Making NSP Work
When leading national nonprofit organizations created the National Community Stabilization Trust (NCST) in the summer of 2008, the premise was that this new organization would connect two disparate worlds — the financial institutions holding unprecedented levels of foreclosed and abandoned property and local housing providers seeking to purchase and reuse these properties to foster neighborhood stabilization.
In late 2008, NCST launched its national REO Property Acquisition Program to facilitate the transfer of foreclosed and abandoned property from financial institutions to local housing providers systematically, predictably, and transparently. It has established working relationships with over 130 NSP grantees and enlisted the participation of the nation’s leading financial institutions.
NCST’s standardized acquisition process enables quick sales of REO to publicly supported buyers, a
money-saving proposition for financial institutions managing REO as it allows them to avoid transaction uncertainty, lower carrying costs and marketing costs, and reduce risk of property deterioration and vandalism. Quick acquisition decisions and fast closings on properties save REO sellers real money that can be passed on to NSP buyers. Financial institutions calculate the price at which they are willing to sell the properties through NCST using a “net realizable value” process that reflects cost savings from the expedited REO sales. NSP grantees have achieved an average property discount of over 17 percent from fair market value on transactions (a savings of over $13,000 per property).
In addition, NCST pioneered the “first look” model, which gives NSP-funded buyers a window of exclusivity to see and determine interest in new REO listings before these properties are marketed to the broader buying public. Although developed initially to ensure a substantial discount consistent with early HUD NSP requirements, the “first look” program is also a way to ensure that NSP buyers can see and selectively buy REO property without competition from investors.
To date, financial institutions working with NCST have transferred nearly 3,000 REO properties directly to NSP grantees representing more than 250 communities in 41 states.
On September 1st, HUD Secretary Shaun Donovan announced a national HUD First Look program. NCST’s established system will serve as the “engine” behind this new program. Large financial institutions participating in First Look include Bank of America, Citigroup, Fannie Mae, Freddie Mac, FHA, GMAC, JPMorgan Chase, Nationstar, and Wells Fargo and specialty servicers such as Ocwen and Saxon. Under the new national program, HUD is encouraging all servicers and investors to commit to establishing a “first look” process for REO listings to ensure that NSP grant recipients can more strategically and effectively acquire properties to advance their local stabilization efforts.
Getting to true scale with REO acquisition and disposition efforts will also require better technology. NSP grantees now have access to a collection of technology tools that can assist them to more accurately assess their local real estate landscape and use data to drive strategic planning efforts:
REOMatch, a web-based mapping and property transaction tool created by NCST, enables property buyers to define target areas and view all REO listings within those set boundaries in real time and helps them identify acquisitions, smoothly navigate the transaction process, and manage NSP acquisition pipelines.
Community Central, developed by Mercy Housing, a national nonprofit that develops, finances, and operates affordable housing, provides comprehensive project management capabilities for local NSP programs. The web-accessible platform offers asset and project management tracking and reporting over a full lifecycle of NSP-funded evaluation, acquisition, rehabilitation, and disposition.
The Reinvestment Fund’s PolicyMap is an indispensable tool that aggregates and displays a wide array of demographic and economic data at a glance, helping local housing providers with planning and execution strategies.