States and cities are just starting to spend the millions they received from the federal Neighborhood Stabilization Program to buy repossessed houses for sale, rehabilitate them and then sell them to lower-income families.
Nearly $6 billion in NSP funds were allocated by the federal government to states and cities to help cut down repossessed houses for sale, help save deteriorating communities and help renters and lower-income families acquire their first homes.
In August last year, the amount of $3.92 billion to fund the NSP was approved by Congress as one of the provisions of the U.S. Housing and Economic Recovery Act.
Congress required that the funding must be used in neighborhoods with the highest number of borrowers with subprime loans and biggest number of foreclosures. State and city governments were also ordered to ensure that all buyers of fixed foreclosure houses were earning only 120 percent or less of the median household income in their areas.
Also, the repossessed houses for sale should be used by the buyers as their primary residences.
Since the NSP provided only general guidelines for the use of the money, state officials have crafted different plans to suit the needs of their constituents.
Arizona, which got $121 million, will spend the money to buy, repair and sell foreclosures homes at big discounts to lower-income families.
Wisconsin will use its allocation to subsidize the home loans of qualified applicants buying repossessed houses for sale. Qualified homebuyers can use the subsidy for the down payment, closing costs or repair costs.
The city of Charleston in South Carolina made an easier approach. It hired the nonprofit Lowcountry Housing Trust to use the NSP money to buy around 70 repossessed houses for sale and then operate about 60 units for rental and sell the rest to qualified families.
The NSP program of Las Vegas has three schemes: homebuyer assistance, lease-to-own, and rental housing. The first scheme will help qualified home buyers with the down payment, closing costs and repairs. The second scheme will enable low-income families to rent a house in a rent-to-own deal while the third scheme involves the purchase of foreclosed houses and condos to be offered as affordable rental housing.
In some cities where many repossessed houses for sale have been abandoned, the NSP money will be spent to demolish them and then prepare the land for further development.
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