Home maintenance. Budgeting. Credit counseling. Negotiating the purchase ... may establish a maximum time for a family to locate a home and purchase a home ...
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Section 8 Homeownership Kathy Winter Iowa State Office U.S. Dept. of HUD 515-284-4315 Kathy_r._Winter@hud.gov
Section 8 Homeownership • Section 8 HO is an option to the PHA • Implements through PHA Annual and administrative plans. • Use Voucher subsidy for monthly homeownership expenses • First-time Homebuyer Program • Resident pays 30% of AMI for housing costs • Open Market Purchase
Legislative History • Sec. 555 of QHWRA of 1998 • Congress amends Sec. 8(y) • Proposed Rule April 1999 • Final Rule Published Sept. 12, 2000 • Effective October 12, 2000 • Special Housing Type under Subpart M of 24 CFR 982
Requirements • FINAL RULE - SEPTEMBER 12, 2000 • PHA choice • Amendment to annual and administrative plan • Final Rules • October 18, 2002: Downpayment Assistance & Streamlining • October 28, 2002: Eligibilty Units Owned or Controlled by a PHA
Requirements • Eligibility of Units Owned or Controlled by a PHA; Final Rule – October 28, 2002 • Downpayment Assistance Grants and Streamlining Amendments; Final Rule – October 18, 2002
PHA CapacityOne of Three Options • ONE: Establish Min. Down-payment • Three (3) percent of sale price • At least one percent of sale price comes from family’s personal resources.
PHA Capacity • Two: PHA requires financing for purchase meets one of following: • Provided, insured or guaranteed by State or Federal Gov. • Complies with secondary market underwriting requirements. • Complies with generally accepted private sector underwriting standards
PHA Capacity • Three: PHA demonstrates in Annual Plan it has capacity or will acquire capacity to successfully operate Homeownership Program.
Family Eligibility • Section 8 Eligible Family • Current program participant • Eligible for admission to Sec 8 HCV program
Family Eligibility • First time Homebuyer • Single Parent or displace homemakers • No HO interest in 3 years • Exception for Family that includes member with disability and homeownership is needed as a reasonable accommodation.
Family Eligibility • Minimum Income 982.627(c) • Disabled Family: Monthly SSI for individual living alone x 12. • Other Families 2000 X National Minimum wage/hr ($10,300/yr) • Welfare assistance may not be included. • Disabled and Elderly Families – Welfare assistance may be included
PHA – Higher Minimum Income • A PHA may set a higher minimum income for all family types. • However Family may still qualify with HUD Min. income. • Family that meets HUD minimum income and not PHA Minimum shall meet the requirement if: • Pre-qualified or pre-approved for financing; • Financing meets PHA established requirements; and • Financing sufficient to purchase unit that meets HQS.
Family Eligibility • Employment 982.627(d) Disabled and elderly exempt • One adult member employed continually fulltime for year prior to HO assistance. • One adult currently employed fulltime – not less than 30 hours • PHA may not create more restrictive employment criteria
Family Eligibility • Mortgage Defaults • Not eligible if any family member has previously received Sec 8 HO assistance and defaulted on mortgage • PHA may establish additional requirements for family eligibility • FSS participants
Homeownership Voucher Option • Family finds eligible property • Subsidy to assist with monthly homeownership expenses • PHA may make monthly payment to family or lender
Pre-Homeownership Counseling982.630 • Family must attend and satisfactorily complete program required by PHA • Family does not pay for counseling • PHA staff and/or other entity may conduct • Consider HUD approved counseling agencies
Pre Homeownership Counseling982.630 • PHA may adapt suggestions to meet local circumstances and needs of family. • PHA may offer additional counseling after assistance begins. • If not HUD approved counselor the PHA should ensure the program is consistent with HUD’s Housing Counseling program.
Pre-Homeownership Counseling • Suggested Topics: • Home maintenance • Budgeting • Credit counseling • Negotiating the purchase price of a home
Pre Homeownership Counseling 982.630 • Topics, cont. • Financing: Obtaining and pros and cons of different approaches • Finding a home • Locating a home in a area without a high concentration of low-income families • Fair housing and state & Federal truth in lending laws
Finding a Home • PHA may establish time limits • Locating a unit and purchasing • PHA may not steer family
Eligible Unit 982.628 • One unit property or single unit in coop or condominium • New Construction • Seller cannot be debarred, suspended or subject to a limited denial of participation by HUD
Eligible Unit • Unit in PHA Jurisdiction • Must pass HQS • Inspected by 3rd party Independent inspector
Home Inspections 982.631 • PHA conducts HQS inspection used for Voucher program • Determines condition is decent, safe and sanitary. • No annual HQS inspection required
Home Inspections • Independent Professional (3rd Party) • Selected and hired by family • Assess adequacy and life span of major systems, appliances and other structural components • Satisfaction of inspection by buyer typical contingency clause in contracts of sale. • PHA may disapprove unit on basis of report
Home Inspections • PHA may require additional inspections after purchase of unit.
Voucher Subsidy Available • Payment standard in Sec. 8 program determines maximum subsidy • No separate HO payment standard schedule • Same subsidy standards
Payment Standard • Payment Standard greater of: • Payment standard at commencement of HO assistance. • Payment standard at most recent reexamination since commencement of HO assistance Never goes below initial calculation
Homeownership Assistance Payment • Family pays at least total tenant payment (TTP), may pay more • Monthly HAP is calculated as the lesser of • Payment standard minus family TTP • Families monthly homeownership expenses minus family TTP
Contract of Sale • Family must provide copy of contract of sale to PHA • Contract of Sale must include: • Prepurchase inspection (buyer satisfaction, buyer not obligated to pay repairs) • Seller certification – seller not debarred, suspended or subject to limited denial of participation. • Terms and Conditions of sale
Financing 982.632 • PHA may establish their own financing requirements, including: • Lender qualifications and terms of financing • PHAs encouraged to review financing prior to approval of assistance to avoid Predatory Lending type situations
PHA Financing Requirements • May prohibit certain forms of financing • Restrictions on other debt secured by home • Terms of financing • Minimum downpayment
PHA Financing Requirements • Affordability of Purchase • PHA may disapprove financing or refinancing if it determines debt is unaffordable or terms don’t meet PHA req. • HUD is working on a Guide Book All PHA financing or affordability requirements must be described in PHA administrative plan.
Financing a Purchase 982.632 • Financing a Unit • PHA may establish their own financing requirements, including: lender qualifications and terms of financing. • PHAs are encouraged to review financing to avoid Predatory Lending before assistance is approved.
PHA Requirements for Admission 982.626(b) • PHA may limit HO Assistance to families or purposes defined by PHA • Examples • FSS participants • Families in XYZ Non-profit Homeownership program (Must include these requirements with the PHA Administrative Plan.)
PHA Requirements 982.629 • PHA may establish a maximum time for a family to locate a home and purchase a home • PHA may require periodic reports on family’s progress in finding a home • PHA decides if the family gets a rental voucher if a home is not found or put on the waiting list. • Must include these requirements with the PHA Administrative Plan
PHA Requirements • PHA determines if the HAP will go to the lender or the family. 982.635(d) • PHA determines the number of Section 8 Vouchers it will commit to the program.
Homeownership Expenses 982.635(c) • The PHA determines amount to be included in the HO expenses/costs • Principal and Interest on mortgage • Mortgage Insurance Premium (MIP) • Property Taxes • Homeowner’s insurance • PHA allowance for maintenance expenses • PHA allowance for major repair and replacement • PHA utility allowance
PHA Allowances • Allowances set for program as a whole, not based on actual cost or condition of homes • PHA may contact counseling agencies and realtors for advice
Homeownership Assistance Payment 982.635 • PHA will make a payment equal to the lower of: • The payment standard (regular Sec. 8 program) minus the total tenant payment; or • The family’s monthly homeownership expenses minus total tenant payment.
Family Share • Family Responsible for all HO expenses not covered by HAP • If homeownership expenses exceed the payment standard, family pays the difference in addition to TTP. • 40% rule does not apply to HO families • Law only limits amount paid by family for rent.
Continued Assistance • Family Obligations • Comply with terms of mortgage. • Use and occupancy • Family’s only residence • Report changes in composition • No subletting or leasing
Continued Assistance • Comply with other family obligations under the voucher program • Notice of move-out • Notice of default • Supply information concerning: • Refinancing • Sale or transfer of any interest in home • Homeownership expenses
Continued Assistance • Prohibition on ownership interest on second residence • Comply with additional PHA requirements • Eg. Postpurchase counseling
Termination of Assistance 982.638 • Termination of Assistance • PHA may terminate assistance in the case of mortgage default (foreclosure) • PHA’s decision on whether family may receive rental assistance. • PHA may terminate if family does not comply with family obligations
Family at Zero HAP 982.635(e) • Homeownership assistance terminates after 180 days with zero assistance. • HOWEVER, PHA has discretion to grant relief where termination would result in extreme hardship.
Time limitations 982.634 • Time limits do not apply to elderly or disabled families • Maximum term: • 10yrs of HAP for a mortgage less than 20 yr • 15yrs of HAP for mortgage 20 yr and more • Applies from initial purchase
Portable 982.636 • Portable • Receiving PHA must have HO program • Family and Unit must meet eligibility requirements
Move to New Unit • Continuation of HO Assistance • Initial Eligibility requirements apply, except: • First time homeowner • Pre-assistance counseling
Example – Sec. 8 Purchase • Family of four purchasing a 3 bedroom home. • Payment Standard for a 3 BR is $800/month • Housing expenses include: • Principal, Interest, Taxes, Insurance (PITI) • Mortgage Insurance Payment (MIP) • Allowances Total $185 • $35 for maintenance allowance 3/BR • $50 replacement allowance 3/BR • $100 utility allowance 3/BR
Example Sec. 8 Purchase • Family Adjusted Annual Income is $20,000 • 30% of Adjusted Monthly Income $500 • Monthly Total Tenant Payment $500 • TTP = Total Family Share