American Dream Downpayment

Initiative (ADDI)

ADDI Basics

American Dream Downpayment Act (PL 108-186) 12/16/03 - $86.9 million appropriated for FY2004

Consolidated Appropriations Act (PL 108-7) 2/20/03 – appropriated $74.5 million for FY2003

Some requirements differ for FY2003 & FY2004 ADDI funds

ADDI Basics Cont.

Dedicated source of homeownership funds Limits assistance to first-time homebuyers Limits subsidy amount but allows blending

with HOME funds Requires housing counseling plan Requires outreach plan to underserved

populations

FY2004 - FY2007 Formula

Based on percentage of rental housing occupied by low-income households (State & local PJs)

Local PJs must have either: Population of 150,000 or Receive an allocation of $50,000 or more

Non-qualifying PJs’ allocations revert to State pool of funds

Puerto Rico and its local PJs are excluded

FY2003 Formula

Same as FY2004 – FY2007 formula except: State and local PJs must have demonstrated prior

commitment to homeownership Puerto Rico and its local PJs are included

Consolidated Plan Requirements

Must address use of ADDI funds in 2004 Consolidated Plan or amendment to the 2004 Plan

Action Plan must include: Description of planned use of ADDI funds Plan for targeted outreach to residents and tenants of

public and manufactured housing Description of actions taken to ensure suitability of

families receiving ADDI assistance to undertake and maintain homeownership

Eligible Households

Low-income At or below 80% of area median income

First-time homebuyer Individual and his/her spouse who has not owned

a home during the most recent 3-year period Exceptions for:

Displaced homemakerSingle parent

Displaced Homemaker

May not be excluded on the basis that the individual, while a homemaker, owned a home with his or her spouse or resided in a home owned by the spouse Adult Not worked full-time, full-year for a number of years but

during such years worked primarily without remuneration to care for the home & family AND

Is unemployed or underemployed and experiencing difficulty in obtaining or upgrading employment

Single Parent

May not be excluded on the basis that the individual, while married owned a home with his or her spouse or lived in a home owned by the spouse Is unmarried or legally separated from a spouse AND Has one or more minor children with custody or joint

custody OR Is pregnant

Homeownership

Fee Simple Title 99-Year Leasehold Agreement Other equivalent form of ownership

approved by HUD Cooperative or mutual housing projects that

constitute homeownership under State law

Eligible Properties

Single-family units (1 - 4 unit dwellings) Condominium units Cooperative units Manufactured housing with lot Manufactured housing lot

Eligible Activities

Downpayment assistance Rehabilitation completed in conjunction with

the home purchase assisted with ADDI funds (Except for FY2003 ADDI funds)

Eligible Costs

Acquisition Costs Rehabilitation Costs (Except for FY2003

ADDI funds) Cap is 20% of PJ’s ADDI FY formula allocation

Related soft costs Reasonable & necessary costs incurred by

homebuyer or PJ and associated with the acquisition/rehab. project

Related Soft Costs

Processing & settlement costs Private lender origination fees Credit reports Title fees Recording fees Appraisal fees Attorney fees

Related Soft Costs Cont.

Professional services (e.g., A&E, spec. writing) Information services to prospective homeowners Project delivery costs directly related to carrying

out the project (but not admin. costs) Project specific environmental costs

Ineligible Costs

Administrative Costs Development hard and soft costs for new

construction Costs related to rental housing Rental assistance

Property Standards

Acquisition only All applicable State & local housing quality

standards and code requirements If no such standard exists use § 982.401 (HQS)

Property Standards Cont.

Acquisition/Rehabilitation Applicable local codes, rehabilitation standards,

ordinances and zoning ordinances. Must have written rehab. standards If no local standard, one of three model codes

All projects must comply with the lead-based paint requirements of Part 35

Forms of Investment

Grants Interest bearing & non-interest bearing loans Interest subsidies Deferred payment loans Other forms of investment approved by HUD

ADDI Subsidy Amounts

$1,000 Minimum HOME + ADDI investment Maximum ADDI investment (Except for FY2003

ADDI funds) is greater of: 6% of purchase price $10,000

Total HOME + ADDI investment cannot exceed FHA 221(d)(3) limits for non-profit elevator construction

Affordability, Value, Residency

Acquisition Only – purchase price cannot exceed 95% of area median purchase price

Acquisition/Rehab. – post rehab. value cannot exceed 95% of area median purchase price

Primary residence requirement

Periods of Affordability

Based upon total ADDI + HOME investment

Homeownership assistance HOME/ADDI amount per-unit

Minimum period of affordability

Under $15,000 5 Years

$15,000 to $40,000 10 Years

Over $40,000 15 Years

Long-term Affordability

Affordability is typically assured through the PJ’s use of deed restrictions and/or covenants running with the land

PJ must impose one of two options to ensure affordability: Resale Recapture

Resale

Requires resale of unit to low-income household Affordability period based on total HOME + ADDI

investment PJ must ensure the sales price allows:

Home to remain affordable to reasonable range of low-income homebuyers

Seller to receive fair return on investment Affordability period continues with new owner Presumption available based upon market study

Recapture

Subsidy recapture options Recapture the entire amount Reduce over period of affordability Shared net proceeds Owner investment returned first

Amount subject to recapture = direct subsidy HOME/ADDI funds that enabled homebuyer purchase Funds reducing the purchase price from fair market value

If no direct subsidy, resale must be used

Limitation on Subs/Contractors

PJ may not provide ADDI funds to any entity that provides downpayment assistance if the activities of the entity are financed in whole or in part directly or indirectly by contributions, service fees, or other payments from sellers of housing

Repayment & Program Income

Repayment in cases of noncompliance Repayment for non-completion ADDI program income is considered HOME

program income and must be used accordingly

Other Requirements

Match is not required (Except for FY2003 ADDI funds)

URA is not applicable (Except for FY2003 ADDI funds)

Other cross-cutting Federal requirements apply to ADDI unless specifically excluded by statute

American Dream Downpayment

Initiative (ADDI)