# Presentation: 514538

## Housing Choice Voucher Homeownership Program

## Voucher Homeownership Program

- Basic concept -- Instead of using voucher subsidy to help family with rent,  homeownership option allows first-time homeowner to use voucher subsidy to meet monthly homeownership expenses

## PHA Option

- PHA option -- PHA has choice to offer or not offer homeownership option as part of their voucher program
- No separate or additional funding available from HUD
- PHA implements by revising PHA Annual Plan and administrative plan

## Homeownership Voucher Option

- Family is responsible for finding eligible unit to purchase instead of rent
- PHA will make monthly homeownership assistance payment on behalf of the new homeowner
- PHA may make payment to lender or directly to family

## Background

- Homeownership Voucher Program authorized by Section 8(y) of the U.S. Housing Act of 1937, as amended by Quality Housing and Work Responsibility Act of 1998
- HUD approved 15 PHAs to operate pilot programs under the proposed rule
- Final Rule published September 12, 2000, became effective October 12, 2000

## Subsequent Rules

- Final Rule published October 18, 2002
- Downpayment grant option
- _Not operational_, implementation delayed until HUD publishes subsequent notice in Federal Register
- Streamlining Amendments to current homeownership voucher option
- Effective November 18, 2002
- Sale of PHA-owned units interim rule
- Published  October 28, 2002
- Effective November 27, 2002

## Homeownership Voucher Subsidy

- Payment standard determines maximum subsidy in voucher program
- PHA uses _same_ payment standard for both renters and homeowners
- Homeownership family:  payment standard will never be less than payment standard at time homeownership assistance commences for the home

## Housing Assistance Payment

- Family must pay at least total tenant payment (TTP), may pay more
- Monthly homeownership assistance payment is calculated as the lesser of:
- Payment standard minus TTP
- Monthly homeownership expenses minus TTP

## Homeownership Expenses

- Principal and interest on mortgage debt
- Mortgage insurance
- Real estate taxes
- Home insurance
- PHA allowance for utilities

## Homeownership Expenses

- Homeownership expenses (cont)
- PHA allowance for routine maintenance
- PHA allowance for major repairs
- Principal and interest on mortgage debt for major repairs
- If home is a coop or condo, may include coop or condo operating charges or maintenance fees
- Land lease payments (in certain cases)

## Family Share

- Family is responsible for all homeownership expenses not covered by the HAP payment
- If homeownership expenses exceed the payment standard, family pays the difference out-of-pocket in addition to TTP

## Family Share

- 40% of adjusted monthly income limitation does not apply to homeownership families (law limits amount family may pay for _rent)_

## Family Eligibility For Homeownership Option

- Current voucher program participant or eligible for admission to the housing choice voucher program
- PHA may not set aside program funding for special housing types or require applicant to use voucher for particular housing type
- May not maintain separate admissions waiting list  or provide selection preference for voucher applicants who agree to use voucher for  homeownership

## Family Eligibility

- In general, no family member has a present ownership interest in a residence at commencement of homeownership assistance (current homeowners are not eligible for the program)
- Statute provides exception for cooperative members who have acquired cooperative membership shares prior to commencement of homeownership assistance

## First-time Homeowner

**No family member owned any present ownership interest in a residence of any family member during last 3 years (except for single parent or displaced homemaker who, while married, owned a home with spouse or resided in home owned by spouse)**
**Cooperative member**
**Family includes person with disability, PHA determines use of homeownership option necessary as reasonable accommodation**

## HUD Minimum Income Requirements

- Non-disabled families
- Federal minimum wage multiplied by 2000 hours ($10,300)
- Disabled families
- Monthly Federal Supplemental Security Income (SSI) benefit for individual living alone multiplied by 12 ($552 x 12 = $6624)
- Except for elderly and disabled families, welfare assistance may not be considered in determining if family meets requirement

## Minimum Income Requirements

- PHA may establish minimum income standard that is higher than HUD limits for either or both types of families
- However, if family meets applicable HUD limit and:
- Demonstrates it has been pre-qualified or pre-approved for financing that meets PHA requirements
- Financing amount sufficient to purchase home that meets HQS in the PHA jurisdiction
- Family is determined to meet income eligibility requirements for the homeownership option

## Family Eligibility

- Full Time Employment (not applicable for elderly and disabled families)
- currently employed full-time (not less than an average of 30 hours a week)
- has been continuously so employed for at least one year
- PHA may determine to what extent interruptions are considered break in continuity

## Family Eligibility

- Mortgage Defaults
- Family is not eligible if any family member *who was an adult family member at time of default *has previously received homeownership assistance and defaulted on mortgage
- PHA may also establish additional requirements for family eligibility

## Pre-Assistance Homeownership Counseling

- Eligible family must attend and satisfactorily complete homeownership counseling program required by PHA
- PHA staff and/or other entity may conduct

## Pre-Assistance Counseling

- Topics include:
- Home maintenance
- Budgeting and money management
- Credit counseling and credit repair
- Financing Aspects
- obtaining financing and loan preapprovals
- types of financing, pros and cons of different approaches, how to avoid loans with oppressive terms and conditions

## Finding a Home

- PHA may establish time limits for a family to locate a home to purchase and  to close on a home
- Tenant-based assistance -  PHA may not steer or restrict family to certain sellers or neighborhoods
- Portability – applies if receiving PHA is administering homeownership option and accepting new families

## Eligible Units

- Unit under construction or already existing at time* *the family enters the contract of sale
- Purchase of home where family does not own fee title to real property (land)
- Home must be located on a permanent foundation
- Family has right to occupy home site for at least 40 years

## Eligible Units

- PHA disapproval of owner
- PHA may not approve unit if PHA has been informed (by HUD or otherwise) seller is debarred, suspended, or subject to limited denial of participation under 24 CFR Part 24
- PHA may deny approval of seller for any reason provided under 982.306(c)

## Sale of PHA-owned Units

- Sale of units owned or substantially controlled by PHA permitted, provided:
- Written assurance family understands they are freely selecting without pressure or steering
- Independent Agency approved by HUD must perform certain PHA administrative functions
- Conduct HQS inspection and review of independent inspection report
- Review of contract of sale
- Review of sales price and any PHA provided financing

## Two Home Inspections

- Housing Quality Standards Inspection and Independent Professional Home Inspection
- PHA conducts housing quality standard inspection under voucher program
- determines current condition is decent, safe, and sanitary
- no annual HQS inspection requirement

## Independent Professional Inspection

- Unit must also be inspected by independent professional selected and hired by family
- Assess adequacy and life-span of major systems, appliances, and other structural components

## Independent Professional Inspection

- Requirement for inspection arranged by buyer and satisfactory to buyer is typical contingency clause in contracts of sale, consistent with real estate practice
- PHA may disapprove unit on basis of report

## Contract of Sale

- Family must provide copy of contract of sale to PHA
- Contract of sale must:
**provide for pre-purchase inspection**
**buyer satisfaction, buyer not obligated to pay for repairs**
**seller certification that seller not debarred, suspended, or subject to limited denial of participation**

## Financing

- PHA may not require use of specific lender but may establish:
- requirements concerning qualifications of potential lenders
- prohibitions on certain forms of financing
- requirements concerning terms of financing
- requirements or restrictions on other debt secured by home

## Financing

- Affordability of Purchase
- PHA may disapprove proposed financing, refinancing, or financing for improvements or repairs if  PHA determines debt is unaffordable or lender or loan terms do not meet PHA requirements
- All PHA financing or affordability requirements must be described in PHA administrative plan

## PHA Capacity

- Concerns about lending abuses
- PHA demonstrates capacity through one of three options
- Option 1:  Establishes minimum downpayment requirement
- 3 percent of sale price
- Family contribution towards downpayment:  at least 1 percent of sale price comes from family’s personal resources

## PHA Capacity

- Option 2:  PHA requires the financing for purchase of a home meets _one_ of the following:
- provided, insured, or guaranteed by state or Federal government
- complies with secondary mortgage market underwriting requirements
- complies with generally accepted private sector underwriting standards

## PHA Capacity

- Option 3:
- PHA demonstrates in its Annual Plan that it has capacity, or will acquire capacity, to successfully operate a homeownership program

## Continued Assistance

- Family obligations include:
- comply with the terms of mortgage
- family’s only residence/no other ownership interest in residential property
- report changes in composition/income
- no subletting or leasing
- other family obligations under voucher program

## Continued Assistance

- Comply with any additional PHA requirements for continuation of homeownership assistance
- post-purchase counseling
- Statement of Homeowner Obligations
- written agreement signed by family to comply with all family obligations under homeownership option

## Time Limits

- Time limits do not apply to elderly or disabled families
- Maximum term
- 15 years if the initial mortgage has term of 20 years or longer
- 10 years in all other cases
- Time limit applies from initial purchase

## Removal of Recapture Provisions

- 10-18-02 Final Rule eliminates the current recapture requirement of homeownership voucher assistance for new families and currently assisted homeowners
- No impact on any non-homeownership voucher recapture provisions

## Homeownership VouchersQuestions and Answers