HOME presentation from

Policy Action Committee Meeting

December 3rd, 2013

11am pacific/2pm eastern

HISTORY OF HOME

1990 HOME program authorized under Title II of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12721). HOME regulations codified in 24 CFR part 92

9/1996 HOME regulations substantially revised (61 FR 48750)

12/16/2011 Substantial MOME rule changes proposed(76 FR 78344)

2/1/2012 Network & Cornerstone staff, members, and allies submit public comments

2/14/2012 Public comment period closed

7/24/13 Revised HOME regulations published in 24 CFR part 92 (78 FR 44627)

§92.2 Definitions: Homeownership

Incorporates community land trusts Incorporates manufactured housing on leased land OneCPD Recommendation: “Revise and update program policies and procedures to include new eligible forms of homeownership: (a) Housing located on land owned by a community land trust, for at least 50 years; (b) Manufactured housing on a ground lease that is at least equal to the applicable affordability period.”

§92.2 Definitions: Program Income

Definition of program income unchanged.

Program income incudes: Proceeds from the disposition by sale or long-term lease of real

property acquired, rehabilitated, or constructed with HOME funds or matching contributions;

Interest or return on the investment permitted under §92.205(b) , which includes:

equity investments, interest-bearing loans or advances, non-interest-bearing loans or advances, interest subsidies, deferred payment loans, grants

§92.205 Eligible activities: General.

Acquisition of vacant land or demolition for a particular project intended to provide affordable housing when construction will begin within 12 months.

Purchase and/or rehabilitate a manufactured housing unit, or purchase the land upon which a manufactured housing unit is located.

Form of assistance that include: equity investments, interest-bearing loans or advances, non-interest-bearing loans or advances, interest subsidies, deferred payment loans, grants

§92.206 Eligible project costs.

Costs of acquiring improved or unimproved real property, including acquisition by homebuyers.

Staff and overhead costs related to carrying out a project cannot be charged to, or paid by, low-income families. These costs can be charged as administrative or project costs (e.g. construction management fees, loan servicing fees, loan processing fees, and underwriting fees).

• Permitted to charge reasonable and customary fees commonly charged to a loan applicant in unassisted real estate transactions, (e.g. cost of credit reports, appraisals fees, nominal application fees)

§92.208 Eligible CHDO operating expense and capacity building costs.

Up to 5 percent of a participating jurisdiction's fiscal year HOME allocation may be used for the operating expenses of community housing development organizations (CHDOs). This amount is in addition to amounts set aside for housing projects that are owned, developed, or sponsored by CHDOs. These funds may not be used to pay operating expenses incurred by a CHDO acting as a subrecipient or contractor under the HOME Program.

§92.214 Prohibited Activities and Fees

May not charge fees to cover administrative costs, especially fees charged directly to low-income program beneficiaries. Prohibited fees include loan servicing, origination, or other fees related to the cost of administering the HOME program (e.g., fees on low-income families for construction management or for inspections for compliance with property standards)

May charge nominal application fees (although these fees are not an eligible HOME cost) to project owners to discourage frivolous applications.

May charge homebuyers a fee for housing counseling.

§92.214 Prohibited Activities and Fees (cont.)

May charge fees that are customarily charged in rental housing, specifically rental project owners may charge: Application fees to prospective tenants;

Parking fees to tenants if customary for rental housing projects in the neighborhood;

Fees for services, such as bus transportation or meals, as long as the services are voluntary.

Participating jurisdictions and state recipients may charge owners of rental projects reasonable annual fees for compliance monitoring during the period of affordability.

§92.254 Qualification as Affordable Housing: Homeownership

PJs no longer permitted to use the FHA Single Family Mortgage Limit [the 203(b) limit] as a surrogate for 95 percent of area median purchase price

PJs must convert homebuyer housing to rental housing if it does not have a sales contract within nine months of project completion

All homebuyers that receive HOME assistance or purchase a unit developed with HOME funds receive housing counseling.

Require PJs to obtain HUD’s specific and written approval of its resale and/or recapture requirements.

§92.254 Qualification as Affordable Housing: Homeownership:

Resale Restrictions

• PJs required to define “fair return on investment” and “affordability to a reasonable range of low-income buyers” in restrictions.

• PJ must address how it will make the housing affordable if the resale price that is needed for a fair return on investment is too high to be within the affordable range.

• Deed restrictions, covenants running with the land, or other similar mechanisms must be used as the mechanism to impose the resale requirements

§92.254 Qualification as Affordable Housing: Homeownership:

Recapture Permits a subsequent low-income purchaser of a HOME-assisted

homeownership unit to assume the existing HOME loan and recapture obligation entered into by the original buyer when no additional HOME assistance is provided to the subsequent homebuyer.

In cases in which the subsequent homebuyer needs HOME assistance in excess of the balance of the original HOME loan, the HOME subsidy to the original homebuyer must be recaptured. A separate HOME subsidy must be provided to the new homebuyer, and a new affordability period must be established based on that assistance to the buyer.