There can be a snowball effect when a large number of foreclosures hit a neighborhood. Who wants to buy a home when prices are declining and many homes in the neighborhood are vacant with unkempt yards because of foreclosures?
But, now there is an opportunity to turn things around with federal stimulus program funding for the Neighborhood Stabilization Program (NSP). The Housing and Economic Recovery Act of 2008 (HERA) has allocated about $43 million in NSP funds to Mississippi to help people buy foreclosed and abandoned homes to help stabilize neighborhoods impacted by the home foreclosure crisis.
According to the Mississippi Development Authority (MDA), this program targets low, moderate and middle-income homebuyers and offers tangible assistance to help communities rebound from escalating foreclosures. Melissa Medley, director of marketing and communications for MDA, said communities with the highest percentage of home foreclosures and the highest percentage of homes financed by subprime loans have been targeted to receive assistance.
MDA’s Community Services Division is administering the NSP funds, which are divided into two programs. Medley said the $23-million Homebuyer Assistance Program (HBA) will be administered by the Mississippi Home Corp., and $16 million has been allocated for a Jackson Housing Program designed for the purchase and redevelopment of foreclosed and abandoned homes and the demolition of blighted structures for redevelopment in Jackson. MDA is currently in the process of developing a request for applications for non-profit organizations that have expressed an interest in administering Jackson Housing Program funds.
Scott Spivey, vice president of corporate communications for the Mississippi Home Corp., said details are currently being worked out regarding the program that will help both families and neighborhoods. Those applying for assistance do not have to be first-time homebuyers, but the home must be the buyer’s primary residence. Income can be up to 120 percent of the median income level for the area.
“The funds will be disbursed as a forgivable grant to cover closing costs, homebuyer education and down payments,” Spivey said. “The amount of the grant will depend on how long the family agrees to stay in the home. So, for example, if they sell their home before the end of their forgiveness period, they’ll be responsible for repaying part of the grant.”
The intent of the program is to help people buy homes quickly while stabilizing the value of homes in a neighborhood.
Spivey thinks the program will be a big help to get over the foreclosure slump.
“Properties are not the thing that makes neighborhoods,” Spivey said. “Families do. We are looking to put families in neighborhoods and rebuild property values.”
Spivey said the mission is specifically related to affordable housing. A lot of foreclosed properties and neighborhoods affected by large amounts of foreclosure are working-class neighborhoods in Mississippi. This will help not only neighborhoods, but assist people with low to moderate incomes in purchasing a home.
“This is a fantastic program for people looking to purchase a home, whether they are looking to move up or buy their first home,” Spivey said. “It is going to make buying that home more affordable.”
Typically the largest investment most people make in their lives is purchasing a home. Spivey said it helps families build equity, while also strengthening neighborhoods and the local economy.
“For a lot of Mississippi families, the dream of home ownership is alive and well,” Spivey said. “That is part of what the American Recovery and Reinvestment Act (ARRA) and the Mississippi Home Corp. are trying to accomplish with a lot of these programs.”
The NSP will only be available in certain areas of the state where foreclosure rates are higher. Eligible communities include — Batesville, Booneville, Brandon, Byhalia, Canton, Carthage, Clarksdale, Cleveland, Clinton, Coldwater, Columbia, Columbus, Corinth, Greenville, Greenwood, Grenada, Hattiesburg, Hernando, Holly Springs, Horn Lake, Itta Bena, Jackson, Kosciusko, Laurel, Lumberton, Madison, Magnolia, McComb, Meridian, Natchez, Nesbit, New Albany, Olive Branch, Oxford, Pearl, Petal, Pontotoc, Raymond, Ridgeland, Senatobia, Southaven, Starkville, Sumrall, Terry, Tupelo, Vicksburg, Walls and Yazoo City.
The Mississippi Home Corp. is also administering two other ARRA programs. One is the Tax Credit Assistance Program (TCAP), which is $21.8 million for gap financing for tax credit developers having a problem with syndication and sale of tax credits.
Spivey said a couple of years ago, tax credit developers would sell to tax credits to investors, and that money was used to build affordable housing. Then came the credit crunch. A significant number of banks stopped loaning money, and investors no longer need a reduction in tax liability. So, the demand for the credits fell.
“Deals that were underwritten expecting a certain amount of investment lost a lot of that capital and it put those deals in jeopardy,” Spivey said. “To save those deals, especially the affordable rental program, Congress created TCAP, which is aimed at shovel-ready developments. As soon as they get assistance, they are ready to break ground and build as soon as possible to help people get into homes.”
The second program is the Tax Credit Exchange Program. This program allows developers to take 40 percent of tax credit allocation for this year, plus any carry forward last year, and exchange that to the U.S. Treasury Department for 85 cents on dollar. The Mississippi Home Corp. is waiting on guidance from the U.S. Treasury Department about how that $2.7-million program will be administered.
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