Billion Dollar Federal Rescues from Main Street to Wall Street

Urban Land Institute Fall Meeting

Ali Solis, Vice President, Public Policy & Industry Relations

October 29, 2008

The Enterprise Mission

Enterprise’s mission is to see that all low-income people in the United States have the opportunity for fit and affordable housing and to move up and out of poverty into the mainstream of American life.

How We Do It

We advise, finance and assist in the construction and rehabilitation of affordable housing and economic development projects.

We create community development models and policies that can be replicated.

What We’ve Accomplished

More than $9 billion in equity, loans and grants invested since 1982.

More than 240,000 affordable homes created.

Investing $1 billion in equity, loans and grants annually.

Foreclosure Crisis – Why we care

Unprecedented Housing Crisis:

Foreclosures have increased by 71% since last year

1.2 million REOs by the end of 2008

Enormous impact on entire communities

40.6 million homes in neighborhoods surrounding foreclosed homes will suffer price decline

$352 billion total decline in property values

Localities will lose $4.5 billion in property taxes and other local tax revenue

Housing and Economic Recovery Act of 2008

HERA provides 3 major new sources of affordable housing and community development funding:

1. Neighborhood Stabilization Funds $3.92 billion in one-time emergency grants to states and cities

$180 million in counseling through NeighborWorks America

2. Housing Trust Fund $150 - $350 million per year in block grants to states to finance affordable

housing

3. Capital Magnet Fund $75 - $200 million per year in competitive grants to CDFIs and qualified

nonprofits to finance affordable housing, economic and community development

Allocation of NSP Funds

Allocation Formula - Grants were targeted to approximately 300 cities, counties, and states based on:

Number and percent of foreclosures Subprime loans Loans in default Loans delinquent

Local Priorities - States and local governments are required to give priority to areas with the greatest need.

Allocation Example: Florida

Palm Beach County $27,700,340

Orange County $27,901,773

Jacksonville-Duval $26,175,317

City of Miami $12,063,702

Miami-Dade County $62,207,200

44 Other Florida Cities and Counties

$294,174,969

State of Florida $91,141,478

Total FL Allocation: $541,364,779

Eligible Uses of NSP Funds

Establish financing mechanisms for purchase and redevelopment of foreclosed homes

Purchase and rehabilitate properties that have been abandoned or foreclosed

Establish land banks for homes that have been foreclosed

Demolish blighted structures

Redevelop demolished or vacant properties

Regulations on NSP Funds

Discount requirement Purchases of foreclosed homes must be at a discount from the current

market appraised value

Resale restriction Resale of rehabbed homes and redeveloped properties must be equal

or less than the cost to acquire and rehabilitate No profit is allowed Developer Fees are permitted

Ineligible activities Foreclosure prevention Demolition of non-blighted structures Purchase of properties no abandoned or foreclosed upon

Regulations on NSP Funds

Income targeting All funds must be used for families whose income does

not exceed 120% AMI

At least 25% must be used to purchase and redevelop housing for families below 50% AMI

Reinvestment of profits For the first five years, states and communities must

reinvest all profits into additional eligible redevelopment activities

NSP: An Opportunity for Developers

Local municipalities need a lot of help to address the magnitude of this crisis

Limited capacity on the part of non-profits

Joint venture partnerships needed

Big need for expert scattered site asset managers

NSP: An Opportunity for Developers

Developer’s Fee is permitted under HUD NSP But no profit may be earned on the sale of a rehabilitated home Program revenue must be reinvested for eligible uses

HUD encourages funds to be used for Green rehabilitation Includes energy efficiency and conservation improvements

Funds may be used for non-residential uses Example: public parks, commercial uses Must still adhere to income requirements

Accessing NSP Funds

Tight timeframe: Action Plan due to HUD December 1, 2008 All funds must be obligated within 18 months of receipt and spent

within 4 years

Opportunities for builders will vary depending on how local or state government chooses to implement NSP

Contact local government, county or state NSP funds will be distributed through Community Development Block

Grant (CDBG) grantees NSP grantees are required to post their action plan on their websites

HUD NSP Website

http://www.hud.gov/offices/cpd/communitydevelopment/programs/neighborhoodspg/

Useful Resource for: Local allocation amounts FAQs Training webcasts Federal Register Notice

Goals of a Community Stabilization Strategy

Keep residents in their homes

Restore market confidence

Prevent and eliminate blight

Preserve property values

Renovate and sell/rent vacant properties

Create land banks for obsolete properties

Reduce holding periods of REOs by lenders/servicers

Target communities to stop downward cycle

Successful Community Stabilization Initiatives

Good data and mapping critical

Precise geographic targeting

Sustain at-risk owners through workouts

Demolish obsolete & blighted properties

Renovate and sell/rent vacant properties

Provide quality counseling

Vacant land banking/reutilization

Public/private partnerships with flexible subsidies to fill development gaps

Enterprise City & State Partners on the Foreclosure Crisis

Atlanta Baltimore Cleveland Columbus Dallas District of Columbia Los Angeles NYC Rochester State of Mississippi

Enterprise’s Role in Target Communities

Leveraging Public Funds through Innovative Financing

Property Valuation Assistance Program Design Expertise Integration with Local Efforts Assistance to state/local government partners on

developing NSP Action Plans Experience with REO-Rehab-Disposition Programs Access to REO Properties through National

Community Stabilization Trust

Concentration Example: Cleveland

Cleveland Foreclosure Response Pilot

3-Year Pilot Plan impacting on 750 homes in six Cleveland neighborhoods:

Help 300 families at risk of foreclosure stay in their homes

Demolish 300 obsolete, blighted structures

Redevelop 150 vacant homes for homeownership,

lease/purchase or rental housing (60-120% AMI)

Cleveland

Cleveland Foreclosure Response Pilot

Partners: Neighborhood Progress, Cleveland Housing Network, City of

Cleveland, 6 CDCs

Development costs total $21 million including: Demolition resources: $1.2 million in CDBG REO Redevelopment: $1.5 million in CDBG soft seconds ($10,000

per homeowner) $4.5 million in gap funding from OHFA

Enterprise’s Role: Technical assistance in the creation of this pilot program $1 million in pre-development and acquisition financing $200,000 grant from program reserves

Remaining Challenges

Production capacity – need to ramp up quickly

$3.92 billion – great start, not nearly enough

Timely access to discounted REOs in bulk

Untangling REOs from complicated financing pools

New Innovation: Community Stabilization Trust

National Community Stabilization Trust (NCST) Coordinates the purchase and disposition of REO

properties from lenders, loan servicers, investors

Lead partner organizations: Enterprise The Housing Partnership Network The Local Initiatives Support Corporation NeighborWorks America

New Innovation: Community Stabilization Trust

Goal of NCST: Effectively link financial institutions with local housing

providers Support local programs to stem decline in communities

NCST Key Activities: Transfer of foreclosed properties to localities Provide financing to support local efforts Organize and facilitate local collaborations Advocate for programs, policies and resources

National Community Stabilization Trust

Growing participation in NCST property acquisition programs from leading national financial institutions and federal agencies:

Wells Fargo JPMorgan Chase Citigroup Freddie Mac Fannie Mae Bank of America/Countrywide GMAC HUD/FHA FDIC

For Further Information

Ali SolisVice President, Public Policy and Industry Relations

asolis@enterprisecommunity.org

202.842.9190

Thank You!