Those of us who have focused on dealing with foreclosed properties and their concentration in particularly hard-hit neighborhoods suffer from a bit of “NSP stress syndrome.”
The federal Neighborhood Stabilization Program (NSP) provides much-needed financial resources. At the same time, this rule-laden program has made addressing a challenging problem even more difficult. The federal government isn’t very good at responding to a crisis. Our friends in the Gulf Coast know this all too well, so it shouldn’t be a surprise, but it doesn’t really hit home until you experience it first-hand.
NSP, despite being an emergency measure, is full of cumbersome and illogical requirements. I laugh when an innocent colleague asks for the NSP regulations and I have to point them to multiple HUD notices, policy alerts, and frequently asked questions.
Does it really make sense to require private buyers of foreclosed properties to send notices to their sellers stating that they don’t have the power of eminent domain? Is it appropriate that HUD regulates how much private money can be at risk on a purchase and sale agreement for a foreclosed property? Is it really necessary to require that new owner-occupants of foreclosed properties with rental units perform income certifications and impose rent restrictions on their tenants in areas where the market rents are below affordable levels? The time and energy that has been needed to make sense of the NSP rules has certainly sapped much of the energy needed to do the real work dealing with foreclosed properties.
Many of the problematic NSP rules relate to seemingly small issues. But each rule imposed has to be dealt with and that slows down and potentially eliminates transactions. For example, it took until last month — more than two years after Congress authorized the program — for HUD to finally agree that the “net sale price” (i.e., after factoring in seller concessions) should be utilized when determining whether the property is being purchased at a discount. In the meantime, transactions that should have qualified have been disallowed by local HUD offices and much time wasted advocating with HUD.
As a taxpayer, I appreciate the importance of ensuring that government money is spent efficiently and effectively, but a program with such multiple and arcane rules and requirements promotes gridlock and is especially problematic when dealing with a crisis. Granted, the program started under the Bush administration. The Obama/Donovan administration has taken probably the most logical path under the circumstances, modifying the program requirements here and there rather than trying to completely redesign the program. In recent months, as they have become more firmly in charge at HUD, they have made many improvements. Still, this tinkering leaves us with a very complicated program that continues to be a challenge to use.