HUD Releases NSP Recapture Notice

On August 23, HUD released its Notice of Neighborhood Stabilization Program (NSP) Reallocation Process Changes. The Notice outlines HUD’s process for handling NSP 1 funds not obligated by the 18-month use – defined by HUD as obligated – deadline.

HUD will use a formula to reallocate NSP 1 funds to communities with the most current need for support in addressing neighborhoods destabilized by foreclosed and abandoned homes and may take into account prior allocations of NSP 1 and NSP 2 funds already serving those communities.

HUD will give most NSP 1 grantees failing to meet the obligation deadline a choice of entering into a memorandum of agreement (MOA) with HUD or having its unobligated funding recaptured. Based largely on the grantee’s NSP 1 performance and the amount of unobligated funds, HUD may enter into a MOA designed to improve the grantee’s performance and enable use of the funds as intended.

States with unused funds will be subject to a recapture of unused amounts of up to $19.6 million because the NSP 1 formula provided states with at least this amount, regardless of the state’s relative need for funds. If a state has unused NSP 1 funds of up to $19.6 million, HUD will recapture and reallocate those funds to a higher need location based on a strictly need-driven formula. After HUD determines the recapture amount, any remaining unused state grant funds in excess of $19.6 million will be addressed under additional corrective actions.

The Notice allows any grantee failing to meet the obligation deadline to submit information to HUD, for up to 30 days following the 18-month deadline, documenting any additional obligation of funds not already recorded in the DRGR system and demonstrating to HUD that the obligation occurred on or before the deadline.

A grantee receiving a reallocation must apply for the grant in accordance with the NSP 1 Notice. HUD will announce the reallocation amounts after completing the recapture process for all states that have failed to meet the deadline. Reallocated funds are subject to the 18-month use deadline.