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This document contains information regarding foreclosure and how to avoid foreclosure.
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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 Capacity One 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 Disabled assistance may not be included. 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 Counseling 982.630 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 Counseling 982.630 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 Example – Sec. 8 Purchase Purchase Price FSS Escrow (DP) First Mortgage – FHA (30yrs @7%) $70,000 $5,000 $65,000 _________________________________________ First Mortgage Payment PITI & MIP on $65k $615 Utility, maintenance and replacement allowances $185 Monthly Homeownership Expenses $800 Example – Sec. 8 Purchase Gross Homeownership Costs $800 PITI & MIP Allowances $615 $185 Total Family Share $500 Homeownership Assistance Payment $300 ($185 allowances+ $315 lender) Example –Sec. 8 Purchase Purchase Price $90,000 FSS Escrow (DP) $ 5,000 First Mortgage – FHA (30yrs @7%) $85,000 ___________________________________________ First Mortgage Payment PITI & MIP on $85k $815 Utility, Maintenance & Replacement Allowance $185 Monthly Homeownership Expenses $1,000 Example Sec. 8 Purchase Gross Homeownership Costs - $1,000 815 185 PITI & MIP Allowances Total Family Share ($185 allowances +$515 lender) $700 $300 Housing Assistance Payment Example Sec. 8 Purchase Is $700 per month Family Share too high for family with $20,000 adjusted annual income? Web Site HUD Section 8 Homeownership: http://www.hud.gov/offices/pih/programs/h cv/homeownership/ Community Program…. Lenders and Insured Loans Conventional Subsidized Loans State Housing Finance Authority USDA Fannie Mae FHA Community Program….. Funding for additional subsidy Federal Home Loan Bank HOME – local government or State of Iowa CDBG – local government or State of Iowa 5(h) proceeds (sale of Public Housing) Local Housing Trust Funds Your Community’s Market What is available in your community for sale? Are they in good condition? What price are they selling for? Are the affordable houses concentrated in low-income areas? Considering your payment standard - will it work without additional subsidy? Would you increase your payment standard? Your Community’s Market Rental Housing Market What is utilization rate of Section 8 Vouchers? What is the need in your community for affordable housing? How long is the waiting list?
