Notice of Allocations, Application Procedures, Regulatory Waivers Granted to and Alternative Requirements for Emergency Assistance for Redevelopment of Abandoned and Foreclosed Homes Grantees Under the Housing and Economic Recovery Act, 2008, 58330-58349 [E8-23476]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 73, Number 194 (Monday, October 6, 2008)]
[Notices]
[Pages 58330-58349]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23476]



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Part III





Department of Housing and Urban Development





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Notice of Allocations, Application Procedures, Regulatory Waivers 
Granted to and Alternative Requirements for Emergency Assistance for 
Redevelopment of Abandoned and Foreclosed Homes Grantees Under the 
Housing and Economic Recovery Act, 2008; Notice

Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / 
Notices

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5255-N-01]


Notice of Allocations, Application Procedures, Regulatory Waivers 
Granted to and Alternative Requirements for Emergency Assistance for 
Redevelopment of Abandoned and Foreclosed Homes Grantees Under the 
Housing and Economic Recovery Act, 2008

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of allocation method, waivers granted, alternative 
requirements applied, and statutory program requirements.

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SUMMARY: This notice advises the public of the allocation formula and 
allocation amounts, the list of grantees, alternative requirements, and 
the waivers of regulations granted to grantees under Title III of 
Division B of the Housing and Economic Recovery Act of 2008, for the 
purpose of assisting in the redevelopment of abandoned and foreclosed 
homes under the Emergency Assistance for Redevelopment of Abandoned and 
Foreclosed Homes heading, referred to throughout this notice as the 
Neighborhood Stabilization Program (NSP). As described in the 
Supplementary Information section of this notice, HUD is authorized by 
statute to specify alternative requirements and make regulatory waivers 
for this purpose. This notice also notes statutory issues affecting 
program design and implementation.

DATES: Effective Date: September 29, 2008.

FOR FURTHER INFORMATION CONTACT: Stanley Gimont, Director, Office of 
Block Grant Assistance, Department of Housing and Urban Development, 
451 Seventh Street, SW., Room 7286, Washington, DC 20410, telephone 
number 202-708-3587. Persons with hearing or speech impairments may 
access this number via TTY by calling the Federal Information Relay 
Service at 800-877-8339. FAX inquiries may be sent to Mr. Gimont at 
202-401-2044. (Except for the ``800'' number, these telephone numbers 
are not toll-free.)

SUPPLEMENTARY INFORMATION:

Authority To Provide Alternative Requirements and Grant Regulatory 
Waivers

    Title III of Division B of the Housing and Economic Recovery Act, 
2008 (HERA) (Pub. L. 110-289, approved July 30, 2008) appropriates 
$3.92 billion for emergency assistance for redevelopment of abandoned 
and foreclosed homes and residential properties, and provides under a 
rule of construction that, unless HERA states otherwise, the grants are 
to be considered Community Development Block Grant (CDBG) funds. The 
grant program under Title III is commonly referred to as the 
Neighborhood Stabilization Program (NSP). When referring to a provision 
of the appropriations statute itself, this notice will refer to HERA; 
when referring to the grants, grantees, assisted activities, and 
implementation rules, this notice will use the term NSP.
    HERA authorizes the Secretary to specify alternative requirements 
to any provision under Title I of the Housing and Community Development 
Act of 1974, as amended, (the HCD Act) except for requirements related 
to fair housing, nondiscrimination, labor standards, and the 
environment (including lead-based paint), in accordance with the terms 
of section 2301 of HERA and for the sole purpose of expediting the use 
of grant funds. (Current and former disaster recovery CDBG grantees 
should note that this authority is substantially and significantly more 
limited from that generally provided with disaster recovery CDBG 
supplemental appropriations; therefore, waivers under the NSP are much 
more limited. For example, HUD does not have authority to provide 
alternative requirements for the National Affordable Housing Act (NAHA) 
or for the Uniform Relocation Assistance Real Property Acquisition 
Policies Act of 1970 (URA). Unless this notice describes how HERA has 
superseded one of their provisions, these statutes will apply as in the 
CDBG program. Such regulatory relief as HUD deemed necessary and was 
authorized to provide under 24 CFR 5.110 and 91.600 to permit 
implementation of the NSP is provided in this notice.)
    The Secretary finds that the following alternative requirements are 
necessary to expedite the use of these funds for their required 
purposes.
    Under the requirements of HERA, the Secretary must provide Congress 
written notice of its intent to exercise the authority to specify 
alternative requirements not less than 10 business days before such 
exercise of authority is to occur. Under the HUD Reform Act, regulatory 
waivers must be justified and published in the Federal Register. The 
Department is also using this notice to provide grantees information 
about other ways in which the requirements for this grant vary from 
regular CDBG program rules. Compiling this information in a single 
notice creates a helpful resource for grant administrators and HUD 
field staff.
    Except as described in this notice, statutory and regulatory 
provisions governing the CDBG program, including those at 24 CFR part 
570 subpart I for states or, for CDBG entitlement communities, 
including those at 24 CFR part 570 subparts A, C, D, J, K, and O, as 
appropriate, shall apply to the use of these funds. (The State of 
Hawaii will be allocated funds and will be subject to part 570, subpart 
I, as modified by this notice.) Other sections of the notice will 
provide further details of the changes, the majority of which deal with 
adjustments necessitated by HERA provisions, simplifying program rules 
to expedite administration, or relate to the ability of state grantees 
to act directly instead of solely through distribution to local 
governments. In a separate guidance issuance, HUD also will provide a 
simplified ``crosswalk'' of NSP and State CDBG requirements for state 
grantee administrators.

Table of Contents

I. Allocations
    A. Formula: Allocation
    B. Formula: Reallocation
II. Alternative Requirements and Regulatory Waivers
    A. Definitions for purposes of the CDBG Neighborhood 
Stabilization Program
    B. Pre-Grant Process
    1. General
    2. Contents of an NSP Action Plan Substantial Amendment
    3. Continued Affordability
    4. Citizen Participation Alternative Requirement
    5. Joint Requests
    6. Effect of Existing Cooperation Agreements Governing Joint 
Programs and Urban Counties
    C. Reimbursement for Pre-Award Costs
    D. Grant Conditions
    E. Income Eligibility Requirement Changes
    F. State Distribution to Entitlement Communities and Indian 
Tribes
    G. State's Direct Action
    H. Eligibility and Allowable Costs
    I. Rehabilitation Standards
    J. Sale of Homes
    K. Acquisition and Relocation
    L. Note on Eminent Domain
    M. Timeliness of Use and Expenditure of NSP Funds
    N. Alternative Requirement for Program Income (Revenue) 
Generated by Activities Assisted With Grant Funds
    O. Reporting
    P. Note That FHA Properties Are Eligible for NSP Acquisition and 
Redevelopment
    Q. Purchase Discount
    R. Removal of Annual Requirements
    S. Affirmatively Furthering Fair Housing
    T. Certifications
    U. Note on Statutory Limitation on Distribution of Funds
    V. Information Collection Approval Note
    W. Duration of Funding

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I. Allocations

A. Formula: Allocation

    HERA provides $3.92 billion of funds that are generally to be 
construed as CDBG program funds for the communities and in the amounts 
listed in Attachment A to this notice. Attachment A also includes a 
description of the allocation formula used to determine the grant 
amounts, as required by HERA.

B. Formula: Reallocation

    1.a. To expedite the use of NSP funds, the Department is specifying 
alternative requirements to 42 U.S.C. 5306(c). If a unit of general 
local government receiving an allocation of NSP funds under this notice 
(as designated in Attachment A) fails to submit a substantially 
complete application for its grant allocation by December 1, 2008, or 
submits an application for less than the total allocation amount, HUD 
will simultaneously notify the jurisdiction of the cancellation of all 
or part of its allocation amount and proceed to reallocate the funds to 
the state in which the jurisdiction is located.
    b. If a state or insular area receiving an allocation of funds 
under this notice fails to submit a substantially complete application 
for its allocation by December 1, 2008, or submits an application for 
less than the total allocation amount, HUD will simultaneously notify 
the state or insular area of the reduction in its allocation amount and 
proceed to reallocate the funds to the 10 highest-need states based on 
original rankings of need.
    2. If any jurisdiction, state, insular, or local area fails to meet 
the requirement to use its grant within 18 months of receipt of the 
amounts, as required, HUD, on the first business day after that 
deadline, will simultaneously notify the grantee and restrict the 
amount of unused funds in the grantee's line of credit. HUD will allow 
the grantee 30 days to submit information to HUD regarding any 
additional ``use'' of funds not already recorded in the Disaster 
Recovery Grant Reporting system (DRGR). Then HUD will proceed to 
recapture the unused funds. HUD will reallocate these unused funds in 
accordance with 42 U.S.C. 5306(c)(4).

II. Alternative Requirements and Regulatory Waivers

    This section of the notice briefly provides a justification for 
alternative requirements, where additional explanation is necessary, 
and describes the necessary basis for each regulatory waiver. This 
section also highlights some of the statutory items applicable to the 
grants. This background narrative is followed by the NSP 
requirement(s).
    HUD's resources for implementing HERA are limited and have other 
calls upon them (for managing the regular CDBG and HOME Investment 
Partnership programs (HOME) and the New York, Gulf Coast, and Midwest 
disaster recovery grants), and the Department wants to target the use 
of its resources toward achieving NSP program performance, and 
preventing and eliminating fraud, waste, and misuse of program funds. 
Because no funds were available specifically for tracking the use of 
NSP grants, HUD is applying an existing system, unmodified. This all 
militates toward keeping standards simple or familiar, wherever 
possible. Therefore, throughout this notice, where HUD had any choice 
of a standard to use to measure compliance, HUD selected the simplest 
one to administer, giving a preference to a standard already in common 
use.
    Each grantee eligible for an NSP grant already receives annual CDBG 
allocations, has carried out needs hearings, has a consolidated plan, 
an annual action plan, a citizen participation plan, a monitoring plan, 
an analysis of impediments to fair housing choice, and has made CDBG 
certifications. The consolidated plan already discusses housing needs 
related to up to four major grant programs: CDBG, HOME, Emergency 
Shelter Grants (ESG), and Housing Opportunities for Persons With AIDS 
(HOPWA). A grantee's annual action plan describes the activities 
budgeted under each of those annual programs.
    HUD is treating a grantee's use of its NSP grant to be a 
substantial amendment to its current approved consolidated plan and 
annual action plan. The NSP grant is a special CDBG allocation to 
address the problem of abandoned and foreclosed homes. HERA establishes 
the need, targets the geographic areas, and limits the eligible uses of 
NSP funds. Treating the NSP as a substantial amendment will expedite 
the distribution of NSP funds, while ensuring citizen participation on 
the specific use of the funds. HUD is waiving the consolidated plan 
regulations on the certification of consistency with the consolidated 
plan to mean the NSP funds will be used to meet the congressionally 
identified needs of abandoned and foreclosed homes in the targeted 
areas set forth in the grantee's substantial amendment. In addition, 
HUD is waiving the consolidated plan regulations to the extent 
necessary to adjust reporting to fit the requirements of HERA and the 
use of the DRGR.
    The waivers, alternative requirements, and statutory changes apply 
only to the grant funds appropriated under HERA and not to the use of 
regular formula allocations of CDBG funds, even if they are used in 
conjunction with NSP funds for a project. They provide expedited 
program implementation and implement statutory requirements unique to 
this appropriation.

A. Definitions for Purposes of the CDBG Neighborhood Stabilization 
Program

Background
    Certain terms are used in HERA that are not used in the regular 
CDBG program, or the terms are used differently in HERA and the HCD 
Act. In the interest of speed and clarity of administration, HUD is 
defining these terms in this notice for all grantees, including states. 
For the same reason, HUD is also defining eligible fund uses for all 
grantees, including states. States may define other program terms under 
the authority of 24 CFR 570.481(a), and will be given maximum feasible 
deference in accordance with 24 CFR 570.480(c) in matters related to 
the administration of their NSP programs.
Requirement
    Abandoned. A home is abandoned when mortgage or tax foreclosure 
proceedings have been initiated for that property, no mortgage or tax 
payments have been made by the property owner for at least 90 days, AND 
the property has been vacant for at least 90 days.
    Blighted structure. A structure is blighted when it exhibits 
objectively determinable signs of deterioration sufficient to 
constitute a threat to human health, safety, and public welfare.
    CDBG funds. CDBG funds means, in addition to the definition at 24 
CFR 570.3, grant funds distributed under this notice.
    Current market appraised value. The current market appraised value 
means the value of a foreclosed upon home or residential property that 
is established through an appraisal made in conformity with the 
appraisal requirements of the URA at 49 CFR 24.103 and completed within 
60 days prior to an offer made for the property by a grantee, 
subrecipient, developer, or individual homebuyer.
    Foreclosed. A property ``has been foreclosed upon'' at the point 
that, under state or local law, the mortgage or tax foreclosure is 
complete. HUD generally will not consider a foreclosure to be complete 
until after the title for the

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property has been transferred from the former homeowner under some type 
of foreclosure proceeding or transfer in lieu of foreclosure, in 
accordance with state or local law.
    Land bank. A land bank is a governmental or nongovernmental 
nonprofit entity established, at least in part, to assemble, 
temporarily manage, and dispose of vacant land for the purpose of 
stabilizing neighborhoods and encouraging re-use or redevelopment of 
urban property. For the purposes of the NSP program, a land bank will 
operate in a specific, defined geographic area. It will purchase 
properties that have been abandoned or foreclosed upon and maintain, 
assemble, facilitate redevelopment of, market, and dispose of the land-
banked properties. If the land bank is a governmental entity, it may 
also maintain abandoned or foreclosed property that it does not own, 
provided it charges the owner of the property the full cost of the 
service or places a lien on the property for the full cost of the 
service.
    Revenue for the purposes of section 2301(d)(4). Revenue has the 
same meaning as program income, as defined at 24 CFR 570.500(a) with 
the modifications in this notice.
    Subrecipient. Subrecipient shall have the same meaning as at the 
first sentence of 24 CFR 570.500(c). This includes any nonprofit 
organization (including a unit of general local government) that a 
state awards funds to.
    Use for the purposes of section 2301(c)(1). Funds are used when 
they are obligated by a state, unit of general local government, or any 
subrecipient thereof, for a specific NSP activity; for example, for 
acquisition of a specific property. Funds are obligated for an activity 
when orders are placed, contracts are awarded, services are received, 
and similar transactions have occurred that require payment by the 
state, unit of general local government, or subrecipient during the 
same or a future period. Note that funds are not obligated for an 
activity when subawards (e.g., grants to subrecipients or to units of 
local government) are made.

B. Pre-Grant Process

Background
    With this notice, HUD is establishing the NSP allocation formula, 
including reallocation provisions, and announcing the distribution of 
funds. CDBG grantees receiving NSP allocations may immediately begin to 
prepare and submit action plan substantial amendments for NSP funds, in 
accordance with this notice. (Insular areas should follow the 
requirements for entitlement communities.)
    To receive NSP funding, each CDBG grantee listed in Attachment A 
must submit an action plan substantial amendment to HUD in accordance 
with this notice by December 1, 2008.
    HUD encourages each grantee to carry out its NSP activities in the 
context of a comprehensive plan for the community's vision of how it 
can make its neighborhoods not only more stable, but also more 
sustainable, competitive, and integrated into the overall metropolitan 
fabric, including access to transit, affordable housing, employers, and 
services.
    HUD encourages each local jurisdiction receiving an allocation to 
carefully consider its administrative capacity to use the funds within 
the statutory deadline versus the capacity of the state administrator. 
HUD expects that after such consideration, some jurisdictions may 
choose to apply for less than the full amount, which will allow the 
balance of their grants to pass to the NSP administrator at the state 
level.
    Another way jurisdictions may cooperate to carry out their grant 
programs is through a joint request to HUD. HUD is providing regulatory 
waivers and alternative requirements to allow joint requests among 
entitlement communities and to allow joint requests between an 
entitlement community and a state. Any two or more contiguous 
entitlement communities (metropolitan cities or urban counties) that 
are in the same metropolitan area and that are eligible to receive an 
NSP grant may instead make a joint request to HUD to implement a joint 
NSP program. A jurisdiction need not have a joint agreement with an 
urban county under the regular CDBG entitlement program to request a 
joint program for NSP funding. Similarly, any entitlement community 
eligible to receive an NSP grant may instead make a request for a joint 
NSP program with its state. An NSP joint request under a cooperation 
agreement results in a single combined grant and a single action plan 
substantial amendment. Potential requestors should contact HUD as soon 
as possible (as far as possible in advance of publishing a proposed NSP 
substantial amendment) for technical guidance. The requestors will 
specify which jurisdiction will receive the funds and administer the 
combined grant on behalf of the requestors; in the case of a joint 
request between a local government jurisdiction and a state, the state 
will administer the combined grant. (Grantees choosing this option 
should consider the Consolidated Plan and citizen participation 
implications of this approach. The lead entity's substantial amendment 
will cover any participating members. The citizen participation process 
must include citizens of all jurisdictions participating in the joint 
NSP program, not just those of the lead entity.)
    Given the rule of construction in HERA that NSP funds generally are 
construed as CDBG program funds, subject to CDBG program requirements, 
HUD generally is treating NSP funds as a special allocation of Fiscal 
Year (FY) 2008 CDBG funding. This has important consequences for local 
governments presently participating in an existing urban county 
program, and for metropolitan cities that have joint agreements with 
urban counties. HUD will consider any existing cooperation agreements 
between a local government and an urban county governing FY2008 CDBG 
funding (for purposes of either an urban county or a joint program) to 
automatically cover NSP funding as well. These cooperation agreements 
will continue to apply to the use of NSP funds for the duration of the 
NSP grant, just as cooperation agreements covering regular CDBG 
Entitlement program funds continue to apply to any use of the funds 
appropriated during the 3-year period covered by the agreements. For 
example, a local government presently has a cooperation agreement 
covering a joint program or participation in an urban county for 
federal FYs 2007, 2008 and 2009. The local government may choose to 
discontinue its participation with the county at the end of the 
applicable qualification period for purposes of regular CDBG 
entitlement funding. However, the county will still be responsible for 
any NSP projects funded in that community, and for any NSP funding the 
local government receives from the county, until those funds are 
expended and the funded activities are completed.
    A third method of cooperating is also available. A jurisdiction may 
choose to apply for its entire grant, and then enter into a 
subrecipient agreement with another jurisdiction or nonprofit entity to 
administer the grant. In this manner, for example, all of the grantees 
operating in a single metropolitan area could designate the same land-
bank entity (or the state housing finance agency) as a subrecipient for 
some or all of their NSP activities.
    Each grantee will have until December 1, 2008, to complete and 
submit a substantial amendment to its annual action plan. A grantee 
that wishes to initially submit its action plan

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amendment to HUD electronically in the DRGR system rather than via 
paper may do so by contacting its local field office for the DRGR 
submission directions. Paper submissions to HUD also will be allowed, 
although each grantee must set up its action plan in DRGR prior to the 
deadline for the first required performance report after receiving a 
grant.
    HUD is using DRGR for the NSP because no other application and 
reporting system was sufficiently flexible to deal with the alternative 
requirements. The emergency nature of this legislation and 
corresponding statutory time frames do not give HUD sufficient time to 
develop a new system or modify an existing system to perfectly fit NSP.
    HUD encourages grantees, during development of their action plan 
amendments, to contact HUD field offices for guidance in complying with 
these requirements, or if they have any questions regarding meeting 
grant requirements.
    Normally, in the CDBG program, a grantee takes at least 30 days 
soliciting comment from its citizens before it submits an annual action 
plan to HUD, which then has 45 days to accept or reject the plan. To 
expedite the process and to ensure that the NSP grants are awarded in a 
timely manner, while preserving reasonable citizen participation, HUD 
is waiving the requirement that the grantee follow its citizen 
participation plan for this substantial amendment. HUD is shortening 
the minimum time for citizen comments and requiring the substantial 
amendment materials to be posted on the grantee's official website as 
the materials are developed, published, and submitted to HUD.
    Each grantee must use its NSP funds within 18 months of receipt. A 
grantee will be deemed by HUD to have received its NSP grant at the 
time HUD signs its NSP grant agreement (or amendment thereof, in the 
case of a state that later receives reallocated grant funds).
    Grantees are cautioned that, despite the expedited application and 
plan process, they are still responsible for ensuring that all citizens 
have equal access to information about the programs. Among other 
things, this means that each grantee must ensure that program 
information is available in the appropriate languages for the 
geographic area served by the jurisdiction. This will be a particular 
issue for those states that this notice is allowing to make grants 
throughout the state, including into regular CDBG entitlement areas. 
Because regular State CDBG funds are not used in entitlement areas, 
State CDBG staffs may not be aware of limited English proficient (LEP) 
speaking populations in those metropolitan jurisdictions.
    HUD will review each grantee submission for completeness and 
consistency with the requirements of this notice and will disapprove 
incomplete and inconsistent action plan amendments. HUD will allow 
revision and resubmission of a disapproved action plan in accordance 
with 24 CFR 91.500 so long as any such resubmission is received by HUD 
45 days or less following the date of first disapproval and in no case 
later than the close of business February 13, 2009.
    In combination, the notice alternative requirements provide the 
following expedited steps for NSP grants:
     Proposed action plan amendment published via the usual 
methods and on the Internet for no less than 15 calendar days of public 
comment;
     Final action plan amendment posted on the Internet and 
submitted to HUD by December 1, 2008 (grant application includes 
Standard Form 424 (SF-424) and certifications);
     HUD expedites review,
     HUD accepts the plan and prepares a cover letter, grant 
agreement, and grant conditions;
     Grant agreement signed by HUD and immediately transmitted 
to the grantee;
     Grantee signs and returns the grant agreements;
     HUD establishes the line of credit and the grantee 
requests and receives voice response system (VRS) access;
     After completing the environmental review(s) pursuant to 
24 CFR part 58 and, as applicable, receiving from HUD or the state an 
approved Request for Release of Funds and certification, the grantee 
may draw-down funds from the line of credit.
    The action plan substantial amendment and citizen participation 
alternative requirement will permit an expedited grant-making process, 
but one that still provides for public notice, appraisal, examination, 
and comment on the activities proposed for the use of NSP grant funds.
Requirement
    1. General note. Except as described in this notice, statutory and 
regulatory provisions governing the CDBG program for states and 
entitlement communities, as applicable, shall apply to the use of these 
funds.
    2. Contents of an NSP Action Plan substantial amendment. The 
elements in the NSP substantial amendment to the Annual Action Plan 
required for the CDBG program under part 91 are:
    a. General information about needs, distribution, use of funds, and 
definitions:
    i. Summary needs data identifying the geographic areas of greatest 
need in the grantee's jurisdiction. (A state must include the needs of 
the entire state and not just the areas not receiving an NSP 
allocation. To include the needs of an entitlement community, the state 
may either incorporate an entitlement jurisdiction's consolidated plan 
and NSP needs by reference and hyperlink on the Internet, or state the 
needs for that jurisdiction in the state's own plan);
    ii. A narrative describing how the distribution and uses of the 
grantee's NSP funds will meet the requirements of Section 2301(c)(2) of 
HERA that funds be distributed to the areas of greatest need, including 
those with the greatest percentage of home foreclosures, with the 
highest percentage of homes financed by a subprime mortgage related 
loan, and identified by the grantee as likely to face a significant 
rise in the rate of home foreclosures. The grantee's narrative must 
address the three need categories in the NSP statute, but the grantee 
may also consider other need categories;
    iii. For the purposes of the NSP, the narratives will include:
    (A) A definition of ``blighted structure'' in the context of state 
or local law;
    (B) A definition of ``affordable rents;''
    (C) A description of how the grantee will ensure continued 
affordability for NSP-assisted housing; and
    (D) A description of housing rehabilitation standards that will 
apply to NSP-assisted activities.
    b. Information by activity describing how the grantee will use the 
funds, identifying:
    i. The eligible use of funds under NSP;
    ii. The eligible CDBG activity or activities;
    iii. The areas of greatest need addressed by the activity or 
activities;
    iv. The expected benefit to income-qualified persons or households 
or areas;
    v. Appropriate performance measures for the activity (e.g., units 
of housing to be acquired, rehabilitated, or demolished for the income 
levels represented in DRGR, which are currently 50 percent of area 
median income and below, 51 to 80 percent, and 81 to 120 percent);
    vi. Amount of funds budgeted for the activity;
    vii. The name and location of the entity that will carry out the 
activity; and

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    viii. The expected start and end dates of the activity.
    c. A Description of the general terms under which assistance will 
be provided, including:
    i. If the activity includes acquisition of real property, the 
discount required for acquisition of foreclosed-upon properties;
    ii. Range of interest rates (if any);
    iii. Duration or term of assistance;
    iv. Tenure of beneficiaries (e.g., rental or homeownership); and
    v. If the activity produces housing, how the design of the activity 
will ensure continued affordability; and
    vi. If the funds used for the activity are to count toward the 
requirement at section 2301(f)(3)(A)(ii) to provide benefit to low-
income persons (earning 50 percent or less of area median income).
    d. Information on how to contact grantee program administrators, so 
that citizens and other interested parties know who to contact for 
additional information.
    3. Continued affordability. Grantees shall ensure, to the maximum 
extent practicable and for the longest feasible term, that the sale, 
rental, or redevelopment of abandoned and foreclosed-upon homes and 
residential properties under this section remain affordable to 
individuals or families whose incomes do not exceed 120 percent of area 
median income or, for units originally assisted with funds under the 
requirements of section 2301(f)(3)(A)(ii), remain affordable to 
individuals and families whose incomes do not exceed 50 percent of area 
median income.
    a. In its NSP action plan substantial amendment, a grantee will 
define ``affordable rents'' and the continued affordability standards 
and enforcement mechanisms that it will apply for each (or all) of its 
NSP activities. HUD will consider any grantee adopting the HOME program 
standards at 24 CFR 92.252(a), (c), (e), and (f), and 92.254 to be in 
minimal compliance with this standard and expects any other standards 
proposed and applied by a grantee to be enforceable and longer in 
duration. (Note that HERA's continued affordability standard is longer 
than that required of subrecipients and participating units of general 
local government under 24 CFR 570.503 and 570.501(b).)
    b. The grantee must require each NSP-assisted homebuyer to receive 
and complete at least 8 hours of homebuyer counseling from a HUD-
approved housing counseling agency before obtaining a mortgage loan. 
The grantee must ensure that the homebuyer obtains a mortgage loan from 
a lender who agrees to comply with the bank regulators' guidance for 
non-traditional mortgages (see, Statement on Subprime Mortgage Lending 
issued by the Office of the Comptroller of the Currency, Board of 
Governors of the Federal Reserve System, Federal Deposit Insurance 
Corporation, Department of the Treasury, and National Credit Union 
Administration, available at https://www.fdic.gov/regulations/laws/
rules/5000-5160.html). Grantees must design NSP programs to comply with 
this requirement and must document compliance in the records, for each 
homebuyer. Grantees are cautioned against providing or permitting 
homebuyers to obtain subprime mortgages for whom such mortgages are 
inappropriate, including homebuyers who qualify for traditional 
mortgage loans.
    c. If NSP funds assist a property that was previously assisted with 
HOME funds, but on which the affordability restrictions were terminated 
through foreclosure or transfer in lieu of foreclosure pursuant to 24 
CFR part 92, the grantee must revive the HOME affordability 
restrictions for the greater of the remaining period of HOME 
affordability or the continuing affordability requirements of this 
notice.
    4. Citizen participation alternative requirement. HUD is providing 
an alternative requirement to 42 U.S.C. 5304(a)(2) and (3), to expedite 
distribution of grant funds and to provide for expedited citizen 
participation for the NSP substantial amendment. Provisions of 24 CFR 
570.302 and 570.486 and those of 24 CFR 91.105(k) and 91.115(i), with 
respect to following the citizen participation plan, are waived to the 
extent necessary to allow implementation of the requirements below.
    a. To receive its grant allocation, a grantee must submit to HUD 
for approval an NSP application by December 1, 2008. This submission 
will include a signed standard federal form SF-424, signed 
certifications, and a substantial action plan amendment meeting the 
requirements of paragraph b below. (24 CFR 91.505 is waived to the 
extent necessary to require submission of the substantial amendment to 
HUD for approval in accordance with this notice.)
    b. Each grantee must prepare and submit its annual Action Plan 
amendment to HUD in accordance with the consolidated plan procedures 
for a substantial amendment under the annual CDBG program as modified 
by this notice or HUD will reallocate the funds allocated for that 
grantee. HUD is providing alternative requirements to 42 U.S.C. 
5304(a)(2) and waiving 91.105(k) and 91.115(i) to the extent necessary 
to allow the grantee to provide no fewer than 15 calendar days for 
citizen comment (rather than 30 days) for its initial NSP submission, 
and to require that, at the time of submission to HUD, each grantee 
post its approved action plan amendment and any subsequent NSP 
amendments on its official website along with a summary of citizen 
comments received within the 15-day comment period. After HUD processes 
and approves the plan amendment and both HUD and the grantee have 
signed the grant agreement, HUD will establish the grantee's line of 
credit in the amount of funds included in the Action Plan amendment, up 
to the allocation amount.
    5. Joint requests. To expedite the use of funds, HUD is providing 
an alternative requirement to 42 U.S.C. 5304(i) and is waiving 24 CFR 
570.308 to the extent necessary to allow for additional joint programs 
described below.
    a. Entitlement Community Joint Agreements. Two or more contiguous 
entitlement communities (metropolitan cities or urban counties) that 
are eligible to receive a NSP allocation and are located in the same 
metropolitan area may enter into joint agreements. All members to the 
joint agreement must be eligible to receive NSP funds, and one unit of 
general local government must be designated as the lead entity. The 
lead entity must execute the NSP grant agreement with HUD. Consistent 
with 24 CFR 570.308, the lead entity must assume responsibility for 
administering the NSP grant on behalf of all members, in compliance 
with applicable program requirements. The substantial amendment to the 
lead entity's action plan will include all participating entitlement 
communities.
    b. Joint agreements with a state. Any entitlement community that is 
eligible to receive an NSP allocation may enter into a joint agreement 
with its state. The state shall be the lead entity and must assume 
responsibility for administering the NSP grant on behalf of the 
entitlement community, in compliance with applicable program 
requirements. The substantial amendment to the state's action plan will 
include any participating entitlement community.
    6. Effect of existing cooperation agreements governing joint 
programs and urban counties. Any cooperation agreement between a unit 
of general local government and a county, concerning either a joint 
program or participation in an urban county under

[[Page 58335]]

24 CFR 570.307 or 570.308, and governing CDBG funds appropriated for 
federal FY 2008, will be considered to incorporate and apply to NSP 
funding. Any such cooperation agreements will continue to apply to the 
use of NSP funds until the NSP funds are expended and the NSP grant is 
closed out. Grantees should note that certain provisions in existing 
cooperation agreements that govern FY2008 CDBG funding may be 
inconsistent with parts of HERA and this notice. For instance, set 
minimum and/or maximum allocation amounts may conflict with priority 
distributions to areas of greatest need identified in the grantee's 
action plan substantial amendment. Conforming amendments should be made 
to existing cooperation agreements, as necessary, to comply with HERA 
and this notice.

C. Reimbursement for Pre-Award Costs

Background
    NSP allocatees will need to move forward rapidly to prepare the NSP 
substantial amendment and to undertake other administrative actions, 
including environmental reviews, as soon as allocations are known. 
Therefore, HUD is granting permission to states and entitlement 
jurisdictions receiving a direct allocation of NSP funds (see 
Attachment A) to incur pre-award costs as if each was a new grantee 
preparing to receive its first allocation of CDBG funds.
Requirement
    24 CFR 570.200(h) is waived to the extent necessary to grant 
permission to entitlement jurisdictions receiving a direct NSP 
allocation under this notice to incur pre-award costs as if each was a 
new grantee preparing to receive its first allocation of CDBG funds. 
Similarly, in accordance with OMB Circular A-87, Attachment B, 
paragraph 31, HUD is allowing states to incur pre-award costs as if 
each was a new grantee preparing to receive its first allocation of 
CDBG funds. As a new grantee, an NSP allocatee will be allowed to incur 
costs necessary to develop the NSP substantial action plan amendment 
and undertake other administrative actions necessary to receive its 
first grant, prior to the costs being included in the final plan, 
provided that the other conditions of 24 CFR 570.200(h) are met. (For 
units of general local government (including entitlements not receiving 
a direct NSP allocation under this notice) applying to the state, 24 
CFR 570.489(b) applies unmodified.)

D. Grant Conditions

    For NSP grantees that HUD determines are high risk in accordance 
with 24 CFR 85.12(a), HUD will apply additional grant conditions in 
accordance with 24 CFR 85.12(b).

E. Income Eligibility Requirement Changes

Background
    The NSP program includes two low- and moderate-income requirements 
at section 2301(f)(3)(A) that supersede existing CDBG income 
qualification requirements. Under the heading ``Low and Moderate Income 
Requirement,'' HERA states that: ``All of the funds appropriated or 
otherwise made available under this section shall be used with respect 
to individuals and families whose income does not exceed 120 percent of 
area median income.''
    This provision does two main things. First, for the purposes of the 
NSP, it effectively supersedes the overall benefit provisions of the 
HCD Act and the CDBG regulations, which allow up to 30 percent of a 
grant to be used for activities that meet a national objective other 
than the low- and moderate-income one. Thus, NSP allows the use of only 
the low- and moderate-income national objective. Activities may not 
qualify under NSP using the ``prevent or eliminate slums and blight'' 
or ``address urgent community development needs'' objectives.
    Second, this provision also redefines and supersedes the definition 
of ``low- and moderate-income,'' effectively allowing households whose 
incomes exceed 80 percent of area median income but do not exceed 120 
percent of area median income to qualify as if their incomes did not 
exceed the published low- and moderate-income levels of the regular 
CDBG program. To prevent confusion, HUD will refer to this new income 
group as ``middle income,'' and keep the regular CDBG definitions of 
``low-income'' and ``moderate income'' in use. Further, HUD will 
characterize aggregated households whose incomes do not exceed 120 
percent of median income as ``low-, moderate-, and middle-income 
households,'' abbreviated as LMMH. For the purposes of NSP CDBG only, 
an activity may meet the HERA low- and moderate-income national 
objective if the assisted activity:
     Provides or improves permanent residential structures that 
will be occupied by a household whose income is at or below 120 percent 
of area median income (abbreviated as LMMH);
     Serves an area in which at least 51 percent of the 
residents have incomes at or below 120 percent of area median income 
(LMMA);
     Creates or retains jobs for persons whose household 
incomes are at or below 120 percent of median income (LMMJ); or
     Serves a limited clientele whose incomes are at or below 
120 percent of area median income (LMMC).
    HUD will use the parenthetical terms above to refer to NSP national 
objectives in program implementation, to avoid confusion with the 
regular HCD Act definitions.
    Land banks are not allowed in the regular CDBG program because of 
the very high risk that the delay between acquiring property and 
meeting a national objective can be excessively long, attenuating the 
intended CDBG program benefits by delaying benefit far beyond the 
annual or even the 5-year consolidated plan cycles. In the regular CDBG 
program (and in the NSP other than in an eligible land-bank use), a 
property acquisition activity is dependent on the national objective 
met by the subsequent reuse of the property in order to demonstrate 
program compliance. Given this, the HERA direction that assistance to 
land banks is an eligible use of NSP funds requires an alternative 
requirement and policy clarification.
    For grantees choosing to assist land banks or demolition of 
structures with NSP funds, the change to the income qualification level 
for low-, moderate-, and middle-income areas will likely include most 
of the neighborhoods where property stabilization is required. If an 
assisted land bank is not merely acquiring properties, but is also 
carrying out other activities intended to arrest neighborhood decline, 
such as maintenance, demolition, and facilitating redevelopment of the 
properties, HUD will, for NSP-assisted activities only, accept that the 
acquisition and management activities of the land bank may provide 
sufficient benefit to an area generally (as described in 24 CFR 
570.208(a)(1) and 570.483(b)(1)) to meet a national objective (LMMA) 
prior to final disposition of the banked property. HUD notes that the 
grantee must determine the actual service area benefiting from a land 
bank's activities, in accordance with the regulations.
    However, HUD does not believe the benefits of just holding property 
are sufficient to stabilize most neighborhoods or that this is the best 
use of limited NSP funds absent a re-use plan. Therefore, HUD is 
requiring that a land bank may not hold a property for more than 10 
years without obligating the property for a specific, eligible

[[Page 58336]]

redevelopment of that property in accordance with NSP requirements.
    Note that if a state provides funds to an entitlement community, 
the entitlement community must apply the area median income levels 
applicable to its regular CDBG program geography and not the ``balance 
of state'' levels.
    Other than the change in the applicable low- and moderate-income 
qualification level from 80 percent to 120 percent, the area benefit, 
housing, jobs, and limited clientele benefit requirements at 570.208(a) 
and 570.483(b) remain unchanged, as does the required documentation.
    The other NSP low- and moderate-income related provision states 
that: ``not less than 25 percent of the funds appropriated or otherwise 
made available under this section shall be used for the purchase and 
redevelopment of abandoned or foreclosed homes or residential 
properties that will be used to house individuals or families whose 
incomes do not exceed 50 percent of area median income.''
    HUD advises grantees to take note of this new threshold as they 
design NSP activities. This provision does not have a parallel in the 
regular CDBG program. Grantees must document that an amount equal to at 
least 25 percent of a grantee's NSP grant (initial allocation plus any 
reallocations) has been budgeted in the initial approved action plan 
substantial amendment for activities that will provide housing for 
income-qualified individuals or families. Prior to and at grant 
closeout, HUD will review grantees for compliance with this provision 
by determining whether at least 25 percent of grant funds have been 
expended for housing for individual households whose incomes do not 
exceed 50 percent of area median income.
Requirements
    1. Overall benefit supersession and alternative requirement. The 
requirements at 42 U.S.C. 5301(c), 42 U.S.C. 5304(b)(3)(A), 24 CFR 
570.484 (for states), and 24 CFR 570.200(a)(3) that 70 percent of funds 
are for activities that benefit low- and moderate-income persons are 
superseded and replaced by section 2301(f)(3)(A) of HERA. One hundred 
percent of NSP funds must be used to benefit individuals and households 
whose income does not exceed 120 percent of area median income. NSP 
shall refer to such households as ``low-, moderate-, and middle-
income.''
    2. National objectives supersession and alternative requirements. 
The requirements at 42 U.S.C 5301(c) are superseded and 24 CFR 
570.208(a) and 570.483 are waived to the extent necessary to allow the 
following alternative requirements:
    a. For purposes of NSP only, the term ``low- and moderate-income 
person'' as it appears throughout the CDBG regulations at 24 CFR part 
570 shall be defined as a member of a low-, moderate-, and middle-
income household, and the term ``low- and moderate-income household'' 
as it appears throughout the CDBG regulations shall be defined as a 
household having an income equal to or less than 120 percent of area 
median income, measured as 2.4 times the current Section 8 income limit 
for households below 50 percent of median income, adjusted for family 
size. A state choosing to carry out an activity directly must apply the 
requirements of 24 CFR 570.208(a) to determine whether the activity has 
met the low-, moderate-, and middle-income (LMMI) national objective 
and must maintain the documentation required at 24 CFR 570.506 to 
demonstrate compliance to HUD.
    b. The national objectives related to prevention and elimination of 
slums and blight and addressing urgent community development needs (24 
CFR 570.208(b) and (c) and 570.483(c) and (d)) are not applicable to 
NSP-assisted activities.
    c. Each grantee whose plan includes assisting rental housing shall 
develop and make public its definition of affordable rents for NSP-
assisted rental projects.
    d. An NSP-assisted property may not be held in a land bank for more 
than 10 years without obligating the property for a specific, eligible 
redevelopment of that property in accordance with NSP requirements.

F. State Distribution to Entitlement Communities and Indian Tribes

Background
    This notice includes an alternative requirement to the HCD Act and 
a regulatory waiver allowing distribution of funds by a state to CDBG 
regular entitlement communities and Tribes. This is consistent with the 
provision of HERA that specifically sets distribution priorities for 
areas with the greatest need, including ``metropolitan areas, 
metropolitan cities, urban areas, rural areas, low- and moderate-income 
areas * * *'' Therefore, states receiving allocations under this notice 
may distribute funds to or within any jurisdiction within the state 
that is among those with the greatest need, even if the jurisdiction is 
among those receiving a direct formula allocation of funds from HUD 
under the regular CDBG program or this notice.
Requirement
    Alternative requirement for distribution to CDBG metropolitan 
cities, urban counties, and Tribes. In accordance with the direction of 
HERA that grantees distribute funds to the areas of greatest need, HUD 
is providing an alternative requirement to 42 U.S.C. 5302(a)(7) 
(definition of ``nonentitlement area'') and waiving provisions of 24 
CFR part 570, including 24 CFR 570.480(a), that would prohibit states 
electing to receive CDBG funds from distributing such funds to units of 
general local government in entitlement communities or to Tribes. The 
appropriations law supersedes the statutory distribution prohibition at 
42 U.S.C. 5306(d)(1) and (2)(A). Alternatively, the state is required 
to distribute funds without regard to a local government status under 
any other CDBG program and must use funds in entitlement jurisdictions 
if they are identified as areas of greatest need, regardless of whether 
the entitlement receives its own NSP allocation.

G. State's Direct Action

Background
    In the State CDBG program, states receiving CDBG funds may not 
directly use the funds for activities, but must distribute them to 
units of general local government, which then use the funds for program 
activities. States may still use this ``method of distribution'' 
program model under NSP, but HUD reminds the states of the 18-month 
``use'' requirement. HUD also notes the language of section 2301(c) 
that says, in part, that:

    Any State * * * that receives amounts pursuant to this section 
shall * * * use such amounts to purchase and redevelop * * *.

This clearly speaks to the states using funds directly for projects and 
supersedes the HCD Act direction for states to only distribute funds to 
nonentitlement areas. Direct use of funds by a state may also result in 
more expeditious use of NSP funds. Therefore, a state receiving NSP 
funds may carry out NSP activities directly for some or all of its 
assisted grant activities, just as CDBG entitlement communities do 
under 24 CFR 570.200(f), including, but not limited to, carrying out 
activities using its own employees, procuring contractors, private 
developers, and providing loans and grants through nonprofit 
subrecipients (including local governments and other public

[[Page 58337]]

nonprofits such as regional or local planning or development 
authorities and public housing authorities).
    For those activities a state chooses to carry out directly, HUD 
strongly advises the state to adopt the recordkeeping required for an 
entitlement community at 570.506 and the subrecipient agreement 
provisions at 570.503. Also, in such cases, as an alternative 
requirement to 42 U.S.C. 5304(i), the state may retain and re-use 
program income as if it were an entitlement community.
    HUD is granting regulatory waivers of State CDBG regulations to 
conform the applicable management, real property change of use, and 
recordkeeping rules when a state chooses to carry out activities as if 
it were an entitlement community.
Requirements
    1. Responsibility for state review and handling of noncompliance. 
This change conforms NSP requirements with the waiver allowing the 
state to carry out activities directly. 24 CFR 570.492 is waived and 
the following alternative requirement applies: The state shall make 
reviews and audits, including on-site reviews of any subrecipients, 
designated public agencies, and units of general local government as 
may be necessary or appropriate to meet the requirements of 42 U.S.C. 
5304(e)(2), as amended, as modified by this notice. In the case of 
noncompliance with these requirements, the state shall take such 
actions as may be appropriate to prevent a continuance of the 
deficiency, mitigate any adverse effects or consequences, and prevent a 
recurrence. The state shall establish remedies for noncompliance by any 
designated public agencies or units of general local governments and 
for its subrecipients.
    2. Change of use of real property for state grantees acting 
directly. This waiver conforms the change of use of real property rule 
to the waiver allowing a state to carry out activities directly. For 
purposes of this program, in 24 CFR 570.489(j), (j)(1), and the last 
sentence of (j)(2), ``unit of general local government'' shall be read 
as ``unit of general local government or state.''
    3. Recordkeeping for a state grantee acting directly. Recognizing 
that the state may carry out activities directly, 24 CFR 570.490(b) is 
waived in such a case and the following alternative provision shall 
apply: State records. The state shall establish and maintain such 
records as may be necessary to facilitate review and audit by HUD of 
the state's administration of NSP funds under 24 CFR 570.493. 
Consistent with applicable statutes, regulations, waivers and 
alternative requirements, and other federal requirements, the content 
of records maintained by the state shall be sufficient to: (1) Enable 
HUD to make the applicable determinations described at 24 CFR 570.493; 
(2) make compliance determinations for activities carried out directly 
by the state; and (3) show how activities funded are consistent with 
the descriptions of activities proposed for funding in the action plan. 
For fair housing and equal opportunity purposes, and as applicable, 
such records shall include data on the racial, ethnic, and gender 
characteristics of persons who are applicants for, participants in, or 
beneficiaries of the program.
    4. State compliance with certifications for state grantees acting 
directly. This is a conforming change related to the waiver to allow a 
state to act directly. Because a state grantee under this appropriation 
may carry out activities directly, HUD is applying the regulations at 
24 CFR 570.480(c) with respect to the basis for HUD determining whether 
the state has failed to carry out its certifications, so that such 
basis shall be that the state has failed to carry out its 
certifications in compliance with applicable program requirements.
    5. Clarifying note on the process for environmental release of 
funds when a State carries out activities directly. Usually, a state 
distributes CDBG funds to units of local government and takes on HUD's 
role in receiving environmental certifications from the grant 
recipients and approving releases of funds. For this grant, HUD will 
allow a state grantee to also carry out activities directly instead of 
distributing them to other governments. According to the environmental 
regulations at 24 CFR 58.4, when a state carries out activities 
directly, the state must submit the certification and request for 
release of funds to HUD for approval.

H. Eligibility and Allowable Costs

Background
    Most of the activities eligible under NSP represent a subset of the 
eligible activities under 42 U.S.C. 5305(a). Due to limitations in the 
reporting system, DRGR, the NSP-eligible uses must be correlated with 
CDBG-eligible activities. The alternative to this approach, using a 
paper-based action plan and reporting process using NSP-eligible uses 
only would be much slower to implement. This correlation also reduces 
implementation risks, because it will ensure that the NSP grants are 
administered largely in accordance with long-established CDBG rules and 
controls. The table in the requirements paragraph below shows the 
eligible uses under NSP and the corresponding eligible activities from 
the regulations for the regular CDBG entitlement program that HUD has 
determined best correspond to those uses. If a grantee creates a 
program design that includes a CDBG-eligible activity that is not shown 
in the table to support an NSP-eligible use, the Department is 
providing an alternative requirement to 42 U.S.C. 5305(a) that HUD may 
allow a grantee an additional eligible-activity category if HUD finds 
the activity to be in compliance with the NSP statute. As under the 
regular CDBG program, grantees may fund costs, such as reasonable 
developer's fees, related to NSP-assisted housing rehabilitation or 
construction activities. NSP funds may be used to redevelop acquired 
property for nonresidential uses, such as a public park, commercial 
use, or mixed residential and commercial use.
    The annual entitlement CDBG program allows up to 20 percent of any 
grant amount plus program income may be used for general administration 
and planning costs. The State CDBG program is also subject to the 20 
percent limitation, but within that cap up to 3 percent may be used by 
the state for state administrative cost and technical assistance to 
potential local government program grant recipients, with the remainder 
available to be granted to local government recipients for their 
administrative costs. Because some of the costs usually allocated under 
these caps are not applicable to NSP grants (for example, the costs of 
completing the entire consolidated plan process), these amounts seem 
excessive to HUD in the context of the NSP program. On the other hand, 
HUD wants to encourage and support expeditious, appropriate, and 
compliant use of grant funds, and to prevent fraud, waste, and abuse of 
funds. Therefore, HUD is providing an alternative requirement that an 
amount of up to 10 percent of an NSP grant provided to a jurisdiction 
and of up to 10 percent of program income earned may be used for 
general administration and planning activities as those are defined at 
24 CFR 570.205 and 206. For all grantees, including states, the 10 
percent limitation applies to the grant as a whole.
    The regulatory and statutory requirements for state match for 
program administration at 24 CFR 570.489 (a)(i) are superseded by the 
statutory direction at section 2301(e)(2) that no matching funds shall 
be required for a state or unit of general local government to receive 
a grant.

[[Page 58338]]

Requirements
    1. Use of grant funds must constitute an eligible use under HERA.
    2. In addition to being an eligible NSP use of funds, each activity 
funded under this notice must also be CDBG-eligible under 42 U.S.C. 
5305(a) and meet a CDBG national objective.
    3.a. Certain CDBG-eligible activities correlate to specific NSP-
eligible uses and vice versa. 42 U.S.C. 5305(a) and 24 CFR 570.201-207 
and 482(a) through (d) are superseded to the extent necessary to allow 
the eligible uses described under section 2301(c)(3) of HERA in 
accordance with this paragraph (including the table and subparagraphs 
below) or with permission granted, in writing, by HUD upon a written 
request by the grantee that demonstrates that the proposed activity 
constitutes an eligible use under NSP. All NSP grantees, including 
states, will use the NSP categories and CDBG entitlement regulations 
listed below.

------------------------------------------------------------------------
                                          Correlated eligible activities
           NSP-eligible uses                from the CDBG entitlement
                                                   regulations
------------------------------------------------------------------------
(A) Establish financing mechanisms for    As part of an activity
 purchase and redevelopment of            delivery cost for an eligible
 foreclosed upon homes and residential    activity as defined in 24 CFR
 properties, including such mechanisms    570.206.
 as soft-seconds, loan loss reserves,     Also, the eligible
 and shared-equity loans for low- and     activities listed below to the
 moderate-income homebuyers.              extent financing mechanisms
                                          are used to carry them out.
(B) Purchase and rehabilitate homes and   24 CFR 570.201(a)
 residential properties that have been    Acquisition
 abandoned or foreclosed upon, in order  (b) Disposition,
 to sell, rent, or redevelop such homes  (i) Relocation, and
 and properties.                         (n) Direct homeownership
                                          assistance (as modified
                                          below);
                                          570.202 eligible
                                          rehabilitation and
                                          preservation activities for
                                          homes and other residential
                                          properties (HUD notes that
                                          rehabilitation may include
                                          counseling for those seeking
                                          to take part in the activity).
(C) Establish land banks for homes that  24 CFR 570.201(a) Acquisition
 have been foreclosed upon.               and (b) Disposition.
(D) Demolish blighted structures.......   24 CFR 570.201(d)
                                          Clearance for blighted
                                          structures only.
(E) Redevelop demolished or vacant        24 CFR 570.201(a)
 properties.                              Acquisition,
                                         (b) Disposition,
                                         (c) Public facilities and
                                          improvements,
                                         (e) Public services for housing
                                          counseling, but only to the
                                          extent that counseling
                                          beneficiaries are limited to
                                          prospective purchasers or
                                          tenants of the redeveloped
                                          properties,
                                         (i) Relocation, and
                                         (n) Direct homeownership
                                          assistance (as modified
                                          below).
                                          204 Community based
                                          development organizations.
------------------------------------------------------------------------

    b. HUD will not consider requests to allow foreclosure prevention 
activities, or to allow demolition of structures that are not blighted, 
or to allow purchase of residential properties and homes that have not 
been abandoned or foreclosed upon as provided in HERA and defined in 
this notice. HUD does not have the authority to permit uses or 
activities not authorized by HERA.
    c. New construction of housing is eligible as part of eligible-use 
(E) to redevelop demolished or vacant properties.
    d. 24 CFR 570.201(n) is waived and an alternative requirement 
provided for 42 U.S.C. 5305(a) to the extent necessary to allow 
provision of NSP-assisted homeownership assistance to persons whose 
income does not exceed 120 percent of median income.
    4. Alternative requirement for the limitation on planning and 
administrative costs. 24 CFR 570.200(g) and 570.489(a)(3) are waived to 
the extent necessary to allow each grantee under this notice to expend 
no more than 10 percent of its grant amount, plus 10 percent of the 
amount of program income received by the grantee, for activities 
eligible under 24 CFR 570.205 or 206. The requirements at 24 CFR 
570.489 are waived to the extent that they require a state match for 
general administrative costs. (States may use NSP funds under this 10 
percent limitation to provide technical assistance to local governments 
and nonprofit program participants.)

I. Rehabilitation Standards

Background
    HERA provides that any NSP-assisted rehab