HOUSING CHOICE VOUCHER HOMEOWNERSHIP PROGRAM …

1 HOUSING CHOICE VOUCHER . HOMEOWNERSHIP . PROGRAM GUIDEBOOK. ACKNOWLEDGEMENTS. This guidebook was prepared by Abt Associates Inc. for the Office of public and Indian HOUSING under contract number C-OPC 21702. The principal authors of this guidebook are Dennis Morgan and Linda Pistilli, with assistance from Michelle Wood. Mary Joel Holin served as the Technical Reviewer. Jeff Smith managed the production of the guidebook.. B.. C. Table of Contents CHapter 1. 2 Introduction 3 Regulatory History 4 VOUCHER Home Buying The Same, Only Different Family Eligibility 5. Counseling 5. Applying for a Mortgage 6. Finding a Home 7. Contract Negotiation 8. Property Inspections 9. Closing/Settlement 9. 10 Pilot Programs & Other Programs CHapter 2. 13 HOMEOWNERSHIP VOUCHER Basics 14 HOMEOWNERSHIP VOUCHER PROGRAM Requirements Applicant Selection 14. Working Closely with Families 14. Qualifying Families 15. First-Time Homebuyers 15. Minimum Income Requirements 15.

2 Minimum Income Requirements & Rules 16. Higher Minimum Income Requirements as a Local Option 16. Minimum Employment Requirements 17. Enhanced Employment Requirements as a Preference 17. No Prior Default 17. Local HOMEOWNERSHIP VOUCHER PROGRAM Requirements 18. Expanding the HOMEOWNERSHIP Options 18. Meeting Unmet Needs with Local Requirements 18. HOMEOWNERSHIP Counseling 19. 20 HOUSING Search . D. Eligible HOUSING 20. HOUSING Search & Purchase Time Limits 20. Additional Search Time & Limits 20. Portability 21. Physical Condition of Units 21. Physical Condition of Unit 22. 22 Home Purchase Contract (or Agreement) of Sale 22. Financing 23. Rural Partners to Make the PROGRAM Work 24. Partners in High Cost Areas 24. 25 Ongoing PROGRAM Activities HOUSING Assistance Payments 25. Accessibility Modifications Included as a HOMEOWNERSHIP Expense 25. Annual Reexaminations 25. Term Limits on Assistance 27. Term Limits on Assistance Elderly and Disabled Families 27.

3 Determining Whether HOMEOWNERSHIP Assistance is Required as a Reasonable Accommodation 28. Summary Rental vs. HOMEOWNERSHIP Assistance 30. CHapter 3. 33 Preliminary Planning Bankable PROGRAM Participants 33. Sufficient Income 34. Credit Issues 35. Limiting HOMEOWNERSHIP Assistance 35. Applicants or Participants 36. Interest in HOMEOWNERSHIP 37. 38 Affordable Units Increasing Affordability with a Land Trust 40. 41 Willing Lenders Persistence Finds Willing Lenders 41. FHA, Fannie Mae and Freddie Mac Lenders 41. State and Local HOUSING Finance Agencies 42.. E. Assisting Families with Disabilities 43. State HOUSING Finance Agency as a Secondary Market 43. Savings and Loans, and Credit Unions 43. Working with Credit Unions 44. Commercial Banks 44. 45 Commercial Banks The Community Reinvestment Act 45. Outreach Materials 46. Keeping Local Lenders 46. 47 Agency Capacity Developing Local Partnership Capacity 47. managing the HOMEOWNERSHIP Workload 48.

4 Working in Rural Areas 48. managing in the Out Years 49. Assignment of Staff 49. managing PHA Priorities 50. Internal Support of the Agency for the PROGRAM 50. CHapter 4. 52 HOMEOWNERSHIP VOUCHER PROGRAM Management 53 Outreach and Briefing New Homeowners Encourage Applicants 53. 54 Selecting HOMEOWNERSHIP PROGRAM Participants New Homeowners Mentor Applicants 54. 55 Credit Cleansing Credit Cleansing Partners 56. Screening an Opportunity for HCV Income Verification 56. 57 HOUSING Counseling Certificates of Completion for the Counseling 57. 58 Issuing the VOUCHER Equivalent . Estimating the HAP 58. HOMEOWNERSHIP PROGRAM and Underwriting Qualifications Differ 59. 59 Reviewing the Contract of Sale . F. Local Provisions in the Contract of Sale 60. 61 Inspecting HOMEOWNERSHIP Units 61 Reviewing the Family's Financing Documents Reviewing Underwriting Qualifications 62. 63 Predatory Lending 66 Reporting Requirements CHapter 5. 68 Providing HOMEOWNERSHIP Counseling 68 What HUD Requires Local Commitment to Post-purchase Counseling 69.

5 70 Format for HOMEOWNERSHIP Counseling Flexible Hours for the PROGRAM 71. Combination of Individual and Group Sessions 71. 71 Who Should Provide the Counseling? In-house Resources for Counseling 72. Using Partners for Counseling 72. 73 Selecting a Counseling Agency 73 Working With Participants Who Need Credit Repair Assistance Methods to Deal with Credit Issues 74. Use the Existing Tools in the Market 75. 76 Developing the Counseling Curriculum 77 Money Smart: Building Knowledge, Security, Confidence An Adult Education PROGRAM 77. The Money Smart Training PROGRAM Format 77. Consistent Homebuyer Education Statewide 78. CHapter 6. 80 Financing the Home Purchase 80 The Finders-Keepers Financing Model 80 Lender Recruitment . G. 82 Financing Models Treatment of HOMEOWNERSHIP Assistance by the IRS 83. Model 1 Single Mortgage Model HAP as Income (Gross-up Model) 83. Not Grossing Up HAP Income 86. Model 2: Single Mortgage HAP as Additional Mortgage Payment (Offset) 86.

6 Payments Directly to Homebuyer 87. Automatic Withdrawal and Direct Payment 88. Buy Down of HAP Payment 88. Bridging the Gap with a Second Mortgage 90. Additional Models: 91. PITI Deduction Option for Home CHOICE Borrowers (Disabled Families) 91. Downpayment Assistance Model 91. 92 Additional Factors Affecting Amount Borrowed 93 Additional Resources for Participant Families Gap Funds for Disabled Households 94. 95 Brushing Up on the Mortgage Loan Process IDA Down Payment Assistance 96. CHapter 7. 98 HOUSING Choices 98 Common Elements 99 One Unit Property Buying a Single-Family Home 99. Financing 100. HOUSING Expenses 100. 101 Condominium Units (or Planned Unit Developments). Buying a Condominium 101. Financing 101. HOUSING Expenses 102. 102 Cooperative Units Renting a Co-op Unit 102. Buying a Co-op Unit 103. Financing 103. HOUSING Expenses 104.. H. 104 Site-Installed Manufactured HOUSING Buying a Site-Installed Manufactured Home 104.

7 Financing 105. HOUSING Expenses 105. 106 Units Where Homeowner Will Not Own the Underlying Real Property (Land). 106 Lease-Purchase Agreements Buying a Lease-Purchase Unit 106. 107 Sale of PHA-owned (or Substantially Controlled) Units CHapter 8. 109 Physical Standards Required for HOMEOWNERSHIP Units 110 The Contract of Sale Assisting Participants During Review of the Contract of Sale 110. Addendum to the Contract of Sale 110. 111 Scheduling the Two Inspections Scheduling the Two Inspections 111. 112 The HQS Inspection Deficiencies Noted During the Inspection 112. Flipping 112. 113 Environmental Requirements 114 The Independent Professional HOUSING Inspection 114 Selecting an Independent Inspector Setting Standards for Inspectors 114. PHA as Advocate During Sales Negotiations 116. 116 The Independent Inspection Report List of Likely Repairs in the Near Future 116. CHapter 9. 119 Post-Purchase PROGRAM Administration 119 Family Obligations 120 Post-Purchase Counseling Follow-up in the First 2 Months 120.

8 I. 120 Ongoing Eligibility Post-Closing Education 121. 121 Post-Purchase HQS Inspections Exterior Spot Checks on Home Condition 121. 122 Participant Moves 122 Portability Loans for Repairs and Improvements 122. Funds for Unplanned Repairs 123. 123 Refinancing 123 Mortgage Default & Foreclosure 124 Death of the Homeowner 124 Term Limits on HOMEOWNERSHIP Assistance Success of the PROGRAM 126. CHapter 10. 128 PROGRAM Reporting Requirements 128 The PHA Plan 130 The PHA Administrative Plan Limitations on the Number of Families 130. PHA Requirements for Participation 131. Maximum Times to Locate and Purchase a Home 131. Issuing Non-purchasing Families a Rental VOUCHER 132. Counseling Requirements 132. Minimum Down payment or Equity Requirements 132. Requirements for Financing the Purchase 132. Comply with Generally Accepted Underwriting Standards 133. Affordability Restrictions on Debt Secured by the Home 133. Financing Affordability 134.

9 Requirements for Continuation of HOMEOWNERSHIP Assistance 134. Determining HOMEOWNERSHIP Expenses 135. Limitations on Moves by Families 136. 136 PHA Reporting Requirements . J. CHAPTER 1. Introduction guidebook is organized as follows Chapter 1 gives a basic overview of the On September 12, 2000, HUD published VOUCHER HOMEOWNERSHIP PROGRAM , followed the final rule for the HOMEOWNERSHIP by guidelines for deciding whether a home- VOUCHER PROGRAM . Since then, there have ownership PROGRAM is right for your agency been widespread expressions of interest in Chapter 2. in the PROGRAM from would-be partici- Chapter 3 describes PROGRAM management. pants and public HOUSING Agencies (PHAs). Chapters 4-8 provide details about PROGRAM Prospective participants are eager to use design including homebuyer counseling, VOUCHER assistance to purchase a home of financing, types of eligible HOUSING and their own. PHAs are enthusiastic about the the physical standards requirements for possibility of assisting families in purchasing potential units.

10 Chapter 9 discusses post- homes, but need guidance on designing sale activities and Chapter 10 discusses programs that allow participating fami- PROGRAM -reporting requirements. lies to have the greatest chance for success. This guidebook is intended as a first step in meeting that need. The HOMEOWNERSHIP VOUCHER regulations, 24 CFR , set up PROGRAM guidelines and only a few specific mandatory requirements covering areas of PROGRAM operation ( for example, income and employment requirements, the calculation of the VOUCHER subsidy, and the term of the HOMEOWNERSHIP assistance to be provided). Otherwise, the regu- lations allow PHAs broad flexibility in tailoring their programs to local conditions. The INTRODUCTION. 2. level of flexibility is at once exhilarating and intimidating exhilarating because there are so many options available to PHAs, and intimidating because many PHAs have little experience with HOMEOWNERSHIP and don't know where to start.