Loan Program Looks to Place Brooklyn Families In Vacant Homes

Three federal and local organizations this month introduced a national program to Fort Greene, Clinton Hill and Bed-Stuy to help first-time homeowners acquire foreclosed properties to reduce vacant housing stock and stabilize neighborhoods.

The new program, called Neighborhood Stabilization Program 2, will distribute up to $80,000 in forgivable loans to applicable first-time homeowners who agree to participate in a series of counseling workshops and live in the neighborhood for at least 15 years. The amount of funding distributed is contingent on the number of qualified applications received and there is no set funding limit for the program in the Brooklyn.  

“What we are hoping for is that families will come in and occupy the homes for a long period of time and help stabilize the whole neighborhood,” said Elizabeth Malone, NSP2 project manager for the New York Mortgage Coalition. 

, a local group with a long history in helping low-income residents into affordable housing, joined NYMC and the U.S. Department of Housing and Urban Development in introducing the loan program to Brooklyn.

Program organizers chose these neighborhoods because 2010 U.S. Census data showed Fort Greene, Clinton Hill and Bed-Stuy were hit harder by foreclosure than other areas of the city and burdened with higher rates of vacant housing. Specifically, Bed-Stuy had 834 instances of delinquency in 2010—the fifth highest of any city neighborhood, with Clinton Hill not far behind, according to foreclosure data from the Center of New York Neighborhoods.

In Clinton Hill alone, 189 vacant houses will be resold in the first stages of the NSP2 program.

One of the key tenets of the program are its direct-to-applicant principle reduction loans that are forgiven over a 15 year period, with NSP2’s grant money going towards paying down the loan’s principal with an eye on increasing the new owner’s equity stake in the home.

For example, if a program participant buys a house for $200,000 and gets the maximum $50,000 NSP2 principal equity loan and $30,000 for repairs, the loan will actually reduce the principal by 25 percent, resulting in lower mortgage and monthly interest rate payments.

“The critical difference is that we have not had a program that gives that much money for principal reduction and the actual acquisition of a home.  Now, participant home buyers will actually have enough equity in the property to be able to afford it, keep it, and actually invest in the community,” said Pat Julien, PACC’s Director of Home Services.  

Because the program is new to this area and its principal reduction approach is different, there is no empirical data pointing to its potential success or failure, according to organizers.

However, organizers said that applicants would face a rigorous application process before receiving the forgivable loans. The applicant vetting will assess whether they have sufficiently good credit, potential income, and reserves of liquid assets to purchase the home that they want to buy. Reviewers will also check that chosen applicants are committed to settling in their chosen neighborhoods. If their application is accepted, program participants will attend mandatory classes on maintaining credit, responsible first-time home buying, and gradual loan repayment. They will also receive periodic counseling from PACC employees to make sure that they remain on track and ensure they pay their mortgage bills on time.  

“That is what is great about this program: there is clarity. They are providing classes and education so I will really know what I am getting into,” said Kassandra Perry, 40, a prospective NSP2 homebuyer.  

The program’s success will be determined primarily by the effectiveness of its vetting measures and the strength of its informational programs, according to Eliot Sclar, a professor of urban development at Columbia University.  

Eager to learn about NSP2, local residents flocked to the program’s introductory information and workshop session, held on Nov. 15 in the basement of the Concord Baptist Church of Christ in Bed-Stuy. 

Seated at a school lunch-style round cafeteria table, Tracy Sneed, 30, explained why she thinks the program will work for her.

 “What I think is unique about it is that it’s a forgivable loan towards the amount we actually have to pay to own it,” Sneed said.  “My husband is from Bedford Stuyvesant and our son goes to the Co-op School in Clinton Hill so if we buy here we will invest in the neighborhood.”   

Related Topics: Foreclosures, Home Loan Programs, Neighborhood Stabilization Program 2, New York Mortgage Coalition, Pratt Area Community Council, U.S. Department of Housing and Urban Development, and vacant properties