Homeownership Voucher Option (24 C.F.R

982.625). Under 24 C.F.R. 982.625, the THDA may elect to provide Housing Choice Voucher assistance to an eligible family who purchases, rather than rents, a dwelling unit that will be occupied by the family. The homeownership option does not require, and HUD does not provide, additional or separate funding. The THDA uses the voucher program funding previously established under existing Annual Contributions Contracts (ACC) for the Housing Choice Voucher program to fund the Homeownership Voucher program option. The program provides additional affordable homeownership opportunities for low-income families and encourages self- sufficiency among Housing Choice Voucher Program participants. (1) Initial Eligibility Requirements. A Housing Choice Voucher Program family wishing to utilize the voucher subsidy to purchase, rather than rent a home, must meet the following initial eligibility requirements to be issued a Certificate of Eligibility: (a) Must be a current participant in the THDA’s HCV Program, all adults that would be listed on the mortgage must be participants in good standing for at least twelve (12) months, and meet the general requirements for continued participation in the THDA Housing Choice Voucher Program. If the family is from the THDA’s waiting list or a port-in, this requirement may be waived if the family has had a Housing Choice Voucher for 12 months, is in good standing, and can provide a pre-qualification letter for a mortgage and meets the requirements outlined in this chapter. Although, no homeownership activities may take place until all port paperwork has been processed under the regular porting policies (24 C.F.R. 982.625(b); 982.626(b)). (b) All adult household members may not have previously lived as an adult in a home that defaulted on a mortgage in the Homeownership Voucher Program (24 C.F.R. 982.627(a)(5); (e)). (c) All household members must be in compliance with the Housing Choice Voucher family rules and obligations (24 C.F.R. 982.626(b)). (d) Must be a “first-time homeowner”, meaning that a family member must not have owned title to a principal residence in the last three (3) years before commencement of homeownership assistance for the family. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 1. The term “first-time homeowner” also includes a single parent or displaced homemaker (as those terms are defined in 12 U.S.C. 12713) who, while married, owned a home with his or her spouse, or resided in a home owned by his or her spouse (24 C.F.R. 982.4). 2. Residents of limited equity cooperatives are eligible for the homeownership program. An exception to this requirement may be granted to residents of limited equity cooperatives and families with a disabled household member who requires a reasonable accommodation. The Housing Choice Voucher program is readily accessible to and usable by such person, and single parents or displaced homemakers (as those terms are defined in 12 U.S.C. § 12713) who, while married, owned a home with a spouse, or resided in a home owned by a spouse. Mobile homes on rented lots are considered personal property; therefore, those families are not considered an owner of real estate for the purposes of this program. 3. The first-time homeowner requirement does not apply after the initial purchase with Homeownership Voucher (24 C.F.R. 982.4(b)). (e) The THDA requires that families receive a minimum of 8 hours of pre-purchase homebuyer education from an approved THDA Homebuyer Education counselor (24 C.F.R. 982.626(a)(3); 982.630). (f) The family must demonstrate that one or more adult members of the family who will own the home at commencement of homeownership is employed full-time averaging a minimum of 30 hours per week and who have been continuously employed within the same career field during the past twelve (12) months before commencement of homeownership assistance. Federal Work Study income is not eligible to meet work history requirement. Families whose head of household or spouse is disabled or elderly are exempted from the employment requirement. In addition, the employment requirement does not apply to an elderly family or a disabled family. Furthermore, if a family, other than an elderly family or a disabled family, includes a person with disabilities, the THDA will grant an exemption from the employment requirement if the THDA determines that an exemption is needed as a reasonable accommodation so that the program is readily accessible to and usable by persons with disabilities (24 C.F.R. 982.627(d)). (g) Must Have at Least $15,000 Annual Income. 1. Exceptions. (i) If a family verifies that they have pre-qualified for a mortgage loan that sufficiently covers the purchase price of a suitable home in their regional area and meets the THDA’s financing standards prior to being admitted to the Homeownership Voucher Program, then the family may be determined eligible if their income is at least the Federal minimum wage (currently $7.25) multiplied by 2,000 hours (currently $14,500). (ii) The Federal Social Security Income Disability standard for families whose head or spouse is disabled for an individual is ($674) multiplied by twelve (12) months (currently $8,088). (iii) Exceptions may be made due to extreme circumstances such as, global recession. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (iv) Elderly and disabled families may use public assistance as income to meet the annual income requirement. (v) Employment Requirement for Disabled Family. The employment requirement does not apply to a disabled family, which would include a family whose head (which includes co-head), spouse, or sole member is a person with a disability and receives SSA Disability Benefits. (vi) Household Members Not Receiving SSA Disability Benefits. The household must provide third-party verification for household members claiming disability who do not receive SSI or other disability payments from the SSA. The THDA will mail a Verification of Disability form to a knowledgeable healthcare provider identified by the household member to verify that the household member meets the HUD definition of disability. 2. Public assistance includes federal housing assistance or the housing component of a welfare-to-work grant, TANF assistance (Families First), SSI that is subject to an income eligibility test, food stamps, general or other assistance provided under a federal, state or local program that provides assistance available to meet family living or housing expenses (24 C.F.R. 982.627(c)). 3. In the event of a loss of employment that results in employment income of less than $15,000 annually, the household will be offered six (6) months to secure new employment earning at least $15,000 annually. If at least one household member does not secure new employment income of at least $15,000 annually within the six (6)-month time period, the assistance will be terminated. During this time, the family must recertify income every ninety (90) calendar days. (i) Exceptions. An exception to the six (6) month timeframe for securing new employment may be considered when a household member loses his job due to no fault of his or her own, such as a factory closing or lay-off. (ii) An exception may also be considered for long-term medical incapacitation. (iii) In this case, the household must send a letter requesting an exception to the THDA and provide documentation of the job loss or medical necessity. 4. Seasonal employees, such as teachers, must be certified annually instead of on an interim basis when income decreases for a short period of time (i.e. summer vacation). (h) Must not owe money to the THDA or any other housing authority (24 C.F.R. 982.626(b)). (i) Homeownership Voucher applicants must wait three (3) years from the discharge date of a Chapter 7 bankruptcy and one (1) year from the discharge date of a Chapter 13 bankruptcy before applying for the program (24 C.F.R. 982.626(b)). (j) Married Head of Household. 1. Income. A head of household who is married, but physically separated, not sharing residence with the spouse in the assisted unit, and not legally divorced from the spouse, must either divorce or include the spouse’s income in the household for the eligibility determination (24 C.F.R. 982.626(b)). HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 2. Promissory Note and Deed of Trust. The THDA will not require both spouses to sign the promissory note when both spouses are residing in the assisted unit as their primary residence. However, the lender may require both spouses to sign the deed of trust in order to encumber the interest of the spouse who is not on the promissory note. (k) At least 1 percent of the purchase price or $1,000, whichever is greater, must come from the family’s personal resources, as evidenced by bank statements. The family may use grants or other funds to cover the remainder of the down payment and closing costs when available. In the event that other funding is unavailable, and closing costs cannot be arranged with the seller, the program participant may be required to provide the full down payment (24 C.F.R. 982.625(g)(1); 982.626(b)). (l) The adult member of the household that will be listed on the mortgage and has the income must have a minimum credit score of 640. If the applicant has no credit score, a nontraditional credit history must be established by providing documentation of payment history, such as but not limited to rent, utility and phone payment records (24 C.F.R. 982.626(b)). (m) The family must cooperate by attending required meetings and providing requested documentation within the required timeframe (24 C.F.R. 982.626(b)). (n) The family will be issued a Certificate of Eligibility with a time limit of 180 days to locate a home from the date of issuance. The Director of Rental Assistance, may approve additional 30-day extensions not to exceed 270 days. If the time limit is exceeded they will be denied and may be required to wait one year (24 C.F.R. 982.629(a)). (o) At any time, if the family no longer meets the eligibility requirements, they will be denied acceptance into the homeownership program and may reapply to the program when eligible (24 C.F.R. 982.626(b); 982.629(c)). (p) The Head of Household may also enroll and participate in the Family Self-Sufficiency Program. (q) Definition of a Disabled Household. 24 C.F.R. 5.403 outlines the definitions of terms to be used for the Homeownership option. Under the Eligibility Requirements for Families at 24 C.F.R. 982.627, certain sections offer variances of the requirements to families based on whether they are a disabled family or a family that includes a person with disabilities. 1. Disabled family means a family whose head (including co-head), spouse, or sole member is a person with a disability. It may include two or more persons with disabilities living together, or one or more persons with disabilities living with one or more live-in aides. 2. Person with a disability means a person who: (i) Has a disability, as defined in 42 U.S.C. 423; (ii) Is determined, pursuant to HUD regulations, to have a physical, mental, or emotional impairment that: (I) Is expected to be of long-continued and indefinite duration; (II) Substantially impedes his or her ability to live independently, and HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (III) Is of such a nature that the ability to live independently could be improved by more suitable housing conditions; or (iii) Has a developmental disability as defined in 42 U.S.C. 15002. 3. Does not exclude persons who have the disease of acquired immunodeficiency syndrome or any conditions arising from the etiologic agent for acquired immunodeficiency syndrome; 4. For purposes of qualifying for low-income housing, does not include a person whose disability is based solely on any drug or alcohol dependence; and means “individual with handicaps,” as defined in 24 C.F.R. § 8.3 , for purposes of reasonable accommodation and program accessibility for persons with disabilities. (r) Reasonable Accommodation Exception. THDA may offer an exemption from the Employment Requirement as a reasonable accommodation to a family that includes a person with disabilities, but only if the PHA administering the Program determines that an exemption is needed as a reasonable accommodation so that the Homeownership Program is readily accessible to and usable by the person with disabilities. (2) Partner Agencies. The THDA has partnered with several agencies throughout Tennessee that offer homebuyer education classes or mortgage loan products. In particular, the THDA has partnered with all of the Neighborworks® Organizations in its jurisdiction. The Neighborworks® Organizations (NWOs) offer homebuyer education based on the Full Cycle Lending, Neighborhood Reinvestment Corporation, and the Neighborworks® network. The trainers are certified by Neighborhood Reinvestment. The NWOs may also offer a low- interest second mortgage loan product for qualified buyers. The THDA has also partnered with Tennessee Network for Community and Economic Development (TNCED) and Rural Legal Services for homebuyer education. Rural Development has partnered with the THDA to offer a low-interest first mortgage loan product for buyers in qualifying communities. The THDA will partner with other government and nonprofit agencies as requested and if possible to enable voucher families to purchase a home. (3) Pre-Purchase Homebuyer Education (24 C.F.R. 982.630). The THDA requires families to receive an 8 hour minimum of pre-purchase homebuyer education from an approved THDA Homebuyer Education counselor. The family will not be considered eligible to use their voucher to purchase a home until they have completed the homebuyer education requirements and secured appropriate financing to purchase a home. All eligible applicants will be given information on a THDA partner agency that offers homebuyer education in close proximity to their residence. In addition, the THDA may conduct additional education and counseling for families. (a) At a minimum, the homebuyer education will include the following: 1. Budgeting and money maintenance; 2. Credit counseling; 3. Knowing the players and their roles in the home buying process; 4. How to negotiate purchase price; 5. Preparation for loan qualification and application; 6. How to obtain homeownership financing; HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 7. How to find a home; 8. Advantages of purchasing and how to locate a home in an area that does not have a high concentration of low-income families; 9. Maintaining a home; and 10. Avoiding delinquencies, defaults and foreclosures. (b) Upon completion of the pre-purchase homebuyer education, the THDA voucher participants should have an understanding of how to do the following: 1. Determine if homeownership is right for them; 2. Budget and manage their credit; 3. Determine what they can afford to spend on a home; 4. Identify what they want and need in a home; 5. Shop for a home that meets their needs; 6. Decide how much to offer for a house; 7. Obtain and use a home inspection; 8. Shop for an affordable mortgage; 9. Know what to expect at closing and settlement; 10. Understand language and terms associated with mortgages and lending; 11. Meet the ongoing financial obligations of homeownership and avoid default; 12. Care for the home after purchase; and 13. Take advantage of financial opportunities that come with homeownership. (4) Post-Purchase Homebuyer Education. The THDA requires post-purchase homebuyer education, 6 hours preferred, with all Homeownership Voucher participants once they have secured a mortgage and have moved into their home in order to remain in compliance with the program regulations. The homeowner is required to demonstrate proof of post-purchase homebuyer education prior to completion of the first year homeownership anniversary. The THDA will work with the family to schedule the post-purchase education. (5) Pre-Qualifying Application and Mortgage Readiness (24 C.F.R. 982.626(b)). The Homeownership Voucher program will be reviewed with all eligible voucher participants through an oral briefing or written, mailed materials. All interested participants will be forwarded a Homeownership Voucher Program Pre-Qualifying Application. Once the THDA receives the Pre-Qualifying Application, it will be reviewed to determine whether the applicant meets the initial eligibility criteria. If the applicant meets the initial eligibility criteria, they will be required to provide verifying documents. The Homeownership Voucher Specialist will schedule an appointment for an orientation. The applicant will be required to sign forms which may include, but not limited to, the Certification of Eligibility, Rules and Regulations, and Homeownership Obligations forms. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (6) Denial. If the Pre-Qualifying Application is denied, the applicant will be sent a denial letter that includes the reason the applicant did not qualify at this time. (7) Financing (24 C.F.R. 982.632). Participating families are responsible for securing financing for the purchase of a home that is insured or guaranteed by the State or Federal government, complies with secondary mortgage market underwriting requirements or complies with generally accepted private sector underwriting standards. Although the THDA will not direct families to any particular lender, Neighborworks® Organizations, Rural Development, Fannie Mae, other lenders, and other non-profit entities currently offer affordable first and/or second mortgages to low-income families participating in the Homeownership Voucher Program. (a) The proposed financing terms (Loan Disclosure) must be submitted to and approved by the THDA prior to the close of escrow, at least 48 hours prior to the closing and then at least 24 hours in advance of closing if there is a change. The THDA will review the terms of the financing for each family to protect the family from predatory or abusive lending practices. (b) The following terms are not acceptable: 1. Loans with financing costs that are a high percentage of the total loan amount; 2. Loans that include high credit insurance premiums; 3. Loans with balloon payments or adjustable rate mortgages (ARMS) that will not be paid off by the subsidy before maturity; 4. Loans with above-market interest rates or discount points; 5. Loans with pre-payment penalties; 6. Loans with excessive fees or fees that have not been adequately explained to the borrower; or 7. Seller financing that is not an approved institution. For example, foreclosed homes are owned by a bank are acceptable. However, individual seller financing or lease to own are not acceptable. (c) The THDA may review lender qualifications and the loan terms before authorizing homeownership assistance. The THDA may disapprove proposed financing, refinancing, or other debt if the THDA determines that the debt is unaffordable or the lender or the loan terms do not meet qualifications. In making the determination, the THDA will take into account other family expenses such as child care, unreimbursed medical expenses, homeownership expenses, and other family expenses. Determinations of these factors will be reviewed case by case. (d) Financing Models. Participating families may use one of two financing models in the Homeownership Voucher Program. 1. One-Mortgage Model. The one-mortgage model allows the Homeownership Voucher Program participant borrower to secure a first mortgage that covers the entire purchase price of the home. HUD’s September 7, 2001 Mortgagee Letter (2001–20) advises lenders to assume the Housing Assistance Payment will continue for at least three years and also advises lenders on acceptable underwriting methods when working with Homeownership Voucher participants. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (i) The following are acceptable underwriting methods for loans made to Homeownership Voucher Program participants: (I) Add the subsidy payment (HAP) to borrower’s income as an “other” source of income. In this model, the subsidy payment may be “grossed up” 25 percent. (II) Deduct the subsidy payment (HAP) from the principal, interest, taxes and insurance (PITI). Housing debt to income ratio is based upon the “net housing obligation” of the borrower. (ii) In the one-mortgage model, the participant makes a payment for his portion of the monthly mortgage payment, approximately 30% of the monthly adjusted income, directly to the lender and the THDA pays the remainder of the mortgage payment directly to the lender or loan servicing company. At the end of the maximum term, the Housing Choice Voucher mortgage assistance payment ends, and the family is responsible for the full mortgage payment. For disabled families, the assistance payment continues as long as they are eligible for HAP. If the mortgage is paid before the term limit ends and HAP is due, it will be paid directly to the participant. 2. Two-Mortgage Model. The two-mortgage model allows a Homeownership Voucher Program participant borrower, which cannot secure a first mortgage that will be sufficient to cover the full purchase price of a home in their area, the alternative of combining a first and second mortgage to purchase a home. The family secures a conventional first mortgage loan based on their family income. The family is responsible for making monthly payments for the full amount of the first mortgage directly to the lender. A THDA partner, typically a nonprofit entity, provides the second mortgage. The second mortgage is typically a low-interest loan for the maximum term allowed. The family’s Housing Choice Voucher subsidy is applied to the principal and interest of the second mortgage and is paid directly to the second mortgage lender or loan servicing company. At the end of the subsidy term, the second mortgage is paid in full. (i) If the family’s subsidy payment exceeds the monthly second mortgage loan payment then the excess monthly payment will be made toward the second mortgage principal. (ii) If there is a remaining term limit, second mortgage is paid, then the HAP may be paid to the first mortgage lender. (iii) If the other lender(s) are unwilling to accept a HAP payment, then it will be the same procedure as if all mortgages are paid. (iv) In the event that all mortgages are paid, HAP is due to the participant, and there is a remaining time on the term limit; the HAP will be paid to the participant. (e) THDA Financing. Should the borrower choose to pursue THDA-funded financing for the first mortgage, the following steps will be required: 1. Complete an executed sales contract on a prospective property. This is optional. Given the nature of the transaction, borrowers may wish to wait for program approval or loan pre-approval, subject to section (11) below. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 2. Contact a THDA approved lender, Originating Agent, and begin the first mortgage pre-qualification process to establish preliminary approval for a loan and a reasonable loan amount that the lender would be willing to make. 3. Establish the availability and need for any second mortgage assistance to provide the purchase price amount. If a sales contract is already executed, need, or lack thereof, will be evident based on difference between the pre-approved amount of the first mortgage and the actual sale price. 4. If need exists, borrowers must then pursue secondary financing from a provider. 5. All requirements of the selected THDA mortgage program must be met. (8) Final Eligibility Determination (24 C.F.R. 982.632). A family who chooses to use their voucher for homeownership may have their income recertified several times between their initial eligibility determination and the final eligibility determination and voucher issuance. Once the family completes the homebuyer education process and is determined mortgage ready, their income eligibility will be recertified. To ensure an accurate HAP figure for the lender, the family’s income will be recertified again when the THDA is notified of the loan closing date. (9) Voucher Issuance and Timeframe for Utilization (24 C.F.R. 982.629(a)). Actually, no voucher will be issued. Once the family is approved for a mortgage, they will have a maximum of 180 days to find a home and enter into a “Contract for Sale.” If a participant is unable to enter into a “Contract for Sale” before the end of the 180-day deadline, the applicant may be provided an additional 60 days to either enter into a “Contract for Sale” or the applicant will be denied from the homeownership program and will be required to wait one year to reapply. (10) Subsidy Standards (24 C.F.R. 982.635(b)(ii)(4)). Subsidy standards will be the same as those set by the Housing Choice Voucher Program. (11) Contract for Sale, Inspection Requirements, and Appraisals (24 C.F.R. 982.631). (a) Contract for Sale. Participants in the Homeownership Voucher program must complete a “Contract for Sale” or Residential Purchase Agreement (herein “Agreement”) with the owner of the property to be purchased. The Agreement must include the THDA Addendum to the Sales Contract or Residential Purchase Agreement and must be approved by the THDA. The Agreement should include at least the home’s price and terms of sale, the purchaser’s pre-purchase inspection requirements, notice that the sale is conditional on the purchaser’s acceptance of the inspection report, an agreement that the seller is obligated to pay for necessary repairs and seller certification that the seller has not been debarred, suspended, or subject to a Limited Denial of Participation (LDP) under 2 C.F.R. 180. (b) Independent Inspection. The participant must obtain an independent professional home inspection of the unit’s major systems at the participant’s expense. The inspection must cover major building systems and components, including foundation and structure, housing interior and exterior and the roofing, plumbing, electrical and heating systems. The report should include a written list of times that are likely to need replacement or repair within the next one to three years. The THDA will review the report with the family, and will determine whether to approve the home for purchase by the family. Even if the unit otherwise complies with the HQS, and may qualify for assistance under the rental voucher program, the THDA has the discretion to disapprove the unit for homeownership assistance based on the information in the inspection report. Reasons for the disapproval of a unit that would otherwise be in compliance with HQS may include: HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 1. Conditions that were required to be, but were not, disclosed to the buyer by the seller. 2. Conditions that normally require disclosure, of which the owner may not have been aware. 3. Conditions that threaten the health and/or safety of the family. 4. Conditions that will require expenditures for repairs or replacement that exceed the family’s resources. 5. Conditions that can be expected to interfere with the family’s use and enjoyment of the property. (c) Housing Quality Standards Inspection. The THDA will conduct a Housing Quality Standards (HQS) inspection according to the HUD guidelines and will review the independent professional inspection of the unit’s major systems to determine if the unit may be approved for program participation. The unit must pass the HQS inspection before commencement of the Housing Assistance Payment. (d) Environmental Review. Additionally, according to 24 C.F.R. 58.6, the THDA will conduct an environmental review to determine whether the unit is located in: 1. A special flood hazard area identified by the Federal Emergency Management Agency (FEMA). If the unit is located in such an area, the THDA cannot approve the purchase of the unit unless the family can demonstrate, prior to settlement, that it has obtained flood insurance for the property. If a unit is purchased in a special flood hazard area, maintaining flood insurance is a required condition for continuing assistance to the family. 2. Though the THDA does not have any coastal resource, PHA’s cannot approve the purchase of a unit located in the coastal barriers resource system with voucher homeownership assistance. 3. A civil airport runway clear zone or a military airfield clear zone. The THDA may approve such a purchase, but must provide written notification to the buyer that the unit is located in an airport runway clear zone or an airfield clear zone. The notification must advise the buyer of what the implications of such locations are and that the property may, at a later date, be acquired by the airport operator. The buyer must sign a statement acknowledging receipt of this information, as described under 24 C.F.R. 58.6. (e) The THDA retains the right to disqualify the unit for inclusion in the homeownership program based on either the HQS inspection or the professional inspection report findings. (f) Appraisals. The Uniform Residential Appraisal Report is required for review. The review will include determining that the sale price is reasonable and assist with the environmental review (24 C.F.R. 982.628(d)(3)(iv); 982.626(c)). (12) Portability (24 C.F.R. 982.636). (a) Port-Out. Families deemed eligible for homeownership assistance may exercise their right to relocate outside of the THDA’s jurisdiction if the receiving public housing authority is administering a Homeownership Voucher Program and is accepting new families into its Homeownership Voucher Program. In the event that a family ports to HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 any county in the state of Tennessee where the Homeownership Voucher Program is not administered, then the THDA will continue to administer the Homeownership Voucher. (b) Port-In. The THDA may administer the Homeownership Voucher Program to Housing Choice Voucher participants under the jurisdiction of another public housing authority within the state of Tennessee. These families must be determined eligible for homeownership assistance and are subject to regular homeownership program guidelines. (c) Whether the THDA will allow porting in or out of the THDA’s jurisdiction is dependent upon whether adequate funding exists and will be denied when funding limitations exists. (13) Permitted Unit Types (24 C.F.R. 982.628). The unit must be an existing dwelling, the foundation must be poured or the unit must be under construction, before the Contract of Sale is executed. Most single family unit types are eligible, such as single family homes, condominiums or townhomes, manufactured homes (must have permanent foundation), or modular or pre-fabricated homes. All of the unit must be owner-occupied, thus eliminating double-sided duplexes from eligibility. If the family does not own fee title to the real property on which the home is located (e.g. manufactured housing on a land lease property), the family must have the right to occupy the site for a period of at least forty years to qualify for participation. The home must be located on a permanent foundation. The unit should be either owner-occupied or vacant at the time of the contract of sale is executed. The THDA does not allow families to enter contracts on such units which any tenant is renting. Per the Uniform Relocation Act, if an existing tenant is renting the home the THDA must be willing to assume relocation expenses, unless the family is purchasing the home they are already renting. (14) Permitted Ownership Arrangements (24 C.F.R. 982.628). To be approved for the program, a home must be either under construction or already existing at the time the THDA makes the final eligibility decision. The homeownership option may be utilized in the following two types of housing: (a) A unit owned by the family, where one or more family members hold title to the home, including homes previously occupied under a lease-purchase agreement; or (b) A cooperative unit, where one or more family members hold membership shares in the cooperative, which applies only to elderly and disabled persons as a reasonable accommodation. (15) Homeownership Assistance Payment (24 C.F.R. 982.635). The participant’s total monthly assistance payments will equal the lower of the following: (a) The voucher payment standard minus the Total Tenant Payment (the greater of 30% of monthly adjusted income or 10% of monthly income or minimum rent); or (b) The monthly homeownership expenses minus the TTP. 1. Homeownership Expenses. Homeownership expenses include principal and interest on the mortgage debt, mortgage insurance premium, real estate taxes and hazard insurance, homeownership association fees for cooperatives, maintenance fees for condominiums, the THDA’s allowance for utilities, the THDA’s allowance for Maintenance and Repairs, and other costs as the THDA determines necessary, including the cost of making the home accessible for a family member with disabilities, if necessary, as a reasonable accommodation. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 The THDA’s allowance for maintenance and repairs costs are based on the number of bedrooms of the unit, not allocation. The THDA’s allowance for utilities is the lesser of the unit size actually selected and the size authorized on the voucher. (c) Mortgage assistance payments will be made by the THDA directly to the approved first or second mortgage lender or loan servicing company. If the assistance payment exceeds the amount due to the lender, the THDA must pay the excess directly to the family. (24 C.F.R. 982.635(d)). (d) When using the two-mortgage model, the household is responsible for the first mortgage payment in full at all times. (e) The THDA may choose to perform an interim reexamination and increase the mortgage assistance payments. (16) Payment Standard (24 C.F.R. 982.635(b)(ii)(4)). At initial move-in to the Homeownership Voucher Program, the payment standard schedule and amount will coincide with those set by the HCV program. The payment standard for subsequent years, after the initial year, will be based on the higher of the following: (a) The payment standard in effect at commencement of the homeownership assistance; or (b) The payment standard in effect at the most recent regular recertification of the family’s income and size. (c) The payment standard is the lesser of the bedroom size allocated or home selected. Nevertheless, it will never be below the amount used at closing regardless of the bedroom allocation. (17) Allowance for Routine and Long-Term Maintenance and Repairs (24 C.F.R. 982.635(c)). As required by HUD regulations, the THDA has established reasonable allowances for routine and long-term maintenance and repairs. The allowances are determined by taking into consideration reasonable and ongoing costs to the family for home maintenance, major repairs and replacements. The family is responsible to make and pay for all homeownership related costs such as, repairs, replacements, routine and long-term maintenance. (18) Utility Allowance (24 C.F.R. 982.635(b)(ii)(4)). The regular Housing Choice Voucher Program utility allowance will be utilized for the Homeownership Voucher Program. (19) Maximum Subsidy Term (24 C.F.R. 982.634). Homeownership assistance will only be provided for the time period the family is in residence in the home. Housing Choice Voucher assistance may be provided for a maximum of fifteen (15) years if the initial mortgage secured to finance the purchase of the home has a term that is twenty (20) years or longer. Mortgages shorter than 20 years have a ten (10)-year term limit. Elderly and disabled families are exempt from a term limit. The participant will be recertified on an annual basis to determine income eligibility. In the event that the participant’s income increases to the point that they are no longer eligible to receive a mortgage subsidy (i.e. zero mortgage assistance payment), the THDA will notify the lenders or loan servicing company of the family’s increased financial responsibility for the payment. The family, however, remains eligible for the program, in the event that their income decreases, for 180 days from the date of the change (zero HAP periods). (a) In the event that the family no longer qualifies as a disabled or elderly family, the maximum HAP term rule goes into effect from the date homeownership assistance HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 commenced. The family will be provided at least six (6) months of continued assistance after the maximum term expires, as long as the family continues to be otherwise eligible for assistance. For example, a family who is no longer considered disabled after receiving twenty (20) years of HAP will receive six (6) additional months of HAP beyond the cessation of disabled status. At the end of the six-month period, HAP will cease since the maximum term of fifteen (15) years has been exceeded. (b) The subsidy term begins on the date the first Homeownership Housing Assistance Payment is paid, regardless of which PHA paid the HAP. (20) Annual Recertification (24 C.F.R. 982.633). At least one hundred twenty (120) days prior to the family’s annual recertification date, the THDA will contact the family and request updated income and other verification information and, when necessary, schedule an HQS inspection. Additionally, at every annual recertification the family will be required to provide documentation of homeownership expenses such as, mortgage statement(s). The family must cooperate with the recertification process in order to remain eligible to receive assistance through the Homeownership Voucher Program. (21) Re-inspections. The THDA will randomly perform a Housing Quality Standards (HQS) inspection at any time after the home purchase. The THDA may elect to conduct other HQS inspections at the request of a partner agency or lender. Based on the inspection, the family will be sent a list of required repairs. The THDA will conduct another inspection within thirty (30) days to determine if the repairs have been completed. The family will be considered non- compliant with the program if they fail to make repairs within the required timeframe. The HQS report may be shared with the lender at the lender’s request to allow the lender to work with the family on securing financing for any major repairs necessary to maintain the quality of the home. The unit may be inspected every year if an extra room was allocated for live-in aide or reasonable accommodation to verify the room is being used for its intended purpose. At any time, for auditing purposes or if a complaint is received, homes may be selected for HQS inspection. The home must always pass HQS. Homeowners must repair emergency HQS violations within 24 hours. (22) Asset Income (24 C.F.R. 5.603(b)(4)). The value of the home will be excluded in the “net family assets” for the first 10 years. After 10 years of assistance, the equity of the home will be verified and counted as an asset income. (23) Home Sale (24 C.F.R. 982.637). The family must sell their current home before they may purchase another home with Housing Choice Voucher assistance. If the family requests to purchase another home with Housing Choice Voucher assistance after they have sold their first home, they must meet the eligibility requirements for participation in the Homeownership Program (e.g. must be employed full-time). The maximum term of homeownership assistance applies to the cumulative time the family receives homeownership assistance. The time limit begins from the initial home purchase in any PHA’s Homeownership Voucher program. The family may not move more than once in any twelve (12)-month period. The THDA may deny permission to move with continued assistance due to lack of funding to provide continued assistance (24 C.F.R. 982.637(c)(1)). (24) Default. If the family defaults on the home, they will not be issued a rental assistance voucher and will never be allowed to participate in the homeownership program (24 C.F.R. 982.627(e); 982.638(d)). (25) Recapture (24 C.F.R. 982.640). The THDA will not recapture the Homeownership Voucher payments unless there was an act of fraud or misrepresentation of a material fact in order to obtain a benefit. Other program funds that were used to purchase the home may require a recapture. Depending on the loan product used, the IRS may have a recapture tax (IRS form 8828). HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (26) Taxes, Insurance, Payments, and Maintenance. The family is responsible to ensure that all real estate taxes, insurance, and mortgages are paid by the due date. Additional responsibilities include paying for any maintenance or repairs that are needed or required for the home. The family is responsible for seeking advice of a tax attorney to determine how much of the mortgage interest and real estate taxes may be deducted (Internal Revenue Code of 1986 IRS letter dated 28th of August 2001). (27) Termination of Assistance (24 C.F.R. 982.638; 982.552(b); 982.553). The family must comply with all Family Obligations. Failure to comply with the Family Obligations of the Homeownership Voucher program will result in termination of the family’s assistance. Before commencement of homeownership assistance, the participant must execute a “Statement of Family Obligations for the Homeownership Program.” If a family is terminated from the Homeownership Voucher Program, they must reapply for the Housing Choice Voucher Program in order to receive rental assistance. To continue to receive homeownership assistance, a participant must comply with the following family obligations: (a) The participant must comply with the terms of any mortgage securing the debt incurred to purchase the home and any refinancing of such debt. (b) The family may not sell, convey, or transfer any interest in the home to any entity or person other than a member of the assisted family residing in the home. (c) The family may not take out a home equity loan without the written consent of the THDA and any second mortgage lender. (d) The family must supply required information regarding income and family composition in a timely manner in order to calculate correctly total tenant payment and homeownership assistance. (e) The family must provide information on any mortgage or other debt incurred to purchase the home, any refinancing of such debt, and any sale or other transfer of interest in the home. (f) The family must notify the THDA if the family defaults on a mortgage securing any debt incurred to purchase the home. (g) The family must notify the THDA before the family moves out of the home. (h) At annual recertification, the participant must document that the mortgage, insurance, and utility payments are current. (i) Non-elderly and nondisabled households must include at least one employed adult family member at all times during participation in the Homeownership Voucher Program. The member must earn at least $15,000 annually. In the event of loss of employment that results in annual income of less than $15,000, the household will be offered four months to secure new employment or increase paid salary. See 0770-01- 05-.34(1)(g). (j) A participant defaults on his or her mortgage loan (i.e. fails to fulfill a monthly payment obligation as required by the Deed of Trust note on a timely basis), as determined by the lender. (k) The family has been ejected from the home due to a judgment or order of foreclosure. (l) The family transfers or conveys the ownership of the home. HOUSING CHOICE VOUCHER PROGRAM CHAPTER 0770-01-05 (m) The family has been unemployed for more than four (4) months. (n) A family member has ownership interest in another residential property. (o) The assisted home must be the family’s only residence. (p) The family must not sublet or lease the unit to someone else. (q) The head of household must live in the assisted home. (r) The family must comply with any requirement to attend and must complete ongoing homeownership education, such as post-purchase counseling. (s) Must comply with all regulations relating to crime or alcohol abuse by family members. (t) Must comply with the recertification process, report changes, and complete HQS repairs. (28) Informal Hearing Process (24 C.F.R. 982.555). When the THDA makes certain adverse decisions towards a HCV applicant or participant, there are times when an informal review or an informal hearing is available. See 0770-01-05-.28.