CHDO Toolbox 

for HOME PJs 

Tools for Managing Your CHDO Relationships 

INCLUDING THE FOLLOWING TOOLS: 

Seven Practices for Promoting Effective CHDOs 

CHDO Quickfinder 

Expanded Assessment Tool of CHDO Qualifications & Capabilities 

CHDO Project Evaluation & Underwriting Checklist 

CHDO Agreement Required Provisions Checklist 

Sample CHDO Written Agreement 

Expanded CHDO Conflict of Interest Policy 

CHDO Proceeds Worksheet

PREPARED BY: 

The National Affordable Housing Training Institute under contract with the 

U.S. Department of Housing and Urban Development 
CHDO Toolbox for HOME PJs

This publication started as an idea of the National

Community Development Association (NCDA),

National Association for County Community

Economic Development (NACCED), National

Association of Local Housing Finance Agencies

(NALHFA), National Association of Housing and

Redevelopment Officials (NAHRO) and the Council

of State Community Development Agencies

(COSCDA). On August 6, 2001, these organizations

and some of their members met in Washington,

D.C. to develop an initial outline for the guidebook.

The author would like to thank the following people

for their participation in this session: Steve Gartrell

(Newton, MA), Robert Gehret (Boston, MA), Greg

Hoover (Davenport, IA), Denise Beigbeder (Ramsey

County, MN), Gary Bachman (Pima County, AZ),

Lisa Baker (President, Baker Street Associates,

Long Beach, CA), and Todd Christensen (State of

Virginia). 

In addition to this session, the author met several

times with the aforementioned national organizations to develop the final publication. The author

would like to thank the following representatives

from these associations who helped tremendously in

developing the final product: Carmel McGuire

(NACCED and NALHFA), Colleen Moore (NAHRO),

Andy McMahon and Linda Thompson (COSCDA),

and Vicki Watson (NCDA).

Finally, the author would like to thank Mary Kolesar,

Director of the Office of Affordable Housing

Programs at the U.S. Department of Housing and

Urban Development, and Virginia Sardone, Director

of the Program Policy Division within the Office of

Affordable Housing Programs for both of their

invaluable input.

Acknowledgement

CHDO Toolbox for HOME PJs

I. The PJ-CHDO Relationship........................................................................1

1. Introduction ........................................................................................................1

2. CHDO Requirements And Resource Materials........................................................1

3. Why Work With CHDOs? ....................................................................................1

4. The Essence Of The PJ-CHDO Relationship ........................................................4

5. So How Many CHDOs Do You Need? ..................................................................5

II. Seven PJ Practices For Promoting Effective CHDOs ............9

1. Make Them Compete! ........................................................................................9

2. Don’t Make Reservations – Make Commitments ..................................................12

3. Put It In Writing! ................................................................................................12

4. What Gets Measured, Gets Done – Impose Performance Standards ......................15

5. Pay CHDOs As Developers, Not Administrators ..................................................17

6. Monitor Performance At Least Quarterly ............................................................19

7. Train, Train, Train..............................................................................................20

III. CHDO Tools ....................................................................................................23

CHDO Quickfinder ................................................................................................24

Expanded Assessment Of CHDO Qualifications & Capabilities....................................27

CHDO Project Evaluation & Underwriting Checklist ..................................................35

CHDO Agreement Required Provisions Checklist ......................................................50

Sample CHDO Written Agreement ..........................................................................53

Expanded CHDO Conflict Of Interest Policy ..............................................................71

CHDO Homebuyer Project Proceeds Instructions & Worksheet ..................................73

Contents

1

CHDO Toolbox for HOME PJs

I. The PJ-CHDO Relationship

1 Introduction

This guide is a compilation of management methods

and tools that are designed to help HOME

Participating Jurisdictions (PJs) to improve, expand

or repair their relationships with CHDOs. 

It has been co-sponsored by the National

Community Development Association, the National

Association of County Community Economic

Development, the National Association of Housing

and Redevelopment Officials and the Council of

State Community Development Agencies. Funding

has been provided through the HUD Community

Development Technical Assistance (CDTA) program. 

The guide is a deliberate attempt to offer advice to

PJs beyond HUD rules and guidance. It is not a

comprehensive guide to CHDO requirements. But if

you already know the basic requirements, it will

serve as a strategic guide to management practices

beyond the guidance of the regulations that can help

you to get the most out of your CHDOs and the

HOME funds you provide them.

2 CHDO Requirements and

Resource Materials

Chapter 3 includes a quick reference guide – labeled

a “CHDO Quickfinder” – to HUD rules and

requirements for CHDOs. It is an overview, and not

a complete discussion of the requirements. The regulation and other HUD guidance should always be

consulted for a comprehensive explanation of

CHDO requirements, including: 

◆ Regulations: 24 CFR Part 92 

• 92.2 Definition of CHDO

• 92.300 – 92.303 

• 92.504(c)(3) Written Agreements for

Developers (including CHDOs)

◆ Notices addressing CHDO issues:

• CPD-97-11 – CHDO notice (under revision)

• CPD-01-13 – CHDO reservations

• CPD-96-09 – CHDO operating expenses

• CPD-97-09 – CHDO proceeds

◆ Other Key HUD References:

• HOMEfires Vol 2 No 1 (3/99) – Eligible

activity chart

• Building HOME training manual Chapter 8

These items can be downloaded from the HUD

HOME Program web site at: www.hud.gov/offices/

cpd/affordablehousing/programs/home/index.cfm.

Hard copies also may be ordered from Community

Connections Clearinghouse at 1-800-998-9999 or

www.comcon.org.

Changes to the HOME and CHDO rules and guidance are expected. Jurisdictions are strongly

encouraged to sign up for the mailing list offered at

the HOME Program web site noted above. The

mailing list provides notification of new materials

and program changes that are being posted on the

HOME web site. By signing up for the mailing list,

and checking the web site at least monthly, you

should be able to keep current with changes to the

HOME Program.

3 Why Work with CHDOs?

Over the last couple of decades, nonprofits have

been playing a rapidly expanding role in the production and operation of affordable housing and the

delivery of services to low- and moderate-income

families. They have taken over an increasing number of service delivery functions formerly conducted

by government, and they are increasingly active in

the physical development of low-income neighborhoods and revitalizing areas. 
2

CHDO Toolbox for HOME PJs

Why should you make the effort to work with

CHDOs? First of all, you’re required to! One of the

stated purposes of the National Affordable Housing

Act of 1990 (the Act that created the HOME

Program) is “to expand the capacity of nonprofit

community housing development organizations to

develop and manage decent, safe, sanitary and

affordable housing”. NAHA established two fundamental obligations for PJs with respect to CHDOs

(in Section 231(a)):

1. The CHDO Set-Aside – jurisdictions must

“reserve not less than 15 percent of (HOME)

funds for investment only in housing to be

developed, sponsored, or owned by community housing development organizations”;

and

2. Affirmative Outreach and Assistance to

CHDOs – jurisdictions must “make reasonable efforts to identify community housing

development organizations that are capable

or can reasonably be expected to become

capable of carrying out elements of the jurisdiction’s housing strategy and to encourage

such community housing development

organizations to do so.”

In addition, the Consolidated Plan regulations at

24 CFR Part 91 requires HOME jurisdictions to

consult with housing and service providers, and also

requires jurisdictions to address institutional

capacity needs and coordination. Consequently,

communities must foster direct relationships with

nonprofit providers as part of their housing delivery

system in order to qualify for Federal funding.

Furthermore, HUD is implementing the performance measurement system known as SNAPSHOT.

While the score encompasses overall program performance on commitment, completion and

occupancy, one of the “double-weighted” factors is

CHDO project completions. If your CHDO performance is lagging, it will diminish your overall

standing in the SNAPSHOT measurement system. 

But the PJ-CHDO relationship can’t just be “shotgun” marriage produced by a Federal threat or

obligation. The PJ-CHDO relationship can and must

be based on much more than simply “qualifying for

the funds.” 

CHDOs bring many attributes to the table:

◆ Housing production and preservation –

CHDOs can add significantly to the local affordable housing stock, and tend to be committed to

permanently affordable housing, yielding longterm returns on the public investments in

affordable housing. 

◆ Leverage and Match – CHDO projects have

the ability to raise funds that are not always available to public agencies and for-profits, adding to

the overall funding for affordable housing.

CHDOs also have the ability to generate more

than their share of HOME Match requirements. 

◆ Volunteer contributions – CHDOs tend to

attract staff and volunteers who are dedicated to

serving the low- and moderate-income population and contribute time and in-kind resources to

community development activities.

◆ Political support – CHDOs are organized

specifically to undertake activities that benefit

low- and moderate-income persons, and they

involve low- and moderate-income persons

directly in the organization through board, committee and membership structures. As a result,

CHDOs tend to have significant community connections that can galvanize broad community

support around the issues of affordable housing

and local housing programs.
3

CHDO Toolbox for HOME PJs

◆ Adaptability in responding to changing

community needs – As nonprofit organizations,

they are likely to have more flexibility of structure

and procedures than public agencies, enabling

them to adapt quickly to changing environments

and needs. 

Despite all those positive attributes, some nonprofit

organizations lack the financial strength and business

discipline to be viable ongoing development entities.

They have limited ability to pay and retain skilled

personnel, which contributes to turnover. Many lack

the working capital to cover planning and predevelopment costs and meet project equity requirements.

They have to seek operating support regularly, and

this may divert attention or delay their ability to

implement projects on a timely basis. Well-intentioned and community-based boards and staff might

lack some of the key management skills needed

for cost-effective implementation of projects and

programs. 

PJs and CHDOs need one another to be successful,

not only in the HOME Program but more broadly in

addressing community development needs. As with

all symbiotic relationships, each side needs certain

things from the other to succeed.

◆ What do communities need from nonprofits, including CHDOs?

• Sustained effort and timely project completion;

• Stability of staff and organization;

• Strong connections, and involvement of, the

low- and moderate-income residents of the

community; 

• Leveraging of foundation and other funds

available only to nonprofits; and

• Development and expansion of capacity and

the ability to carry expanding roles in community development.

◆ What do nonprofits need from communities to successfully fill this role?

• Access to operating support;

• Access to seed money and predevelopment

funds;

• Access to training and capacity building in

housing development and management;

• Access to gap financing;

• Access to other conventional lenders and

public funders;

• The opportunity to earn reasonable developer fees; and

• Predictable pipelines of projects to sustain

staffing.

HOME is a key resource in building and sustaining

this symbiotic relationship, but alone it is insufficient

to address all of these needs. Moreover, CHDOs

need to be diversified in their sources of support to

be able to survive changes in any program. HOME

funds have to be used strategically and within the

limitations of the program.

Unfortunately, not every community enjoys successful PJ-CHDO relationships. We see two common

and challenging PJ-CHDO situations:

1. PJs that have enough CHDOs, but can’t

seem to get them to deliver housing activities

that address the PJ’s housing priorities in a

timely and cost effective manner; and

2. PJs that just don’t have enough nonprofits –

they either have a shortage of housing nonprofits or have trouble recruiting existing

nonprofits to qualify for CHDO designation.

This guide is intended to provide some perspective

and a few tools for strategic management of the

PJ-CHDO relationship.
4

CHDO Toolbox for HOME PJs

4 The Essence of the PJ-CHDO

Relationship

The foundation for successful management of the

PJ-CHDO relationship under the HOME Program

can be built upon four basic principles:

1. CHDO status and funding is not an 

entitlement.

2. CHDOs are developers, not subrecipients.

3. CHDO benefits (operating expenses,

pre-development loans, and proceeds)

are useful, but optional. 

4. PJs have an affirmative obligation to 

provide technical assistance to CHDOs.

While the HOME Program establishes the set-aside

and several additional benefits that can be offered to

CHDOs, no individual CHDO is “entitled” to receive

anything beyond CHDO designation and technical

assistance. Entitlement is a dangerous precedent. When the risks of losing current and future

funding are minimized, it can diminish the urgency

to perform and can undermine the authority of the

PJ. The PJ must be in control of CHDO funding in

the same way it must control all other HOME funding. 

The second principle – CHDOs are developers – is

critical to understanding the limits of the relationship. Under HOME, a subrecipient administers a

program or activity on behalf of the PJ. The subrecipient steps into the shoes of the PJ and assumes

all administrative responsibilities (except intergovernmental clearance and environmental review).

However, when HOME funds are expended on

“development” of properties owned or controlled by

the CHDO, such projects cannot be subrecipient

activities. Because CHDOs are developing properties under their control, they must be treated as

developers and operate within the narrow parameters of a development agreement.

It is common to use the term “partnership” when

talking about relationships with CHDOs and other

nonprofit developers. But this term is somewhat

misleading. While the relationship is symbiotic and

hopefully you are collaborating and cooperating

with nonprofit developers, you are not “partners.”

The partner term implies equal roles or a peer relationship. However, when it comes to HOME, the PJ

is a funder or lender and the CHDO is a developer.

Instead of “partners,” you are “investors” in your

CHDOs and their projects on behalf of the public.

As a fiduciary of public funds, you must make certain that your investment is cost-effective and meets

the priorities of the jurisdiction’s Consolidated Plan

and the requirements of the regulations. You must

retain full authority to oversee the activities of the

developer and control disbursements. 

The third principle stresses that the unique forms of

CHDO assistance – i.e., operating expenses, predevelopment loans, and CHDO proceeds – are

strategic options that the PJ can choose to provide or not provide to some or all CHDOs. Some

CHDOs or projects may need one or more of these

benefits to succeed, but others might not. While likely it is the easiest route politically to just split up the

pie among the CHDOs, by doing so PJs lose their

ability to target the funds for leverage, and can risk

fostering a sense of entitlement among CHDOs. PJs

should reserve the flexibility to make strategic decisions about when and how to use these options, if

at all. 

The fourth principle is a reminder that, while you

don’t owe CHDOs any particular financial benefits,

you do owe CHDOs help and guidance. You can

deliver it directly, or use HUD’s extensive CDTA

and CHDO intermediary network to help CHDOs
5

CHDO Toolbox for HOME PJs

increase their capacity and earn the opportunity to

spend HOME funds. Be sure to talk with your local

HUD CPD office about the availability of CHDO TA.

Make no mistake about it – you need CHDOs as

much as they need you. There are mutual benefits

to the symbiotic relationship, but there are definite

roles and the PJ must retain management control.

5 So How Many CHDOs 

Do You Need? 

Before you proceed to the next chapter on tools for

managing your CHDO relationships, it is critical for

you to determine how many and what role(s) you’d

like your CHDOs to play. If you don’t know or can’t

articulate what roles you want them to play, how

can you expect them to deliver the priority projects

you need? Consider the following questions.

First, how many CHDOs can your community support? CHDOs (and other nonprofits)

need to have a steady pipeline of projects to sustain

them. Consider the following questions:

◆ How many “slots” do you have for CHDOs in

your HOME Program? That is, how many

CHDO projects can you fund every couple of

years (on the assumption that CHDO projects on

average may one to two years to complete)?

Don’t just limit your answer to the minimum

CHDO set-aside of 15%, but to whatever portion of your HOME funding realistically could be

put toward viable CHDO projects.

◆ How many CHDOs/nonprofits can be supported by the overall mix of local funding (HOME,

CDBG and other funds)? What other funding

sources are available to support nonprofit projects locally? No CHDO or other nonprofit should

be entirely dependent on one program (HOME

or otherwise) for funding. Diversification is

essential to long-term health. 

◆ How many CHDOs will keep the environment

competitive and not an entitlement situation?

Everyone does a little better job when they have

to compete. If you have the ability to fund three

CHDOs every two years, then having four or five

competing for those funds removes the sense of

entitlement and creates a little healthy competition.

◆ Have the CHDOs and other nonprofits maximized their efforts to obtain state, private, and

other Federal funding? The competitive environment encourages creativity in leveraging other

funding sources. Is your community getting its

fair share of other nonprofit funding resources?

These questions should help you come to a general

conclusion regarding the number of CHDO/nonprofit projects or organizations the local funding

environment can support or needs to have a competitive environment.

Second, what do you want your CHDOs to

do? Go back to your ConPlan analysis of needs and

strategic goals. What priority needs did you identify

that CHDOs could or should address?

◆ Development of additional rental housing?

◆ Preservation (acquisition and rehab) of existing

rental housing?

◆ Development of special needs and homeless

housing?

◆ Development of homebuyer units or projects?

◆ Other (non-CHDO) activities (e.g., management of

local programs such as downpayment assistance)?

Compare this list of priority needs to the types of

projects your CHDOs have been doing. Are they
6

CHDO Toolbox for HOME PJs

addressing all needs, or are certain needs being

ignored?

Third, what are your current CHDOs and

nonprofits capable of doing? How do their

capabilities compare to your priority needs? Can

they meet all of your needs, or do you need other

organizations with different capabilities? What are

the gaps in capacity that you need to fill?

You may want to use the following matrix to help

you summarize your analysis:

Type of Housing PJ Priority Existing CHDO Capacity Gap

(Hi-Med-Low) Capacity

Rental Housing 

Development

Existing rental housing 

rehab/mgt

New home buyer 

opportunities

Homebuyer 

acquisition/rehab

Housing for special 

populations 

Homeless trans/perm 

housing

Other non-CHDO

activities
7

CHDO Toolbox for HOME PJs

Based on this analysis, you should be able to answer

the following questions:

◆ Are there enough capable CHDOs to do the

volume of CHDO activities year in and year out

without backlog or performance problems?

◆ Are there enough capable CHDOs to create an

environment of competition, where individual

CHDOs do not have a sense of entitlement or

certainty of funding regardless of what they

choose to do and how they perform?

◆ Are there CHDOs capable of developing and

operating all of the different types of housing

you need developed (ownership, rental, special

needs and homeless)?

If any of these questions elicit a negative conclusion,

then you either have to improve the capacity of the

existing CHDOs or consider recruiting some new

ones. 

With this perspective on your needs for CHDOs,

proceed to the next chapter for a discussion of

strategic management practices and tools.

9

CHDO Toolbox for HOME PJs

II. Seven PJ Practices for 

Promoting Effective CHDOs

Below are seven recommendations regarding the

management of CHDOs that we have chosen to call

(with apologies to Stephen Covey) the “Seven PJ

Practices for Promoting Highly Effective CHDOs.”

1. Make them compete 

2. Don’t make reservations –

make commitments

3. Execute thorough written agreements 

4. Impose performance standards 

5. Pay CHDOs as developers, 

not administrators

6. Monitor performance at least 

quarterly

7. Train, train, train

Drawn from the first decade of experience with

CHDOs, these practices create an alternative paradigm for managing the PJ-CHDO relationship. 

The seven practices are matters of management discretion. In no way are they to be interpreted as

“requirements.” You may decide not to adopt them,

or choose to incorporate any of the practices as you

see fit. Together, however, they create a much more

productive environment for nurturing successful

CHDOs. 

If you choose to adopt the management paradigm,

keep in mind that it may be difficult to change old

habits and expectations. It is much harder to take

away something (e.g., entitlements, benefits, administrative costs) once it has been given. Even if you

decide you want to move toward this management

model, it might be best to devise a transition that

allows your agency and the CHDOs to adjust to the

new management style. 

So, get ready to change the way you manage your

CHDO relationships!

1 Make Them Compete!

We like a reasonable level of competition as 

the basis for all recommendations that follow.

Competition forces everyone to sharpen their

pencils and do a better job of planning their projects

and packaging their project applications. In addition,

the awareness of competition keeps organizations

performing after contracts are awarded, because

performance is necessary to maintain good standing

for future awards.

On the other hand, an exclusive arrangement where

the same CHDO gets funded each year may foster

a sense of entitlement. Entitlement breeds complacency, if not backlogs. Where possible, make them

compete. 

At the same time, keep in mind that excessive competition can be wasteful and counter-productive,

diverting a lot of nonprofit effort toward the competition rather than performance. And, there may

not be enough funding to sustain the entire nonprofit population. As noted in the previous chapter,

it is healthy to have a few more CHDOs than your

available funding slots – but not an excessive supply

of CHDOs. 

To make sure that your process is competitive, consider the following suggestions:

1. Nurture enough capable CHDOs to maintain a competitive environment – This is

what creates and sustains the competitive environment. But make sure they are capable, of

course. Some thoughts on recruiting new CHDOs:

a. Recruit New CHDOs – Look first for existing nonprofits with proven track records of

performance. Some nonprofits may be reluctant to make board changes to meet CHDO

requirements, but they can create CHDO subsidiaries while maintaining their overall
10

CHDO Toolbox for HOME PJs

structure and broader focus. Conduct outreach

to regional nonprofits that serve more than

your jurisdiction, Community Action Agencies,

Habitat style organizations, faith-based organizations and special needs agencies.

b.Monitor existing CHDOs for changing

conditions – Nonprofits that lose key staff or

board members might experience a dramatic

change in ability to deliver. When changes

occur, intervene early to train new staff and

keep the organization on course.

c. Qualify CHDOs based on capacity, not

just regulations – The CHDO Checklist in

CPD-97-11 is not sufficient. A CHDO that is

qualified but not capable is unlikely to be able

to perform adequately in a demanding program such as HOME. Attached is a CHDO

Assessment tool to help you focus on

issues of nonprofit capacity as well as the regulatory requirements of CHDO qualification.

Where deficiencies exist, determine the appropriate TA or training to provide.

2. Run an RFP or other type of competitive

application process – The application for

funding is the competitive arena. RFPs or similar

solicitations create a level playing field for all the

potential CHDOs. Some RFP suggestions: 

a. Tell them what projects you want – The

choice of projects should not be left to the

CHDO. When you issue the RFP, make clear the

types and locations of projects in which you are

most interested, consistent with the ConPlan.

Require them to respond to priority needs.

b. Make performance a threshold or factor

for award – As you infuse your HOME

Program with the expectation of “performance,” make timely and cost effective

performance on current and past awards a

threshold factor for award. Some PJs establish

percentage thresholds of drawdown or completion on prior awards to be considered for

new funding. Others make it a competitive

factor for award rather than a threshold.

3. Consider using CHDO Operating Expenses

and Pre-Development Loans to fund project planning & application – Some CHDOs

resist or fail to succeed in a competitive application process because of their lack of working

capital to pay the upfront costs of putting

together an application. If you face this problem

with your CHDOs, consider using CHDO

Operating Expenses or Pre-Development Loans

to cover some of the upfront planning costs. 

One PJ gave each of three newly designated

CHDOs $5,000 - $10,000 of CHDO Operating

Expense funds to help them conduct the preliminary planning and feasibility work for potential

projects, with the understanding that the

CHDOs would submit a project application for

funds in 90 – 120 days. This investment helped

the PJ to identify that two of three were capable

of undertaking projects, but the third was not yet

ready. The PJ avoided the more costly mistake

of committing and expending CHDO project

funds for a project that was unlikely to be completed in a timely manner or at all. 

CHDO Operating Expense funds were used in

this case because they do not have to be projectspecific. However, they must be invested in a

CHDO that has a funded project, or is expected

to be funded, in the next two years (see 92.208

and 92.300(e).) The PJ had enough funds to

assist two CHDOs per year, so they had four

“CHDO” slots available – sufficient for them to

meet the regulatory standard of a reasonable

expectation of funding the three new CHDOs. 
11

CHDO Toolbox for HOME PJs

Remember that CHDO Operating Expenses are

not project funds – they do not have to be repaid

in the event the project does not go forward.

Also, Operating Expense funds do not require

environmental clearance nor do they trigger

HOME Match requirements. However, the

CHDO Operating Expense written agreement

must reflect the requirements of 92.300(e).

Pre-Development Loans could be used in a similar manner if the project has been identified as

an eligible HOME Project. There are two levels

of pre-development lending specified in 92.301.

TA/site control loans generally can be used prior

to environmental review, but the seed money

loans should be granted only after environmental

clearance. The pre-development loan written agreement should reflect the requirements of 92.301.

4. Select CHDO projects based on sound

underwriting – Determining CHDO project eligibility isn’t sufficient. You have limited HOME

funds to invest. You need to make a wise commitment and expenditure of funds in affordable

housing projects that can be delivered as quickly

as possible, but that will also remain viable for

the compliance period and beyond. This requires

careful underwriting.

Consider the four-step process for selection as

outlined in the attached CHDO Project

Evaluation and Underwriting Checklist:

a. Threshold Review – First determine if the

project can meet the HOME regulatory

requirements, or if there are any “deal killers”

in the proposed project that may render it ineligible for HOME CHDO funding. Review the

application for HOME project eligibility,

CHDO eligibility and cost eligibility. 

b. Factors for award – After threshold review

has removed any clearly ineligible projects,

factors for award can be applied to determine

the order in which projects will be underwritten and funded. See the earlier comments

about previous performance.

c. Underwriting Risk Analysis – Assess the

market, borrower and project risk factors to

determine if the project is feasible and viable

as a housing development project. Risk analysis is a combination of the traditional financial

analyses and non-financial risk factors. 

The key market factors are affordability and

market comparability. The key borrower risk

factors are capability and liquidity – whether

the developer has the skills to do the development and the funds to meet the capital

advance requirements of the project. The key

project risk determination is viability. It’s not

enough to get the project built; it also has to

last for the compliance period or longer. 

A CHDO Project Evaluation and

Underwriting Checklist is included with

the CHDO tools in Chapter 3 to help you

identify the risk factors.

d. Investment Terms – The final step is to

determine the appropriate terms for the public investment, including the size of the

investment, subordination to other debt,

whether the investment is a loan or grant, the

loan term and compliance period, whether

interest will be charged or amortization

required, assignability to another buyer, and

other such terms for the HOME subsidy. This

is also covered in section 4 of the CHDO

Project Evaluation and Underwriting

Checklist in Chapter 3.
12

CHDO Toolbox for HOME PJs

5. If you have more than enough good projects, fund more than the 15% – The 15% is

a floor, not a ceiling. If you have more than the

minimum, HUD’s cumulative method of tracking

CHDO commitments essentially provides a

carry-forward credit for the extra commitment to

future years. This gives you a buffer for when

some future CHDO project falls apart of fails to

materialize. Also, given the long-term nature of

some CHDO project development phases, forward funding conditioned on future years

allocations may be a method for giving CHDOs

a preliminary commitment that allows them to

plan and seek other funding sources.

Once again, the goal is to have enough capacity to

spend your CHDO funds quickly and effectively. A

little bit of competition should help you to achieve a

better mix of projects and more cost effective

expenditure of HOME funds.

2 Don’t Make

Reservations – Make

Commitments

CHDO reservations are inferior to project

commitments from a management perspective.

Reservations require only the designation of a particular CHDO to receive funding, but not necessarily

a specific project. Initially, the Congress and HUD

put in the step of the CHDO “reservation” as a designation step that had to occur within 18 months, so

that CHDO projects might be identified by the 24-

month project commitment deadline. However, in

response to complaints by PJs with limited CHDO

capacity, HUD gave PJs some additional flexibility

by slipping the reservation requirement to 24

months. This may have relieved the commitment

pressure in the early years, but it also may have set

an unfortunate precedent for the long-term management of CHDOs.

We are not fans of the “reservation” option.

Reservations create a sense of entitlement to the

CHDO that relieves the CHDO of the time pressure

to package a viable project that qualifies for commitment. In fact, when HUD began compiling the

SNAPSHOT performance measures at the end of

2002, there were 61 PJs with all their CHDO funds

reserved but no completed CHDO units. Reservations

don’t always translate into production.

Furthermore, the award of funds to an organization

rather than a project may foster a sense that HOME

funds can be secured by politics rather than professional performance. 

So, unless you are up against the commitment deadline and at risk of losing the CHDO funds, skip the

reservation step. Go directly to the commitment

step, and make your CHDOs apply like all other

developers for a project-specific commitment.

3 Put It In Writing!

So you have selected the CHDO projects you want to fund. The next step is

to set them up in IDIS and let them

begin to use the funds, right? Wrong!

The rule at 92.504(b) requires you to have a written

agreement with a CHDO (or any other recipient of

HOME funds) before you disburse funds. But

92.502 says that you may set up a project after you

“commit” funds, and the definition of Commitment

in 92.2 defines commitment (for a rehab or new

construction project – the likely categories for most

CHDO projects) as having “executed a written legally binding agreement under which HOME assistance

will be provided to the owner for an identifiable project under which construction can reasonably be

expected to start within 12 months of the agreement

date.” Bottom line: you need a written agreement at

the commitment stage.
13

CHDO Toolbox for HOME PJs

Sure, you will execute a note and mortgage at the

time of closing, and these documents will replace,

amend or incorporate the written agreement, but

the closing is too late to document the relationship.

Much of the CHDO work in planning and preparing

the project will have already occurred by the closing.

Significant errors already may have been made by

the time of closing, and delays and other performance problems are likely to have already surfaced.

Without a written agreement, pre-closing problems

may be difficult to address.

(Remember that environmental review is required

before a firm commitment can be made. If environmental review is not completed prior to the

execution of the written agreement, it must be conditional, and contain the wording in CPD-01-11.)

Is the written agreement just a regulatory requirement you have to meet to satisfy? Emphatically NO!

It’s actually one of the most important steps in managing your relationship with the CHDO.

As good fences make good neighbors, so do good

agreements make good business associates. You are

about to enter a business relationship. It has to be

specific and arms-length. It has to be documented so

that each party knows what is expected of the other.

So what do you need in the CHDO written agreement? We can start with the regulatory requirements

to make sure we’re covered, but we can’t stop there.

Performance is not just about regulatory compliance; it’s about delivering on time, on budget and

within scope.

92.504(c)(3) indicates the minimum requirements

for a written agreement, and there are some additional regulatory requirements listed elsewhere in

the regulation. Attached is a checklist you may wish

to use to review your CHDO agreement for the

required elements. Here are thoughts to keep in

mind when developing written agreements:

◆ Be explicit. Don’t just say in the agreement

that “the CHDO must comply with Section soand-so of 24 CFR Part 92”. Be specific. For

example, if your PJ utilizes a local housing code

as its property standard, the agreement should

state the specific standards, rather than merely

indicating compliance with 92.251. Sure, it

would be lazy on their part to not bother to read

the requirements that are referenced, but it is

lazy on your part to not specify the requirements

in the first instance. It sends a message that it

wasn’t important enough to you to be specific.

◆ Set performance standards. Be sure to

include interim deadlines and performance standards that can be used to monitor progress and

pay developer fees. See the discussion of performance standards below.

◆ Identify procurement requirements. As

developers, CHDOs are subject to any procurement standards that you indicate in your

agreement. Failure to specify procurement standards means that no procurement standards are

applicable. They are not automatically subject to

either the PJs standards at 24 CFR 85.36 or the

nonprofit subrecipient standards at 84.41-.48.

Your choices include:

• Applying your procurement standards (or a

modified version);

• Applying the nonprofit subrecipient standards;

or

• Requiring the CHDO to develop its own procurement policy for review and approval by

the PJ.

While you can choose to apply the public procurement standards, these may be unnecessarily
14

CHDO Toolbox for HOME PJs

restrictive and costly for a CHDO to implement.

For example, the publication of bids by legal

notice may be unnecessary, and it may not

always be cost-effective to require a sealed bid

scenario. Set standards that ensure an appropriate level of competition, and reserve your right

to review and approve bids if needed for less

experienced CHDOs. 

◆ Address Conflict of interest. The award of

financial benefits (both contracts and unit benefits) to persons who appear to have inside

information or undue influence is perhaps the

most likely source of negative public attention to

the program. You must be alert to potential conflicts before they occur. In the HOME Program,

HUD requires potential conflict of interest to be

addressed before it can occur. The regulation

permits PJs to grant exceptions to the conflict of

interest provisions for developers in advance. 

For CHDO developers, 92.356(f) only restricts

the award of rental unit occupancy to related

parties. Obviously, this doesn’t address all conflict situations. For example, one CHDO

produced five homebuyer units, all of which were

awarded to officials or staff of the CHDO – a

questionable application of the “self-help” housing concept to say the least! Another CHDO

awarded construction contracts without competition to a general contractor who serves on the

board. 

HUD is considering an extension of the conflict

standards to also address award of contracts and

other forms of HOME assistance. Whether or

not HUD extends the conflict of interest provisions applicable to CHDOs, we strongly

recommend that you extend the provisions to all

contract and unit benefits through the written

agreement. An Expanded CHDO Conflict

of Interest Policy is included with the tools in

Chapter 3 to help you consider a broader policy.

Remember, you are in a position to grant an

exception in advance to a potential conflict of

interest situation if you determine that fair procedures have been put into place to prevent the

conflict. But once a conflict of interest accusation

has arisen, it is very hard to eliminate the conflict

after the fact, and even harder to overcome the

damage done to reputation of the CHDO and

your program. 

◆ Specify the Use of CHDO Proceeds. CHDO

proceeds are subject to the provisions of

92.300(a)(1), which essentially limit the first

reuse of the funds to affordable housing. At a

minimum, this standard must be referenced.

However, it may be to the advantage of the PJ

to regulate the use of proceeds by more than the

minimum. Possible additional requirements could

include:

• Permanent or long-term restriction on the use

of the funds, or establishing a revolving loan

fund;

• Limiting the use to HOME-assisted projects

rather than just “affordable housing”, or

restricting to a specific use (e.g., homebuyer

assistance);

• Reporting requirements on the use and status

of the Proceeds Account to the PJ (such as an

annual audit requirement); and/or

• Conditions on the use of funds for development staff and operating costs that support

development.

One PJ discovered recently that their CHDO

had generated nearly $500,000 in CHDO

proceeds over the years by developing a few
15

CHDO Toolbox for HOME PJs

units of for-sale housing each year. The funds

had accumulated in the CHDO’s accounts

because the CHDO was not sure how to use

the funds. At the same time, the PJ wanted to

expand the responsibilities of the CHDO to

develop a new subdivision of for-sale homes,

but the CHDO only had a part-time executive

director. 

Through renegotiation of the Proceeds terms

of the CHDO agreements, the CHDO agreed

to escrow and permanently restrict the use of

the Proceeds to projects approved by the City,

and to include the funds as a separate schedule in its annual audit submission to the City.

In return, the City approved use of the funds

to hire a fulltime staff person to manage the

subdivision project and to use a portion of the

Proceeds along with new CHDO funding to

subsidize half of the new homes for lowincome buyers. Effectively, the use of CHDO

Proceeds produced a faster project with more

assisted units.

Chapter 3 includes a tool entitled the HOME

Funds & CHDO Proceeds Reconciliation

Worksheet to assist with the calculation of

CHDO Proceeds for a homebuyer project,

which is the situation most likely to generate

CHDO Proceeds. 

Please note: repayments of HOME homebuyer notes/mortgages from resales by the

homebuyers are “recaptured funds” that

must be repaid to the PJ, and may not be

retained by the CHDO as CHDO proceeds.

A CHDO Agreement Required Provisions

Checklist and a Sample CHDO Written

Agreement are attached to provide guidance in

meeting regulatory requirements as well as addressing these additional management issues. 

4 What Gets Measured,

Gets Done – Impose

Performance

Standards

“What gets measured gets done.” Isn’t

this so true? Don’t you respond faster and better

when someone is charting your progress? With the

heavy demands on schedules and resources – for

both PJs and CHDOs – it is easy to let things sit if

no one is tracking or demanding timely performance.

HUD is considering providing guidance to PJs on

setting performance standards. With or without the

HUD guidance, consider inserting performance

standards in the contract that allow you to conduct

effective ongoing monitoring. 

Performance standards are difficult to discuss in

general. They need to be project-specific, and there

are so many different types of CHDO projects.

However, consider incorporating the following into

the written agreements and your monitoring of the

CHDO:

◆ Interim deadlines/milestones – While most

agreements have a time frame for completion,

many agreements fail to include interim time

frames, deadlines or milestones. Without these,

your ability to conduct progress monitoring is

limited. Key milestones for CHDO development

projects might include the following, depending

upon the type of project:

• Completion of project designs and specifications

• Application for (or receipt of) local approvals

(zoning, etc.)

• Site acquisition

• Full financing commitments

• Construction closing
16

CHDO Toolbox for HOME PJs

• Marketing milestones (such as the selection/

approval of X number or Y percent of buyers

or tenants)

• Initial occupancy

• Permanent loan closing (or sale)

• Sustaining occupancy

Several milestones should be incorporated to

permit at least quarterly progress monitoring

(as discussed later.) Also, milestones should be

identified that correspond to the partial release

of developer fees (as discussed below).

◆ Completion dates, penalties and requirements for extensions – While most agreements

have completion dates for the project based on

the CHDO’s proposal, these are not commonly

enforced. CHDOs have been permitted to

expect that they can exceed the completion date

without consequences or permission. Do not

permit this expectation and practice to continue.

The written agreement should stipulate deadlines

(either as specific dates or as number of

days/weeks/months from the contract start date

in cases where the start date is not yet clear). 

The written agreement should also specify the

criteria for granting extensions, such as:

• Satisfactory progress toward completion;

• Identification of specific impediments that are

beyond the control of the CHDO;

• Submission of a revised schedule that reflects

reasonable completion of the project; and 

• Any penalties, fee adjustments, or other 

consequences of extensions. 

When CHDOs fail to meet the deadline, the

written agreement should invoke one or more of

the following:

• Probation, including the suspension of eligibility for new CHDO, HOME, CDBG or other

PJ funding awards and/or the processing of

new projects in the pipeline; 

• Withholding of developer fee payments;

• Reduction of developer fees; and/or 

• Other forms of penalties designed to encourage the CHDO to restore performance. 

Whatever penalties you choose, they should be

in the written agreement. The agreement should

permit such penalties to be waived in the event

the delay is beyond the control of the CHDO,

and there should be a way of escalating the penalty if performance continues to lag after due notice.

In some cases, PJs have included a designated

assignee clause in the written agreement, which

permits the PJ to make a determination that the

CHDO is not capable of completing the project

within the terms of the agreement, and to assign

the award to a substitute developer which has

been named in the agreement or is designated by

the PJ at that time.
17

CHDO Toolbox for HOME PJs

5 Pay CHDOs as

Developers, Not

Administrators

Developers earn developer fees; subrecipients are

paid administrative costs. These should not be

confused.

Historically, the approach has been to pay the

administrative costs of a nonprofit while it developed a project. This has created a sense of

development as a paycheck rather than a project –

you get paid for working on it, whether or not you

succeed. 

In the real development world however, developer

fees are paid for services rendered. Fees are earned

when milestones are reached. Holding payments

until milestones are reached creates the proper

incentive for the developer to complete the task

quickly and successfully. 

While we recommend a fee structure for CHDOs,

most CHDOs cannot wait until the end of the project to receive their fee. A schedule for fee advances

should be negotiated. An initial fee advance of a

modest portion (10 – 20%) of the fee might be

granted at the time of execution of the agreement to

capitalize the CHDO, but any further fee advances

should be based on the achievement of documented

project milestones (see previous recommendation),

such as:

◆ Acquisition closing

◆ Construction commencement 

◆ Percentage of construction completed

◆ Substantial completion or the certificate of

occupancy

◆ Permanent closing or sale to homebuyers

◆ Sustaining occupancy and full reporting/

compliance

The final payment of fees should be held until all

costs are incurred and paid, occupancy has been

achieved, and the required reports and documentation are submitted.

There is one other advantage of paying developer

fees rather than administrative costs: fees that are

based on performance only require documentation

of the performance milestone. They do not require

time sheets, mileage logs and other arduous documentation that is required for administrative costs.

So the recordkeeping burden of the CHDO and PJ

are reduced substantially through a fee structure.

Another prevalent historical perspective has been

that nonprofits should be able to develop housing

for less than for-profit developers. This has resulted

in nonprofits being under-funded and unable to

maintain a steady pace of development. 

Fees are the lifeblood of the development business.

Fees not only cover the costs of doing the development for which the fees are earned, but also cover

the costs of “next project” selection and pre-development planning until fees can be earned on the

next deal. Nonprofits that don’t have these funds

have to divert their attention to fundraising before

they can get on with the next project. 

Another common practice is to pay projects the

same developer fee based on percentage of cost –

say no more than 10% of total development cost

excluding fee. But developer costs are not proportional to size; some costs are fixed. The application

of a fixed developer fee has resulted in smaller, more

complex nonprofit projects being under-funded, and

developers having an incentive to increase the size

of projects in order to earn a reasonable fee.

In the HOME Program, the inclusion of CHDO

Operating Expenses was taken by some PJs to suggest that CHDO development costs should be
18

CHDO Toolbox for HOME PJs

covered by the 5% cap. But that is not the intent of

CHDO Operating Expenses, and giving a CHDO

only 5% of the HOME funds (which are usually only

a portion of the total project funding) almost never

adequately compensates the nonprofit for its development efforts. In fact, this practice is almost

certain to produce long-term organizational viability

problems. (CHDO Operating Expenses can be used

to partially cover the developer fee, but the fee

shouldn’t be limited to this amount.)

Also keep in mind that CHDO Proceeds might be

generated by a CHDO project. This is particularly

true in a homebuyer project where the units will be

sold and the CHDO receives net sales proceeds.

(See the discussion in the previous section regarding

the regulation of CHDO Proceeds through the written agreement. Also see the HOME Funds &

CHDO Proceeds Reconciliation Worksheet

in Chapter 3.) Any CHDO Proceeds must be considered along with CHDO fees as part of the total

fees and profit of the project. Where CHDO

Proceeds are expected over and above the return of

any CHDO equity invested in the project, developer

fees can be reduced to give an overall reasonable

return to the CHDO for its development effort.

There are a number of approaches that you can

take to structuring fees. For example:

◆ Adopt a sliding scale fee range – say 15% to 5%

of total development cost – with the larger percentages awarded to smaller projects to reflect

fixed costs of development. As project size

increases, reduce the percentage fee granted. 

◆ Give a smaller fee on acquisition projects or the

acquisition portion of the budget (say 3 – 5%),

and a higher fee rate (say 6% - 15%) on the hard

and soft costs of construction and rehab. 

◆ Apply different fee structures based on the

complexity of the work involved in the project,

as determined by the scope of work and

complexity of financing, management and implementation. Or, award larger fees on projects that

have intricate financing schemes to achieve affordability for a lower range of incomes.

◆ Offer fee bonuses on projects that are delivered

below cost and ahead of schedule, splitting any

savings that might be achieved through lower costs

and lower construction interest with the developer.

Move beyond the old notions of nonprofit development. Embrace the principal that anyone who

develops – for-profit or nonprofit – is entitled to a

reasonable market-based fee for development services rendered. Recognize that nonprofits tend to

take on more complicated projects than many private developers, and may in fact require larger fees

as a percentage of development cost because they

are taking on the most difficult projects – multi-subsidy projects packaged to serve extremely low

income households, small project such as infill and

community-based special need homes, difficult to

develop sites that go against the market trends but

are critical to community revitalization, and other

complicated development scenarios.

A CHDO that must operate in the fee-based world

of development will learn to be more selective of

projects and more persistent in execution. The

CHDO will learn to choose projects that can be

delivered more quickly and with greater certainty in

order to generate fees to support the organization.

This will increase productivity and give you assisted

units more quickly. 

Over time, the successful CHDOs will grow, while

the inefficient ones will fade away. Remember, your

obligation as a PJ is to nurture successful CHDOs,

not to sustain particular organizations on life support. Use the developer fee approach to encourage

and reward success in development. 
19

CHDO Toolbox for HOME PJs

6 Monitor Performance

At Least Quarterly

HOME rules require at least annual monitoring of all contractors, including

CHDOs. HUD has issued a useful monitoring guide

titled Monitoring HOME Program Performance

and also offers training on monitoring. 

However, annual compliance monitoring is not sufficient when it comes to development. Projects can

fall apart or come to a stop is a matter of weeks or

months. Major mistakes that affect compliance and

cost can be made at any time. 

We all have to admit that we perform better when

we know someone is watching our work. And, the

more frequently we are checked, the more likely we

are to stay on schedule. So, while the rule requires

at least annual monitoring, you need more frequent

checkpoints to determine if progress is being made

in housing development. 

Monthly checkpoints are common with construction

projects due to construction draws. At that time, an

inspection of the work is usually done, but it doesn’t

typically address all of the other activities that are

critical elements of project performance – marketing, management, recordkeeping and compliance.

A more complete review of project status and compliance should be done at least on a quarterly basis.

Quarterly options include:

◆ Written progress report – You may not be

able to be on site each quarter, so require the

CHDO describe the project status, progress,

impediments and revised schedule and budget. 

◆ Progress meeting – Meeting face to face permits interaction, observation and follow-up on

the information. This is best done in combination with the written progress report.

◆ Site visit – It is hardest of all to hide a lack of

progress if you have to show someone your

progress. So go visit the CHDO, look at records,

inspect the project site(s), and do whatever else

you need to do on a regular basis to make them

realize you are watching.

A second recommendation: give the CHDOs (and

your other recipients) the HUD Production Reports

(monthly) and SNAPSHOTS (quarterly). While

HOME has enjoyed success relative to other HUD

programs in the completion of units and reporting

of results through the IDIS system, HUD publishes

these reports as a way of spurring jurisdictions to

increase their efforts to complete and close out projects. You know how you react: you cringe if you are

not performing well, beam if you did well, and in

either case redouble your efforts to ensure better

performance in the future. Why not let CHDOs

experience the same sensations of successful or lagging performance by:

◆ Forwarding the Production Reports and SNAPSHOTS to the CHDOs and other recipients as

HUD publishes the numbers;

◆ Compiling your own recipient-by-recipient

report on their contribution to your overall performance; and/or

◆ ncluding progress/status reports on CHDOs in

the CAPER so the public and HUD know their

performance.

Is this being heavy-handed? No, it’s the public’s

funds. The public has a right to know and hold

the recipients accountable, as HUD holds you

accountable.
20

CHDO Toolbox for HOME PJs

7 Train, Train, Train

Sometimes it seems as though the HOME

Program is inundated with trainings and technical assistance providers. Sometimes you

wonder about the quantity and quality

of training. Is it overkill? No, as long

as it is focused for maximum effect.

The HOME Program is complicated due to a very

detailed statute and rule. It is essential that practitioners using HOME funds have a solid command of

the rules. With CHDOs, there is a need to train new

CHDOs, but there is also need to provide ongoing

training to existing CHDOs to address turnover and

to expand the skills of existing staff. Consider the

following suggestions:

1) Track the HUD web site for HUD-funded training

opportunities at: http://www.icfhosting.com/

hcd/cpd/hcdcpd.nsf/webpages/Welcome.html.

2) Contact your CPD Representative in your HUD

Field Office to identify scheduled trainings and

also the HOME TA Providers and CHDO intermediaries listed with the Field Office. If trainings

your CHDOs need aren’t scheduled, request

them.

3) Plan an orientation briefing or training for every

new CHDO. If they are new, use the training

package provided by HUD for the HOME basics

course called Building HOME. The overheads

and manual are available at: http://www.hud.

gov/offices/cpd/affordablehousing/library/build

ing/index.cfm. 

4) Conduct at pre-contract briefing with CHDOs at

the time of each new award. Address past performance issues as well as the new award

requirements. 

5) When key CHDO staff or board changes occur,

offer the Building HOME training to the new

staff. 

6) If you choose to adopt any of the management

practices recommended in this guide, conduct a

training to introduce the documents. A training

package will be made available through your

association.

7) Consider ways to encourage or reward CHDOs

for participation in additional training opportunities. Make it a factor for award in your

competition. Let CHDOs demonstrate that their

staff have attended trainings and participated in

courses to expand their knowledge about affordable housing development and the HOME

Program. 

8) Consider making ongoing training a requirement

for CHDO recertification – a la continuing education credits. If cost is an issue, and usually it is,

consider making available CHDO Operating

Expense money as grants to permit CHDO staff

to attend training.

In the end, the knowledge that you share with your

CHDOs and the additional training they receive will

reflect in the quality and timeliness of the projects

they do for you.

So, the seven management practices that attempt to

introduce a new paradigm for the PJ-CHDO relationship are:

1. Make them compete 

2. Don’t make reservations – make

commitments

3. Execute thorough written agreements 
21

CHDO Toolbox for HOME PJs

4. Impose performance standards 

5. Pay CHDOs as developers, not

administrators

6. Monitor performance at least quarterly

7. Train, train, train

They are built around the sound concepts of competition, business-like administration, and performance

measurement and payment. While the transition might

be a bit rocky, if you choose to follow these practices

in whole or in part, you are likely to experience

improved and sustained performance by your CHDOs.

23

CHDO Toolbox for HOME PJs

CHDO Quickfinder

Expanded Assessment Tool of CHDO Qualifications & Capabilities

CHDO Project Evaluation & Underwriting Checklist

CHDO Agreement Required Provisions Checklist

Sample CHDO Written Agreement

III. CHDO Tools
24

CHDO Toolbox for HOME PJs

CHDO QuickFinder

A Reference Guide to CHDO Requirements of the HOME Program

HOME Investment Partnership Program – Title II of National Affordable

Housing Act of 1990 (NAHA)

■ Regulations: 24 CFR Part 92: key CHDO sections

❑ 92.2: Definition of CHDO (CHDO qualifications)

❑ 92.300 - 92.303: set-aside, pre-dev loans 

❑ 92.208: CHDO operating expenses

❑ 92.504(c)(3): written agreements for developers (incl. CHDOs)

■ HOME Notices:

❑ CPD-97-11 (new version expected in 2003)

❑ CPD-01-13: CHDO reservations (annual issuance)

❑ CPD-96-09: CHDO operating expenses

❑ CPD-97-09: CHDO proceeds

■ HOMEfires Vol 2 No 1 (3/99): Eligible activities chart

■ Training Manual: Building HOME, Chapter 8

■ HUD HOME Program: www.hud.gov/offices/cpd/affordablehousing/programs/home/index.cfm

■ Community Connections Clearinghouse: 1-800-998-9999 or www.comcon.org

The CHDO Set-Aside 92.300(a)

■ 15% of PJ’s annual allocation must be reserved for CHDO projects 

■ Funds must be committed to CHDO development projects:

❑ Requires acquisition, construction or rehabilitation component to be a “development” project

❑ CHDOs must have “effective project control” (CHDO must own, develop or sponsor the project)

■ Funds must be reserved specific CHDOs and committed to CHDO projects within 24 months.

■ CHDO allocation tracked on cumulative basis (see Commitment Notice CPD-01-13 or successor)

Eligible CHDO Activities 92.300(a), CPD-97-11

■ Rental housing:

❑ Acquisition and/or rehabilitation of rental housing

❑ New construction of rental housing

■ Homebuyer housing:

❑ Acquisition and/or rehabilitation of properties for sale to homebuyer

❑ New construction of homebuyer properties

❑ Direct financial assistance (i.e. downpayment and closing costs) to purchasers of HOME-assisted

homebuyer housing owned, sponsored or developed by a CHDO with HOME funds
25

CHDO Toolbox for HOME PJs

Operating Expenses (Optional) 92.208, CPD-96-09

Amount ■ Up to 5% of PJ’s annual allocation

■ No use of the funds is mandated

Eligible Uses ■ Uses must be used for “reasonable and necessary costs for the operation” of

the CHDO, consistent with 92.208 

■ Eligible costs include salaries, wages, and other employee compensation and

benefits; employee education, training, and travel; rent; utilities; communication

costs; taxes; insurance; equipment; materials and supplies.

Requirements ■ Written agreement required (can be part of a CHDO project commitment)

■ If CHDO does not have a current commitment, agreement must specify CHDO is

expected to receive CHDO funds within 24 months of receiving operating

expenses. (92.300(e))

■ A CHDO may not receive HOME funding for any fiscal year that exceeds

50 percent of the CHDO’s total operating expenses in that fiscal year, or $50,000,

whichever is greater [§ 92.300 (f)].

■ CHDO operating expenses are not subject to HOME match requirements.

Pre-Development Loans (Optional) 92.300(c), 92.301

Amount ■ Limited to 10% of total amount reserved for CHDOs from annual allocation;

no project-specific limit

TA/Site Control ■ Eligible uses: feasibility studies, consultants, legal fees, preliminary applications,

Loans(92.301(a)) preliminary architectural/engineering, options/site control, title clearance

■ Does not require environmental clearance

Seed Money ■ Uses: pre-construction costs, such as loan commitments, plan & specifications,

Loans (92.301(b)) zoning, engineering, legal, etc.

■ Requires environmental clearance of project

■ Requires site control, development team, preliminary commitment of HOME

Repayment ■ Repaid from or rolled into construction/permanent financing

provisions ■ Forgivable if project impediments beyond the control of the CHDO

CHDO Proceeds (Optional) 92.300(a)(2), CPD-97-09

■ At PJ option, CHDO can retain proceeds from project, but:

❑ First reuse of proceeds must be for low-income housing or HOME activities

❑ Recaptured funds from HOME homebuyer notes/mortgages are subject to HOME rules

(see recapture 92.503(d))

❑ If proceeds not permitted to be retained by CHDO, PJ must treat as program income

Written ■ Must specify whether CHDO can retain proceeds & the reuse of those

Agreement proceeds (type of activity permitted/required)

27

CHDO Toolbox for HOME PJs

Expanded Assessment of

CHDO Qualifications & Capabilities
28

CHDO Toolbox for HOME PJs

This tool combines the regulatory requirements of

CHDO qualification with additional questions to

help a PJ to determine if a nonprofit has the capacity to be successful as a CHDO. For each of six

topics, the regulatory thresholds are provided. If the

organization does not meet these thresholds, then it

may not be certified as a CHDO regardless of its

overall capabilities. However, if it meets the regulatory thresholds, then utilization of the organization

as a CHDO may be influenced by the additional

questions that indicate capacity to successfully manage housing development activities. If deficiencies

are noted, the PJ should provide technical assistance or refer the nonprofit to a CHDO

intermediary for assistance prior to the award of

CHDO funds.

Expanded Assessment of CHDO Qualifications & Capabilities

Topic/Question Adequate Deficiency

1 Organizational Status & Mission

Regulatory Thresholds:

The nonprofit is organized under State or local laws, as evidenced by:

_____ A Charter, OR

_____ Articles of Incorporation.

It has a tax exemption ruling from the Internal Revenue Service as

evidenced by:

_____ A 501(c)(3) or (4) Certificate from the IRS or

_____ A group exemption letter under Section 905 from the IRS

that includes the CHDO.

It has among its purposes the provision of low- and moderateincome housing, as evidenced by:

_____ Charter,

_____ Articles of Incorporation,

_____ By-laws, OR

_____ Resolutions.

Additional Questions:

Certificate of Good Standing: Can it deliver a certificate of good

standing or other documents from the State?

Service Area: Does it have a documented service area consistent

with its CHDO activities?

Strategic Plan: Has it produced a strategic plan that specifies an

action plan for housing development?

Shared commitment: Do board and staff exhibit shared

commitment to its housing development mission?

Other organization issues:
29

CHDO Toolbox for HOME PJs

Topic/Question Adequate Deficiency

2 Board Composition

Regulatory Thresholds:

At least 1/3 of board membership is for residents of low-income

neighborhoods, other low-income community residents, or elected

representatives of low-income neighborhood organizations, as

evidenced by:

_____ By-Laws,

_____ Charter, OR

_____ Articles of Incorporation

No more than one-third of the governing board members may be

public officials (including any employees of the PJ) or appointed by

public officials, and government-appointed board members may not,

in turn, appoint any of the remaining the board members, as

evidenced by:

_____ By-laws,

_____ Charter, OR

_____ Articles of Incorporation.

If the CHDO is sponsored/created by a for-profit entity, the for-profit

entity may not appoint more than one-third of the membership of the

CHDO’s governing body, and the board members appointed by the

for-profit entity may not, in turn, appoint the remaining two-thirds of the

board members, as evidenced by the CHDO’s:

_____ By-laws,

_____ Charter, OR

_____ Articles of Incorporation.

Additional Questions:

Board stability: Has there been stability/continuity of board

members over the last several years?

Development oversight: Does the board have a committee

structure or other means of overseeing planning and

development?

Board skills: Do board members have professional skills directly

relevant to housing development (e.g., real estate, legal,

architecture, finance, management)? 

Decision-making: Has the board demonstrated the ability to

make timely decisions?

Board-staff relations: Is there a good relationship between board

and staff? Do they have shared goals?

Other board issues:Topic/Question Adequate

Deficiency
Topic/Question Adequate Deficiency

3 Sponsorship/Independence

Regulatory Thresholds:

The CHDO is not controlled, nor receives directions from individuals,

or entities seeking profit from the organization, as evidenced by:

_____ The organization’s By-laws, OR

_____ A Memorandum of Understanding (MOU).

If sponsored or created by a for-profit entity, the for-profit entity’s

primary purpose does not include the development or management of

housing, as evidenced:

_____ In the for-profit organization’s By-laws

If sponsored or created by a for-profit entity, the CHDO is free to

contract for goods and services from vendor(s) of its own choosing,

as evidenced by:

_____ By-laws,

_____ Charter, OR

_____ Articles of Incorporation

If sponsored by a religious organization, the CHDO is a separate

secular entity from the religious organization, with membership

available to all persons, regardless of religion or membership criteria,

as evidenced by:

_____ By-laws,

_____ Charter, OR

_____ Articles of Incorporation

Additional Questions:

Identity of Interest: Are there any identity of interest issues between

the CHDO and the contractors/vendors, consultants, and

professionals it uses for its CHDO projects?

4 Relationship/Service to the Community

Regulatory Thresholds:

It has a history of serving the community within which housing to be

assisted with HOME funds is to be located, as evidenced by:

_____ Documentation of at least one year of experience in 

serving the community, OR

_____ For new organizations, documentation that its parent 

organization has at least one year of experience in

serving the community.

30

CHDO Toolbox for HOME PJs
31

CHDO Toolbox for HOME PJs

Topic/Question Adequate Deficiency

4 Relationship/Service to the Community (Cont.)

It provides a formal process for low-income, program beneficiaries to

advise the organization in decisions regarding design, siting,

development, & management of affordable housing projects, as

evidenced by:

_____ The organization’s By-laws,

_____ Resolutions, OR

_____ A written statement of operating procedures approved by

the governing body.

Additional Questions:

Needs: Are current plans well grounded in an understanding of

current housing conditions, housing needs, and need for supportive

services? Has it done any analyses of the local housing market and

the housing needs of low-income households?

Relations: How strong are the current reputation of the

corporation and the relationship with the community?

NIMBY: To what extent does NIMBY opposition exist to low

income housing in the service area? To what extent do channels

exist for the CHDO to negotiate with the community and potential

opponents?

Local government relations: How strong is the CHDO’s

relationship with the local government? How strongly does local

government support its housing activities?

Other community issues:

5 Financial Management & Capacity

Regulatory Threshold:

It conforms to the financial accountability standards of 24 CFR 84.21,

“Standards for Financial Management Systems”, as evidenced by:

_____ A notarized statement by the president or CFO;

_____ A certification from a CPA, OR

_____ A HUD approved audit summary.

Additional Financial Management Questions:

Audit: Does the CHDO have an annual audit? Is the most recent

audit current? 

Audit findings: Were there management or compliance findings

in the last two years? Are finding resolved?

Budgeting: Does it do annual budgeting of its operations and all

activities or programs? Does it track and report budget v. actual

income and expenses? 
32

CHDO Toolbox for HOME PJs

Topic/Question Adequate Deficiency

5 Financial Management & Capacity (Cont.)

Reporting: Is financial reporting regular, current and sufficient for

the board to forecast and monitor the financial status of the

corporation?

Cash flow management: Does it know its current cash position

and maintain controls over expenditures? How regularly does it

experience cash flow problems?

Internal controls: Does it have adequate internal controls to

ensure separation of duties & safeguarding of corporate assets? 

Is there sufficient oversight of all financial activities?

Procurement/Conflict of Interest: Does the organization have a

conflict of interest policy governing employees and development

activities, particularly in procurement of contract services and the

award of housing units for occupancy?

Insurance: Does it maintain adequate insurance – liability, fidelity

bond, workers comp, property hazard, & project?

Financial stability: Does the current balance sheet and budget

indicate sufficient funds to supports essential operations? To what

extent does the organization have a diversified and stable funding

base for operations? What revenue sources are predictable yearto-year? Does the CHDO have an established fundraising program

for both capital & operational needs?

Portfolio Financial Condition: If it has a portfolio of properties,

are they are in stable physical and financial condition or are they a

drain on corporate resources? Does it collect adequate

management fees from the properties?

Liquidity: Does the organization have liquid assets available to

cover current expenses? Does it have funds available for predevelopment expenses or equity investments required for

development?

Other financial issues:

6 Development Capacity

Regulatory Threshold:

It has a demonstrated capacity for carrying out activities assisted with

HOME funds, as evidenced by:

_____ Experience of key staff who have completed similar projects

to HOME-funded activities, OR

_____ Contract(s) with consultants who have relevant housing

experience, to train key staff 
33

CHDO Toolbox for HOME PJs

Topic/Question Adequate Deficiency

6 Development Capacity (Cont.)

Additional Capacity Questions:

Structure: Can the current corporation structure support housing

development activities, or is there a need for a subsidiary or other

organizational structure for future development? Are there operations

or activities that need to be organizationally separate from housing

development activities and portfolios?

Portfolio: Does its portfolio of projects/properties evidence

competent management and oversight? Do the properties appear

to have adequate funding?

Previous Performance: Has it done the CHDO activities

previously? Did it perform competently? 

Management capacity: Does the current management have the

ability to manage additional development activities? Does the

organization have the capabilities to analyze alternative housing

projects?

Procedures: Are the corporate lines of authority for development

activities clear? Are policies & procedures in place governing

development activities?

Project management: Does the organization have procedures for

monitoring the progress of a project? Does it have the capacity to

monitor project-level cash flow and schedule?

Personnel: Does it have staff that are assigned responsibilities for

housing development? Are personnel policies and job descriptions

clear? 

Staff skills: How strong are staff in the following areas:

❑ Legal/financial aspects of housing development 

❑ Management of real estate development 

❑ Oversight of design & construction management

❑ Marketing, intake 

❑ Property management (if applicable) 

Training: Are staff encouraged to obtain training and develop new

skills? What is their potential for learning skills that they currently

do not have?

Member involvement: Is the membership active and in support of

the housing activities?

Use of consultants: To what extent does the CHDO have access

to and make use of qualified development consultants? How well

do consultants interact with staff? Is the consulting focus on

training staff?
34

CHDO Toolbox for HOME PJs

Topic/Question Adequate Deficiency

6 Development Capacity (Cont.)

Funding access: Does the organization have funds available as

equity in housing development projects? Does the organization

have the ability to raise funds for the capital requirements of a

project? How strong are relationships with funders of housing?

With lenders?

Opportunity costs: If the organization pursues housing

development, what other activities are likely to suffer or not be able

to be pursued due to the effort required for development activities?

Other capacity issues:

7 Conclusions

Has the organization met all CHDO regulatory thresholds? If not,

these must be corrected prior to CHDO certification.

Have capacity deficiencies been identified that should be

addressed prior to awarding CHDO funds to this organization or as

a condition of the commitment? If not, proceed with CHDO

certification and funding.

Can the capacity deficiencies be addressed by TA from the PJ or

from a qualified CDTA CHDO intermediary? If so, refer for TA.
35

CHDO Toolbox for HOME PJs

CHDO Project 

Evaluation & Underwriting Checklist
36

CHDO Toolbox for HOME PJs

This tool has been designed to assist PJs in analyzing CHDO projects to determine if it is a project

that should be funded. It is organized in four steps:

1. Threshold Review – Determine if the project

can meet the HOME regulatory requirements, or

if there are any “deal killers” in the proposed

project that render it ineligible for HOME CHDO

funding.

2. Factors for Award – Any factors for Award

should be evaluated at this point to determine the

order in which projects are to be underwritten.

3. Underwriting Risk Analysis – Review the

market, borrower and project risk factors to

determine if the project is feasible and viable as

a housing development project. Risk is rated as

acceptable, able to be mitigated or adjusted to

become acceptable, or unacceptable risk that is

a deal killer.

4. Investment Terms – Determine the appropriate investment terms (subordination, loan/grant,

loan/compliance term, amortization, interest

rate, etc.) for the HOME subsidy.

Each step contains a series of statements or questions that the PJ should consider when making the

decision regarding a proposed CHDO project.

Each step also results in a recommendation of modifications or conditions on the project that will

become part of a commitment to reflect the risk,

compliance and investment issues raised by the

analysis. 

CHDO Project Evaluation & Underwriting Checklist
37

CHDO Toolbox for HOME PJs

Step 1: HOME Compliance Thresholds

HOME Compliance Threshold Eligible Ineligible

1 Project Eligibility

The project is HOME-eligible as low-income housing & is

not one of the ineligible types of housing:

❑ Fed public housing w/ operating subsidy

❑ expiring use property covered by Title VI

❑ a shelter

❑ Rental Rehab Program under agreement

The project is an eligible CHDO activity 

(1 of the following)

❑ Rental housing acquisition and/or rehabilitation of

rental housing

❑ New construction of rental housing

❑ Homebuyer acquisition and/or rehab of units for sale

to homebuyer

❑ New construction of homebuyer properties

❑ Financial assistance to purchasers of qualified

CHDO homebuyer housing

The CHDO has effective project control (meets the

own, develop or sponsor requirement)

All proposed HOME-funded costs are HOME eligible

All HOME funds will be used to assist eligible low-income

units

2 HOME-Assisted Units

Occupancy:

❑ All proposed HOME assisted units will serve LowIncome

❑ If rental, the project complies with 90% @ 60% PJ

program requirement

❑ If rental > 5 units, at least 20% @ 50%

Affordability:

❑ If homebuyer, sales price/value is under 203(b) limit

❑ If rental, rent will meet HOME limits, adjusted for

tenant-paid utilities

Property standards:

❑ Project will meet local property standards after

completion

❑ If pre-1978 building, project will comply with LBP

requirements

❑ Project will comply with accessibility standards

(Section 504 & FHAA)

Change

Required
38

CHDO Toolbox for HOME PJs

HOME Compliance Threshold Eligible Ineligible

2 HOME-Assisted Units (Cont.)

Compliance period: project will meet minimum 

compliance period:

❑ If rental, project will maintain occupancy, rent and

property standards for period

❑ If homebuyer, project will meet resale or recapture

standards of ConPlan & rule

3 Other Key Project Requirements

Environmental review: the project can achieve 

environmental clearance:

❑ Statutory Checklist applies: completed, or no

problems anticipated

❑ NEPA applies: assessment required & completed,

or no problems anticipated

And, the applicant has not undertaken any “choice

limiting actions” such as acquisition, demolition or

construction prior to environmental clearance

Labor standards: if 12+ HOME-assisted units, project

costs include Davis-Bacon rates

Relocation: If occupied, URA/Section 104(d) relocation

standards apply

If rental new construction, site & neighborhood

standards

Fair Housing: Project can and will comply with fair

housing & nondiscrimination laws & regulations

Affirmative MarketinG: If 5+ HAUs, affirmative

marketing procedures apply

Conflict of Interest: The project will comply with conflict

of interest provisions

4 Recommended Changes/Terms for 

Compliance 

Recommended conditions for commitment based on 

compliance changes indicated in Step 2:

❑

❑

❑

Change

Required
39

CHDO Toolbox for HOME PJs

At this stage, the application should be reviewed

and ranked/rated according to the Factors for

Award stated in the RFP, NOFA, Annual Plan or

other funding documents. This rating/ranking

should be used to place the applications in order for

review at the underwriting stage.

Step 2: Factors for Award

Factor for Award Max Points Points

Available Awarded

Total Points

Ranking
40

CHDO Toolbox for HOME PJs

Step 3: Underwriting Risk Analysis

Risk Category – Risk Factor

1 Market Risk Overall Rating:

Market trends: General market trends (vacancy levels,

prices) support the development of the additional units at

the proposed pricing

Neighborhood market: Immediate project area market

conditions are positive and support development of the

units at the proposed pricing

Community conditions: The immediate physical/social

conditions support the development of housing 

Target population pool: A sufficient pool of target

households exists in the primary geographic market area

to support the project; or sufficient primary data (waiting

lists or client lists) is presented to support timely

occupancy of the development upon completion

Affordability: The prices are affordable to a reasonable

range of incomes (the range = minimum income required

to afford: maximum eligibility income)

Needs: The project design (unit types, sizes, amenities,

services) reflects the apparent needs & desires of the

target population

Competition: The project price, location condition and

amenities is reasonably attractive in comparison to other

housing choices available to low-income area HHs

If Homebuyer: Loan Availability – An adequate number

of loan sources are available tocompetitive rates for

buyers

Other market risk factors:

Acceptable

Risk

Mitigatable

Risk

Deal

Killer
41

CHDO Toolbox for HOME PJs

Risk Category – Risk Factor

2 Borrower Risk Overall Rating:

Compatibility: The project is compatible with the mission

and strategic focus of the CHDO

Board capacity: The board (if a nonprofit) is stable and

has the skills and experience to oversee development 

Staff development capacity: The CHDO staff &

development team have the required skills to undertake &

complete the project

CHDO past performance: The CHDO has performed

adequately on previous projects

CHDO backlog/current projects: The current workload

will not affect the ability of the CHDO to complete this

project

CHDO liquidity: The CHDO has sufficient liquid assets

to meet a short-term emergency needs of the project

Equity/pre-dev funds availability: The CHDO has the

cash needed for its equity contributions, pre-development

costs, & organizational overhead to support the project

during planning & implementation (rule of thumb:

5 – 10% of TDC)

Liquidity/financial ability to absorb overruns/delays:

The CHDO has sufficient financial strength to absorb

reasonable project delays and cost overruns 

Opportunity costs: The CHDO will not be prevented

from accomplishing its other activities as a result of

undertaking this development project

Contingent/portfolio liabilities: The financial obligations

of the organization with respect to its portfolio or other

programs present no significant risks to the proposed

project.

Rental only: Ongoing management capacity – the

applicant (or its identified management agent) has the

capacity to manage the ongoing real estate, and to

provide services as proposed

Homebuyer only: Homebuyer mortgagability – The

project provides cost-effective mortgage terms to buyers

that maximizes their borrowing potential and minimizes

the gap

Other Borrower risk factors:

Acceptable

Risk

Mitigatable

Risk

Deal

Killer
42

CHDO Toolbox for HOME PJs

Risk Category – Risk Factor

3 Project Risk Overall Rating:

Development budget cost reasonableness

■ Acquisition cost: The acquisition cost is

supported by appraisal or by evidence of market

value, and is reasonable given site remediation and

prep costs

■ Hard cost: Construction/rehab costs meet the

following:

❑ The design incorporates “green principles” for

energy-efficiency

❑ The scope will ensure property standards

compliance & economic useful life for at least the

compliance period;

❑ Costs are reasonably related to scope;

❑ Costs are final or based on detailed

specifications to be considered reliable; and 

❑ There is a reasonable contingency provision for

construction costs

■ Soft costs: All non-construction line items are

reasonable and supported, and reflect all expected

project-related costs 

■ Developer/consultant fees: Total fees (including other

fees collected by the developer) are reasonable

compared to market and costs of doing this project

■ Homebuyer only: Marketing/sales costs – Marketing

and sales costs are reasonable and sufficient 

■ Rental Only: Reserves – The project has adequate

provisions for operating & replacement reserves:

❑ Capitalization of initial operating deficit is

sufficient to reflect a reasonable rent-up period;

and 

❑ Reserves are capitalized or reasonable annual

contributions are in the operating budget

Acceptable

Risk

Mitigatable

Risk

Deal

Killer
43

CHDO Toolbox for HOME PJs

Risk Category – Risk Factor

3 Project Risk (Cont.) Overall Rating:

Rental Only: Operating budget cost reasonableness

■ Rental Revenue: Rents comply with HOME limits and

are reasonable compared to market rents; an adequate

vacancy/collection loss allowance 

■ Operating Expenses: Total operating expenses

(per unit per annum or month – PUPA or PUM) are

reasonable for this type of project; all line items

reasonable

■ Management Expenses: Sufficient allowance for

management costs for this type of project 

■ Reserve contributions: Reasonable contributions to

operating and replacement reserves (taking into

account capitalized contributions to reserves)

■ Net Operating Income: NOI and net available for 

debt service are reasonably calculated to maximum

borrowing potential; debt service coverage factor is

reasonable or reflects lender requirements

■ Cash flow: Cash flow projections are reasonable and

not excessive for equity invested (if any)

■ Services: Adequate provision for services to reflect 

the target population’s needs; service revenue sources

identified sufficient to cover service expenses

(separate from real estate operations)

Readiness to proceed: Project plans are sufficiently

advanced to ensure timely expenditure of HOME funds

upon award:

■ Site control: CHDO owns or controls the site

■ Status of approvals: Community approvals are in place

or strong support is in evidence 

■ Commitment of funds

■ Project designs are complete

Acceptable

Risk

Mitigatable

Risk

Deal

Killer
44

CHDO Toolbox for HOME PJs

Risk Category – Risk Factor

3 Project Risk (Cont.) Overall Rating:

Completion risk: Risk factors that might jeopardize

completion of the project on time and within budgeted

resources:

■ Site acquisition: The risk of not being able to

complete acquisition of the site or require

environmental remediation 

■ Likelihood of approvals: The risk of obtaining

approvals to develop the site 

■ Adequacy of funds: The risk of losing or not being

able to finalize all critical funding commitments

■ Firmness of budget: The risk that budget estimates

are insufficient to cover construction scope or

unfunded cost overruns

■ Realistic schedule: The risk of failing significantly

behind on the implementation schedule

■ Homebuyer only: The marketing/ outreach plans are

sufficient to deliver an adequate number of buyers by

the time units are available

Viability risk: The risk that the project, upon completion,

will not be able to be maintained as affordable housing for

at least the compliance period:

■ Rental housing only:

❑ Long-term operating projections (based on

reasonable year-to-year rent and expense

increases) provide adequate reserve

contributions and positive cash flow;

❑ Management & maintenance plans are sufficient

to protect physical property long-term

■ Homebuyer housing only:

❑ The project offers adequate homebuyer pre/post

counseling 

■ Permanent financing is based on reasonable &

affordable ratios

4 Overall Risk Rating: 

Recommended Project changes and conditions for CHDO commitment based on underwriting 

risk analysis:

■

■

■

■

■

Acceptable

Risk

Mitigatable

Risk

Deal

Killer
45

CHDO Toolbox for HOME PJs

Risk Category – Risk Factor Comments/Conclusion

1 Pre-Gap Analysis Review: Questions to be

reviewed prior to calculation of the gap to

ensure that the gap is minimized

Rental only:

■ Rents: Are rents maximized to market conditions yet

affordable to the target households?

■ Operating costs: Do operating expenses reflecting full

yet efficient operation of the property?

■ Development costs: Do development costs reflect

what is necessary, do they reflect competitive pricing,

and are there sufficient controls on expenditure to

ensure cost effective development?

■ Primary mortgage(s) terms: Are the first and any

other junior lien terms the best available to maximize

other borrowings?

■ Other subsidies: Has the CHDO identified all possible

other public subsidies for the project?

Homebuyer only:

■ Development costs: Do development costs reflect

what is necessary, do they reflect competitive pricing,

and are there sufficient controls on expenditure to

ensure cost effective development?

■ Price/Value relationship: Is the proposed sales price

of the unit reflective of fair market value?

■ Primary mortgage: Are first mortgage terms and

commitments maximized to minimize the amount of

subsidy required?

■ Homebuyer subsidy: Does the proposed amount of

HOME subsidy to the homebuyer reflect what is

needed to make the home affordable? 

■ Resale/recapture: Do the proposed note/mortgage

terms reflect HOME resale/recapture requirements?

2 Layering Review

If one or more public sources of subsidy are proposed for

the project, 

■ Identify & review the terms of each public source

■ Consult with other public agencies if possible to

confirm the terms and discuss possible changes

■ Include all public subsidies in the gap analysis below

■ Conduct a final pre-closing review to determine if any

changes in sources

Step 4. Terms of Investment
46

CHDO Toolbox for HOME PJs

Risk Category – Risk Factor Comments/Conclusion

3 Gap Analysis

Rental only:

■ Compute maximum debt: Divide the approved Net Operating

Income (NOI) by debt service coverage factor of primary

debt; use mortgage factor to capitalize monthly available for

debt service into maximum borrowing amount

■ Subtract all identified sources (equity, maximum loan and

other public subsidies) from approved Total Development

Cost (TDC) to determine the gap

■ Compute the subsidy per HOME-assisted unit

Homebuyer Development Subsidy:

■ Determine Total Development Cost (TDC)

■ Determine average/total net sales proceeds (after sales

costs) from sale of property(ies) at market value

■ Determine Development Subsidy:

❑ TDC: net sales proceeds = the potential Development

Subsidy amount; deduct other public development

subsidies from difference to determine maximum

HOME development subsidy.

❑ If net sales proceeds exceed TDC, determine if developer

profits, repayable HOME subsidy, or CHDO proceeds (if

CHDO project)

Home Buyer Subsidy:

■ Determine fair value sales price of property(ies)

■ If buyers are known, compute maximum first mortgage

amount per buyer; if buyers not known, compute average

and range of mortgage amounts for likely buyers

■ Compute total amount of buyer price subsidy needed

■ Add closing cost assistance proposed to determine total

buyer subsidy amount

■ HOME-compliant note & mortgage will be used to cover this

amount

4 Investment Terms

Subordination: Determine what debt will be permitted to be

senior to the HOME lien, and what inter-creditor arrangements

will be required/permitted

Loan Term: Length of the loan should reflect at least the

minimum HOME compliance period and may also consider:

■ useful life of HOME-funded improvements

■ term for expected repayment (if applicable)

■ other public subsidy compliance periods
47

CHDO Toolbox for HOME PJs

Risk Category – Risk Factor Comments/Conclusion

4 Investment Terms (Cont.)

Interest rate: Determine if interest will apply to loan principal,

whether it will accrue/compound

Amortization: Determine whether loan payments are to be

made initially or over the life of the loan

Forgiveness: Determine whether unamortized principal will be

forgiven at the end of the loan term or will remain due and payable 

Legal mechanism: Determine which of the follow legal

documents are required by HOME and are to be used:

■ Note & mortgage

■ Deed covenant or restriction

■ Right of first refusal or purchase option

■ Other

Assignability: Determine if there are any circumstances under

which assignment might be permitted or required

Use of CHDO Proceeds: determine whether any proceeds from

the sale of properties or repayments of HOME notes/

mortgages are to be repaid to the PJ or retained by the CHDO:

■ Repayment of homebuyer note/mortgage principal is

considered “recaptured” funds and must be reinvested as

HOME funds by the PJ

■ If the CHDO is permitted to retain net sales proceeds from

the initial sale of homebuyer properties (or conveyance of

rental properties under HOME agreements), the PJ must

specify the use of the CHDO proceeds in the agreement (at

a minimum, proceeds are restricted in their first reuse to

affordable housing for low income persons

■ Any proceeds returned to the PJ are subject to HOME

program income requirements

Homebuyer only: Recaptured Funds: Terms include the

accounting and reuse of recaptured funds under the terms of the

rule and CPD-97-09

5 Recommended Terms/Conditions

Recommended loan provisions & conditions for commitment based on project analysis (in addition to risk

factor changes and compliance changes indicated in Steps 1 & 2:

■

■

■

■

■

49

CHDO Toolbox for HOME PJs

CHDO Written Agreements

Required Provisions Checklist
50

CHDO Toolbox for HOME PJs

CHDO Agreement Required Provisions Checklist

Agreement Provisions Rule Reference Covered

Required Provisions 

Use of HOME Funds: 92.504(c)(3)(i)

■ type & number of units to be produced ❑

■ schedule ❑

■ budget ❑

Affordability requirements 92.504(c)(3)(ii)

■ If rental:

❑ restrictive covenant/other mechanism 92.252(e) ❑

❑ initial rents 92.252(a)-(c) ❑

❑ basis/process for rent adjustments 92.252(f) ❑

■ If homebuyer:

❑ Resale/recapture mechanism 92.254(a)(5) ❑

Project requirements 92.250 – 92.258

■ If rental:

❑ occupancy/income requirements 92.252(a), (h), (i) ❑

❑ tenant protections 92.253 ❑

❑ affordability period 92.252(e) ❑

❑ rent limits 92.252(f) ❑

❑ income certification/recertification 92.203, 252(h)-(i) ❑

❑ fixed/floating election 92.252(j) ❑

■ If homebuyer:

❑ price/value limits 92.254(a)(2) ❑

❑ affordability period 92.254(a)(3)-(4) ❑

❑ ownership interest 92.254(c) ❑

Physical Standards

■ Property Standards 92.251 ❑

■ Accessibility Standards 92.251(a)(3) ❑

■ Lead-Based Paint (if pre-1978) 92.355 ❑

Affirmative Marketing (if 5+ assisted units) 92.504(c)(3)(v)(A), ❑

92.351

Non-discrimination 92.504(c)(3)(v)(B), ❑

92.350
51

CHDO Toolbox for HOME PJs

Agreement Provisions Rule Reference Covered

Displacement & Relocation (if occupied properties) 92.504(c)(3)(v)(C), ❑

92.353

Environmental Review 92.352

■ Conditional commitment until environmental clearance 

and release of funds ❑

■ CHDO will assemble information as required by PJ to complete 

environmental assessment and/or statutory checklist completed 

as applicable ❑

■ No choice limiting actions may be taken prior to clearance ❑

Contract & Labor Standards (if applicable)

■ Davis-Bacon (if 12+ assisted units) 92.354 ❑

■ Section 3 92.508(a)(7) ❑

■ M/WBE 92.508(a)(7) ❑

Conflict of interest (award of rental units) 92.504(c)(3)(v)(E),

92.356(f) ❑

CHDO Provisions 92.504(c)(3)(xi)

■ Develop, own or sponsor requirement 92.300(a)(1) ❑

■ Use of CHDO Proceeds (if applicable) 92.300(a)(2) ❑

■ Pre-development loan repayment (if applicable) 92.301 ❑

■ Tenant participation plan (if applicable) 92.303 ❑

Records & Reports 92.508(a)(3)

■ Records required for all CHDO projects:

❑ CHDO documentation ❑

❑ Income documentation on all assisted HHs ❑

❑ Property standards compliance documents ❑

❑ Financial records (vouchers & disbursements) ❑

■ Records required if rental:

❑ income eligibility documentation ❑

❑ rent rolls ❑

❑ leases for assisted units ❑

■ Records required if homebuyer:

❑ price/value documentation ❑

❑ resale/recapture documents ❑
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Agreement Provisions Rule Reference Covered

■ If rental, annual report as specified by PJ 92.252(f)(2) ❑

Requests for Disbursements 92.504(c)(3)(viii) ❑

Enforcement of the agreement:

■ If rental, deed restriction required ❑

■ If homebuyer, liens or other 92.504(c)(3)(i) ❑

Duration of the agreement 92.504(c)(3)(ix) ❑

Conditions for religious organizations (if applicable) 92.504(c)(3)(x) ❑

Return of Repayments, Recaptured Funds (if applicable) 92.503(b), (c) ❑

Access for Monitoring 92.504(a), (d) ❑

Additional Recommended provisions Covered

Performance Standards

■ Project completion deadline & penalties ❑

■ Interim milestones ❑

■ Developer fee schedule tied to milestones ❑

■ Reporting/monitoring schedule ❑

Procurement 

■ Procedures 24 CFR 84.40 - .48 ❑

■ Conflict of interest (award of contracts) 92.356(b)-(e) ❑

Sources/Uses of Non-HOME Funds ❑

Project audit, cost certification ❑

If homebuyer project:

■ Designation of development subsidies ❑

■ Homebuyer subsidies & terms ❑

■ Repayment required from sales proceeds ❑

Conflict of interest (award of homebuyer or owneroccupied rehab unit benefits) 92.356(f) ❑

Maintenance of Property & Insurance ❑

Termination/Destruction of Property ❑

Recommended

Reference
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CHDO Toolbox for HOME PJs

Sample CHDO Written Agreement
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CHDO Toolbox for HOME PJs

Disclaimer: 

This document has been provided for the sole purpose of demonstrating how recommended CHDO performance terms discussed in the CHDO Toolbox can be incorporated into

a standard CHDO Written Agreement. 

Although this document contains required HOME regulatory provisions, it is not represented to be a complete agreement, and it also contains numerous provisions that are not

required by regulations. 

It has not been reviewed or approved by HUD or legal counsel. 

AGREEMENT BETWEEN 

THE CITY OF __________

AND

________________________________

THIS AGREEMENT MADE this_________day of ____________,________, by and between the City

of ____________________, hereinafter referred to as the “CITY”, and ________________________,

a nonprofit corporation hereinafter referred to as the “AWARDEE” and which is located at: 

WITNESSETH

WHEREAS, the CITY is the recipient of HOME Investment Partnerships Program Funds from the

U.S. Department of Housing and Urban Development (HUD), including funds that are reserved for

the use of Community Housing Development Organizations (CHDOs); and 

WHEREAS, the AWARDEE has been certified with the CITY as a CHDO, and has submitted a

proposal for use of CHDO funds for a CHDO-eligible project under HOME regulations; 

NOW, THEREFORE in consideration of the mutual covenants and obligations herein contained,

including the Attachments, and subject to the terms and conditions hereinafter stated, the parties

hereto understand and agree as follows:

Section I – Definitions

A. AGENCY – is hereby defined as the _________________________________, the HOME

Program administering agency of the City of __________________. For the purpose of this

Agreement and all administration of HOME funds, the AGENCY shall act on behalf of the

CITY in the execution and fiscal and programmatic control of this agreement. The term

“Approval by the CITY” or like term used in this Agreement shall in no way relieve the

AWARDEE from any duties or responsibilities under the terms of this Agreement, or obligation

State or local law or regulation.
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CHDO Toolbox for HOME PJs

B. DIRECTOR – is hereby defined as the Director of the _________________Agency of the CITY.

C. FEE – is hereby defined as the amount of money the CITY agrees to pay and the AWARDEE

agrees to accept as payment in full for all the professional, technical and construction services

rendered pursuant to this Agreement to complete the WORK as further defined in Section IV -

SCOPE OF PROFESSIONAL SERVICES, hereof.

D. WORK – is hereby defined as all the professional, technical and construction services to be

rendered or provided by the AWARDEE as described here. 

E. PROJECT – is defined in Section IV below.

F. HOME – is hereby defined as the HOME Investment Partnerships Program as described in

24 CFR Part 92, under the authority of 42 U.S.C. 3535 (d) and 12701 - 12839.

Section II – Term

The AWARDEE expressly agrees to complete all work required by this agreement in accordance

with the timetable set forth. 

Milestone Deadline

Project Start Date

Interim Milestones/Deadlines (list below):

Project Completion Date

In addition, this project is subject to ongoing compliance requirements of HOME for ____ years

from the date of initial occupancy. During this compliance period, the AWARDEE will assure continued compliance with HOME requirements. For homebuyer units this includes monitoring units

for principal residency and recapture of funds at time of resale. For rental units, this includes ongoing property standards, occupancy and rent limits compliance. 

Timely completion of the work specified in this agreement is an integral and essential part of performance. The expenditure of HOME funds is subject to Federal deadlines and could result in the

loss of the Federal funds. By the acceptance and execution of this agreement, it is understood and

agreed by the AWARDEE that the PROJECT will be completed as expeditiously as possible and that

the AWARDEE will make every effort to ensure that the project will proceed and will not be delayed.

Failure to meet these deadlines can result in cancellation of this contract and the revocation of

HOME funds.
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Since it is mutually agreed that time is of the essence as regards this agreement, the AWARDEE

shall cause appropriate provisions to be inserted in all contracts or subcontracts relative to the work

tasks required by this agreement, in order to ensure that the PROJECT will be completed according to the timetable set forth. It is intended that such provisions inserted in any subcontracts be, to

the fullest extent permitted by law and equity, binding for the benefit of the CITY and enforceable

by the CITY against the AWARDEE and its successors and assigns to the project or any part thereof or any interest therein.

In the event the AWARDEE is unable to meet the above schedule or complete the above services

because of delays resulting from Acts of God, untimely review and approval by the CITY and other

governmental authorities having jurisdiction over the PROJECT, or other delays that are not caused

by the AWARDEE, the CITY shall grant a reasonable extension of time for completion of the

WORK. It shall be the responsibility of the AWARDEE to notify the CITY promptly in writing whenever a delay is anticipated or experienced, and to inform the CITY of all facts and details related

to the delay.

Section III – Scope of Work

The AWARDEE, in close coordination with the CITY, shall perform all professional services (the

“WORK”) necessary to complete the development and occupancy of the following project in full

compliance with the terms of this Agreement: 

(insert project description, including HOME-assisted units description & compliance term)

It is understood that the AWARDEE will provide a specific working budget and realistic timetable

as relates to: acquisition, construction/rehabilitation, soft costs, development fees and other allowable costs/activities prior to any fund usage. Said budget shall identify all sources and uses of funds,

and allocate HOME and non-HOME funds to activities or line items.

The aforementioned Work tasks will be performed in essentially the manner proposed in the

AWARDEE’s proposal as received by the AGENCY on_________. The aforementioned document

will be considered to be a part and portion of this agreement for reference.
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CHDO Toolbox for HOME PJs

Section IV – Reimbursement of Expenses & Developer Fees

A. Project expenses (excluding developer fee) shall be paid based on vouchers for actual expenses

incurred or paid. Requests for payment must be submitted by the AWARDEE on forms

specified by the CITY, with adequate and proper documentation of eligible costs incurred in

compliance with 92.206 and necessary for HUD IDIS disbursement requirements. All such

expenses shall be in conformance to the approved project budget. Budget revision and

approval shall be required prior to payment of any expenses not conforming to the approved

project budget. 

B. The CITY shall pay the AWARDEE, as maximum compensation or FEE for the developer

services required pursuant to the Scope of Work thereof, 

_______________________________________________________ ($_________) of HOME

Funds. Progress payments of FEES (if applicable) will not exceed the following cumulative

maximum percentages of total developer fee at the following stages of project completion:

Milestone Max. Cumulative

Developer Fee %

Acquisition closing 25%

Construction closing / start of construction or rehab 40%

50% construction completion 60%

Construction completion (certificate of occupancy) 75%

Sustaining occupancy (or sale) & completion report 100%

If multiple projects or buildings are involved, the developer fee may be pro-rated to each

building or project, and the applicable percentage may be applied to each.

C. The CITY reserves the right to inspect records and project sites to determine that

reimbursement and compensation requests are reasonable. The CITY also reserves the right to

hold payment until adequate documentation has been provided and reviewed. 

D. The AWARDEE may submit a final invoice upon completion. Final payment shall be made after

the CITY has determined that all services have been rendered, files and documentation

delivered, and units have been placed in service in full compliance with HOME regulations,

including submission of a completion report and documentation of eligible occupancy, property

standards and long-term use restrictions.

E. The CITY shall have the right to review and audit all records of the AWARDEE pertaining to

any payment by the CITY. Said records shall be maintained for a period of five years after

completion.
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CHDO Toolbox for HOME PJs

Section V – Project Requirements 

The AWARDEE agrees to comply with all requirements of the HOME Program as stated in 24 CFR

Part 92, including but not limited to the following.

A. No HOME project funds will be advanced, and no costs can be incurred, until the City has

conducted an environmental review of the proposed project site as required under 24 CFR Part

58. The environmental review may result in a decision to proceed with, modify or cancel the

project. 

Notwithstanding any provision of this Agreement, the parties hereto agree and acknowledge

that this Agreement does not constitute a commitment of funds or site approval, and that such

commitment of funds or approval may occur only upon satisfactory completion of

environmental review and receipt by the CITY of a release of funds from the U.S. Department

of Housing and Urban Development [or the State of ______________] under 24 CFR Part §58. 

Further, the AWARDEE will not undertake or commit any funds to physical or choice-limiting

actions, including property acquisition, demolition, movement, rehabilitation, conversion, repair

or construction prior to the environmental clearance, and must indicate that the violation of this

provision may result in the denial of any funds under the agreement. 

B. The HOME funds advanced to the PROJECT will be secured by a note and mortgage, and in

the case of a rental project, a deed covenant as required by 24 CFR Part 92.

C. The AWARDEE will ensure that any expenditure of HOME funds will be in compliance with the

requirements at 92.206, and acknowledges that HOME funds will only be provided as

reimbursement for eligible costs incurred, including actual expenditures or invoices for work

completed. 

D. If the project is to be owner-occupied, the AWARDEE will ensure that all HOME assisted units

will be in compliance with 24 CFR 92.254, including documenting that the property is eligible

under 92.254(a)(1) – (2), and will maintain compliance during the minimum compliance period.

(If the property also contains a rental unit assisted with HOME funds, the AWARDEE will ensure

that occupancy complies with the requirements of 92.254(a)(6).) If the project is to be rental,

the AWARDEE will ensure that that project is eligible under 92.214, and that it will meet the

applicable standards of 24 CFR 92.252 – 253 at occupancy and for the minimum compliance

period. 

E. The designated HOME-assisted units of this PROJECT will meet the affordability requirements

as found in 24 CFR 92.252 (rental) or 92.254 (owner-occupied) as applicable. The AWARDEE

shall collect and maintain Project beneficiary information pertaining to household size, income

levels, racial characteristics, and the presence of Female Headed Households in order to

determine low and moderate-income benefit in a cumulative and individual manner. Income

documentation shall be in a form consistent with HOME requirements as stated in the HUD

Technical Guide for Determining Income and Allowances Under the HOME

Program.
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F. In the selection of occupants for PROJECT units, the AWARDEE shall comply with all nondiscrimination requirements of 24 CFR 92.350. If the project consists of 5 or more units, the

AWARDEE will implement affirmative marketing procedures as required by 24 CFR 92.351.

Such procedures are subject to approval of the AGENCY. 

G. If the PROJECT is occupied at the time of this commitment, the AWARDEE will comply with

the relocation requirements of 24 CFR 92.353.

H. The AWARDEE shall assure compliance with 24 CFR 92.251 as relates to Property Standards

and Housing Quality Standards (HQS), Accessibility Standards under 24 CFR 92.251(a)(3) as

applicable, and Lead Based Paint Requirements as found in 24 CFR 92.355 and 24 CFR Part 35. 

I. If the PROJECT is to be owner-occupied, the AWARDEE shall assure that any NOTES and

MORTGAGES recorded for homebuyers shall be in compliance with 24 CFR 92.254 and that

the AWARDEE will monitor each unit for principal residency (under 92.254(a)(3)) and

resale/recapture (under 92.254 (a)(4) – (5)).

J. The AWARDEE will provide any documentation required by the AGENCY regarding match as

may be required to document match for purposes of the HOME program.

K. If any project under this agreement involves the construction or rehabilitation of 12 or more

HOME-assisted units, the AWARDEE shall comply with the provisions of the Davis-Bacon Act

(40 U.S.C. 276 a to a - 7) as supplemented by AGENCY of Labor regulations (29 CFR, Part 5),

as amended. 

L. If the property is sold through a lease-purchase agreement, the AWARDEE will ensure

compliance with 92.254(a)(7), as modified by the 1999 Appropriations Act, Section 599B.

M. The AWARDEE will be monitored by the AGENCY for compliance with the regulations of

24 CFR 92 for the compliance period specified above. The AWARDEE will provide reports and

access to project files as requested by the AGENCY during the PROJECT and for Five (5) years

after completion and closeout of the AGREEMENT. 

Section VI – Repayment of Loan

A. All HOME funds are subject to repayment in the event the PROJECT does not meet the Project

Requirements as outlined above. 

B. It is understood that upon the completion of the PROJECT, any HOME funds reserved but not

expended under this agreement will revert to the CITY.
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CHDO Toolbox for HOME PJs

C. If the PROJECT is rental, funds will remain a deferred loan for the period of _____, at which

time the loan may be forgiven or extended in the sole discretion of the CITY for another term.

Sale of the property to another party may occur only with the approval of the CITY, and the

purchaser shall assume all obligations of the AWARDEE under this agreement, the note and

mortgage, and the deed covenants. Provisions in those documents will provide for the

extinguishment of the requirements only in the event of a third-party foreclosure or deed in lieu

of foreclosure.

D. If the PROJECT is for owner-occupancy, the AWARDEE shall lend the HOME funds to the

individual buyers in an amount sufficient to make the purchase affordable. Any HOME funds

that reduce the price of the property below the fair market value of the property shall be

secured by a HOME note and mortgage as required in 92.254(a)(5)(ii), using the note and

mortgage prescribed or approved by the AGENCY (and consistent with the method of

recapture identified in the CITY’s Consolidated Plan.”) 

1) All net sales proceeds from the sale of units are considered to be either:

________ Program Income and must be returned to the AGENCY as repayment of the

HOME loan; or

________ CHDO proceeds that may be retained by the AWARDEE and used in

conformance with 24 CFR 92.300(a)(2), or as specified below:

____________________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________

2) Prior to each closing, the AWARDEE will provide to the AGENCY the estimated settlement

statement, along with a reconciliation statement and the draft note and mortgage. The

reconciliation statement shall account for the pro-ration of HOME project funds to the

individual unit, and identify those funds that are to be lent to the buyer as “Buyer subsidies”

secured by the HOME note and mortgage, the pro-rated HOME development funds that are

to be forgiven as “Development subsidies”, and the amount of developer fee or CHDO sales

proceeds to be retained from settlement funds. 

3) All resale proceeds that are received from buyers as they resell the properties during the

compliance period to other buyers shall be considered “Recaptured Funds” under 24 CFR

92.254(a)(5)(ii)A)(5) and must be repaid to the CITY for use in eligible HOME projects as

required by 24 CFR 92.503. The AWARDEE shall promptly notify the AGENCY of such

transactions and will promptly convey any Recaptured Funds to the AGENCY. 
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Section VII – CHDO Provisions

It is understood that the AWARDEE has certified that it is and will maintain CHDO (Community

Housing Development Organization) status for the term of the PROJECT/AGREEMENT in accordance with 24 CFR 92. AWARDEE agrees to provide information as may be requested by the

AGENCY to document its continued compliance, including but not limited to an annual board rooster and certification of continued compliance.

Any funds advanced as CHDO pre-development funds must be in compliance with 92.301, and are

forgivable only under the terms in 92.301. 

Any funds advanced to the CHDO as CHDO Operating Expenses must be expended in compliance

with 24 CFR 92.208. 

Any funds that the CHDO is permitted to retain as CHDO proceeds from this project shall be used

in compliance with 24 CFR 92.300(a)(2) or as specified in this Agreement.

If the project is rental, the AWARDEE will create and follow a tenant participation plan as required

in 24 CFR 92.303.

Section VIII – Procurement Standards

The AWARDEE shall establish procurement procedures to ensure that materials and services are

obtained in a cost-effective manner. When procuring for services to be provided under this agreement, the AWARDEE shall comply at a minimum with the nonprofit procurement standards at 24

CFR 84.40 - .48. 

In addition, the following requirements are imposed on any procurement under this PROJECT:

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________________

In addition, it is understood that any AWARDEE that can be considered to be a religious organization shall

abide by all portions of 24 CFR 92.257.

Section IX – Conflict of Interest Provisions

The AWARDEE warrants and covenants that it presently has no interest and shall not acquire any

interest, directly or indirectly, which could conflict in any manner or degree with the performance

of its services hereunder. The AWARDEE further warrants and covenants that in the performance

of this contract, no person having such interest shall be employed.

HOME conflict of interest provisions, as stated in 92.356, apply to the award of any contracts

under the agreement and the selection of tenant households to occupy HOME-assisted units. 
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No employee, agent, consultant, elected official, or appointed official of the AWARDEE may obtain

a financial interest or unit benefits from a HOME-assisted activity, either for themselves or those

with whom they have family or business ties, during their tenure or for one year thereafter. This

prohibition includes the following:

■ Any interest in any contract, subcontract or agreement with respect to a HOME-assisted project or program administered by the AWARDEE, or the proceeds thereunder; or

■ Any unit benefits or financial assistance associated with HOME projects or programs

administered by the AWARDEE, including:

❑ Occupancy of a rental housing unit in a HOME-assisted rental project; 

❑ Receipt of HOME tenant-based rental assistance; 

❑ Purchase or occupancy of a homebuyer unit in a HOME-assisted project;

❑ Receipt of HOME homebuyer acquisition assistance; or 

❑ Receipt of HOME owner-occupied rehabilitation assistance.

This prohibition does not apply to an employee or agent of the AWARDEE who occupies a HOMEassisted unit as the on-site project manager or maintenance worker.

In addition, no member of Congress of the United States, official or employee of HUD, or official

or employee of the Participating Jurisdiction shall be permitted to receive or share any financial or

unit benefits arising from the HOME-assisted project or program. 

Prior to the implementation of the HOME-assisted activity, exceptions to these provisions may be

requested by the AWARDEE in writing to the Participating Jurisdiction. The AWARDEE must

demonstrate and certify that the policies and procedures adopted for the activity will ensure fair

treatment of all parties, and that the covered persons referenced in this policy will have no inside

information or undue influence regarding the award of contracts or benefits of the HOME assistance. The Jurisdiction may grant exceptions or forward the requests to HUD as permitted by

24 CFR 92.356, 85.36 and 84.42, as they apply. 

Section X – City Responsibilities

The CITY shall furnish the AWARDEE with the following services and information from existing

CITY records and CITY files:

A. The CITY shall provide to the AWARDEE information regarding its requirements for the

PROJECT. 

B. The CITY will provide the AWARDEE with any changes in HOME regulations or program limits

that affect the project, including but not limited to income limits, property value limits and rent

limits.
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C. The CITY will conduct progress inspections of work completed to protect its interests as lender

and regulatory authority for the project, and will provide information to the AWARDEE

regarding any progress inspections or monitoring to assist it in ensuring compliance.

The CITY’s review and approval of the WORK will relate only to overall compliance with the general requirements of this Agreement and HOME regulations, and all CITY regulations and

ordinances. 

Nothing contained herein shall relieve the AWARDEE of any responsibility as provided under this

Agreement.

Section XI – Equal Employment Opportunity

During the performance of this contract, the AWARDEE agrees as follows:

A. The AWARDEE will not discriminate against any employee or applicant for employment

because of race, color, religion, sex, or national origin(s). The AWARDEE will take affirmative

action to ensure the applicants are employed, and that employees are treated during

employment, without regard to their race, color, religion, sex or national origin(s). Such action

shall include, but not be limited to, the following: employment, upgrading, demotion, or

transfer, recruitment or recruitment advertising; layoff or termination; rates of pay or other

forms of compensation; and selection for training, including apprenticeship. The AWARDEE

agrees to post in conspicuous places, available to employees and applicants for employment,

notices to be provided by the contracting officer of the CITY setting forth the provisions of this

nondiscrimination clause.

B. The AWARDEE will, in all solicitations or advertisements for employees placed by or on behalf

of the AWARDEE, state that all qualified applicants will receive consideration for employment

without regard to race, color, religion, sex, or national origin.

C. The AWARDEE will send to each labor union or representative of workers with which he has a

collective bargaining agreement or other contract or understanding, a notice to be provided by

the CITY’s contracting officer, advising the labor union or worker’s representative of the

AWARDEE’s commitments under Section 202 of Executive Order No. 11246 of September

24, 1965, and shall post copies of the notice in conspicuous places available to employees and

applicants for employment. 

D. The AWARDEE will comply with all provisions of Executive Order 11246 of September 24,

1965, and of the rules, regulations, and relevant orders of the Secretary of Labor. 

E. The AWARDEE will furnish all information and reports required by Executive Order 11246 of

September 24, 1965, and by the rules, regulations, and orders of the Secretary of Labor, or

pursuant thereto, and will permit access to its books, records, and accounts by the AGENCY

and the Secretary of Labor for purposes of investigation to ascertain compliance with such

rules, regulations, and order.
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F. In the event the AWARDEE is found to be in noncompliance with the nondiscrimination clauses

of this contract or with any of such rules, regulations or orders, this contract may be canceled,

terminated or suspended in whole or in part and the AWARDEE may be declared ineligible for

further Government contracts in accordance with procedures authorized in Executive Order

11246 of September 24, 1965, and such other sanctions may be imposed and remedies

invoked as provided in Executive Order 11246 of September 24, 1965 or by rule, regulations,

or order of the Secretary of Labor or as otherwise provided by law.

G. The AWARDEE will include the provisions of paragraphs (a) through (g) of this agreement in

every subcontract or purchase order unless exempted by rules, regulations, or orders of the

Secretary of Labor issued pursuant to section 204 of Executive Order 11246 of September 24,

1965, so that such provisions will be binding upon each subcontractor or vendor. The

AWARDEE will take such action with respect to any subcontract or purchase order as the

AGENCY may direct as a means of enforcing such provisions, including sanctions for

noncompliance; provided, however, that in the event the AWARDEE becomes involved in, or

is threatened with litigation with a subcontractor or vendor as a result of such direction by the

AGENCY, the AWARDEE may request the United States to enter into such litigation to protect

the interest of the United States.

Section XII – Labor, Training & Business Opportunity

The AWARDEE agrees to comply with the federal regulations governing training, employment and

business opportunities as follows:

A. It is agreed that the WORK to be performed under this agreement is on a project assisted under

a program providing direct Federal financial assistance from the US Department of Housing

and Urban Development and is subject to the requirements of Section 3 of the Housing and

Urban Development Act of 1968, as amended, 12 U.S.C. 1701 u, as well as any and all

applicable amendments thereto. Section 3 requires that, to the greatest extent feasible,

opportunities for training and employment be given low and moderate income residents of the

project area, and that contracts for work in connection with the project be awarded to business

concerns which are located in, or owned in substantial part by persons residing in the project

area. 

B. The AWARDEE shall comply with the provisions of said Section 3 and the regulations issued

pursuant thereto by the Secretary of Housing and Urban Development set forth in 24 Code of

Federal Regulations and all applicable rules and orders of the AGENCY of Housing and Urban

Development issued thereunder as well as any and all applicable amendments thereto prior to

the execution of this contract as well as during the term of this contract. The AWARDEE

certifies and agrees that it is under no contractual or other disability, which would prevent it

from complying with these requirements as well as any and all applicable amendments thereto.

C. The AWARDEE will include this Section 3 clause in every subcontract for work in connection

with the project and will, at the direction of the CITY, take appropriate action pursuant to the

subcontractor upon a finding that the subcontractor is in violation of regulations issued by the

Secretary of Housing and Urban Development, in 24 Code of Federal Regulations. The
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AWARDEE will not subcontract with any subcontractor where it has notice or knowledge that

the latter has been found in violation of regulations under 24 code of Federal Regulations and

will not let any subcontract unless the subcontractor has first provided it with a preliminary

statement of ability to comply with these requirements as well as with any and all applicable

amendments thereto.

D. Compliance with the provisions of Section 3, the regulations set forth in 24 Code of Federal

Regulations and all applicable rules and orders of the AGENCY of Housing and Urban

Development issued thereunder prior to the execution of the contract shall be a condition

precedent to federal financial assistance being provided to the PROJECT as well as a continuing

condition, binding upon the applicant or recipient for such assistance, its successors, and

assigns. Failure to fulfill these requirements shall subject the AWARDEE or recipient, its

contractors and subcontractors, its successors, and assigns to those sanctions specified by

24 Code of Federal Regulations as well as with any and all applicable amendments thereto.

Section XIII – Compliance with Federal, State & Local Laws

The AWARDEE covenants and warrants that it will comply with all applicable laws, ordinances,

codes, rules and regulations of the state local and federal governments, and all amendments thereto, including, but not limited to; Title 8 of the Civil Rights Act of 1968 PL.90-284; Executive Order

11063 on Equal Opportunity and Housing Section 3 of the Housing and Urban Development Act

of 968; Housing and Community Development Act of 1974, as well as all requirements set forth

in 24 CFR 92 of the HOME INVESTMENT PARTNERSHIP PROGRAM. The AWARDEE

covenants and warrants that it will indemnify and hold the City forever free and harmless with

respect to any and all damages whether directly or indirectly arising out of the provisions and maintenance of this contract.

The AWARDEE agrees to comply with all applicable standards, orders, or requirements issued

under section 306 of the Clean Air Act (42 U.S.C. 1857(h)), section 508 of the Clean Water Act

(33 U.S.C. 1368), Executive Order 11738, and Environmental Protection Agency regulations

(40 CFR part 15). 

The AWARDEE further warrants and agrees to include or cause to be included the criteria and

requirements of this section in every non-exempt subcontract in excess of $100,000. The

AWARDEE also agrees to take such action as the federal, state or local government may direct to

enforce aforesaid provisions. 

Section XIV – Suspension & Termination

In accordance with 24 CFR 85.43, suspension or termination may occur if the AWARDEE materially fails to comply with any term of the award, and that the award may be terminated for

convenience in accordance with 24 CFR 85.44. 
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If, through any cause, the AWARDEE shall fail to fulfill in timely and proper manner its obligations

under this contract, or if the AWARDEE shall violate any of the covenants, agreements, or stipulations of this contract, the CITY shall thereupon have the right to terminate this contract by giving

written notice to the AWARDEE of such termination and specifying the effective date thereof, at

least five (5) days before the effective date of such termination. In such event, the AWARDEE shall

be entitled to receive just and equitable compensation for any work satisfactorily completed hereunder to the date of said termination. Notwithstanding the above, the AWARDEE shall not be

relieved of liability to the CITY for damages sustained by the CITY by virtue of any breach of the

contract by the AWARDEE and the CITY may withhold any payments to the AWARDEE for the

purpose of setoff until such time as the exact amount of damages due the CITY from the

AWARDEE is determined whether by court of competent jurisdiction or otherwise.

Section XV – Termination for Convenience of the CITY

The CITY may terminate for its convenience this contract at any time by giving at least thirty (30)

days notice in writing to the AWARDEE. If the contract is terminated by the CITY, as provided herein, the City will reimburse for any actual and approved expenses incurred, including those costs

involved in terminating the contracts and shutting down the work as of the date of notice, and the

AWARDEE will be paid as a FEE an amount which bears the same ratio to the total compensation

as the services actually performed bear to the total service of the AWARDEE covered by this contract, less payments of compensation previously made. Claims and disputes between the parties will

be submitted to the American Arbitration Association for resolution. Award or judgment may be

entered in any court having jurisdiction thereof.

Section XVI – Default-Loss of Grant Funds 

If the AWARDEE fails in any manner to fully perform and carry out any of the terms, covenants,

and conditions of the agreement, and more particularly if the AWARDEE refuses or fails to proceed

with the work with such diligence as will insure its completion within the time fixed by the schedule set forth in ATTACHMENT C of this agreement, the AWARDEE shall be in default and notice

in writing shall be given to the AWARDEE of such default by the AGENCY or an agent of the

AGENCY. If the AWARDEE fails to cure such default within such time as may be required by such

notice, the CITY, acting by and through the AGENCY, may at its option terminate and cancel the

contract.

In the event of such termination, all grant funds awarded to the AWARDEE pursuant to this agreement shall be immediately revoked and any approvals related to the PROJECT shall immediately

be deemed revoked and canceled. In such event, the AWARDEE will no longer be entitled to receive

any compensation for work undertaken after the date of the termination of this agreement, as the

grant funds will no longer be available for this project.

Such termination shall not effect or terminate any of the rights of the CITY as against the

AWARDEE then existing, or which may thereafter accrue because of such default, and the foregoing provision shall be in addition to all other rights and remedies available to the CITY under the
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law and the note and mortgage (if in effect), including but not limited to compelling the AWARDEE

to complete the project in accordance with the terms of this agreement, in a court of equity.

The waiver of a breach of any term, covenant or condition hereof shall not operate as a waiver of

any subsequent breach of the same or any other term, covenant, or condition hereof.

Section XVII – Reporting Responsibilities

The AWARDEE agrees to submit any and all quarterly reports required by HUD or the CITY to the

AGENCY on the following due dates: October 1, January 1, April 1, and July 1, next following the

date of this agreement. 

The AGENCY will send the AWARDEE one reminder notice if the quarterly report has not been

received fourteen (14) days after the due date. If the AWARDEE has not submitted a report fourteen (14) days after the date on the reminder notice, the CITY will have the option to terminate the

contract as described in this agreement. In addition, the AWARDEE agrees to provide the AGENCY

information as required to determine program eligibility, in meeting national objectives, and financial records pertinent to the project. Additional reporting requirements are included as

ATTACHMENT ____.

Section XVIII – Inspection, Monitoring & Access to Records

The CITY reserves the right to inspect, monitors, and observe work and services performed by the

AWARDEE at any and all reasonable times.

The CITY reserves the right to audit the records of the AWARDEE any time during the performance of this Agreement and for a period of five years after final payment is made under this

Agreement. 

If required, the AWARDEE will provide the AGENCY with a certified audit of the AWARDEE’s

records representing the Fiscal Year during which the PROJECT becomes complete whenever the

amount listed in SECTION VII is at or exceeds $300,000, pursuant to the requirements of OMB

Circular A-133.

Access shall be immediately granted to the CITY, HUD, the Comptroller General of the United

States, or any of their duly authorized representatives to any books, documents, papers, and

records of the AWARDEE or its contractors which are directly pertinent to that specific contract for

the purpose of making audit, examination, excerpts, and transcriptions.

Section XIX – General Conditions

A. All notices or other communication which shall or may be given pursuant to this Agreement

shall be in writing and shall be delivered by personal service, or by registered mail addressed to

the other party at the address indicated herein or as the same may be changed from time to
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time. Such notice shall be deemed given on the day on which personally served; or, if by mail,

on the fifth day after being posted or the date of actual receipt, whichever is earlier. 

City address

Awardee address

B. Title and paragraph headings are for convenient reference and are not a part of this

Agreement. 

C. In the event of conflict between the terms of this Agreement and any terms or conditions

contained in any attached documents, the terms in this Agreement shall rule. 

D. No waiver or breach of any provision of this Agreement shall constitute a waiver of a subsequent

breach of the same or any other provision hereof, and no waiver shall be effective unless made

in writing.

E. The parties hereto agree that this Agreement shall be construed and enforced according to the

laws of the State of __________________. 

F. Should any provisions, paragraphs, sentences, words or phases contained in this Agreement be

determined by a court of competent jurisdiction to be invalid, illegal or otherwise unenforceable

under the laws of the State of ____________ or the City of ____________, such provisions,

paragraphs, sentences, words or phrases shall be deemed modified to the extent necessary in

order to conform with such laws, or if not modifiable to conform with such laws, then same

shall be deemed severable, and in either event, the remaining terms and provisions of this

Agreement shall remain unmodified and in full force and effect.

G. The AWARDEE shall comply with the provisions of the Copeland Anti-Kick-Back Act

(18 U.S.C. 874) as supplemented in the AGENCY of Labor Regulations (29 CFR Part 3), as

amended.

H. The AWARDEE shall comply with the provisions of sections 103 and 107 of the Contract Work

Hours and Safety Standard Act (40 U.S.C. 327-330) as supplemented by AGENCY of Labor

regulations (29 CFR, Part 5), as amended.
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I. The AWARDEE further warrants and agrees to include or cause to be included the criteria and

requirements of paragraphs (G) through (H) of this section in every nonexempt subcontract. The

AWARDEE also agrees to take such action as the federal, state or local government may direct

to enforce aforesaid provisions. 

J. The obligations undertaken by AWARDEE pursuant to this Agreement shall not be delegated or

assigned to any other person or agency unless CITY shall first consent to the performance or

assignment of such service or any part thereof by another person or agency. 

K. The Agreement shall be binding upon the parties hereto, their heirs, executors, legal

representative, successors and assigns. 

L. AWARDEE shall indemnify and save CITY harmless from and against any negligent claims,

liabilities, losses and causes of action which may arise out of AWARDEE’s activities under this

Agreement, including all other acts or omissions to act on the part of AWARDEE, including any

person acting for or on its behalf, and, from and against any orders, judgments, or decrees

which may be entered, and from and against all costs, attorneys fees, expenses and liabilities

incurred in the defense of any such claims, or in the investigation thereof. 

M. AWARDEE and its employees and agents shall be deemed to be independent contractors, and

not agents or employees of the CITY, and shall not attain any rights or benefits under the civil

service or pension ordinances of the CITY, or any rights generally afforded classified or

unclassified employee; further they shall not be deemed entitled to state Compensation benefits

as an employee of the CITY.

N. Funding for this Agreement is contingent on the availability of funds and continued

authorization for program activities and is subject to amendment or termination due to lack of

funds, or authorization, reduction of funds, and/or change in regulations. 

IN WITNESS WHEREOF,

the City of _______________________ and the AWARDEE have caused their signatures to be hereunto affixed and duly attested

__________________________________________________

__________________________________________________

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CHDO Toolbox for HOME PJs

Expanded CHDO

Conflict of Interest Policy
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CHDO Toolbox for HOME PJs

No employee, agent, consultant, elected official, or appointed official of _______________________

(the “CHDO”) may obtain a financial interest or unit benefits from a HOME-assisted activity, either

for themselves or those with whom they have family or business ties, during their tenure or for one

year thereafter. This prohibition includes the following:

◆ Any interest in any contract, subcontract or agreement with respect to a HOME-assisted project or program administered by the CHDO, or the proceeds thereunder; or

◆ Any unit benefits or financial assistance associated with HOME projects or programs

administered by the CHDO, including:

❑ Occupancy of a rental housing unit in a HOME-assisted rental project; 

❑ Receipt of HOME tenant-based rental assistance; 

❑ Purchase or occupancy of a homebuyer unit in a HOME-assisted project;

❑ Receipt of HOME homebuyer acquisition assistance; or 

❑ Receipt of HOME owner-occupied rehabilitation assistance.

This prohibition does not apply to an employee or agent of the CHDO who occupies a HOMEassisted unit as the on-site project manager or maintenance worker.

In addition, no member of Congress of the United States, official or employee of HUD, or official

or employee of the Participating Jurisdiction shall be permitted to receive or share any financial or

unit benefits arising from the HOME-assisted project or program. 

Prior to the implementation of the HOME-assisted activity, exceptions to these provisions may be

requested by the CHDO in writing to the Participating Jurisdiction. The CHDO must demonstrate

and certify that the policies and procedures adopted for the activity will ensure fair treatment of all

parties, and that the covered persons referenced in this policy will have no inside information or

undue influence regarding the award of contracts or benefits of the HOME assistance. The

Jurisdiction may grant exceptions or forward the requests to HUD as permitted by 24 CFR 92.356,

85.36 and 84.42, as they apply. 

Expanded CHDO Conflict of Interest Policy
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CHDO Toolbox for HOME PJs

CHDO Homebuyer Project Proceeds

Instructions & Worksheet
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CHDO Toolbox for HOME PJs

HOME Funds Reconciliation &

CHDO Proceeds Worksheet

The purpose of this worksheet is to assist the

CHDO and PJ for tracing the ultimate distribution

of HOME funds in a CHDO homebuyer project. It

is intended to be used at a closing to reconcile the

HOME investments and determine what HOME

funds were written off as Development Subsidy,

provided as buyer assistance, repaid from the closing, or retained by the CHDO as CHDO proceeds.

Step 1. Determine Total HOME

Investment

The first step is to determine the total HOME investment, which is a combination of any HOME funds

provided to the CHDO to be used in the development phase of the project for acquisition,

construction/rehab and soft costs.

Step 2. Determine Development

Subsidy

The second step is to determine if the project had

costs in excess of sales prices, and therefore is eligible to write off part or all of the HOME

development funds as “Development Subsidy” that

does not have to be mortgage to the buyer(s). 

Please note that Development Subsidy write-off is

eligible only using the recapture method, and not

the resale method.

Step 3. Calculate Total HOME Buyer

Subsidies

HOME buyers can be assisted in several ways. They

can receive:

◆ Rollover purchase subsidies from CHDO development funds (in essence, this is the portion of

the HOME development funds that are not written off as Development Subsidy, which can be in

the form of downpayment assistance or purchase assistance, and must be mortgaged to the

home buyer

◆ Closing Cost Assistance – which does not have

to be mortgage as it falls outside of the sales

price/fair market value of the property; and/or

◆ New buyer assistance funds that are made available to the buyer at closing and were not

originally invested as development funds in the

CHDO project

These must be totaled to determine the Total Buyer

Subsidies.

Instructions for CHDO Homebuyer Project
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CHDO Toolbox for HOME PJs

Step 4. Determine HOME Funds To

Be Repaid

When CHDO funds are invested in the development

phase of the project (e.g., as a construction loan),

some of these funds may be repaid from net sales

proceeds. They may also be retained by the CHDO

as CHDO proceeds – at the PJ’s option. This step

is designed to calculate what funds are available for

repayment, or to be retained by the CHDO as proceeds. Any such repayments are considered

program income to the PJ.

If repayment is mandated, then it is appropriate to

allow the CHDO to draw any remaining developer

fee due from the unit, after paying closing costs

(realtor, legal and recording costs, etc.) and other

construction loans. Then any net proceeds are available for repayment, if required by the PJ.

Step 5. Reconcile HOME Funds &

CHDO Proceeds

The final step in the process is to take the four previous calculations to reconcile the ultimate allocation

of all HOME funds invested in that unit. Take the

total HOME investment in the unit, and subtract

funds allocated as Development Subsidies, Buyer

Subsidies, and any Repayments from Sales

Proceeds. The net result is any CHDO funds that

are to be retained by the CHDO as CHDO proceeds.

Again, CHDO proceeds are the option of the PJ.

Essentially, the PJ’s choice is to permit them to be

retained or to be repaid as program income to the

PJ. If CHDO proceeds are permitted, they must be

reinvested as required by 92.300(a)(2) – either to be

used for HOME-eligible or other housing activities to

benefit low-income families. PJs are responsible for

monitoring the reuse of CHDO proceeds.
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CHDO Toolbox for HOME PJs

CHDO/Project: ______________________________________

Property: __________________________________________

Purchaser: __________________________________________

Date of Closing: ______________________________________

CHDO Homebuyer Project Funds 

Reconciliation & Proceeds Worksheet

Step Project Per HOME-Assisted Unit 

Step 1. Determine Total HOME Investment

HOME Development Financing

+ HOME Buyer Assistance (Not part of Dev Cost)

Total HOME Investment $ - $ - 

Step 2. Determine Development Subsidy

Total Development Costs

- Sales Price/Fair Market Value

Excess Costs = Development Subsidy $ - $ - 

Step 3. Calculate Total HOME Buyer Subsidies

HOME Development Funds mortgaged to Buyer

+ Buyer Closing Cost Assistance

+ New HOME Buyer Purchase Assistance

Total Buyer Subsidies $ - $ - 

Step 4. Determine HOME Funds To Be Repaid

Sales Proceeds

- Sales Costs

- Construction/Other Debt Payoff

- Allowed Developer Fees/Costs

Net Proceeds Available to Repay HOME $ - $ - 

Step 5. Reconcile HOME Funds & CHDO Proceeds

Total HOME Investment

- Development Subsidy - not mortgaged to buyer

- HOME Buyer Subsidies

- HOME Dev Funds to be Repaid from Closing*

HOME Funds Retained as CHDO Proceeds $ - $ - 

* program income