

The Formula 

Using the estimated rate of loans in 

foreclosure or delinquent, HUD identified the 

20 percent of neighborhoods likely to be most 

distressed. This equates to an estimated 

serious delinquency rate (90 days delinquent 

or in foreclosure) of greater than 17.8 percent. 

Using the methodology described above, the 

national rate was estimated at 8.9 percent.1

For each place and balance of county in the 

United States we add up only from the 20 

percent of neighborhoods with the greatest 

need the number of foreclosed homes 

between 2007 and 2010 and separately the 

number units 90 days or more vacant in 

March 2010. 

This ‘‘jurisdiction level’’ file is then used to 

run a formula to allocate the funds available, 

$969,700,000. Sixty percent of these funds 

are allocated based on each jurisdiction’s 

share of foreclosures and 40 percent of the 

funds are allocated based on each 

jurisdiction’s share of vacancies. 

Minimum Grant Threshold 

If a place gets less than HUD’s established 

minimum grant threshold of $1 million, its 

grant is rolled up into the county grant. If the 

county grant is less than the minimum grant 

threshold of $1 million, its grant is rolled up 

into the state grant. 

State Minimum Grant of $5 million 

For any state government that would 

receive less than $5 million, its grant is 

increased to $5 million with all grant 

amounts above the minimum grant threshold 

reduced on a pro-rata basis to only allocate 

the amounts available. 

Note 1: Identifying Census Tracts with 

High Rates of Foreclosures, Delinquencies, 

and Subprime Loans: 

To estimate which neighborhoods are 

likely to have high rates of foreclosures, 

delinquencies, and subprime loans, HUD 

used a July 2010 extract of county level 

serious delinquency rates from McDash 

Analytics to develop a predictive model 

using public data that was available for every 

Census Tract in the United States. The 

predictive model, which was weighted on 

number of mortgages in each county, was 

able to predict most of the variance between 

counties in their serious delinquency rate (Rsquare of 0.821). The model used is as 

follows: 

0.523 (intercept) 

+0.476 Unemployment Change 3/2005 to 3/ 

2010 (BLS LAUS) 

¥0.176 Rate of low cost high leverage loans 

2004 to 2007 (HMDA) 

+0.521 Rate of high cost high leverage loans 

2004 to 2007 (HMDA) 

+0.090 Rate of high cost low leverage loans 

2004 to 2007 (HMDA) 

¥0.188 Fall in Home Value Since Peak 

(FHFA Metro and Non-Metro Area) 

The predictive rate of seriously delinquent 

mortgages was multiplied times the number 

of loans made between 2004 and 2007 in a 

Census Tract to estimate the number of 

seriously delinquent loans in a Census Tract. 

Note 2: Calculating Number of 

Foreclosures at the Neighborhood Level: 

To estimate the number of homes in a 

neighborhood that have completed, or are at 

risk of becoming Real Estate Owned in a 

Census Tract, was done by allocating the 

statewide total of the greater of the sum of 

all foreclosure completions between January 

2007 and June 2010 (from RealtyTrac) or the 

sum of all foreclosure starts between January 

2007 and March 2010 (from the Mortgage 

Bankers Association) based on each Tracts 

share of a states estimated number of 

seriously delinquent loans. The estimated 

number of seriously delinquent loans was 

calculated by multiplying the estimated rate 

of seriously delinquent loans times the 

number of mortgages made between 2004 and 

2007 (from Home Mortgage Disclosure Act 

data). 

Attachment C 

NSP Recommended Energy Efficient and 

Environmentally-Friendly Green Elements 

HUD strongly recommends that your 

proposed NSP3 program incorporate the 

following energy efficient and 

environmentally-friendly Green elements. No 

specific element is required. HUD encourages 

thoughtful, achievable consideration and 

implementation of energy efficient and 

environmentally friendly elements inside 

your NSP3 program. 

HUD is providing the guidance below 

because the Department has become aware 

during the implementation of NSP1 that 

many grantees are not aware that many of 

their common community development 

practices, such as trying to help police and 

teachers live in the neighborhood in which 

they work, are also considered sustainable 

and environmentally friendly. Similarly, 

most affordable housing units are also 

smaller and can easily be made more energy 

efficient than larger units. The increased 

energy efficiency then serves to increase the 

long-term affordability of the units. 

Transit Accessibility 

Select NSP target areas that are transit 

accessible, for example those that are in a 

census tract with convenient bus service 

(local bus service every 20 minutes during 

rush hour or an express commuter bus); or 

bordering a census tract with a passenger rail 

stop or station (including, for example, 

commuter rail, subway, light rail, and 

streetcars). 

Green Building Standards 

Comply with the required NSP 

rehabilitation standards and also fund new 

construction and gut rehabilitation activities 

that will exceed the Energy Star for New 

Homes standard. Ensure that moderate 

rehabilitation or energy retrofits will 

purchase only Energy Star products and 

appliances. You may go further and require 

NSP homes to achieve an established 

environmental or energy efficiency standard 

such as Green Communities or equivalent. 

Re-Use Cleared Sites 

Re-use cleared sites in accordance with a 

comprehensive or neighborhood plan. Plan to 

re-use all demolition sites within the term of 

your NSP grant as replacement housing, for 

use as a community resource, or to provide 

an environmental function. Examples 

include community gardens, pocket parks, or 

floodplain impoundment areas. 

Deconstruction 

Deconstruction means salvaging and reusing materials resulting from demolition 

activities. It recycles building materials, and 

provides employment. 

Renewable Energy 

1. Passive Solar. Orient the building to 

make the greatest use of passive solar heating 

and cooling. 

2. Photovoltaic-ready. Site, design, 

engineer and wire the development to 

accommodate installation of photovoltaic 

panels in the future. 

Sustainable Site Design 

1. Transportation Choices. Locate projects 

within a one-quarter mile of at least two, or 

one-half mile of at least four community and 

retail facilities. 

2. Connections to Surrounding 

Neighborhoods. Provide three separate 

connections from the development to 

sidewalks or pathways in surrounding 

neighborhoods. 

3. Protecting Environmental Resources. Do 

not locate the project within 100 feet of 

wetlands; 1,000 feet of a critical habitat; or 

on steep slopes, prime farmland or park land. 

4. Erosion and Sediment Control. 

Implement EPA’s Best Management Practices 

for erosion and sedimentation control during 

construction. 

5. Sustainable Landscaping. Select native 

trees and plants that are appropriate to the 

site’s soils and microclimate. 

6. Energy Efficient Landscaping. Locate 

trees and plants to provide shading in the 

summer and allow for heat gain in the 

winter. 

Water Conservation 

1. Efficient Irrigation. Install low volume, 

non-spray irrigation system (such as drip 

irrigation, bubblers, or soaker hose). 

Energy Efficient Materials 

1. Durable Materials. Use materials that 

last longer than conventional counterparts 

such as stone, brick or concrete. 

2. Resource Efficient Materials. Use layouts 

and advanced building techniques that 

reduce the amount of homebuilding material 

required. 

3. Heat Absorbing Materials. Use materials 

that retain solar heat in winter and remain 

cool in summer. 

4. Solar-Reflective Paving. Use lightcolored/high-albedo materials and/or openmstockstill on DSKH9S0YB1PROD with NOTICES

64348 Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Notices 

grid pavement with a minimum Solar 

Reflective index of 0.6 over at least 30 

percent of the site’s hardscaped areas. 

5. Local Source Materials. Use materials 

from local sources that are close to the job 

site. 

6. Green Roofing. Use Energy Starcompliant and high-emissive roofing, and/or 

install a Green (vegetated) roof for at least 50 

percent of the roof area; or a combination of 

high-albedo and vegetated roof covering 75 

percent of the roof area. 

Healthy Homes 

1. Green Label Certified Floor Covering. Do 

not install carpets in basements, entryways, 

laundry rooms, bathrooms or kitchens; if 

using carpet, use the Carpet and Rug 

Institute’s Green Label certified carpet and 

pad. 

2. Healthy Flooring Materials: Alternatives. 

Use non-vinyl, non-carpet floor coverings in 

all rooms. 

3. Healthy Flooring Materials: Reducing 

Dust. Install a whole-house vacuum system 

with high-efficiency particulate air filtration. 

4. Sealing Joints. Seal all wall, floor and 

joint penetrations to prevent pest entry; 

provide rodent and corrosion proof screens 

(e.g., copper or stainless steel mesh) for large 

openings. 

5. Termite-Resistant Materials. Use termiteresistant materials in areas known to be 

infested. 

6. Tub and Shower Enclosures: Moisture 

Prevention. Use one-piece fiberglass or 

similar enclosure or, if using any form of 

grouted material, use backing materials such 

as cement board, fiber cement board, fiberglass reinforced board or cement plaster. 

7. Green Maintenance Guide. Provide a 

guide for homeowners and renters that 

explains the intent, benefits, use and 

maintenance of Green building features, and 

encourages additional Green activities such 

as recycling, gardening and use of healthy 

cleaning materials. 

8. Resident Orientation. Provide a walkthrough and orientation to the homeowner or 

new tenants. 

[FR Doc. 2010–26292 Filed 10–18–10; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF THE INTERIOR 

Bureau of Ocean Energy Management, 

Regulation and Enforcement 

[Docket No. BOEM–2010–0052] 

BOEMRE Information Collection 

Activity: 1010–0182, Increased Safety 

Measures for Energy Development on 

the OCS NTL, Extension of a 

Collection; Comment Request 

AGENCY: Bureau of Ocean Energy 

Management, Regulation and 

Enforcement (BOEMRE), Interior. 

ACTION: Notice of an extension of an 

information collection (1010–0182). 

SUMMARY: To comply with the 

Paperwork Reduction Act of 1995 

(PRA), BOEMRE is inviting comments 

on a collection of information that we 

will submit to the Office of Management 

and Budget (OMB) for review and 

approval. The information collection 

request (ICR) concerns the paperwork 

requirements in Notice to Lessees and 

Operators (NTL) ‘‘No. 2010–N05, 

Increased Safety Measures for Energy 

Development on the OCS.’’ 

DATES: Submit written comments by 

December 20, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Cheryl Blundon, Regulations and 

Standards Branch at (703) 787–1607. 

You may also contact Cheryl Blundon to 

obtain a copy, at no cost, of NTL No. 

2010–N05 that requires the subject 

collection of information. 

ADDRESSES: You may submit comments 

by either of the following methods listed 

below. 

• Electronically: go to http:// 

www.regulations.gov. In the entry titled 

‘‘Enter Keyword or ID,’’ enter docket ID 

BOEM–2010–0052 then click search. 

Follow the instructions to submit public 

comments and view supporting and 

related materials available for this 

collection. BOEMRE will post all 

comments. 

• E-mail cheryl.blundon@boemre.gov. 

Mail or hand-carry comments to the 

Department of the Interior; Bureau of 

Ocean Energy Management, Regulation 

and Enforcement; Attention: Cheryl 

Blundon; 381 Elden Street, MS–4024; 

Herndon, Virginia 20170–4817. Please 

reference ICR 1010–0182 in your 

comment and include your name and 

return address. 

SUPPLEMENTARY INFORMATION: 

Title: Increased Safety Measures for 

Energy Development on the OCS, NTL 

No. 2010–N05. 

OMB Control Number: 1010–0182. 

Abstract: The Outer Continental Shelf 

(OCS) Lands Act, as amended (43 U.S.C. 

1331 et seq. and 43 U.S.C. 1801 et seq.), 

authorizes the Secretary of the Interior 

(Secretary) to prescribe rules and 

regulations to manage the mineral 

resources of the OCS. Such rules and 

regulations will apply to all operations 

conducted under a lease, right-of-use 

and easement, and pipeline right-ofway. Operations on the OCS must 

preserve, protect, and develop oil and 

natural gas resources in a manner that 

is consistent with the need to make such 

resources available to meet the Nation’s 

energy needs as rapidly as possible; to 

balance orderly energy resource 

development with protection of human, 

marine, and coastal environments; to 

ensure the public a fair and equitable 

return on the resources of the OCS; 

preserve and maintain free enterprise 

competition; and ensure that the extent 

of oil and natural gas resources of the 

OCS is assessed at the earliest 

practicable time. 43 U.S.C. 1332(6) 

states that ‘‘operations in the outer 

Continental Shelf should be conducted 

in a safe manner by well-trained 

personnel using technology, 

precautions, and techniques sufficient 

to prevent or minimize the likelihood of 

blowouts, loss of well control, fires, 

spillages, physical obstruction to other 

users of the waters or subsoil and 

seabed, or other occurrences which may 

cause damage to the environment or to 

property, or endanger life or health.’’ 

To carry out these responsibilities, 

BOEMRE issues regulations to ensure 

that operations in the OCS will meet 

statutory requirements; provide for 

safety and protect the environment; and 

result in diligent exploration, 

development, and production of OCS 

leases. In addition, we also issue NTLs 

that provide clarification, explanation, 

and interpretation of our regulations. 

These NTLs are also used to convey 

purely informational material and to 

cover situations that might not be 

adequately addressed in our regulations. 

The latter is the case for the information 

collection required in the NTL. Because 

of the unusual nature of this 

information collection, issuing an NTL 

is the appropriate means to collect the 

information at the time of the event. 

The subject of this ICR is an NTL 

based on the recommendations in the 

May 27, 2010, Report from the Secretary 

of the Interior to the President of the 

United States, Increased Safety 

Measures for Energy Development on 

the Outer Continental Shelf (Report). 

BOEMRE issued NTLs for operators to 

comply with the requirements and 

recommendations of the report as a 

result of the Deepwater Horizon oil spill 

in the Gulf of Mexico. This collection 

pertains to one NTL, covered under the 

regulations at 30 CFR part 250, subparts, 

A, D, E, and F. The primary information 

collections for these regulations are 

approved under the Office of 

Management and Budget (OMB) Control 

Numbers 1010–0114, 1010–0141, 1010- 

0067, and 1010–0043, respectively. 

However, BOEMRE believes that the 

paperwork burdens in the NTL are in 

addition to those currently approved. 

Only one of the requirements in the 

NTL has not yet been fully met; 

therefore, we are renewing that 

requirement in this collection to allow 

operators and/or lessees more response 

time than allowed by the original 

emergency OMB request. 

BOEMRE issued this NTL for lessees 

and operators to comply with the 

requirements and recommendations of 

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