Navigation Search Map (504) 658-4000

Translate this page

The City of New Orleans

Mayor Mitchell J. Landrieu

Mayor's Press Releases Subscribe to the Mayor's Press Release feed

Mayor Landrieu announces Soft Second Mortgaage Affordable Homeownership Development Program Awardees

November 08, 2012

NEW ORLEANS, LA—Today, Mayor Mitch Landrieu announced that 17 local home developers have been selected to participate in the City’s soft second mortgage program. The City’s Office of Community Development directs this initiative which is already providing hundreds of New Orleans families an opportunity to become first-time homebuyers through the successful soft second Direct Homebuyer Assistance Program. Under the soft second Affordable Homeownership Development Program announced today, the selected local developers will renovate blighted houses or build on vacant properties across the city. These new homes will be available for sale to residents earning less than 120% of the Area Median Income. In turn, the City will set aside enough soft second mortgage money to guarantee a subsidy for all qualified buyers. In an effort to bring blighted and vacant properties back into commerce, the developers will select properties from the New Orleans Redevelopment Authority’s existing inventory. These properties will be sold at below market prices to the developers. The City reserved $18 million dollars of the original $52.3 million soft second mortgage program to run this developer initiative.

“The soft second mortgage development program is an important component in both rehabilitating blighted, historic properties and building on vacant lots while assisting eligible first-time homebuyers achieve the dream of homeownership through our soft second mortgage homebuyer program,” Mayor Landrieu said. “These Hurricane Katrina recovery dollars are making a real difference in reducing blight, stimulating our local economy, and in improving the lives of first-time homeowners city-wide.”

A total of 240 homes will be produced through this portion of the program. 111 of the homes will be built on properties currently owned by NORA. 129 homes will be built on privately-owned lots. Many of these privately-owned lots were originally LLT or NORA lots that were sold to developers in the past year. Awardees were selected through an open and competitive process with special consideration for areas within the city targeted for redevelopment under the City’s place-based planning strategy that encourages rehabilitation of blighted, historic properties and infill housing. New homes will be built on sites across the city from Village de L’Est to Hollygrove and the Westbank. Prices for the new and renovated homes will range from $90,000 to $210,000. Both nonprofit and for-profit developers have been selected in this first round of the Affordable Homeownership Development Program.

The term “soft second” is used to describe a forgivable loan that is made by the City in tandem with a conventional or FHA mortgage provided by a traditional lender. This subsidized forgivable loan bridges the affordability gap between the price of the home and the maximum amount a homebuyer can borrow with a first mortgage loan. The homebuyer receives only the amount of soft second funding that is needed to close the affordability gap which will be determined by need and annual household income. Families earning less than 90% of the area median income are also eligible to receive a small forgivable loan to help them pay closing costs.

Jeffrey Hebert, Executive Director of the New Orleans Redevelopment Authority said, “NORA is excited to participate in this initiative. Today’s announcement is an important step in returning blighted and vacant properties back to commerce. Strengthening our neighborhoods is essential to building the city we want to become.”

“The success of the soft second initiative demonstrates the value of collaboration and planning,” said Brian Lawlor, Director of Housing Policy for the City of New Orleans. “Today’s Affordable Homeownership Development Program announcement furthers the City’s commitment to strengthen neighborhoods by reducing blight, encourage development, and increase homeownership. We have worked with our partners in all sectors to develop strong programs that leverage private resources and allow us to continue our efforts to rebuild our great city.”

Pat Forbes, Executive Director of the Louisiana Office of Community Development said, “Seven years after Katrina, the recovery investments continue to flow intoNew Orleans, rebuilding the City, eliminating blight, spurring the economy, and helping those of moderate income to become homeowners. We're excited about working with the City ofNew Orleanson this important recovery program.”

Funding for City’s two soft second initiatives totals $52.3 million coming from federal Disaster Community Development Block Grant (D-CDBG) dollars provided by the State ofLouisianafor housing recovery from Hurricanes Katrina and Rita.

AFFORDABLE HOME DEVELOPMENT PROGRAM

The following local home developers have been selected to participate in the Affordable Home Development Program: 

  • Armstrong N Construction
  • Association Neighborhood Development
  • Build Now
  • Clayton Ventures LLC
  • First NBC Community, LLC/SoutheastLouisianaBuildingTrades Council
  • Harmony Neighborhood Development
  • Iris Development
  • Liberty Community Development Corporation
  • Make It Right
  • Neighborhood Restoration ofBaton Rouge, LLC
  • New OrleansArea Habitat for Humanity
  • Pontchartrain Park Community Development Corporation
  • Project Homecoming, Inc./ Fauborg St. Roch Project
  • ProPowerhouse Construction & VOB Homes ofNew Orleans
  • ProvidenceCommunity Housing
  • St. Bernard Project, Inc.
  • West OrleansDevelopment (Peoples Community Subsidiary, Inc.)

Attached to this email is a chart listing the awardees and number of units to be developed.

DIRECT HOMEBUYER ASSISTANCE PROGRAM

The “soft second” mortgage homebuyer initiative is a successful collaboration of the City, lenders, and homebuyer counseling agencies. The following are highlights to date:

  • 24 New Orleans lenders have been approved to provide loans for the program.
  • Since late December 2011, 223 bank-approved applications have been forwarded to the City and 199 commitments for “soft second” mortgages have been issued totaling $10,716,983.
  • Average processing time for City approval is currently 17 days including time for inspection and re-inspection of houses.
  • 80% of the commitments have been for households earning less than 80% of the area median income. The City is exceeding its goal of at least 50% for this income group.
  • 158 home purchases have closed and completed all reporting and documentation.
  • The average “soft second” mortgage is approximately $47,000 and the average closing cost assistance grant is approximately $7,000.
  • The City has partnered with the Louisiana Homebuyer Education Collaborative to provide training for applicants. To be eligible for assistance, homebuyers must complete a pre-approved 12-hour homebuyer training course to prepare them to qualify for a mortgage and to become homeowners, sign a purchase contract for a home and obtain a commitment for a first mortgage. Purchasers of two-family homes must complete a landlord training class.

HOUSEHOLD ELIGIBILITY

This program is designed to spur mixed income development in areas across the City by assisting families with incomes up to 120% of the Area Median Income to purchase single or two-family homes and FHA-approved condominiums. At least 50 percent of the program funds are targeted to homebuyers at or below 80% AMI. Homebuyers with incomes at or below 80% of AMI are eligible for up to $10,000 down payment and closing cost assistance in both programs. Homebuyers with incomes between 81% and 90% of AMI are eligible for up to $5,000 in down payment and closing cost assistance.

The soft second mortgage programs are implemented in a manner that is consistent with the Mayor’s place-based development strategy and promote housing development and neighborhood stabilization to leverage the City’s current investments in infrastructure.

Interested homebuyers can apply for a soft second mortgage through their first mortgage lender after they complete a homebuyer training class and sign a contract on a home. Once the applicant is approved for a first mortgage at a participating bank, the lender compiles and submits a soft second loan application to the City on the borrower’s behalf. The City completes the review in approximately 14-21 days and the State releases funds 21 days later. A list of lenders, realtors and housing counseling agencies currently participating in this program is attached to this release.

In order for participants to be eligible for any level of forgiveness of the subsidy, the homeowner must reside at the house for a minimum of 5 years. The homeowner must repay the “soft second” mortgage in full if the first mortgage goes into default or if the house is sold within the first 5 years. Twenty-five percent of the “soft second” loan is forgiven after year 5 and an additional 15% each year thereafter until the loan is zeroed out after 10 years.

For more information, please visit www.nola.gov/softseconds

 
Add to Twitter Add to Newsvine Add to Reddit Add to Yahoo Bookmarks Add to Yahoo MyWeb Add to Facebook Add to LinkedIn Add to Digg Add to Google Bookmarks Add to Terchnorati Add to StumbleUpon Add to Delicious

Last updated: 11/8/2012 6:13:46 PM

Was this page helpful?
 
 

 
 Security code