The Department of Housing and Urban Development (HUD) has published guidelines for Neighborhood Stabilization Program participants (NSP) seeking a jump start on purchasing Federal Housing Administration (FHA) owned real estate (REO). NSP qualified buyers will receive both priority status and a discount when purchasing property through FHA's First Look Sales Method, a part of its property disposition program.
NSP was established under the Housing and Economic Recovery Act of 2008 which authorized $3.92 billion in emergency assistance for the redevelopment of abandoned and foreclosed homes and residential properties through Community Block Grants. The FHA REO property disposition program is designed to dispose of properties in a manner that expands homeownership opportunities, strengthens neighborhoods and communities, and ensures a maximum return to the mortgage insurance funds.
Eligible NSP purchasers include governmental entities and nonprofit organizations which will be using NSP funds, at least in part, to purchase the FHA property. For-profit organizations are not eligible. The purchaser must submit required documentation to an applicable FHA Homeownership Center before participating in First Look.
When an REO property becomes available for purchase within an NSP designated area, it will be designated a First Look property and the availability will be publicized to eligible NSP purchases within the geographic boundaries of the project. The period between the conveyance of the property to FHA and the receipt of an appraisal on the property shall constitute the First Look consideration period which should last up to 12 days on average. During that period the potential purchases can look at the property, determine its suitability and their eligibility to purchase that specific property. Once the property is appraised, the potential purchaser has two days to submit a written offer to purchase it. If no offer is received from an eligible NSP purchaser during that two day period, FHA will make the property available under its regular disposition procedures.
First Look will convey the property to the purchaser for 10 percent below the appraised value less any applicable costs including commission. In no case will the discount be less than 1 percent of the appraised property value. Offers can include contingencies for environmental review, lead paint inspection and other provisions.
The complete list of procedures for qualifying to participate in First Look was published on July 15 in the Federal Register and can be reviewed at http://edocket.access.gpo.gov/2010/pdf/2010-17335.pdf.