5.3. SR 04-05-2010Item # 5.3.
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MEMORANDUM
TO: Mayor and City Council
FROM: Annie Deckert, Economic Development Assistant
DATE: April 5, 2010
SUBJECT: Neighborhood Stabilization Program Fund Update
Attachments
• NSP Targeted Neighborhood Map
• NSP Funding Chart
• Foreclosure Initiatives and Housing Rehab Pamphlet
Background
In response to the drastic increase in foreclosures and the impact of the subprime lending
situation on housing, Congress authorized the Neighborhood Stabilization Program under
the Housing and Economic Recovery Act (HERA) signed by the President in July 2008.
NSP provides emergency assistance fox the redevelopment of abandoned and foreclosed
homes that might otherwise become sources of abandonment and blight. Minnesota
Housing is a grantee for the state in the amount of $38.8 million and will administer the use
of these funds in highly impacted communities in greater Minnesota. ($20 million has also
been allocated specifically to metro area jurisdictions).
In February, the Elk River Housing Redevelopment Authority (HRA) was awarded $593,820
to provide targeted assistance to address foreclosed properties in specific neighborhoods
within the City that may otherwise become sources of abandonment, blight, or crime. The
funds can be used for down payment assistance, purchase rehabilitation, and acquisition
rehabilitation. The HRA contracted with Tri-CAP, anon-profit community agency to assist
in the administration of the funds.
The purpose of these funds is to assist buyers in becoming successful homeowners in the
long term and to decrease the negative effects of foreclosures on communities. In order for
a property to be eligible for NSP funds, the home must be foreclosed and located in one of
the targeted neighborhoods. Program is not limited to first time homebuyers. Funds are
provided as deferred grants/loans with occupancy requirements.
The following neighborhoods are eligible for the funds:
o Country Crossing
o Elk River Station
o Grandview
o Heritage Landing
o Sandpiper Estates
o Twin Lake Townhomes
o Trott Brook Farms (all subdivisions)
NSP Activities Funded to Date
In October, staff was allowed to submit amendments to the NSP contract to increase the
success of the NSP program. Two targeted neighborhoods were omitted, several were
added, and the amount of down payment assistance increased. Below is a summary of the
NSP funds spent to date:
Down Payment Assistance
Eligible applicants can apply for funding to assist with a down payment and/or closing costs.
Tri-CAP has closed a total of six down payment assistance applications, in amounts ranging
from $5,000-$15,000. Two of these applications (for $5,000 in dpa) received an additional
$10,000 each in down payment assistance from the Greater MN Housing Foundation
(GMHF) and one received $15,000 based on income eligibility.
In November of 2009, the NSP down payment assistance available from the City increased
from $5,000 to $10,000-$15,000 depending on income eligibility.
Purchase Rehabilitation Assistance
Eligible applicants can apply for funding to make necessary improvements to their property.
There have been no applications received for this initiative at this time. Staff and Tri-CAP
have estimated the cost to be approximately $35,000 per property, with no maximum set.
Acquisition Rehabilitation
Staff and Tri-CAP will purchase homes in need of rehabilitation in the targeted
neighborhoods, make necessary improvements and sell them to an income eligible buyer.
The first home was purchased under this initiative on October 30, 2009 with Tri-CAP as
developer/buyer and the HRA as funding agent via NSP. Rehab has been completed and
listed. Staff and Tri-CAP received a purchase agreement in the amount of $99,000 and
closed on February 26, 2010. The eligible applicant received down payment assistance in the
amount of $14,999. Below is the approximate breakdown of the costs:
• Acquisition (plus filing fees) $ 102,863
• Rehabilitation/utilities/advertising $ 8,409
• Realtor Sales Commission (5.4%) $ 5,395
• Development (paid to Tri-CAP) $ 11,667
• Total Costs $ 128,334
At the time of closing, roughly $81,000 was received as mortgage proceeds. This money is
considered NSP program income. NSP program income is does not need to be spent by the
September 20, 2010 deadline and can be retained by the HRA and used for NSP initiatives
to spend on NSP initiatives.
Marketing and Education
Staff and Tri-CAP have taken on several initiatives to educate and market the program to
local realtors, home buyers and the community. This includes:
• Preparation and release of five press releases
• www.ci.elk-river.mn.us/nsp
• Creation and distribution of pamphlet
• Success stories in ERStar News
• County marketing meeting
• Staff & Tri-CAP have presented to local realtor groups
• Facebook & Twitter
• One and one meetings with realtors and home buyers
NSP de-obligation of funds
On March 9, 2010, staff was notified that after much review and consideration Minnesota
Housing Finance Agency (MHFA) recommended the Ciry of Elk River for deobligation at
its March Board meeting. MHFA is required by statute to obligate 100% of its
Neighborhood Stabilization Program grant within 18 months from the program's inception.
The deobligation of funds, although an unpleasant and unfortunate process, is necessary to
ensure all program funds axe committed prior to the September deadline, and therefore
utilized in the State of Minnesota. The money will be reallocated to other entitlement
communities who have a greater need for the money.
Next steps
Staff will work with Tri-CAP and MHFA to execute all necessary contract amendments
necessary to complete the deobligation process. The HRA and Tri-CAP will continue to
work together on remaining down payment assistance applications until funds are spent
down.
Staff continues to receive foreclosure data and will continue to promote new and existing
foreclosure resources and housing financial programs to the community.
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