Transcript Building HOME

Homebuyer Assistance
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Beneficiary
 Must qualify as low-income
 Must occupy property as a principal
residence for affordability period
 Receive title through fee simple title, land
trust, or, if homeownership under state law,
receive share in mutual housing or coop
 Contracts for deed not homeownership
24 CFR 92.254(a)
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Eligible Properties
 Eligible property types:
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Single-family (1-4 units), including
condominium units and manufactured housing
Manufactured home
 Sales price must be < 95% of median
purchase price in the area
24 CFR 92.254(a)
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Eligible Properties
 1-4 units (single family), including
condominium units
 PJ must inspect units for property standard
compliance
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HQS for acquisition
Rehab/New Construction standards if
applicable
Includes lead-based paint requirements
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Affordability Requirements
 PJs have two options for controlling
affordability of the property during the
affordability period:
 Recapture
 Resale
24 CFR 92.254
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Recapture Provisions
 Homebuyer sells to any willing buyer
 Sale triggers recapture of all or portion
of “direct subsidy” to the homebuyer
 Direct subsidy = financial assistance
that reduced purchase price from
FMV or was provided directly to
homebuyer (e.g., downpayment,
closing costs, HOME mortgage)
24 CFR 92.254(a)(5)(ii)
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Recapture Provisions
 Recapture full amount of subsidy or
a reduced amount
 May forgive portion
 May share net proceeds
 May capture portion of
appreciation
24 CFR 92.254(a)(5)(ii)
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Recapture Provisions
If no direct subsidy, must use
resale provisions
Recapture amount is limited to
net proceeds of sale
Cannot recapture more than is
available at closing
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Common Recapture Issues
 Insufficient description in Con Plan
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HUD must review for regulatory compliance
and approve
Citizens have insufficient information
 Permit “assumption” of requirements or waive
recapture if next buyer is low-income
 Not limited to net proceeds
 Buying out of requirements
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Resale Provisions
When the home is sold,
HOME affordability restrictions
are passed on to the next buyer
24 CFR 92.254(a)(5)(i)
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Resale Provisions
 Purchaser must be low-income and occupy
as principal residence
 Resale restrictions control subsequent sale
during the period of affordability
 New buyer assumes existing affordability
period, unless additional HOME $ provided
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New, potentially shorter POA
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Resale Provisions
 Resale Price must be “affordable to
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reasonable range of low-income families”
Original homebuyer must receive a “fair
return” on investment
Both terms must be defined in Con Plan, and
PJ must state how it will address situations
where both standards cannot be met
Alternative: Presumption of Affordability
24 CFR 92.254(a)(5)(i)
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Common Resale Issues
 Resale provisions described in Con Plan
often don’t meet requirements
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Insufficient detail
No fair return or return not fair
Don’t require resale to low-income buyer
Don’t define affordability to a “reasonable
range” of low-income buyers
Don’t define upfront how resale price will be
determined
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Common Resale/Recapture Issues
 PJs often develop a “hybrid” provision
that includes elements of both or an
“either or” provision that creates
uncertainty for the homebuyer
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HOME rule currently does not permit either of
these approaches
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Ensuring Affordability
 Written agreement with homebuyer imposing
resale/recapture and requiring principal
residency for POA
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Must be separate from loan docs
 Resale – deed restriction required
 Recapture – optional; lien OK
 Monitoring for principal residence not
required
24 CFR 92.254(a)()(i)(A)
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Emerging
Homeownership Issues
HOME Program Design
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Program Design Issue
 The homeownership landscape is in the midst
of enormous shifts
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Depreciation in previously overvalued markets
Skyrocketing foreclosures
Substantial contraction of the mortgage
market
Have you rethought your
program design yet?
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Program Re- Design Issues
 Market changes
 Underwriting standards
 Counseling
 Anti-predatory lending and resubordination
policies
 Rehabilitation option
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