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Homebuyer Assistance

224 CFR 92.254(a)

Beneficiary

Must qualify as low-income Must occupy property as a principal

residence for affordability period Receive title through fee simple title, land

trust, or, if homeownership under state law, receive share in mutual housing or coop Contracts for deed not homeownership

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Eligible Properties Eligible property types:

Single-family (1-4 units), including condominium units and manufactured housing

Manufactured home Sales price must be < 95% of median

purchase price in the area

24 CFR 92.254(a)

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Eligible Properties 1-4 units (single family), including

condominium units PJ must inspect units for property standard

compliance HQS for acquisition Rehab/New Construction standards if

applicable Includes lead-based paint requirements

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Affordability Requirements PJs have two options for controlling

affordability of the property during the affordability period:RecaptureResale

24 CFR 92.254

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Recapture Provisions Homebuyer sells to any willing buyer Sale triggers recapture of all or portion

of “direct subsidy” to the homebuyerDirect subsidy = financial assistance

that reduced purchase price from FMV or was provided directly to homebuyer (e.g., downpayment, closing costs, HOME mortgage)

24 CFR 92.254(a)(5)(ii)

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Recapture ProvisionsRecapture full amount of subsidy or

a reduced amountMay forgive portionMay share net proceedsMay capture portion of

appreciation

24 CFR 92.254(a)(5)(ii)

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Recapture Provisions

If no direct subsidy, must use resale provisions

Recapture amount is limited to net proceeds of saleCannot recapture more than is

available at closing

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Common Recapture Issues

Insufficient description in Con Plan HUD must review for regulatory compliance

and approve Citizens have insufficient information

Permit “assumption” of requirements or waive recapture if next buyer is low-income

Not limited to net proceeds Buying out of requirements

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Resale Provisions

When the home is sold,

HOME affordability restrictions are passed on to the next buyer

24 CFR 92.254(a)(5)(i)

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Resale Provisions Purchaser must be low-income and occupy

as principal residence Resale restrictions control subsequent sale

during the period of affordability New buyer assumes existing affordability

period, unless additional HOME $ provided New, potentially shorter POA

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Resale Provisions Resale Price must be “affordable to

reasonable range of low-income families” Original homebuyer must receive a “fair

return” on investment Both terms must be defined in Con Plan, and

PJ must state how it will address situations where both standards cannot be met

Alternative: Presumption of Affordability

24 CFR 92.254(a)(5)(i)

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Common Resale Issues Resale provisions described in Con Plan

often don’t meet requirements Insufficient detail No fair return or return not fair Don’t require resale to low-income buyer Don’t define affordability to a “reasonable

range” of low-income buyers Don’t define upfront how resale price will be

determined

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Common Resale/Recapture Issues

PJs often develop a “hybrid” provision that includes elements of both or an “either or” provision that creates uncertainty for the homebuyer HOME rule currently does not permit either of

these approaches

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Ensuring Affordability Written agreement with homebuyer imposing

resale/recapture and requiring principal residency for POA Must be separate from loan docs

Resale – deed restriction required Recapture – optional; lien OK Monitoring for principal residence not

required

24 CFR 92.254(a)()(i)(A)

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Emerging Homeownership Issues

HOME Program Design

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Program Design Issue

The homeownership landscape is in the midst of enormous shifts Depreciation in previously overvalued markets Skyrocketing foreclosures Substantial contraction of the mortgage

market

Have you rethought your

program design yet?

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Program Re- Design Issues

Market changes Underwriting standards Counseling Anti-predatory lending and resubordination

policies Rehabilitation option