Minneapolis approves $5.6 million foreclosure plan
The Minneapolis City Council and Mayor R.T. Rybak approved a spending plan Friday, Nov. 21 to use $5.6 million in federal Neighborhood Stabilization funds to acquire and redevelop foreclosed properties in neighborhoods hardest hit by foreclosures.
The funds are the result of the Housing and Economic Recovery Act of 2008, which was passed by Congress and signed into law in July to help state and local governments respond to rising foreclosures and falling home values. The funds are targeted based on the number and percent of foreclosures, subprime mortgages, and mortgage defaults and delinquencies. The City will now submit its plan to the U.S. Department of Housing and Urban Development (HUD) for approval.
The $5.6 million plan is focused around purchasing, re-developing, and rehabilitating foreclosed properties:
$500,000 will establish financing mechanisms to purchase and redevelop foreclosed homes and residential properties, including using soft seconds, loan loss reserves and shared equity loans for low and moderate income homebuyers. Contract for Deed or incentive programs geared to home homeownership will also be considered.
$1,464,800 will support the First Look Program, a new national pilot project launched in Minneapolis to coordinate the transfer of real estate-owned properties from financial institutions nationwide to local housing organizations, in collaboration with state and local governments. This funding will also provide value gap financing to partners to cover the difference between cost of purchase and rehab of property and final sale price.
$1,515,200 will be used to acquire vacant foreclosed properties that are not candidates for rehabilitation, demolish them, and hold them as vacant parcels until the market is ready to absorb new development of owner-occupied housing units.
$1,700,000 will be used to demolish blighted structures. To date, the City has more than 900 properties on its vacant and boarded list.
$420,000 will cover program administration costs within the City of Minneapolis Departments of Community Planning and Economic Development, Finance and Intergovernmental Relations.
Additional Neighborhood Stabilization funding guideline details:
- The funds must begin to be used within 18 months of receipt and spent within four years.
- No less than 25 percent of the funds ($1.4 million of the $5.6 million) must be used for housing low-income individuals or families whose income is below 50 percent of the area median income.
- Property rehabilitation spending may include energy efficiency and conservation measures.
- Purchases of properties must be at least five percent below current market value (based on a 60-day appraisal from the date of acquisition).
- Properties can be sold for only an amount equal to or less than the cost to acquire and redevelop such a home or property up to a decent, safe and habitable condition.
- Within the first five years of the program, any revenue generated from the sale, rental, or redevelopment of properties in excess of actual costs shall be recycled back into the City's foreclosure program.
- After July 30, 2013, any program income must be returned to HUD, unless otherwise approved by HUD for eligible program use.
Published Nov 21, 2008