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Billion Dollar Federal Rescues from Main Street to Wall Street Urban Land Institute Fall Meeting Ali Solis, Vice President, Public Policy & Industry Relations October 29, 2008 The Enterprise Mission Enterprise’s mission is to see that all low-income people in the United States have the opportunity for fit and affordable housing and to move up and out of poverty into the mainstream of American life. How We Do It We advise, finance and assist in the construction and rehabilitation of affordable housing and economic development projects. We create community development models and policies that can be replicated. What We’ve Accomplished More than $9 billion in equity, loans and grants invested since 1982. More than 240,000 affordable homes created. Investing $1 billion in equity, loans and grants annually. Foreclosure Crisis – Why we care Unprecedented Housing Crisis: Foreclosures have increased by 71% since last year 1.2 million REOs by the end of 2008 Enormous impact on entire communities 40.6 million homes in neighborhoods surrounding foreclosed homes will suffer price decline $352 billion total decline in property values Localities will lose $4.5 billion in property taxes and other local tax revenue Housing and Economic Recovery Act of 2008 HERA provides 3 major new sources of affordable housing and community development funding: 1. Neighborhood Stabilization Funds $3.92 billion in one-time emergency grants to states and cities $180 million in counseling through NeighborWorks America 2. Housing Trust Fund $150 - $350 million per year in block grants to states to finance affordable housing 3. Capital Magnet Fund $75 - $200 million per year in competitive grants to CDFIs and qualified nonprofits to finance affordable housing, economic and community development Allocation of NSP Funds Allocation Formula - Grants were targeted to approximately 300 cities, counties, and states based on: Number and percent of foreclosures Subprime loans Loans in default Loans delinquent Local Priorities - States and local governments are required to give priority to areas with the greatest need. Allocation Example: Florida State of Florida $91,141,478 Total FL Allocation: $541,364,779 Miami-Dade County $62,207,200 44 Other Florida City of Miami Cities and Counties $12,063,702 $294,174,969 Jacksonville-Duval $26,175,317 Orange County $27,901,773 Palm Beach County $27,700,340 Eligible Uses of NSP Funds Establish financing mechanisms for purchase and redevelopment of foreclosed homes Purchase and rehabilitate properties that have been abandoned or foreclosed Establish land banks for homes that have been foreclosed Demolish blighted structures Redevelop demolished or vacant properties Regulations on NSP Funds Discount requirement Purchases of foreclosed homes must be at a discount from the current market appraised value Resale restriction Resale of rehabbed homes and redeveloped properties must be equal or less than the cost to acquire and rehabilitate No profit is allowed Developer Fees are permitted Ineligible activities Foreclosure prevention Demolition of non-blighted structures Purchase of properties no abandoned or foreclosed upon Regulations on NSP Funds Income targeting All funds must be used for families whose income does not exceed 120% AMI At least 25% must be used to purchase and redevelop housing for families below 50% AMI Reinvestment of profits For the first five years, states and communities must reinvest all profits into additional eligible redevelopment activities NSP: An Opportunity for Developers Local municipalities need a lot of help to address the magnitude of this crisis Limited capacity on the part of non-profits Joint venture partnerships needed Big need for expert scattered site asset managers NSP: An Opportunity for Developers Developer’s Fee is permitted under HUD NSP But no profit may be earned on the sale of a rehabilitated home Program revenue must be reinvested for eligible uses HUD encourages funds to be used for Green rehabilitation Includes energy efficiency and conservation improvements Funds may be used for non-residential uses Example: public parks, commercial uses Must still adhere to income requirements Accessing NSP Funds Tight timeframe: Action Plan due to HUD December 1, 2008 All funds must be obligated within 18 months of receipt and spent within 4 years Opportunities for builders will vary depending on how local or state government chooses to implement NSP Contact local government, county or state NSP funds will be distributed through Community Development Block Grant (CDBG) grantees NSP grantees are required to post their action plan on their websites HUD NSP Website http://www.hud.gov/offices/cpd/communitydevel opment/programs/neighborhoodspg/ Useful Resource for: Local allocation amounts FAQs Training webcasts Federal Register Notice Goals of a Community Stabilization Strategy Keep residents in their homes Restore market confidence Prevent and eliminate blight Preserve property values Renovate and sell/rent vacant properties Create land banks for obsolete properties Reduce holding periods of REOs by lenders/servicers Target communities to stop downward cycle Successful Community Stabilization Initiatives Good data and mapping critical Precise geographic targeting Sustain at-risk owners through workouts Demolish obsolete & blighted properties Renovate and sell/rent vacant properties Provide quality counseling Vacant land banking/reutilization Public/private partnerships with flexible subsidies to fill development gaps Enterprise City & State Partners on the Foreclosure Crisis Atlanta Baltimore Cleveland Columbus Dallas District of Columbia Los Angeles NYC Rochester State of Mississippi Enterprise’s Role in Target Communities Leveraging Public Funds through Innovative Financing Property Valuation Assistance Program Design Expertise Integration with Local Efforts Assistance to state/local government partners on developing NSP Action Plans Experience with REO-Rehab-Disposition Programs Access to REO Properties through National Community Stabilization Trust Concentration Example: Cleveland Cleveland Foreclosure Response Pilot 3-Year Pilot Plan impacting on 750 homes in six Cleveland neighborhoods: Help 300 families at risk of foreclosure stay in their homes Demolish 300 obsolete, blighted structures Redevelop 150 vacant homes for homeownership, lease/purchase or rental housing (60-120% AMI) Cleveland Cleveland Foreclosure Response Pilot Partners: Neighborhood Progress, Cleveland Housing Network, City of Cleveland, 6 CDCs Development costs total $21 million including: Demolition resources: $1.2 million in CDBG REO Redevelopment: $1.5 million in CDBG soft seconds ($10,000 per homeowner) $4.5 million in gap funding from OHFA Enterprise’s Role: Technical assistance in the creation of this pilot program $1 million in pre-development and acquisition financing $200,000 grant from program reserves Remaining Challenges Production capacity – need to ramp up quickly $3.92 billion – great start, not nearly enough Timely access to discounted REOs in bulk Untangling REOs from complicated financing pools New Innovation: Community Stabilization Trust National Community Stabilization Trust (NCST) Coordinates the purchase and disposition of REO properties from lenders, loan servicers, investors Lead partner organizations: Enterprise The Housing Partnership Network The Local Initiatives Support Corporation NeighborWorks America New Innovation: Community Stabilization Trust Goal of NCST: Effectively link financial institutions with local housing providers Support local programs to stem decline in communities NCST Key Activities: Transfer of foreclosed properties to localities Provide financing to support local efforts Organize and facilitate local collaborations Advocate for programs, policies and resources National Community Stabilization Trust Growing participation in NCST property acquisition programs from leading national financial institutions and federal agencies: Wells Fargo JPMorgan Chase Citigroup Freddie Mac Fannie Mae Bank of America/Countrywide GMAC HUD/FHA FDIC For Further Information Ali Solis Vice President, Public Policy and Industry Relations email@example.com 202.842.9190 Thank You!