Last summer, the Los Angeles Housing Department (LAHD) rolled out their Neighborhood Stabilization Program (NSP). This was a program that was specifically designed for low-medium income, first time buyers to utilize federal funds to purchase foreclosed properties in federally designated areas in LA county that have been hard hit by foreclosures.
Initially, I thought this program would go from 0-60 in no time with the high percentage of LA county first time buyers looking to purchase the incredibly priced foreclosures that were saturating LA county.
However, after spending the first few months trying to get several of my low-medium income, first time buyers into escrow using this program, I quickly realized that this program wasn't going to be the end all be all to our market and my clients that I thought it would be.
There have been many unexpected challenges with the NSP. In most of the targeted NSP neighborhoods, there has been an unusually high demand and competition for foreclosed properties from all-cash investors.
Because REO listing agents and their bank sellers want the quickest and easiest transaction, they will almost always accept the all-cash offer instead of the financed offer, regardless of how much higher the financed offer is.
Additionally, repairs are almost always needed for these foreclosures and many times, the repairs are substantial and many problems are often hidden from the homebuyers and/or not disclosed, which is why most REO listing agents and their bank sellers will not accept financed offers.
Furthermore, many REO listing agents and their bank sellers foolishly refuse to accept FHA or VA financing because of what they perceive to be unreasonable inspection requirements.
Another problem that has been discovered in working with this program is that many properties that have been listed as foreclosures really aren't. Many times, these foreclosed homes are just properties where an investor is just reselling them from the foreclosing lender.
As a result, the pace of purchasing foreclosed properties with NSP funds has been a lot slower than anyone had predicted. LAHD has reviewed and evaluated its programs, they've made some modifications and sought other sources of properties or financing in order to be able to carry out the NSP goals and increase the NSP performance.
Through discussions with many of their approved lenders, LAHD has revised the purchase assistance loan documents to remove reference to the rehabilitation requirements for the properties and created separate rehabilitation loan documents to be executed by the borrowers after the close of escrow.
If the LAHD is not able to achieve rehabilitation of properties to LAHD standards through the standard NSP, they will transition the program to primarily support buyers of REO properties through Restore Neighborhoods LA (RNLA).
RNLA is a non-profit, property holding and development company whose primary task is the purchase, rehabilitation and resale of foreclosed or abandoned properties in the designated target areas.
RNLA is increasing activity with the National Community Stabilization Trust (NCST). They are finalizing purchase agreements with several of the banks represented by the NCST. They have also initiated rehabilitation of properties which will be sold to eligible buyers assisted through NSP. RNLA will purchase properties in bulk from lenders and loan servicers, with negotiated discounts of at least 15% of current market value, for ultimate resale to qualified owners.
It is anticipated that RNLA will purchase single-family properties that require more extensive rehabilitation than those properties that could have been purchased by homebuyers participating in the standard NSP. Once the rehabilitation is completed under the oversight of RNLA, homes will be sold to qualified homebuyers at a price no greater than the total cost of acquisition, maintenance, rehabilitation and other cost items allowed by NSP.
Right now, there are currently no rehabbed properties available for purchase but I've been checking out the RNLA site everyday and as soon as properties become available, I will post them online. First time buyers: stop getting beat out by all-cash investors. Contact me today at 805.2069123 or donne4loans@earthlink.net to find out if you are eligible for NSP down payment assistance.
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