Topic Question
Demolition

Guidance on demolition.

Clearance is an eligible activity under the Community Development Block Grant (CDBG) program found in §570.201(d). In NSP, demolition is eligible on blighted properties under Eligible Use D, as a part of a Redevelopment Activity under Eligible Use E, or as part of a Reconstruction activity under Eligible Use B. Clearance can include: Demolition of buildings and improvements; Removal of demolition products (rubble) and other debris; Physical rem...
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Counseling of Homebuyers

How does a nonprofit organization become a HUD-approved housing counseling agency?

Information on how to become a HUD-approved housing counseling agency is located on the HUD.gov page How to Become a HUD Approved Housing Counseling Agency. Other helpful information for housing counselors is also available on the HUD.gov page Information for Housing Counselors....
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Counseling of Homebuyers

Is there a listing of HUD-approved housing counseling agencies?

A list of HUD-approved housing counseling agencies is available online. View the list of HUD-approved housing counseling agencies.

Counseling of Homebuyers
Counseling of Homebuyers

What documentation is required to confirm compliance with the NSP homeownership counseling requirement?

A copy of the homeowner's certificate from a HUD-approved housing counseling agency fulfills the documentation requirement. NSP grantees must keep copies of these certificates in the homeowner's file to demonstrate compliance.

Counseling of Homebuyers
Counseling of Homebuyers

If a prospective homebuyer can obtain a first mortgage but has had a foreclosure in the last five years, is the person eligible to purchase an NSP property?

Typically, if a prospective buyer can qualify for a first mortgage, they are eligible to purchase an NSP property.  However, some NSP grantees may provide mortgages or other financing mechanisms using their own credit standards which may not allow for a past foreclosure.

Counseling of Homebuyers
Counseling of Homebuyers

What are an NSP grantee's options if there is no HUD-approved housing counseling agency within the jurisdiction or the grantee who wants to provide homeownership counseling is not HUD-approved?

NSP grantees can request an exception from the HUD Field Officer for good cause. Generally, good cause is the lack of a HUD-approved housing counseling agency. Some other options include offering online counseling (although it may not be as effective as in-person counseling), or a grantee may choose to pay an extra fee to bring the courses to the jurisdiction.

Counseling of Homebuyers
Counseling of Homebuyers

Is the cost of homeowner counseling an eligible NSP expense if the prospective homebuyer does not ultimately purchase a home through NSP?

Yes, homeowner counseling costs are eligible even if the person does not purchase an NSP-assisted home. Whether or not the prospective homebuyer purchases a home through NSP, the housing counseling costs are counted as project delivery costs under the applicable eligible activity.

Counseling of Homebuyers
Homebuyer Program Design and Implementation

How should NSP grantees select eligible homebuyers?

To be eligible for NSP funds, a homebuyer must:       Demonstrate income eligibility (household income at or below 120% AMI),      Agree to occupy the residence as their principal residency,     Demonstrate ability to pay the mortgage and maintain the home, Complete eight hours of housing counseling by a HUD certified counseling agency.   Grantees must affirmatively market the program so prospective ...
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Homebuyer Program Design and Implementation

Once a grantee has verified household income, how should the grantee determine NSP eligibility?

To determine if a household is eligible for assistance, the grantee must compare the verified income against HUD's published income limits to ensure the household income is at or below 120% AMI. View the current NSP income limits.

Homebuyer Program Design and Implementation
Homebuyer Program Design and Implementation

How should income be documented and verified?

Grantees must document that beneficiaries have incomes at or below the annual income limits established by HUD. Source documentation is required for verification. For guidance on acceptable methods for collecting and certifying income data, see the Guide to Completing NSP Income Certifications. The new online Income Calculator will make this task much simpler. The online Income Calculator is available on the OneCPD Resource Exchange....
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Homebuyer Program Design and Implementation

When multiple qualified buyers make offers to purchase a home, what criteria should be used to choose the buyer?

Each grantee and subrecipient should develop a marketing plan that complies with Fair Housing and CDBG regulations for open access and equitable distribution of houses and include it in the Action Plan. Grantees may create a lottery, maintain a waiting list on a first-come basis, and/or establish prequalification criteria to select homebuyers. The NSP Policy Alert Homeownership Assistance Guidance provides guidance on selecting qualified purchase...
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Homebuyer Program Design and Implementation

Does an NSP homebuyer need to be a first time homebuyer?

No, an NSP homebuyer does not have to be a first time homebuyer.

Homebuyer Program Design and Implementation
Homebuyer Program Design and Implementation

How should a grantee ensure principal residency?

The written agreement between the grantee and the homebuyer must specify that the buyer will use the property as a principal residence throughout the affordability period. Refer to the Homeownership Toolkit on the OneCPD Resource Exchange for additional guidance on how to incorporate this into a written agreement.

Homebuyer Program Design and Implementation
Homebuyer Program Design and Implementation

Is an applicant who has an Individual Taxpayer Identification Number (ITIN) eligible for assistance under the NSP program?

The NSP regulations are silent on the issue of ITIN loans. 24 CFR Part 5 requires the disclosure and verification of Social Security Numbers, Employer Identification Numbers, and citizen or eligible immigration status of persons receiving NSP assistance. With few exceptions, HUD cannot make financial assistance available to applicants and participants who do not have eligible citizenship or noncitizen immigration status. If grantees can find a le...
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Homebuyer Program Design and Implementation

Whose income is used to determine household income?

It depends on which of the three ways you calculate income; Part 5, IRS, or American Community Survey (ACS)/ Census. The Part 5 definition of household income includes the income calculation of all adults, 18 and older, who will be part of the household during the time NSP assistance will be received, plus unearned income of minor children (e.g., TANF). The IRS method includes everyone that was included in the recipient's tax returns. The ACS met...
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Homebuyer Program Design and Implementation

Are participants in the Section 8 Homeownership program eligible for NSP assistance?

Yes. Persons with down payment assistance, participants in lease-purchase programs, and Section 8 homeownership voucher holders may use those mechanisms to purchase an NSP home.  Additionally, prospective purchasers may receive financial assistance from the NSP program to purchase houses that have been acquired with NSP funds, but the grantee must ensure that multiple forms of assistance do not overly subsidize the purchase.

Homebuyer Program Design and Implementation
Land Banks

FAQs related to land banks are currently being developed.

Land Banks
Lease Purchase

What is a lease-purchase program?

Lease-purchase is a program where a home is rented for a period of time to a prospective buyer. The grantee should work with the renter to ensure that they have improved or repaired their credit and saved enough to purchase the home. Applicable regulations are found at 24 CFR Part 92.254 (A)(7). However, NSP has allowed longer lease periods than the HOME regulations do and has allowed temporary rentals for longer than three years. In these cases,...
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Lease Purchase

If a grantee institutes a lease-purchase program, will it be required to provide relocation assistance to a tenant who does not qualify to purchase the property at the end of the lease term?

Generally, a grantee will not be required to provide relocation assistance to a tenant who does not qualify to purchase the property at the end of the lease-purchase agreement term, if the following conditions are met: The lease-purchase agreement is executed with a new tenant, and not a tenant who was in the property at the time of the Initiation of Negotiations (ION) for acquisition, demolition, rehabilitation, or conversion of a lower-income ...
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Lease Purchase

Can former owners of foreclosed properties participate in lease-purchase agreements?

Former owners of foreclosed properties can participate in lease-purchase agreements. The grantee can acquire, rehabilitate, and sell the property back to the former owner, assuming the owner is income eligible, completes the required housing counseling, and is successful in securing financing. The property can be sold to the former owner through a lease-purchase agreement or standard sales contract. Note that if the grantee is the current owner, ...
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Lease Purchase

What are some best practices in using lease-purchase programs to sell NSP properties?

Lease Purchase best practices depend greatly on the specific situation that the grantee and homebuyer face. There are several resources on the OneCPD Resource Exchange, including the Greatest Hits of Lease-Purchase Webinar that can assist grantees in developing lease-purchase programs for NSP. To search for resources related to lease-purchase programs, go to the Advanced Search, and select Lease Purchase Programs as a topic. Presentation slides, ...
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Redevelopment

Can grantees use NSP funds for transportation infrastructure improvements?

Grantees can use NSP1 funds under Eligible Use E - Redevelopment toward public improvements, as described in CDBG 24 CFR 570.201(c). Public improvements are not eligible under NSP2 and NSP3 unless they directly serve a housing redevelopment.

Redevelopment
Redevelopment

If a developer owns a vacant property that was acquired with non-federal funds prior to applying for NSP funds, can NSP funds be used to repay the acquisition loan and/or for the construction of this project?

Retroactive reimbursement for property acquisition is not an eligible use and NSP funds cannot be used to pay for the cost of the acquisition of the property. NSP funds can, however, be used for the cost of new construction under Eligible Use E - Redevelopment if it is located in a target area. The grantee or subrecipient may recover the costs of acquisition at sale or refinancing.

Redevelopment
Redevelopment

If an NSP grantee, subrecipient, or developer acquired property before NSP funding became available, are the acquisition and rehabilitation costs for the property eligible?

Properties that were acquired via tax foreclosure, where the grantee was the initial successor in interest are eligible foreclosures regardless of when the grantee foreclosed on the property, assuming ownership has not been transferred to another entity. For non-tax foreclosures, under Eligible Use E - Redevelopment, if the property is vacant, NSP funds can be used for rehabilitation regardless of when the property was acquired. A vacant property...
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Redevelopment

Although redevelopment activities financed with NSP2 and 3 funds are restricted to housing, would it be possible to use NSP funds to finance the housing component of a mixed-use development?

Yes, a grantee can redevelop part or all of a mixed use property with NSP funds. At the completion of the project the grantee must ensure that an equitable proportion of the units meet an NSP national objective.

Redevelopment
Redevelopment

Does the NSP requirement to purchase a property at a 1% discount from its current, market value apply to the acquisition of property for redevelopment under Eligible Use E - Redevelopment?

If a property is vacant and not abandoned or foreclosed, then the one percent discount does not apply.

Redevelopment
Redevelopment

What is the difference between an NSP redevelopment activity and a rehabilitation activity?

For the purposes of NSP, redevelopment is typically used to describe activities that include the new construction of housing on vacant or demolished properties, or the conversion of property from a non-residential use to housing. Under redevelopment, there may be a change of use at the site such as converting a vacant commercial building to residential units, or the new construction of "in fill" units on vacant lots as part of a broader neighborh...
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Redevelopment

Are NSP redevelopment activities restricted to housing, or can redevelopment also be for commercial or public facilities?

Only NSP1 funds may be used to redevelop acquired property for nonresidential uses; redevelopment activities using NSP2 and NSP3 funds must be for housing NSP2 and NSP3 funds can be spent on public improvements only when it is essential to complete the housing project (connection of water lines, sidewalk, etc.). Mixed use development containing both residential and commercial uses may be an appropriate NSP activity for some jurisdictions if all p...
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Redevelopment

Is undeveloped land eligible to be redeveloped under NSP Eligible Use E - Redevelopment?

Yes. In order for a property to be "redeveloped" under Eligible Use E, vacant land must have been previously developed and be currently vacant. Raw land would not be eligible for redevelopment unless it is infill property with utilities available at the site.

Redevelopment
Redevelopment

What is the definition of vacant properties as referenced in NSP Eligible Use E - Redevelop Demolished or Vacant Properties?

A property is vacant if there is no one occupying it at the time of acquisition. The NSP Policy Alert Explanation of Property Types Under Each Eligible Use published December 2009 states, "Vacant properties includes both vacant land and properties with vacant structures on the land." It should be noted that a property cannot be made vacant. In other words, a grantee cannot encourage in any way a property owner to remove residential or commercial ...
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Redevelopment

Can an NSP grantee redevelop properties with blighted structures that are not foreclosed or abandoned?

If a structure is blighted (regardless of its status-foreclosed, abandoned, vacant), a grantee can demolish the structure and redevelop the property under Eligible Use E - Redevelopment.

Redevelopment
Redevelopment

What properties can be redeveloped under NSP Eligible Use E - Redevelopment?

In order for a property to be eligible under Eligible Use E, it must fulfill 2 conditions: the property (previously developed land, with or without structures) must be vacant; and it must be located in an area of greatest need, as identified in a grantee's NSP Substantial Amendment. It does not need to be abandoned or foreclosed. See the NSP Policy Alert Guidance on Property Types under Each NSP Eligible Use for more guidance....
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Rental Housing Development

What rental rates should be used for NSP-assisted rental properties?

The Unified NSP1 and NSP3 Notice requires grantees to ensure continued affordability for assisted units. It says "in its NSP action plan substantial amendment, a grantee will define 'affordable rents.' " Grantees must also ensure that costs are reasonable and that any subsidy does not unduly enrich a developer. Charging higher rents should increase revenues for the developer and thus reduce the level of initial subsidies. NSP grantees have define...
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Rental Housing Development

If an NSP grantee uses HOME standards to set its affordable rents, how should the grantee calculate rent for multifamily rental housing built entirely for households at or below 50 percent AMI?

The NSP program adopted 24 CFR Part 92.252(a) of the HOME rental requirements, and therefore the maximum HOME rents that can be charged are the lesser of the following rents: The fair market rent for existing housing for comparable units in the area as established by HUD under 24 CFR Part 888.111; or A rent that does not exceed 30 percent of the adjusted income of a family whose annual income equals 65 percent of AMI, as determined by HUD, with ...
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Rental Housing Development

Can HOME Tenant Based Rental Assistance (TBRA) funds be used with NSP funds?

A grantee can combine HOME funds and NSP funds in the same project in order to stretch limited resources. While HOME and NSP have similar regulations, there are some differences. When grantees combine funds from two Federal programs, the most restrictive Federal rules apply. HOME TBRA funds provided as a subsidy to the tenant household can be used in conjunction with NSP assisted rental housing if all applicable HOME regulations, such as tenant i...
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Rental Housing Development

What is required for income certification for rental programs?

HUD has determined that tenant incomes must be certified as meeting the applicable income limits at initial occupancy and at any time a new tenant occupies a unit. Existing tenants are not required to recertify their incomes annually, but new tenants must meet the prevailing income limits when taking occupancy of an NSP-assisted unit throughout the period of affordability.

Rental Housing Development
Rental Housing Development

How do the HOME rent standards affect NSP units?

The NSP program has adopted 24 CFR Part 92.252(a) of the HOME rental requirements as a "safe harbor" when defining affordable rents, although grantees could have chosen an alternate approach if approved by HUD in their Action Plan. Therefore if the grantee chose to use the HOME rents as its standard, the maximum rents that can be charged are the lesser of: The fair market rent for existing housing for comparable units in the area as established ...
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Rental Housing Development

How do grantees determine the LMMI benefit standard for NSP-assisted rental developments?

Occupancy of NSP-assisted housing by LMMI households under the LMMI Housing national objective is determined using the following general rules:  All NSP-assisted single unit structures must be occupied by LMMI households. An NSP-assisted two-unit structure (duplex) must have at least one unit occupied by an LMMI household. An NSP-assisted structure containing more than two units must have at least 51 percent of the units occupied by LMMI ho...
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Rental Housing Development

What are recommendations for using rental property management?

There are two levels of rental property management: asset management (owner's long-term responsibilities) and property management (manager's day-to-day responsibilities). Both the owner and manager need clear, written policies and procedures that incorporate all of the tasks to be performed by each party and identify who performs them. The grantee must adopt effective policies and procedures to oversee the rental project long term compliance. Fro...
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Davis-Bacon and Related Acts (Labor Standards)

Does Davis-Bacon apply retroactively for construction begun before having received NSP funding?

Pursuant to Department of Labor guidance, Davis-Bacon requirements do not apply retroactively to a project for which the construction contract was awarded, and/or for which construction started prior to notice of grant award.

Davis-Bacon and Related Acts (Labor Standards)
Davis-Bacon and Related Acts (Labor Standards)

Does Davis-Bacon apply when NSP funds are used for a single condominium unit?

A condominium or a cooperative is subject to Davis-Bacon requirements if the condominium unit is part of a multi-unit structure of eight or more units. When looking at the development of multifamily housing (including condominiums and cooperatives), where not all the units are NSP-assisted, it is the total number of units in the structure (not the number of assisted units) that triggers Davis-Bacon. For instance, in a 40-unit condominium that has...
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Davis-Bacon and Related Acts (Labor Standards)

If a project is using both NSP funds and funding from another federal source, which funding source's rules should the grantee follow regarding Davis-Bacon?

When assessing the applicability of overlapping rules, apply the more restrictive rule.

Davis-Bacon and Related Acts (Labor Standards)
Davis-Bacon and Related Acts (Labor Standards)

If a project is using both NSP funds and funding from another federal source, which funding source's rules should the grantee follow regarding Davis-Bacon?

When assessing the applicability of overlapping rules, apply the more restrictive rule.

Davis-Bacon and Related Acts (Labor Standards)
Davis-Bacon and Related Acts (Labor Standards)

How does Davis-Bacon apply when not all units on a property are funded by NSP?

A property with eight or more units must comply with Davis-Bacon standards. The eight unit threshold applies to the number of units on the property, and not the number of units being rehabilitated or constructed, and not the number of units funded by CDBG and/or NSP dollars. A property is defined as one or more buildings on an undivided lot or on contiguous lots or parcels, which are commonly-owned and operated as one rental, cooperative, or cond...
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Davis-Bacon and Related Acts (Labor Standards)

Does Davis-Bacon apply when a contractor is hired to maintain NSP properties?

Davis-Bacon does not apply when a contractor is hired to maintain NSP properties. Davis-Bacon applies only when rehabilitating or constructing a structure with eight or more units or on a property operated as a single development.

Davis-Bacon and Related Acts (Labor Standards)
Davis-Bacon and Related Acts (Labor Standards)

Does Davis-Bacon apply when NSP funding is used only for acquisition or financing activities such as down payment and closing costs?

Davis-Bacon does not apply where NSP funds are used solely for acquisition or financing activities, and no NSP funds are used for the rehabilitation or construction portion of the project.

Davis-Bacon and Related Acts (Labor Standards)
Davis-Bacon and Related Acts (Labor Standards)

Does Davis-Bacon apply when conducting demolition activities?

Generally, Davis-Bacon does not apply to a project where NSP funds are used for demolition under Eligible Use D - Demolition. However, if subsequent construction on the site is planned as part of the same contract, or if subsequent construction is contemplated as part of a future construction project (which would likely be conducted under Eligible Use E - Redevelopment), then the demolition work is considered to be a part of the overall construct...
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Davis-Bacon and Related Acts (Labor Standards)

When do Davis-Bacon requirements apply?

NSP funded projects follow CDBG requirements regarding the applicability of Davis-Bacon Prevailing Wage requirements. These are issued by the U. S. Department of Labor and required for all construction and rehabilitation work over $2,000. Davis-Bacon applies to projects with eight or more separate, contiguous units operated by a single entity as a single project (e.g., it applies to properties with eight or more units in a single structure). Gran...
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Economic Opportunities under Section 3

Is there a requirement that an NSP grantee, subrecipient, or an entitlement community have a Section 3 plan?

Having a Section 3 plan is not a program requirement; however, it is recommended. With a plan, the entity is going to be better prepared and more able to comply with the Section 3 requirements if they arise.

Economic Opportunities under Section 3
Economic Opportunities under Section 3

Can NSP funds be used to train Section 3 hires?

Yes, NSP administrative funds can be used for the training of individuals under Section 3. Note that NSP administrative funds are subject to a 10% cap. Employment and training goals may be met by either directly providing the employment or training or by facilitating the employment or training. That is, grantees, subrecipients, developers, contractors or subcontractors can satisfy Section 3 employment.

Economic Opportunities under Section 3
Economic Opportunities under Section 3

Does Section 3 reporting apply only to construction and rehabilitation activities or to all activities carried out under NSP?

Section 3 reporting only applies to construction and rehabilitation activities. For instance, acquisition activities are not subject to the Section 3 thresholds. This also means that if the grantee invests its funds only in acquisition and private funds are used for rehabilitation, then Section 3 does not apply because the Federal funds are not invested in construction or rehabilitation.

Economic Opportunities under Section 3
Economic Opportunities under Section 3

How do Section 3 and Vicinity Hiring requirements apply if the construction contractor for an NSP project is bringing back former employees that had been laid off or employees on worker's compensation?

For Section 3 and Vicinity Hiring Preference, new hires are any employees who are added to the payroll full-time to work on a contract. That means if a crew member was inactive or laid-off before the NSP-funded work began, then that person is counted as a new hire.

Economic Opportunities under Section 3
Economic Opportunities under Section 3

Under Section 3, can employees be hired only for the duration of the NSP project and then laid off upon project completion?

Yes, Section 3 applies only to economic opportunities that are generated by the use of certain Federal funds. Therefore, once the employment opportunity that is generated with Federal funds is complete, the contractor is not required to use those employees on other non-Federal/NSP projects.

Economic Opportunities under Section 3
Economic Opportunities under Section 3

Is volunteer labor on an NSP project subject to the Section 3 hiring goals (such as volunteer labor for Habitat for Humanity)?

No, since volunteers are not considered "new hires," the Section 3 hiring goals do not apply to them.

Economic Opportunities under Section 3
Economic Opportunities under Section 3

Is it possible for Vicinity Hiring Preference guidelines to violate fair housing provisions because of the NSP geographic target?

The Vicinity Hiring Preference requirements for NSP and fair housing requirements do not generally conflict. Generally, low-income persons living in certain target areas are not protected classes and therefore it is not unlawful to give preference to these groups of persons or businesses. If a grantee has concerns that the geographic targeting requirement might have disparate impact on a protected class, or if it has a specific instance where it ...
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Economic Opportunities under Section 3

If a contractor is subject to hiring requirements through a negotiated union contract, can it comply with Section 3?

In most instances, there are not significant conflicts between Section 3 and most labor union contracts. However, if a contractor is subject to certain legally binding hiring requirements through its union agreements, then it must honor those obligations. If this interferes with the contractor's ability to meet its Section 3 hiring goals, it should be explained in its annual report (HUD Form 60002 or its online equivalent).

Economic Opportunities under Section 3
Economic Opportunities under Section 3

What are the Section 3 employment reporting and American Recovery and Reinvestment Act of 2009 job reporting requirements?

For Section 3, grantees must demonstrate and report to HUD the efforts taken to satisfy the Section 3 requirements in HUD Form 60002, Complete HUD Form 60002 online. If the Section 3 numeric goals for employment and contracting are not met, the grantee must document that it made comprehensive efforts to reach eligible residents/businesses, yet due to local workforce conditions and qualifications, it was unable to meet these goals.   &nb...
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Economic Opportunities under Section 3

Do Section 3 requirements supersede state and local procurement requirements?

If an NSP grantee combines NSP funds with sources that are not subject to Section 3, (such as state or local funds), the most restrictive rules always apply. Therefore, grantees must comply with Section 3 in addition to other existing Federal, State, and local laws and regulations. Should a grantee find a situation where the Section 3 requirements conflict with other program requirements, or state and/or local law, it should consult with counsel ...
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Economic Opportunities under Section 3

If an entity receives funds from multiple HUD programs, do the Section 3 rules take precedence over other program rules?

Most HUD programs are subject to the Section 3 requirements, including the Community Development Block Grant and HOME Programs. The Section 3 requirements for all CPD programs are the same. Public housing authorities, however, are subject to different Section 3 requirements. If these two sources are combined, the more stringent rules apply.

Economic Opportunities under Section 3
Economic Opportunities under Section 3

How can an NSP grantee comply with both Section 3 and Vicinity Hiring requirements in small target areas?

To comply with both Section 3 and Vicinity Hiring Preference requirements, the grantee (or its partner) should give first preference to: hiring low-income residents and contracting with Section 3 business concerns in the NSP target area. If there are not enough low-income residents or Section 3 business concerns in the target area, then the grantee can look to hire/contract with qualified residents and businesses from the Section 3 priority areas...
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Economic Opportunities under Section 3

What is the distinction between Section 3 requirements and Vicinity Hiring Preference requirements for NSP?

The purposes of Section 3 and the Vicinity Hiring Preference are similar. The purpose of Section 3 is to ensure that, to the greatest extent feasible, new employment and contracting opportunities that are generated by the use of HUD funds (including NSP) are used to hire/contract with low income residents of the project area and businesses that are owned by or that hire low-income residents (Section 3 business concerns). The purpose of Vicinity ...
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Economic Opportunities under Section 3

When does Section 3 apply for NSP projects?

Two monetary thresholds apply to Section 3: A grantee or subrecipient invests more than $200,000 in NSP funds (or NSP funds in combination with other Section 3 covered assistance, such as Community Development Block Grant funds or HOME funds) for a NSP demolition, construction or rehabilitation project; and A contractor or subcontractor is awarded a contract for work arising in connection with a NSP new construction, rehabilitation or demolition...
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Environmental Review

Is radon testing and abatement required for homes assisted with HUD funding?

No, HUD does not require radon testing and abatement systems for units receiving assistance. Individuals concerned about radon should check with their State radon office. Refer to the web page of HUD's Office of Healthy Homes and Lead Hazard Control concerning strategies to address radon.

Environmental Review
Environmental Review

What constitutes "minor rehabilitation" for Environmental Reviews?

For single-family dwelling units (1-4 units), minor rehabilitation is applicable under the following conditions: the proposed activities will not increase unit density beyond four units; the land use is not changing; and the footprint of the building (i.e., foundation, decks, garages, porches, etc.) is not being extended into a floodplain or wetland, or in cases where the building is in a floodplain, the footprint of the building is not going to ...
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Environmental Review

May grantees use non-HUD financing (e.g., a bridge loan) towards the acquisition of a property prior to obtaining full environmental clearance?

No. Grantees may not commit or expend resources, either public or private, prior to receiving environmental clearance. Therefore, grantees cannot use other funds to acquire property prior to receiving environmental clearance. However, HUD has issued a policy statement allowing NSP grantees to enter into an "option agreement" or a "conditional contract" and still be able to obligate funds before the environmental review is completed. For details, ...
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Environmental Review

Is the acquisition and rehab of vacant residential structures (without any change in the number of dwelling units) considered an increase in residential density for the purposes of environmental review?

No. Simply rehabilitating a vacant residential building in the situation described is not a change in unit density. See § 58.2(a)(8) in Part 58 regulations found under Laws and Regulations posted on HUD's Environment website.

Environmental Review
Environmental Review

Are subsequent transfers of a property that was acquired with NSP funds subject to HUD environmental compliance review requirements?

Sometimes. HUD environmental compliance review requirements will continue to apply as long as the CDBG requirements apply to the transfers of title and/or the use of the property as a result of the transfer. Therefore, the environmental review needs to be completed before a commitment is made to another party for the sale or transfer of the property. Note that the level of environmental review will vary depending upon whether the property is to r...
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Environmental Review

Do environmental review requirements apply to properties acquired or managed by a land bank under NSP?

Yes. What determines the level of review required is the type of activity or activities being proposed for the properties. For example, acquisition and disposition of properties (including vacant property that will remain "as is") are categorically excluded subject to Part 58.5, and thus do not require an Environmental Assessment, as long as there is no change in land use (24 CFR Part 58.35(a)(5)). Note that a review to ensure the project complie...
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Environmental Review

What environmental review requirements are there for homes acquired prior to the start of NSP, if NSP was not used for acquisition?

The environmental review requirements do not apply to homes acquired prior to the start of NSP. A project becomes "Federal" for purposes of HUD's environmental review process when a recipient submits a project application for HUD funding. Sometimes HUD grant recipients utilize an application process to implement its NSP program. In such instances, where subrecipients apply for NSP funding from a HUD recipient, the project becomes "Federal" and HU...
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Environmental Review

What is the process for assessing the noise pollution affecting a property?

The purpose of HUD's noise regulation is to encourage suitable separation between noise sensitive land uses, particularly housing, and major noise sources (i.e., roadways, railroads, and military and civilian airports). The Responsible Entity (typically a unit of local government or state) must determine whether there are any major roadways with 1,000 feet, railroads within 3,000 feet, and military or civilian airports (regulated by the Federal A...
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Environmental Review

What is required in an environmental review to be compliant with the historic preservation section for an NSP property that will be rehabbed or demolished?

Detailed guidance, including exemptions, can be found in the NSP Toolkits and NSP-related memos on HUD's Environment website. If NSP may affect a historic building or archeological site, the RE must consult with the State Historic Preservation Office (SHPO) and others to try to avoid, minimize or mitigate any adverse impacts to those properties. The conclusion of consultation may be documented in a letter signed by the SHPO or a Memorandum of Agr...
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Environmental Review

If a project has received environmental review clearance and an approved Request for Release of Funds (RROF) in a location, would the use of NSP funds for replicated project activities at the same location be considered 'supplemental assistance' per 24 CFR 58.35(b)(7), and not require another environmental review and RROF?

To be considered supplemental funds, the additional projects/activities must not change the scope, magnitude, location, or environmental circumstances of the original, HUD-approved proposal. If these factors do not change, the addition of other funds by the same responsible entity will not require additional environmental review, certification or clearance. However, the responsible entity is required to provide a determination that the project de...
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Environmental Review

In what order does environmental review, release of funds, site selection, and executing a legally binding agreement need to occur?

A legally binding agreement may not be executed before the environmental review is completed (including securing release of funds approval, when required). Neither may bids for choice-limiting actions (such as acquisition, construction, demolition, etc.) occur before the environmental review is completed. Therefore, the environmental review process should begin at the earliest possible time during project planning and as soon as potential project...
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Environmental Review

How far must a project be located away from a hazard in order to receive NSP funding?

There are two types of manmade hazards that NSP grantees must consider: storage tanks and contamination.            In the case of above ground storage tanks that contain explosive or flammable materials (defined at 24 CFR 51.201), the Responsible Entity (RE) must not approve projects located at less than an acceptable separation distance (ASD) from these tanks unless appropriate mitigation measures are implemented ...
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Environmental Review

Who is responsible for completing and documenting the Environmental Review?

Under Part 58,the environmental review can be completed by the Responsible Entity's (i.e., unit of general local government or the state) staff, program partners, or a hired consultant. However, the Responsible Entity (RE) is ultimately responsible for the content of the Environmental Review Record (ERR) and must make an independent evaluation of the environmental issues, take responsibility for the scope and content of the compliance findings, a...
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Environmental Review

What NSP activities are non-choice-limiting and therefore do not need an environmental review?

All activities and actions receiving NSP funds must have some level of environmental review completed before NSP funds are committed and spent, including such activities as administrative costs and down payment assistance (Refer to 24 CFR 58.38). Therefore, all project partners are bound to not committing or spending any project funds, including non-NSP funds, until the environmental review is completed. However, there are a few actions for which...
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Environmental Review

If a NSP grantee plans to acquire property through an auction, how can it demonstrate compliance with the environmental review requirements?

Any acquisition of real property, including property acquired through auctions using NSP funding, requires completion of a HUD environmental compliance review before a firm commitment to purchase the property can be made. HUD policy does not allow bids before the environmental review is complete in order to allow for an unprejudiced decision about the action and to allow for any modifications or project cancellation based upon the environmental review.

Environmental Review
Environmental Review

What type of review is required when a single-family home is demolished and rebuilt vs. a home that is acquired and rehabilitated using NSP funds?

Generally, the level of environmental review required depends upon the program design and project description. All the activities described in this question-- demolition and rebuilding of a single-family home on a single site; acquisition and disposition of an existing building; rehabilitation of a home-- would all be considered categorically excluded from the National Environmental Policy Act (NEPA), subject to Part 58.5 (Related Federal laws an...
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Environmental Review

What is the difference between a tiered review (Tier 1 and Tier 2) and a Phase 1 and Phase 2 Environmental Site Assessment?

A Tier 1 review evaluates and analyzes environmental impacts related to proposed activities that will occur on a typical site (even though the locations are not yet known) within a specified geographic area. Any environmental compliance issues and/or impacts that could not be resolved without knowing the exact project location within the targeted neighborhood are addressed later in the Tier 2 review. A Phase 1 Environmental Site Assessment (ESA) ...
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Environmental Review

What is the difference between environmental reviews conducted in accordance with 24 CFR Part 50 and in accordance with 24 CFR Part 58?

24 CFR Part 58 applies to states, Indian tribes, and units of local government that assume the Federal environmental review role. Since most NSP grantees fall in this group, they are not subject to Part 50. 24 CFR Part 50 applies to projects where HUD retains responsibility for the environmental review because there is no governmental entity that can assume the federal review role. This may occur for some NSP2 grantees or for projects with other ...
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Real Estate Acquisition and Relocation
(URA and Other Requirements)

If an NSP designee (e.g., a subrecipient or developer) is acquiring a foreclosed property with NSP funds, is the designee required to provide a written notice to the owner under the voluntary acquisition provisions of the URA?

Yes, the designee is required to provide a written "Notice to Owner." The URA voluntary acquisition requirements (49 CFR 24.101(b)(1)-(5)) apply to anyone who uses NSP funds (or any Federal financial assistance) to acquire property, including any agency, nonprofit, or individual homebuyer who uses federally-funded down payment or other financial assistance. The Notice contains specific provisions related to the property's market value, a declarat...
Read More. Real Estate Acquisition and Relocation
(URA and Other Requirements)
Real Estate Acquisition and Relocation
(URA and Other Requirements)

If a property owner evicts a tenant or terminates a tenant's lease in order to facilitate an NSP acquisition, is the tenant eligible for relocation assistance?

Any legal occupant who is evicted or whose lease is terminated for the purpose of making a property eligible for a federally funded program or project and/or evading a relocation obligation may be eligible for assistance. Where an owner evicts a tenant in order to sell a property as "vacant" to an Agency for a HUD-funded project, HUD usually presumes that the tenant was displaced "for the project," unless the Agency can document that the tenant's...
Read More. Real Estate Acquisition and Relocation
(URA and Other Requirements)
Real Estate Acquisition and Relocation
(URA and Other Requirements)

Tenants occupying a property at the Initiation of Negotiations (ION) date are eligible for relocation assistance under the URA. How is the ION determined?

If a tenant is displaced as a direct result of privately undertaken rehabilitation, demolition, or acquisition, NSP uses the definition of ION in the CDBG program regulations at 24 CFR 570.606(b)(3): ION occurs upon the execution of the loan or grant agreement between the grantee (or State or state recipient, as applicable) and the person owning or controlling the real property. In the absence of a loan or grant agreement between the grantee and ...
Read More. Real Estate Acquisition and Relocation
(URA and Other Requirements)
Real Estate Acquisition and Relocation
(URA and Other Requirements)

How do URA regulations apply to short sale purchases under NSP?

URA regulations governing real property acquisition, found at 49 CFR part 24, Subpart B, make a distinction between "voluntary acquisitions," which meet the criteria in 49 CFR 24.101(b)(1)-(5) and "involuntary acquisitions." NSP-assisted acquisitions of foreclosed and abandoned residential properties through a short sale are expected to be voluntary acquisitions and subject to the URA. However, there may be instances where such acquisitions canno...
Read More. Real Estate Acquisition and Relocation
(URA and Other Requirements)
Real Estate Acquisition and Relocation
(URA and Other Requirements)

If the former owner is still living in a lender-foreclosed property, would an NSP grantee be required to pay relocation to the former owner if he will be displaced for an NSP-funded activity?

If the former owner is a lawful occupant and is displaced by the NSP-funded activity, he is eligible for relocation assistance and payments under URA. An unlawful occupant (per 49 CFR 24.2(a)(29)) displaced for an NSP-funded acquisition is not entitled to relocation assistance and payments. The grantee needs to make a careful determination about whether or not the former owner is a lawful occupant. A lawful occupant could be the former owner who ...
Read More. Real Estate Acquisition and Relocation
(URA and Other Requirements)
Real Estate Acquisition and Relocation
(URA and Other Requirements)

If a grantee uses NSP to acquire a property and allows a tenant to move into it temporarily (e.g., prior to reselling it to a developer or homebuyer or because the property is being land banked), would the tenant be entitled to relocation assistance when he or she is later required to move out?

The tenant is not eligible for relocation assistance as long as two conditions are met: The tenant must be a "subsequent tenant" in accordance with the URA, that is, the tenant must not have been an occupant of the house at the time of the Initiation of Negotiations (ION) for acquisition, demolition, rehabilitation, or conversion of the unit; and Before agreeing to occupy the house, the grantee must provide the tenant with a Move-in Notice (per ...
Read More. Real Estate Acquisition and Relocation
(URA and Other Requirements)
Real Estate Acquisition and Relocation
(URA and Other Requirements)

Is a lease-purchase tenant who cannot meet the eligibility requirements to buy a house at the end of the lease term entitled to relocation assistance?

The lease-purchase tenant is not eligible for relocation assistance as long as two conditions are met: The lease-purchase tenant must be a "subsequent tenant" in accordance with the URA, that is, the tenant must not have been an occupant of the house at the time of the Initiation of Negotiations (ION) for acquisition, demolition, rehabilitation, or conversion of the unit; and Before agreeing to occupy the house, the grantee must provide the tena...
Read More. Real Estate Acquisition and Relocation
(URA and Other Requirements)
Real Estate Acquisition and Relocation
(URA and Other Requirements)

Are the Section 104(d) relocation requirements waived for NSP?

No, these requirements have not been waived. NSP funding recipients must comply with the 104(d) Residential Anti-displacement and Relocation Assistance Plan (RARAP) requirements of 24 CFR 42.325. While the one-for-one unit replacement requirements of Section 104(d) were waived for the NSP programs, any occupant who would be displaced for an activity from a unit that would qualify under these relocation assistance provisions of Section 104(d).&nbs...
Read More. Real Estate Acquisition and Relocation
(URA and Other Requirements)
Energy Efficiency/Energy Star

How do NSP grantees find Energy Star certified contractors?

The Energy Star website provides a full list of available contractors by state. View the Energy Star New Homes Partner Locators.

Energy Efficiency/Energy Star
Energy Efficiency/Energy Star

Are there recognized standards for energy efficient appliances?

Yes, NSP projects must adhere to the Energy Star standard for energy efficient appliances. These standards evolve over time.  View the Energy Star for New Homes Program Guidelines, and find Energy Star products.

Energy Efficiency/Energy Star
Energy Efficiency/Energy Star

If energy efficient appliances are installed in an NSP home, is a deed restriction or covenant required to ensure those appliances will remain in the home if resold?

To ensure that energy efficient appliances remain in the home, NSP requires a deed restriction or covenant for clothes washers, dryers and dishwashers. The deed restriction/covenant does not prohibit the replacement of appliances in cases when that is necessary.

Energy Efficiency/Energy Star
Energy Efficiency/Energy Star

Is purchase and installation of energy efficient appliances an eligible cost?

Yes, energy efficient stoves, refrigerators and central air conditioners are eligible costs under NSP. Installation of energy efficient clothes washers, dryers and dishwashers are permitted when done in conjunction with housing rehabilitation and/or sale projects in the NSP program. For additional guidance see the NSP Policy Alert: Guidance on NSP Eligible Appliance Purchases....
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Energy Efficiency/Energy Star

Does NSP require adherence to Energy Star standards?

NSP encourages energy efficiency. NSP1 allows for the use of Energy Star appliances. NSP2 and NSP3 add a requirement for meeting the Energy Star rating for new construction and substantial rehabilitation. For new construction and substantial (or gut) rehabilitation of buildings up to 3 stories, units must be certified by a Home Energy Rater as an Energy Star Qualified Home and all appliances must be Energy Star qualified. Buildings four stories o...
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Energy Efficiency/Energy Star

Is there an Energy Star checklist that grantees should use to show compliance?

The Environmental Protection Agency (EPA) provides guidelines for building Energy Star homes. Within these guidelines are checklists and tools that grantees and raters can use. An independent HERS (Home Energy Rating System) certified rater will use these checklists when inspecting an Energy Star home. Inspection checklists can be found on the Energy Star for New Homes Program Guidelines page....
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Energy Efficiency/Energy Star

Are solar photo-voltaic panels an eligible expense under NSP?

A one-time purchase and installation of photo-voltaic panels are eligible development costs as part of NSP-funded rehabilitation and new construction.  The installation should be consistent with the grantee's rehabilitation standards and obtained at a reasonable cost.

Energy Efficiency/Energy Star
Energy Efficiency/Energy Star

Do NSP rules require an independent, third party analysis and verification of Energy Star standards when constructing or rehabbing a home?

Third party verification of Energy Star is not a requirement for moderate rehab. For gut rehab and new construction, it is a requirement that a developer, grantee and subrecipient use a HERS (Home Energy Rating System) certified rater to verify that the standard for Energy Star Qualified New Homes has been met. HERS raters inspect, test and certify all homes seeking Energy Star qualified homes label. The Energy Star website has a list of raters b...
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Energy Efficiency/Energy Star

Are there different Energy Star standards for NSP1, NSP2 and NSP3?

All NSP rounds encourage energy efficiency. NSP2 and 3 require adherence to Energy Star standards for new construction and gut rehabilitation. Energy Star standards do not change across grant rounds, however, Energy Star guidelines are updated from time to time. When rehabilitating or constructing a new NSP home, use the prevailing Energy Star standards based on when the construction or rehabilitation project began. Please refer to the Energy Sta...
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Green and Sustainable Building

Is using green building techniques and materials really cost effective for my NSP project?

Generally yes. The long-term utility and maintenance cost savings will sufficiently repay the average per-unit cost of "going green." Enterprise Green Communities published a document Incremental Cost, Measurable Savings: Enterprise Green Communities Criteria, which is a study that addresses green building standards in affordable housing projects.

Green and Sustainable Building
Green and Sustainable Building

Can green building practices apply to older homes that are being rehabbed under NSP?

Yes, NSP grantees can take measures to rehabilitate older homes using green building practices. Any steps taken while rehabbing an older home, which promote site improvement, water conservation, energy efficiency, healthy indoor environments, low maintenance, etc., are considered green building practices. Such practices generally improve the comfort and increase the marketability of the homes as well. For additional information, refer to the NSP ...
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Green and Sustainable Building

Under NSP, what are the minimum requirements for green building standards for new construction?

There are no specific green building requirements under NSP. However, HUD strongly encourages grantees to incorporate green and sustainable building practices in their NSP programs. Under NSP2, many grantees specified green building standards as a part of their competitive application. NSP2 grantees should meet these standards.   For additional information, refer to the NSP Green Housing Development Guide.  Another valuable resource is ...
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DRGR Requirements

How should NSP grantees account, report and monitor Revolving Loan Funds?

As of Release 7.3, Revolving Loan Funds (RLF) can be established in DRGR at the Project level. Each RLF will allow users to identify activities where receipts will be recorded and Program Income will be disbursed under the RLF. RLF projects must only include activities with a single activity type.

DRGR Requirements
DRGR Requirements

How is Program Income reported in DRGR?

As of DRGR Release 7.3, there are three steps to reporting program income: Estimate program income. On a periodic basis, a grantee must estimate program income expected as it pertains to the overall grant budget, and individual project and activity budgets. (Action Plan Module) Receipt program income. Grantees identify the amount of program income received using the RECEIPT function. (Drawdown Module) Draw program income. Grantees draw program i...
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DRGR Requirements

For NSP, how many users are needed in DRGR?

DRGR requires at least two users in each system for three different roles. There must be a Drawdown Requestor user to make draws and then Voucher Approver user to approve draws. Either of these users can also have the Administrative role that manages the various users in the system. It is highly recommended that each grantee have at least one backup user for each role-two Draw Requestors, two Voucher Approvers, and two Administrative users-in cas...
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DRGR Requirements

Who should I call if I need a password reset or a session reset because I have been locked out or am having connectivity issues? Who can I contact to get assistance working with screens, error messages, or other basic questions?

Ask a Question: DRGR users should submit questions through Ask a Question. TA providers will provide help with basic DRGR questions and troubleshooting. When submitting questions indicate how urgent your request is and if you prefer to receive your reply via phone or email. For users having problems with error messages, please include the error message, identify grant and activity #s, and provide screenshots of steps taken leading to the error me...
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DRGR Requirements

How are new users added to the system? Why does DRGR say that some users are expiring?

Instructions for adding new users are located on the DRGR Home Page. Once users are added to DRGR, the administrative user must assign the user to all appropriate grants using the Admin Module. The administrative user will also need to be certified and re-certified every six months using the Admin Module to remain active for that grant. If a user has expired, he or she will no longer have access to the system until they are re-certified by the Ad...
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DRGR Requirements

Why is the Action Plan not allowing edits? Why won't DRGR let me submit my QPR?

The QPR can only be submitted when the Action Plan is in the Reviewed and Approved status. Likewise, if the QPR is submitted and waiting for the field office's approval, the grantee will not be able to make changes to the Action Plan. If changes to the Action Plan are required, plan for enough time to allow the field office to review and approve the Action Plan before the next QPR needs to be submitted. See the DRGR Training for NSP Users Day 1 -...
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DRGR Requirements

How does an Activity originally set up for LMMI get credit for properties sold to LH25?

If the entire amount that has been invoiced and budgeted for, the activity can be changed by selecting the LH25 national objective on the first page of Add Activity in the Action Plan module.  If not, the change may require amending the applicable invoiced, budgeted, and obligated amounts to an existing or completely new activity. Keep in mind that all Accomplishments will need to be modified as well. Use the Reports module to get accurate d...
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DRGR Requirements

For NSP, what is the difference between Draws/Disbursements and Expenditures in DRGR?

The disbursed amount is based on the vouchers created and approved in the Drawdown Module. The Expenditures are derived from what the grantee manually enters into the second page of the QPR. This amount is based on what the grantee has spent to date, regardless of what they have drawn in the system.

DRGR Requirements
DRGR Requirements

When creating a voucher for an NSP drawdown, why does the amount available to draw for an Activity differ from what I think it should be?

On the 'Create Voucher - Page 2 of 4' in the Drawdown module, the Amount Available hyperlink for each voucher line item details the automatic calculations that determine the amount available to draw against. To learn how to read these calculations, see the DRGR Training for NSP Users Day 1 - Presentation Slides pages 16-21.   DRGR math rules guide the calculations. As of Release 7.3, DRGR requires all program income in each RLF (Revolving Lo...
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DRGR Requirements

Can vouchers be changed if the funds are returned or the drawdown was recorded against the wrong Activity?

Yes. As of Release 7.3, DRGR allows the user to make multiple voucher revisions at one time transferring all or a portion of the original drawdown amount to a different Activity. A line item can be revised if the following conditions apply: Line item has a status of Open or Completed. All activities are part of the same grant. The Activity receiving the draw credit must have enough money budgeted and obligated to allow the drawdown and its statu...
Read More. DRGR Requirements
DRGR Requirements

Why are some NSP performance measures not available when attempting to report on them in the QPR?

If no value, even "0," was entered as a projection for the measure in the Action Plan, that metric will not be available to report on in the QPR. Also, the performance measures are determined by the Activity Type selected in the Action Plan. If the grantee does not see a measurement they are expected to report on, it may be because they selected the wrong Activity Type.

DRGR Requirements
DRGR Requirements

How can I make corrections to NSP performance measures that have already been entered in prior QPRs?

A grantee must first identify the cumulative totals entered in prior QPRs and then determine the category(ies) and subcategory(ies) to be updated. There are two ways in DRGR to extract the actual accomplishments entered from all prior QPRs:  Use the View Cumulative Totals link–on the first page of the edit QPR screen for Direct Benefit activities–to see current quarter vs. cumulative totals. Pull PerfReport 1 {Actuals v Projected} and P...
Read More. DRGR Requirements
DRGR Requirements

What specific DRGR performance measurements should NSP grantees track?

This will depend on the Activity Type. For an Area Benefit activity, grantees should record the number of properties, census tracts and number of individuals in that tract. For Direct Benefit activities, grantees should report whether or not they are working with Single-family or Multi-family Units, Owner or Renter Households, the various income levels of these households, and their Race/Ethnicity data.

DRGR Requirements
DRGR Requirements

How should Activities be set up in DRGR?

An Activity should be at the level of detail to meet a national objective. At a minimum, activities should be listed separately in DRGR based on the following factors:  Responsible Organization: The entity most directly responsible for the administration of the program should be listed as the responsible organization (e.g. subrecipient, developer). It is not necessary to go down to the contractor level, e.g. an auditing firm). Activity Type...
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Procurement

Under the "Buy American" provision in NSP2, are contractors only limited to buying materials and goods from domestic suppliers?

The "Buy American" provision (FAR 52.225) of NSP2 only applies to construction, alteration, maintenance, or repair of public buildings and public works. This provision is not applicable to construction projects involving private residential dwellings, and does not apply when funds are used solely for land acquisition. However, HUD has interpreted "public buildings" to include public housing and other structures that will remain in public ownership.

Procurement
Procurement

Which rules or requirements must be followed when there is a conflict between local or state law and federal procurement rules?

When there is a conflict between federal and state and local rules or requirements for procurement, the most restrictive would apply. For example, the federal dollar threshold for small purchase procurement for goods and services is $100,000 but if state or local rules or requirements establish a lower threshold, then the lower dollar limit would apply.

Procurement
Procurement

Can an NSP grantee use contractors originally procured under NSP1 for activities and projects funded under NSP2 or NSP3 grants, without undertaking a new procurement process?

In general NSP grantees should not continue to use the same contractors for NSP2 or NSP3 without going through a competitive procurement process. But if the original procurement process did not specify if the work was for NSP1, and the work to be done for NSP2 or NSP3 is very similar to what was in the original procurement, then yes you can continue to use the contractors again. However, processes that are not opened up regularly to new entrants ...
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Procurement

If a grantee or subrecipient terminates a contractor, can the grantee or subrecipient use the next lowest, responsive and responsible bidder from the original solicitation, or does the project need to be rebid?

The grantee or subrecipient may be able to award the contract to the next qualified bidder. The project does not need to be rebid, however depending on the length of time and the level of work completed on the project, the next responsible bidder should be asked to submit updated pricing information and a revised scope of services.

Procurement
Procurement

If an NSP grantee does not receive any bids during the procurement process, what steps should the grantee take to comply with procurement rules?

If a grantee follows a proper bid process and receives no bids, it is permissible to use "non-competitive negotiation" (sometime known as "sole source") to award a contract. The grantee must have complete documentation in place to show that appropriate efforts were made towards a formal, competitive procurement. Note that while the OMB requirements permit for a "small purchase" procurement process for goods and services under $100,000, a grantee'...
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Procurement

Do grantees or subrecipients have to use a procurement process to select a realtor to market and sell NSP properties?

Yes, a grantee or subrecipient must procure a realtor through a procurement process complying with 24 CFR Part 85, assuming that realtor fees and commissions will be less than $100,000. In cases where fees may exceed $100,000, procurement is subject to 24 CFR Part 85.36.

Procurement
Procurement

Are grantees subject to procurement requirements when selecting subrecipients and developers?

No, CDBG regulations allow grantees (including consortium members) to select subrecipients and developers without a competitive procurement process. It is recommended that a grantee adopt a selection process to ensure that both subrecipients and developers have minimum qualifications, sufficient organizational capacity and prior experience related to the project or program. If a subrecipient is engaged to oversee a program, they must follow procu...
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Procurement

Are NSP grantees and their subrecipients required to procure a developer in accordance with the federal uniform administrative requirements?

NSP grantees and their subrecipients are not required to competitively procure developers in accordance with federal uniform administrative requirements; however, using a Request for Qualification (RFQ) or Request of Proposal (RFP) helps establish a minimum set of qualifications and can aid in identifying good program partners. For more information, see the NSP Policy Alert Guidance on the Procurement of Developers and Subrecipients....
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Procurement

What factors should be considered when a grantee or subrecipient establishes a "reasonable" developer fee?

There is no cap or limit on a developer fee, and there are a number of factors involved when determining if a developer fee is reasonable. Grantees should consider: The risk of the project and typical levels of return for similar types of projects. Reasonable and customary fees for similar types of projects in their community. Other sources of developer profit, in addition to the developer fee, such as builder’s profits, property management fe...
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Procurement

Can a developer select and hire a firm to carry out rehabilitation activities without undergoing a competitive procurement process?

Developers may select and hire contractors to perform rehabilitation without undertaking a competitive procurement process, but the contractor's costs must be reasonable and are subject to cost certification. Developers must be mindful of the requirements under Section 3: Economic Opportunities.

Procurement
Procurement

Can a subrecipient earn a fee?

No, a subrecipient cannot earn a fee under NSP. Subrecipients can only be reimbursed for actual costs incurred for their activities in accordance with the written agreement with the grantee.

Procurement
Procurement

Is there a dollar threshold that affects federal procurement requirements?

Yes, 24 CFR Part 84.44 applies to procurement for nonprofits. 24 CFR Part 85.36 applies to procurement for government entities. In either case, contract amounts under $100,000, known as "small purchases", allow for informal bids. However, if state or local rules and requirements establish more restrictive standards, then the most stringent requirements would apply.

Procurement
Program Income

What is the property registry referenced in the Notice?

HUD will provide direction to grantees by the date of the closeout on procedures for reporting and tracking NSP program income revenues. Tracking will continue in the Disaster Recovery Grant Reporting System (DRGR) until the Integrated Disbursement and Information System (IDIS) enhancements allowing the NSP property registry and program income tracking are developed and released.

Program Income
Program Income

Will there be training for the updates to the Integrated Disbursement and Information System (IDIS) as it relates to the NSP program income transfer?

IDIS already has substantial guidance available online on how to receipt the Community Development Block Grant (CDBG) program income. HUD is working with its technical assistance providers to present webinars on the transfer process. In addition, HUD is developing detailed guidance on the procedures for transferring program income from the Disaster Recovery Grant Reporting System (DRGR) to IDIS. These should provide a detailed map of the process....
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Program Income

Is there technical assistance available to help with the transfer process?

Yes, HUD and its technical assistance providers are finalizing a schedule for “DRGR Office Hours” to allow grantees to receive customized support from the best the Disaster Recovery Grant Reporting System (DRGR) experts available. Each grantee will be able to register for up to three one-hour sessions working with shared screens one-on-one. Issues requiring more time than that will be referred for on-call TA. This service will be available fo...
Read More. Program Income
Program Income

Is there a limit on how much program income can be transferred to the Community Development Block Grant (CDBG) program?

No. However, if a grantee transfers a large amount relative to its annual CDBG grant, the grantee is strongly advised to immediately develop and implement a work-plan (which may include a substantial amendment) to use the funds expeditiously and prevent CDBG timeliness issues in future years. Alternatively, the grantee may make several transfers of NSP program income in order to avoid imbalances in its CDBG program. Keep in mind also that large t...
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Program Income

Can I transfer NSP program income on hand now so that I can access my line of credit funds, but retain program income earned in the future for NSP purposes? Or must all program income go to Community Development Block Grant (CDBG) once the transfer option is selected?

Use of the program income transfer option is voluntary. The grantee has the option of identifying which present and future NSP to transfer or not. HUD does expect the decision, once HUD grants permission, to be final for the identified amounts and any future sources. HUD strongly cautions grantees against choosing a transfer approach that involves multiple permissions from HUD as the staff resources are limited and processing delays could result.

Program Income
Program Income

Will HUD waive or extend deadlines for meeting the Community Development Block Grant (CDBG) 1.5 ratio due to an influx of NSP program income transferred into the CDBG program? Will HUD at least permit the transfer, understanding that it will impact the 1.5 ratio compliance as long as the Grantee submits a Plan indicating how it will address the issue?

HUD will take into account the timing and amount of program income transfers when evaluating timeliness, but HUD will not allow large balances to remain in the CDBG accounts indefinitely.

Program Income
Program Income

Is there a deadline by which the transfer of funds must occur?

No. HUD has not issued a deadline by which the transfer of funds must occur. HUD expects that the transfer of unused NSP program income and identification of the program to which future NSP payments will be made will largely be determined prior to NSP grant closeout.

Program Income
Program Income

After the initial transfer of NSP program income on hand, can I continue transferring subsequent program income into the Integrated Disbursement and Information System (IDIS) as it is earned until such time as there is no program income remaining?

Yes. HUD encourages grantees to identify future sources of NSP program income and decide prior to grant closeout whether to receipt the amounts to NSP or to the Community Development Block Grant (CDBG).

Program Income
Program Income

Can I transfer program income earned but unused prior to the issuance of the Notice, or do the changes in the Notice apply only to funds earned after the Notice was issued?

Yes, a grantee may transfer program income earned but unused prior to the issuance of the Program Income Notice. NSP program income on hand at the time the Notice was issued and program income received following the issuance of the Notice may be transferred to the Community Development Block Grant (CDBG) program at any time before, at, or following grant close out....
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Program Income

Can I transfer NSP program income to my Community Development Block Grant (CDBG) Program prior to grant closeout?

Yes, an NSP grantee may transfer NSP program income to its CDBG program at any time before, during, or after NSP closeout, as described in the Program Income Notice. Note that program income transfers must first be approved by the local HUD field office.

Program Income
Program Income

When I receive additional NSP program income after I have received approval to transfer my current NSP program income to my Community Development Block Grant (CDBG) program, where and how do I track additional program income received?

This will depend on the scope of the grantee’s request and the field office’s written transfer permission.

Program Income
Program Income

Prior to the Integrated Disbursement and Information System (IDIS) enhancements, will there be a way to perform the transfer of NSP program income?

Yes, HUD will soon issue procedures for the transfer of NSP program income to the Community Development Block Grant (CDBG) program prior to any IDIS enhancements.

Program Income
Program Income

When will the Integrated Disbursement and Information System (IDIS) enhancements to allow NSP registry and program income tracking be released?

HUD does not anticipate that will occur anytime soon. NSP property may not be transferred to the Community Development Block Grant (CDBG) program, but anticipated program income arising from the sale of NSP property may be identified as amounts to be transferred to CDBG. In such a case, the NSP property will be tracked in the Disaster Recovery Grant Reporting System (DRGR) (post-closeout), but any program income would be receipted to the CDBG pro...
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Program Income

What information needs to be reported on an ongoing basis in the Integrated Disbursement and Information System (IDIS) after the transfer of NSP program income?

Once NSP program income has been receipted in the Disaster Recovery Grant Reporting System (DRGR), it will be subject to the standard Community Development Block Grant (CDBG) statutory and regular requirements.

Program Income
Program Income

If I have transferred all of my program income to the Community Development Block Grant (CDBG) program, are there any ongoing reporting requirements in the Disaster Recovery Grant Reporting System (DRGR)?

Only NSP projects funded from line of credit or un-transferred NSP program income will need to be reported in DRGR. Transferred funds will become CDBG funds and subject only to CDBG requirements.

Program Income
Program Income

How does the transfer of NSP program income to the Community Development Block Grant (CDBG) program affect reconciliation of data in the Disaster Recovery Grant Reporting System (DRGR)?

The grantee must make sure that its local financial records clearly record the transfer as permitted by HUD. In DRGR, HUD advises the grantee to amend activity and/or the overall narratives in the Action Plan to record the change, and to upload to the DRGR NSP Action Plan an electronic copy of the field office’s written permission for the transfer. Assistance with DRGR issues will be available soon.

Program Income
Program Income

Will HUD approval be needed each time NSP program income is receipted in the Integrated Disbursement and Information System (IDIS) or will one approval cover all future transfers?

It depends. The frequency of approval is determined by the scope of the grantee’s request to the Field Office. A grantee may request a one-time transfer of program income on hand. A grantee may also identify and ask for transfer of all expected program income from a particular activity of group of activities (such as a rehab portfolio). The two approaches may also be combined. Please note that HUD strongly recommends combining the two approache...
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Program Income

What happens to NSP program income that is not transferred and stays in the Disaster Recovery Grant Reporting System (DRGR)?

Funds not transferred to the CDBG program must continue to be used for NSP-eligible purposes and meet NSP reporting and compliance requirements before and after closeout.

Program Income
Program Income

What changes need to be made in the Disaster Recovery Grant Reporting System (DRGR) and the Integrated Disbursement and Information System (IDIS) to complete the transfer of NSP program income to the Community Development Block Grant (CDBG) program?

HUD is currently developing procedures for these transactions. HUD is planning a webinar on July 19, 2016 to instruct grantees and field office staff on the mechanics of this process involving both reporting systems. HUD will issue written instructions in advance of that date.

Program Income
Program Income

When transferring NSP program income to the Community Development Block Grant (CDBG) program, what CDBG action plan year will it affect?

CDBG program income will be accounted for in the year that the program income was received into the CDBG program.

Program Income
Program Income

Will I have to do a substantial amendment to my NSP Action Plan in the Disaster Recovery Grant Reporting System (DRGR) if I decide to transfer funds?

No, but you must look to the Community Development Block Grant (CDBG) program to determine whether an amendment will be required to the CDBG Action Plan. This will depend on the scope and nature of the change. For example, if you dismantle an NSP Revolving Loan Fund (RLF) and direct its unused amounts and anticipated future revenue to the CDBG program, you will have some work to do in DRGR. On the other hand, if you are simply transferring unused...
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Program Income

Will I have to do a substantial amendment to my Consolidated Plan/Action Plan if I decide to transfer funds?

This is likely. This will depend on whether your intended use of the program income will change from the use described in your existing NSP1 or 3 substantial amendment or your NSP2 proposal, and whether this change meets the Community Development Block Grant (CDBG) requirements for a substantial amendment. The regulations at 24 CFR 91.105(c) identify a change in the use of CDBG funds from one eligible activity to another as requiring a substantia...
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Program Income

Can I still serve households up to 120% Area Median Income with amounts earned in NSP program income after transferring the funds to the Community Development Block Grant (CDBG) program?

No. Program income transferred from NSP to the CDBG program will be subject to all CDBG statutory and regulatory requirements and loses the NSP requirements as well as NSP flexibility. The CDBG program is restricted to serving households up to 80% Area Median Income and so transferred funds will be subject to this same restriction, and grantees will not be able to use transferred funds to serve households at 120% Area Median Income.

Program Income
Program Income

Will the Community Development Block Grant (CDBG) expenditure caps apply to the NSP program income funds transferred to the CDBG program (20% for admin, 15% for public service)?

Yes. After transfer, the transferred funds will be CDBG funds in all respects.

Program Income
Program Income

If I transfer all NSP program income (PI) to the Community Development Block Grant (CDBG) program, does this mean the 25% Set-Aside requirement does not apply to the transferred PI regardless of thresholds (annual PI that does not exceed $25,000 and annual PI that exceeds $250,000)?

That is correct because the former NSP program income is instead subject to all CDBG requirements, such as timely expenditures, income limits at 80% of Area Median Income, etc. The 25% set-aside amount is calculated on two figures:

  1. The original grant amount, and
     
  2. Any program income expended or obligated to date.

As long as that requirement has been satisfied, NSP requirements no longer apply to the transferred funds.

Program Income
Program Income

If I have not yet met the 25% Set-Aside Requirement, can I retain only the amount of program income needed to meet the set-aside requirement and transfer the remaining program income? Or must I meet the Set-Aside Requirement prior to any transfers?

A grantee does not have to have met the 25% set-aside prior to requesting a program income transfer. However, HUD has the discretion to determine the risk that the grantee will fail to meet the 25% set-aside (for grant funds plus program income expended to date) and make a determination regarding a fund transfer in that context. HUD may disallow the transfer if the risk of non-compliance with any NSP requirement is high or would be increased by t...
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Program Income

How can I verify if I have met the 25% Set-Aside Requirement for my Line of Credit and Program Income?

Because it will become Community Development Block Grant (CDBG) program funding, the program income on hand is not subject to the 25% set-aside requirement. Therefore, first deduct the amounts of any unused NSP program income proposed for transfer (not including anticipated future revenue). Next calculate the amount of funds expended or obligated for set-aside projects. Divide that set-aside amount by the total grant amount plus program income us...
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Program Income

Can an entitlement that is part of a non-entitlement NSP Consortium transfer program income to its Community Development Block Grant (CDBG) program?

It depends on the terms of the consortium funding agreement between the lead applicant and the entitlement consortium member. NSP has maintained since the inception of the program that the members of a consortium are considered to be grantees, not subrecipients. If the consortium funding agreement allows the entitlement consortium member to retain NSP program income and the funds are not needed to ensure that the consortium as a whole meets NSP2 ...
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Program Income

What if my organization is not a Community Development Block Grant (CDBG) entitlement? How is program income treated for my organization before and after closeout?

Most program income will be received by CDBG entitlement cities and counties, and by states, which have systems and procedures to manage NSP revenues, which are treated in most respects like CDBG revenues. However, non-profit consortium members in NSP2 grant consortia that receive revenues generated by NSP projects will not have access to the state and municipal CDBG tracking systems. Therefore, the transfer option will not be available for priva...
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Program Income

What rules do I follow for spending program income earned through NSP after I have transferred the funds to the Community Development Block Grant (CDBG) program?

This depends on the scope of the grantee’s transfer request and the field office’s written permission. NSP program income will be receipted in the Disaster Recovery Grant Reporting System (DRGR). Transferred program income will be receipted as CDBG program income, and will be subject to CDBG program requirements.

Program Income
Program Income

If NSP program income is transferred to the Community Development Block Grant (CDBG) program and used for a CDBG homeowner assistance program activity for down payment with a recapture provision, if the homeowner defaults, are the funds considered NSP or CDBG when they are returned?

Once NSP funds are transferred into a CDBG program, they will always be CDBG funds and subject to all CDBG requirements (but not NSP requirements).

Program Income
Program Income

If we have not closed out our NSP grant, and we transfer some NSP program income to the Community Development Block Grant (CDBG) program, can we transfer it back to NSP for use on an NSP activity, if needed?

No. Once a grantee has transferred NSP funds to the CDBG program, transferred NSP program income will become CDBG program income upon receipt in the Integrated Disbursement Information System (IDIS) subject to all CDBG statutory and regulatory requirements for program income. CDBG funds are not eligible for transfer back to the NSP program.  

Program Income
Program Income

What is the approval process for obtaining authorization to transfer NSP program income to the Community Development Block Grant (CDBG) program?

The grantee must send a written request to the field office identifying the amounts of unused NSP program income and, if the grantee chooses, the sources and expected future revenue streams of NSP program income proposed for transfer. The field office will verify the amounts in the Disaster Recovery Grant Reporting System (DRGR) and ensure that the 25% set-aside has been met. Detailed operating procedures in DRGR and the Integrated Disbursement a...
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Program Income

Am I required to transfer my NSP program income to my Community Development Block Grant (CDBG) program, or is it optional?

No, this is not a requirement. HUD is making the transfer option available to NSP grantees as a solution to address the issues identified in FAQ 2831 and FAQ 2832. Use of the transfer feature is solely at the discretion of the grantee....
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Program Income

The NSP Program Income Notice states that NSP program income can be transferred to the Community Development Block Grant (CDBG) program. Can NSP program income be transferred to the HOME program or other grants also listed in the Integrated Disbursement and Information System (IDIS)?

No. The Notice of the Neighborhood Stabilization Program: Changes to Closeout Requirements related to Program Income (Program Income Notice), published June 14, 2016, permits grantees under the NSP program who are also grantees under the CDBG program to transfer program income. The Program Income Notice does not apply to grant recipients under other CPD-funded programs, including the HOME program....
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Program Income

Why is HUD allowing the transfer of NSP program income to the Community Development Block Grant Program (CDBG) program?

The Notice of Neighborhood Stabilization Program: Closeout Requirements and Recapture (Closeout Notice) published November 27, 2012, required that program income generated by NSP-assisted activities must continue to be used for NSP uses with the exception of minimal amounts received after grant closeout. In attempting to implement this requirement, HUD has become aware that it is, in many instances, administratively unworkable for NSP grantees fo...
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Program Income

What happens to program income generated after NSP grants close out?

HUD will issue guidance related to grant close out, which will include how grantees will handle program income earned after the end of the grant term. In general, grantees must continue to use those funds for eligible activities, report program income receipt and use in DRGR system and maintain local records.

Program Income
Program Income

How will HUD treat program income earned by state grantees? In NSP, unlike in CDBG, states may act directly to administer programs. Will this change treatment of program income at the state or subrecipient level?

Most state funds flowed through subgrantees and subrecipients such as cities and towns. Non-entitlement subrecipients will operate as before, following the regulations at 24 CFR 570.489(e). Non-entitlement subrecipients will continue to report program income to the state. States that receive revenues from direct administration of NSP activities will report on, and be subject to the same limitations, as subrecipients.  In NSP, some states mad...
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Program Income

Are sales proceeds earned by a developer considered program income and must they be returned to the grantee?

Sales proceeds retained by a developer are not program income and are not required to be returned to the grantee. See the NSP Policy Alert Program Income in NSP

Program Income
Program Income

Is a for-profit developer required to complete an audit of their NSP funding?

No, for-profit developers are not subject to A-133 audits unless the grantee has elected to impose this requirement via its contract with the developer. See the June 2010 Webinar Accounting, Recordkeeping and Monitoring.

Program Income
Program Income

Do the regulations on program income, specifically regarding the "first in, first out," rule differ between the three different NSP programs?

No, there is no difference related to expending program income prior to drawing funds from a grantee's line of credit. Program income must be tracked and used separately by NSP program. If the grantee has NSP1 or NSP2 program income on-hand, that does not affect their ability to draw NSP3 funds and vice versa.

Program Income
Program Income

If a subgrantee expects to receive future program income from one project, can it begin and/or complete a second project using its own funds, and reimburse itself with the program income from the first project when it is received?

If the grantee allows the subgrantee to retain program income and the subgrantee follows all NSP requirements on the second project, including the environmental review, the subgrantee may reimburse itself with NSP program income for expenses it incurred on the NSP eligible and approved project at such time as it receives NSP program income.

Program Income
Program Income

How is program income generated by rental units treated?

Program income is defined as gross income less costs incidental to generation of the income. Rental income received for properties owned by grantees and subrecipients is program income. Rental income received by private rental property owners is NOT program income.

Program Income
Program Income

What is not considered program income?

Program income is not considered the following: proceeds from fundraising by subrecipients; funds collected through special assessments on public improvements (unlikely in NSP); subrecipient (who is a nonprofit) proceeds from disposition of real property five years or more after grant close-out; income received in a single calendar year by the recipient and all its subrecipients (combined) if the total amount of such income does not exceed $25,00...
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Program Income

What are common sources of program income?

There are several forms of program income but the most common are proceeds from the sale of real property developed with NSP funds or repayment of a NSP loan made to either purchase and/or rehabilitate a property.

Program Income
Program Income

Can program income generated from NSP funds be used for activities other than NSP-eligible activities?

No, program income can only be used for eligible activities permitted under the NSP program. Certain eligible activities under NSP 1, such as public facilities or unlimited demolition, are not the same or are eligible as under NSP 2 or 3.

Program Income
Program Income

Does the requirement of setting aside 25% of funds to be expended for housing for individual households whose incomes do not exceed 50% of area median income apply to program income?

Yes, NSP 1 and 3 grantees are required to expend no less than 25% of the initial grant award, plus any program income to assist households with income at or below 50% of area median.

Program Income
Program Income

Can grantees use program income to pay administration costs during and after the grant period? Should program income be included when calculating the 10% administrative cost limit?

The administrative cap is calculated as grant + program income X 10%.  Grantees are permitted to use up to 10% of any program income for administrative costs both before and after grant close-out.

Program Income
Program Income

How should grantees account, report, and monitor revolving loan funds?

Revolving loan funds (RLFs) are capitalized by the receipt of program income deposited into a separate fund (independent of other NSP program accounts) set up for the purpose of carrying out a specific eligible activity. RLF loans generate repayments and this income, both principal and interest, are considered program income, which must continue to be used for eligible activities. Revolving funds must be held in interest bearing accounts, and int...
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Program Income

If a developer acquires and rehabilitates a property using NSP funds and then sells a property to an eligible buyer, are the sales proceeds considered program income? Can the developer keep the proceeds?

If a developer sells a property, a NSP grantee may permit the proceeds to be retained by the developer and those funds are not considered program income. However, the grantee must ensure that the proceeds retained by the developer are reasonable.  More information is available in the NSP Policy Alert Program Income in NSP.

Program Income
Program Income

If an NSP grantee uses both NSP and CDBG funds and/or NSP1 and NSP3 funds in a project, how does the grantee calculate NSP program income across the multiple funding sources?

Grantees must pro-rate the program income based on the proportion each program paid of the total development cost. Program income must be tracked separately for each program and must be reported in the appropriate data system, either DRGR or IDIS.

Program Income
Program Income

Is program income recorded as the net cash received from a sale of an NSP home, or is the income recorded as the sale price of the home being sold?

The amount receipted as program income would be the net proceeds received by the grantee or subrecipient after all closing and other eligible fees are paid.

Program Income
Program Income

How does program income affect the grantee's expenditure deadlines?

Use of program income is counted toward the grantee's minimum required expenditure. HUD will determine if an NSP grantee has met its expenditure deadline by comparing the original grant award amount to the sum of all program income expended and all grant funds expended, as reported in DRGR.

Program Income
Program Income

If a subrecipient or consortia member acquires and rehabilitates a property using NSP funds and then sells a property to an eligible buyer, are the sales proceeds considered program income? If so, do they get to keep the program income?

Sales proceeds paid to the subrecipient or consortia member would be program income. Subrecipients and consortia members, if detailed in their written agreement with the NSP grantee, may be permitted to retain the program income for future eligible NSP expenditures. More information is available in the NSP Policy Alert Program Income in NSP.

Program Income
Program Income

How should grantees track program income received?

Program income is receipted in the DRGR system. The DRGR Fact Sheet Overview of Major Functions - Release Version 7.3 details the steps related to how a grantee tracks program income received.  

Additionally, grantees should separate maintain local records which will reflect the funds received and expended.

Program Income
Program Income

Would it be reasonable for a developer to retain all sales proceeds?

The answer depends on the type of developer and the net amount of the proceeds after all development expenses are paid. If the developer is a for-profit entity, the grantee must ensure that the total return to the developer, including developer fee and retained proceeds is reasonable and that there is no undue enrichment of the developer. If the developer is a nonprofit, it would be acceptable for the grantee to allow the nonprofit to retain all ...
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Conflict of Interest

Can an NSP entity request a waiver of the conflict of interest requirements for one of its income eligible employees to qualify to purchase a NSP property?

Yes, an NSP entity can request an exception from conflict of interest rules from their HUD field office, which will review the circumstances for exception on a case-by-case basis. For more information on exceptions, see 24 CFR 570.611 (d) for the full requirements.   NOTE: When Dealing with Conflict of Interest questions, it is recommended that you contact your local field office to ensure compliance with all applicable regulations. Specific...
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Conflict of Interest

Is it considered a conflict of interest when an NSP entity wishes to sell an NSP property to an income-eligible person (or a family member of a person) employed by the entity or another NSP entity?

Maybe, NSP conflict of interest regulations prohibit NSP entities from selling a unit assisted under the program to their employees or their family members who exercise or have exercised any functions or responsibilities with respect to CDBG activities assisted under this part, or who are in a position to participate in a decision-making process or gain inside information with regard to such activities. Affected entities should contact their loca...
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Conflict of Interest

Does it constitute a conflict of interest for an entity that had a prior financial interest in a property to participate in the subsequent NSP activities related to that property?

In general, a conflict of interest would only arise if the entity received a financial interest or benefit from performing NSP activities on the property. See 24 CFR 570.611 for the regulatory guidance on conflict of interest for NSP grantees and consult your field office. NOTE: When Dealing with Conflict of Interest questions, it is recommended that you contact your local field office to ensure compliance with all applicable regulations. Specifi...
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Conflict of Interest

Do conflict of interest rules apply to people a developer hires?

For a developer who is neither a grantee nor a subrecipient, the conflict of interest rules found in 24 CFR 570.611 do not apply. Grantees should have policies and procedures in place to avoid undue enrichment. NOTE: When Dealing with Conflict of Interest questions, it is recommended that you contact your local field office to ensure compliance with all applicable regulations. Specific facts vary greatly such that general advice has limited appli...
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Conflict of Interest

Can an NSP developer hire a contractor who is a related party to the developer to perform rehabilitation work on NSP properties?

Yes, an NSP developer may hire such a contractor as long as the developer is not a governmental entity, a grantee, or a subgrantee, and the developer ensures that all costs are reasonable. However, if a developer has an "identity of interest" (developer also acting as general contractor or subcontractor), then this must be disclosed and the NSP grantee should adopt policies regarding the extent of the fee or profit that will inure to the related ...
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Conflict of Interest

Can a real estate agent who is engaged to market and sell NSP-assisted properties purchase a NSP property if they qualify as an income eligible buyer?

In general, no. An income eligible real estate agent who markets and sells NSP property cannot purchase an NSP property for him/herself. A conflict of interest would arise because the agent would receive a financial benefit from the NSP program. However, the NSP entity may request an exception from HUD. See 24 CFR 570.611 for the regulatory guidance on conflict of interest for NSP grantees.   NOTE: When Dealing with Conflict of Interest ques...
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Conflict of Interest

Can an employee of an NSP grantee who acts as a "buying agent" receive a commission on NSP property purchases?

No, an employee of an NSP grantee cannot receive commission or any other type of fee related to the sale of an NSP property because it presents a conflict of interest. However, NSP program funds may be used to pay the cost of the employee's salary and any direct expenses.   NOTE: When Dealing with Conflict of Interest questions, it is recommended that you contact your local field office to ensure compliance with all applicable regulations. S...
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Conflict of Interest

What are the conflict of interest rules concerning real estate agents or brokers?

24 CFR 570.611 of the CDBG regulations govern conflicts of interest. In general, conflicts arise when a representative of the grantee has a financial interest in a contract awarded by the agency. If the broker is independently representing a beneficiary of the program, it is unlikely that there is a conflict but the relationship should be disclosed to the local NSP grantee and any fee paid to the broker on the transaction must meet federal standa...
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Conflict of Interest

What constitutes a conflict of interest under NSP?

Under the CDBG regulations (24 CFR 570.611), the general rule is that no "persons covered" (below) who exercise or have exercised any functions or responsibilities with respect to CDBG activities assisted under this part, or who are in a position to participate in a decision-making process or gain inside information with regard to such activities, may obtain a financial interest or benefit from a CDBG-assisted activity, or have a financial intere...
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25% Set Aside

Does program income have a 25% low-income set-aside requirement?

Yes, the 25% low-income set aside requirement applies to: The initial NSP allocation; Any program income received from NSP 1 (PI received after the Unified NSP1 and NSP3 Notice was issued October 19, 2010) and NSP3 activities. NSP2 program income is expected to be included in this requirement, effective the date of the NSP Closeout Notice, to be issued in the Fall of 2012. ...
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25% Set Aside

Is the 25% low income targeting requirement applied to the entire grant amount or only to the 90% of the grant that is not used for general administration and planning?

The 25% low income targeting provision is counted against the entire grant amount, including administration and planning funds.

25% Set Aside
25% Set Aside

Assume a grantee has adopted the HOME affordability rules and the costs for a specific unit have been counted toward the LH25 set aside. If an NSP homebuyer in that LH25 unit resells within the affordability period, is s/he required to sell the property to another very low income homebuyer?

It depends on whether the grantee adopted the recapture or resale methodology for ensuring long term affordability.  If the recapture methodology was used and the homeowner sells the NSP-assisted property during the affordability period, the very low income homeowner may sell the NSP-assisted property to any buyer at any price the market will bear, subject to the terms outlined in the mortgage, deed restriction, or covenant running with the ...
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25% Set Aside

In DRGR, does a grantee count all of the units designated to meet the 25% low-income set-aside, if more than 25% of the total grant allocation benefits households at or below 50% AMI?

In DRGR, all qualifying units that are designated for households at or below 50% AMI should be designated as LH25, including any exceeding the minimum.

25% Set Aside
25% Set Aside

How should grantees count NSP funds expended for multi-unit housing properties toward the 25% low-income set-aside requirement?

If a structure is assisted in whole or in part with NSP funds and contains two or more housing units, the proportion of NSP funds that can be counted toward the low-income targeting requirement is equal to the proportion of units occupied by households at or below 50% AMI. For example, if a grantee spends $1,000,000 of NSP funds on a 10-unit project where four of the ten units rent to households with incomes at or below 50% AMI, 40% of the NSP ex...
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25% Set Aside

To meet the 25% low-income set-aside requirement, can the local housing authority construct housing using NSP funds and provide Section 8 residents the opportunity to become first-time homebuyers using the Section 8(h) Homeownership Program? Is it permissible to limit the homebuyers for these units to Section 8 residents?

Yes and yes. There is no HUD rule that prohibits a preference for persons participating in the Section 8 program. However, grantees must be in compliance with Fair Housing laws and ensure that the preference for Section 8 households does not have an unintended discriminatory effect. Grantees considering this arrangement should contact the Fair Housing and Equal Opportunity (FHEO) officer in the local HUD Field Office to ensure that the preference...
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25% Set Aside

To meet the 25% low-income set-aside requirement, can a grantee insert a clause into a developer agreement to sell a certain amount of units to households at or below 50% AMI?

Grantees may insert a clause in developer agreements stating that the developer will market and sell a certain number of units to homebuyers with household incomes at or below 50% AMI. Grantees should remember the 25% set-aside requirement is met only when the properties are occupied, and the units must be occupied by grant closeout.

25% Set Aside
25% Set Aside

If property acquired with NSP funds will not be occupied prior to the NSP grant closeout, will an executed deed restriction requiring occupancy by a household at or below 50% AMI meet the 25% low-income set-aside requirement?

No. If the property is not occupied by the time of grant closeout, the expenditures do not count towards meeting the 25% set-aside requirement. But remember, the grant cannot be closed out until all units are occupied.

25% Set Aside
25% Set Aside

If a property is partially rehabbed using NSP funds and 100 percent of the units are for residents at or below 50% AMI, can a playground on the site count towards the 25% low-income set-aside?

To count towards the 25% set aside, the playground must be:

  • On the project site and used only by the residents;
  • Included in the total development cost of the project; and       
  • Be a small proportion of the total development cost.  
25% Set Aside
25% Set Aside

Can vacant land be redeveloped with new construction and count toward the 25% set-aside?

Vacant, abandoned or foreclosed properties and new construction of previously residential or commercial properties used to house individuals and families at or below 50% AMI may be used to meet the 25% set aside requirement. The Dodd-Frank Act allowed that, as of the effective date of the Act, any NSP eligible property could be used to satisfy the 25% set aside requirement.

25% Set Aside
25% Set Aside

If a grantee uses NSP funds to acquire residential properties, but does not redevelop or rehabilitate them before closeout, can these properties still count toward the 25% low-income set-aside?

No. The income targeting requirement is based on actual occupancy. If the houses are not occupied by the time of grant closeout, the properties do not count toward the 25% set-aside requirement.

25% Set Aside
25% Set Aside

What happens if at grant close out the grantee does not meet the 25% low-income set-aside requirement?

Each grantee must expend 25% of its grant amount for activities that will provide housing for households whose income is at or below 50% AMI. If the grantee fails to do so, HUD may require that the grantee return all or a portion of the NSP grant.

25% Set Aside
25% Set Aside

An NSP grantee intended to rent a rehabbed unit to a household at or below 50% AMI but is unable to do so. What must the grantee do to re-categorize the funding?

If the home cannot be rented to a household at or below 50% AMI, and the funds have already been obligated towards the 25% set-aside requirement, the grantee or subgrantee can de-obligate the funds and reallocate them as appropriate. Even if the grantee has failed projects, the grantee must ensure that they meet the 25% requirement.

25% Set Aside
25% Set Aside

When does the 25% low-income set-aside requirement need to be met?

25% set aside requirement needs to be met at grant close out.

25% Set Aside
Affordability Period

How is the affordability period calculated and enforced?

NSP grantees generally use the HOME regulations to establish affordability periods based on the amount of NSP assistance per unit. See charts below for specific amounts. Rental housing activity NSP amount per-unit Minimum period of affordability in years Under $15,000 5 $15,000 to $40,000 10 Over $40,000 or rehabilitation involving refinancing 15 New construction or acquisition of newly constructed housing 20 &nb...
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Affordability Period

What date does NSP use as the beginning of the 5-20 year affordability period?

The affordability period for homeownership programs begins on the date of the purchase and loan closing (generally the same date.)           For rental projects, the affordability period begins when the project reaches stabilized occupancy (sometimes called "break-even" cash flow) generally about 80-90% occupancy.         For lease-purchase type programs, the period s...
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Affordability Period

What is the continued affordability period for NSP properties?

NSP uses the HOME continued affordability regulations as a minimum baseline for affordability requirements. Under the HOME program standard, the affordability period is determined by the level of NSP investment in the unit of housing, whether rental or home ownership:    Under $15,000 = 5-year affordability period  $15,000-$40,000 = 10-year affordability period Over $40,000 = 15-year affordability period    For ...
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Affordability Period

What is the impact of foreclosure on the affordability period? Does it differ for rental vs. homeownership?

As provided in 24 CFR Part 92.254(a)(5)(i)(A), "affordability restrictions may terminate upon occurrence of any of the following termination events: foreclosure, transfer in lieu of foreclosure or assignment of an FHA insured mortgage to HUD. The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure to preserve affordability. The affordability restriction...
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Affordability Period

How does HUD determine rent limits for "middle income" tenants (80-120% AMI)?

Since neither the HOME Program nor CDBG has policies developed for this middle income group, grantees should develop appropriate policies for their own circumstances. HUD finds the following two options acceptable:  Grantees may set flat rents at 30% of 120% AMI. This method is easier to administer but less flexible in volatile markets and less tied to the individual tenant’s ability to afford the rent. However, the grantee should ensure ...
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Affordability Period

If a foreclosed property was previously assisted by HOME funds, can a grantee use NSP funds to acquire and rehabilitate it, and, if so, how does that affect the affordability requirements?

There is no restriction on the use of NSP funds to acquire and rehabilitate previously assisted properties. With regard to HOME assisted properties, however, the affordability restrictions were probably terminated through foreclosure or transfer in lieu of foreclosure pursuant to 24 CFR Part 92. The Unified NSP1 and NSP3 Notice states that the grantee must revive the HOME affordability restrictions for the greater of the remaining period of HOME ...
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Affordability Period

Can an NSP homebuyer refinance during the affordability period?

Rules related to refinancing should be included in the agreement between the homebuyer and the grantee. Most subsidy programs will allow refinancing during the affordability period but may have different rules regarding increasing the private first mortgage, cashing in equity, and repaying the NSP assistance.

Affordability Period
Affordability Period

How must the affordability and resale/recapture provisions be legally recorded?

As provided in paragraph 24 CFR Part 92.254(a)(5)(i)(A), deed restrictions, covenants running with the land, or other similar mechanisms must be used as the mechanism to impose the affordability and recapture/resale requirements.

Affordability Period
Amendments

How can a grantee change its disposition strategy from homeownership to rental?

Property can be rented to income-eligible households if the activity is allowed under the grantee's NSP1 Substantial Amendment, NSP2 Action Plan, or NSP3 Substantial Amendment. Grantees should review the NSP Policy Alert: Guidance on Amendment Procedures for guidelines for submitting subsequent amendments if necessary.

Amendments
Amendments

An NSP3 grantee's action plan states that it will assist 20% of REO units in a target area, consistent with the NSP3 mapping tool's guidance on visible impact. If a grantee wants to change its target area, are there consequences if the NSP3 grantee does not meet the 20% goal?

No. The 20% guidance is not a program requirement.

Amendments
Amendments

Can a grantee submit to HUD one amendment that amends both its NSP1 and NSP3 action plans?

No. To amend both its NSP1 and NSP3 action plans, a grantee must submit to HUD separate amended action plans for NSP1 and NSP3.

Amendments
Amendments

If an NSP action plan substantial amendment is modified during the mandatory public comment period, does the comment period reset?

When the amendment is modified during the mandatory public comment period, the comment period is reset if the modification to the amendment includes one of the following changes: The grantee changes its allocation priorities or the method of funds distribution, The grantee wishes to carry out an activity that was not previously described in the action plan substantial amendment, The grantee changes the purpose, scope, location, or beneficiaries ...
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Amendments

When requesting amendments to an approved NSP action plan substantial amendment to change or add census tracts, should these requests be made at once or should the requests be made in multiple submissions?

Changing target areas does require an action plan amendment. It is most efficient to submit multiple requests in one amendment.

Amendments
Amendments

Are grantees allowed to transfer funds from one eligible activity to another eligible activity after the NSP action plan has been approved?

A grantee is allowed to move funds from one eligible activity to another if all of the activities have already been described in a HUD-approved action plan. Depending on the scope of the change, an amendment to the action plan substantial amendment may be required. Grantees should contact their HUD Field Office to determine whether the magnitude of the change is considered a substantial change in scope and requires an amendment.   For m...
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Amendments

What is the process for amending NSP2 action plans?

The NSP2 amendment process differs from the NSP1 and NSP3 amendment process. No amendment to an approved application may be made unless HUD rates the approved application as amended and it scores high enough to have been selected for funding under the NSP2 competition. NSP2 grantees must consult with HUD before submitting any amendment requests. To amend an NSP2 action plan, NSP2 grantees must follow the posting method for their original NSP2 act...
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Amendments

What is the process for amending NSP1 and NSP3 approved action plan substantial amendment?

The amendment process is similar to the amendment process for the Consolidated Plan. Each grantee must follow the citizen participation process for substantial amendments found in the respective NSP Notices. A grantee that has its own processes that may be more restrictive than these regulations must always follow the more restrictive standards. The grantee must post its proposed amendment on its website and appropriate newspaper publications and...
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Amendments

What are the public comment requirements if a grantee needs to amend its approved NSP action plan substantial amendment?

If an NSP grantee needs to amend its approved NSP action plan substantial amendment, the grantee must adhere to the same public comment process involved in the original amendment / application that includes posting its proposed amendment on its website and appropriate newspaper publications and making the amendment available for public comment for 15 days for NSP1 and NSP3 and 10 days for NSP2. The grantee should post the comments received during...
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Amendments

When is a grantee required to make an amendment to an approved NSP action plan substantial amendment?

If there is ever any question about the possibility that a grantee may need an amendment, contact your Field Office to determine the correct course of action. In general an amendment to an approved NSP action plan substantial amendment is required under any one of the following circumstances: The grantee changes its allocation priorities or the method of funds distribution. The grantee wishes to carry out an activity that was not previously desc...
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Appraisals and Property Valuation

What happens if the sales price is lower than the total development cost?

Given current market conditions in the neighborhoods that NSP is designed to stabilize, it is common for the total development cost of a home to exceed local market value. The difference between the total development cost and the appraisal and/or sales price must be treated as a development subsidy that is not recoverable.

Appraisals and Property Valuation
Appraisals and Property Valuation

What is included in the Total Development Cost?

The maximum sales price for a property sold to an individual as a primary residence is limited to the total development costs, which includes the acquisition cost plus rehabilitation or redevelopment costs necessary to rehabilitate the property. The aggregation of acquisition, rehabilitation, and redevelopment costs generally may include, among other items, costs related to the sale of the property such as staff time spent identifying homebuyers,...
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Appraisals and Property Valuation

Does the maximum sales price apply when NSP funds are used only to rehab the property?

The NSP limit on the maximum sales price applies when NSP funds are invested in a property, regardless of how those funds are used.

Appraisals and Property Valuation
Appraisals and Property Valuation

What is the maximum sales price of an NSP-assisted homebuyer property?

The sale price to the individual household under NSP is capped at the total development cost or appraised value, which ever is less. Note that all costs for an NSP project must be considered reasonable according to the requirements outlined in OMB Circular A-87.

Appraisals and Property Valuation
Appraisals and Property Valuation

Is there a minimum sales price for reselling an NSP property?

There is no minimum sales price for reselling an NSP property, but there is a limit to the amount of down payment assistance that can be provided, and the grantee is subject to the cost reasonableness standards under OMB Circular A-87 and A-122, which requires that the grantee pay "reasonable costs." The maximum sales price is the lesser of current appraised value or total development cost.

Appraisals and Property Valuation
Appraisals and Property Valuation

Who can conduct an appraisal?

Persons performing appraisals of NSP-funded acquisitions of "foreclosed upon" properties must meet the appraisal qualifications of 49 CFR Part 24.103(d). These persons can include the grantee's staff. The regulations at 49 CFR Part 24.103(d)(2) require only contract "fee" appraisers to be State licensed or certified. Staff appraisers need not be State licensed or certified, but they must meet the remaining qualifications outlined in the regulation.

Appraisals and Property Valuation
Appraisals and Property Valuation

When is an appraisal not required?

The property does not meet the definition of foreclosed or HUD has determined that compliance with URA appraisal requirements is unnecessarily burdensome, if the anticipated value of the proposed acquisition is estimated at $25,000 or less, and the acquisition is voluntary. If the grantee determines that this is the case, the current market value of the property may be established by a valuation of the property that is based on a review of availa...
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Appraisals and Property Valuation

Is an NSP grantee required to do an appraisal?

An appraisal must be completed within 60 days of sale for all foreclosed properties so that the 1% purchase discount can be determined. The appraisal requirement applies only to properties that are considered foreclosed at the time of acquisition, as defined by NSP.

Appraisals and Property Valuation
Eligible Activities/Uses

What is the Neighborhood Stabilization Program (NSP)?

Congress created the Neighborhood Stabilization Program to help cities, counties and states deal with community problems that are the result of the mortgage foreclosure crisis in the nation. HUD provides money to about 250 local governments (cities and counties) and all 50 states. Generally, the money must be used to buy, fix up, and resell foreclosed and abandoned homes. As long as the funds are used for this redevelopment, the units of governme...
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Eligible Activities/Uses

How would I go about getting an NSP home or becoming involved in the program?

If you are interested in participating in this program, you need to contact your city, county, state and/or a nonprofit working in your area to find out how the program operates. This is true both for prospective homebuyers and for potential contractors, nonprofits, and other partners.             Find out who administers the Neighborhood Stabilization Program in your area. Additional information about NSP ...
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Eligible Activities/Uses

What can NSP fund?

NSP funds are intended to stabilize neighborhoods. To achieve this, grantees can use NSP funds to: Establish financing mechanisms for purchase and redevelopment of foreclosed homes and residential properties (Eligible Use A); Purchase and rehabilitate homes and residential properties abandoned or foreclosed (Eligible Use B); Establish land banks for foreclosed homes and residential properties (Eligible Use C); Demolish blighted structures (Eligi...
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Eligible Activities/Uses

What are the differences between NSP1, NSP2, and NSP3?

NSP1 is the original program that refers to the $3.92 billion authorized under the Housing and Economic Recovery Act (HERA) of 2008. NSP2 was authorized under the American Recovery and Reinvestment Act (the Recovery Act) of 2009 and provided $2 billion in funding. NSP3 was authorized under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010 and provided $1 billion in funding. Unlike NSP1 and NSP3 which provided ...
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Eligible Activities/Uses

Will HUD block payment of expenses incurred in the NSP Program after the expenditure deadline?

It depends on whether the grantee meets the spending requirement. However, HUD will allow draws for legitimate expenses incurred on or before the expenditure deadline.             HUD will process draws for any expense legitimately incurred by the deadline, even if the draw occurs several weeks later. For example, staff and administrative costs may be incurred through the deadline date, although they will n...
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Eligible Activities/Uses

Is the development of public facilities and improvements an eligible use of NSP funds?

The development of public facilities and improvements is only eligible under NSP1 for Eligible Use E - Redevelopment. Public facilities are not eligible under NSP2 and NSP3. Public improvements are not eligible under NSP2 and NSP3 unless they directly serve a housing redevelopment.   Public facilities generally include buildings that are either publicly owned or that are traditionally provided by the government, or owned by a nonprofit, and ...
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Eligible Activities/Uses

Can NSP funds be combined with other funding sources in a project?

Yes, NSP funds may be combined with other funding sources in a project. For example NSP can be combined with other sources of HUD assistance such as HOME, CDBG, Section 8, Section 202, Section 236, and Section 811. Note that whenever the program rules of the different funding sources conflict, the most stringent rules apply.

Eligible Activities/Uses
Eligible Activities/Uses

Can one entity charge both activity delivery costs and a developer fee for the same project?

No, an entity cannot serve both the role of a subrecipient and a developer in the same project; therefore the entity may not charge both an activity delivery fee and a developer fee to the same project.         NSP definitions of developers, subrecipients, and contracts are available in the NSP Policy Alert Guidance on Developers, Subrecipients, and Contractors - Implications of Using Different Entity Types to Carry out N...
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Eligible Activities/Uses

What are the definitions of developer and subrecipient under NSP?

A subrecipient is a nonprofit, public agency or a for-profit entity authorized under 570.201(o) that assists a grantee or another subrecipient to administer all or a portion of its NSP program. This also includes any land bank receiving NSP funds from a grantee or another subrecipient.     A developer is a for-profit or private nonprofit individual or entity that the grantee provides NSP assistance to for the purpose of (1) acquiring ho...
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Eligible Activities/Uses

The NSP2 NOFA required that an applicant's grant request must "have the effect of either returning a minimum of 100 abandoned or foreclosed homes back to productive use or otherwise eliminating or mitigating their negative effects on the stability of the target geography." How is "unit" defined in regards to this requirement?

The number of units at the time of acquisition (before any demolition, rehabilitation, or new construction occurs) would count toward the 100 unit goal. If the property was demolished before acquisition, the general rule is to count only the number of units in the original dwelling or in the last residential property on the site. However, if the site was converted from commercial to residential use, it is permissible to count towards the goal all...
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Eligible Activities/Uses

Can NSP eligible properties be acquired through real estate auctions or sheriff's sales?

Yes, eligible properties may be acquired through real estate auctions or sheriff's sales as long as grantees follow URA requirements, have completed an environmental review and comply with 24 CFR 24.101, as well as state and local laws. See the NSP Policy Alert: Guidance on Property Types under Each NSP Eligible Use for more information on NSP eligible uses....
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Eligible Activities/Uses

Is the sale of a one to four unit residential property to an income eligible buyer who will rent out the other units in the building allowable under NSP?

Yes, a multi-unit NSP property may be sold to an income eligible owner-occupant who will rent out the other units to income-eligible tenants.

Eligible Activities/Uses
Eligible Activities/Uses

Is the deposit of NSP funds into an FHA 203(k) account an allowable use?

Yes, NSP funds may be deposited into an FHA 203(k) required reserve account for future rehabilitation disbursements. See the NSP Policy Alert: Guidance on FHA Mortgage Insurance for NSP Grantees for more information.

Eligible Activities/Uses
Eligible Activities/Uses

Can new housing construction or reconstruction of substandard properties not suitable for rehabilitation be performed under Eligible Use B - Acquisition and Rehabilitation?

No, new housing construction and reconstruction of substandard properties not suitable to rehabilitate cannot be performed under Eligible Use B. However, those activities could be done under Eligible Use E - Redevelopment.

Eligible Activities/Uses
Eligible Activities/Uses

What kinds of activities are eligible under Eligible Use A - Financing Mechanisms?

Other than Revolving Loan funds, most activities in Eligible Use A actually fall under one of the other eligible uses. For instance providing financial assistance to a homebuyer to purchase a home would actually fall under Eligible Use B - Acquisition and Rehabilitation or Eligible Use E - Redevelopment.

Eligible Activities/Uses
Eligible Activities/Uses

If NSP funds are used to acquire a property in a Low, Moderate, Middle Income (LMMI) area, and other funds are used for rehabilitation, can the LMMA national objective be used instead of the Low, Moderate, Middle Income Housing (LMMH) national objective?

No, all NSP-assisted housing acquisition and rehabilitation activities must meet the LMMH national objective, not the LMMA national objective.

Eligible Activities/Uses
Eligible Activities/Uses

What is the definition of a land bank?

As defined in the Unified NSP1 and NSP3 Notice issued October 19, 2010, "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 propertie...
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Eligible Activities/Uses

What is the definition of gut rehabilitation?

The Unified NSP1 and NSP3 Notice issued October 19, 2010 defines gut rehabilitation as "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." This definition also applies to NSP2.

Eligible Activities/Uses
Eligible Activities/Uses

Can NSP funding be provided to properties located outside of the target area specified in a grantee's Substantial Amendment to their Annual Action Plan?

NSP1 and 3 grantees can undertake activities on a limited number of units that are outside of the established target areas if the units are located in adjacent, eligible census tracts according to the grantee's approved Annual Action Plan. The activities must be reasonably related to addressing the overall foreclosure and abandonment problem in the community. No new Action Plan amendment would be required if the proposed activity was described in...
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Eligible Activities/Uses

Can NSP funds be used to address health, safety, and rehabilitation issues in properties that are not foreclosed, vacant, or abandoned?

No, NSP funds can only be used on properties within an NSP target area that are foreclosed, abandoned, or vacant as defined in an NSP grantee's approved target area. However, grantees can perform clearance and demolition activities if the property is blighted under Eligible Use D - Demolition.

Eligible Activities/Uses
Eligible Activities/Uses

If a property was purchased prior to NSP and prior to the completion of an Environmental Review, and qualifies as "foreclosed" or "abandoned", can NSP funding be used to rehabilitate the property?

Yes, if the grantee completes the environmental review based on the rehabilitation only. In this case, NSP funds cannot be used to reimburse the purchase price; this would be done at the time of sale or refinancing.

Eligible Activities/Uses
Eligible Activities/Uses

What is the definition of a blighted structure?

The Unified NSP1 and NSP3 Notice issued October 19, 2010 defines a structure as, "blighted when it exhibits objectively determinable signs of deterioration sufficient to constitute a threat to human health, safety, and public welfare." This definition also applies to NSP2.     For a property to be considered blighted, it must meet the definition of blighted as defined in the grantee's action plan substantial amendment. The NSP Policy Al...
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Eligible Activities/Uses

What are the definitions of abandoned and foreclosed?

A home or residential property is considered abandoned under NSP if any one of the following applies: Mortgage, tribal leasehold, or tax payments are at least 90 days delinquent; 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 The property is subject to a court-ordered receivership or nuisance abatement related to ...
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Eligible Activities/Uses

Where can I find a list of the NSP target areas?

Target areas or areas of greatest need chosen by NSP grantees are included in each grantee's action plan/substantial amendment. These can be found on the NSP Resource Exchange by searching for the appropriate grantees. Maps and census tract, census block, and neighborhood data for NSP1, NSP2, and NSP3 target areas are available on the NSP Grantee Data page on the OneCPD Resource Exchange....
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Eligible Activities/Uses

What kinds of property types are eligible for acquisition, redevelopment, and disposition under NSP?

The following property types are all eligible for NSP assistance: Vacant, demolished, foreclosed, or abandoned properties Properties owned by public agencies that are abandoned foreclosed or vacant Tax reverted properties in an NSP grantee’s housing inventory HUD REO foreclosed properties Foreclosed properties owned by non-profit developers and mortgage providers (such as Habitat for Humanity Bank donated foreclosed properties. See the NSP Po...
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Eligible Activities/Uses

What entities received NSP1, NSP2 and/or NSP3 funding from HUD?

View a database of all NSP grantees.

Eligible Activities/Uses
Eligible Activities/Uses

How is Area Median Income calculated?

HUD publishes annual income limits based on household size that are used to determine the maximum household income. Once household income is determined, compare it to HUD's income limit for that household size. If the income for that household size is at 50% of the median or less based on the chart, that household will count towards the 25% low-income set-aside. View the current NSP income limits....
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Eligible Activities/Uses

Under what conditions can NSP grantees acquire short sale properties using NSP funds?

A grantee can acquire a short sale property with NSP funds if the property meets one of the NSP definitions of foreclosed. The NSP Policy Alert: Guidance on the Impact of New Definitions for NSP-Eligible Properties provides the definition of abandoned and foreclosed and discusses different scenarios of properties that are considered abandoned as well as foreclosed.   The June 8, 2010 NSP webinar Acquisition Strategies provides information on...
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Eligible Activities/Uses

What is the definition of reconstruction?

Community Development Block Grant (CDBG) Program policy states that "reconstruction generally means the rebuilding of a structure on the same site in substantially the same manner." Reconstruction is a form of rehabilitation. The number of dwelling units on a site may not be increased; but, the number of rooms per unit may be increased or decreased. CPD Notice 07-08: Use of Community Development Block Grant (CDBG) Program Funds in Support of Hous...
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Eligible Costs

What percentage of an NSP award can be used for administration costs?

NSP regulations allow for an amount of up to 10% of an NSP grant provided to a jurisdiction and up to 10% 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% limitation applies to the grant as a whole. The 10% cap is applicable to administrative costs incurred by a grantee and its subrecipients.

Eligible Costs
Eligible Costs

Can NSP1, NSP2, and NSP3 funds all be used on the same project?

Yes, a project may receive a combination of NSP1, NSP2, and NSP3 assistance. However, it is important to ensure that the project itself and all costs are eligible under all NSP1, NSP2, and NSP3 requirements as the requirements for the three programs vary slightly. Therefore, if any resources are combined, all sets of rules must be met. Where the requirements differ, the more stringent rules must be followed. The project must be in the target area...
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Eligible Costs

Are monitoring costs eligible for reimbursement in NSP?

Yes, monitoring costs are allowable expenses during the NSP grant period. General, ongoing monitoring costs of an entire operation are charged to program administration. Review or monitoring of specific projects as well as on-site monitoring for federal regulations (such as Davis Bacon, Environmental Review, etc.) can be considered an activity delivery cost prior to the closeout of the project.

Eligible Costs
Eligible Costs

What kinds of closing costs are eligible in NSP?

All reasonable and customary closing costs associated with the acquisition and disposition of an NSP-assisted property are allowable. Examples of typical closing costs include, but are not limited to title insurance, settlement fees, recording fees, real estate taxes due at settlement, state documentary stamp and intangible taxes, wire and courier charges, appraisal costs and land surveys.

Eligible Costs
Eligible Costs

What are eligible disposition costs under NSP, and how can they be charged?

Disposition refers to the sale, lease, or donation of real property. Disposition costs are allowable for NSP-assisted properties under Eligible Uses A, B, C, and E, and they include the following: Property Maintenance Costs (including lawn services) Utilities Operating Expenses (only during initial lease-up under Eligible Use B) Preparation of Legal Documents Surveys Marketing Financial Services Transfer of Taxes Homeowners Association Fees Temp...
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Eligible Costs

Is the installation of security systems an eligible NSP cost?

The costs associated with the installation of security systems during rehabilitation and disposition of NSP assisted properties are eligible maintenance expenses. If the installation of security systems is part of the grantee's NSP rehabilitation standards prior to sale and is included in the scope of work for an NSP assisted property, then these costs would be considered a rehabilitation project cost for that specific address. If the security co...
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Eligible Costs

Are luxury items eligible for reimbursement with NSP funds?

Luxury items are not eligible for reimbursement with NSP funds. NSP references both the CDBG and HOME standards for determining appropriate rehabilitation improvements. Generally speaking, basic amenities in NSP-assisted housing should be comparable to basic amenities in the area's unassisted housing, recognizing that NSP homes must compete in the market. Thus, they may have upgraded amenities (e.g. granite countertops) if this is typical in the ...
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Eligible Costs

What appliances are eligible to be purchased with NSP funds?

The following appliances are eligible under NSP: stoves, refrigerators, and central air conditioning (where appropriate). Energy efficient (compliant with Energy Star standards) clothes washers, dryers and dishwashers are permitted in NSP when done in conjunction with housing rehabilitation and/or sale projects in the NSP program and when all of the following conditions are met: NSP funds have rehabilitated or constructed the homes; Installation...
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Eligible Costs

Is rehab to a common area in an NSP property and eligible cost?

Yes, rehabilitation costs to common areas in a multifamily property are eligible for reimbursement with NSP funds. Please note that expenses related to common areas (such as a courtyard) must meet cost reasonableness standards.

Eligible Costs
Eligible Costs

Can NSP funds be used to capitalize an operating reserve for a multi-family project?

NSP funds can be used for operating reserves in certain circumstances if the NSP grantee can demonstrate that such a requirement is consistent with industry practices and the dollar amount of the required reserves is consistent with local industry standards. It is allowed when a third party mortgage lender requires that funds be allocated for operating reserves as a condition of the lender approving a mortgage. NSP funds can be used for up-front ...
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Eligible Costs

When are interest payments on a construction line of credit or bridge loan considered eligible costs in NSP?

The interest payments on a construction line of credit or bridge loan are considered eligible development costs and reimbursable with NSP funds during acquisition and construction.

Eligible Costs
Eligible Costs

When is a home warranty considered an eligible cost in NSP?

The cost of an initial home warranty (for the first year) is considered an eligible expense in NSP; however, once the property has been disposed to an eligible household, additional NSP funds cannot be used for repairs outside of the warranty. A home warranty is also an eligible cost during resale.

Eligible Costs
Eligible Costs

Are items that are stolen or damaged during rehabilitation or disposition of NSP property able to be replaced or repaired with NSP funds?

Insurance that a grantee, subrecipient, developer, or contractor holds in case of damage or loss should cover the cost to repair or replace any items. However, according to OMB Circulars A-122 and A-87, "Costs incurred because of losses not covered under nominal deductible insurance coverage provided in keeping with sounds business practices are allowable." If the theft and/or damage are the result of negligence on the part of the entity, there s...
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Eligible Costs

When can NSP funds be used to pay insurance deductibles?

According to OMB Circulars A-122 and A-87, "Costs incurred because of losses not covered under nominal deductible insurance coverage provided in keeping with sound business practices are allowable."

Eligible Costs
Eligible Costs

What kinds of insurance are considered eligible NSP costs for grantees / subrecipients / developers / contractors?

The following types of insurance are considered eligible costs for NSP grantees, subrecipients, developers and contractors: Construction Insurance - During redevelopment, insurance for construction is considered part of the development cost and is reimbursable by NSP for the grantee, subrecipient, and developer. Builder’s Risk Insurance - Contractors who are required to obtain builders risk insurance in relation to an NSP covered contract are ...
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Eligible Costs

Can NSP funds be used to purchase tax-exempt bonds to fund eligible project acquisition and development costs?

NSP funds cannot be used to purchase tax-exempt bonds. NSP funds can be used only as a financing mechanism for the purchase and redevelopment of foreclosed upon homes and residential properties (soft second loans, loan loss reserves, equity sharing, etc.) as explained under Eligible Use A. NSP funding is grant funding and would typically provide a better cost of funds than bond financing for similar purposes. There is no cost of funds for NSP and...
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Eligible Costs

Can NSP funds be used to pay "back taxes," clear tax liens or other liens, code enforcement fines, if they are associated with acquisition costs?

Yes, there are some situations where NSP funds could be used to pay these taxes, but the options are limited. If title to a foreclosed property is held by a private entity and the tax was levied by the NSP1 grantee or another jurisdiction, then NSP funds by be used indirectly to clear the tax liens through the acquisition process. For example, if the fair market value of a foreclosed property less the NSP required purchase discount is valued at $...
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Eligible Costs

What kinds of taxes are considered eligible costs in NSP?

Property taxes are considered an eligible cost during construction and should be included as part of the total development cost, as long as the taxing agency is not the NSP grantee or subrecipient.   Homeowners association fees are also considered an eligible cost during construction and should be included as part of the total development cost.     During long-term management, taxes and insurance are generally eligible as operating...
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Eligible Costs

Are costs incurred for a failed acquisition eligible to be paid by NSP?

In general, costs incurred for a failed acquisition are eligible for payment with NSP funds. HUD understands that an NSP grantee may investigate the acquisition of a property and incur costs before acquiring it, but then decide that the acquisition is not feasible. Additionally, if contractors and/or developers incurred costs associated with the site (e.g.: surveys, engineer reviews, inspections, etc.), then these expenses are also eligible for payment.

Eligible Costs
Eligible Costs

Can NSP funding be used to rehabilitate a property if it was purchased prior to NSP and prior to the completion of an Environmental Review, but qualifies as "foreclosed" or "abandoned" based on the revised definitions?

The answer to this question depends on the purchaser. If a grantee directly purchased a property that met the new definition of abandoned or foreclosed because the owner was delinquent but not yet foreclosed, the grantee becomes the Initial Successor in Interest (ISII). The grantee can then donate or sell that property to an individual or developer and provide NSP rehabilitation/demolition assistance. Note that retroactive reimbursement for prope...
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Eligible Costs

What are the different ways a staff member's time or salary can be charged to NSP, and how must their time be recorded?

Salaries and/or wages for a staff person responsible for NSP program implementation are eligible expenses and may be charged to either administration or activity delivery costs. The allocation of staff-time charges as activity delivery costs is limited to costs that add value or help advance the implementation of a specific NSP-funded eligible project or activity. When charging staff costs to activity delivery, the staff person must keep a timesh...
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Eligible Costs

What costs related to meetings, conferences and trainings are considered eligible expenses under NSP?

According to OMB Circular A-87, the costs of meetings and conferences, the purpose of which is the dissemination of technical information to assist with carrying out eligible NSP programs and projects, are allowable administrative expenses. This includes costs of meals, transportation, rental of facilities, speakers' fees, and other items incidental to such meetings or conferences. Training costs are also eligible to be paid with NSP funds. These...
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Eligible Costs

May NSP funds designated for administration or project delivery be used to pay audit costs that are incurred to satisfy the requirements of OMB Circular A-133?

NSP grantees and subrecipients that expend $500,000 or more in all Federal awards in a single program to a single entity must have an audit conducted in accordance with OMB Circular A-133. NSP administrative funds can be used to pay for all or a portion of audit costs depending on the percentage amount of NSP funds expended. If multiple federally awarded funds are expended in a single program year, then NSP grantees and or their subrecipients nee...
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Eligible Costs

What are the differences between administration expenses and activity delivery costs?

Activity delivery costs are charges directly attributable to project implementation and are limited to costs incurred in carrying out a specific NSP funded eligible activity. Section 570.206 notes that "staff and overhead costs directly related to carrying out activities [are] eligible under 570.201 through 570.204, since those costs are eligible as part of such activities."     According to 24 CFR 570.206, administrative costs are clas...
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Eligible Costs

What kinds of costs and/or expenses are eligible to be paid from the 10% administration allowance?

The use of NSP funds to pay program administrative costs is authorized under 24 CFR 570.206, Program Administrative Costs, which permits NSP funds to be used for "reasonable administrative costs and carrying charges related to the planning and execution of community development activities assisted in whole or in part [with NSP funds].” These administrative costs satisfy the statutory requirement for meeting a national objective because the cost...
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Eligible Costs

What kinds of third-party fees are considered eligible development costs in NSP?

The following third-party fees are eligible for reimbursement by NSP from the acquisition phase to the disposition phase:   Broker Fees (as long as they are reasonable) Property Management fees (that are properly documented and connected to an eligible NSP property from the time of acquisition to either sale/disposition of a property or placing a rental development “in service,” management fees cannot be charged as a fixed fee if the NS...
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Eligible Costs

What entities are able to charge activity delivery costs?

Grantees, subrecipients, and consortium members are able to charge certain costs to activity delivery as long as the costs are directly attributable to NSP project implementation. Developers are not allowed to charge activity delivery costs but they may charge for actual, eligible project costs. NSP definitions of developers, subrecipients, and contracts are available in the NSP Policy Alert: Guidance on Developers, Subrecipients, and Contractors...
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Eligible Costs

What type of entity is allowed to earn a "developer fee?"

Developer fees are only permitted to be paid to private individuals, for-profit, and private non-profit entities. In the NSP program, grantees, subrecipients, and consortium members are not allowed to receive a "developer fee" for carrying out any NSP eligible activities. Additionally, a consortium member cannot establish a for-profit affiliate or subsidiary outside the consortium grantee structure to receive a "developer fee." An entity that may...
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Eligible Costs

What is considered a reasonable developer fee under NSP guidelines?

NSP grantees must ensure that a developer fee is reasonable and customary for similar types of projects or developments within their community or market area. Typically, a developer fee is a "reward" in return for taking the "risk" of a real estate development; hence the complexity and scale of a project should be a consideration in establishing a developer fee. Low cost, low risk projects should receive a fee that is less than a larger, more cos...
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Marketing and Selling Properties

Can a grantee use a home assisted with NSP funds as a model home to help market and sell NSP properties?

NSP grantees may use an NSP-assisted home as a model home. However, the property cannot be reported in DRGR as completed until it has been occupied and an end-use or national objective has been met.

Marketing and Selling Properties
Marketing and Selling Properties

What are examples of NSP-eligible marketing costs?

Examples of NSP-eligible marketing costs include, but are not limited to: printing and distribution of marketing materials; listing fees; home staging professional services; open house hosting; and realtor professional services. A realtor commission is an eligible NSP cost provided that the commission is reasonable and customary for similar types of projects in their community. These costs can be charged as project delivery costs or development c...
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Marketing and Selling Properties

What is required to meet affirmative fair marketing plan requirements?

Affirmative fair marketing plan requirements dictate that an applicant for HUD housing program funds 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...
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Marketing and Selling Properties

What strategies should grantees pursue to market NSP homes?

Grantees should research conditions in their local markets by talking to real estate agents, analyzing recent trends, and similar methods. Considerable information is available on-line. With market knowledge, grantees can then decide which buyers they are targeting and how to reach them. Grantees should try to sell the whole neighborhood, not just the house. Community organizations, churches, schools and other neighborhood-based groups can help w...
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Marketing and Selling Properties

Can grantees reduce the sales price of a house assisted with NSP funds if the house is not selling?

NSP requires that grantees set an NSP house's sale price at no higher than the appraised value or total development cost, whichever is lower. If a home is not attracting offers, it is possible that the asking price was set higher than the current market or higher than a price affordable to the target population. For example, if a home does not sell after 60 days of strong marketing and sales efforts, it may be necessary to lower the price in mode...
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Purchase Discount

How much is the purchase discount?

The purchase discount is 1% below the current market appraised value of the home or property for all foreclosed properties acquired with NSP funds. The required purchase discount has changed since the publication of the initial NSP1 Notice.

Purchase Discount
Purchase Discount

Does the 1% purchase price discount apply to the acquisition of property for redevelopment under Eligible Use E - Redevelopment?

If a property is vacant and not abandoned or foreclosed, then the one percent discount does not apply.

Purchase Discount
Purchase Discount

Does the 1% purchase price discount apply when only the rehab is done with NSP funds?

The purchase discount on foreclosed properties does not apply to properties that were purchased with non-NSP funds. It should be noted that all other regulations including Environmental Review and URA apply in this situation, and any property where NSP funds are used.

Purchase Discount
Purchase Discount

Does the 1% purchase price discount apply to abandoned or vacant properties?

If a property is abandoned or vacant, it is not subject to the 1% discount. The requirement applies only to foreclosed upon homes and residential properties.

Purchase Discount
Purchase Discount

How does the 1% purchase price discount apply to bulk purchases?

The 1% discount applies to each individual purchase.

Purchase Discount
Purchase Discount

Does the 1% purchase price discount apply if there are multiple sources of funds?

The statutory requirement under Title III of the Housing and Economic Recovery Act of 2008 (HERA) requires that any foreclosed upon home or residential property purchased in whole or in part with NSP funds must be purchased at a discount. The discount must be at least one percent below the current market appraised value of the home or property. This requirement applies regardless of the other sources of the money in the project.

Purchase Discount
Purchase Discount

Does the 1% purchase price discount apply to down payment assistance?

No. The purchase discount is only required for foreclosed upon homes acquired in part or in whole with NSP funds by the grantee from the REO holder or bank. Subsequent resale to NSP homebuyers are not affected by this requirement.     The only situation that the one percent discount would affect the homeowner is when the grantee is providing assistance a NSP eligible homebuyer to acquire a foreclosed property directly from REO holder or...
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Resale/Recapture

When an NSP homebuyer sells a property with either a recapture or resale provision, what happens to the revenue when the property's value has appreciated?

Under recapture, the answer depends on whether the grantee has elected to impose a shared appreciation clause in the agreement with the buyer. If a shared appreciation model is used, then the negotiated percentage of appreciation that belongs to the borrower and to the grantee would be calculated and distributed upon sale. The grantee's portion of the recaptured funds would be treated as program income and subject to all NSP rules. If the grantee...
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Resale/Recapture

If a homebuyer does not receive a direct subsidy, can a grantee impose a recapture provision with equity sharing if the property is transferred before the affordability period ends?

The recapture approach to affordability can only be used when there is a direct homebuyer subsidy.  If there is no direct homebuyer subsidy, the grantee must impose a resale restriction.  It is not permissible to have both a resale and a recapture provision on the same unit.     The NSP enabling legislation specifically allows equity sharing, which is typically enacted as a shared appreciation clause under the recapture approa...
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Resale/Recapture

Does the time remaining for the affordability period transfer to the next eligible unit for which the funds are used?

When using the recapture approach for homebuyer activities, the affordability period for the unit ends upon recapture of the NSP funds. When using the resale approach, the remainder of the affordability period carries over to the next buyer.

Resale/Recapture
Resale/Recapture

How does the length of the affordability period differ if a grantee chooses to use a recapture or resale provision?

When resale restrictions are used, the affordability period is determined by the per unit total NSP investment. When recapture provisions are used, the period is determined by the per unit amount of NSP assistance that enabled the homebuyer to purchase the property (the direct subsidy.)     Consider the following scenario and how the period of affordability changes depending on the approach: $50,000 of NSP funds is provided to a develop...
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Resale/Recapture

What are the main features of recapture and resale?

Resale requirements must ensure that for the duration of the affordability period the housing is subsequently purchased only by a buyer who is income eligible to receive NSP funds, and who will use the property as principal residence. The resale requirement must also ensure that the price at resale provides the original NSP-assisted owner a fair return on investment (including the homeowner's investment and any capital improvement) and ensure tha...
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Resale/Recapture

What are the resale and recapture approaches to affordability?

The recapture and resale approaches are the two methods that the HOME program uses and adopted by NSP to ensure continued affordability of assisted housing for homeowners. The HOME regulations at 24 CFR Part 92.254 describe these rules in greater detail.   Generally, resale is designed to require that if the homebuyer needs to sell the home during the affordability period they must sell it to an income eligible person. This process is most u...
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Tenant Rights and Tenant Protections

Bona fide tenants occupying a property at the date of notice of foreclosure are eligible for NSP tenant protections. How is the date of notice of foreclosure determined?

Section 1497 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203 states, "the date of a 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." Note: Relocation and tenant protection can be a difficult subject for many grantees ...
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Tenant Rights and Tenant Protections

How do the tenant protections requirements apply to short sale purchases under NSP?

The tenant protection requirements directly affect initial successors in interest (ISII) who take title to property through foreclosure. Typically, the ISII in a property acquired through foreclosure is the successful purchaser at foreclosure, such as the lender or trustee for holders of obligations secured by mortgage liens. The NSP definition of foreclosed property includes initiation of the foreclosure process, as well as the end outcome resul...
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Tenant Rights and Tenant Protections

What is a bona fide tenant under NSP?

The Unified NSP1 and NSP3 Notice states, "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." Note: Relocation and tenant protection can be a difficult subject for many grantees and m...
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Monitoring and Compliance

How often do grantees need to monitor subrecipients?

NSP has no requirement regarding the frequency of monitoring; however, HUD emphasizes that monitoring should be an ongoing process to help ensure strong performance and compliance. Grantees are ultimately responsible for ensuring subrecipients comply with all applicable requirements, achieve objectives within schedule and budget. For more information, refer to the NSP webinar Monitoring Subgrantees by Grantees....
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Monitoring and Compliance

What is the difference between a monitoring "finding" and a "concern?"

A finding is a deficiency in program performance based on material noncompliance with a statutory, regulatory, or program requirement for which sanctions or corrective actions can be posed. A concern is a deficiency in program performance not based on statutory, regulatory, or program requirements, and sanctions or corrective actions are not posed. For more information, refer to the CPD Monitoring Handbook....
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Monitoring and Compliance

Are grantees required to do on-site inspection as part of their compliance monitoring?

An inspection prior to occupancy at project completion is required to ensure the rehabilitation standards were met. However, there is no NSP requirement for inspections as a part of ongoing compliance monitoring for either rental or homeownership units. HUD highly recommends that the grantee develop policies and procedures for inspections during the development period as well as the affordability period. For more information please see the NSP we...
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Monitoring and Compliance

Are grantees responsible for reporting the number of jobs created through NSP projects?

Only NSP2 grantees are responsible for reporting jobs created on FederalReporting.gov. Guidance is provided in a White House memorandum. The Recovery Act Job Creation Calculator is a tool for calculating the correct Full Time Equivalent job total to report on Federalreporting.gov.

Monitoring and Compliance
Monitoring and Compliance

Are there required forms for recording program delivery expenses?

NSP does not mandate any specific forms for this purpose. It does, however, require that grantees and subrecipients use time and activity records to track hours associated with these activities. The forms should, at a minimum, identify the activity and the actual hours spend on program delivery.

Monitoring and Compliance
Monitoring and Compliance

What are the reporting requirements for NSP grantees?

NSP grantees must report to the Disaster Recovery Grant Reporting (DRGR) system. Grantees are required to enter their action plans, projects and activities, as well as Quarterly Performance Reports (QPR). More information on operating the DRGR system can be found on the OneCPD Resource Exchange by searching "DRGR." In addition, NSP2 grantees must meet ARRA reporting requirements in federalreporting.gov and enter their environmental review informa...
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Monitoring and Compliance

How does HUD monitor for compliance with NSP?

HUD will monitor grantees, consistent with the CPD Monitoring Handbook. This responsibility rests with the Field Office. Grantees are responsible for the compliance of their subrecipients and developers. For guidance on the process, see the following webinars: Monitoring of HUD Grantees (5/3/11) Monitoring of Subgrantees (5/5/11 ) State Monitoring (8/9/11) Presentation slides, transcripts, and recordings for all NSP webinars are availab...
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Monitoring of Subgrantees and Developers

How long must grantees keep records for NSP?

The citizen participation plan requires that the grantee provides citizens, public agencies, and other interested parties with reasonable and timely access to information and records relating to the grantee's consolidated plan. In practice, this is considered to be four years after grant closeout.

Monitoring of Subgrantees and Developers
Monitoring of Subgrantees and Developers

What does HUD consider to be a "reasonable" developer fee for NSP?

Reasonable developer fees are defined in relation to the functions and responsibilities the developer undertakes. There are various factors that can help NSP grantees determine what is reasonable, including the risk of the project and what is customary for similar types of projects in their community.

Monitoring of Subgrantees and Developers
Monitoring of Subgrantees and Developers

Must developers follow the federal procurement rules when selecting contractors or purchasing goods/services?

Developers are considered end users and are not subject to the federal procurement rules. See the July 2010 NSP Cross Cutting Regulation Overview Series: Procurement.

Monitoring of Subgrantees and Developers
Monitoring of Subgrantees and Developers

Are non-profit developers required to have an audit of their NSP funding?

Yes, non-profit developers and subrecipients who expend more than $500,000 of all federal funds in a given year are subject to the audit requirements contained OMB Circular A-133. See the June 2010 Accounting, Recordkeeping and Monitoring Webinar. Presentation slides, transcripts, and recordings for all NSP webinars are available at Training and Events....
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Monitoring of Subgrantees and Developers

Does a developer have to invest its own money into NSP projects?

A developer does not necessarily have to invest its own money into a project, but the entity must demonstrate ownership or control of the property to be rehabilitated or redeveloped.

Monitoring of Subgrantees and Developers
Monitoring of Subgrantees and Developers

Are sample NSP developer agreements available?

The NSP Toolkits include sample agreements and are available on the OneCPD Resource Exchange. These are only sample agreements and each agreement will need to be adapted and reviewed by local legal counsel.

Monitoring of Subgrantees and Developers
Monitoring of Subgrantees and Developers

Can the same nonprofit organization be considered both a developer and a subrecipient under NSP?

A single nonprofit could be designated as a subrecipient and a developer for separate and distinct activities, but not for the same activity.

Monitoring of Subgrantees and Developers
Monitoring of Subgrantees and Developers

Can public agencies such as housing or redevelopment authorities be designated as developers under NSP rules?

Housing authorities and other public agencies cannot be designated as developers. However, public agencies can be subrecipients. A non-profit spin-off organization of a housing or redevelopment authority can be designated as a developer if that entity is private, not public, and distinct from the housing authority in matters such as board membership and organizational control. See the NSP Policy Alert: Guidance on Developers, Subrecipients, and C...
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Monitoring of Subgrantees and Developers

How can developers be selected by an NSP grantee?

The federal procurement rules do not apply to the selection of developers. Depending on their state or local procurement laws and policies, grantees may select developers using any process that enables them to effectively review developer qualifications and proposed projects.

Monitoring of Subgrantees and Developers
Structuring Financial Assistance Models

What is the maximum Combination Loan to Value (CLTV) permitted for a Federal Housing Administration (FHA) loan on an NSP home?

The CLTV limit is defined by the first mortgage lender. See the NSP Policy Alert Guidance on Operating Deficit Reserves, Overhead Expenses, and Combined Loan to Value Ratios for more details.

Structuring Financial Assistance Models
Structuring Financial Assistance Models

Can NSP funds be used to capitalize, as part of a rental project's development budget, one or more pre-funded reserves, including operating reserves, as well as lease up, debt service or replacement reserves?

Yes, grantees may use NSP to fund an up-front deposit to a rental project's operating, lease-up, or debt service reserves when such a deposit is required by either a private lender on this project or by the grantee's written underwriting/lending policies.  This up-front deposit should be reasonable and cover only amounts necessary for the required initial deposit. Replacement reserves should be funded with cash flow from the project, not est...
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Structuring Financial Assistance Models

Does NSP require potential homebuyer to provide an earnest money deposit?

NSP does not require homebuyers to provide an earnest money deposit. However, grantees may require earnest money deposits as a part of the local program rules. FHA loans do require an earnest money deposit.

Structuring Financial Assistance Models
Structuring Financial Assistance Models

If a soft second mortgage is provided by an entity (such as a Habitat affiliate), could the payments under the soft second be payable to the NSP grantee rather than the Habitat affiliate?

Yes, if agreed upon by all parties, the grantee could require that NSP mortgage payments be returned to the grantee as program income.

Structuring Financial Assistance Models
Structuring Financial Assistance Models

Can homebuyers make payments on an NSP soft second mortgage to the NSP grantee or to a subrecipient or affiliate?

Grantees can choose to structure payments from homebuyers' soft second mortgages in any way they deem reasonable.  These mortgage payments may return to the grantee, or to a subrecipient or developer, whoever holds the NSP mortgage.  Payments back to the grantee or a subrecipient are program income. Payments back to a developer are not program income but the grantee must ensure that the total amount of NSP funds that it allows the devel...
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Structuring Financial Assistance Models

Does HUD have guidelines for how to structure NSP soft second mortgages to comply with conventional underwriting standards?

The NSP Toolkit Guide to Understanding Mortgage Financing for NSP Assisted Homebuyers provides guidelines for how to structure NSP soft second mortgages to comply with conventional underwriting standards.

Structuring Financial Assistance Models
Structuring Financial Assistance Models

Does a servicer of second mortgages derived from NSP funds need to be a HUD-approved servicer?

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

Structuring Financial Assistance Models
Structuring Financial Assistance Models

Are soft second mortgages permitted under NSP?

Yes. Soft second mortgages can be provided in two ways. First they can be provided directly to buyers of vacant, foreclosed or abandoned properties.  Second, grantees that provide construction assistance to developers can allow some of that assistance to remain in the deal as a soft second loan for the buyer.

Structuring Financial Assistance Models
Structuring Financial Assistance Models

Is the creation of a loan loss reserve an eligible use of NSP funds?

A loan loss reserve can be created under Eligible Use A: Financing Mechanisms for purchase and redevelopment of foreclosed upon homes and residential properties. This reserve can provide partial risk coverage to motivate financial institutions to offer loan products to potential NSP home-buyers and developers of ownership and rental housing. The NSP Policy Alert: NSP Loan Loss Reserve Guidance, published December 2010, provides more information o...
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Structuring Financial Assistance Models

Does HUD have underwriting guidelines for multifamily rental projects funded by NSP?

Grantees have the primary responsibility for underwriting each project and should adopt standard underwriting procedures in order to ensure that all costs are reasonable and appropriate per OMB Circular A-87 and do not unduly enrich any parties involved. HUD has developed webinars and templates to assist NSP grantees in developing underwriting policies and procedures. The NSP Underwriting Principles Webinar, held August 2010, provides basic tips ...
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Subsidy Layering

Can NSP1, NSP2, and/or NSP3 funding be combined and used on the same project?

Funding from different NSP allocations can be combined on the same project provided all of the following are met: The target areas overlap; The activity is eligible based on the approved NSP1, NSP2 and/or NSP3 Action Plans; and There is a clear delineation of specific expenses being paid by multiple NSP allocations with no overlap. It is advised that this delineation be well documented in the project files in case of audit or monitoring of the g...
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Subsidy Layering

How can NSP grantees use FHA mortgage insurance programs such as the 203(b) and 203(k) programs to assist homebuyers in purchasing an NSP home?

The NSP Policy Alert Guidance on FHA Mortgage Insurance for NSP Grantees provides an overview of how grantees can use the 203(b) and 203(k) program to assist homebuyers. The Alert reviews the FHA memo Neighborhood Stabilization Program and FHA Financing dated March 24, 2010, and its implications for NSP grantees....
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Subsidy Layering

How can NSP funds be used to obtain interim financing from a private lender?

The NSP Guide to Using Interim Financing for NSP Activities, describes the advantages and disadvantages of incorporating interim financing into a grantee's NSP program, helps grantees to assess whether interim financing is a good fit for their activities, reviews key steps to implementing interim financing, and provides information on how interim financing can be obtained.

Subsidy Layering
Subsidy Layering

Does NSP have a requirement that NSP funds be recorded in a particular lien position?

NSP does not have a requirement for NSP funds to be recorded in a particular lien position. However, grantees can adopt separate underwriting guidelines that limit the level of subordination of NSP funds permitted under their programs.

Subsidy Layering
Subsidy Layering

If NSP funds are not used for the acquisition of a foreclosed property, do the appraisal and 1% discount apply?

If NSP funds are not used for the acquisition of property, the appraisal and 1% discount do not apply. However, the acquisition process is subject to the requirements of the Uniform Relocation Act (URA) when applicable.

Subsidy Layering
Subsidy Layering

If NSP and another source of Federal funds are used to assist a property, how should program income resulting from the sale of the property be prorated?

For an activity that is funded by multiple sources of Federal funding, program income should be prorated to reflect the proportion of the total development cost invested from each funding source. For example: A project had a total development cost of $100,000. The NSP investment was $60,000 (60%), and HOME provided $40,000 (40%). The house sold for $90,000. 60% ($54,000) is NSP Program Income, and 40% ($36,000) is HOME program income.

Subsidy Layering
Subsidy Layering

If NSP funds are combined with other federal funds in a project, such as CDBG or HOME, which program requirements apply?

When multiple sources of federal funds are combined in a project, the requirements of all programs must be met. Therefore, for any specific requirement, the most restrictive requirement applies.

Subsidy Layering
Subsidy Layering

Can a household use federally funded rental assistance such as Section 8 or HOME TBRA to rent a unit that acquired and/or rehabilitated with NSP?

Yes, federally funded rental assistance may be used by a household to rent a unit acquired and/or rehabilitated with NSP.

Subsidy Layering
Subsidy Layering

An NSP grantee used NSP funds to acquire and rehabilitate a home. Can the grantee use other sources of HUD funding, such as HOME or CDBG, to providing financing assistance to a homebuyer to purchase the NSP home?

Yes, a grantee may provide an eligible homebuyer with other sources of HUD funding such as HOME and CDBG to help the eligible homebuyer purchase the NSP assisted home. Grantees must ensure that multiple forms of assistance do not overly subsidize the purchase and that where the regulations of different programs differ; the more stringent regulation is followed. Grantees may not replace one federal source of funds with another; such an investment ...
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Content current as of November 8, 2021.