Builders Can Rehab Foreclosed Homes for HUD Program

Under the Neighborhood Stabilization Program (NSP) included in the Housing and Economic Recovery Act passed this summer, NAHB members may find opportunities to rehabilitate or redevelop homes that been foreclosed upon or abandoned.

The Department of Housing and Urban Development is distributing almost $4 billion to states and local communities to help them remove these properties from the market in a process aimed at stabilizing neighborhoods that have been hit hard by the current housing crisis. Following rules established by HUD, the homes can be purchased and rehabilitated, or if they are too deteriorated, they can be demolished and redeveloped.

The funds can also be used to provide financing for eligible households to purchase these properties, such as second loans. The properties will be sold to households earning up to 120% of area median income.

States and localities may choose to administer the NSP program directly or to contract with third parties.

The residential properties must be rehabilitated to comply with local health and safety standards. In addition, adding energy-efficiency and conservation improvements are considered eligible rehabilitation costs.

While the law does not permit any entity to make a profit on the sale of any of these homes, builders may earn developer fees as part of the rehabilitation or redevelopment costs. NAHB members should contact their local or state government to find out how the program will be implemented and what opportunities might be available for builders.

For an NAHB summary of the program rules, click here. For information about the program from HUD, click here.