Section 8 Homes

Document Sample
Section 8 Homes Powered By Docstoc
					                                                                               Tuesday,
                                                                               September 12, 2000




                                                                               Part IV

                                                                               Department of
                                                                               Housing and Urban
                                                                               Development
                                                                               24 CFR Parts 5, 903 and 982
                                                                               Section 8 Homeownership Program; Final
                                                                               Rule




VerDate 11<MAY>2000   12:39 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00001   Fmt 4717   Sfmt 4717   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55134       Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

DEPARTMENT OF HOUSING AND                           amended by a final rule published on                    (ACC) or new tenant-based Section 8
URBAN DEVELOPMENT                                   October 21, 1999 (64 FR 56894),                         funding for rental or homeownership
                                                    implement the statutory merger of the                   purposes. The PHA may opt to limit the
24 CFR Parts 5, 903 and 982                         Section 8 tenant-based certificate and                  number of Section 8 homeownership
[Docket No. FR–4427–F–02]                           voucher programs into a new Housing                     vouchers or not implement the
                                                    Choice Voucher program. Subpart M of                    homeownership option. There is no
RIN 2577–AB90                                       24 CFR part 982 describes program                       separate or additional funding for the
                                                    requirements for alternatives to the                    homeownership program.
Section 8 Homeownership Program                     basic Housing Choice Voucher program.                     Generally, a PHA that administers
AGENCY: Office of the Assistant                        Homeownership assistance offers a                    Section 8 tenant-based assistance has
Secretary for Public and Indian                     new option for families that receive                    the choice whether to offer the
Housing, HUD.                                       Section 8 tenant-based assistance. As                   homeownership option. However, a
                                                    with the other special housing types,                   PHA that elects to provide
ACTION: Final rule.
                                                    HUD does not provide any additional or                  homeownership assistance must have
SUMMARY: This final rule implements                 separate funding for homeownership                      the capacity to operate a successful
the ‘‘homeownership option’’                        assistance under section 8(y). In general,              Section 8 homeownership program. The
authorized by section 8(y) of the United            a public housing agency (PHA) that                      PHA has the required capacity if it:
States Housing Act of 1937, as amended              administers section 8 tenant-based                        • Establishes a minimum homeowner
by section 555 of the Quality Housing               assistance has the choice whether to                    downpayment requirement of at least 3
and Work Responsibility Act of 1998.                offer homeownership assistance as an                    percent of the purchase price for
Under the section 8(y) homeownership                option for qualified applicants and                     participation in its Section 8
option, a public housing agency may                 participants in the PHA’s Housing                       homeownership program, and requires
provide tenant-based assistance to an               Choice Voucher program. The PHA may                     that at least one percent of the purchase
eligible family that purchases a dwelling           choose to make homeownership                            price come from the family’s personal
unit that will be occupied by the family.           assistance available for any qualified                  resources;
This final rule follows publication of an           applicant or participant, or to restrict                  • Requires that financing for purchase
April 30, 1999 proposed rule, and takes             homeownership assistance to families or                 of a home under its Section 8
into consideration the public comments              purposes defined by the PHA.                            homeownership program be provided,
received on the proposed rule.                         As required by law, the                              insured, or guaranteed by the state or
                                                    homeownership option is not available                   Federal government, comply with
DATES: Effective Date: October 12, 2000.
                                                    for units receiving section 8 project-                  secondary mortgage market
FOR FURTHER INFORMATION CONTACT:                    based assistance. By law,                               underwriting requirements, or comply
Gerald J. Benoit, Office of Public and              homeownership under section 8(y) may                    with generally accepted private sector
Indian Housing, Department of Housing               only be provided for families receiving                 underwriting standards; or
and Urban Development, Room 4210,                   ‘‘tenant-based assistance’’ (42 U.S.C.                    • Otherwise demonstrates in its
451 Seventh Street, SW., Washington,                1437f(y)(1)). Integral to the tenant-based              Annual Plan that it has the capacity, or
DC 20410; telephone (202) 708–0477.                 nature of the housing choice voucher                    will acquire the capacity, to successfully
(This is not a toll-free number.) Hearing           program is the freedom-of-choice                        operate a Section 8 homeownership
or speech-impaired individuals may                  afforded to the participant family,                     program.
access this number via TTY by calling               regardless of whether the voucher is                      At the briefing of families selected to
the toll-free Federal Information Relay             used for rental or homeownership                        participate in the tenant-based Section 8
Service at 1–800–877–8339.                          assistance. A PHA may not reduce a                      program, the PHA must discuss any
SUPPLEMENTARY INFORMATION:                          family’s choice by limiting the use of                  homeownership option. Family
                                                    homeownership assistance to particular                  participation in the homeownership
I. Introduction                                                                                             program is voluntary. Although the
                                                    units, neighborhoods, developers, or
   On April 30, 1999 (64 FR 23488),                 lenders. For example, while HUD                         homeownership program is open to both
HUD published a proposed rule for                   encourages PHAs to develop                              Section 8 applicants and participants,
public comment to implement the                     partnerships with lenders in order to                   not every Section 8 tenant-based family
‘‘homeownership option’’ under section              assist the family in obtaining financing,               may receive homeownership assistance.
8(y) of the United States Housing Act of            the PHA may not require the family to                   The PHA may limit the number of
1937 (42 U.S.C. 1437 et seq.) (referred to          use a certain lender or financing                       homeownership families and there are
as the ‘‘1937 Act’’), as amended by                 approach.                                               statutory family eligibility requirements
section 555 of the Quality Housing and                                                                      such as a minimum level of income and
Work Responsibility Act of 1998 (Title              II. Overview of the Section 8                           a history of full-time employment. (The
V of the FY 1999 HUD Appropriations                 Homeownership Program                                   employment history requirement is not
Act; Public Law 105–276, approved                      An overview of how the Section 8                     applicable to elderly and disabled
October 21, 1998; 112 Stat. 2461, 2518)             homeownership program works follows.                    families, and there is a modified income
(referred to as the ‘‘Public Housing                The details regarding the operation of                  requirement for elderly and disabled
Reform Act’’). Section 8(y) authorizes              the Section 8 homeownership option are                  families.) The program is generally
Section 8 tenant-based assistance for an            provided elsewhere in the preamble and                  limited to first-time homeowners. The
eligible family that occupies a home                the regulatory text.                                    PHA may add other local eligibility
purchased and owned by members of                                                                           requirements such as participation in
the family.                                         A. General                                              the Family Self-Sufficiency (FSS)
   The April 30, 1999 rule proposed to                PHA administration of the Section 8                   program.
implement the section 8(y)                          homeownership program differs from                        Once a family has been determined by
homeownership option by adding a new                the tenant-based rental program in many                 the PHA to be eligible for Section 8
‘‘special housing type’’ under subpart M            ways. A PHA may use the certificate                     homeownership assistance, the family
of HUD’s regulations at 24 CFR part 982.            and voucher program funding already                     must attend homeownership counseling
The part 982 regulations, which were                under Annual Contributions Contract                     sessions. The counseling may be done


   VerDate 11<MAY>2000   16:26 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00002   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm01   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55135

by PHA staff or another entity such as                 Homeownership housing assistance                     time during receipt of homeownership
a HUD-approved housing counseling                   payments may be made directly to the                    assistance the family qualifies as a
agency.                                             family or to lender on behalf of the                    disabled family. If, during the course of
   The PHA must advise the family of                family. (Two-party checks to the family                 homeownership assistance, the family
any deadlines on locating a home,                   and lender are not authorized because                   ceases to qualify as a disabled or elderly
securing financing, and purchasing the              such a practice is incompatible with                    family, the maximum term becomes
home. In establishing such time limits,             typical lending documents and                           applicable from the date
the PHA should ensure that a family                 practices.) Before the housing assistance               homeownership assistance commenced.
who has executed a sales contract is                begins, the family and the PHA must                     However, such a family must be
provided reasonable time to close on the            execute a ‘‘statement of homeowner                      provided at least 6 months of
purchase of the home. The PHA does                  obligations.’’ The Section 8 tenant-based               homeownership assistance after the
not issue a voucher to the family. If the           housing assistance payments (HAP)                       maximum term becomes applicable
family is unable to locate a home to                contract, request for lease approval and                (provided the family is otherwise
purchase within the PHA established                 lease addendum are not applicable to                    eligible to receive Section 8
deadlines, the PHA may issue the family             the Section 8 homeownership program.                    homeownership assistance).
a rental voucher.                                      The homeownership housing
   A home may be purchased under the                assistance payment will equal the lower                    PHAs shall recapture a percentage of
homeownership option if, at the time                of (1) the payment standard minus the                   homeownership assistance defined in
the PHA determines that the family is               total tenant payment or (2) the monthly                 the regulations upon the sale or
eligible to purchase the home with                  homeownership expenses minus the                        refinancing of the home. Sales proceeds
homeownership assistance, the home is               total tenant payment. The family is                     that are used by the family to purchase
either under construction or already                responsible for the monthly                             a new home with Section 8
existing. The home chosen by the family             homeownership expenses not                              homeownership assistance are not
must pass an initial PHA Housing                    reimbursed by the housing assistance                    subject to recapture. Further, a family
Quality Standards (HQS) inspection.                 payment. (Total tenant payment is                       may refinance to take advantage of
(The HQS used for the Section 8 rental              higher of the minimum rent, 10 percent                  lower interest rates, or better mortgage
program is applicable to the                        of monthly income, 30 percent of                        terms, without any recapture penalty.
homeownership program.) In addition,                monthly adjusted income, or the welfare                 Only those proceeds realized upon
the family must hire an independent,                rent.) The PHA must use the utility                     refinancing that are retained by the
professional home inspector to inspect              allowance schedule and payment                          family (for example during a ‘‘cash-out’’
the home selected by the family to                  standard schedules applicable to the                    of the refinanced debt) are subject to the
identify physical defects and the                   Section 8 voucher rental program.                       program recapture provision.
condition of the major building systems                After the homeownership housing                         A PHA opting to administer the
and components. A copy of the                       assistance payments begin, the PHA will                 Section 8 homeownership program must
independent inspection report must be               annually reexamine family income and                    establish local homeownership policies.
given to the PHA. The family and the                composition and make appropriate                        The following policies must be
PHA must determine if any prepurchase               adjustments to the amount of the
                                                                                                            described in the PHA administrative
repairs are necessary.                              monthly housing assistance payment.
   The family will enter into a contract                                                                    plan: any additional PHA requirements
                                                    There is no requirement for the PHA to
of sale with the seller. The family must                                                                    for participation in its Section 8
                                                    conduct an annual HQS inspection.
secure its own financing for the home                  Except for elderly and disabled                      homeownership program (§ 982.626(b));
purchase. There is no prohibition                   families, Section 8 homeownership                       PHA maximum times to locate and
against using local or State Community              assistance may only be paid for a                       purchase a home (§ 982.629(a)); PHA
Development Block Grant (CDBG) or                   maximum period of 15 years if the                       policy about issuing the family a rental
other subsidized financing in                       initial mortgage incurred to finance                    voucher if the family does not find a
conjunction with the Section 8                      purchase of the home has a term that is                 suitable house to buy (§§ 982.629(c));
homeownership program. The PHA may                  20 years or longer. In all other cases, the             any minimum cash downpayment or
prohibit certain forms of financing,                maximum term of homeownership                           equity requirements (§ 982.632); any
require a minimum cash downpayment,                 assistance is 10 years. The PHA may not                 requirements for financing purchase of
or determine that the family cannot                 establish shorter or longer maximum                     a home, including requirements
afford the proposed financing. (There               terms. The maximum term for                             concerning qualification of lenders (for
are no Section 8 funds for home                     homeownership assistance applies to                     example, prohibition of seller financing
purchase financing. Instead, the Section            any member of the household who has                     or case-by-case approval of seller
8 housing assistance will be provided               an ownership interest in the unit during                financing), terms of financing (for
monthly to help the family meet                     any time that homeownership payments                    example, a prohibition of balloon
homeownership expenses.)                            are made, or is the spouse of any                       payment mortgages and establishment
   It is anticipated that mortgage lenders          member of the household who has an                      of a minimum homeowner equity
will consider the Section 8 assistance              ownership interest in the unit at the                   requirement), and financing
when underwriting the loan. If purchase             time homeownership payments are                         affordability (§ 982.632); any PHA
of the home is financed with FHA-                   made.                                                   requirements for continuation of
insured mortgage financing, such                       The maximum term for                                 homeownership assistance
financing is subject to FHA mortgage                homeownership assistance does not                       (§ 982.633(b)(8)); PHA policy for
insurance credit underwriting                       apply to an elderly family or a disabled                determining the amount of allowable
requirements. Otherwise, the                        family. In the case of an elderly family,               homeownership expenses (§ 982.635(c));
underwriting standards of the                       this exception is only applied if the                   PHA policy for payment of the HAP to
individual lender and/or financing                  family qualifies as an elderly family at                the family or lender (§ 982.635(d)); and
program will apply in cases where                   the commencement of homeownership                       any PHA policies that prohibit more
financing for purchase of the home is               assistance. In the case of a disabled                   than one move by the family during any
not FHA-insured.                                    family, this exception applies if at any                one year period (§ 982.637(a)(3)).


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00003   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55136        Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

B. Who Is Assisted                                  or displaced homemaker who, while                       Section 8 voucher program. The PHA
                                                    married, owned a home with his or her                   may elect to offer either or both of these
1. General
                                                    spouse, or resided in a home owned by                   forms of cooperative assistance in its
   The homeownership option is used to              his or her spouse.                                      voucher program, and to define the
assist families in two types of housing:               The restriction to ‘‘first-time’’                    appropriate role of each available form
   • A unit owned by the family—One                 homeowners is intended to direct                        of cooperative assistance in the local
or more family members hold title to the            homeownership assistance to ‘‘new’’                     Section 8 program.
home.                                               homeowners who may be unable to                            In the new homeownership option,
   • A cooperative unit—One or more                 purchase a home without this                            Section 8 assistance is paid on behalf of
family members hold membership                      assistance, but to discourage use of                    a cooperative member, but there is no
shares in the cooperative.                          Section 8 subsidy on behalf of families                 requirement that the cooperative enter
2. Assistance for Homeowner                         who have achieved homeownership                         into any agreement or any direct
                                                    independently, without benefit of the                   relationship with the PHA that provides
   Before enactment of Section 8(y),                Federal Section 8 subsidy. In addition,                 Section 8 assistance for the cooperative
Section 8 assistance could be paid on               the PHA may not commence                                member. The cooperative is not asked to
behalf of a renter or cooperative                   homeownership assistance for a family                   modify any ordinary requirement for
member, but not for a family that owns              if any family member has previously                     cooperative membership or occupancy,
fee title to its home. Section 8 rental             received assistance under the                           nor asked to modify any requirement
assistance terminates when the family               homeownership option, and has                           concerning assessment or collection of
takes title to the home. By contrast,               defaulted on a mortgage securing debt                   the cooperative carrying charge,
Section 8(y) is specifically designed to            incurred to purchase the home (see                      maintenance of the unit or sanctions for
authorize assistance for a                          § 982.627(e) of this final rule).                       violation of cooperative requirements.
‘‘homeowner’’—a family that owns title                                                                         For clarity, in describing requirements
to the home.                                        3. Assistance for Cooperative Member                    for homeownership assistance to a
   The law provides that the public                    Section 8(y) authorizes                              cooperative member, the new rule
housing agency may provide assistance               homeownership assistance for a family                   supplements existing definitions. The
for:                                                that ‘‘owns or is acquiring shares in a                 term ‘‘cooperative’’ refers to housing
   • A ‘‘first-time homeowner’’; and                cooperative.’’ Thus, the law allows                     owned by a corporation or association,
   • A family that owns or is acquiring             assistance for a family that already owns               and where a member of the corporation
shares in a cooperative.                            cooperative shares before                               or association has the right to reside in
   By law and this rule, the                        commencement of Section 8                               a particular unit, and to participate in
homeownership option is designed to                 homeownership assistance, not just for                  management of the housing (§ 982.4).
promote and support homeownership                   a family that acquires cooperative shares               The rule also adds the following two
by a ‘‘first-time’’ homeowner—a family              for the first time with the support of                  new definitions:
that moves for the first time from rental           such assistance. In this respect, the law                  • Cooperative member. A family of
housing to a family-owned home.                     treats ownership of cooperative                         which one or more members owns
Section 8 payments supplement the                   membership different from ownership                     membership shares in a cooperative.
family’s own income to facilitate the               of title to the home. In the latter case,                  • Membership shares. Shares in a
transition from rental to                           the law authorizes assistance for a first               cooperative. By owning such
homeownership. The initial availability             time homeowner. The rule specifies that                 cooperative shares, the share-owner has
of these assistance payments helps the              cooperative membership shares may be                    the right to reside in a particular unit in
family pay the costs of homeownership,              purchased at or before commencement                     the cooperative, and the right to
and may provide additional assurance                of homeownership assistance (see the                    participate in management of the
for a lender, so that the family can                definition of ‘‘membership shares’’ at                  housing.
finance purchase of the home.                       § 982.4).                                                  Prior to the enactment of the Public
   Section 8 homeownership assistance                  Before this rule, HUD has provided                   Housing Reform Act, a family could
for cooperative homeowners is                       essentially the same Section 8 rental                   only receive assistance in a cooperative
specifically authorized for both a family           assistance for a cooperative member as                  that had adopted requirements to
that is a first time cooperative                    for a family that chooses to rent a unit                maintain continued affordability for
homeowner and a family that owned its               in conventional rental housing. Since                   lower income families after transfer of a
cooperative unit prior to receiving                 the origin of the Section 8 program, the                member’s interest. There is now no such
Section 8 assistance. Cooperative                   law has provided that with respect to                   statutory affordability requirement for
homeowners were eligible for tenant-                members of a cooperative, ‘‘rent’’ means                Section 8 tenant-based assistance to
based assistance prior to passage of the            the charges under the occupancy                         cooperative residents—whether such
Public Housing Reform Act.                          agreements between the members and                      assistance is provided under the rental
   To qualify as a ‘‘first-time                     the cooperative (42 U.S.C. 1437f(f)(5)).                assistance program or under the new
homeowner,’’ the assisted family may                Thus Section 8 assistance is paid to                    Section 8(y) homeownership option—
not include any person who owned a                  cover the difference between the                        and there is no such requirement under
‘‘present ownership interest’’ in a                 cooperative occupancy charges and the                   this rule.
residence of any family member during               income-based tenant rent.                                  HUD believes that such a continuing
the three years before the                             Under this final rule, the PHA may                   affordability requirement would restrict
commencement of homeownership                       provide assistance for a cooperative                    housing choice of Section 8 families
assistance for the family (regulatory               member either under the new                             among available cooperative units. Such
definition at § 982.4; statutory definition         homeownership option or under the                       a requirement would also diminish a
at 42 U.S.C. 1437f(y)(7)(A)). Such                  special procedures for cooperative                      major advantage of homeownership—
interest includes ownership of title or of          housing within the Section 8 tenant-                    the incentive for an assisted family to
cooperative membership shares. This                 based rental program (§ 982.619). Each                  maintain and improve the housing and
rule defines the term ‘‘first-time                  form of assistance is designated as a                   to benefit from appreciation upon a
homeowner’’ to include a single parent              separate special housing type under the                 future sale of the home. This rule


   VerDate 11<MAY>2000   16:26 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00004   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm01   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55137

removes the federal mandate for existing            continuation of assisted occupancy.                        Section 982.317 also provides that in
continuing affordability requirements               Consequently, there is no need to                       determining whether the rent to owner
for rental assistance in cooperative                specify any allocation of maintenance                   for a unit subject to a lease-purchase
housing.                                            responsibility between the cooperative                  agreement is a reasonable amount, any
   In addition, this rule modifies the              and the family.                                         ‘‘homeownership premium’’ paid by the
allocation of maintenance responsibility                                                                    family to the owner must be excluded
between the cooperative and the family.             4. Lease-Purchase Agreements
                                                                                                            when the PHA determines rent
In the regular rental assistance program,              The law and rule explicitly permit                   reasonableness.
the owner is responsible for most                   Section 8 homeownership assistance for                     Lease-purchase agreements are
maintenance of a unit. Under the old                a family that purchases a home that the                 considered rental, and all the normal
rule, this principle also applies to rental         family previously occupied under a                      tenant-based Section 8 rental rules are
assistance for Section 8 cooperative                ‘‘lease-purchase agreement’’—generally                  applicable. The family will be subject to
housing. However, in a conventional                 a lease with option to purchase. Section                the homeownership regulatory
cooperative, the member is generally                8(y) provides that the PHA may provide                  requirements at the time the family is
responsible for maintenance of the                  Section 8 homeownership assistance for                  ready to exercise the homeownership
individual apartment, and the                       an eligible family that purchases ‘‘a unit
                                                                                                            option under the lease-purchase
cooperative entity is only responsible              under a lease-purchase agreement’’ (42
                                                                                                            agreement. At that point in time, the
for maintenance of common areas and                 U.S.C. 1437f(y)(1)).
                                                       Prior to enactment of the Public                     PHA will determine whether the family
systems. The cooperative agreement                                                                          is eligible for Section 8 homeownership
defines the division of maintenance                 Housing Reform Act, a family that
                                                    received Section 8 rental subsidy could                 assistance (e.g., whether the family
obligations between the member and the                                                                      meets the income and employment
cooperative.                                        exercise an option to purchase the unit
                                                    under a lease-purchase agreement.                       thresholds and any other criteria
   The existing regulation is amended by
                                                    However, there were problems in                         established by the PHA). If determined
this rule to reflect the normal division
                                                    applying the rent reasonableness                        eligible for a homeownership voucher,
of maintenance responsibility in
                                                    requirements and, as noted above,                       the family will then arrange for an
cooperative housing for which rental
                                                    Section 8 rental subsidy terminated                     independent home inspection, attend
(not homeownership) assistance is being
                                                    when the family took title to the home.                 counseling sessions, and obtain
provided (§ 982.619(d)(3)). The revised
rule provides that the family is                    Thus the prospective loss of subsidy                    financing. Homeownership assistance
responsible for a breach of the HQS                 discouraged the family from taking title,               will begin when the family purchases
caused by failure to perform                        and moving from rental to                               the home and after all of the
maintenance in accordance with the                  homeownership. However, Section 8(y)                    requirements of the homeownership
cooperative occupancy agreement                     now provides a vehicle for continuation                 option are met.
between the family and the cooperative.             of Section 8 assistance after the family                C. How to Qualify for Homeownership
The PHA must take prompt and                        takes title to the home.                                Assistance
vigorous action to enforce the family                  To qualify as a first-time homeowner
maintenance obligation, and may                     (as noted above) the family may not                     1. General
terminate assistance for failure to                 have owned title to a principal                           To qualify for assistance under the
perform maintenance in accordance                   residence in the last three years. The                  homeownership option, a family must
with the cooperative occupancy                      rule specifies, however, that the right to              meet the general requirements for
agreement (§ 982.619(d)(4)).                        purchase title under a lease-purchase                   admission to the PHA’s Section 8
   During the term of the HAP contract              agreement does not constitute a                         tenant-based voucher program, and
between the PHA and the cooperative,                prohibited ‘‘present ownership                          additional special requirements for
the unit and premises must be                       interest.’’ A family that holds an option               homeownership assistance (§ 982.627).
maintained in accordance with the                   to purchase may exercise the option and                 The PHA may not provide
Section 8 HQS. If the contract unit and             receive assistance under the new                        homeownership assistance for a family
premises are not properly maintained,               homeownership option.                                   unless the PHA determines that the
the PHA may exercise all available                     A new § 982.317 is added to describe
                                                                                                            family satisfies all of the following
remedies, regardless of whether the                 the requirements for lease-purchase
                                                                                                            initial requirements at commencement
family or the owner is responsible for              agreements. The housing assistance
                                                                                                            of homeownership assistance for the
such breach of the HQS. PHA remedies                payment for a lease-purchase unit may
                                                                                                            family:
for breach of the HQS include recovery              not exceed the amount that would be
                                                    paid on behalf of the family if the rental                • The family satisfies the minimum
of overpayments, suspension of housing
                                                    unit was not subject to a lease-purchase                income requirements described in
assistance payments, abatement or other
                                                    agreement. Any ‘‘homeownership                          § 982.627(c) of the final rule;
reduction of housing assistance
payments, termination of housing                    premium’’ included in the rent to the                     • The family satisfies the
assistance payments and termination of              owner that would result in a higher                     employment requirements described in
the HAP contract (§ 982.619(d)(1)).                 subsidy amount than would otherwise                     § 982.627(d) of the final rule;
   In the new homeownership                         be paid by the PHA must be absorbed                       • The family has not defaulted on a
cooperative option under Section 8(y),              by the family. ‘‘Homeownership                          mortgage securing debt to purchase a
there is no HAP contract (between the               premium’’ is defined as an increment of                 home under the homeownership option
PHA and the cooperative as unit                     value attributable to the value of the                  (see § 982.627(e) of the final rule);
‘‘owner’’) and no lease (between the                lease-purchase right or agreement such                    • Except for cooperative members
cooperative and the family). The unit is            as an extra monthly payment to                          who have acquired cooperative
only inspected before the                           accumulate a downpayment or reduce                      membership shares prior to the
commencement of assistance. There is                the purchase price. Families are                        commencement of homeownership
no requirement that the family or                   permitted to pay an extra amount out-                   assistance, no family member has a
cooperative assure that the unit                    of-pocket to the owner for purchase                     present ownership interest in a
continues to satisfy HQS during the                 related expenses.                                       residence at the commencement of


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00005   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55138       Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

homeownership assistance for the                    homeownership assistance payments                       disabled family. In particular, as
purchase of any home;                               will not be disrupted because of a drop                 required by the law, the requirement to
  • Except for cooperative members                  in family income. Any minimum                           count welfare assistance income does
who have acquired cooperative                       income requirement will only apply                      not apply in the case of a family that
membership shares prior to the                      again if the family purchases a                         includes a disabled person other than
commencement of homeownership                       subsequent home with Section 8                          the household head or spouse (and
assistance, the family has entered into a           homeownership assistance.                               where the household head or spouse are
contract of sale in accordance with                    The law provides that the income                     not elderly or disabled).
§ 982.631(c);                                       counted in meeting any minimum
  • The family satisfies any other initial          income requirement under the                            3. Family Employment
requirements established by the PHA.                homeownership option must come from                        Section 8(y) provides that, except as
2. Minimum Income Requirement                       sources other than welfare assistance.                  provided by HUD, the family must be
                                                    Thus, PHAs may limit homeownership                      able to demonstrate, at the time that the
   To enter the Section 8 voucher                   assistance to families with substantial                 family initially receives homeownership
program, a family must be income-                   non-welfare income available to pay                     assistance, that one or more adult
eligible (i.e., below the maximum                   housing and non-housing costs.                          members of the family have achieved
income cutoff). However, to qualify for             However, the law provides that HUD                      employment for the time period
the homeownership option in the                     may count welfare assistance in                         established by HUD (42 U.S.C.
voucher program, the family must                    determining availability of voucher                     1437f(y)(1)(B)).
demonstrate sufficient income to meet a             homeownership assistance for an                            The final rule requires that the family
minimum income standard, which is                   elderly or disabled family (in which the                must demonstrate that one or more
intended to assure that a family will               household head or spouse is an elderly                  adult members of the family who will
have sufficient income to pay                       or disabled person). (The term ‘‘welfare                own the home at commencement of
homeownership and other family                      assistance’’ is defined in HUD’s                        homeownership assistance:
expenses not covered by the Section 8               regulations at § 5.603, thereby                            • Is currently employed on a full-time
subsidy.                                            identifying the types of income that may                basis (the term ‘‘full-time employment’’
   Section 8(y) provides that a family              not be included in determining whether                  is defined to mean not less than an
may not receive homeownership                       a family meets the homeownership                        average of 30 hours per week); and
assistance unless the family                        minimum income standard.)                                  • Has been continuously so employed
demonstrates that gross monthly income                 The rule also clarifies that the                     during the year before commencement
is at least two times the voucher                   requirement to disregard welfare                        of homeownership assistance for the
‘‘payment standard’’ or an ‘‘other                  assistance income only applies in                       family.
amount’’ established by the Secretary               determining whether a family has the                       The final rule provides that the PHA
(Section 8(y)(1)(B), 42 U.S.C.                      minimum income to qualify for                           has the discretion to determine whether
1437f(y)(1)(B)).                                    homeownership assistance. However,                      (and to what extent) an employment
   At the request of several public                 welfare assistance income is counted for                interruption is considered permissible
commenters, the final rule establishes a            other program purposes: in determining                  in satisfying the employment
national minimum income requirement                 income-eligibility for admission to the                 requirement. The final rule also clarifies
that is equal to 2,000 hours of annual              voucher program, in calculating the                     that the PHA may consider successive
full-time work at the Federal minimum               amount of the family’s total tenant                     employment during the one-year period
wage. In response to public comment,                payment (gross family contribution);                    and self-employment in a business.
the final rule also provides that the               and in calculating the amount of the                       The employment requirement does
adult family members who will own the               monthly homeownership assistance                        not apply to an elderly family or a
home at the commencement of the                     payment for a family assisted under the                 disabled family. Furthermore, if a
homeownership assistance (as opposed                homeownership option.                                   family, other than an elderly family or
to only the head of household or                       Under the law, HUD may permit                        a disabled family, includes a person
spouse) must have annual income (gross              PHAs to count welfare assistance                        with disabilities, the PHA must grant an
income) that is not less than the                   income of an ‘‘elderly family’’ or a                    exemption from the employment
minimum income requirement.                         ‘‘disabled family’’—a family whose head                 requirement if the PHA determines that
   The law does not specify whether the             or spouse is elderly or disabled                        an exemption is needed as a reasonable
minimum income requirement is only                  (definitions of these terms are found in                accommodation so that the program is
applied at initial qualification for                section 3(b)(3)(B) of the 1937 Act; 42                  readily accessible to and usable by
commencement of homeownership                       U.S.C. 1437a(b)(3)(B))—in determining                   persons with disabilities.
assistance, or is also a continuing                 whether a family has the minimum
requirement that must be maintained so              income to qualify for homeownership                     4. Discussion of Other Requirements
long as the family is receiving assistance          assistance. On consideration of this                       a. Homeownership counseling.
under the homeownership option. (By                 issue, and recognizing the special needs                Section 8(y) provides that a family that
contrast, the law explicitly provides that          of such families, the rule requires that                receives assistance under the
the statutory employment requirement                the PHA count welfare assistance of an                  homeownership option must participate
only applies at the time the family                 elderly or disabled family in                           in a homeownership and housing
initially receives homeownership                    determining whether the family meets                    counseling program provided by the
assistance.) HUD has decided that any               the minimum income requirement for                      PHA (42 U.S.C. 1437f(y)(1)(D)). The rule
minimum income requirement will only                homeownership assistance. This                          provides that, before commencement of
be applied to determine initial                     requirement to count welfare assistance                 homeownership assistance for a family,
qualification to purchase a particular              in determining whether a family has the                 the family must attend and satisfactorily
home, not as a continuing requirement.              minimum income to qualify for                           complete the pre-assistance
This policy gives assurance to the                  homeownership assistance only applies,                  homeownership and housing counseling
family, and possibly to a potential                 however, to families which satisfy the                  program required by the PHA (pre-
mortgage lender, that the stream of                 statutory definition of an elderly or                   assistance counseling) (§ 982.630).


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00006   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55139

Suggested topics for the PHA-required               counseling will assist families in                      otherwise habitable. The PHA HQS
pre-assistance counseling program                   making informed decisions when                          inspection does not include an
include:                                            selecting the home they wish to                         assessment of the adequacy and life
   • Home maintenance (including care               purchase.                                               span of the major building components,
of the grounds);                                       b. Financing purchase of home.                       building systems, appliances and other
   • Budgeting and money management;                Families selected to participate in the                 structural components.
   • Credit counseling;                             Section 8 homeownership program must                       The only difference between the HQS
   • How to negotiate the purchase price            secure their own financing. If the family               inspection requirements for the tenant-
of a home;                                          applies for a mortgage or loan (including               based rental and homeownership
   • How to obtain homeownership                    an FHA mortgage), all regular lender                    programs is that the PHA is not required
financing and loan preapprovals,                    underwriting and property inspection                    by the regulation to conduct annual
including a description of types of                 requirements apply.                                     inspections. The exemption from annual
financing that may be available, and the               The rule provides that a PHA may                     HQS homeownership inspections is
pros and cons of different types of                 establish requirements for financing                    authorized by the statute. The initial
financing;                                          purchase of a home to be assisted under                 (prior to the commencement of housing
   • How to find a home, including                  the homeownership option (§ 982.632).                   assistance) HQS inspection is the only
information about homeownership                     All PHA financing or affordability                      PHA inspection required for
opportunities, schools, and                         requirements must be described in the                   homeownership units during the entire
transportation in the PHA jurisdiction;             PHA administrative plan. The PHA may                    time the family is receiving Section 8
   • Advantages of purchasing a home                also set requirements concerning                        homeownership assistance.
in an area that does not have a high                qualifications of lenders and terms of                     The other inspection required by this
concentration of low-income families                financing. For example, a PHA may                       final rule is a statutory requirement that
and how to locate homes in such areas;              determine that mortgages with balloon                   is consistent with private real estate
   • Information on fair housing,                   payments and certain kinds of variable                  practice. The independent professional
including fair housing lending and local            interest rate loans are not in the best                 home inspection is conducted by a
fair housing enforcement agencies; and              interest of the family because it is                    private market home inspector (not PHA
   • Information about the Real Estate              unlikely the family could afford the                    staff) that is experienced and qualified
Settlement Procedures Act (12 U.S.C.                payments when the balloon comes due                     to conduct prepurchase inspections for
2601 et seq.) (RESPA), state and Federal            or interest rates rise. In addition, the                homebuyers. The purpose of the home
truth-in-lending laws, and how to                   PHA could opt to prohibit seller                        inspection is the identification of home
identify and avoid loans with                       financing, or to only allow seller                      defects and an assessment of the
oppressive terms and conditions.                    financing in cases when the seller is a                 adequacy and life span of the major
   The PHA may adapt subjects covered               nonprofit or the purchase price can be                  building components, building systems,
in pre-assistance counseling to local               clearly supported by an independent                     appliances and other structural
circumstances and the needs of                      appraisal.                                              components. The requirement for an
individual families. The PHA may also                  Another purpose of the PHA                           inspection arranged by the buyer and
offer additional counseling after                   financing review would be to determine                  satisfactory to the buyer is a typical
commencement of homeownership                       whether the monthly mortgage or loan                    contingency clause in contracts of sale.
assistance (ongoing counseling). If the             payment is affordable after considering                 The Section 8 family selects the home
PHA offers a program of ongoing                     other family expenses. The PHA may                      inspector and pays the home inspector’s
counseling for participants in the                  disapprove proposed financing,                          fees. (The source of funds for family
homeownership option, the PHA has                   refinancing or other debt if the PHA                    payment of the home inspection may be
the discretion to determine whether the             determines that the debt is unaffordable.               a gift, family savings or an inheritance,
family is required to participate in the            PHAs may wish to establish minimum                      or sources other than family savings.) A
ongoing counseling.                                 initial downpayment requirements to                     copy of the inspection report is
   The counseling may be provided by                ensure that the family has a personal                   provided to the family and the PHA.
the PHA, another entity such as a HUD-              financial stake in the home, thus                          Although the PHA may not require
approved housing counseling agency, or              helping to minimize mortgage loan                       the family to use a particular inspector,
by both the PHA and another entity.                 defaults (for example, the PHA may                      the PHA may establish standards for
HUD-approved housing counseling                     require that the family use its own                     qualification of the home inspector
agencies provide free counseling. The               resources to make the entire initial                    selected by the family. For example, the
HUD field office will provide the PHA               downpayment, or a percentage of the                     PHA may require the use of a home
with a list of the HUD-approved                     initial downpayment).                                   inspector certified by the American
counseling agencies. If the PHA is not                 c. Home inspections. Two kinds of                    Society of Home Inspectors, or a similar
using a HUD-approved housing                        physical inspections are required in the                national organization.
counseling agency to provide the                    homeownership option (in addition to,                      The PHA must review the home
counseling for families participating in            and separate from, any lender required                  inspector’s report to determine whether
the homeownership option, the PHA                   inspections): an HQS inspection by the                  repairs are necessary prior to purchase,
should ensure that its counseling                   PHA and an independent professional                     and to generally assess whether the
program is consistent with the                      home inspection by an inspector that is                 purchase transaction makes sense in
homeownership counseling provided                   used in the private market by                           light of the overall condition of the
under HUD’s Housing Counseling                      homebuyers. (§ 982.631).                                home and the likely costs of repairs and
program.                                               The PHA inspection is the normal                     capital expenditures. For example, the
   Experience with low-income                       initial HQS inspection conducted by the                 home inspector’s report might reveal
homeownership programs has                          PHA for the tenant-based rental                         foundation instability, and a defective
demonstrated that quality counseling is             assistance program. This inspection will                roof and heating system that needs
imperative for successful                           indicate the current physical condition                 immediate replacement at great cost.
homeownership and prevention of                     of the unit and any repairs necessary to                Confronted with these facts the PHA
mortgage defaults. In addition,                     ensure that the unit is safe and                        would discuss the inspection results


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00007   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55140        Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

with the family and decide whether to               purchase a unit outside of the initial                  the homeownership option. Section
disapprove the unit for assistance under            PHA’s jurisdiction, if the receiving PHA                982.641 details the portions of the
the homeownership option because of                 is administering a voucher                              voucher regulations that apply to the
the major physical problems and                     homeownership program and is                            homeownership special housing type.
substantial correction costs, or whether            accepting new homeownership families.                   PHAs should carefully review this
it is feasible to have the necessary                In general, the portability procedures for              section of the regulations.
repairs accomplished prior to sale.                 the Housing Choice Voucher program                         It is noted that all civil rights laws
   d. Switching from Section 8                      (described in §§ 982.353 and 982.355)                   applicable to the Section 8 voucher
homeownership voucher assistance to                 apply to the homeownership option and                   program are applicable to the
rental voucher assistance, and vice-                the administrative responsibilities of the              homeownership program. PHAs must
versa, after a mortgage default and at              initial and receiving PHA are not altered               comply with all equal opportunity and
other times. There are a number of                  except that some administrative                         nondiscrimination requirements
circumstances under which a family                  functions (e.g, issuance of a voucher or                imposed by contract or Federal law. In
may switch between rental and                       execution of a tenancy addendum) do                     addition, PHAs are reminded that
homeownership assistance under the                  not apply to the homeownership option.                  ‘‘finders-keepers’’ applies to
voucher program. Various scenarios are                 The receiving PHA may absorb the                     homeownership assistance; PHAs may
described below.                                    homeownership family or bill the initial                not steer families to particular units or
   • A Section 8 participant receiving              PHA for the homeownership housing                       neighborhoods. Further, as in the
voucher assistance may request a PHA                assistance using the normal portability                 tenant-based rental voucher program,
operating a homeownership program to                billing process. Communications                         PHAs must provide assistance to
determine whether the family is eligible            between the initial and receiving PHA                   expand housing opportunities. The PHA
for Section 8 homeownership                         are necessary. As is the case for Section               briefing for both rental and
assistance. If the family is determined             8 rental portable families, all of the                  homeownership families must explain:
eligible for homeownership assistance,              receiving PHA’s administrative policies                    • Where the family may lease or
the PHA may authorize the family to                 are applicable to the homeownership                     purchase a unit;
search for a home to purchase. The                  family. The family will be required to                     • How portability works (if the family
family would continue to receive rental             attend the briefing and counseling                      qualifies to lease or purchase a unit
assistance until the family vacates the             sessions required by the receiving PHA.                 outside the PHA jurisdiction under
rental unit (consistent with the lease).            The receiving PHA, not the initial PHA,                 portability procedures); and
   • A Section 8 applicant selected from            will determine whether the financing                       • The advantages of moving to an
the PHA waiting list goes to the briefing           for and the physical condition of the                   area that does not have a high
and learns of the homeownership                     unit are acceptable.                                    concentration of poor families (if the
option. The PHA determines the family                  f. Buying another home with Section                  family is currently living in a high
is eligible for homeownership and the               8 assistance. A homeownership family                    poverty census tract within the
family is given two months to find a                may purchase another home with                          jurisdiction of the PHA).
home to purchase. At the end of the two             Section 8 assistance provided there is                     Further, if the family includes any
months the PHA extends the search                   no mortgage loan default. The family                    person with disabilities, the PHA must
period for an additional month because              must sell its current home in order to                  take appropriate steps to ensure
the family has found a unit. However,               purchase another with homeownership                     effective communication during the
the purchase never occurs due to                    assistance.                                             briefing in accordance with 24 CFR 8.6.
problems qualifying for a loan. The                    As noted above, PHAs shall recapture                    h. Link between Section 8
family opts to rent an apartment and try            a percentage of homeownership                           homeownership and the Family Self-
homeownership at a later time after they            assistance defined in the regulations                   Sufficiency (FSS) Program. PHAs may
have increased their savings. The PHA               upon the sale or refinancing of the                     wish to link Section 8 homeownership
issues the family a rental voucher.                 home. Proceeds invested in the                          with the FSS program. For example,
   • The family purchases a home under              purchase of another home are exempt                     participation in the FSS program could
the Section 8 homeownership option.                 from recapture. Most of the                             be a PHA eligibility requirement. The
After several years the family decides              homeownership requirements                              PHA may also opt to incorporate the
that they prefer to live in a rental                applicable to the first home purchase                   homeownership goal into the family’s
apartment. If there is no mortgage loan             remain applicable to a subsequent                       FSS contract of participation so any FSS
default and the family has met all                  purchase. For example, the family must                  escrow could be advanced for purchase
obligations under the Section 8                     once again meet the employment                          of a home or home maintenance/
program, the PHA may issue the family               threshold. The necessity of any                         improvement purposes. It is noted that
a rental voucher. The family must sell              counseling will be determined by the                    FSS families must meet the
the home before the PHA may provide                 PHA. An independent home inspection                     homeownership income and
rental assistance. If there is a default on         will be conducted and the PHA will                      employment thresholds.
a mortgage (whether FHA-insured or                  determine the acceptability of the                         i. PHA determination of
non-FHA), the PHA may exercise the                  financing. The maximum term of                          ‘‘homeownership expense’’. Section
PHA option to issue the family a rental             homeownership assistance applies to                     982.635(c) details the expenses that the
voucher only if the family vacates the              the cumulative time the family receives                 PHA will include when determining the
home and conveys the title in                       homeownership assistance. The only                      family’s homeownership expenses. The
accordance with § 982.638(d) (assuming              exception to eligibility requirements                   principal and interest amount is the
the family has met all the family                   applicable to initial receipt of                        debt service amount for the initial
obligations under the Section 8 program             homeownership assistance is that the                    (original) mortgage debt, any refinancing
other than not causing a mortgage                   family need not meet the first-time                     of such debt, and any mortgage
default).                                           homebuyer requirement (See                              insurance premium. The utility
   e. Portability. Generally, a family              § 982.637(b)).                                          allowance is the same utility allowance
determined eligible for homeownership                  g. Applicability of the Section 8                    schedule as used in the rental voucher
assistance by the initial PHA may                   tenant-based voucher requirements to                    program. The PHA allowance for


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00008   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55141

maintenance expenses is the amount the              defined terms throughout HUD’s                          homeownership program be provided,
PHA thinks is appropriate for routine               regulations.                                            insured, or guaranteed by the state or
maintenance for a home.                                3. Revised definition of the term                    Federal government, comply with
   The PHA allowance for major repairs              ‘‘cooperative’’ (§ 982.4(b)). In response               secondary mortgage market
and replacements is the amount the                  to public comment, the definition of the                underwriting requirements, or comply
PHA thinks is appropriate for a                     term ‘‘cooperative’’ in the final rule is               with generally accepted private sector
replacement ‘‘reserve’’ for a home. If a            no longer limited to housing owned by                   underwriting standards; or
member of the family is a person with               a nonprofit entity.                                        • Otherwise demonstrates in its
disabilities, such debt may include debt               4. Revised definition of the term                    Annual Plan that its has the capacity, or
incurred by the family to finance costs             ‘‘first-time homeowner’’ (§ 982.4(b)). The              will acquire the capacity, to successfully
needed to make the home accessible for              definition of ‘‘first-time homeowner’’                  operate a Section 8 homeownership
such person, if the PHA determines that             has been revised to clarify that any                    program. A PHA may acquire this
allowance of such costs as                          family who has owned any residential                    capacity by either partnering with an
homeownership expenses is needed as a               property during the preceding three                     entity experienced in reviewing
reasonable accommodation so that the                years (regardless of whether its is the                 homeownership financing or by hiring
homeownership option is readily                     family’s principal residence) does not                  staff with such experience.
accessible to and usable by such person,            meet the definition of a ‘‘first-time’’                    The final rule also makes a
in accordance with 24 CFR part 8.                   homeowner. The final rule also clarifies                conforming change to HUD’s PHA Plan
   These allowances for maintenance                 that a single parent or displaced                       regulations at 24 CFR part 903. The
                                                    homemaker who, while married, owned                     revision is necessary so that the capacity
expenses and major repairs and
                                                    a home with a spouse (or resided in a                   requirement can be applied fully to
replacements should not be based on
                                                    home owned by a spouse) is considered                   high-performing PHAs wishing to
the condition of the home, similar to
                                                    a ‘‘first-time homeowner’’ for purposes                 provide Section 8 homeownership
how utility allowances work. It is
                                                    of the Section 8 homeownership option.                  assistance. The final rule amends
recommended that a PHA contact                         5. Separate definition of the term                   § 903.11 to provide that the information
counseling agencies, local realtors and             ‘‘Present ownership interest’’                          required by § 903.7(k) pertaining to
relevant national organizations for                 (§ 982.4(b)). For purposes of clarity, this             homeownership programs must be
advice on the appropriate level for these           final rule provides a separate definition               included in the PHA’s streamlined
local allowances. (Families are not                 of the term ‘‘present ownership                         Annual Plan submission only to the
required to put the amount set aside for            interest.’’ The proposed rule had                       extent that the PHA participates in
these two maintenance allowances in                 defined this term within the definition                 homeownership programs under section
the bank or in escrow. Further, it is not           of the term ‘‘first-time homeowner.’’                   8(y) of the 1937 Act.
expected that the monthly amounts for                  6. Overview of special housing types                    8. Reorganization of Eligibility
these allowances will cover all                     (§ 982.601). This final rule reorganizes                requirements (§§ 982.626, 982.627, and
maintenance and capital expenditures.)              and makes several clarifying changes to                 982.628). For purposes of clarity, this
III. Summary of Changes Made by this                § 982.601, which provides an overview                   final rule reorganizes the eligibility
Final Rule to the April 30, 1999                    of the special housing types. For                       requirements for participation in the
Proposed Rule                                       example, the changes clarify that the                   homeownership option located in
                                                    provisions of subpart M of 24 CFR part                  §§ 982.626 and 982.627 of the proposed
   The following discussion summarizes              982 apply solely to the specific special                rule). Section 982.626 of the final rule
the most significant differences between            housing type noted in the heading of                    describes the initial requirements that
the April 30, 1999 proposed rule and                each regulatory section. Further, the                   must be satisfied before the
this final rule. The changes made in                revisions clarify that the PHA may not                  commencement of homeownership
response to public comment are                      set aside program funds or program slots                assistance. Section 982.627 of the final
discussed in greater detail in sections             for special housing types or for a                      rule sets forth the eligibility
IV., V., and VI. of this preamble.                  specific special housing type. These                    requirements (such as the minimum
   1. Revised definition of ‘‘net family            technical changes do not establish or                   income and employment requirements)
assets’’ (§ 5.603(d)). In response to               modify existing program requirements,                   for families wishing to participate in the
public comment, this final rule revises             but are designed solely to make                         homeownership option. Section 982.628
the definition of ‘‘net family assets’’             § 982.601 easier to understand.                         of the final rule describes the eligibility
located in 24 CFR 5.603(d) to exclude                  7. PHA capacity to operate successful                requirements for homes purchased with
the value of a home currently being                 Section 8 homeownership program                         homeownership assistance. With the
purchased with Section 8                            (§ 982.625(d)). This final rule adds a                  exception of those changes described
homeownership assistance. This                      new § 982.625(d), which requires that a                 elsewhere in this preamble, this
exclusion is limited to the first 10 years          PHA wishing to provide Section 8                        reorganization is not substantive, but is
after the purchase date of the home.                homeownership assistance must have                      intended to clarify these regulatory
   2. Use of the term ‘‘welfare                     the capacity to operate a successful                    requirements. The substance of
assistance’’ rather than the term ‘‘public          homeownership program. The PHA has                      proposed § 982.628 and subsequent
assistance’’ (§ 982.4(a)). The final rule           the required capacity if it either:                     regulatory sections have been
replaces the proposed definition of the                • Establishes a minimum homeowner                    redesignated to conform to the
term ‘‘public assistance’’ with a cross-            downpayment requirement of at least 3                   establishment of new § 982.628 (for
reference to the term ‘‘welfare                     percent of the purchase price for                       example, proposed § 982.628 has
assistance’’, which is defined at 24 CFR            participation in its Section 8                          become § 982.629 of this final rule,
5.603. The proposed definition of                   homeownership program, and requires                     proposed § 982.630 has become
‘‘public assistance’’ was redundant of              that at least one percent of the purchase               § 982.631, etc.).
HUD’s existing definition of ‘‘welfare              price come from the family’s personal                      9. Homeownership assistance as a
assistance.’’ Further, the use of the term          resources;                                              reasonable accommodation
‘‘welfare assistance’’ in this final rule              • Requires that financing for purchase               (§ 982.627(b)(3)). This final rule revises
will help to ensure the consistent use of           of a home under its Section 8                           § 982.627 to clarify that a family


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00009   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55142        Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

containing a family member with                        15. Interruptions in employment                         23. Seller certification in contract of
disabilities who requires                           (§ 982.627(d)(2)). The final rule provides              sale that the seller is not debarred,
homeownership assistance as a                       that the PHA has the discretion to                      suspended, or subject to a limited denial
reasonable accommodation is eligible                determine whether (and to what extent)                  of participation (§ 982.631(c)(2)(v)). In
for the homeownership option,                       an employment interruption is                           response to public comment, the final
regardless of whether the family is a               considered permissible in satisfying the                rule provides that the contract of sale
cooperative member or a first-time                  employment requirement. The final rule                  must contain a seller certification that
homeowner (as those terms are defined               also clarifies that the PHA may consider                the seller is not debarred, suspended, or
at § 982.4).                                        successive employment during the one-                   subject to a limited denial of
   10. Prohibition on the provision of              year period and self-employment in a                    participation under 24 CFR part 24.
homeownership assistance to family                  business.                                                  24. Applicability of Federal Housing
with present ownership interest                        16. Eligible homes for purchase under                Administration (FHA) underwriting
(§ 982.627(a)(6)). This final rule clarifies        the homeownership option                                standards for non-FHA insured loans
that, except for cooperative members                (§ 982.628(a)(2)). The final rule provides              (§ 982.632). The final rule removes the
who have acquired cooperative                       that a home is eligible for purchase                    requirement that purchases of homes
membership shares prior to the                      under the homeownership option if, at                   financed without FHA mortgage
commencement of homeownership                       the time the PHA determines that the                    insurance must, nonetheless, comply
assistance, no family member may have               family is eligible to purchase the home                 with the basic underwriting
a present ownership interest in a                   with homeownership assistance, the                      requirements for FHA-insured single
residence at the commencement of                    home is either under construction or                    family homes. However, the final rule
homeownership assistance for the                    already existing.                                       continues to provide that if the purchase
purchase of any home.                                  17. Provision of homeownership                       of the home is financed with FHA
   11. Establishment of national                    counseling (§ 982.630). The final rule                  mortgage insurance, such financing is
minimum income requirement                          clarifies that, although the PHA must                   subject to FHA mortgage insurance
(§ 982.627(c)). At the request of several           require pre-assistance homeownership                    requirements.
                                                                                                               25. PHA approval of refinancing
public commenters, the final rule                   counseling, the PHA is not itself
                                                                                                            agreements or securing of additional
establishes a national minimum income               obligated to provide the required
                                                                                                            financing on the home (§ 982.632(c)).
requirement that is equal to 2,000 hours            counseling.
                                                                                                            The final rule provides that the PHA
of annual full-time work at the Federal                18. Housing counseling topics
                                                                                                            may establish requirements or other
minimum wage. A PHA may not                         (§ 982.630(b)). The final rule clarifies
                                                                                                            restrictions concerning debt secured by
establish a minimum income                          that the PHA-required counseling
                                                                                                            the home.
requirement in addition to the                      program should ‘‘generally’’ cover the                     26. PHA disapproval of lender
minimum income standard established                 topics listed in § 982.629(b).                          qualifications and loan terms
by this rule.                                          19. Fair housing as a suggested                      (§ 982.632(d)). This final rule clarifies
   12. Fulfilling the minimum income                counseling topic (§ 982.630(b)(8)). The                 that the PHA may review lender
requirement (§ 982.627(c)(1)). In                   final rule expands the list of suggested                qualifications and the loan terms before
response to public comment, the final               housing counseling topics to include                    authorizing homeownership assistance.
rule provides that the adult family                 information on fair housing, fair                       The PHA may disapprove proposed
members who will own the home at the                housing lending practices, and local fair               financing, refinancing or other debt if
commencement of the homeownership                   housing enforcement agencies.                           the PHA determines that the debt is
assistance (as opposed to only the head                20. RESPA and predatory lending as                   unaffordable, or if the PHA determines
of household or spouse) must have                   suggested counseling topics                             that the lender or the loan terms do not
annual income (gross income) that is not            (§ 982.630(b)(9)). The final rule expands               meet PHA qualifications.
less than the minimum income                        the list of suggested housing counseling                   27. Prohibition on ownership interest
requirement.                                        topics to include information about the                 in second residence (§ 982.633(b)(7)).
   13. Establishment of national                    Real Estate Settlement Procedures Act                   This final rule clarifies that no family
employment requirement (§ 982.627(d)).              (12 U.S.C. 2601 et seq.) (RESPA), state                 member may have a present ownership
At the request of several public                    and Federal truth-in-lending laws, and                  interest in a second residence while
commenters, this final rule establishes a           how to identify and avoid loans with                    receiving homeownership assistance.
uniform national employment                         oppressive terms and conditions.                           28. Additional requirements for
requirement. For purposes of                           21. Revision of housing counseling                   continuation of homeownership
uniformity, the final rule defines ‘‘full-          topics (§ 982.630(c)). The final rule                   assistance (§ 982.633(b)(8)). The final
time employment’’ to mean not less                  provides that a PHA may revise the                      rule provides that the additional
than an average of 30 hours per week.               subjects covered in the pre-assistance                  requirements for continuation of
Further, the final rule adds a new                  counseling to address local                             homeownership assistance established
§ 982.627(d)(4), which provides that a              circumstances and the needs of                          by the PHA may include a requirement
PHA may not establish an employment                 individual families.                                    for post-purchase homeownership
requirement in addition to the                         22. Housing counseling standards                     counseling or for periodic unit
employment standard established by the              (§ 982.630(e)). The final rule provides                 inspections while the family is receiving
final rule.                                         that, if the PHA is not using a HUD-                    homeownership assistance. With
   14. Fulfilling the employment                    approved housing counseling agency to                   regards to post-purchase counseling,
requirement (§ 982.627(d)(1)). The final            provide the counseling for families                     PHAs are encouraged to at least provide
rule provides that one or more adult                participating in the homeownership                      the family written briefing materials
members of the family who will own the              option, the PHA should ensure that its                  covering the topics in the PHA-required
home at commencement of                             counseling program is consistent with                   housing counseling program at the time
homeownership assistance (not just the              the homeownership counseling                            of any refinancing of the initial debt, or
head of household or spouse) must                   provided under HUD’s Housing                            the financing for improvement or repair
fulfill the employment requirement.                 Counseling program.                                     of the home.


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00010   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55143

   29. Maximum term of homeownership                cooperative or condominium operating                    voucher homeownership assistance for
assistance (§ 982.634). The final rule              charges or maintenance fees assessed by                 any member of a family that is
provides for a mandatory term limit on              the condominium or cooperative                          dispossessed from the home pursuant to
homeownership assistance of 15 years if             homeowner association.                                  a judgement or order of foreclosure on
the initial mortgage incurred to finance               33. Homeownership assistance                         any mortgage (whether FHA-insured or
purchase of the home has a term that is             payments to lender or family                            non-FHA) securing debt incurred to
20 years or longer. In all other cases, the         (§ 982.635(d)(2)). The final rule clarifies             purchase the home, or any refinancing
maximum term of homeownership                       that, if the PHA decides to make the                    of such debt. However, the family may
assistance is 10 years. The PHA may not             homeownership assistance payments                       be eligible to receive continued voucher
establish shorter or longer maximum                 directly to the lender, and the assistance              rental assistance. The PHA may
terms.                                              payment exceeds the amount due to the                   consider mitigating circumstances in
   30. Applicability of maximum term                lender, the PHA must pay the excess                     determining whether to provide a family
for homeownership assistance                        amount directly to the family.                          with rental assistance after a mortgage
(§ 982.634). The final rule clarifies that             34. Automatic termination of                         default.
the maximum term for homeownership                  homeownership assistance                                   39. Recapture of homeownership
assistance applies to any member of the             (§ 982.635(e)). The final rule clarifies                assistance (§ 982.640). In response to
household who has an ownership                      that homeownership assistance for a                     public comment, the final rule provides
interest in the unit during any time that           family terminates automatically 180                     for the recapture of a percentage of
homeownership payments are made, or                 calendar days after the last housing                    homeownership assistance provided to
is the spouse of any member of the                  assistance payment on behalf of the                     the family upon the sale or refinancing
household who has an ownership                      family. However, a PHA has the                          of the home. Sales proceeds that are
interest in the unit at the time                    discretion to grant relief from this                    used by the family to purchase a new
homeownership payments are made.                    requirement in those cases where                        home with Section 8 homeownership
   As in the proposed rule, the final rule          automatic termination would result in                   assistance are not subject to recapture.
provides that the maximum term for                  extreme hardship for the family.                        Further, a family may refinance to take
homeownership assistance does not                      35. Clarification of portability                     advantage of lower interest rates, or
apply to an elderly family or a disabled            procedures (§ 982.636). This final rule                 better mortgage terms, without any
family. The final rule clarifies that, in           clarifies the portability procedures for                recapture penalty. Only those proceeds
the case of an elderly family, this                 Section 8 homeownership assistance.                     realized upon refinancing that are
exception is only applied if the family             Generally, a family determined eligible                 retained by the family (for example
qualifies as an elderly family at the               for homeownership assistance by the                     during a ‘‘cash-out’’ of the refinanced
commencement of homeownership                       initial PHA may purchase a unit outside                 debt) are subject to the new recapture
assistance. In the case of a disabled               of the initial PHA’s jurisdiction, if the               provision.
family, this exception applies if at any            receiving PHA is administering a                           The final rule requires that, upon
time during receipt of homeownership                voucher homeownership program and is                    purchase of the home, a family receiving
assistance the family qualifies as a                accepting new homeownership families.                   homeownership assistance shall execute
disabled family.                                    In general, the portability procedures for              documentation as required by HUD, and
   If, during the course of                         the Housing Choice Voucher program                      consistent with State and local law, that
homeownership assistance, the family                (described in §§ 982.353 and 982.355)                   secures the PHA’s right to recapture the
ceases to qualify as a disabled or elderly          apply to the homeownership option and                   homeownership assistance. The lien
family, the maximum term becomes                    the administrative responsibilities of the              securing the recapture of
applicable from the date                            initial and receiving PHA are not altered               homeownership subsidy may be
homeownership assistance commenced.                 except that some administrative                         subordinated to a refinanced mortgage.
However, such a family must be                      functions (e.g, issuance of a voucher or                The amount of homeownership
provided at least 6 months of                       execution of a tenancy addendum) do                     assistance subject to recapture shall
homeownership assistance after the                  not apply to the homeownership option.                  automatically be reduced over a 10 year
maximum term becomes applicable                        36. Prohibition on provision of                      period, beginning one year from the
(provided the family is otherwise                   continued assistance to family with                     purchase date, in annual increments of
eligible to receive homeownership                   interest in prior home (§ 982.637(a)(2)).               10 percent. At the end of the 10 year
assistance in accordance with this part).           The final rule provides that a PHA may                  period, the amount of the
   31. Inclusion of accessibility                   not commence continued tenant-based                     homeownership assistance subject to
modifications as homeownership                      assistance for occupancy of the new unit                recapture will be zero.
expenses (§ 982.635(c)(2)(vii) and                  so long as any family member owns any
§ 982.635(c)(3)(vii)). The final rule                                                                       IV. Public Comments Received on the
                                                    title or other interest in the prior home.
clarifies that, if a member of the family              37. Denial or termination of                         April 30, 1999 Proposed Rule
is a person with disabilities, eligible             homeownership assistance (§ 982.638).                     The public comment period on the
homeownership expenses may include                  For purposes of clarity, the final rule                 April 30, 1999 proposed rule closed on
debt incurred to finance costs needed to            consolidates the provisions regarding                   June 29, 1999. HUD received 93 public
make the home accessible for the family             the denial and termination of                           comments. Comments were submitted
member, if the PHA determines that the              homeownership assistance in a new                       by PHAs, including regional and State
allowance is needed as a reasonable                 § 982.638.                                              housing agencies; national organizations
accommodation.                                         38. Continued assistance after                       representing PHAs; legal services
   32. Inclusion of condominium or                  mortgage defaults (§ 982.638(d)). This                  organizations; mortgage bankers; Fannie
cooperative operating charges or                    final rule clarifies the regulatory                     Mae and Freddie Mac; advocates for
maintenance fees as homeownership                   provisions regarding continued                          persons with disabilities; low-income
expenses (§ 982.635(c)(4)). The final rule          assistance to a family that has defaulted               housing advocates; and various other
provides that, if the home is a                     on a mortgage obtained through the                      organizations and individuals. The
cooperative or condominium unit,                    homeownership option. The final rule                    following sections of this preamble
homeownership expenses may include                  provides that the PHA must terminate                    present a summary of the significant


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00011   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55144       Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

issues raised by the public commenters              assistance for extremely low-income                     permit localized financing strategies in
on the April 30, 1999 proposed rule,                families. According to these                            order to achieve success in individual
and HUD’s responses to these                        commenters, the homeownership option                    communities. The approach of the final
comments.                                           is geared toward families with relatively               rule is consistent with two of the
   Section V. of the preamble discusses             higher incomes than the typical Section                 purposes of the Public Housing Reform
general comments that did not address               8 rental program participant.                           Act: to deregulate PHAs, and to provide
a specific regulatory section. Section VI.             HUD response. Section 8(y) provides                  more flexible use of Federal assistance
of the preamble discusses those                     that a PHA, in its discretion, may make                 to PHAs (see section 505(b) of the Public
comments that concerned a specific                  Section 8 homeownership assistance                      Housing Reform Act).
regulatory provision of the proposed                available to eligible families. HUD                       While standardized requirements may
rule.                                               anticipates that PHAs will consider                     facilitate participation by certain
                                                    local circumstances (such as the                        regional and national financing entities,
V. Discussion of General Comments Not               availability of other local resources)                  and increase opportunities for sales of
Regarding a Specific Regulatory                     when deciding whether or not to                         mortgages in the secondary market,
Section                                             implement a homeownership program.                      HUD believes that PHA flexibility over
A. Support for Proposed Rule                           HUD does not believe it is necessary                 certain features of the program will not
                                                    to establish upper limits on the number                 preclude that result. For instance, a
   Comment: Support for proposed rule.              of families a PHA may allow to                          regional lending institution could
Several commenters expressed support                participate in the homeownership                        establish its own requirements to
for the proposed rule and the concept of            option in order to protect the interests                participate in the section 8(y) program.
the Section 8 homeownership option.                 of extremely low-income families. Since                 PHAs could then choose to structure
One commenter wrote: ‘‘In general, [our             the same income targeting requirements                  their programs accordingly in order to
PHA] commends the job that HUD has                  apply to the rental and homeownership                   comply with and complement the
done in this component of the immense               components of the Section 8 Housing                     lender’s requirements for participation.
regulatory undertaking required by the              Choice Voucher program,
[Public Housing Reform Act].’’ Another              implementation of the homeownership                     C. Comments Regarding Persons with
commenter wrote that its board                      option should not have a significant                    Disabilities
‘‘unanimously endorsed the concept of               effect on the availability of Section 8                    Comment: Support for rule provisions
the Section 8 homeownership program,                voucher assistance to extremely low-                    regarding the elderly and persons with
and applauds HUD for taking this                    income applicants.                                      disabilities. A number of commenters
initiative.’’ Still another commenter                  Comment: The lack of uniformity in                   commended HUD for the sensitivity
wrote: ‘‘[We] applaud the proposed                  program rules for PHAs will discourage                  shown in the proposed rule to persons
Section 8 Homeownership Program.’’                  lender participation and impede family                  with disabilities’ real life situations,
   HUD Response. HUD is appreciative                choice and economic mobility. Several                   especially in the areas of income and
of the comments in support of HUD’s                 commenters wrote that the proposed                      employment. These commenters wrote
efforts in developing the proposed rule.            rule grants too much discretion to PHAs                 that the proposed rule demonstrated
HUD believes that the Section 8                     to establish certain critical elements of               that HUD is attuned to disability issues
homeownership option will provide                   the homeownership program. These                        and that a conscious effort was made to
local PHAs with greater flexibility in              areas include minimum income                            recognize those barriers faced in
addressing the housing needs of their               requirements, program eligibility                       accessible housing.
communities while creating                          requirements, financing requirements,                      HUD response. HUD appreciates the
homeownership opportunities for the                 and the duration of homeownership                       comments supporting the proposed rule
low-income families the Section 8                   assistance. The commenters wrote that,                  provisions concerning the elderly and
tenant-based program is designed to                 as a result of the lack of uniform rules,               persons with disabilities.
serve.                                              there will be considerable disparity                       Comment: The rule should require the
                                                    from one jurisdiction to another unless                 PHA or a local supportive service
B. General Concerns About the
                                                    HUD imposes uniform rules. The                          provider to annually review difficulties
Proposed Rule
                                                    commenters wrote that such disparities                  faced by persons with disabilities in
  Comment: HUD should prohibit or                   would discourage lender participation                   maintaining their mortgage payments or
limit the use of Section 8 rental                   and prevent regional efforts to expand                  homes. The commenter submitting this
assistance funds for homeownership.                 homeownership opportunities. Without                    suggestion wrote that an annual review
Several commenters were opposed to                  broad lender participation, families                    is necessary to ensure that: (1)
the concept of Section 8                            would be deprived of the protections                    homeowners with disabilities continue
homeownership. These commenters                     offered by a competitive marketplace                    to be able to access the supportive
wrote that limited Section 8 resources              and would be vulnerable to fraudulent                   services they choose; and (2) supportive
should be used solely to assist families            real estate and financing practices.                    service agencies and the PHA are aware
in renting decent, safe, and sanitary                  HUD response. The final rule                         of any problems the family may be
units. One of the commenters wrote that             continues to provide PHAs with broad                    having.
many communities currently offer other              administrative flexibility over the                        HUD Response: The final rule
programs with Community                             homeownership option. Where HUD has                     provides that PHAs may offer post-
Development Block Grant (CDBG),                     determined that uniformity is                           purchase counseling, and HUD
HOME, or state or local funding to assist           appropriate (such as in the areas of                    encourages the use of such counseling
prospective first-time homebuyers.                  minimum income, employment, and                         to further lessen the risk of defaults.
Several of the commenters suggested                 maximum term of assistance), this final                 However, it would be inappropriate to
that HUD should establish reasonable                rule establishes uniform Federal                        limit post-purchase counseling to
upper limits on the number or                       standards. However, HUD continues to                    persons with disabilities, and HUD
percentage of households that can use               believe that administrative flexibility is              believes it would be inappropriate to
the homeownership option, in order to               essential for the program to address                    presume that persons with disabilities
protect the availability of rental                  local needs, adapt to local markets, and                require additional scrutiny because they


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00012   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55145

are more likely to default on their                   HUD response. The Section 8                           agencies or private nonprofits to
mortgages. Accordingly, HUD has not                 homeownership program is a ‘‘special                    administer a Section 8 homeownership
adopted the suggestion made by the                  housing type’’ under subpart M of the                   program. Several commenters wrote that
commenter.                                          tenant-based Section 8 program                          this approach would expand
   Comment: The rule should define                  regulations. Except when specifically                   homeownership opportunities for
what constitutes a ‘‘reasonable                     modified by subpart M, requirements in                  persons with disabilities, even in those
accommodation’’ for a person with                   the other subparts of the tenant-based                  cases where a PHA chooses not to
disabilities. Several commenters wrote              regulations apply to the special housing                provide the homeownership option or
that the proposed rule would require a              types (including the homeownership                      where there is no tenant-based program
PHA to offer Section 8 homeownership                program). Accordingly, as specified in                  at all (perhaps an area where there is
assistance ‘‘if needed as a reasonable              § 982.301, the PHA, in briefing a family                little or no rental housing, but an
accommodation for a family member                   that includes any person with                           abundance of low-cost single-family
who is a person with disabilities’’ (64             disabilities, must take appropriate steps               homes).
FR 23488). These commenters suggested               to ensure effective communication in                       HUD response. Section 8(o)(15) of the
that the final rule should establish                accordance with 24 CFR 8.6.                             1937 Act specifically provides that a
guidelines to determine when                                                                                PHA providing tenant-based assistance
homeownership assistance is a                       D. Comments Regarding the Role of                       ‘‘may at the option of the agency,
‘‘reasonable accommodation.’’ The                   Nonprofits                                              provide assistance for homeownership’’
commenters wrote that, without such                    Comment: The final rule should                       and that a PHA ‘‘may contract with a
guidance in the final rule, PHAs that               encourage PHAs to contract with                         nonprofit organization to administer a
choose not to provide a homeownership               nonprofit organizations to administer                   homeownership program.’’ The decision
option may fail to provide the required             the homeownership assistance. A                         to offer homeownership assistance rests
‘‘reasonable accommodation’’ to persons             number of commenters wrote that PHAs                    with the PHA and there is no additional
with disabilities.                                  have had little experience in operating                 or separate funding provided for
   Other commenters, however, wrote                 homeownership programs, whereas                         homeownership assistance. A PHA that
that PHAs should not be required to                 nonprofits have a solid-track record in                 does not want to use existing staff to
offer homeownership assistance as a                 this area. These commenters wrote that                  implement a homeownership program
reasonable accommodation. The                       PHA partnerships with nonprofits may                    may consider subcontracting with a
commenters wrote that this obligation               prove particularly helpful in preventing                nonprofit organization to administer the
could be costly to a PHA that has not               fraud and other abusive practices. In                   homeownership program on behalf of
elected to offer the homeownership                  addition, the commenters wrote that                     the PHA, but is not required to do so.
option and has not assembled the                    nonprofits’ knowledge of the market can
counseling and other resources needed               help ensure that families are exposed to                E. Comments Regarding Income
to operate it.                                      housing choices in a range of                           Targeting
   HUD response. The provision of                   neighborhoods. The commenters wrote                        Comment: The final rule should
homeownership assistance as a                       that there is much to be gained by                      clarify whether Section 8
reasonable accommodation is                         requiring, or at least strongly                         homeownership subsidies are subject to
determined on a case-by-case basis by               encouraging, PHAs to partner with                       the same income targeting requirements
the PHA. The PHA will determine what                nonprofits in the design and operation                  as the Section 8 rental assistance
is reasonable based on the specific                 of Section 8 homeownership programs.                    program. A few commenters wrote that
circumstances and individual needs of                  HUD response. While the final rule                   if the new income targeting
the person with a disability. It is the             does not require the PHA to partner                     requirements of the Public Housing
sole responsibility of the PHA to                   with a nonprofit, the PHA may wish to                   Reform Act apply, the requirements will
determine whether it is reasonable to               consider subcontracting with nonprofits                 reduce the pool of families eligible for
implement a homeownership program                   for administration of one or more of the                Section 8 homeownership assistance.
as a reasonable accommodation. For                  responsibilities under the                                 HUD response. The Section 8
example, depending on the individual                homeownership program, just as it may                   homeownership program is a ‘‘special
circumstances, the PHA may determine                contract out other PHA functions in                     housing type’’ under subpart M of the
that it is a reasonable accommodation to            administering the Section 8 Housing                     tenant-based Section 8 program
provide homeownership assistance                    Choice Voucher program. Alternatively,                  regulations. Except when specifically
when the PHA has implemented a                      the PHA may wish to consult with                        modified by subpart M, requirements in
limited homeownership program and is                nonprofit organizations with                            the other subparts of the tenant-based
currently assisting the maximum                     homeownership experience in designing                   regulations apply to the special housing
number of homeowners in the PHA                     the PHA’s homeownership program.                        types (including the homeownership
program. On the other hand, the PHA                 HUD encourages PHAs lacking in                          program). The income targeting
may determine that it is not reasonable             homeownership program experience to                     requirements apply to the PHA’s entire
to provide homeownership assistance as              explore the possibility of working with                 tenant-based Section 8 program,
a reasonable accommodation in cases                 experienced nonprofits through                          including the rental and any
where the PHA has otherwise opted not               partnerships or contractual                             homeownership portion of the program.
to implement a homeownership                        arrangements to design and administer                      HUD anticipates that most
program.                                            a successful section 8(y) program.                      participants in the Section 8
   Comment: All homeownership                       Regardless of the PHA approach to the                   homeownership program will be current
briefing materials should be accessible             delivery of PHA responsibilities, the                   program participants, not applicants.
to persons with disabilities. Several               PHA is always responsible for overall                   Since families continuing to receive
commenters suggested that HUD should                compliance with program requirements.                   assistance under the 1937 Act are not
ensure that all homeownership                          Comment: Where there is no PHA                       considered as new admissions, their
programs and briefing materials are                 willing to implement the                                income levels are not examined for
accessible to person with all types of              homeownership option in a particular                    compliance with income targeting
disabilities.                                       area, HUD should permit other public                    requirements.


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00013   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55146       Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

F. Comments Regarding the                              One of the commenters wrote that                     PHA may choose to make
Relationship Between the                            lenders should not consider Section 8                   homeownership assistance freely
Homeownership Option and the Family                 assistance as a source of income because                available for any qualified applicant or
Self-Sufficiency (FSS) Program                      payments are not earned income or                       participant, or to restrict
                                                    entitlement income, are not guaranteed                  homeownership assistance to families or
   Comment: Linking the FSS Program to              for more than 12 months, and may                        purposes defined by the agency. (64 FR
Homeownership Option. One                           decrease with an increase in total family               23488)
commenter expressed the opinion that it             income or violation of Section 8                          One commenter wrote that the
is very important to retain PHA                     program requirements.                                   proposed regulatory text does not
discretion regarding whether to link the               Another commenter recommended                        contain comparable language. The
Section 8 homeownership program to                  that the final rule prohibit                            commenter wrote that a PHA should
FSS. Several commenters wrote that                  discrimination based on source of                       have the discretion to limit application
families should not be required to                  income because lending institutions do                  of its Section 8 homeownership
participate in the FSS program as a                 not view government benefits as a                       program, in whole or in part, to achieve
condition of receiving homeownership                reliable or stable source of income.                    local housing goals or priorities.
assistance.                                         Accordingly, these lenders will be                      Accordingly, the commenter suggested
   HUD response. There is no federal                unlikely to approve home loan                           that the final rule contain regulatory text
requirement that families must                      applications from Section 8 recipients.                 equivalent to the quoted preamble
participate in the FSS program as a                    HUD response. Section 8(y) does not                  language.
condition of receiving homeownership                regulate the lending industry.                            HUD response. The final rule
assistance. There is, however, PHA                  Consequently, the final rule does not                   explicitly provides at § 982.626(b) that
administrative flexibility to link the FSS          impose any requirement on lenders to                    the PHA may limit homeownership
and homeownership programs. For                     treat the subsidy in a certain manner,                  assistance to families or purposes
example, the PHA may adopt local                    nor does the rule prohibit                              defined by the PHA.
                                                    discrimination by lenders based on                        Comment: HUD should explicitly
homeownership eligibility requirements
                                                    source of income. Lenders will apply                    authorize and encourage PHAs to join
such as participation in the FSS
                                                    their underwriting criteria for financing               together to administer the
program. The PHA may opt to
                                                    of homes to be purchased under the                      homeownership option. Several
incorporate the homeownership goal in
                                                    Section 8 homeownership program.                        commenters wrote that lenders are
the family’s FSS contract of
                                                    HUD notes that, to the extent applicable,               much more likely to participate in a
participation so any FSS escrow could
                                                    lenders must comply with the Equal                      regional program than in a program
be advanced for purchase of a home or
                                                    Credit Opportunity Act (15 U.S.C. 1601                  whose rules vary from PHA to PHA. The
home maintenance/improvement
                                                    et seq.) (referred to as ‘‘ECOA’’) and the              commenters wrote that a regional
purposes. HUD believes that PHA
                                                    implementing regulations issued by the                  program would facilitate mobility and
discretion over this issue is appropriate
                                                    Federal Reserve Board at 12 CFR part                    minimize portability concerns.
and in keeping with the intention to                                                                          HUD response. PHAs currently have
ensure there is sufficient PHA flexibility          202. ECOA prohibits lending
                                                    discrimination, including                               necessary flexibility to join in the
to address the local community’s needs                                                                      regional administration of the
and objectives in the administrative                discrimination based on receipt of
                                                    public assistance.                                      homeownership option. Explicit
policies of the program.                                                                                    authorization is not necessary for PHAs
G. Considering Section 8 Assistance as              H. Comments Regarding Mortgage                          to jointly administer (or otherwise
Income for Purposes of Financing                    Defaults                                                cooperate in the administration) of the
Purchase of Home                                      Comment: HUD should require that                      Section 8 homeownership program.
                                                    each PHA with a homeownership                             Comment: PHAs should be required to
  Comment: Section 8 assistance should              program develop a strategy to reduce                    provide homeownership option. A few
not be considered income for purposes               foreclosure risk. Two commenters wrote                  commenters suggested that PHAs
of financing the purchase of the home.              that such a requirement would help                      should be required to offer Section 8
Several commenters wrote that the                   minimize foreclosures among                             homeownership assistance. The
proposed rule did not adequately                    participating families.                                 commenters wrote that HUD should
consider the high cost of housing in                  HUD response. Although HUD has not                    exempt a PHA from offering
certain metropolitan areas. The                     adopted the suggestion, the final rule                  homeownership assistance only if the
commenters wrote that the preamble to               does provide that a family must attend                  PHA can document that implementing
the proposed rule states that ‘‘it is               and satisfactorily complete pre-                        the homeownership option in its
anticipated that mortgage lenders will              assistance homeownership counseling                     jurisdiction would not be feasible.
consider the Section 8 assistance as a              before homeownership assistance may                       HUD response. The recommendation
source of income when underwriting                  commence. In addition, HUD                              made by the commenters is inconsistent
the loan’’ (64 FR 23488, 23489). Instead,           encourages PHAs to provide post-                        with the 1937 Act. Section 8(o)(15) of
the commenters suggested that the final             purchase counseling and otherwise                       the 1937 Act specifically provides that
rule should require that the voucher                develop local strategies to reduce                      a PHA providing tenant-based Section 8
housing assistance payment be                       mortgage foreclosures by families                       assistance ‘‘may at the option of the
deducted from the monthly housing                   participating in the homeownership                      agency, provide assistance for
expense. The commenters wrote that,                 program.                                                homeownership.’’ Accordingly, HUD
due to the high cost of housing in                                                                          has not adopted the suggestion made by
certain metropolitan areas, the housing             I. Other General Comments                               the commenters.
assistance payment will not raise                      Comment: The final rule should                         Comment: HUD should isolate
income sufficiently to permit the family            explicitly permit PHAs to limit                         Section 8 homeownership loans from
to qualify for a loan in an amount                  homeownership assistance to local                       other FHA loans. One commenter wrote
necessary to purchase a good quality                needs. The preamble to the April 30,                    that loans under the Section 8
home.                                               1999 proposed rule provided that: The                   homeownership program will likely


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00014   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55147

have higher default ratios than other               Section 8 homeownership program                         definition would better reflect the
loans, and that lenders originating these           since homeownership families do not                     reality of diverse legal practices among
loans would be penalized when their                 pay rent.                                               states. Another commenter wrote that
default numbers are higher than those of              Comment: If the lender is relying on                  the proposed definition is unnecessarily
their peers who have not participated in            the Section 8 assistance to secure the                  intrusive, imposes unnecessary
the program. Specifically, the                      mortgage, is the family, the PHA, or                    administrative functions, and unduly
commenter wrote that lenders                        HUD is responsible for payment of the                   hinders the use of cooperative housing.
participating in the Section 8                      note?                                                     HUD response. Consistent with the
homeownership program might unfairly                  HUD response. Neither the PHA nor                     recommendation, the regulatory
lose their FHA approved lender status.              HUD is guarantor of mortgage note for                   definition of ‘‘cooperative’’ in the final
Therefore, the commenter suggested that             a home being purchased under the                        rule is no longer limited to housing
HUD’s tracking systems should isolate               Section 8 program. The terms of the                     owned by a nonprofit entity.
loans issued under the Section 8                    loan note will determine who is
                                                                                                            B. Lease-purchase arrangements
homeownership program from other                    responsible for payment (usually the
                                                                                                            (proposed §§ 982.305 and 982.317)
FHA loans.                                          family) of the loan.
  HUD response. Lenders will use                                                                              Comment: HUD should develop a
                                                    VI. Discussion of Comments Regarding                    model lease-purchase agreement to
normal FHA underwriting criteria for                a Specific Regulatory Section
FHA-insured loans. As a result, HUD                                                                         prevent fraud by seller. The commenter
does not anticipate a higher than                      For the convenience of readers, the                  wrote that a standard lease-purchase
average default rate and HUD does not               discussion that follows is organized by                 agreement would prevent seller fraud.
intend to track these loans separately.             the regulatory section of the proposed                    HUD response. HUD does not intend
                                                    rule it pertains to (e.g., § 982.625,                   to provide or require the use of a
J. General Questions About the                      § 982.633, etc.). As noted, HUD has                     standard HUD-prescribed lease-
Proposed Rule                                       made several organizational changes at                  purchase agreement for the Housing
   Comment: Is a PHA an eligible seller             the final rule stage. Accordingly, the                  Choice Voucher program. HUD believes
under the homeownership program?                    proposed regulatory section headings do                 broad flexibility is needed in this area
   HUD response. There is no                        not always correspond to those of this                  to reflect the wide range of acceptable
prohibition against a family purchasing             final rule.                                             real estate market practices that differ
a PHA-owned home under the Section                                                                          among localities.
                                                    A. Definitions (proposed § 982.4)                         Comment: Applicability of
8 homeownership program. However,
the PHA cannot steer families (or                      Comment: Definition of ‘‘Public                      homeownership requirements upon
otherwise limit or restrict purchase                Assistance’’ is too broad. Several                      entering lease-purchase agreement. Two
options) to PHA-owned or controlled                 commenters wrote that the proposed                      commenters suggested that a lease-
units.                                              definition of ‘‘public assistance’’ is                  purchase family should be required to
   Comment: Is a manufactured home                  overly broad and subject to                             comply with all homeownership
eligible for purchase under the                     misinterpretation. The commenters                       requirements before purchase of the
homeownership program?                              suggested that the definition should be                 home. Another commenter wrote that
   HUD response. A manufactured home                narrowed to specifically identify only                  PHAs should be provided with the
and the real property upon which the                those welfare programs that may not be                  option of requiring compliance with the
manufactured home sits are eligible for             counted in determining minimum                          homeownership requirements at the
purchase under the homeownership                    income. Other commenters wrote that                     start of the lease-purchase arrangement.
program.                                            the definition should exclude food                        One commenter wrote that Section 8
   Comment: At annual reexaminations                stamps, unemployment insurance and                      families opting for homeownership
of family income subsequent to home                 permanent disability payments.                          through a lease-purchase arrangement
purchase, will the owned home be                       HUD response. The final rule                         should be required to satisfy at least half
counted as an asset? One commenter                  addresses the concerns raised by the                    the continuous employment and half
wrote that this could become a serious              commenters regarding the clarity of the                 the required counseling requirements at
problem if there is rapid appreciation of           definition of ‘‘public assistance.’’                    the time they enter the lease-purchase
the value of the home.                              Specifically, HUD has removed the                       program. The commenter wrote that,
   HUD response. In response to this                definition of the term ‘‘public                         since lease-purchase families typically
comment, HUD has revised the                        assistance’’ and adopted, in its place,                 have credit-history problems to clear up
definition of ‘‘net family assets’’ found           the definition of the term ‘‘welfare                    over time, it would be onerous to
in 24 CFR 5.603(d). The revised                     assistance’’ located in 24 CFR 5.603.                   impose all of the homeownership
definition excludes the value of a home             The definition of ‘‘welfare assistance’’ is             requirements on the family at the time
currently being purchased with Section              well-established and understood by                      of their entrance into the program.
8 homeownership assistance. This                    PHAs. Further, the use of the term                        Other commenters wrote that a lease-
exclusion is limited to the first 10 years          ‘‘welfare assistance’’ in this final rule               purchase family should be subject to the
after the purchase date of the home.                will help to ensure the consistent use of               independent professional home
   Comment: Is the initial 40 percent               defined terms throughout HUD’s                          inspection requirements of the
maximum rent burden requirement                     regulations.                                            homeownership program before
under the Housing Choice Voucher                       Comment: The definition of                           entering into a lease-purchase
program applicable to the                           ‘‘cooperative’’ should not be limited to                arrangement. These commenters wrote
homeownership option? The commenter                 ‘‘housing owned by a nonprofit                          that it would be devastating to a lease-
wrote that this provision, if applied to            corporation or association.’’ One                       purchase family to reach the purchase
the homeownership program, would                    commenter wrote that many housing                       option stage only to discover that the
severely limit housing choice.                      cooperatives are incorporated under                     purchase is jeopardized due to a
   HUD response. The 40 percent initial             their home state’s business corporation                 property defect.
rent burden cap does not apply to                   act. The commenter suggested that by                      Several commenters suggested that
families who will participate in the                dropping the word ‘‘nonprofit,’’ the                    the counseling requirement should be


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00015   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55148       Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

applicable before entering into the lease-          acquisition to low-income families.                     homeownership assistance should not
purchase arrangement. These                         Section 8 rental assistance is currently                be made available at initial admission.
commenters wrote that families should               used in these settings to pay for the                   According to the commenter, this will
have an idea of what the responsibilities           membership acquisition over time.                       facilitate proper counseling and a
of homeownership are before entering                   HUD response. This comment, which                    considered housing search without
into a lease-purchase arrangement.                  appears to relate only to Section 8 rental              imposing artificial deadlines.
  One commenter wrote that HUD                      assistance, is outside the scope of this                   HUD response. HUD has not adopted
should continue to allow a family to                rulemaking, which implements the                        this suggestion. HUD notes, however,
enter into a lease-purchase arrangement             ‘‘homeownership option’’ authorized by                  that PHAs may choose to impose this
without being subject to the                        section 8(y) of the 1937 Act. HUD notes,                condition as an additional requirement
homeownership program requirements.                 however, that the final rule provides                   for eligibility.
  HUD response. HUD has not changed                 that the costs of purchasing a                             Comment: Possible exceptions to the
the requirements specified in the                   cooperative unit may be included as a                   first-time homebuyer requirement.
proposed rule for lease-purchase                    ‘‘homeownership expense’’ for purposes                  Several commenters made suggestions
arrangements. The final rule does not               of determining the amount of monthly                    on possible exceptions to the first-time
require families with lease-purchase                homeownership assistance payment (see                   homebuyer requirement. Other
arrangements under the Section 8                    § 982.635(c) of this final rule).                       commenters, however, wrote that HUD
tenant-based rental program to comply                                                                       should retain the first-time
with any of the Section 8                           D. Homeownership Option: General
                                                    (proposed § 982.625)                                    homeownership requirements as set
homeownership program requirements.                                                                         forth in the proposed rule, since the
However, HUD believes it is in the best                Comment: Newly constructed homes                     definition conforms to the industry
interest of these families for the PHA to           or units under construction should be                   standard. Among the suggested
brief the family on the homeownership               eligible for purchase under the                         exceptions, were exceptions for:
requirements if they expect to receive              homeownership option. Several                              • A divorced spouse who does not
Section 8 homeownership assistance to               commenters wrote that in some areas                     retain homeownership interest;
complete the purchase transaction. The              the only affordable housing is new                         • Persons with disabilities who lost a
PHA may refer families participating in             housing being constructed by                            previous home as a result of becoming
lease-purchase arrangements to HUD                  nonprofits, and that new construction                   disabled;
homeownership counseling agencies.                  provides greater assurances to low-                        • Any otherwise eligible person with
There is generally little or no cost to the         income families that major repairs will                 a disability;
participant for this HUD funded                     not be necessary. The commenters wrote                     • Victims of domestic violence;
counseling.                                         that the prohibition against new                           • Current manufactured homeowners;
                                                    construction would make it more                            • Owners of substandard housing;
C. Cooperative Housing (proposed                    difficult for persons with disabilities to              and
§ 982.619).                                         find accessible homes. Other                               • Single parents.
  Comment: Final rule should clarify                commenters wrote that new                                  Another commenter suggested that
that the occupancy agreement controls               construction normally occurs in areas of                the first-time homebuyer requirement
not only the allocation of maintenance              job growth. The prohibition would                       should only apply to the mortgagor, not
responsibility between the cooperative              therefore prevent families from moving                  to the entire family. The commenter
member and the cooperative, but also                to such an area in search of employment                 wrote that, otherwise, other family
the rules to which the Section 8 assisted           opportunities.                                          members would be unfairly prevented
members are subject. Several                           HUD response. In response to these                   from subsequently enjoying Section 8
commenters wrote that consideration                 comments, HUD has revised proposed                      homeownership benefits.
and adoption of the rules governing co-             § 982.625, which described the ‘‘existing                  Two commenters wrote that
ownership is the focus of much                      home’’ requirement. Section                             homeownership assistance should not
democratic process in virtually every               982.628(a)(2) of this final rule provides               be restricted to first-time homebuyers.
housing cooperative. The commenters                 that a home may be purchased under                      Several commenters wrote that PHAs
wrote that few cooperatives would be                the homeownership option if, at the                     should be provided with the option of
willing to accept the existence of a                time the PHA determines that the family                 establishing additional exceptions to the
differently-privileged class of Section 8-          is eligible for Section 8 homeownership                 first-time homebuyer requirement.
assisted members in their midst.                    assistance, the home is either under                       HUD response. HUD has carefully
  HUD response. HUD disagrees that                  construction or already existing.                       considered all of the suggested
the suggested clarification is necessary.           However, before commencing                              exemptions to the first-time homebuyer
The rule does not change the legal                  homeownership assistance for the                        requirement and is sympathetic to the
relationship between the cooperative                family, the PHA must determine that the                 circumstances of families in many of the
and cooperative member.                             home satisfies all of the applicable                    suggested categories. However, HUD has
  Comment: Final rule should clarify                requirements described in § 982.628 of                  decided not to attempt to specify, by
that, where rental assistance is used in            this final rule (for example, the home                  regulation, the many possible situations
a cooperative setting, Section 8                    must have been inspected by a PHA                       that may merit an exception to the first-
assistance may be used for the                      inspector and by an independent                         time homebuyer requirement.
acquisition costs of cooperative                    inspector designated by the family; and                    However, HUD has revised the
memberships or shares. The commenter                the home must meet the HUD Housing                      definition of ‘‘first-time homeowner’’ at
wrote that this is especially critical in           Quality Standards (HQS)).                               § 982.4 to clarify the eligibility of single
limited-equity cooperatives, which is                  Comment: The homeownership option                    parents and displaced homemakers, as
the type of cooperative in which most               should be available only to current                     those terms are defined in section 956
Section 8 rental assistance is used. In             recipients of Section 8 rental assistance               of the Cranston-Gonzalez National
limited-equity cooperatives, the share or           who have successfully complied with all                 Affordable Housing Act (codified at 42
membership prices are strictly limited              rental program requirements for at least                U.S.C. 12713). Section 956 provides that
to provide ongoing affordability of                 one year. One commenter suggested that                  no displaced homemaker or single


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00016   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55149

parent ‘‘may be denied eligibility under            that, in certain areas, much of the                     programs. In response to this comment,
any Federal program to assist first time            affordable housing stock consists of two-               the final rule provides at § 982.631 that
homebuyers’’ because of previous                    and three-family homes, and the rental                  the contract of sale must contain a seller
ownership of a home by or with a                    income would help the family meet its                   certification that the seller is not
spouse. Accordingly, this final rule                share of the homeownership expenses.                    debarred, suspended, or subject to a
provides that such individuals are                     HUD response. Homeownership                          limited denial of participation under 24
‘‘first-time homeowners’’ for purposes of           assistance is provided to assist a family               CFR part 24.
the homeownership option and are,                   with the monthly homeownership
therefore, eligible to receive Section 8            expenses of its residence.                              F. How to Qualify for Homeownership
homeownership assistance.                           Homeownership assistance may not be                     Assistance (Proposed § 982.627)
   In addition, HUD has further revised             used to assist the family with the                         Comment: The relaxed regulatory
this definition to clarify that any family          monthly expenses for investment or                      requirements for the elderly and persons
who has owned any residential property              rental property. The family may not use                 with disabilities will limit
during the preceding three years                    Section 8 homeownership assistance to                   homeownership assistance to these
(regardless of whether it is the family’s           purchase two- or three-family homes.                    individuals. One commenter wrote that
principal dwelling unit or not) does not            Accordingly, § 982.628 of this final rule               lenders will be wary of the relaxed
qualify as a first-time homeowner.                  clarifies that a home purchased with                    employment/income requirements
   Comment: The PHA should not be                   homeownership assistance must either                    established by the proposed rule for the
able to ‘‘pass over’’ a family on its               be a one unit property or a single                      elderly and persons with disabilities.
waiting list in order to provide another            dwelling unit in a cooperative or                       The commenter wrote that lenders,
family homeownership assistance. One                condominium.                                            concerned for their risk in underwriting
commenter suggested that such a                        Comment: PHAs should not be                          a loan without the usual level of work
practice would be unfair to families on             allowed to establish local eligibility                  history, will be less likely to approve
the waiting list. Another commenter                 requirements for the homeownership                      home loans for elderly and disabled
suggested that HUD should explicitly                option that are more restrictive than                   families.
forbid separate waiting lists for rental            those for Section 8 rental assistance.                     HUD response.
and homeownership assistance.                       Several commenters wrote that stricter                     HUD has not revised the rule in
   HUD response. HUD’s regulations at               requirements have the potential to                      response to this comment. The relaxed
24 CFR part 982, subpart M, provide                 discriminate or discourage users with                   eligibility requirements for elderly and
that a PHA may not set aside program                disabilities from using the                             disabled families are used by the PHA
funding for special housing types or for            homeownership option.                                   to determine if the family is eligible for
a specific special housing type. The                   HUD response. HUD has not adopted                    homeownership assistance. The rule
PHA may not require an applicant to                 this suggestion. Section 8(y) specifically              does not impose relaxed or exception
use the Housing Choice Voucher                      requires homeownership eligibility                      standards for any family with respect to
program assistance for a particular                 criteria that are not applicable to the                 their ability to obtain financing from a
special housing type. Consequently, a               Section 8 rental assistance program. In                 lender.
PHA may not maintain separate waiting               addition, HUD believes it is appropriate                   Lenders will determine the
lists for special housing types or provide          for PHAs to have broad administrative                   creditworthiness of each borrower on a
a selection preference based on a                   authority to target homeownership                       case-by-case basis using their own
family’s willingness to use the housing             assistance for specific purposes. Since                 requirements and standards.
choice voucher for a particular special             the PHA has the option whether or not
housing type.                                       to offer Section 8 homeownership                        G. Minimum Income Requirements
   Instead, if the PHA opts to offer                assistance, HUD believes retaining PHA                  (proposed § 982.627(b)).
Section 8 homeownership assistance,                 administrative flexibility over this area                 Comment: The minimum income
the PHA may offer families (both                    is important to encourage wider                         requirements should be eliminated.
current participants and applicants who             implementation of the homeownership                     Several commenters wrote that, since
have been issued housing choice                     option.                                                 lenders will evaluate a family’s
vouchers) that meet the initial eligibility            Comment: The prohibition against                     resources as part of their mortgage
criteria (including any additional                  providing homeownership assistance if                   application review, HUD should rely on
requirements established by the PHA)                the seller is debarred, suspended, or                   them to screen out families who do not
the opportunity to use their Section 8              subject to a limited denial of                          have sufficient resources to make
assistance to purchase a home. If the               participation imposes a hardship on the                 payments on a mortgage loan, rather
PHA has established limits on the                   purchaser. The commenter wrote that                     than permitting PHAs to establish a
number of vouchers that may be used                 after the purchase agreement is signed,                 minimum income threshold.
for homeownership, the PHA simply                   the purchaser is contractually obligated                  HUD response. HUD has not adopted
suspends offering Section 8                         to buy the home according to the terms                  this suggestion. Section 8(y) explicitly
homeownership assistance at such time               the parties agreed to. Failure to                       establishes a minimum income
that the number of families receiving               complete the sale will result in loss of                requirement for participation in the
homeownership assistance, in                        downpayment and could result in the                     Section 8 homeownership program.
combination with the number currently               purchaser being sued for failure to                       Comment: HUD should establish
in the pre-assistance phase of the                  perform. An alternative would be to                     uniform minimum income
program, reaches the PHA limit.                     have the PHA conduct a review of the                    requirements.
                                                    seller before execution of the purchase                   Several commenters wrote that a
E. Initial requirements (Proposed                   agreement.                                              national standard creates certainty,
§ 982.626)                                             HUD response. PHAs are encouraged                    making it possible for national, regional,
   Comment: The rule should allow for               to regularly review the list of                         or statewide entities (lenders, advocates,
homeownership assistance to be used by              individuals and entities that are                       intermediaries, nonprofits, etc.) to
a family to purchase a two- and three-              debarred, suspended or subject to a                     develop and administer activities in
family home. The commenter wrote                    limited denial of participation in HUD                  support of the program.


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00017   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55150       Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

   Other commenters wrote that the final            income requirement fails to                             H. Family Employment (proposed
rule should restrict the PHA from                   acknowledge the varied structure of                     § 982.627(c))
establishing minimum income                         some families, and has a disparate                         Comment: The employment
requirements that will prevent persons              impact on single-headed households,                     requirement should be eliminated.
on fixed incomes from receiving                     domestic partners, and households that                  Several commenters recommended
homeownership assistance, since                     have related but unmarried adult                        elimination of this requirement. The
elderly and persons with disabilities are           members. Several commenters wrote                       commenter wrote that HUD should rely
often on low, fixed incomes. The                    that the minimum income requirements                    on lenders to determine what is an
commenters recommended that any                     fail to account for the wide variety of                 acceptable employment history, rather
minimum income requirements                         families receiving Section 8 assistance.                than establishing minimum
established by the PHA should not be so             For example, it is possible for the head                employment requirements or permitting
high that they exclude these individuals            of household to have no earned income                   PHAs to establish such requirements.
from homeownership assistance.                      but have a domestic partner, adult child,
   HUD response. HUD agrees that the                                                                        Other commenters wrote that, since a
                                                    or other adult family member that                       minimum income requirement already
regulation should establish a national              works.
standard for the minimum income                                                                             exists, the employment requirement is
                                                       HUD response. The purpose of the                     redundant. The commenters suggested
requirements. As suggested by several of            minimum income requirement is to
the commenters, HUD has decided to                                                                          that, in the place of an employment
                                                    ensure that the family has adequate                     requirement, HUD require a family to
establish a national minimum income                 resources to meet the additional costs
requirement that is equal to 2,000 hours                                                                    show proof that it earned the minimum
                                                    associated with homeownership. The                      income amount during the past year.
of annual full-time work under the                  proposed rule tied the minimum income
Federal minimum wage. A PHA may not                                                                            HUD response. The employment
                                                    to the head of household and spouse in                  requirement is statutory and the
establish a minimum income                          order to ensure that those family
requirement in addition to the                                                                              requirement is essential to the purpose
                                                    members who actually owned the home                     of rewarding work and assisting families
minimum income standard established                 met the income requirement, as opposed
by this final rule. HUD believes that this                                                                  in making the transition to economic
                                                    to other family members that might                      self-sufficiency. However, the final rule,
standard is administratively straight-              shortly leave the household following
forward, and addresses the statutory                                                                        in accordance with the law, provides
                                                    the purchase (thereby increasing the risk               exceptions from the employment
income requirement without arbitrarily              of defaults). However, HUD agrees that
eliminating working families that are                                                                       requirement for disabled and elderly
                                                    this type of restriction does not                       families.
making no more than the minimum                     sufficiently take the variety of family
wage.                                                                                                          Comment: PHAs need flexibility in
                                                    structures into account. Therefore, the                 determining whether the family has
   Comment: PHAs should be permitted
                                                    final rule provides that the adult family               fulfilled the ‘‘continuous’’ employment
to make reasonable exceptions to the
                                                    members who will own the home at                        requirement. Several commenters wrote
minimum income requirement if they
determine that the applicant household              commencement of homeownership                           that the final rule should focus on
has a high probability of being a                   assistance must have annual income                      whether prospective participants have
successful owner. One commenter wrote               (gross income) that is not less than the                maintained a steady income, not on
that the minimum income requirements                minimum income requirement, as                          whether they have been continuously
do not address one of the factors in                opposed to only the head and spouse.                    employed. The commenters wrote that
mortgagor credit review—a household’s                  Comment: Disabled and elderly                        in some parts of the country there are
total monthly fixed payment obligation.             families should be exempt from                          seasonal industries that result in annual
The commenter wrote that a household                minimum income requirements. One                        full-time income being acquired during
below the minimum requirement may                   commenter wrote that although the rule                  only part of the year. Many persons,
have an exemplary credit history and no             permits public assistance payments to                   such as construction workers, nurses,
additional debt obligations. According              be considered in determining whether                    taxi drivers, waitresses and hair
to the commenter, such a household                  an elderly or disabled family meets the                 dressers, may have multiple employers
would be a better candidate for                     minimum income requirements,                            in the same year. The commenters
homeownership than a household with                 disabled or elderly families would still                recommended that the final rule grant
income above the minimum.                           have difficulty in meeting the minimum                  PHAs flexibility in interpreting the
   HUD response. HUD has not adopted                income threshold. The commenter                         ‘‘continuous’’ employment requirement.
this suggestion. The minimum income                 suggested that elderly and disabled                        HUD response. HUD agrees that the
requirement represents the bare                     families should be exempt from the                      employment requirement should allow
minimum income threshold the family                 minimum income requirements,                            for small breaks in service to be taken
must meet to be eligible for                        because the goal of rewarding work does                 into consideration. The final rule
homeownership assistance, and does                  not apply to these households.                          provides that the PHA has discretion to
not automatically indicate the family                  HUD response. Section 8(y) does not                  determine whether (and to what extent)
would be a successful candidate for                 provide for an exemption from the                       an interruption is considered
homeownership. Instead of making                    minimum income requirement for                          permissible. The final rule also clarifies
exceptions to the minimum income                    elderly or disabled families, other than                that the PHA may count successive
requirement for families that otherwise             the source of income used to determine                  employment during the year and
appear to have a high probability of                if the family meets the requirement. The                consider self-employment in a business.
being a successful homeowner, the PHA               purpose of the minimum income                              Comment: Requiring the ‘‘head of
could work with the family on                       requirement is to ensure that the family                household or spouse’’ to meet
increasing family income through the                has sufficient income available to absorb               employment requirement fails to
FSS program or other self-sufficiency               the additional expenses associated with                 acknowledge the varied structure of
efforts.                                            homeownership, not to ensure that the                   some families. Several commenters
   Comment: Requiring the ‘‘head of                 family meets the employment                             wrote that requiring the head of
household or spouse’’ to meet minimum               requirement.                                            household or spouse to meet the


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00018   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55151

employment requirements will                        I. Ineligibility of Family if Head or                   rate or financial management activities
disqualify many non-traditional                     Spouse Previously Defaulted on a                        since the family may continue to receive
families. In some extended families the             Mortgage When Receiving                                 rental assistance in their rental unit
head of household may be unemployed,                Homeownership Assistance (proposed                      during the search and settlement
but there may be an adult child who is              § 982.627(d))                                           process. The decision to extend the
employed and providing the income                     Comment: Prohibition against                          homeownership option to applicants,
upon which the family could qualify for             mortgage defaults is unnecessarily                      participants, or both applicants and
financing. One commenter suggested                                                                          participants rests with the PHA.
                                                    restrictive. Several commenters wrote
                                                                                                               Comment: A family should be allowed
that the final rule should simply require           that the requirement is unnecessarily
                                                                                                            more than two months to locate a home.
that an adult member of the household               restrictive. These commenters wrote                     Several commenters wrote that finding
be gainfully employed.                              that this is a matter best left to the                  a home can be a lengthy process and
   HUD response. HUD agrees with the                discretion of the loan underwriter, who                 requires more than two months.
commenters and the final rule provides              will consider the default in determining                Although there was no consensus on the
that any of the adult family members                whether to approve the mortgage.                        amount of time that should be provided,
                                                      Another commenter suggested that a                    all of the commenters advocated that the
who will own the home at
                                                    family who defaulted on a previous                      final rule establish a greater length of
commencement of homeownership
                                                    mortgage due to the death of a family                   time for finding a home. Suggestions
assistance may fulfill the employment               member, or other circumstances beyond
requirement.                                                                                                included a minimum of four months, six
                                                    the family’s control, should not be                     months, and a range of six to nine
   Comment: The required term of                    prohibited from receiving future                        months. A number of commenters wrote
employment should be lengthened. One                homeownership assistance. The                           that due to the difficulty of finding a
commenter suggested that HUD should                 commenter suggested that the final rule                 home that is both affordable and
impose a two year employment term.                  should permit the PHA to determine on                   accessible, the final rule should ensure
The commenter recommended that the                  a case-by-case basis whether the default                that persons with disabilities are
final rule should require either: (1) two           was beyond the family’s control.                        provided with ample time to find a
years employment with the same                        HUD response. The prohibition on                      home to purchase.
employer; or (2) two years employment               participation by a family that previously                  HUD response. Neither the April 30,
in the same line of work. The                       defaulted on a mortgage while receiving                 1999 proposal nor this final rule place
commenter wrote that this is the                    section 8(y) assistance is a statutory                  a two month limitation on the family’s
minimum required by mortgage                        requirement. Accordingly, HUD has not                   search for a home. Section 982.303
underwriters. Other commenters                      adopted the changes suggested by the                    (term of voucher) is not applicable to
suggested that the employment term                  commenters.                                             the homeownership option (see
should be at least three years. Another             J. Additional PHA Requirements for                      § 982.641(b) of this final rule). HUD has
commenter wrote that the head of                    Family Search and Purchase (proposed                    not adopted the suggestions to establish
household or spouse should be required              § 982.628)                                              a minimum term for family search and
to be employed for as long as the family                                                                    purchase. HUD believes this decision is
                                                       Comment: Delays in provision of                      properly left to the administrative
is receiving homeownership assistance,              assistance may limit effectiveness of                   discretion of the PHA, as the housing
with limited periods of unemployment                program. One commenter wrote that the                   market will vary from community to
due to circumstances beyond the control             longer, more unpredictable time frame                   community. However, in establishing
of the family taken into consideration.             between the time the PHA determines a                   such time limits, the PHA should ensure
   HUD response. The final rule does not            family is eligible for homeownership                    that a family who has executed a sales
extend the minimum employment term.                 assistance and the time that assistance                 contract is provided reasonable time to
HUD believes one year of substantially              actually commences would affect lease                   close on the purchase of the home.
continuous employment is an                         up rates and PHA financial                                 Comment: The final rule should
acceptable minimum threshold and a                  management. The commenter wrote that                    explicitly provide that if a family is
realistic gauge of the likelihood of                this unpredictability may cause PHAs to                 unable to locate a home within the time
continued employment in the future. At              offer homeownership assistance only to                  limits, the PHA should be required to
                                                    existing participants, rather than                      issue a rental voucher or put the family
the request of several public
                                                    allowing new clients to participate.                    at the top of the waiting list. One
commenters, this final rule establishes a
                                                       HUD response. HUD agrees with the                    commenter made this suggestion.
uniform national employment                         comment that permitting applicants to                      HUD response. HUD has not adopted
requirement. For purposes of                        participate in the homeownership                        this comment. HUD does not wish to
uniformity, the final rule defines ‘‘full-          option will present PHAs with several                   impose this type of requirement on
time employment’’ to mean not less                  significant challenges (such as defining                PHAs.
than an average of 30 hours per week.               a realistic search term for a first-time                   Comment: The PHA should provide a
Further, the final rule adds a new                  homebuyer without creating adverse                      letter to the lender verifying the
§ 982.627(d)(4), which provides that a              impact on utilization rates and                         applicant’s family income, payment
PHA may not establish an employment                 administrative fees) that do not surface                standard assistance, and any other
requirement in addition to the                      if the PHA limits the option to current                 financial help that would be offered to
employment standard established by the              rental participants. For this reason, HUD               the family. Two commenters wrote that
final rule. However, the lender will                anticipates that most participants in the               this type of documentation would
apply its own underwriting criteria,                Section 8 homeownership program will                    enable the family to show prospective
which may include an employment                     be families currently participating in the              sellers, realtors, etc. that the family is in
requirement that is more stringent than             tenant-based rental program. The time                   fact empowered to make the acquisition
the standard adopted by the final rule.             required for a current participant to                   of a home. The commenters also wrote
                                                    locate and purchase a home will have a                  that this would assist the lender to pre-
                                                    minimal impact on the PHA’s lease-up                    qualify the family accurately.


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00019   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55152       Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

  HUD Response. Although HUD is not                   Comment: Paragraph (b) of this                        that PHAs be granted the discretion to
requiring PHAs to provide such a letter             section would be more accurate if it                    establish criteria for one uniform
to lenders in the final rule, PHAs may              read ‘‘The PHA-required pre-assistance                  inspection. Another commenter
opt to provide prospective lenders or               counseling program. . . .’’ One                         recommended that the scope of the HQS
realtors with information concerning the            commenter wrote that the addition of                    inspection be expanded to include the
family’s participation in the Section 8             the word ‘‘required’’ would clarify that                desired features of an independent
homeownership program, the applicable               the PHA itself is not obligated to                      professional home inspection.
payment standard, and how the                       provide the counseling.                                    Other commenters supported the dual
monthly subsidy will be calculated                    HUD response. HUD agrees with the                     inspection requirement contained in the
under the housing choice voucher                    commenter, and has incorporated the                     proposed rule. These commenters wrote
program. However, HUD would caution                 suggested revision in the final rule.                   that an independent home inspection
the PHA not to provide income                         Comment: The final rule should allow                  was useful to identify potential
information on an individual family to              as much flexibility as possible to PHAs                 problems that were not immediate
any third party. The family must                    in the development of counseling                        deficiencies, but that an HQS inspection
disclose income to the lender through               programs. One commenter wrote that                      is also important to identify basic health
the mortgage application process, and               several of the mandatory counseling                     and safety issues. One commenter wrote
the verification of family income for               requirements may be inappropriate for                   that the HQS inspection was also useful
underwriting purposes is the                        certain types of PHA homeownership                      because it limited the possible financial
responsibility of the lender, not the               programs. The commenter urged that                      burden on the family by identifying
PHA.                                                the final rule provide greater flexibility              significant HQS deficiencies and
                                                    regarding the crafting of                               eliminating the need for the family to
K. Homeownership Counseling                         homeownership counseling programs.                      pay for a subsequent independent
(proposed § 982.629)                                  HUD response. The final rule clarifies                inspection.
  Comment: HUD should provide                       that the PHA-required counseling                           HUD response. After carefully
funding for homeownership counseling                program should ‘‘generally’’ cover the                  considering the comments, HUD has not
services. Several commenters                        topics listed in § 982.630. The final rule              changed the requirement that the unit
recommended that HUD provide                        also provides that the PHA may adapt                    must pass an initial HQS inspection
additional funding for homeownership                the housing counseling topics to local                  conducted by the PHA and also be
counseling. One commenter suggested                 circumstances and the needs of                          subject to an independent professional
that HUD should make the additional                 individual families. Further, the final                 home inspection. Section 8(y) removes
funds available through a demonstration             rule provides that, if the PHA is not                   the requirement that the PHA conduct
program or competition. Other                       using a HUD-approved housing                            annual HQS inspections, but does not
commenters wrote that HUD should                    counseling agency to provide the                        eliminate the requirement that the unit
provide the necessary funding by either             counseling for families participating in                initially meet HQS before assistance
an increase in the ongoing                          the homeownership option, the PHA                       payments may commence. The statute
administrative fee or by making                     should ensure that its counseling                       specifically requires that the contract of
provisions for approving release of the             program is consistent with the                          sale provide for a pre-purchase
hard-to-house fee (currently available              homeownership counseling provided                       inspection by an independent
for assisting large families to lease a             under HUD’s Housing Counseling                          professional, which is clearly separate
unit).                                              program.                                                and distinct from the statutory HQS
  HUD Response. HUD has not adopted                   Comment: Counseling programs                          inspection.
these recommendations. There are no                 should include information on fair                         The purposes of these inspections are
additional appropriations made                      housing and fair housing lending                        also separate and distinct. The HQS
available for this purpose. Furthermore,            practices, as well as referrals to local                inspection determines if the current
PHAs can partner with HUD-funded                    fair housing enforcement agencies. One                  physical condition of the unit is decent,
homeownership counseling agencies to                commenter made this suggestion.                         safe, and sanitary, and is therefore
provide the necessary counseling. Since               HUD response. HUD agrees with the                     eligible to be assisted under the Section
these agencies provide homeownership                commenter, and the suggested revision                   8 program. It is the sole responsibility
counseling services at little or no                 has been incorporated in the final rule.                of the PHA to determine whether a
charge, the cost incurred by the PHA                                                                        potential unit meets the HQS
                                                    L. Home Inspections and Contract of
would be nominal. A list of the HUD-                                                                        requirements of the program.
                                                    Sale (proposed § 982.630)                                  The HQS inspection is not designed
approved homeownership counseling
agencies is available from the HUD                     Comment: Dual inspection                             to assess the life span of major
Housing Counseling Clearinghouse                    requirements. A number of commenters                    components, building systems,
website (http://www.hudhcc.org/                     objected to the proposed dual HQS/                      appliances and other structural
agencies/agencies.html).                            independent home inspection                             components in order to identify
  Comment: Charges to the family for                requirements. Several commenters                        potential problems for the future, such
counseling should be nominal. One                   wrote that two inspections would be                     as the need to replace an aging heating
commenter made this recommendation.                 duplicative and add unnecessary                         system or roof in the next several years.
  HUD response. Family completion of                expense and time to the homebuying                      Clearly, such information is important
the pre-assistance homeownership                    process. The commenters offered                         for a potential homebuyer to take into
counseling program is mandatory in                  various alternatives to the dual                        consideration. The requirement for an
order for homeownership assistance to               inspection requirement. Several                         inspection arranged by the buyer and
commence on behalf of the family.                   commenters suggested that only the                      satisfactory to the buyer is a typical
Since the PHA cannot charge a family                independent inspection be required;                     contingency clause in contracts of sale
any type of fee to receive Section 8                others recommended that the initial                     and is consistent with private real estate
assistance, the PHA may not charge a                HQS inspection be retained and the                      practice.
family a fee or otherwise pass on any of            requirement for third-party inspection                     HUD does not believe it is advisable
the cost of the counseling to the family.           be removed. One commenter suggested                     to combine the distinct purposes of each


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00020   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55153

inspection into a single inspection.                wrote that, given the expense involved                  urged that the final rule establish an
Combining the inspections                           in contracting with a home inspector,                   absolute prohibition against balloon
compromises the independent standing                PHAs should be provided the option of                   payments.
of the professional inspector, who is               paying for the independent home                            HUD response. After carefully
selected by and paid by the potential               inspection.                                             considering the comments submitted on
buyer, and the separate programmatic                   HUD response. The independent                        this issue, HUD has decided that it is
role and responsibility of the PHA HQS              home inspection is supposed to be                       appropriate to retain PHA
inspector. HUD also agrees that the                 independent of, not only the seller, but                administrative discretion to establish
initial HQS inspection serves to ensure             also the PHA. The HQS inspection,                       requirements regarding the terms of the
the family does not enter into a contract           conducted prior to the time the family                  financing. The PHA is in the best
of sale or otherwise expend family                  enters into a contract of sale and                      position to determine what is workable
resources for the independent                       contracts for the independent                           in its local community, and what level
inspection for units that are ineligible            inspection, and the pre-assistance                      of risk related to variable interest rate
for Section 8 assistance.                           counseling program should reduce the                    mortgages and balloon payments is
  Comment: The final rule should                    likelihood of the family having to incur                acceptable for the PHA’s
provide PHAs the discretion to modify               the cost of the inspection for numerous                 homeownership program. HUD believes
the inspection requirements for new                 units.                                                  that the flexibility granted to PHAs by
homes. Several commenters wrote that                   Comment: The independent inspector                   the final rule will help to ensure
newly constructed homes often come                  should be allowed to be an employee or                  responsible financial oversight of the
with builder/contractor warranties and              contractor of the PHA. One commenter                    homeownership program and that
that new homes have to pass a series of             wrote that some PHAs contract with                      homeowners are provided with
inspections by local authorities in order           private nonprofit agencies that provide                 necessary protections. In addition, HUD
to receive a final certificate of                   a variety of housing related services.                  believes that allowing the PHA to
occupancy. The commenters                           According to the commenter, these                       prohibit questionable types of financing
recommended that the final rule permit              agencies have rehabilitation programs                   will increase the number of PHAs
PHAs to establish more relaxed                      and inspectors that are completely                      willing to offer the homeownership
inspection standards for newly                      separate from the Section 8 program.                    option.
constructed homes.                                  The commenter wrote that PHAs should                       While HUD believes that PHAs
  HUD response. HUD has not provided                not lose these agencies as a resource for               should have the discretion to determine
PHAs with the discretion to relax or                independent inspections.                                what financing requirements are
modify the inspection requirements for                 HUD response. HUD has not adopted                    appropriate for their localities, HUD
newly constructed homes. HUD does                   this recommendation. The pre-purchase                   also wishes to protect families
not believe that the inspection                     inspection is supposed to be conducted                  participating in the Section 8
requirement will prove problematic for              by a professional independent of the                    homeownership option from abusive
new homes. The unit must initially                  PHA. The purpose of the requirement is                  lending practices. This final rule makes
meet the HQS and there is no automatic              to provide the potential buyer with an                  several changes that are designed to
guarantee against poor construction or              impartial third-party assessment of the                 ensure that families are protected from
other types of problems, regardless of              physical condition of the property’s                    abusive lending practices. For example,
the date of completion of a particular              systems and components. The final rule                  § 982.632 of this final rule clarifies that
unit.                                               explicitly provides that the independent                a PHA may review lender qualifications
  Comment: HQS inspections should be                inspector may not be a PHA employee                     and the loan terms before authorizing
performed on a regular basis throughout             or contractor, or other person under                    homeownership assistance. The PHA
the term of assistance. One commenter               control of the PHA.                                     may disapprove proposed financing,
wrote that HQS inspections should be                                                                        refinancing or other debt if the PHA
required annually during the term of                M. Financing Purchase of Home;
                                                                                                            determines that the debt is unaffordable
homeownership assistance. Another                   Affordability of Purchase (proposed                     or the lender or the loan terms do not
commenter suggested that HQS                        § 982.631)                                              meet PHA qualifications. HUD also
inspections should be performed at least               Comment: PHA administrative                          encourages PHAs to analyze each loan
once every two years at minimum. One                authority to establish financing                        (including refinancing or financing for
commenter wrote that the PHA, or local              requirements. Several commenters                        improvements or repairs) to identify and
supportive service provider, should be              wrote that the PHA is not acting as the                 eliminate abusive lending practices.
given the option of performing annual               lender, nor has an ownership interest in                (See Section VII. of this preamble for
HQS inspections.                                    the property, and should not determine                  additional information regarding the
  HUD response. The statute explicitly              acceptable types of financing or                        prevention of predatory lending
provides that the annual HQS                        establish payment requirements. As an                   practices in the Section 8
inspection is not required for section              alternative, one of the commenters                      homeownership option.)
8(y) units. While the final rule does not           suggested that HUD should allow PHAs                       Comment: The final rule should
require the PHA to conduct subsequent               to define in their PHA Plans                            establish uniform qualification
inspections of the unit, the final rule             questionable financing situations (such                 requirements for lenders. One
clarifies that the additional                       as balloon payment mortgages) that                      commenter wrote that examples of this
requirements for continuation of                    would trigger a PHA review to                           type of lender or financial program
homeownership assistance established                determine the reasonableness of the                     qualifications might include identifying
by the PHA may include additional unit              financing arrangement.                                  specific entities (such as conventional
inspections while the family is receiving              Several other commenters wrote that                  mortgage lenders) that regularly
homeownership assistance (see                       variable interest rates have the potential              participate in the secondary market or
§ 982.633(b)(8) of this final rule).                to negatively impact a first-time                       that participate in governmental lending
  Comment: PHAs should be permitted                 homebuyer’s success if the mortgage                     or mortgage insurance programs; State
to pay for the independent professional             balloons while the family’s income                      Housing Finance Agency programs;
home inspection. Several commenters                 remains stagnant. These commenters                      subsidy programs administered by


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00021   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55154       Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

states, counties, cities, or subdivisions;          closing costs, which would be                           Another commenter suggested that the
and nonprofit organizations.                        applicable regardless of the PHA policy                 final rule should establish uniform
   HUD response. HUD believes such a                regarding seller contributions.                         standards for use by PHAs in assessing
requirement is too restrictive and could               Comment: Use of FHA underwriting                     the affordability of debt. The commenter
inappropriately limit available financing           standards for non-FHA insured loans.                    wrote that a national standard will
in some markets. The final rule                     Several commenters supported the                        provide certainty for institutions
continues to allow the PHA to establish             requirement that all loans under the                    seeking to develop programs designed to
requirements concerning the                         Section 8 homeownership program meet                    dovetail with the homeownership
qualification of lenders but does not               FHA underwriting criteria. On the other                 option. The commenter recommended
impose any for the program as a whole.              hand, other commenters wrote that the                   that a standard similar to that used in
   Comment: Final rule should not                   use of FHA underwriting standards                       the HOME program or the USDA
require or permit the PHA to establish              would unduly restrict the availability of               Section 502 Direct loan program be
homebuyer downpayment requirements.                 properties available for purchase. These                adopted.
Several commenters opposed any                      commenters wrote that the use of FHA                       Another commenter wrote that the
homebuyer downpayment requirements                  criteria would prevent families from                    PHA’s right to review and disapprove
under the homeownership program.                    using other types of flexible mortgage                  financing should be limited to seller
One commenter wrote that requiring                  financing designed to assist low-income                 financing. The commenter wrote that
families to make downpayments from                  homebuyers. Some commenters also                        reputable mortgage lenders have no
their own resources will effectively                wrote that the added burden and                         incentive to underwrite loans that will
prevent families residing in expensive              restrictions of complying with FHA                      default.
housing markets from ever participating             requirements would deter lenders from                      HUD response. The final rule retains
in the homeownership option. Another                participating in the program.                           the broad PHA administrative discretion
commenter wrote that foreclosures are                  HUD response. After considering the                  to disapprove proposed financing if the
not caused by families choosing to walk             comments on this issue, HUD has                         PHA determines that the debt for the
away from a home because they have                  revised the rule by removing the                        purchase of the home is unaffordable.
equity invested but because they lose               requirement that purchases of homes                     HUD believes that local administrative
their income.                                       financed without FHA-insured mortgage                   flexibility is appropriate, and that the
   HUD response. The proposed rule did              assistance must, nonetheless, comply                    decisions as to what level of debt is
not propose to establish a minimum                  with the basic mortgage insurance credit                unaffordable or what terms of financing
downpayment requirement, but                        underwriting requirements for FHA-                      are appropriate are best left to the PHA.
proposed to grant the PHA flexibility to            insured single family mortgage loans.
establish a requirement for a minimum                  HUD proposed this requirement to                     N. Continued Assistance Requirements;
homeowner equity payment from the                   minimize the risk of default by                         Family Obligations (proposed § 982.632)
family’s personal resources. The final              imposing a minimum underwriting                            Comment: The family should obtain
rule continues to provide this flexibility          standard. However, HUD agrees that                      PHA approval prior to entering into
to the PHA. A PHA may determine that                imposing FHA requirements on non-                       refinancing agreements or securing
a minimum contribution by the family                FHA loans would unduly restrict the                     additional financing on the home
for the downpayment is appropriate to               availability of financing vehicles and                  (whether to finance repairs, consolidate
demonstrate the family’s commitment                 options for Section 8 homeownership                     debts, or for any other reason) and the
and readiness for the responsibilities of           families. FHA underwriting                              family should secure counseling before
homeownership. HUD notes that an                    requirements are in place for FHA                       such action. One commenter made this
Individual Development Account (IDA)                mortgages to protect the solvency of the                suggestion.
is considered to be a family asset under            FHA fund but may not necessarily be an                     HUD response. HUD agrees that the
HUD’s annual income regulations at                  appropriate standard for non-FHA                        PHA should have the option to require
§ 5.609 and would, therefore, be                    loans. In fact, mandating FHA                           prior PHA approval before the family
considered a personal family resource               underwriting standards would result in                  enters into a refinancing agreement or
for purposes of meeting such a PHA                  eliminating desirable non-FHA                           secures additional financing on the
downpayment requirement.                            financing options for families, such as                 home. Accordingly, § 982.632 of the
   Comment: Final rule should permit                foundation funds or State programs for                  final rule incorporates the suggestion
seller contributions to downpayment/                first-time homebuyers.                                  made by the commenter.
closing costs. According to one                        The final rule clarifies that if purchase               Comment: HUD should develop
commenter, this policy would increase               of the home is financed with FHA-                       contracts for use in the Section 8
housing choice for participating                    insured mortgage financing, the                         homeownership program. One
families.                                           financing is subject to FHA insurance                   commenter wrote that a Statement of
   HUD response. This final rule does               credit underwriting requirements.                       Homeowner Obligations is not a
not prohibit seller contributions to the            Otherwise, the underwriting standards                   contract and would probably be
downpayment or closing costs.                       of the individual lender and/or                         insufficient if the PHA has to turn to the
However, the final rule continues to                financing program will apply in cases                   local courts. The commenter
provide that the PHA may establish a                where financing for purchase of the                     recommended that HUD develop two
minimum equity requirement from the                 home is not FHA-insured.                                separate contracts for use by PHAs—one
family’s personal resources, types of                  Comment: PHA authority to                            if the payments are made directly to the
financing, and qualifications of lenders.           disapprove proposed financing if the                    family and another for payments made
The PHA’s administrative policy on                  PHA determines the debt for the                         directly to the lender.
these subjects might impact on the                  purchase of the home is unaffordable.                      HUD response. The PHA is not
extent to which seller contributions                One commenter recommended that the                      contractually obligated to make
would be permissible. In addition,                  final rule should require the PHA to                    payments to the lender. The HAP
individual lenders may have                         take a family’s expenses into account in                payments to the lender are made on
underwriting criteria impacting seller              determining whether to approve the                      behalf of the family, not the PHA. If the
contributions to the downpayment or                 financing for a homeownership loan.                     HAP payment were to cease, the family


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00022   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55155

would still be responsible for the full             mortgage subsidy for ten or more years,                 full responsibility for monthly
monthly mortgage payment due the                    HUD would be promoting ongoing                          homeownership expenses at the end of
lender. Furthermore, mortgages are                  dependency on Section 8 assistance and                  such time. HUD also believes that the
often sold and families may refinance.              reducing the availability of limited                    maximum term established by this final
Encumbering the mortgage or the lender              Section 8 resources for other families.                 rule is sufficient to achieve broad lender
with a mandated HUD contract may                       A couple of commenters wrote that                    participation.
ultimately discourage lender                        the final rule should establish a uniform                  HUD understands the concerns raised
participation in the program.                       maximum term instead of permitting a                    by some of the commenters regarding
   Comment: Homebuyers should be                    PHA to establish a maximum term                         Section 8 homeowners who, due to
required to demonstrate that real                   shorter than ten years. The commenters                  circumstances beyond their control, are
property taxes, assessments, water                  stated that without the availability of a               unable to assume full responsibility for
taxes, etc., are current on an annual               uniform program time period, lenders                    the monthly homeownership expenses
basis. One commenter made this                      and other agencies likely to provide                    at the end of the maximum term. HUD
suggestion.                                         subsidy assistance would find it                        encourages PHAs and families to
   HUD response. HUD has not added                  difficult to develop national or regional               realistically assess the family’s
evidence of payment of taxes as a                   programs to support the                                 economic situation a year or so before
specific requirement for continued                  homeownership option. However, other                    the conclusion of the maximum term of
homeownership assistance in the final               commenters recommended that PHAs                        the homeownership assistance. The
rule. However, § 982.633(b)(8) of this              should have absolute flexibility to                     family would then be in a position to
final rule permits PHAs to establish                determine the maximum term of                           decide whether it might be in the
additional requirements for the                     assistance based on their local housing                 family’s best interest to sell the property
continuation of homeownership                       needs.                                                  and revert to Section 8 rental assistance.
assistance, which could include such a                 HUD response. After carefully                           The final rule retains the provision
requirement. HUD believes that                      considering the comments on the                         that if the family receives
imposing a requirement of this type is              maximum term for a family to receive                    homeownership assistance for different
best left to the discretion of the                  homeownership assistance, HUD has                       homes or from different PHAs, the total
individual PHA.                                     significantly revised the requirement in                of assistance term is subject to the
                                                    the final rule.                                         regulatory maximum term (15 or 10
O. Maximum Term of Homeownership                       HUD agrees that there is a need to                   years, depending on the length of the
Assistance (proposed § 982.633)                     establish a Federal standard regarding                  initial mortgage to purchase the first
   Comment: What is the appropriate                 the maximum time that a family may                      unit under the homeownership option).
length of time to provide                           receive homeownership assistance to                        As in the proposed rule, the final rule
homeownership assistance to the                     ensure that the program is equitable for                provides that the maximum term limit
family? Several commenters wrote in                 all families receiving homeownership                    does not apply to elderly or disabled
support of the ten year limit. Other                assistance. Further, a uniform Federal                  families. The final rule clarifies that, in
commenters urged HUD to extend the                  standard will establish consistency                     the case of an elderly family, the
10 year limit. Many of these                        across jurisdictional lines, thus                       exception is only applied if the family
commenters suggested that the                       facilitating wider lender participation.                qualifies as an elderly family at the
maximum term be extended to fifteen,                The final rule removes PHA discretion                   commencement of homeownership
twenty, or thirty years, to better reflect          to establish a shorter minimum term                     assistance. For instance, if a family is a
usual mortgage terms. The commenters                than the Federal standard.                              non-elderly family when
urging an extension of the maximum 10                  HUD also believes that a time limit is               homeownership assistance commences,
year period stated that the shorter term            appropriate for homeownership                           the family is still subject to the term
would discourage lenders and the                    assistance. The purpose of the Section 8                limit on assistance even if the family
secondary mortgage market from                      homeownership program goes beyond                       subsequently meets the definition of an
participating in the program. Several of            simply defraying the monthly                            elderly family during the term. In the
these commenters wrote that in ten                  homeownership costs as opposed to                       case of a disabled family, the exception
years it is unlikely that the unamortized           rent. Rather, the objective is to move an               applies if at any time during receipt of
balance of a mortgage could be                      assisted renter into homeownership in                   homeownership assistance the family
refinanced at a monthly payment                     order to foster responsibility and assist               qualifies as a disabled family.
affordable to an unassisted homeowner,              the family in ultimately achieving                         If, during the course of
therefore resulting in a large number of            economic self-sufficiency. A related                    homeownership assistance, the family
mortgage defaults. Accordingly, the                 statutory objective is to assist renters                ceases to qualify as a disabled or elderly
commenters stated that the maximum                  make the transition to economic self-                   family, the maximum term becomes
term might limit homeownership                      sufficiency. This objective is made clear               applicable from the date
assistance to higher income families                from the fact that section 8(y) targets                 homeownership assistance commenced.
able to afford the increased mortgage               homeownership assistance to first-time                  However, such a family must be
payments following the termination of               homebuyers. The statute does not                        provided at least 6 months of
assistance. Further, low income families            expand eligibility for scarce Section 8                 homeownership assistance after the
concerned about defaulting at the end of            assistance to existing homeowners.                      maximum term becomes applicable
the maximum term would be forced to                    The final rule provides for a                        (provided the family is otherwise
purchase in depressed real estate                   mandatory term limit on                                 eligible to receive homeownership
markets, such as minority and/or                    homeownership assistance of 15 years if                 assistance in accordance with this part).
poverty concentrated areas.                         the initial mortgage incurred to finance                   Comment: Does the maximum term
   On the other hand, a number of                   purchase of the home has a term that is                 requirement mean that no person in the
commenters wrote that the ten year                  20 years or longer. In all other cases, the             family may have received more than ten
maximum term should be reduced to                   maximum term of homeownership                           years assistance? One commenter asked
three, five, or seven years. These                  assistance is 10 years. HUD believes that               whether the daughter of a head of
commenters stated that by providing a               a family should be able to assume the                   household who has resided in a home


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00023   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55156       Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

purchased under the homeownership                   applicable payment standard. The                           Comment: To prevent loss of home
option for ten years would be prohibited            payment standard for a family receiving                 due to unpaid taxes, the final rule
from applying for assistance to purchase            homeownership assistance is the greater                 should require that the mortgage
her own home. The commenter                         of the payment standard at the                          payment include taxes. One commenter
recommended that the final rule clarify             commencement of homeownership                           made this suggestion.
that the maximum term applies only to               assistance for occupancy of the home                       HUD response. This is a matter that is
those family members who obtained an                and the payment standard at the most                    more appropriately left to negotiation
ownership interest through the program.             recent regular reexamination of family                  between the lender and the family,
   HUD response. The final rule clarifies           income and composition since the                        subject to any local or state laws.
that the time limit applies to any                  commencement of homeownership                              Comment: PHAs should be permitted
member of the household who has an                  assistance for occupancy of the home.                   to set a separate payment standard for
ownership interest in the unit during               This policy minimizes the risk of                       the homeownership program. Several
any time that homeownership payments                default due to decreases in the payment                 commenters wrote that PHAs should
are made, or is the spouse of any                   standard or changes in family                           have the latitude to set a separate
member of the household who has an                  composition.                                            payment standard for the
ownership interest in the unit at the                  Comment: Should the family or the                    homeownership option. For example, a
time homeownership payments are                     lender receive the HAP payments?                        payment standard of 95% of the Fair
made.                                               Several commenters suggested that HAP                   Market Rent (FMR) might work for the
                                                    payments should only be made directly                   rental market, but for the for-sale market
P. Amount and Distribution of Monthly                                                                       a payment standard of 105% might be
Homeownership Assistance Payment                    to the lender and never to the family.
                                                    One of the commenters wrote that this                   more appropriate. Another commenter
(proposed § 982.634)                                                                                        wrote that, if the unit selected by the
                                                    would increase the efficiency of
   Comment: Families should be                                                                              participating family is new, the PHA
                                                    program administration. Other
permitted to receive homeownership                                                                          should have the latitude to adjust the
                                                    commenters were concerned that a
assistance for the initial 3 years of the                                                                   payment standard to account for the
                                                    family might inappropriately use the
mortgage term, even if HAP assistance                                                                       superiority of the housing unit.
                                                    funds and potentially jeopardize the
is reduced to zero as a result of the                                                                          HUD response. HUD has not made the
annual examination of the family’s                  mortgage. One of the commenters also
                                                                                                            recommended changes. The subsidy
income. According to the commenter,                 suggested that shelter costs (such as
                                                                                                            level for a homeowner should not be
this recommendation would provide a                 debt service, property taxes, insurance
                                                                                                            higher than for a renter under the
safety net for mortgage lenders and                 and reserve for replacement) be built
                                                                                                            tenant-based program. Fewer families
would be consistent with current                    directly into the mortgage payment.
                                                                                                            would be assisted if HUD provided a
underwriting requirements, which                       Several other commenters wrote that                  higher subsidy to homeowners. Also, it
require payments like child support to              the payments should be made directly                    would not be equitable to provide larger
be available for a minimum of 36                    to the family and not the lender. The                   subsidies for families who are more
months.                                             commenters wrote that it would be an                    likely (on average) to have higher
   HUD response. The length of time a               administrative nightmare for lenders to                 incomes than their counterparts
family will remain eligible for a subsidy           be required to accept separate payments                 receiving rental assistance.
in the homeownership program is the                 from the homeowner (for the family’s                       Comment: What do ‘‘monthly
same as in the rental program. During               portion) and the PHA. The commenters                    homeownership expenses’’ include?
this time, the family has a subsidy slot            recommended that the assistance                         Two commenters requested clarification
reserved, thereby denying use of the                payment should be made by the PHA as                    regarding the items included in
assistance by another deserving family.             a direct automatic deposit into the                     ‘‘monthly homeownership expenses.’’
In light of the severe needs for housing            family’s bank account with provisions                      HUD response. The final rule lists the
assistance and the length of time                   for automatic withdrawal of the                         items that comprise the monthly
applicants must already wait to receive             mortgage amount by the lender.                          homeownership expenses at
assistance, HUD has not revised the rule               HUD comment. This final rule                         § 982.635(c).
to increase the length of time the                  continues to provide that the PHA may                      Comment: Homeownership expenses
subsidy slot is reserved for a family who           make the homeownership assistance                       should not include maintenance
has a relatively high income and no                 payment either directly to the family or                expenses nor major repairs and
longer qualifies for a subsidy.                     to a lender on behalf of the family. The                replacements. One commenter wrote
   Comment: The final rule should                   PHA may determine it is necessary to                    that these are expenses that come with
provide that a stable bedroom-size                  make housing assistance payments                        the risk of homeownership. The
assistance level will be provided to the            directly to the family in order to secure               commenter wrote that families
family throughout the life of the                   lender participation, thereby avoiding                  participating in the program should
mortgage. Three commenters worried                  the possibility that both the PHA and                   have the means to maintain their home
that as children leave home Section 8               the family will be sending checks to the                and protect the investment without
assistance levels would be reduced,                 lender for the mortgage payment. On the                 subsidy.
therefore jeopardizing the ability of a             other hand, some lenders may indicate                      HUD response. HUD has not adopted
family to maintain its mortgage                     their participation is contingent on                    this comment. The costs of maintaining
payments. The commenters wrote that                 receiving the payment directly from the                 and repairing a home are significant
such fluctuating assistance levels would            PHA.                                                    expenses associated with
discourage lenders from participating in               The final rule clarifies that if the PHA             homeownership. HUD does not believe
the program.                                        decides to make the homeownership                       it is inappropriate to consider these
   HUD response. HUD does not need to               assistance payment directly to the                      costs in determining the monthly
revise the proposed rule to address this            lender, and the assistance payment                      homeownership expense for a family.
concern. The final rule retains the                 exceeds the amount due to the lender,                   Furthermore, in any case where the
provision that protects the homeowner               the PHA must pay the excess amount                      family’s monthly homeownership
from decreases in the normally                      directly to the family.                                 expenses exceed the applicable payment


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00024   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55157

standard, the maximum subsidy that                  appropriate allowance amount provided                   retains the portability rights of the
may be paid on behalf of a family is                for maintenance expenses; major repairs                 Section 8 voucher, but may only
capped by the applicable payment                    and replacements; and utilities (which                  continue to receive homeownership
standard. Reimbursement for such                    is the same utility allowance amount                    assistance if the receiving PHA runs a
expenses is therefore limited by the                that applies to the voucher program as                  homeownership program and is
voucher subsidy formula.                            a whole). HUD believes it is appropriate                accepting additional homeownership
   Comment: In addition to the                      for the PHA to determine the allowance                  families.
allowance for major home repair and                 amounts provided for the                                   Comment: PHAs should be authorized
replacements, there should also be                  homeownership expenses, since a                         to enter into homeownership
consideration for the cost of                       realistic projection of these average                   transactions outside their normal
modifications to make a home                        costs will vary from jurisdiction to                    service areas, provided no other PHA
accessible to owners with disabilities.             jurisdiction.                                           runs a homeownership program in that
Several commenters wrote in support of                                                                      area. The commenter wrote that this
this change to the proposed rule.                   Q. Portability (proposed § 982.635)                     policy would follow the principle of
   HUD response. The final rule clarifies              Comment: Applicability of portability                promoting maximum portability
that where a member of the family is a              to the homeownership program. Several                   wherever the PHA is willing to
person with disabilities, mortgage debt             commenters suggested that                               administer the program.
incurred to finance costs for major                 homeownership assistance should be                         HUD response. HUD has not adopted
repairs, replacements or improvements               freely portable. The commenters wrote                   this comment. The PHA area of
for the home may include debt incurred              that restricting portability would                      operation is determined by state law,
by the family to finance costs needed to            prohibit a family living in a center city               and the language of Section 8(y) does
make the home accessible for the                    from pursuing job opportunities in                      not provide a statutory basis for
disabled person, if the PHA determines              suburban areas where the                                overriding state law with respect to PHA
the allowance is needed as a reasonable             homeownership option is not provided.                   administration of the homeownership
accommodation.                                         One commenter suggested that if a                    option.
   Comment: Other items should be                   person with a disability finds a home
considered in determining the                       outside the jurisdiction of the initial                 R. Move With Continued Tenant-Based
homeownership expenses. Several                     PHA, the initial PHA should be                          Assistance (proposed § 982.636)
commenters suggested the consideration              permitted to continue to administer the                    Comment: A family should not be
of various items in the determination of            program where the receiving PHA will                    permitted to use the homeownership
homeownership expenses, including                   not provide homeownership assistance.                   option more than once. One commenter
water and sewer fees; condominium                   The commenter wrote that the final rule                 questioned whether the policy
fees; and homeowner association fees.               could also require the receiving PHA to                 permitting a family to purchase multiple
   HUD response. Water and sewer fees               provide homeownership assistance to                     units with voucher assistance was a
were already covered in the proposed                the person with the disability.                         prudent use of scarce housing subsidy
rule under the PHA utility allowance for               Several other commenters                             dollars.
the home. The final rule has been                   recommended that portability of                            HUD response. Both the proposed and
amended to provide that if the home is              assistance under the Section 8                          final rules permit the family to purchase
a cooperative or condominium unit,                  homeownership program between PHA                       one or more subsequent homes with
homeownership expenses may also                     jurisdictions should be prohibited. One                 continued Section 8 assistance,
include cooperative or condominium                  commenter wrote that Section 8                          provided that the head of household or
operating charges or maintenance fees,              homeownership funding is provided by                    spouse has not defaulted on a mortgage
or charges assessed by the                          HUD to assist local needs and should                    securing debt incurred to purchase the
condominium or cooperative                          not be transferable to another                          home (see §§ 982.627(e) and 982.637 of
homeowner association.                              jurisdiction that has chosen not to                     this final rule). HUD believes it is
   Comment: HUD should develop a                    provide such assistance.                                appropriate to permit family mobility in
uniform rule for allowances of                         HUD response. As noted above, HUD                    the homeownership program. Families
homeownership expenses. The                         has clarified the portability procedures                may need to move for a number of
proposed rule would allow PHAs to                   of the proposed rule, which provide that                compelling reasons such as safer
adopt policies for determining the                  the family may qualify to move outside                  neighborhoods, better schools, because
amount of homeownership expenses in                 the initial PHA jurisdiction with                       more or less space is needed, or to be
determining the family’s Section 8                  continued assistance under the voucher                  closer to a job.
subsidy amount. Several commenters                  program. In general, the receiving PHA                     The final rule provides that the PHA
stated that giving discretion to PHAs to            is not required to permit families that                 may not commence homeownership
exclude any of these amounts as                     move into the PHA’s jurisdiction to                     assistance for occupancy of the new unit
expenses would create great inequities              receive any special housing type                        so long as any family member owns any
across jurisdiction lines. The                      (including homeownership assistance),                   title or other interest in the prior home.
commenters suggested that HUD adopt                 regardless of whether the family was                    As noted earlier, the final rule provides
a uniform rule regarding                            receiving such assistance at the initial                that the family cannot be assisted if they
homeownership expenses. One of the                  PHA. While the family participating in                  own another residential property. HUD
commenters recommended that all of                  the Housing Choice Voucher program                      agrees that it is appropriate to limit
the listed items be considered                      has the portability right to move                       homeownership assistance only to
homeownership expenses.                             anywhere in the country where a PHA                     families that do not own other
   HUD response. The proposed rule and              administering tenant-based assistance                   residential property. The purpose of the
the final rule do not provide the PHA               has jurisdiction, Section 8(y) also                     program is to help families meet their
with the discretion to exclude any of the           provides the PHA with the sole                          immediate housing needs and limited
listed homeownership expenses or to                 discretion to determine whether to make                 assistance funds should not be provided
add any additional items. The PHA is                homeownership assistance available. A                   to families who currently own another
responsible for determining the                     family under the homeownership option                   home, regardless of whether the family


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00025   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55158       Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

chooses not to make that property their             homeownership subsidy may be                            the family should not be penalized
primary residence.                                  subordinated to a refinanced mortgage.                  through placement at the end of the
  Comment: The final rule should                       The homeownership assistance                         waiting list. Another commenter,
provide for the recapture of                        subject to recapture shall automatically                however, recommended that a
homeownership assistance upon the                   be reduced over a 10 year period,                       defaulting family should be placed at
sale or transfer of the home. Several               beginning one year from the purchase                    the bottom of the Section 8 waiting list.
commenters made this suggestion.                    date, in annual increments of 10                           Two commenters wrote that a family
There was no consensus among these                  percent. For example, if the family sells               that defaults should be required to re-
commenters as to the extent of the                  the home during the first year after                    apply for Section 8 assistance (rather
recapture. Two of the commenters                    purchase, the PHA will recapture 100%                   than being placed back on the waiting
suggested that recaptures should only               of the homeownership assistance                         list). One of the commenters believed
apply to half of the homeownership                  provided to the family. If the family                   that it would be unfair to other families
assistance payments made to or on                   sells one year (but less than two years)                to place the defaulting family on the
behalf of the family. One of these                  after purchase, the PHA will recapture                  waiting list (even at the bottom of the
commenters also suggested that the PHA              90% of the homeownership assistance,                    list) since in many jurisdictions Section
should use the recaptured proceeds to               etc. At the end of the 10 year period, the              8 waiting lists are closed for an
assist other Section 8 families. Another            amount homeownership assistance                         extended periods.
commenter wrote that any recapture                  subject to recapture will be zero.                         Several commenters recommended
provision should be designed to limit                  Comment: HUD should clarify how to                   that the PHA should have the flexibility
the amount of equity that a participant             treat a rollover sale by which the family               to develop its own guidelines regarding
may realize through the sale of a home              sells one unit to purchase another. The                 the provision of rental assistance after a
under the Section 8 homeownership                   commenter questioned if the profit from                 default or to handle such matters on a
program.                                            the sale of the first property should be                case-by-case basis. The commenters
                                                    counted as income (for purposes of                      wrote that there may be circumstances
  HUD response. HUD agrees with the
                                                    determining the total tenant payment) if                beyond the recipient’s control (such as
commenters that it is appropriate for
                                                    the family purchased or rented another                  death, divorce, disability, or job lay-off)
HUD to recapture homeownership
                                                    unit with Section 8 assistance.                         that result in a default. The commenters
assistance upon the sale or refinancing                HUD response. In calculating the                     wrote that a recipient should not be
of the home. Further, HUD agrees with               family income, the treatment of income                  penalized in these instances.
the commenters that the recaptured                  realized by the family as a result of the                  HUD response. The proposed and
assistance should be used to assist                 sale of a home purchased with                           final rule both provide that the PHA
additional housing choice voucher                   assistance under the homeownership                      may terminate the family’s participation
assistance families. HUD recognizes that            program is no different than treatment                  in the voucher program if the family
the possibility of accumulating equity in           of net income from real property under                  fails to comply with the terms of the
the property and the realization of profit          24 CFR part 5. However, in accordance                   mortgage (for instance, if the family
upon sale is an important facet of                  with § 982.640 of this final rule, the                  defaults). Like other grounds for denial
homeownership. However, HUD                         PHA may recapture a percentage of the                   or termination of voucher assistance, the
believes these benefits can be realized             homeownership assistance provided to                    decision whether to deny the family’s
even if a portion of the assistance                 family upon the sale or refinancing of                  continued participation in the voucher
payments made on behalf of the family               the home (see the discussion of the                     program or to permit the family to
are retained by the PHA out of the net              preceding comment). Any profit                          automatically be placed back on the
sales proceeds of the property in order             remaining from the sale or refinancing                  waiting list rests with the PHA.
to further assist other needy families.             after the recapture is ‘‘income’’, and                     The final rule also retains the
  The final rule establishes a new                  may reduce the amount of future                         statutory provision that if the family
§ 982.640 that provides for such                    subsidy for the family.                                 defaults on an FHA-insured mortgage,
recaptures. PHAs shall recapture a                     Comment: If a family participating in                the PHA must terminate the Section 8
percentage of the homeownership                     the homeownership program decides to                    assistance and may not issue the family
assistance defined in the regulations               ‘‘switch back’’ to rental assistance, must              a rental voucher unless the family: (1)
upon the sale or refinancing of the                 the family first sell its home before                   Moves from the unit within the
home. Sales proceeds that are used by               receiving rental assistance?                            specified time period established or
the family to purchase a new home with                 HUD response. Yes, the family must                   approved by HUD; and (2) conveys the
Section 8 homeownership assistance are              sell its home before the family can                     title to the home, as required by HUD,
not subject to recapture. Further, a                receive continued Section 8 rental or                   to HUD or HUD’s designee. Even if the
family may refinance to take advantage              homeownership assistance in another                     family complies with these
of lower interest rates, or better                  unit. The final rule makes this                         requirements, the PHA may still deny
mortgage terms, without any recapture               clarification.                                          the family continued participation in
penalty. Only those proceeds realized                  Comment: What ramifications should                   the rental voucher program, since the
upon refinancing that are retained by               a family default have on continued                      family did not comply with the family
the family (for example during a ‘‘cash-            participation in the rental program?                    obligations under § 982.633.
out’’ of the refinanced debt) are subject           Several commenters suggested that a                        The final rule continues to leave the
to the new recapture provision.                     family that defaults on its mortgage                    decision on the ramifications of the
  New § 982.640 requires that, upon                 should not be allowed to receive Section                termination of homeownership
purchase of the home, a family receiving            8 rental assistance. The commenters                     assistance because of a default with the
homeownership assistance shall execute              recommended that the family should be                   PHA. The PHA may allow the family to
documentation as required by HUD, and               placed on the waiting list. However,                    move and receive rental assistance
consistent with State and local law, that           there was no consensus among these                      (except in cases where the family
secures the PHA’s right to recapture the            commenters regarding where on the                       defaulted on an FHA-insured mortgage
homeownership assistance. The lien                  waiting list the family should be placed.               and has not complied with HUD
securing the recapture of                           For example, one commenter wrote that                   requirements for conveyance and


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00026   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55159

possession of the property). The PHA                program. One commenter identified                       homeownership option from abusive
may also choose, consistent with the                various requirements of the                             lending practices. HUD has joined with
PHA policy in the PHA administrative                homeownership option that will require                  the Department of the Treasury to
plan, to require the family to reapply for          staff time and new staff expertise to                   develop recommendations on
rental assistance. The PHA may place                carry out. The commenter suggested that                 legislative, regulatory, and other steps to
the family at the bottom of the list, at            HUD should compensate PHAs on a                         curb predatory mortgage practices.
the top of the list, or wherever the                performance basis and provide some                      These recommendations, which are
family would normally fall based on                 preliminary funding to set up the                       contained in a joint HUD-Treasury
PHA preferences. The PHA may also                   program. Another commenter wrote that                   report, are based on information that
prohibit the family from re-applying for            HUD should provide a one time                           HUD and the Department of the
assistance for a certain period of time.            incentive of $5,000 for each homebuyer                  Treasury gathered as co-chairs of the
HUD notes that the family may request               family as an incentive for PHAs to                      National Predatory Lending Task Force,
an informal hearing if a current                    participate.                                            convened in April, 2000. Through
participant that has defaulted on a                    HUD response. The final rule has not                 public forums with industry,
mortgage for a Section 8                            adopted these suggestions. Section 8(y)                 consumers, consumer advocates, and
homeownership unit is denied a rental               is intended to provide PHAs with added                  local and state governments in
voucher.                                            flexibility in serving the housing needs                Washington, Atlanta, Los Angeles, New
  Comment: The incentives provided for              of their local communities within the                   York, Baltimore, and Chicago, HUD and
rapid possession and title conveyance               existing framework and funding                          the Department of the Treasury
for homes with FHA mortgage defaults                constraints of the Section 8 Housing                    collected evidence on the nature and
should be extended to all lenders                   Choice Voucher program. HUD does not                    growing incidence of predatory lending
including secondary market agencies.                have any additional or separate funding                 practices nationwide.
Two commenters made this suggestion.                to increase administrative fees for PHAs                   As noted above, this final rule makes
  HUD response. As noted above, the                 that choose to exercise the                             several changes that are designed to
PHA must deny the family continued                  homeownership option.                                   ensure that families are protected from
assistance if the family defaults on an                It is true that the PHA has some                     abusive lending practices. For example,
FHA-insured mortgage and does not                   additional administrative duties for                    § 982.632 of this final rule clarifies that
comply with HUD requirements. HUD                   homeownership families. However,                        a PHA may review lender qualifications
has not extended the mandatory                      there is a corresponding reduction in                   and the loan terms before authorizing
termination provision to a family who               the administrative responsibilities that                homeownership assistance. The PHA
defaults on a non-FHA mortgage.                     the PHA must perform for a family                       may disapprove proposed financing,
  Section 8(y) provides for the                     receiving rental assistance over the                    refinancing or other debt if the PHA
mandatory termination of a family that              duration of the family’s participation in               determines that the debt is unaffordable
does not comply with HUD                            the program. For example, the PHA is                    or the lender or the loan terms do not
requirements to convey title and vacate             not required to determine rent                          meet PHA qualifications.
the property because the Federal                    reasonableness or conduct annual HQS                       PHAs are also encouraged to analyze
government has a vested interest in                 inspections under the homeownership                     each loan (including refinancing or
protecting the FHA insurance fund.                  option.                                                 financing for improvements or repairs)
HUD does not believe that it is                        Comment: HUD should consider                         before providing assistance to determine
appropriate to extend this mandatory                allowing the PHA to impose a one-time                   whether the lender and the loan meet its
termination policy in the case of non-              fee on families participating in the                    qualifications. While no one set of
FHA mortgages. There may be                         program to offset additional PHA                        abusive practices or terms characterizes
circumstances where the terms of the                expenses, such as marketing, developing                 a predatory mortgage loan, PHAs should
mortgage or the conditions for rapid                program materials, and coordinating                     be particularly careful of loans with the
possession and title conveyance to the              activities with homebuyer counselors.                   following features: loans in which
lender are not reasonable. The PHA                  One commenter made this suggestion.                     financing costs represent a high
should have the discretion to decide                   HUD response. HUD has not adopted                    percentage of the total loan amount;
how to address these situations.                    this suggestion. PHAs may not charge                    loans that include high credit insurance
  Comment: The final rule should                    families fees to participate in the                     premiums; balloon payments that the
require lenders to provide a copy to the            homeownership program or for the                        borrower will be unable to repay;
PHA of any default notice at the same               normal program responsibilities to be                   interest rates (including variable rates)
time such notice is sent to the borrower.           performed by the PHA. Although there                    significantly higher than conventional
One commenter made this suggestion.                 are additional PHA upfront                              mortgages; pre-payment penalties,
  HUD response. HUD has not revised                 responsibilities associated with a family               especially penalties that extend over
the rule to incorporate this suggestion.            purchasing a home, the time necessary                   long terms; high ratios of family debt to
HUD believes the recommended change                 to perform the PHA’s ongoing                            income; loans based on unverified
could negatively impact lender                      responsibilities will decrease since rent               sources of income or without regard to
participation and the sale of mortgages             reasonableness and annual HQS                           the borrower’s ability to repay;
on the secondary market. Section                    inspections are not required in the                     excessive fees or fees ‘‘packed’’ into the
982.633(b)(6) of the final rule retains the         homeownership program.                                  loan amount without the borrower’s
requirement that the family must notify                                                                     understanding; and ‘‘loan flipping’’
                                                    VII. Prevention of Predatory Lending                    accompanied by high fees (including
the PHA if the family defaults on a
                                                    Practices                                               prepayment penalties that strip the
mortgage securing any debt incurred to
purchase the home.                                    While HUD believes that PHAs                          borrower’s equity with each successive
                                                    should have the discretion to determine                 refinancing).
S. Administrative Fees (proposed                    what financing requirements are                            HUD will revise its regulations for the
§ 982.637)                                          appropriate for their localities, HUD                   Section 8 homeownership option, as
  Comment: Additional HUD funding is                also wishes to protect families                         appropriate, to implement legislative or
needed for implementation of new                    participating in the Section 8                          other changes made in response to the


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00027   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55160       Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

joint HUD-Treasury report. A copy of                Unfunded Mandates Reform Act                            will not affect a substantial number of
the joint report may be obtained through              Title II of the Unfunded Mandates                     small entities.
HUD’s internet homepage at                          Reform Act of 1995 (2 U.S.C. 1531–                      Executive Order 13132, Federalism
www.hud.gov.                                        1538) establishes requirements for
                                                    Federal agencies to assess the effects of                  Executive Order 13132 (entitled
VIII. Performance-Based Standards for
                                                    their regulatory actions on State, local,               ‘‘Federalism’’) prohibits an agency from
the Section 8 Homeownership Option
                                                    and tribal governments and the private                  publishing any rule that has federalism
  HUD intends to develop performance-               sector. This final rule does not impose                 implications if the rule either imposes
based standards for the Section 8                   any Federal mandates on any State,                      substantial direct compliance costs on
homeownership option. HUD would use                 local, or tribal governments or the                     State and local governments and is not
these standards to monitor PHA                      private sector within the meaning of                    required by statute, or the rule preempts
program performance in administering                Unfunded Mandates Reform Act of                         State law, unless the agency meets the
their Section 8 homeownership                       1995.                                                   consultation and funding requirements
programs, and to determine whether                                                                          of section 6 of the Executive Order. This
HUD intervention is appropriate due to              Executive Order 12866                                   final rule is exclusively concerned with
excessive mortgage default rates.                      The Office of Management and Budget                  the establishment of an alternative use
                                                    (OMB) reviewed this final rule under                    of Section 8 rental voucher assistance.
IX. Findings and Certifications                                                                             Specifically, the rule authorizes a PHA
                                                    Executive Order 12866, Regulatory
Paperwork Reduction Act                             Planning and Review. OMB determined                     to provide tenant-based assistance for an
                                                    that this final rule is a ‘‘significant                 eligible family that purchases a dwelling
  The homeownership option is a                                                                             unit that will be occupied by the family.
                                                    regulatory action,’’ as defined in section
special housing type under 24 CFR part                                                                      This final rule does not have federalism
                                                    3(f) of the Order (although not
982, subpart M, of the unified rule for                                                                     implications and does not impose
                                                    economically significant, as provided in
the Section 8 tenant-based voucher                                                                          substantial direct compliance costs on
                                                    section 3(f)(1) of the Order). Any
program. The information collection                                                                         State and local governments or preempt
                                                    changes made to the final rule
requirements of the Section 8 rental                                                                        State law within the meaning of the
                                                    subsequent to its submission to OMB
voucher program approved by the Office                                                                      Executive Order.
                                                    are identified in the docket file, which
of Management and Budget (OMB)
                                                    is available for public inspection in the               Catalog of Domestic Assistance Number
under the Paperwork Reduction Act of
                                                    office of the Department’s Rules Docket
1995 (44 U.S.C. 3501–3520) are not                                                                             The Catalog of Domestic Assistance
                                                    Clerk, Room 10276, 451 Seventh Street,
increased by the implementation of this                                                                     number for the program affected by this
                                                    SW, Washington, DC 20410–0500.
new special housing type. While the                                                                         final rule is 14.855.
rule substitutes several variations to              Impact on Small Entities
existing requirements under the normal                                                                      List of Subjects
                                                      The Secretary, in accordance with the
Section 8 tenant-based program, the                 Regulatory Flexibility Act (5 U.S.C.                    24 CFR Part 5
homeownership option does not                       605(b)) (the RFA), has reviewed and
increase the total reporting and                                                                              Administrative practice and
                                                    approved this final rule and in so doing                procedure, Aged, Claims, Drug abuse,
recordkeeping burden resulting from the             certifies that this rule will not have a
collection of information for the Section                                                                   Drug traffic control, Grant programs—
                                                    significant economic impact on a                        housing and community development,
8 voucher program. The following                    substantial number of small entities.
provisions of this final rule contain                                                                       Grant programs—Indians, Individuals
                                                    The reasons for HUD’s determination                     with disabilities, Loan programs—
information collections: §§ 982.305,                are as follows:
982.629, 982.631, 982.633, and 982.638.                                                                     housing and community development,
                                                      (1) A Substantial Number of Small                     Low and moderate income housing,
  The OMB approval number for the                   Entities Will Not Be Affected. The final                Mortgage insurance, Pets, Public
Section 8 tenant-based assistance                   rule is exclusively concerned with                      housing, Rent subsidies, Reporting and
program is 2577–0169. An agency may                 public housing agencies that administer                 recordkeeping requirements.
not conduct or sponsor, and a person is             tenant-based housing assistance under
not required to respond to, a collection            section 8 of the United States Housing                  24 CFR Part 903
of information unless the collection                Act of 1937. Specifically, the final rule                 Administrative practice and
displays a valid control number.                    will permit a PHA to provide Section 8                  procedure, Public housing, Reporting
Environmental Impact                                tenant-based assistance to an eligible                  and recordkeeping requirements.
                                                    family that purchases a dwelling unit
  A Finding of No Significant Impact                that will be occupied by the family.                    24 CFR Part 982
(FONSI) with respect to the                         Under the definition of ‘‘Small                           Grant programs—housing and
environment was made in accordance                  governmental jurisdiction’’ in section                  community development, Housing, Rent
with HUD regulations in 24 CFR part 50              601(5) of the RFA, the provisions of the                subsidies, Reporting and recordkeeping
that implement section 102(2)(C) of the             RFA are applicable only to those few                    requirements.
National Environmental Policy Act of                PHAs that are part of a political                         For the reasons described in the
1969 (42 U.S.C. 4223) at the proposed               jurisdiction with a population of under                 preamble, HUD amends 24 CFR parts 5,
rule stage. That FONSI remains                      50,000 persons. The number of entities                  903 and 982 as follows:
applicable to this final rule and is                potentially affected by this rule is
available for public inspection between             therefore not substantial.                              PART 5—GENERAL HUD PROGRAM
7:30 a.m. and 5:30 p.m. weekdays in the               (2) No Significant Economic Impact.                   REQUIREMENTS; WAIVERS
Office of the Rules Docket Clerk, Office            The final rule will not change the
of General Counsel, Room 10276,                     amount of funding available under the                     1. The authority citation for part 5
Department of Housing and Urban                     Section 8 voucher program.                              continues to read as follows:
Development, 451 Seventh Street, SW,                Accordingly, the economic impact of                       Authority: 42 U.S.C. 3535(d), unless
Washington, DC.                                     this rule will not be significant, and it               otherwise noted.



   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00028   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
               Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                55161

  2. In § 5.603(b), amend the definition                 c. In paragraph (b), remove the                      under § 982.625 to § 982.641. A special
of ‘‘net family assets’’ by adding new                definition of ‘‘Mutual housing’’; and                   housing type.
paragraph (4) to read as follows:                        d. In paragraph (b), add the                         *     *      *     *    *
                                                      definitions of ‘‘Cooperative member,’’                    Interest in the home. In the
§ 5.603   Definitions.                                ‘‘Family,’’ ‘‘First-time homeowner,’’                   homeownership option:
*      *    *     *     *                             ‘‘Home,’’ ‘‘Homeowner,’’                                  (1) In the case of assistance for a
   (d) * * *                                          ‘‘Homeownership assistance,’’                           homeowner, ‘‘interest in the home’’
   Net family assets. * * *                           ‘‘Homeownership expenses,’’                             includes title to the home, any lease or
   (4) For purposes of determining                    ‘‘Homeownership option,’’ ‘‘Interest in                 other right to occupy the home, or any
annual income under § 5.609, the term                 the home,’’ ‘‘Membership shares,’’                      other present interest in the home.
‘‘net family assets’’ does not include the            ‘‘Present ownership interest,’’ and                       (2) In the case of assistance for a
value of a home currently being                       ‘‘Statement of homeowner obligations’’                  cooperative member, ‘‘interest in the
purchased with assistance under part                  in alphabetical order.                                  home’’ includes ownership of
982, subpart M of this title. This                                                                            membership shares in the cooperative,
                                                      § 982.4    Definitions.
exclusion is limited to the first 10 years                                                                    any lease or other right to occupy the
after the purchase date of the home.                  *      *    *     *    *                                home, or any other present interest in
                                                         (b) * * *                                            the home.
*      *    *     *     *                                Cooperative. Housing owned by a
                                                      corporation or association, and where a                 *     *      *     *    *
PART 903—PUBLIC HOUSING                                                                                         Membership shares. In the
                                                      member of the corporation or
AGENCY PLANS                                                                                                  homeownership option: shares in a
                                                      association has the right to reside in a
                                                                                                              cooperative. By owning such
  3. The authority citation for 24 CFR                particular unit, and to participate in
                                                                                                              cooperative shares, the share-owner has
part 903 continues to read as follows:                management of the housing.
                                                         Cooperative member. A family of                      the right to reside in a particular unit in
  Authority: 42 U.S.C. 1437c; 42 U.S.C.               which one or more members owns                          the cooperative, and the right to
3535(d).                                              membership shares in a cooperative.                     participate in management of the
                                                                                                              housing.
                                                      *      *    *     *    *
  4. Revise § 903.11(c)(1) to read as                                                                         *     *      *     *    *
                                                         Family. A person or group of persons,
follows:                                              as determined by the PHA, approved to                     Present ownership interest. In the
                                                      reside in a unit with assistance under                  homeownership option: ‘‘Present
§ 903.11 Are certain PHAs eligible to
submit a streamlined Annual Plan?                     the program. See discussion of family                   ownership option’’ in a residence
                                                      composition at § 982.201(c).                            includes title, in whole or in part, to a
*      *      *      *      *                                                                                 residence, or ownership, in whole or in
   (c) * * *                                          *      *    *     *    *
                                                         First-time homeowner. In the                         part, of membership shares in a
   (1) For high performing PHAs, the                                                                          cooperative. ‘‘Present ownership
streamlined Annual Plan must include                  homeownership option: A family of
                                                      which no member owned any present                       interest’’ in a residence does not include
the information required by § 903.7(a),                                                                       the right to purchase title to the
(b), (c), (d), (g), (h), (k), (m), (n), (o), (p)      ownership interest in a residence of any
                                                      family member during the three years                    residence under a lease-purchase
and (r). The information required by                                                                          agreement.
§ 903.7(m) must be included only to the               before commencement of
                                                      homeownership assistance for the                        *     *      *     *    *
extent this information is required for
                                                      family. The term ‘‘first-time                             Special housing types. See subpart M
the PHA’s participation in the public
                                                      homeowner’’ includes a single parent or                 of this part 982. Subpart M of this part
housing drug elimination program and
                                                      displaced homemaker (as those terms                     states the special regulatory
the PHA anticipates participating in this
                                                      are defined in 12 U.S.C. 12713) who,                    requirements for: SRO housing,
program in the upcoming year. The
                                                      while married, owned a home with his                    congregate housing, group home, shared
information required by § 903.7(k) must
                                                      or her spouse, or resided in a home                     housing, manufactured home (including
be included only to the extent that the
                                                      owned by his or her spouse.                             manufactured home space rental),
PHA participates in homeownership
                                                                                                              cooperative housing (rental assistance
programs under section 8(y).                          *      *    *     *    *
                                                         Home. In the homeownership option:                   for cooperative member) and
*      *      *      *      *                                                                                 homeownership option
                                                      A dwelling unit for which the PHA pays
                                                      homeownership assistance.                               (homeownership assistance for
PART 982—SECTION 8 TENANT-
                                                         Homeowner. In the homeownership                      cooperative member or first-time
BASED ASSISTANCE: HOUSING
                                                      option: A family of which one or more                   homeowner).
CHOICE VOUCHER PROGRAM                                                                                          Statement of homeowner obligations.
                                                      members owns title to the home.
  5. The authority citation for 24 CFR                   Homeownership assistance. In the                     In the homeownership option: The
part 982 continues to read as follows:                homeownership option: Monthly                           family’s agreement to comply with
                                                      homeownership assistance payments by                    program obligations.
    Authority: 42 U.S.C. 1437f and 3535(d).
                                                      the PHA. Homeownership assistance                       *     *      *     *    *
Subpart A—General Information                         payment may be paid to the family, or
                                                      to a mortgage lender on behalf of the                   Subpart G—Leasing a Unit
   6. Amend § 982.4 as follows:                       family.                                                   7. Add § 982.305(b)(3) to read as
   a. In paragraph (a)(3), in the first                  Homeownership expenses. In the                       follows:
sentence revise the phrase ‘‘and utility              homeownership option: A family’s
reimbursement’’ to read ‘‘utility                     allowable monthly expenses for the                      § 982.305   PHA approval of assisted
reimbursement’’ and ‘‘welfare                         home, as determined by the PHA in                       tenancy.
assistance’’;                                         accordance with HUD requirements (see                   *     *     *     *     *
   b. In paragraph (b), revise the                    § 982.635).                                               (b) * * *
definitions of ‘‘Cooperative,’’ and                      Homeownership option. Assistance                       (4) In the case of a unit subject to a
‘‘Special housing types’’;                            for a homeowner or cooperative member                   lease-purchase agreement, the PHA


     VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00029   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55162         Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

must provide written notice to the                     (4) Shared housing;                                     (1) Assistance for a cooperative
family of the environmental                            (5) Manufactured home;                               member under the homeownership
requirements that must be met before                   (6) Cooperative housing (excluding                   option pursuant to § 982.625 through
commencing homeownership assistance                 families that are not cooperative                       § 982.641; or
for the family (see § 982.626(c)).                  members); and                                              (2) Rental assistance for a family that
*     *     *     *     *                              (7) Homeownership option.
                                                                                                            leases a cooperative housing unit from
                                                       (b) PHA choice to offer special
  8. Add § 982.317 to read as follows:                                                                      a cooperative member (such rental
                                                    housing type. (1) The PHA may permit
                                                                                                            assistance is not a special housing type,
§ 982.317   Lease-purchase agreements.              a family to use any of the following
                                                                                                            and is subject to requirements in other
   (a) A family leasing a unit with                 special housing types in accordance
                                                                                                            subparts of this part 982).
assistance under the program may enter              with requirements of the program:
                                                    single room occupancy (SRO) housing,                    *       *     *    *     *
into an agreement with an owner to
purchase the unit. So long as the family            congregate housing, group home, shared                     (d) Maintenance. (1) During the term
is receiving such rental assistance, all            housing, manufactured home when the                     of the HAP contract between the PHA
requirements applicable to families                 family owns the home and leases the                     and the cooperative, the dwelling unit
otherwise leasing units under the                   manufactured home space, cooperative                    and premises must be maintained in
tenant-based program apply. Any                     housing or homeownership option.                        accordance with the HQS. If the
                                                       (2) In general, the PHA is not required              dwelling unit and premises are not
homeownership premium (e.g.,
                                                    to permit families (including families                  maintained in accordance with the
increment of value attributable to the
                                                    that move into the PHA program under                    HQS, the PHA may exercise all available
value of the lease-purchase right or
                                                    portability procedures) to use any of                   remedies, regardless of whether the
agreement such as an extra monthly
                                                    these special housing types, and may                    family or the cooperative is responsible
payment to accumulate a downpayment
                                                    limit the number of families using                      for such breach of the HQS. PHA
or reduce the purchase price) included
                                                    special housing types.                                  remedies for breach of the HQS include
in the rent to the owner that would
result in a higher subsidy amount than              *      *     *     *     *                              recovery of overpayments, abatement or
would otherwise be paid by the PHA                     (c) Program funding for special                      other reduction of housing assistance
must be absorbed by the family.                     housing types. (1) HUD does not provide                 payments, termination of housing
   (b) In determining whether the rent to           any additional or designated funding for                assistance payments and termination of
owner for a unit subject to a lease-                special housing types, or for a specific                the HAP contract.
purchase agreement is a reasonable                  special housing type (e.g, the                             (2) The PHA may not make any
amount in accordance with § 982.503,                homeownership option). Assistance for                   housing assistance payments if the
any homeownership premium paid by                   special housing types is paid from                      contract unit does not meet the HQS,
the family to the owner must be                     program funding available for the PHA’s                 unless any defect is corrected within the
excluded when the PHA determines                    tenant-based program under the                          period specified by the PHA and the
rent reasonableness.                                consolidated annual contributions                       PHA verifies the correction. If a defect
                                                    contract.                                               is life-threatening, the defect must be
Subpart H—Where Family Can Live                        (2) The PHA may not set aside                        corrected within no more than 24 hours.
and Move                                            program funding or program slots for                    For other defects, the defect must be
                                                    special housing types or for a specific                 corrected within the period specified by
  9. Revise § 982.352(a)(6) to read as              special housing type.                                   the PHA.
follows:                                            *      *     *     *     *                                 (3) The family is responsible for a
§ 982.352   Eligible housing.
                                                       (e) Applicability of requirements. (1)               breach of the HQS that is caused by any
                                                    Except as modified by this subpart, the                 of the following:
  (a) * * *                                         requirements of other subparts of this
  (6) A unit occupied by its owner or by                                                                       (i) The family fails to perform any
                                                    part apply to the special housing types.
a person with any interest in the unit.                (2) Provisions in this subpart only                  maintenance for which the family is
*     *    *     *    *                             apply to a specific special housing type.               responsible in accordance with the
                                                    The housing type is noted in the title of               terms of the cooperative occupancy
Subpart M—Special Housing Types                     each section.                                           agreement between the cooperative
                                                       (3) Housing must meet the                            member and the cooperative;
  10. Amend § 982.601 as follows:
  a. Revise paragraphs (a), (b)(1), and             requirements of this subpart for a single                  (ii) The family fails to pay for any
(b)(2);                                             special housing type specified by the                   utilities that the cooperative is not
  b. Remove paragraph (d);                          family. Such housing is not subject to                  required to pay for, but which are to be
  c. Redesignate paragraph (c) as                   requirements for other special housing                  paid by the cooperative member;
paragraph (d);                                      types. A single unit cannot be                             (iii) The family fails to provide and
  d. Remove the first sentence of newly             designated as more than one special                     maintain any appliances that the
designated paragraph (d); and                       housing type.                                           cooperative is not required to provide,
  e. Add new paragraphs (c) and (e) as                 11. Amend § 982.619 as follows:                      but which are to be provided by the
set forth below.                                       a. Revise paragraph (a);                             cooperative member; or
                                                       b. Redesignate paragraph (d) as                         (iv) Any member of the household or
§ 982.601   Overview.                               paragraph (e); and
  (a) Special housing types. This                                                                           guest damages the dwelling unit or
                                                       c. Add new paragraph (d).
subpart describes program requirements                                                                      premises (damages beyond ordinary
for special housing types. The following            § 982.619     Cooperative housing.                      wear and tear).
are the special housing types:                        (a) Assistance in cooperative housing.                   (4) If the family has caused a breach
  (1) Single room occupancy (SRO)                   This section applies to rental assistance               of the HQS for which the family is
housing;                                            for a cooperative member residing in                    responsible, the PHA must take prompt
  (2) Congregate housing;                           cooperative housing. However, this                      and vigorous action to enforce such
  (3) Group home;                                   section does not apply to:                              family obligations. The PHA may


   VerDate 11<MAY>2000   16:54 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00030   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm01   PsN: 12SER2
             Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                55163

terminate assistance for violation of               paragraph (d)(1), (d)(2), or (d)(3) of this             homeownership assistance for a family
family obligations in accordance with               section.                                                unless the PHA determines that the
§ 982.552.                                             (1) The PHA establishes a minimum                    family satisfies all of the following
   (5) Section 982.404 does not apply to            homeowner downpayment requirement                       initial requirements at commencement
assistance for cooperative housing                  of at least 3 percent of the purchase                   of homeownership assistance for the
under this section.                                 price for participation in its Section 8                family:
*      *     *    *    *                            homeownership program, and requires                        (1) The family has been admitted to
   12. Add §§ 982.625 through 982.641               that at least one percent of the purchase               the Section 8 Housing Choice Voucher
under a new undesignated heading                    price come from the family’s personal                   program, in accordance with subpart E
‘‘Homeownership Option’’ to read as                 resources;                                              of this part.
                                                       (2) The PHA requires that financing                     (2) The family satisfies any first-time
follows:
                                                    for purchase of a home under its Section                homeowner requirements (described in
Homeownership Option                                8 homeownership program:                                paragraph (b) of this section).
Sec.                                                   (i) Be provided, insured, or                            (3) The family satisfies the minimum
982.625 Homeownership option: General.              guaranteed by the state or Federal                      income requirement (described in
982.626 Homeownership option: Initial               government;                                             paragraph (c) of this section).
     requirements.                                     (ii) Comply with secondary mortgage                     (4) The family satisfies the
982.627 Homeownership option: Eligibility           market underwriting requirements; or                    employment requirements (described in
     requirements for families.                        (iii) Comply with generally accepted
982.628 Homeownership option: Eligible
                                                                                                            paragraph (d) of this section).
                                                    private sector underwriting standards;                     (5) The family has not defaulted on a
     units.
                                                    or                                                      mortgage securing debt to purchase a
982.629 Homeownership option:
     Additional PHA requirements for family
                                                       (3) The PHA otherwise demonstrates                   home under the homeownership option
     search and purchase.                           in its Annual Plan that it has the                      (see paragraph (e) of this section).
982.630 Homeownership option:                       capacity, or will acquire the capacity, to                 (6) Except for cooperative members
     Homeownership counseling.                      successfully operate a Section 8                        who have acquired cooperative
982.631 Homeownership option: Home                  homeownership program.                                  membership shares prior to
     inspections and contract of sale.                                                                      commencement of homeownership
982.632 Homeownership option: Financing             § 982.626 Homeownership option: Initial
     purchase of home; affordability of             requirements.                                           assistance, no family member has a
     purchase.                                         (a) List of initial requirements. Before             present ownership interest in a
982.633 Homeownership option: Continued             commencing homeownership assistance                     residence at the commencement of
     assistance requirements; Family                for a family, the PHA must determine                    homeownership assistance for the
     obligations.                                   that all of the following initial                       purchase of any home.
982.634 Homeownership option: Maximum
                                                    requirements have been satisfied:                          (7) Except for cooperative members
     term of homeownership assistance.                                                                      who have acquired cooperative
982.635 Homeownership option: Amount                   (1) The family is qualified to receive
                                                    homeownership assistance (see                           membership shares prior to the
     and distribution of monthly                                                                            commencement of homeownership
     homeownership assistance payment.              § 982.627);
982.636 Homeownership option:                          (2) The unit is eligible (see § 982.628);            assistance, the family has entered a
     Portability.                                   and                                                     contract of sale in accordance with
982.637 Homeownership option: Move with                (3) The family has satisfactorily                    § 982.631(c).
     continued tenant-based assistance.             completed the PHA program of required                      (8) The family also satisfies any other
982.638 Homeownership option: Denial or             pre-assistance homeownership                            initial requirements established by the
     termination of assistance for family.          counseling (see § 982.630).                             PHA (see § 982.626(b)). Any such
982.639 Homeownership option:                          (b) Additional PHA requirements.                     additional requirements must be
     Administrative fees.                                                                                   described in the PHA administrative
982.640 Homeownership option: Recapture
                                                    Unless otherwise provided in this part,
                                                    the PHA may limit homeownership                         plan.
     of homeownership assistance.
                                                    assistance to families or purposes                         (b) First-time homeowner
982.641 Homeownership option:
     Applicability of other requirements.           defined by the PHA, and may prescribe                   requirements. At commencement of
                                                    additional requirements for                             homeownership assistance for the
§ 982.625   Homeownership option:                   commencement of homeownership                           family, the family must be any of the
General.                                            assistance for a family. Any such limits                following:
  (a) The homeownership option is                   or additional requirements must be                         (1) A first-time homeowner (defined
used to assist a family residing in a               described in the PHA administrative                     at § 982.4);
home purchased and owned by one or                  plan.                                                      (2) A cooperative member (defined at
more members of the family.                            (c) Environmental requirements. The                  § 982.4); or
  (b) A family assisted under the                   PHA is responsible for complying with                      (3) A family of which a family
homeownership option may be a newly                 the authorities listed in § 58.6 of this                member is a person with disabilities,
admitted or existing participant in the             title requiring the purchaser to obtain                 and use of the homeownership option is
program.                                            and maintain flood insurance for units                  needed as a reasonable accommodation
  (c) The PHA must approve a live-in                in special flood hazard areas,                          so that the program is readily accessible
aide if needed as a reasonable                      prohibiting assistance for acquiring                    to and usable by such person, in
accommodation so that the program is                units in the coastal barriers resource                  accordance with part 8 of this title.
readily accessible to and useable by                system, and requiring notification to the                  (c) Minimum income requirements.
persons with disabilities in accordance             purchaser of units in airport runway                    (1) At commencement of
with part 8 of this title. (See § 982.316           clear zones and airfield clear zones.                   homeownership assistance for the
concerning occupancy by a live-in aide.)                                                                    family, the family must demonstrate
  (d) The PHA must have the capacity                § 982.627 Homeownership option:                         that the annual income (gross income),
to operate a successful Section 8                   Eligibility requirements for families.                  as determined by the PHA in
homeownership program. The PHA has                    (a) Determination whether family is                   accordance with § 5.609 of this title, of
the required capacity if it satisfies either        qualified. The PHA may not provide                      the adult family members who will own


   VerDate 11<MAY>2000   16:54 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00031   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm01   PsN: 12SER2
55164        Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

the home at commencement of                         as a reasonable accommodation so that                   the family must attend and satisfactorily
homeownership assistance is not less                the program is readily accessible to and                complete the pre-assistance
than the Federal minimum hourly wage                usable by persons with disabilities in                  homeownership and housing counseling
multiplied by 2,000 hours.                          accordance with part 8 of this title.                   program required by the PHA (pre-
   (2)(i) Except in the case of an elderly             (4) A PHA may not establish an                       assistance counseling).
family or a disabled family (see the                employment requirement in addition to                      (b) Suggested topics for the PHA-
definitions of these terms at § 5.403(b) of         the employment standard established by                  required pre-assistance counseling
this title), the PHA shall not count any            this paragraph.                                         program include:
welfare assistance received by the                     (e) Prohibition against mortgage                        (1) Home maintenance (including care
family in determining annual income                 defaults. The PHA shall not commence                    of the grounds);
under this section.                                 homeownership assistance for a family                      (2) Budgeting and money
   (ii) The disregard of welfare assistance         if any family member has previously                     management;
income under paragraph (c)(2)(i) of this            received assistance under the                              (3) Credit counseling;
section only affects the determination of           homeownership option, and has                              (4) How to negotiate the purchase
minimum annual income used to                       defaulted on a mortgage securing debt                   price of a home;
determine if a family initially qualifies           incurred to purchase the home.                             (5) How to obtain homeownership
for commencement of homeownership                                                                           financing and loan preapprovals,
assistance in accordance with this                  § 982.628     Homeownership option: Eligible            including a description of types of
                                                    units.
section, but does not affect:                                                                               financing that may be available, and the
   (A) The determination of income-                    (a) Initial requirements applicable to               pros and cons of different types of
eligibility for admission to the voucher            the unit. The PHA must determine that                   financing;
   program;                                         the unit satisfies all of the following                    (6) How to find a home, including
   (B) Calculation of the amount of the             requirements:                                           information about homeownership
family’s total tenant payment (gross                   (1) The unit is eligible. (See § 982.352.            opportunities, schools, and
family contribution); or                            Paragraphs (a)(6), (a)(7) and (b) of                    transportation in the PHA jurisdiction;
   (C) Calculation of the amount of                 § 982.352 do not apply.)                                   (7) Advantages of purchasing a home
homeownership assistance payments on                   (2) The unit was either under                        in an area that does not have a high
behalf of the family.                               construction or already existing at the                 concentration of low-income families
   (iii) In the case of an elderly family or        time the PHA determined that the                        and how to locate homes in such areas;
a disabled family, the PHA shall count              family was eligible for homeownership                      (8) Information on fair housing,
welfare assistance in determining                   assistance to purchase the unit.                        including fair housing lending and local
annual income.                                         (3) The unit is either a one unit                    fair housing enforcement agencies; and
   (3) A PHA may not establish a                    property or a single dwelling unit in a                    (9) Information about the Real Estate
minimum income requirement in                       cooperative or condominium.                             Settlement Procedures Act (12 U.S.C.
addition to the minimum income                         (4) The unit has been inspected by a                 2601 et seq.) (RESPA), state and Federal
standard established by this paragraph.             PHA inspector and by an independent                     truth-in-lending laws, and how to
   (d) Employment requirements. (1)                 inspector designated by the family (see                 identify and avoid loans with
Except as provided in paragraph (d)(2)              § 982.631).                                             oppressive terms and conditions.
of this section, the family must                       (5) The unit satisfies the HQS (see                     (c) The PHA may adapt the subjects
demonstrate that one or more adult                  § 982.401 and § 982.631).                               covered in pre-assistance counseling (as
members of the family who will own the                 (b) PHA disapproval of seller. The
                                                                                                            listed in paragraph (b) of this section) to
home at commencement of                             PHA may not commence
                                                                                                            local circumstances and the needs of
homeownership assistance:                           homeownership assistance for
                                                                                                            individual families.
   (i) Is currently employed on a full-             occupancy of a home if the PHA has                         (d) The PHA may also offer additional
time basis (the term ‘‘full-time                    been informed (by HUD or otherwise)                     counseling after commencement of
employment’’ means not less than an                 that the seller of the home is debarred,                homeownership assistance (ongoing
average of 30 hours per week); and                  suspended, or subject to a limited denial               counseling). If the PHA offers a program
   (ii) Has been continuously so                    of participation under part 24 of this                  of ongoing counseling for participants in
employed during the year before                     title.                                                  the homeownership option, the PHA
commencement of homeownership                       § 982.629 Homeownership option:                         shall have discretion to determine
assistance for the family.                          Additional PHA requirements for family                  whether the family is required to
   (2) The PHA shall have discretion to             search and purchase.                                    participate in the ongoing counseling.
determine whether and to what extent                   (a) The PHA may establish the                           (e) If the PHA is not using a HUD-
interruptions are considered to break               maximum time for a family to locate a                   approved housing counseling agency to
continuity of employment during the                 home, and to purchase the home.                         provide the counseling for families
year. The PHA may count successive                     (b) The PHA may require periodic                     participating in the homeownership
employment during the year. The PHA                 family reports on the family’s progress                 option, the PHA should ensure that its
may count self-employment in a                      in finding and purchasing a home.                       counseling program is consistent with
business.                                              (c) If the family is unable to purchase              the homeownership counseling
   (3) The employment requirement does              a home within the maximum time                          provided under HUD’s Housing
not apply to an elderly family or a                 established by the PHA, the PHA may                     Counseling program.
disabled family (see the definitions of             issue the family a voucher to lease a
these terms at § 5.403(b) of this title).           unit or place the family’s name on the                  § 982.631 Homeownership option: Home
Furthermore, if a family, other than an                                                                     inspections and contract of sale.
                                                    waiting list for a voucher.
elderly family or a disabled family,                                                                          (a) HQS inspection by PHA. The PHA
includes a person with disabilities, the            § 982.630 Homeownership option:                         may not commence homeownership
PHA shall grant an exemption from the               Homeownership counseling.                               assistance for a family until the PHA has
employment requirement if the PHA                     (a) Before commencement of                            inspected the unit and has determined
determines that an exemption is needed              homeownership assistance for a family,                  that the unit passes HQS.


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00032   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
             Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                55165

   (b) Independent inspection. (1) The              a home to be assisted under the                         assistance, use and occupancy of the
unit must also be inspected by an                   homeownership option. Such PHA                          home is subject to § 982.551(h) and (i).
independent professional inspector                  requirements may include requirements                      (ii) The family may grant a mortgage
selected by and paid by the family.                 concerning qualification of lenders (for                on the home for debt incurred to finance
   (2) The independent inspection must              example, prohibition of seller financing                purchase of the home or any refinancing
cover major building systems and                    or case-by-case approval of seller                      of such debt.
components, including foundation and                financing), or concerning terms of                         (iii) Upon death of a family member
structure, housing interior and exterior,           financing (for example, a prohibition of                who holds, in whole or in part, title to
and the roofing, plumbing, electrical,              balloon payment mortgages, or                           the home or ownership of cooperative
and heating systems. The independent                establishment of a minimum                              membership shares for the home,
inspector must be qualified to report on            homeowner equity requirement from                       homeownership assistance may
property conditions, including major                personal resources).                                    continue pending settlement of the
building systems and components.                       (b) If the purchase of the home is                   decedent’s estate, notwithstanding
   (3) The PHA may not require the                  financed with FHA mortgage insurance,                   transfer of title by operation of law to
family to use an independent inspector              such financing is subject to FHA                        the decedent’s executor or legal
selected by the PHA. The independent                mortgage insurance requirements.                        representative, so long as the home is
inspector may not be a PHA employee                    (c) The PHA may establish                            solely occupied by remaining family
or contractor, or other person under                requirements or other restrictions                      members in accordance with
control of the PHA. However, the PHA                                                                        § 982.551(h).
                                                    concerning debt secured by the home.
may establish standards for qualification                                                                      (4) Supplying required information. (i)
                                                       (d) The PHA may review lender
of inspectors selected by families under                                                                    The family must supply required
the homeownership option.                           qualifications and the loan terms before
                                                    authorizing homeownership assistance.                   information to the PHA in accordance
   (4) The independent inspector must                                                                       with § 982.551(b).
provide a copy of the inspection report             The PHA may disapprove proposed
                                                                                                               (ii) In addition to other required
both to the family and to the PHA. The              financing, refinancing or other debt if
                                                                                                            information, the family must supply any
PHA may not commence                                the PHA determines that the debt is
                                                                                                            information as required by the PHA or
homeownership assistance for the                    unaffordable, or if the PHA determines
                                                                                                            HUD concerning:
family until the PHA has reviewed the               that the lender or the loan terms do not                   (A) Any mortgage or other debt
inspection report of the independent                meet PHA qualifications. In making this                 incurred to purchase the home, and any
inspector. Even if the unit otherwise               determination, the PHA may take into                    refinancing of such debt (including
complies with the HQS (and may                      account other family expenses, such as                  information needed to determine
qualify for assistance under the PHA’s              child care, unreimbursed medical                        whether the family has defaulted on the
tenant-based rental voucher program),               expenses, homeownership expenses,                       debt, and the nature of any such
the PHA shall have discretion to                    and other family expenses as                            default), and information on any
disapprove the unit for assistance under            determined by the PHA.                                  satisfaction or payment of the mortgage
the homeownership option because of                    (e) All PHA financing or affordability               debt;
information in the inspection report.               requirements must be described in the                      (B) Any sale or other transfer of any
   (c) Contract of sale. (1) Before                 PHA administrative plan.                                interest in the home; or
commencement of homeownership                                                                                  (C) The family’s homeownership
                                                    § 982.633 Homeownership option:
assistance, a member or members of the                                                                      expenses.
                                                    Continued assistance requirements; Family
family must enter into a contract of sale           obligations.                                               (5) Notice of move-out. The family
with the seller of the unit to be acquired                                                                  must notify the PHA before the family
by the family. The family must give the                (a) Occupancy of home.
                                                                                                            moves out of the home.
PHA a copy of the contract of sale (see             Homeownership assistance may only be                       (6) Notice of mortgage default. The
also § 982.627(a)(7)).                              paid while the family is residing in the                family must notify the PHA if the family
   (2) The contract of sale must:                   home. If the family moves out of the                    defaults on a mortgage securing any
   (i) Specify the price and other terms            home, the PHA may not continue                          debt incurred to purchase the home.
of sale by the seller to the purchaser.             homeownership assistance after the                         (7) Prohibition on ownership interest
   (ii) Provide that the purchaser will             month when the family moves out. The                    on second residence. During the time
arrange for a pre-purchase inspection of            family or lender is not required to                     the family receives homeownership
the dwelling unit by an independent                 refund to the PHA the homeownership                     assistance under this subpart, no family
inspector selected by the purchaser.                assistance for the month when the                       member may have any ownership
   (iii) Provide that the purchaser is not          family moves out.                                       interest in any other residential
obligated to purchase the unit                         (b) Family obligations. The family                   property.
   unless the inspection is satisfactory to         must comply with the following                             (8) Additional PHA requirements. The
the purchaser.                                      obligations.                                            PHA may establish additional
   (iv) Provide that the purchaser is not              (1) Ongoing counseling. To the extent                requirements for continuation of
obligated to pay for any necessary                  required by the PHA, the family must                    homeownership assistance for the
repairs.                                            attend and complete ongoing
   (v) Contain a certification from the                                                                     family (for example, a requirement for
                                                    homeownership and housing                               post-purchase homeownership
seller that the seller has not been                 counseling.
debarred, suspended, or subject to a                                                                        counseling or for periodic unit
                                                       (2) Compliance with mortgage. The                    inspections while the family is receiving
limited denial of participation under               family must comply with the terms of
part 24 of this title.                                                                                      homeownership assistance). The family
                                                    any mortgage securing debt incurred to                  must comply with any such
§ 982.632 Homeownership option:                     purchase the home (or any refinancing                   requirements.
Financing purchase of home; affordability           of such debt).                                             (9) Other family obligations. The
of purchase.                                           (3) Prohibition against conveyance or                family must comply with the obligations
  (a) The PHA may establish                         transfer of home. (i) So long as the                    of a participant family described in
requirements for financing purchase of              family is receiving homeownership                       § 982.551. However, the following


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00033   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55166        Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

provisions do not apply to assistance               assistance terms is subject to the                         (iii) Home insurance;
under the homeownership option:                     maximum term described in paragraph                        (iv) The PHA allowance for
§ 982.551(c), (d), (e), (f), (g) and (j).           (a) of this section.                                    maintenance expenses;
  (c) Statement of homeowner                                                                                   (v) The PHA allowance for costs of
                                                    § 982.635 Homeownership option: Amount                  major repairs and replacements;
obligations. Before commencement of
                                                    and distribution of monthly homeownership                  (vi) The PHA utility allowance for the
homeownership assistance, the family                assistance payment.
must execute a statement of family                                                                          home; and
                                                       (a) Amount of monthly                                   (vii) Principal and interest on
obligations in the form prescribed by
                                                    homeownership assistance payment.                       mortgage debt incurred to finance costs
HUD. In the statement, the family agrees
                                                    While the family is residing in the                     for major repairs, replacements or
to comply with all family obligations
                                                    home, the PHA shall pay a monthly                       improvements for the home. If a
under the homeownership option.
                                                    homeownership assistance payment on                     member of the family is a person with
§ 982.634 Homeownership option:                     behalf of the family that is equal to the               disabilities, such debt may include debt
Maximum term of homeownership                       lower of:                                               incurred by the family to finance costs
assistance.                                            (1) The payment standard minus the                   needed to make the home accessible for
   (a) Maximum term of assistance.                  total tenant payment; or                                such person, if the PHA determines that
Except in the case of a family that                    (2) The family’s monthly                             allowance of such costs as
qualifies as an elderly or disabled family          homeownership expenses minus the                        homeownership expenses is needed as a
(see paragraph (c) of this section), the            total tenant payment.                                   reasonable accommodation so that the
family members described in paragraph                  (b) Payment standard for family. (1)                 homeownership option is readily
(b) of this section shall not receive               The payment standard for a family is the                accessible to and usable by such person,
homeownership assistance for more                   lower of:                                               in accordance with part 8 of this title.
                                                       (i) The payment standard for the                        (3) Homeownership expenses for a
than:
                                                    family unit size; or                                    cooperative member may only include
   (1) Fifteen years, if the initial
                                                       (ii) The payment standard for the size
mortgage incurred to finance purchase                                                                       amounts allowed by the PHA to cover:
                                                    of the home.                                               (i) The cooperative charge under the
of the home has a term of 20 years or                  (2) If the home is located in an
longer; or                                                                                                  cooperative occupancy agreement
                                                    exception payment standard area, the
   (2) Ten years, in all other cases.                                                                       including payment for real estate taxes
                                                    PHA must use the appropriate payment
   (b) Applicability of maximum term.                                                                       and public assessments on the home;
                                                    standard for the exception payment                         (ii) Principal and interest on initial
The maximum term described in                       standard area.
paragraph (a) of this section applies to                                                                    debt incurred to finance purchase of
                                                       (3) The payment standard for a family                cooperative membership shares and any
any member of the family who:                       is the greater of:
   (1) Has an ownership interest in the                                                                     refinancing of such debt;
                                                       (i) The payment standard (as                            (iii) Home insurance;
unit during the time that                           determined in accordance with
homeownership payments are made; or                                                                            (iv) The PHA allowance for
                                                    paragraphs (b)(1) and (b)(2) of this                    maintenance expenses;
   (2) Is the spouse of any member of the           section) at the commencement of
household who has an ownership                                                                                 (v) The PHA allowance for costs of
                                                    homeownership assistance for                            major repairs and replacements;
interest in the unit during the time                occupancy of the home; or                                  (vi) The PHA utility allowance for the
homeownership payments are made.                       (ii) The payment standard (as                        home; and
   (c) Exception for elderly and disabled           determined in accordance with                              (vii) Principal and interest on debt
families. (1) As noted in paragraph (a)             paragraphs (b)(1) and (b)(2) of this                    incurred to finance major repairs,
of this section, the maximum term of                section) at the most recent regular                     replacements or improvements for the
assistance does not apply to elderly and            reexamination of family income and                      home. If a member of the family is a
disabled families.                                  composition since the commencement                      person with disabilities, such debt may
   (2) In the case of an elderly family, the        of homeownership assistance for                         include debt incurred by the family to
exception only applies if the family                occupancy of the home.                                  finance costs needed to make the home
qualifies as an elderly family at the start            (4) The PHA must use the same                        accessible for such person, if the PHA
of homeownership assistance. In the                 payment standard schedule, payment                      determines that allowance of such costs
case of a disabled family, the exception            standard amounts, and subsidy                           as homeownership expenses is needed
applies if at any time during receipt of            standards pursuant to §§ 982.402 and                    as a reasonable accommodation so that
homeownership assistance the family                 982.503 for the homeownership option                    the homeownership option is readily
qualifies as a disabled family.                     as for the rental voucher program.                      accessible to and usable by such person,
   (3) If, during the course of                        (c) Determination of homeownership                   in accordance with part 8 of this title.
homeownership assistance, the family                expenses. (1) The PHA shall adopt                          (4) If the home is a cooperative or
ceases to qualify as a disabled or elderly          policies for determining the amount of                  condominium unit, homeownership
family, the maximum term becomes                    homeownership expenses to be allowed                    expenses may also include cooperative
applicable from the date                            by the PHA in accordance with HUD                       or condominium operating charges or
homeownership assistance commenced.                 requirements.                                           maintenance fees assessed by the
However, such a family must be                         (2) Homeownership expenses for a                     condominium or cooperative
provided at least 6 months of                       homeowner (other than a cooperative                     homeowner association.
homeownership assistance after the                  member) may only include amounts                           (d) Payment to lender or family. The
maximum term becomes applicable                     allowed by the PHA to cover:                            PHA must pay homeownership
(provided the family is otherwise                      (i) Principal and interest on initial                assistance payments either:
eligible to receive homeownership                   mortgage debt, any refinancing of such                     (1) Directly to the family or;
assistance in accordance with this part).           debt, and any mortgage insurance                           (2) At the discretion of the PHA, to a
   (d) Assistance for different homes or            premium incurred to finance purchase                    lender on behalf of the family. If the
PHAs. If the family has received such               of the home;                                            assistance payment exceeds the amount
assistance for different homes, or from                (ii) Real estate taxes and public                    due to the lender, the PHA must pay the
different PHAs, the total of such                   assessments on the home;                                excess directly to the family.


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00034   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
            Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations                                                 55167

  (e) Automatic termination of                      homeownership assistance (in                               (d) Mortgage default. The PHA must
homeownership assistance.                           accordance with homeownership option                    terminate voucher homeownership
Homeownership assistance for a family               program requirements).                                  assistance for any member of family
terminates automatically 180 calendar                  (2) The PHA may not commence                         receiving homeownership assistance
days after the last housing assistance              continued tenant-based assistance for                   that is dispossessed from the home
payment on behalf of the family.                    occupancy of the new unit so long as                    pursuant to a judgment or order of
However, a PHA has the discretion to                any family member owns any title or                     foreclosure on any mortgage (whether
grant relief from this requirement in               other interest in the prior home.                       FHA-insured or non-FHA) securing debt
those cases where automatic                            (3) The PHA may establish policies                   incurred to purchase the home, or any
termination would result in extreme                 that prohibit more than one move by the                 refinancing of such debt. The PHA, in
hardship for the family.                            family during any one year period.                      its discretion, may permit the family to
                                                       (b) Requirements for continuation of                 move to a new unit with continued
§ 982.636 Homeownership option:                     homeownership assistance. The PHA                       voucher rental assistance. However, the
Portability.                                        must determine that all initial                         PHA must deny such permission, if:
   (a) General. A family may qualify to             requirements listed in § 982.626 have                      (1) The family defaulted on an FHA-
move outside the initial PHA                        been satisfied if a family that has                     insured mortgage; and
jurisdiction with continued                         received homeownership assistance                          (2) The family fails to demonstrate
homeownership assistance under the                  wants to move to a new unit with                        that:
voucher program in accordance with                  continued homeownership assistance.                        (i) The family has conveyed title to
this section.                                       However, the following requirements do                  the home, as required by HUD, to HUD
   (b) Portability of homeownership                 not apply:                                              or HUD’s designee; and
assistance. Subject to § 982.353(b) and                (1) The requirement for pre-assistance                  (ii) The family has moved from the
(c), § 982.552, and § 982.553, a family             counseling (§ 982.630) is not applicable.               home within the period established or
determined eligible for homeownership               However, the PHA may require that the                   approved by HUD.
assistance by the initial PHA may                   family complete additional counseling                   § 982.639 Homeownership option:
purchase a unit outside of the initial              (before or after moving to a new unit                   Administrative fees.
PHA’s jurisdiction, if the receiving PHA            with continued assistance under the                       The ongoing administrative fee
is administering a voucher                          homeownership option).                                  described in § 982.152(b) is paid to the
homeownership program and is                           (2) The requirement that a family                    PHA for each month that
accepting new homeownership families.               must be a first-time homeowner
   (c) Applicability of Housing Choice                                                                      homeownership assistance is paid by
                                                    (§ 982.627) is not applicable.                          the PHA on behalf of the family.
Voucher program portability                            (c) When PHA may deny permission
procedures. In general, the portability             to move with continued assistance. The                  § 982.640 Homeownership option:
procedures described in §§ 982.353 and              PHA may deny permission to move to                      Recapture of homeownership assistance.
982.355 apply to the homeownership                  a new unit with continued voucher                          (a) General. The PHA shall recapture
option and the administrative                       assistance as follows:                                  a percentage of the homeownership
responsibilities of the initial and                    (1) Lack of funding to provide                       assistance provided to the family upon
receiving PHA are not altered except                continued assistance. The PHA may                       the family’s sale or refinancing of the
that some administrative functions (e.g,            deny permission to move with                            home.
issuance of a voucher or execution of a             continued rental or homeownership                          (b) Securing the PHA’s right of
tenancy addendum) do not apply to the               assistance if the PHA determines that it                recapture. Upon purchase of the home,
homeownership option.                               does not have sufficient funding to                     a family receiving homeownership
   (d) Family and PHA responsibilities.             provide continued assistance.                           assistance shall execute documentation
The family must attend the briefing and                (2) Termination or denial of                         as required by HUD, and consistent with
counseling sessions required by the                 assistance under § 982.638. At any time,                State and local law, that secures the
receiving PHA. The receiving PHA will               the PHA may deny permission to move                     PHA’s right to recapture the
determine whether the financing for,                with continued rental or                                homeownership assistance in
and the physical condition of the unit,             homeownership assistance in                             accordance with this section. The lien
are acceptable. The receiving PHA must              accordance with § 982.638.                              securing the recapture of
promptly notify the initial PHA if the                                                                      homeownership subsidy may be
family has purchased an eligible unit               § 982.638 Homeownership option: Denial
                                                    or termination of assistance for family.
                                                                                                            subordinated to a refinanced mortgage.
under the program, or if the family is                                                                         (c) Recapture amount for sales. In the
unable to purchase a home within the                  (a) General. The PHA shall terminate                  case of the sale of the home, the
maximum time established by the PHA.                homeownership assistance for the                        recapture shall be in an amount
   (e) Continued assistance under                   family, and shall deny voucher rental                   equalling the lesser of:
§ 982.637. Such continued assistance                assistance for the family, in accordance                   (1) The amount of homeownership
under portability procedures is subject             with this section.                                      assistance provided to the family,
to § 982.637.                                         (b) Denial or termination of assistance               adjusted as described in paragraph (f) of
                                                    under basic voucher program. At any                     this section; or
§ 982.637 Homeownership option: Move                time, the PHA may deny or terminate                        (2) The difference between the sales
with continued tenant-based assistance.             homeownership assistance in                             price and purchase price of the home,
   (a) Move to new unit. (1) A family               accordance with § 982.552 (Grounds for                  minus:
receiving homeownership assistance                  denial or termination of assistance) or                    (i) The costs of any capital
may move to a new unit with continued               § 982.553 (Crime by family members).                    expenditures;
tenant-based assistance in accordance                 (c) Failure to comply with family                        (ii) The costs incurred by the family
with this section. The family may move              obligations. The PHA may deny or                        in the sale of the home (such as sales
either with voucher rental assistance (in           terminate assistance for violation of                   commission and closing costs);
accordance with rental assistance                   participant obligations described in                       (iii) The amount of the difference
program requirements) or with voucher               § 982.551 or § 982.633.                                 between the sales price and purchase


   VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00035   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2
55168        Federal Register / Vol. 65, No. 177 / Tuesday, September 12, 2000 / Rules and Regulations

price that is being used, upon sale,                    (2) Any provisions concerning the                      (1) Section 982.403 (Terminating HAP
towards the purchase of a new home                   assisted tenancy or the lease between                   contract when unit is too small);
under the Section 8 homeownership                    the family and the owner;                                 (2) Section 982.404 (Maintenance:
option; and                                             (3) Any provisions concerning PHA                    Owner and family responsibility; PHA
   (iv) Any amounts that have been                   approval of the assisted tenancy;                       remedies); and
previously recaptured, in accordance                    (4) Any provisions concerning rent to                  (3) Section 982.405 (PHA initial and
with this section.                                   owner or reasonable rent; and                           periodic unit inspection).
   (d) Recapture amount for refinancing.                (5) Any provisions concerning the                      (e) Subpart J requirements. The
In the case of a refinancing of the home,            issuance or term of voucher.                            requirements of subpart J of this part
                                                        (b) Subpart G requirements. The                      (Housing Assistance Payments Contract
the recapture shall be in an amount
                                                     following provisions of subpart G of this               and Owner Responsibility) (§§ 982.451–
equalling the lesser of:
                                                     part do not apply to assistance under                   456) do not apply to assistance under
   (1) The amount of homeownership                   the homeownership option:
assistance provided to the family,                                                                           the homeownership option.
                                                        (1) Section 982.302 (Issuance of                       (f) Subpart K requirements. Except for
adjusted as described in paragraph (f) of            voucher; Requesting PHA approval of
this section; or                                                                                             those sections listed below, the
                                                     assisted tenancy);                                      requirements of subpart K of this part
   (2) The difference between the current               (2) Section 982.303 (Term of voucher);
mortgage debt and the new mortgage                                                                           (Rent and Housing Assistance Payment)
                                                        (3) Section 982.305 (PHA approval of
debt; minus:                                                                                                 (§§ 982.501–521) do not apply to
                                                     assisted tenancy);
                                                        (4) Section 982.306 (PHA disapproval                 assistance under the homeownership
   (i) The costs of any capital
                                                     of owner);                                              option:
expenditures;
                                                        (5) Section 982.307 (Tenant                            (1) Section 982.503 (Voucher tenancy:
   (ii) The costs incurred by the family                                                                     Payment standard amount and
in the refinancing of the home (such as              screening);
                                                        (6) Section 982.308 (Lease and                       schedule);
closing costs); and
                                                     tenancy);                                                 (2) Section 982.516 (Family income
   (iii) Any amounts that have been                                                                          and composition: Regular and interim
previously recaptured as a result of                    (7) Section 982.309 (Term of assisted
                                                     tenancy);                                               reexaminations); and
refinancing.                                                                                                   (3) Section 982.517 (Utility allowance
                                                        (8) Section 982.310 (Owner
   (e) Use of sales price in determining             termination of tenancy);                                schedule).
recapture amount. The recapture                         (9) Section 982.311 (When assistance                   (g) Subpart L requirements. The
amount shall be determined using the                 is paid) (except that § 982.311(c)(3) is                following provisions of subpart L of this
actual sales price of the home, unless               applicable to assistance under the                      part do not apply to assistance under
the sale is to an identity-of-interest               homeownership option);                                  the homeownership option:
entity. In the case of identity-of-interest             (10) Section 982.313 (Security                         (1) Section 982.551(c) (HQS breach
transactions, the PHA shall establish a              deposit: Amounts owed by tenant); and                   caused by family);
sales price based on fair market value.                 (11) Section 982.314 (Move with                        (2) Section 982.551(d) (Allowing PHA
   (f) Automatic reduction of recapture              continued tenant-based assistance).                     inspection);
amount. The amount of homeownership                     (c) Subpart H requirements. The                        (3) Section 982.551(e) (Violation of
assistance subject to recapture will                 following provisions of subpart H of this               lease);
automatically be reduced over a 10 year              part do not apply to assistance under                     (4) Section 982.551(g) (Owner
period, beginning one year from the                  the homeownership option:                               eviction notice); and
purchase date, in annual increments of                  (1) Section 982.352(a)(6) (Prohibition                 (5) Section 982.551(j) (Interest in
10 percent. At the end of the 10 year                of owner-occupied assisted unit);                       unit).
period, the amount of homeownership                     (2) Section 982.352(b) (PHA-owned                      (h) Subpart M requirements. The
assistance subject to recapture will be              housing); and                                           following provisions of subpart M of
zero.                                                   (3) Those provisions of                              this part do not apply to assistance
                                                     § 982.353(b)(1),(2), and (3) (Where                     under the homeownership option:
§ 982.641 Homeownership option:                      family can lease a unit with tenant-
Applicability of other requirements.                                                                           (1) Sections 982.602–982.619; and
                                                     based assistance) and § 982.355                           (2) Sections 982.622–982.624.
  (a) General. The following types of                (Portability: Administration by receiving
provisions (located in other subparts of             PHA) that are inapplicable per                            Dated: August 24, 2000.
this part) do not apply to assistance                § 982.636;                                              Harold Lucas,
under the homeownership option:                         (d) Subpart I requirements. The                      Assistant Secretary for Public and Indian
  (1) Any provisions concerning the                  following provisions of subpart I of this               Housing.
Section 8 owner or the HAP contract                  part do not apply to assistance under                   [FR Doc. 00–22829 Filed 9–11–00; 8:45 am]
between the PHA and owner;                           the homeownership option:                               BILLING CODE 4210–33–P




    VerDate 11<MAY>2000   10:27 Sep 11, 2000   Jkt 190000   PO 00000   Frm 00036   Fmt 4701   Sfmt 4700   E:\FR\FM\12SER2.SGM   pfrm04   PsN: 12SER2