Congressional Action

		Housing and Economic Recovery Act, Title III (P.L. 110-289)

In response to the mortgage foreclosure crisis several bills were introduced during the 110 th Congress that were intended to address specific issues, including:
reducing the number of homeowners facing foreclosure because of their inability to keep pace with rising interest rates as their adjustable rate mortgages, many of them subprime loans, reset; reclaiming the supply of vacant housing by providing assistance to states, local governments, and nonprofit entities that could use funds to acquire, resell, rehabilitate, rent, or demolish vacant properties in an effort to minimize potential blight and associated problems in neighborhoods with high concentrations of foreclosed properties; and addressing declining tax revenues, particularly property taxes and the subsequent cutbacks or curtailment in the delivery of public services. Title III of HERA—Emergency Assistance for the Redevelopment of Abandoned and Foreclosed Homes—appropriated $3.92 billion in supplemental CDBG assistance to states and local governments based on a formula developed by HUD that differs from that used to distribute funds under the regular CDBG program. Eligible Activities

Unlike the larger CDBG program, which allows state and local government grant recipients to undertake any of 27 eligible activities authorized under the statute, HERA restricted grant recipient use of NSP funds to the following housing and foreclosure-related activities: 
the creation of financing instruments that enable state and local government NSP recipients to finance the purchase and redevelopment of foreclosed homes and residential properties; the purchase and redevelopment of foreclosed residential properties for sale, rent, or redevelopment; the demolition of blighted residential structures; the establishment of land banks; and the redevelopment of vacant and demolished properties. 111-5)

			Legislative Action

During the first month of the 111 th Congress, Members debated the passage of the American Recovery and Reinvestment Act of 2009 (ARRA, H.R. 1 ). Recipients are required to spend at least half of the funds within two years of allocation, and 100% within three years of the date funds are allocated. The act also required grantees to obligate NSP-2 funds within one year of its enactment. NSP 3: Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203)

			Legislative Action

Congress appropriated an additional $1 billion for NSP-3 under the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. The Wall Street Reform Act established a minimum allocation of 0.5% ($5 million) for each of the 50 states and $1 million for local units of government. The Wall Street Reform Act gives grantees two years from the date a grant agreement is signed with HUD to expend 50% of their NSP-3 allocation and three years to expend 100% of these funds. Current Debate

On March 1, 2011, Representative Gary Miller introduced the Neighborhood Stabilization Termination Act, H.R. 861 , which would rescind the $1 billion in NSP-3 funds appropriated under the Wall Street Reform Act. On March 2, 2011, the House Financial Services Committee's Subcommittee on Insurance, Housing, and Community Opportunity conducted a hearing on NSP and three federal foreclosure mitigation programs. On March 9, 2011, the House Financial Services Committee considered, marked up, and ordered reported H.R. 861 . During the markup the committee approved by voice vote an amendment requiring HUD to publish a notice of termination of the NSP program on its website. The notice is to be posted within five days following the bill's enactment and is to include language directing citizens to contact their congressional representatives and locally elected officials if they are concerned about the impact of foreclosures on their communities.
In response to the rising number of home mortgage foreclosures the 110th Congress passed the Housing and Economic Recovery Act of 2008 (HERA), P.L. 110-289. Title III (Emergency Assistance for the Redevelopment of Abandoned and Foreclosed Homes) of HERA authorized the creation of the Neighborhood Stabilization Program (NSP-1). Using the administrative framework of the Community Development Block Grant (CDBG) program, a total of $3.92 billion was allocated to 307 recipients, including all 50 states, Puerto Rico, insular areas, and qualifying local governments. Funds were awarded by formula based on a state or locality's concentrations of foreclosed homes, subprime mortgage loans, and delinquent home mortgages.
Since the passage of HERA, Congress has appropriated an additional $3 billion in NSP funds to assist state and local governments to acquire, rehabilitate, and resell the growing inventory of abandoned and foreclosed residential properties resulting from the home mortgage crisis. In 2009, Congress appropriated $2 billion for NSP-2 activities when it passed the American Recovery and Reinvestment Act of 2009 (ARRA), P.L. 111-5. ARRA revised key elements of the program as a result of a number of issues raised during the early implementation of NSP-1. Funds appropriated under ARRA for NSP-2 were awarded competitively and included non-profit and for-profit entities as direct recipients of funds when teamed with a state or local government. In 2010, Congress appropriated $1 billion for NSP-3 under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Wall Street Reform Act), P.L. 111-203. The Wall Street Reform Act also used a formula to award funds to states and qualifying local governments with high concentrations of foreclosed homes, subprime mortgages, and delinquent or defaulted residential mortgages.
Legislation appropriating funds for each of the three rounds included specific deadlines for the obligation and expenditure of funds. Under NSP-1, grantees were required to obligate funds within 18 months from the date HUD signed their grant agreements and to expend their allocations within four years of the allocation date. NSP-2 recipients are required to spend at least 50% of their grant awards within two years of the date funds were allocated, and 100% within three years of the date funds were allocated. Although the Wall Street Reform Act did not include a deadline identifying when funds were to be obligated, it did require that 50% of a recipient's allocation must be expended within two years, and 100% within three years.
On March 1, 2011, Representative Gary Miller introduced the Neighborhood Stabilization Termination Act, H.R. 861, which would rescind the $1 billion in NSP-3 funds appropriated under the Wall Street Reform Act. On March 2, 2011, the House Financial Services Committee's Subcommittee on Insurance, Housing, and Community Opportunity conducted a hearing on NSP and three federal foreclosure mitigation programs. On March 9, 2011, the House Financial Services Committee considered, marked up, and ordered reported H.R. 861. During the markup the committee approved by voice vote an amendment requiring HUD to publish a notice of termination of the NSP program on its website. The notice is to be posted within five days following the bill's enactment and is to include language directing citizens to contact their congressional representatives and locally elected officials if they are concerned about the impact of foreclosures on their communities.
This report will be updated as events warrant.