Can NSP funding be used to rehabilitate a property if it was purchased prior to NSP and prior to the completion of an Environmental Review, but qualifies as "foreclosed" or "abandoned" based on the revised definitions?

Date Published: October 2012

Print ShareThis


The answer to this question depends on the purchaser. If a grantee directly purchased a property that met the new definition of abandoned or foreclosed because the owner was delinquent but not yet foreclosed, the grantee becomes the Initial Successor in Interest (ISII). The grantee can then donate or sell that property to an individual or developer and provide NSP rehabilitation/demolition assistance.

Note that retroactive reimbursement for property acquisition is not eligible. If properties were purchased out of foreclosure or abandonment prior to the onset of NSP, but have been in continuous ownership by the grantee, then NSP funds can be used for rehabilitation and new construction, but not for acquisition costs because the grantee cannot pay itself for the purchase. This property would still be considered foreclosed or abandoned, and thus could be used under the 25% low-income set aside. Under Public Law 111-203, vacant and demolished property types are now eligible to be counted towards 25% set aside as well.    

However, if an individual household or a developer buys a property that now qualifies as foreclosed and the grantee wants to be able to provide NSP rehabilitation/demolition assistance, the developer/individual must be under an NSP written agreement with the grantee at the time the property is purchased, even if the acquisition is not paid by NSP. The grantee must ensure that they document the condition of the property at the time of acquisition to establish that it was "foreclosed" or "abandoned" as defined under NSP. While the new definitions make it possible to access properties that were not previously eligible for NSP funding, the environmental review and purchase discount rules still apply. The ER regulations cited at 24 CFR 58.22 set the timing rules for acquiring property. It says that federal funds may not be used if the properties were acquired prior to submission of the grantee's application, and the ER was not completed at the time of acquisition. It goes on to say that even if a property is acquired with another source of funds, federal funds cannot be used if the ER is not completed prior to acquisition. Because the property was acquired prior to the completion of the ER, the property is not eligible for NSP funding.

Tags: NSP Program Requirements - Eligible Costs