NSP1-A Deadline Looms

Last week HUD announced the details of their enforcement of the 18-month deadline for obligation of the first round of Neighborhood Stabilization Program funds (NSP1).  NSP1 is a federal program for “the purpose of assisting in the redevelopment of abandoned and foreclosed homes,” and was funded through the Housing and Economic Recovery Act of 2008 (HERA)

TxLIHIS issued a report in June indicating that many grantees in Texas might miss their18-month obligation deadline.

HUD released two documents, a formal Federal Register notice and less formal “guidance” interpreting the formal notice.

The notice states: “HUD will block each grantee’s ability to obligate NSP1 grant funds in the Disaster Recovery Grant Reporting System (DRGR) on the first business day after the statutory 18-month deadline for use of funds.”

There are 15 direct NSP1 grantees in Texas: TDHCA (the state grantee), and 14 other local jurisdictions (such the city of Houston and Fort Bend county).  State grantees such as TDHCA are treated differently than the other grantees in the published enforcement rules; in short, the first $19.6 million of unobligated funds left at TDHCA will be recaptured, no questions asked, while the other (non-state) direct grantees will have further opportunity to obligate their funds.

Non-state direct grantees will face a wide range of range of corrective actions, such as “required obligation schedules, required technical assistance, contracting with an experienced sub-recipient or development partner, cancellation of lagging activities, and similar steps.”  The level of  corrective action will escalate with the magnitude of un-allocated funds.

TDHCA chose to reallocate its funds to a network of local sub-recipients, including many managed by TDRA.  Since these funds were originally allocated by HUD to TDHCA, they will be subject to the stricter recapture rules of a state grantee.

TDHCA’s 18-month obligation deadline is Friday, September 3, 2010.  While the exact deadline may vary for the other direct grantees in Texas, HUD states that by October 1 most NSP1 grantees will have passed the 18-month obligation deadline

HousingandDevelopment.com is reporting that nationally, grantees have obligated over 85% of NSP1 funds.  Nevertheless, Texas grantees likely lag this average; as of July 31, HUD’s NSP 1 National State Summary Report indicated a 76.6% national obligation rate, with Texas grantees clocking in at only 53.2%.

8/31 Update: HUD reported this afternoon that they were at 91% obligated nationally, and that 13 grantees (nationally) have already reached their 18-month deadline and all 13 have obligated 100% of their funds.  Nine state grantees still have more than $9 million remaining to obligate (several with “substantially more” than $9 million left to obligate).

By this time next week we should know if TDHCA met its obligation deadline or if it will be cutting a (figurative) check to HUD returning NSP1 funds.  There is clearly a need for funds to address foreclosure in Texas, and a failure to obligate these funds would be a failure for Texans.

Even if TDHCA pulls this out and makes the deadline, Texas needs to learn how to fix whatever is putting it behind the curve in this program.  The recent financial reform bill contained a third round of Neighborhood Stabilization Program funds (NSP3), and in 2012, when we are five days out from the 18-month NSP3 obligation deadline, we should be celebrating our accomplishments, not hoping for the best.