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Homes and Community Renewal

New York State Issues Plan to Distribute $54.5 in Federal Funds to Buy and Renovate Foreclosed Properties

NEW YORK -- Friday, November 7, 2008 -- New York State today issued for public comment its draft plan for distributing $54.5 million in Federal Neighborhood Stabilization Program (NSP) funds that were allocated to the State to buy, renovate and resell foreclosed homes.

The funds, approved as part of the Housing and Economic Recovery Act of 2008 passed by Congress in July, are aimed at stabilizing neighborhoods hardest hit by the subprime and foreclosure crisis. The New York State Housing Finance Agency (HFA) will oversee the distribution of the NSP funds in New York State.

New York State was allocated a total of $100.3 million in NSP funds by the U.S. Department of Housing and Urban Development (HUD). Of that total, $54.5 million will be administered by HFA. The remainder will be distributed directly by HUD to the six areas most severely affected by the crisis: New York City, Nassau, Suffolk and Orange counties, and the towns of Babylon and Islip on Long Island.

The plan will be open for public comment through November 21st before it is finalized. It must be filed with HUD by December 1st. "These critical funds will allow states and local government to redevelop properties in foreclosure that might otherwise become sources of abandonment and blight, which lowers everyone's property values," said U.S. Senator Charles Schumer. "The faster we address the housing crisis that is dragging down our economy, the faster we will be able to get our economy back on track."

Priscilla Almodovar, HFA President and Chief Executive Officer, said, "These funds should go a long way to redevelop foreclosed and abandoned homes in those areas hardest hit by the recent foreclosure crisis. These homes can become eyesores in our communities and negatively impact our home values. With our partners in government, the nonprofit community and the private sector, we are committed to investing these funds in communities where they will have the greatest impact."

Last month, HFA requested expressions of interest from local governments and nonprofit organizations as a first step towards distributing funds to eligible communities. About 50 entities replied, indicating there was demand for some $117 million in funding.

It is expected that most of HFA's allocation will be distributed to programs that purchase and rehabilitate foreclosed and abandoned residential properties. Some 700 to 900 housing units are expected to be renovated and remarketed through the program. A limited portion of the funds will be used for demolition and to create local land banks. However, these uses must be part of comprehensive plans for revitalization or redevelopment of the sites for affordable housing.

Once the State's NSP plan is finalized, HFA will issue a Request for Proposal under which local governments, nonprofits and other providers can apply for the funds. HFA is required to commit all of the NSP funds within 18 months of a grant agreement between HUD and HFA. Approval of the agreement is expected to occur by early January 2009.

Under HUD guidelines, priority will be given to areas with the greatest percentage of home foreclosures, areas with the highest percentage of homes financed with subprime mortgages, areas with the greatest amount of vacant homes, and areas likely to face a significant increase in the rate of home foreclosures.

HUD guidelines also state that the NSP funds must be used to benefit households with incomes below 120% of the local Area Median Income. Additionally, 25% of the funds must be made available to assist households that have up to 50% of the Area Median Income.

The NYS Housing Finance Agency was created in 1960 to sell bonds to finance the construction and rehabilitation of multifamily affordable rental housing in New York State.

Last updated on 12/03/08