17 Local Home Developers to Participate in New Orleans Soft Second Mortgage Program

By Bruce Eggler, NOLA.com | The Times-Picayune on November 09, 2012

New Orleans Mayor Mitch Landrieu announced Thursday that 17 local home developers have been selected to participate in the city’s new soft second mortgage 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.

The city’s original soft second mortgage program was launched under Mayor Ray Nagin but never got off the ground and was put on hold after the Landrieu administration took office in 2010. Late last year, the city resumed the program, aimed at low-income first-time homebuyers, with $52 million in post-Katrina federal aid.

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, the mayor’s office said.

The 17 newly chosen developers will renovate blighted houses or build new homes on vacant properties across the city. Both nonprofit and for-profit developers are among those selected. For more information, visit www.nola.gov/softseconds.

The soft second Affordable Homeownership Development Program is already giving hundreds of New Orleans families an opportunity to become first-time homebuyers through the Direct Homebuyer Assistance Program, Landrieu’s office said.

The new homes will be available for sale to residents earning less than 120 percent 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 NORA properties will be sold at below-market prices to the developers. The city has reserved $18 million of the original $52 million for the soft second program to run this new 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 to achieve the dream of homeownership,” Landrieu said.

A total of 240 homes will be produced through this portion of the program, with 111 to be built on properties owned by NORA and 129 on privately owned lots. Many of the privately owned lots were originally Louisiana Land Trust or NORA lots that were sold to developers in the past year.

Landrieu’s office said awardees were selected through a competitive process, with special consideration for areas targeted for redevelopment under the city’s place-based planning strategy, which 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 West Bank. Prices for the new and renovated homes will range from $90,000 to $210,000.

The subsidized forgivable “soft second” loan bridges the gap between the price of a home and the maximum amount a buyer can borrow with a first mortgage loan. The homebuyer receives the amount of soft second funding that is needed to close the affordability gap, as determined by need and annual household income. Families earning less than 90 percent of the area median income are also eligible to receive a small forgivable loan to help them pay closing costs.

Jeff Hebert, executive director of NORA, said, “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. “Today’s announcement furthers the city’s commitment to strengthen neighborhoods by reducing blight, encourage development and increase homeownership.”

The $52.3 million for the soft second initiatives comes from federal Disaster Community Development Block Grant dollars provided for housing recovery after hurricanes Katrina and Rita.

The following developers were selected to participate in the Affordable Home Development Program: Armstrong N Construction, Association Neighborhood Development, Build Now, Clayton Ventures LLC, First NBC Community LLC/Southeast Louisiana Building Trades Council, Harmony Neighborhood Development, Iris Development, Liberty Community Development Corp., Make It Right, Neighborhood Restoration of Baton Rouge LLC, New Orleans Area Habitat for Humanity, Pontchartrain Park Community Development Corp., Project Homecoming Inc./Faubourg St. Roch Project, ProPowerhouse Construction & VOB Homes of New Orleans, Providence Community Housing, the St. Bernard Project Inc., and West Orleans Development (Peoples Community Subsidiary Inc.)

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