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									                          Commonwealth of Massachusetts
              HOME American Dream Downpayment Initiative (ADDI)
                Buyer Assistance Application and Program Guidelines
                                    June 2009

A. Overview

The Department of Housing and Community Development (DHCD) uses HOME ADDI to help
income- and program-qualified households purchase their first home.

The U.S. Department of Housing and Urban Development (HUD) has promulgated regulations and
issued guidelines governing the use of HOME ADDI funds for homeownership projects. All
applications to DHCD must conform in every respect to HUD’s requirements.

For purposes of the HOME ADDI program, homeownership means ownership in fee simple title, or a
99-year leasehold interest, or an equivalent form of ownership approved by HUD. The ownership
interest may be subject to mortgages, deeds of trust or other liens or instruments securing debt on the
property as approved by DHCD, and/or other encumbrances or restrictions that do not impair good and
marketable title.

B. Eligible Applicants

Eligible applicants for funding under DHCD’s HOME ADDI Buyer Assistance Program include: non-
profit sponsors, municipalities, and non-profits in partnership with municipalities. Please note that
HOME Participating Jurisdictions (PJs) and Consortium communities (see attachment A) are not
eligible to apply for funding under this program. Non-profit sponsors who intend to provide
assistance in HOME PJ and Consortium communities must provide a matching contribution
equal to the amount being requested from DHCD.

C. Eligible and Ineligible Property Types

DHCD’s HOME ADDI may be used to purchase the following types of properties:

   o 1-4 family residence
   o Condominium unit
   o Manufactured home and lot

DHCD requires all units purchased with HOME ADDI assistance to meet applicable state and local
codes, as well as Section 8 Housing Quality Standards (HQS) at the time of closing. In addition,
these units must meet the Massachusetts Lead Law and the HUD federal lead-based paint regulations
at 24 CFR Part 35, prior to occupancy, whether children of any age are present or not. The
administering agency is responsible for conducting a property standards inspection and may do this
using qualified staff or another qualified inspector under contract with the agency.

                                                   1                                         June 2009
A licensed appraiser must appraise all properties purchased with HOME ADDI assistance. The
purchase price must not exceed 95% of the area’s median price, as determined by the HOME Program
and as cited on HUD’s HOME Program website (see Attachment B).

D. Participant Eligibility Requirements

The non-profit organizations and municipalities that receive HOME ADDI funds must use certain
criteria to identify eligible homebuyers. All the following criteria apply to potential homebuyers:

1.     They must be first-time homebuyers. DHCD has defined a first-time homebuyer as an
       individual or an individual and his or her spouse who have not owned a home during the 3-year
       period before the purchase of a home with HOME assistance, except that:

       a. Any individual who is a displaced homemaker may not be excluded from consideration as a
          first-time homebuyer 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;

       b. Any individual who is a single parent may not be excluded from consideration as a first-time
          homebuyer on the basis that the individual, while married, owned a home with his or her
          spouse or resided in a home owned by the spouse; and

       c. Any individual who owns or owned a dwelling unit whose structure is not permanently affixed
          to a permanent foundation or is not in compliance with State, local, or other applicable codes
          and cannot be brought into compliance with such codes for less than the cost of construction a
          permanent structure may not be excluded from consideration as a first-time homebuyer.

2.     They must be low-income. A household is eligible for DHCD downpayment and closing costs
       assistance if it earns less than 80% of area median income as defined by the U. S. Department
       of Housing and Urban Development (HUD) (see attachment C – “Low Income” = 80% of

3.     Income eligibility of the household must be verified within six months prior to occupancy using
       Definition 1: Annual Income as Defined in 24CFR Part 5 (i.e.: the Section 8 method), as
       described in the Technical Guide for Determining Income and Allowances for the HOME
       Program. If more than six months have elapsed, the income eligibility must be verified again.
       (You may access online direction at HUD’s website,
       http://www.hud.gov/offices/cpd/affordablehousing/training/web/calculator/definitions/part5.cfm )

              Please note: if a participant is purchasing a multi-family home the net rental
              income must be included in the income eligibility analysis. To determine the net
              rental income, you may deduct the rental units’ share of the Principal, Interest,
              Taxes and Insurance as well as reasonable management expenses from the rental

4.     A financial needs assessment must be completed prior to purchase for each household in
       addition to the income qualification. Eligible participants may not have assets in excess of
       $25,000 at the time of the assessment. “Assets” shall be calculated as outlined in the

                                                   2                                         June 2009
         Technical Guide for Determining Income and Allowances for the HOME Program (see
         Attachment D).

5.       They must intend to use the property as their principal residence.

6.       All potential parties to the deed of the property to be purchased with HOME ADDI funds must
         have completed a first-time homebuyer education course and must attend a post-purchase
         counseling course within four months of closing.

7.       They must obtain a conforming mortgage on the basis of their own income and credit-
         worthiness (i.e. without the assistance of a co-signer) with terms generally accepted by the
         industry for no less than 90% of the property’s purchase price.

8.       Potential homebuyers who do not qualify for a competitive or favorable interest rate or who
         have high debt ratios may be considered ineligible for HOME ADDI loans. Back end ratios
         (ratio of the borrower’s total debt principal, interest, taxes, insurance (PITI) + other monthly
         debts to the gross monthly income) should be below 40%. Even with compensating factors,
         back end ratios must not exceed 43%.

9.       They must contribute at least $750.00 of their own funds towards the equity in the house at the
         time of closing.

E. Maximum Assistance Amount

The maximum amount of downpayment and closing cost assistance for each homebuyer is the lesser of
the amount necessary to complete the eligible first-time homebuyer’s transaction, $10,000, or 5% of
the purchase price.

F. Eligible Closing Costs

DHCD will recognize one-time costs associated with the closing as eligible closing costs. These costs
may include:

     o   Lead paint inspection;
     o   Appraisal fee;
     o   Attorney’s fees;
     o   Title charges;
     o   Government recording and transfer charges;
     o   Certain reserves deposited with lender, provided amounts are not excessive.

**The homebuyer receiving a HOME ADDI loan may not receive cash from the real estate
transaction at the time of closing.

                                                     3                                          June 2009
G. Counseling Requirements

Agencies and municipalities that receive HOME ADDI awards must ensure that participants in the
program complete a first-time homebuyer education course that includes pre- and post- purchase
counseling and individual foreclosure prevention, as necessary. Agencies and municipalities can
choose to provide the counseling directly through a series of first-time homebuyer courses that include
one-on-one counseling or contract with another entity to provide the counseling. A copy of the first-
time homebuyer education certificate must be maintained in each participant’s file along with
documentation of post-purchase counseling once it has been completed.

In addition, agencies and municipalities that receive HOME ADDI awards must provide counseling
specific to the requirements of the HOME ADDI Buyer Assistance program prior to committing funds
to a household. Items that should be reviewed may include but are not limited to: the HOME ADDI
Buyer Assistance Disclosure Statement and Mortgage, eligible first mortgage loan products, lead paint
policy, recapture policy, refinance policy, and the necessity of post-purchase counseling. It is the
expectation that administering agencies will maintain relationships with program participants through
the term of the HOME ADDI loan.

H. Eligible Administrative Costs

DHCD will provide funding in an amount equal to 10% of the HOME ADDI funding award for
reasonable costs incurred for administering the HOME ADDI Buyer Assistance Program. Eligible
administrative costs may include:

   o General management, oversight and coordination;
   o Affirmative fair marketing;
   o Annual certification that participants have maintained the property as their primary residence, and
     that tenant’s rental income and rent levels meet HOME requirements (Please see Section I below
     if applicable);
   o Loan processing.

DHCD also will provide an amount up to $250 per loan for “eligible project costs” as defined in 24 CFR
Part 92.206(a) (6). Eligible project costs are those directly attributed to staff and overhead related to
carrying out the program and may include:

   o HQS inspections;
   o Work specifications preparation;
   o Homebuyer counseling.

Please note that these expenses can be charged as eligible project costs only if the household purchases a
property using DHCD’s HOME ADDI Buyer Assistance funds.

I. Long-Term Affordability

A mortgage provided by DHCD must be recorded with each property, restricting the use and
subsequent resale of the property for a period of 5 years. The mortgage requires that the property serve
as the purchaser’s primary residence for the term of the restriction.
                                                     4                                           June 2009
If an owner desires to sell the property prior to the end of the five-year affordability period, the full
amount of the loan must be repaid to DHCD from the net proceeds of the sale. Net proceeds are
considered the sale price minus loan repayment (other than HOME funds) and reasonable closing

Any rental units in the property may be unrestricted, provided that the HOME ADDI assistance is
earmarked solely for the homeowner’s unit. However, in the unlikely event that any of the rental units
in the property are HOME ADDI assisted, they must remain affordable for at least 5 years and must
meet the following requirements:

   o They must be occupied by persons at or below 60% of the area median income at initial

   o They must be leased at or below the “high” HOME rent, that is the lesser of either:

           o The Section 8 Fair Market Rent (FMR), or
           o A rental rate equal to or less than 30% of the adjusted income for individuals or
             households who incomes are 65% of area median, minus tenant-paid utilities.

If during the term of affordability the tenant’s income exceeds 80% of area median income, other
HOME rules will apply.

Typically rental units within multi-family houses purchased with HOME ADDI Buyer Assistance
funds will not be HOME restricted unless the following is true:

   o The total per unit pro-rata share of the HOME ADDI assistance exceeds the total per unit pro-
     rata share of all other funding (mortgage, purchaser’s contributions, grants, etc.) being used to
     purchase the property.

   o The local community chooses to restrict both units.

If there are HOME ADDI assisted rental units, then, at the time of initial rent up and on an annual basis
thereafter, property owners must certify tenant incomes, rents, and utility allowances. All
documentation must be maintained in the applicant’s HOME ADDI file.

J. Refinance Policy

When a homeowner participating in the program wishes to refinance the first mortgage on a property,
DHCD will approve the subordination of the HOME ADDI mortgage only if the refinance will result
in a lower interest rate and the terms of the mortgage are acceptable to DHCD. Participants will not
have to repay any of their HOME ADDI assistance subsidies if:

      the new mortgage will have a lower fixed interest rate, and
      the amount of the new loan does not exceed the outstanding principal balance of the loan being
       refinanced, plus reasonable closing costs.

                                                   5                                          June 2009
DHCD will not approve the subordination of the HOME ADDI mortgage if the purpose of the
refinance is to cash out equity in the property. Participants will have to repay the entire HOME ADDI
subsidy if they choose to refinance at a mortgage amount greater than their existing mortgage balance
plus reasonable closing costs. Please note: paying off personal debt (for example, credit cards, car
loans, student loans, etc.) is not considered a closing cost. Repayment of the HOME ADDI loan for
any reason other than the sale of the property does not change the minimum period of time for which
the HOME ADDI borrower must use the home as his/her principal place of residence.

K. Performance Measurement and Fair Housing Data Collection

HUD’s emphasis on outcome performance measurement has been incorporated into DHCD’s HOME
programs. DHCD will require all HOME ADDI recipients to provide outcome, objective and indicator
data. In addition, the Commonwealth requires that recipients submit certain fair housing data and
comply with the Massachusetts Fair Housing Mission Statement and Principles.

L. Environmental Checklist and Uniform Relocation Act Requirements

In accordance with HUD’s environmental review process, DHCD will collect environmental data for
each property receiving HOME ADDI funds. DHCD will require all agencies to determine the FEMA
Flood Insurance Rate Map (FIRM) Panel number and assess whether the property is located in a flood
plane, coastal zone management zone, or airport runway clear zone. This information can be obtained
from FEMA’ s website at:


In addition, in compliance with 49 CFR Part 24, (the, “Uniform Relocation Act”), DHCD will require
participating agencies to ensure that acquisition of any property receiving HOME ADDI assistance
will not contribute to any “displaced” persons, as defined by the Act, thereby triggering relocation

M. DHCD Funding Priorities

DHCD has established funding priorities for applications seeking state HOME ADDI funds. The
funding priorities have been established to support programs with the following special characteristics:

   o   Official local support;
   o   Minimal request for DHCD assistance;
   o   Utilization of funds in HOME non-entitlement communities;
   o   Employer-assisted households;
   o   Programs with non-profit sponsorship.

                                                   6                                          June 2009
                                                                                                                  Attachment A

                  HOME Entitlement and Consortia Communities and Contact Agencies
Entitlement Communities

Boston                         Department of Neighborhood Development                     617-635-0257
Brockton                       Brockton Redevelopment Authority                           508-587-6085
Cambridge                      Community Development Department                           617-349-4600
Fall River                     Community Development Agency                               508-679-0131
Lawrence                       Planning and Community Development Dept.                   978-794-5891
Lowell                         Division of Planning and Development                       978-970-4252
Lynn                           Community Development Department                           781-477-2800
New Bedford                    Office of Community Development                            508-979-1581
Somerville                     Office of Housing and Community Development                617-625-6600 x 2500
Springfield                    Community Development Department                           413-787-6500
Worcester                      Planning and Community Development Dept.                   508-799-1400

Consortia Communities

Barnstable County Consortium
Cape Cod Commission                                      508-362-3828, Paul Ruchinskas

Barnstable         Bourne              Brewster          Chatham
Dennis             Eastham             Falmouth          Harwich
Mashpee            Orleans             Provincetown      Sandwich
Truro              Wellfleet           Yarmouth

Fitchburg-Leominster Consortium
Fitchburg Office of Planning Coordinator                 978-345-1018

Holyoke-Chicopee-Westfield Consortium
Holyoke Office for Community Development                 413-322-5610, Linda McQuade

North Suburban Consortium
Malden Redevelopment Authority                           781-324-5720, Peter Garbati

Arlington          Chelsea             Everett           Malden
Medford            Melrose             Revere            Winthrop

Metrowest Consortium
Newton Department of Planning and Development            617-796-1140, Steve Gartrell

Bedford            Belmont             Brookline         Framingham           Lexington             Lincoln
Natick             Needham             Newton            Sudbury              Waltham               Watertown

North Shore Consortium
Peabody Office of Community Development                  978-538-5774, Kevin Hurley

Andover            Amesbury            Beverly           Boxford              Danvers               Essex
Georgetown         Gloucester          Hamilton          Haverhill            Ipswich               Lynnfield
Manchester         Marblehead          Merrimac          Methuen              Middleton             Newburyport
North Andover      Reading             Peabody           Rockport             Rowley                Salem
Salisbury          Swampscott          Wenham            West Newbury         Wilmington

Quincy – Weymouth Consortium
Quincy Department of Planning and Community Development              617-376-1360, Nancy Callanan

Quincy             Weymouth            Braintree         Holbrook             Milton

Taunton Consortium
Mayor’s Office of Community Development                  508-821-1030, Kevin J. Shea

                                                                 7                                                   June 2009
Attleboro    Berkley        Dighton   Easton       Lakeville   Mansfield
Middleboro   N. Attleboro   Norton    Plainville   Raynham     Seekonk

                                              8                            June 2009
                                                                         Attachments B & C

HOME 95 Percent of Median Sale Price Limits


HOME Income Limits


                                            9                                      June 2009
                                                                                           Attachment D
Needs Assessment – Net Family Assets

   Inclusions                                               Exclusions

1. Cash held in savings accounts, checking             1. Necessary personal property, except as noted
accounts, safe deposit boxes, homes, etc. For          in number 8 of inclusions, such as clothing,
savings accounts, use the current balance. For         furniture, cars and vehicles specially equipped
checking accounts, use the average 6-month             for person with disabilities.
2. Cash value of recoverable trusts available to       2. Interest in Indian trust land.
the application.
3. Equity in rental property or other capital          3. Assets not effectively owned by the applicant.
investment. Equity is the estimated current            That is, when assets are held in an individual’s
market value of the asset less the unpaid balance      name, but the assets and any income they earn
on all loans secured by the asset and all              accrue to the benefit of someone else who is not
reasonable costs (e.g. broker fees) that would be      a member of the household and that other
incurred in selling the asset.                         person is responsible for income taxes incurred
                                                       on income generated by the asset.
4. Cash value of stocks, bonds, Treasury bills,        4. Equity in cooperatives in which the family
certificates of deposit and money market               lives.
5. Individual retirement and Keogh accounts            5. Assets not accessible to and that provide no
(even though withdrawal would result in a              income for the applicant.
6. Retirement and pension funds.                       6. Term life insurance policies (i.e. where there
                                                       is no cash value).
7. Cash value of life insurance policies available     7. Assets that are part of an active business
to the individual before death (e.g. surrender         “Business” does not include rental of properties
value of a whole life or universal life policy).       that are held as an investment and not a main
8. Personal property held as an investment such
as gems, jewelry, coin collections, antique cars,
9. Lump sum or one-time receipts, such as
inheritances, capital gains, lottery winnings,
victim’s restitution, insurance settlements and
other amounts not intended as periodic
10. Mortgages or deeds of trust held by an

                                                  10                                          June 2009

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