Neighborhood Stabilization Program

The Neighborhood Stabilization Program (NSP) is a program funded by the U.S. Department of Housing and Urban Development (HUD).  In Oregon, the program is being administered byt the Oregon Department of Housing and Community Services (OHCS).  The program is designed to provide financing to assist homebuyers in purchasing bank owned properties (REO properties) in targeted ares of Oregon for the purpose of stavilizing property values in the neighborhood.  the State of Oregon has money from the Federal government earmarked for this program until September of 2010...  BUT it is expected to run out before that time.  It is available on a first com first serve basis.

How Does the NSP work?

The Neighborhood Stabilization Program will provide a "soft" second mortgage to assistance fo up to $50,000 to income eligible homebuyers to purchase bank-owned properties in targeted areas.

The NSP assistance can include down payment, closing costs, pre-paid expenses and first mortgage reduction.  The home must be the borrower's primary residence and cannot be used at any time as rental property.

The NSP funds are considered "soft" mortges, which means that there is no interest due or payments required.  The NSP loan will be subordinated to the first mortgage from the homebuyer's primary lender.  The first mortgage must be a 30-year term loan and can oly have a fixed intered rate.  No refinances, adjustable rate mortgages, interest only, hybrids, combo or second mortgages with variable rates, or sub-rime loans will be allowed in conjuction with the NSP program.  The maximum debt-to-income ratio can not exceed 45%.

These loans are 0% interest rates, no payment second mortgages.  No money is paid back unless you sell the property, transfer title, or refinance the first mortgage.  If you sell the property before five (5) years, then the original NSP loan amount is due along with a portion of the appreciation realized on the property.  The equity due to the lender diminishes from 50% before the first year after the anniversary of closing to 0% on or after the fifth anniversay of closing on the property.  After 5 years, if you sell, transfer title or refinance, then you would only be required to repay the NSP funds that you borrowed.

The program also requires that any purchase price of the bank owned home must be a minimum of one percent (1%) discount from the current market-appraised value of the propety. 

Because an REO home may need some reparis, upgrades and general energy efficient improvements, there are also loan programs that can work in conjuction with the Neighborhood stabiliztion program to provide additional funds to make home repairs and energy efficient improvements.  These programs are not part of the NSP, but work with the NSP. 

Income and Education Requirements

The NSP funds are meant to help lower and middle income buyers in their ability to purchase a home.  The homebuyer eligibility requirements for the program are that they do not exceed 120% of the area median income for thier household.

There is a requirement that all homebuyers receive and complete at least eight hours of homebuyer counseling from a HUD-approved housing counseling agency before obtaining a NSP mortgage loan.

There are careful time lines with an NSP loan and it does require close cooperation between the buyer, realtor, thier loan officer and the NSP provider.