7: Homeownership Requirements
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Microsoft PowerPoint - 7- Homeownership Nov 2021©2021 NCDA
1
Project Example: Birmingham, AL
“Blitzbuilds” happen in first week
of June each year
(Homeownership Month) during
which Habitat, a group of licensed
homebuilders and City cooperate
to buildout a small (1011 lot)
subdivision over a oneweek
timeframe. City HOME dollars
backstop any shortfalls on materials.
©2021 NCDA 2
1) Homebuyers to purchase and rehabilitate housing;
2) Developers or owners (including CHDOs) to develop
affordable homeownership housing
PJs must develop written policies and procedures for
homebuyer projects and programs: See CPD1809
Requirements for HOME Homebuyer Program Policies
and Procedures
Forms of Assistance I
Direct assistance to homebuyers
• Rehabilitation costs for purchased
property
• Provided as loans, grants or loan
guarantees
• Most use loans
©2021 NCDA 4
• Acquisition, Construction, Reconstruction,
Rehabilitation,
• Conversion of nonhousing,
• Site improvements.
• Grants
•
Equity Investments, interest subsidies, loan
guarantees
HOME Subsidy should allow units to be affordable
without further subsidy.
©2021 NCDA 5
Homeownership Affordability Period
• Resale or recapture provisions
imposed; and
• HA Units must meet property
standards.
•
Affordability period does not apply to
rehabilitation of owneroccupied housing
(not acquired with HOME Assistance)
©2021 NCDA 6
Homeownership Assistance per Unit Minimum period of
affordability in years
Under $15,000 5
•
Household Assisted must be Low Income (=<80% Area Median Income)
• Homebuyer –
by the time of purchase agreement
• New construction or rehab. units –
at time of agreement to purchase or lease
purchase
•
Incomeeligibility requirement only at purchase
•
Can remain in property regardless of later income so long as the home is
principal residence
• Principal Residence
•
Buyers must use property as their principal residence during affordability period
©2021 NCDA 8
•
All HOMEassisted homebuyers must receive housing counseling
(Requirements in CPD1809)
•
Provided by certified housing counselors who work for organizations
approved to participate in HUD’s Housing Counseling Program.
•
Homebuyers may be charged a reasonable fee for counseling
•
HOME funds can be used for counseling costs when the household
purchases unit with HOME assistance (project soft costs or admin)
•
If homebuyer is not assisted with HOME funds, counseling must be admin.
cost.
©2021 NCDA 9
Maximum Property Value
• Property must “be modest”
•
HOME purchase price (for both New Construction and Existing Housing) or
after purchase & rehab. Limit:
•
95% of median purchase price for area. Either:
1. Single family mortgage limits at
• https://www.hudexchange.info/resource/2312/homemaximum
purchasepriceafterrehabvalue/
2.
PJ may determine using procedures in §92.254(a)(2)(iii)
©2021 NCDA 10
11/7/2021
6
State County Name Metropolitan/FMR Area Name 1Unit
2unit 3unit 4unit
Unadjusted
Median Value 1Unit 2unit 3unit 4unit
Unadjusted
Median
Value
AL Jefferson County
BirminghamHoover, AL HUD Metro FMR Area
$199,000 $254,000 $308,000 $381,000 $209,000 $243,000 $311,000
$377,000 $467,000 $256,000
AL St. Clair County
BirminghamHoover, AL HUD Metro FMR Area
$195,000 $250,000 $302,000 $375,000 $205,400 $243,000 $311,000
$377,000 $467,000 $256,000
AL Shelby County
BirminghamHoover, AL HUD Metro FMR Area
$202,000 $258,000 $313,000 $388,000 $212,550 $243,000 $311,000
$377,000 $467,000 $256,000
AL Chilton County
Chilton County, AL HUD Metro FMR Area
$150,000 $193,000 $233,000 $289,000 $158,350 $243,000 $311,000
$377,000 $467,000 $256,000
AL Walker County
Walker County, AL HUD Metro FMR Area
$150,000 $193,000 $233,000 $289,000 $158,350 $243,000 $311,000
$377,000 $467,000 $256,000
AL Russell County Columbus, GAAL MSA $150,000
$193,000 $233,000 $289,000 $158,350 $243,000 $311,000 $377,000
$467,000 $256,000
AL Baldwin County DaphneFairhopeFoley, AL MSA
$209,000 $268,000 $324,000 $401,000 $220,000 $243,000 $311,000
$377,000 $467,000 $256,000
AL Lawrence County Decatur, AL MSA $152,000 $195,000
$236,000 $292,000 $160,000 $243,000 $311,000 $377,000 $467,000
$256,000
AL Morgan County Decatur, AL MSA $154,000 $197,000
$239,000 $295,000 $162,000 $243,000 $311,000 $377,000 $467,000
$256,000
AL Geneva County
Dothan, AL HUD Metro FMR Area $150,000
$193,000 $233,000 $289,000 $158,350 $243,000 $311,000 $377,000
$467,000 $256,000
AL Houston County
Dothan, AL HUD Metro FMR Area $151,000
$193,000 $234,000 $290,000 $158,820 $243,000 $311,000 $377,000
$467,000 $256,000
AL Henry County
Henry County, AL HUD Metro FMR Area
$156,000 $199,000 $241,000 $299,000 $163,750 $243,000 $311,000
$377,000 $467,000 $256,000
AL Colbert County FlorenceMuscle Shoals, AL MSA
$154,000 $198,000 $239,000 $296,000 $162,500 $243,000 $311,000
$377,000 $467,000 $256,000
AL Lauderdale County
FlorenceMuscle Shoals, AL MSA $154,000 $198,000
$239,000 $296,000 $162,500 $243,000 $311,000 $377,000 $467,000
$256,000
AL Etowah County Gadsden, AL MSA $150,000 $193,000
$233,000 $289,000 $158,350 $243,000 $311,000 $377,000 $467,000
$256,000
AL Limestone County Huntsville, AL MSA $185,000
$237,000 $287,000 $356,000 $195,000 $243,000 $311,000 $377,000
$467,000 $256,000
AL Madison County Huntsville, AL MSA $185,000
$237,000 $287,000 $356,000 $195,000 $243,000 $311,000 $377,000
$467,000 $256,000
AL Mobile County Mobile, AL MSA $152,000 $195,000
$236,000 $292,000 $160,000 $243,000 $311,000 $377,000 $467,000
$256,000
AL Autauga County Montgomery, AL MSA $167,000
$214,000 $259,000 $321,000 $176,000 $243,000 $311,000 $377,000
$467,000 $256,000
AL Elmore County Montgomery, AL MSA $185,000
$237,000 $287,000 $356,000 $195,000 $243,000 $311,000 $377,000
$467,000 $256,000
AL Lowndes County Montgomery, AL MSA $157,000
$201,000 $243,000 $301,000 $165,000 $243,000 $311,000 $377,000
$467,000 $256,000
AL Montgomery CounMontgomery, AL MSA $157,000
$201,000 $243,000 $301,000 $165,000 $243,000 $311,000 $377,000
$467,000 $256,000
AL Hale County
Tuscaloosa, AL HUD Metro FMR Area $180,000
$230,000 $279,000 $346,000 $189,500 $243,000 $311,000 $377,000
$467,000 $256,000
AL Tuscaloosa County
Tuscaloosa, AL HUD Metro FMR Area $180,000
$231,000 $280,000 $346,000 $189,900 $243,000 $311,000 $377,000
$467,000 $256,000
AL Pickens County
Pickens County, AL HUD Metro FMR Area
$150,000 $193,000 $233,000 $289,000 $158,350 $243,000 $311,000
$377,000 $467,000 $256,000
HOME and Housing Trust Fund Homeownership Sales Price Limits FY 2021
(Data through June 2020; New limits effective June 1, 2021)
Existing Homes HOME/HTF Purchase Price Limit
New Homes HOME/HTF Purchase Price Limit
©2021 NCDA 11
Exception
to Restriction on Subsequent HOME Funding
•
Normally, no additional HOME Funds after one year from project completion.
•
A PJ may use additional HOME funds after one year:
•
Before foreclosure or at foreclosure sale to acquire housing through a
purchase option, right of first refusal, or other preemptive right;
•
To provide assistance to another HOME eligible homebuyer.
• Total of original and additional
HOME assistance may not exceed maximum
perunit subsidy.
©2021 NCDA 12
Homebuyer Unit Transfer Deadline [§92.254(a)(3)]
•
Units acquired, rehabilitated or newly constructed with HOME funds for
homeownership purposes must be sold to an eligible buyer within 9 months
of construction completion.
•
If transfer has not occurred, the unit must be converted to a HOME rental unit
and operated in compliance with §
92.252
•
If converted to rental, affordability period applicable to rental projects applies
20 years for new construction rental
©2021 NCDA 13
Resale vs. Recapture
• PJ must impose either resale
or recapture requirements on
HOMEAssisted homeowner units
(except owneroccupied rehab, not acquired
w/HOME)
•
Must include requirements in Consolidated Plan or Action
Plan and HUD must approve in writing
•
Cannot be hybrid, but can use combination in separate PJ
programs
11/7/2021
8
Resale I
During affordability period, on initial and subsequent sales of HOMEAssisted Unit:
•
PJimposed deed restriction or covenant running with land, with following conditions:
•
Must be sold to an incomeeligible family
•
Must be principal residence of owner
• Must be affordable
to a reasonable range of lowincome homebuyers (usually 70
80% AMI); and
•
Must provide seller with a fair return on their investment including homeowner’s
investment (downpayment and principal payments) and any capital improvement.
•
Fair return defined by PJ (for example: resale price based on changes in Housing
Price Index [HPI])
•
Must address how it can be made affordable if return on investment is too high
Resale II
•
Must also have agreement (mortgage, note) w/entity (buyer,
developer) initially receiving funds
•
Recommend mortgage assumable by subsequent buyers, which gives
more protection
•
Funds repaid under mortgage are not Recaptured Funds but are PI
(and will reduce amount needed by PJ to repay)
11/7/2021
9
• Provides longterm affordability
•
Useful in areas of rapidly rising housing prices and in highhousingcost areas
• Disadvantages
•
Mortgage financing may be difficult to obtain
•
If property is sold in foreclosure or if buyer defaults on HOME terms, proceeds might
not cover required repayment of HOME assistance
•
Amount repayable is total of HOME assistance to the unit:
both development and buyer
•
PJ is on the hook for full amount of HOME assistance
•
Buyers may not understand/accept deed restriction
•
Administration is somewhat more complicated
Resale – IV
Deed restrictions may terminate in event of foreclosure
•
HOME investment must be repaid if unit no longer meets
affordability requirements
•
Restrictions revived if owner of foreclosed property regains
ownership during affordability period
•
To forestall foreclosure, add purchase options or rights of first refusal
to deed restriction
•
See exception to restrictions on subsequent HOME funding (earlier
slide)
11/7/2021
10
Middle City Background
•
High housing cost area (median single family home price = $320,000)
•
House affordable to a family of 4 at 80% AMI is $190,000
•
Resale price based on changes (up or down) in Housing Price Index
Costbuydown assistance program
• Downpayment of at least $5,000
•
Bought down to a price affordable at 70% of AMI
•
Resale affordable to a reasonable range of homebuyers –
i.e. from 70% 80%
of AMI
•
For a family of 4 at 70% of AMI, affordable price is $180,000
Resale Example, cont.
•
Assistance to subsequent buyers (up to max. sub. limit), if necessary,
brings cost back down to that affordable by a 70% AMI family
•
Deed restriction with following requirements:
•
Must be sold to a lowincome family and be their principal
residence;
•
Resale price is initial purchase price increased by same percentage
as Index (e.g., Housing Price Index –
HPI) plus cost of any capital
improvements
• Mortgage –
assumable by subsequent buyers
11/7/2021
11
($320,000 Median Home Price, Aff. House @ 80% AMI= $190,000)
Market Sale Price
HOME Subsidy (Cost
Family)
$300,000 $120,000 $180,000 $5,000 $175,000
Resale
Issue #1: Return to Seller (In 10 years HPI has increased 5%)
Resale Price ($180,000 x
Resale 10 Years later –
$189,000 $5,000 $194,000 $142,000 $52,000
(Return $9k on Invest. $10k)
Resale Issue #2: Price to New Income Eligible Buyer
Resale Issue #3: Additional Subsidy
not to exceed Max. Sub. Limit
Sale Price Additional
Max. Subsidy Limit
Final Total Subsidy
Recapture I
• Can only
be used when providing direct subsidy to
homebuyer
•
During affordability period, when HA property sold, PJ
collects some or all of HOME assistance from net sale
proceeds
•
HOME must be sold to any willing buyer, at any price, at any
time
•
PJ decides proportion of net proceeds to seller and to PJ
(Recapture)
•
Property no longer subject to HOME Rules after Recapture
©2021 NCDA
Assumption of Recapture Obligations by Subsequent
Homebuyer [§92.254(a)(5)(ii)]
•
Subsequent lowincome purchaser of a HA homeownership
unit may assume the existing HOME loan and recapture
obligation when no additional HOME assistance is provided
•
Where additional HOME assistance needed, the original
HOME assistance must be recaptured.
•
A separate HOME subsidy must be provided to the new
homebuyer, and a new affordability period must be
established based on that assistance to the buyer.
©2021 NCDA
Recapture II
• Easier to administer
•
Easier for buyers and banks to understand
•
May provide additional funding for HOME
activities
•
If no net proceeds neither seller nor PJ on hook
for HOME Assistance
Disadvantage
©2021 NCDA
• HOME Amount Subject to Recapture
•
Amount of HOME assistance that enabled homebuyer
to buy dwelling unit
•
Includes HOME assistance that reduced purchase
price from fair market value to an affordable price
•
Excludes amount between cost of producing unit
and market value of property
(i.e., development subsidy)
•
If HOME assistance only used for development
subsidy, resale option must be used
©2021 NCDA
Recapture IV
Market value of home (If HA development)
Sales Price of home
= Amount subject to recapture
Does not
include HOME $ used for cost of producing unit (development
subsidy)
26©2021 NCDA
•
$45,000 HOME second mortgage at 3% interest for 20 years
•
$6,000 HOME downpayment assistance: deferred, forgivable loan
• Total direct subsidy:
•
$5,000 HOME downpayment assistance to homebuyer: deferred,
forgivable loan
•
$50,000 to CHDO to write down cost to affordable
•
Total direct subsidy subject to recapture:
• Affordability Period:
29
•
Recapture Amount Limited to Net Proceeds of sale
• Net Proceeds
are sales price minus superior loan
repayment (other than HOME funds) and any closing
costs
• Recapture Options 1.
Owner Investment Returned First 2.
PJ Recaptures Entire Amount 3.
Reduction During Affordability Period 4.
Shared Net Proceeds
©2021 NCDA
Recapture Option 1
Owner Investment Returned First
•
Owner’s entire investment (downpayment and capital
improvements made by owner since purchase) recovered before
recapturing HOME investment.
Owner Investment Returned First Example – Insufficient Net
Proceeds
HOME Investment = $50,000 Homeowner Investment = $5,000 Total
Investment = $55,000 Net Proceeds = $40,000
PJ Recaptures = $35,000 Homeowner Recaptures = $5,000
30©2021 NCDA
HOME Investment = $50,000 Homeowner Investment =
$5,000 Total Investment = $55,000 Net Proceeds = $40,000
PJ Recaptures = $40,000 Homeowner Recaptures = $0
31©2021 NCDA
Recapture Option 3
Reduction During Affordability Period
• HOME investment repayment amount
reduced on a prorata
basis during affordability period
©2021 NCDA 32
PJ May Share Net Proceeds
•
If net proceeds not sufficient to Recapture
HOME investment (or a reduced amount from
Reduction During Affordability Period method)
plus
•
Allows homeowner to recover investment
(downpayment and capital improvement)
©2021 NCDA
$5,000
Total Invest. = $55,000
Net Proceeds = $40,000
$50,000/($50,000+$5,000) = 91%
Recaptured = $36,363.64
$3,636.36
Homeowner Investment/HOME
34©2021 NCDA
35
HOME funds may be used to assist purchase of “Single Unit” (14
unit) properties with rental units:
1.
If HOME used only for unit of buyer as principal residence:
HOME affordability requirements on that unit only
2. If HOME used for entire property
•
HOME rental affordability requirements on rental units
• If Resale
used, affordability requirements during entire
affordability period
• IF Recapture
used, affordability requirements may be
terminated (at PJ’s discretion) upon recapture of HOME
investment
3.
If HOME used only for rental units
HOME rental affordability requirements on rental units
during entire affordability period
©2021 NCDA