Federal housing officials have reached an agreement with mortgage lenders that will give nonprofit organizations and state and local governments right of first refusal to purchase foreclosed homes in certain targeted neighborhoods.

Lenders participating in the "National First Look Program" represent about 75 percent of the real estate owned (REO) marketplace, the Department of Housing and Urban Development announced Wednesday.

Participating institutions include Bank of America, Chase, Citi, Deutsche Bank, GMAC, Nationstar Mortgage, Ocwen Financial Corporation, Saxon Mortgage Services, U.S. Bank, Wells Fargo, Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA).

The program is a partnership between HUD and the National Community Stabilization Trust. Communities participating in HUD’s Neighborhood Stabilization Program — "NSP grantees" — will be given the first opportunity to purchase REO properties in certain neighborhoods so these homes can either be rehabilitated, rented, resold or demolished.

NSP grantees can also stabilize neighborhoods by creating "land banks" to assemble, temporarily manage and dispose of foreclosed homes.

NSP grantees will be notified when a property becomes available, and be given 24 to 48 hours to express their interest in purchasing it.

Once they’ve expressed interest in a property, NSP grantees will get five to 12 business days to conduct inspections. The lender that owns the property will then offer it to the NSP grantee at a price determined by the lender.

If no NSP grantee exercises its right to purchase an REO property during the "First Look" period, the lender will follow its normal process and sell the home on the open market.

So far, the government has provided $6 billion in funding to help communities buy up properties through the Neighborhood Stabilization Program, Housing Secretary Shaun Donovan said in announcing the new program.

HR 3221, the Housing and Economic Recovery Act of 2008, provided an initial $4 billion in funding, of which 92 percent has already been spent, Donovan said.

Last year’s $787 billion stimulus bill, the American Recovery and Reinvestment Act of 2009, provided an additional $2 billion in NSP funding.

The financial regulatory reform bill passed by Congress in July provided another $1 billion in NSP funding, for a total of $7 billion.

All told, that money is expected to help NSP grantees purchase 100,000 properties in the nation’s hardest-hit markets, Donovan said — a number equal to about 20 percent of the homes that have become REOs in targeted neighborhoods over the last 18 months.

Those purchases "will have ripple effects that could have a profound impact on our local, regional and national housing markets alike," Donovan said.

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