FHA Good Neighbor Next Door Program

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

There’s never been a more favorable time to market special programs offered by HUD in regards to foreclosed properties. Little is known by the average “consumer on the street” about the opportunities that are available to them in certain circumstances. One of the least advertised programs that can benefit a very specific group of consumers is the Good Neighbor Next Door Program (GNND).

Good Neighbor Next Door is designed as an incentive to assist HUD in moving out the inventory of foreclosed properties. The program is also intended to strengthen communities by encouraging full-time employed professionals to take residency in areas categorized as revitalization areas by HUD.

Originators have a unique opportunity to market the GNND program to staff at fire departments and schools because firefighters, emergency medical technicians and teachers are eligible to purchase HUD homes at a 50% discount off the listing price in HUD revitalization neighborhoods as long as they agree to occupy the property for a minimum 36 month period. In addition, there is only a minimum $100 downpayment requirement for eligible buyers. There is no requirement for first-time home buying.

A three year owner occupant period is required because GNND allows the borrower to purchase the home at a 50% reduction but requires a second mortgage note for the remaining 50% to be held for the minimum three year occupancy period. No interest or payments are due on the second lien as long as the borrower certifies occupancy annually for each of the three years required. If the participant fails to satisfy the three year occupancy requirement, they may be subject to a pro-rata portion of the discount due and payable to HUD.

Often, the foreclosed properties listed by HUD are in need of minor or major repair. GNND may be utilized with the standard FHA 203b if repairs are required and total $5000 or less or in cases of larger repair requirements, the FHA 203k or 203k streamline program may be utilized.

The first step to learning more about the program is determining if there are specific revitalization areas near you. Simply go to http://hud.uai.com/hudpls/ViewMap.aspx?FindAddTI=1 where you can locate revitalization areas by specific property address or by state.

The next step is determining if there are HUD home listings within revitalization zones in your area. To find listings by state, go to http://www.hud.gov/homes/index.cfm and click on your state of interest.

Third, it is important that you understand and communicate the program qualification requirements. Any law enforcement officer employed full-time by a law enforcement agency of the federal government, a state, a unit of general local government, or an Indian tribal government; and, in carrying out such full-time employment, is sworn to uphold, and make arrests for violations of, federal, state, tribal, county, township, or municipal laws is eligible for GNND. Teachers employed full-time in a state-accredited public or private school that teach pre-kindergarten through grade 12 are considered eligible as long as the property being purchased is within the territory covered by the school. Firefighters and emergency medical technicians are considered eligible if employed full-time by a unit of the federal, state, general or Indian tribal government serving the area where the property is located.

You’ll find information on the GNND program at http://www.hud.gov/offices/hsg/sfh/reo/goodn/gnndabot.cfm.

You will find answers to frequently asked questions regarding the Good Neighbor Next Door Program at http://www.hud.gov/offices/hsg/sfh/reo/goodn/gnndfaq.cfm.

Information on the GNND 36 month occupancy requirement, the second lien, payoffs and subordination of the second lien is available at http://www.hud.gov/offices/hsg/sfh/nsc/gnndserv.cfm.

You’ll find HUD’s Mortgagee Letter 2000-27 helpful regarding HUD REO information. Go to http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/00-27.doc to read the full content.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.