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Neighborhood Stabilization & Foreclosure Response

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Enterprise Point of Contact:

Amanda Sheldon Roberts
Housing Director
Last Updated: April 29, 2012

Issue Background: Neighborhood Stabilization & Foreclosure Response

The Neighborhood Stabilization Program (NSP) provides emergency assistance to states and local governments to acquire and redevelop foreclosed, vacant and abandoned properties that have become blights on the community and are driving down neighboring property values.

As the foreclosure crisis spread throughout the country, it became apparent that entire neighborhoods were being harmed by vacant and abandoned homes. In order to stabilize these neighborhoods and stop the precipitous decline of neighborhood property values, the NSP Program was authorized and funded by Title III of the Housing and Economic Recovery Act of 2008 (HERA; Public Law 110-289), passed on July 30, 2008. Since the initial round (NSP1), two additional rounds of NSP funding have been provided by Congress. On February 17, 2009, the American Recovery and Reinvestment Act (ARRA; Public Law 111-5) provided an additional $2 billion for the program via a competitive allocation (NSP2). On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act, Public Law 111-203) provided an additional $1 billion for a third round (NSP3), but the allocation returned to the needs-based formula of NSP1.

With the foreclosure crisis still affecting communities across the country, larger scale solutions will be required to stabilize the housing market and neighborhoods. The Obama Administration has released several new initiatives to help troubled homeowners, including the Home Affordable Modification Program (HAMP) for loan modifications, the Emergency Homeowners Loan Program (EHLP) for unemployed borrowers and the Home Affordable Refinance Program (HARP) for underwater borrowers. The Administration is also working on a Real-Estate Owned (REO) initiative that is aimed at reducing the large inventory of government-owned vacant and foreclosed properties. The “REO-to-Rental” initiative will permit qualified investors to purchase pools of foreclosed properties provided the investor rents the properties for a pre-determined period of time.

Current Policy State

The three rounds of NSP total nearly $7 billion dollars. NSP1 grantees obligated their funds by September 2010, NSP2 grantees have until 2013 to expend their funds, and NSP3 awards must be expended by 2014. NSP has changed significantly since its creation in 2008. Congress has made improvements through legislative corrections in ARRA and the Dodd-Frank Act, and HUD has issued dozens of policy updates. However, there are still outstanding regulatory issues that need to be addressed. Advocates continue to work with HUD and Congress to further improve the NSP program.

On Feb. 1, 2012, the White House released President Obama’s Plan to Help Responsible Homeowners and to Heal the Housing Market – a fact sheet detailing the President’s 2012 State of the Union announcements regarding an expanded mortgage refinance program and other initiatives aimed at supporting the recovery of the housing market. By permitting non-Government-Sponsored Enterprise (GSE) borrowers who meet certain criteria to refinance into Federal Housing Administration (FHA)-backed loans, the newly proposed mortgage refinance plan would enable underwater homeowners that are current on their payments to gain access to today’s historically low interest rates. The program, which could potentially impose new fees on large financial institutions in order to pay for its estimated cost of $5-10 billion, would require Congressional approval.

The fact sheet also includes details on an expansion of HAMP, a Homeowner Bill of Rights, a pilot for transitioning foreclosed homes into rental properties, a full year of forbearance for borrowers looking for work, a joint investigation into mortgage origination and servicing abuses, and requested funding for Project Rebuild and the National Housing Trust Fund.

On February 9, 2012 the Obama Administration, working with 49 of the 50 states’ attorneys general, reached a settlement with the five largest mortgage servicers: JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, and Ally Financial. The settlement was in response to litigation related to the servicers' foreclosure processes. In the aggregate, the settlement will cost the five servicers approximately $25 billion, with the largest amount set aside for principal reduction. In addition, the servicers agreed to abide by a national servicing standard that includes affirmative measures to deter blight, in part through working with non-profits. For more information and a breakdown of states' use of the settlement funds, read the Enterprise summary materials.

Legislative and Regulatory Priorities

NSP is an important but limited tool. Therefore, in order to truly stabilize neighborhoods devastated by the foreclosure crisis, Congress and the Administration need to address the many policy issues that will enhance NSP neighborhoods. Therefore, Enterprise is working with the administration to shape programs and policies that will have the largest positive impact on troubled homeowners and neighborhoods. In 2012, Enterprise is focused on the new REO-to-Rental initiative and ensuring that neighborhoods benefit from the implementation of the February 9 national mortgage settlement.

Publications and Resources

Enterprise Resources


Community Foreclosure Response

Communities are threatened by the mortgage foreclosure crisis and the impact of concentrated foreclosures. Enterprise is working on programs and policies to protect the communities we serve. Learn more about our Community Revitalization initiatives.

2012 Mortgage Services Settlement

Principal Reduction as a Foreclosure Response Tool

Neighborhood Stabilization Program

NSP Formula Grant Program Requirements (Rounds 1 and 3) and NSP3 Formula Allocations

The Department of Housing and Urban Development published the Notice of Formula Allocations and Program Requirements for the Neighborhood Stabilization Program (NSP) Formula Grants (FR-5447-N-01) on October 19, 2010. This is a unified notice for both the first and third round of NSP funding (NSP1 and NSP3). For NSP1 grantees, the notice provides consolidated program requirements, combining the original NSP notice (FR-5255-N-01; October 6, 2008), the NSP Bridge Notice (FR-5255-N-02; June 19, 2009), and other program modifications over the past two years. The notice also outlines the allocation formula amounts, alternative requirements and the waivers of regulations that are specific to NSP3, which received $1 billion in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law Number 111-203).

Stabilizing Housing and Neighborhoods

Real Estate Owned (REO) Asset Disposition

Regulatory Reform - Qualified Residential Mortgages

On July 27, 2011, Vice President, National Community Foreclosure Response Initiative Robert Grossinger provided Public Comment to the federal financial regulatory agencies on the risk retention and qualified residential mortgage requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law Number 111-203.

FHA Mortgage Products to Stabilize High-Foreclosure Neighborhoods

On August 16, 2010, Vice President, Public Policy and Government Relations Adrienne Quinn provided Public Comment to FHA on Risk Management Initiatives that included recommendations for mortgage products that are available to homebuyers seeking to purchase homes in areas with high foreclosure and vacancy rates.

Financial Regulatory Reform Foreclosure Provisions

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law Number 111-203) included $1 billion for a third round of the Neighborhood Stabilization Program (NSP3), as well as a long-awaited vacant property legislative improvement so that vacant properties can count toward the low-income set aside in NSP.

NSP Recapture/Reallocation Notice

On August 23, 2010, HUD released the Notice of Neighborhood Stabilization Program (NSP) Reallocation Process Changes (FR-5435-N-01). The Notice describes the corrective actions, recapture process, reallocation formula and waivers of regulations affecting grantees that fail to meet the 18-month deadline for obligating the first round of NSP funds (NSP 1).

CRA Credit for NSP Activities

On July 23, 2010, Vice President, Public Policy and Government Relations Adrienne Quinn submitted Public Comment on Consideration of Neighborhood Stabilization Program (NSP) Activities for Community Reinvestment Act (CRA) credit to the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve, Federal Deposit Insurance Corporation and Office of Thrift Supervision.

2009 Economic Stimulus (NSP2)

Enterprise NSP Report

External Resources
© 2012 Enterprise Community Partners, Inc.
We are Enterprise. Our family includes Enterprise Community Partners, Inc, a national Section 501(c)(3) charitable organization that provides expertise for affordable housing and sustainable communities. Financing for affordable housing is offered through our tax-exempt subsidiary, Enterprise Community Loan Fund, Inc., and our for-profit subsidiary, Enterprise Community Investment, Inc. Housing development is offered through Enterprise Community Investment's subsidiary, Enterprise Homes, Inc. The content on this website reflects information about all of these entities.