Neighborhood Housing Services of America said it is planning an "orderly wind-down" of its affordable housing programs due to "extraordinary liquidity demands" resulting from the housing downturn and is ceasing its purchase of new loans.

"The financial demands of the current market and expected continuing challenges have contributed to NHSA's inability to secure its annual grant from NeighborWorks America," NHSA of Oakland, Calif., said Friday. "The lack of grant funding has left the nonprofit organization with liquidity levels that will not allow it to continue operations."

A spokesman for NeighborWorks, which is based in Washington, said it was "surprised" by the announcement as the two nonprofits had been in talks for some time about what NHSA might be able to do to continue meeting the terms of its grant. "We hoped that we could come to an agreement that [would keep] NHSA doing the work it's done for years," the spokesman said.

NHSA said it had made several changes over the past year and negotiated concessions in loan terms and interest rates from its lenders and investors "in anticipation of obtaining the grant funding." NHSA plans to service existing mortgages "until arrangements can be made to transfer these responsibilities to other parties."

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