Section 8 Homeownership

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Section 8 Homeownership

• Kathy Winter
• Iowa State Office
• U.S. Dept. of HUD
• 515-284-4315
• Kathy_r._Winter_at_hud.gov

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Section 8 Homeownership

• Section 8 HO is an option to the PHA
• Implements through PHA Annual and administrative
  plans.
• Use Voucher subsidy for monthly homeownership
  expenses
• First-time Homebuyer Program
• Resident pays 30 of AMI for housing costs
• Open Market Purchase

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Legislative History

• Sec. 555 of QHWRA of 1998
• Congress amends Sec. 8(y)
• Proposed Rule April 1999
• Final Rule Published Sept. 12, 2000
• Effective October 12, 2000
• Special Housing Type under Subpart M of 24 CFR
  982

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Requirements

• FINAL RULE - SEPTEMBER 12, 2000
• PHA choice
• Amendment to annual and administrative plan
• Final Rules
• October 18, 2002 Downpayment Assistance
  Streamlining
• October 28, 2002 Eligibilty Units Owned or
  Controlled by a PHA

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Requirements

• Eligibility of Units Owned or Controlled by a
  PHA Final Rule October 28, 2002
• Downpayment Assistance Grants and Streamlining
  Amendments Final Rule October 18, 2002

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PHA CapacityOne of Three Options

• ONE Establish Min. Down-payment
• Three (3) percent of sale price
• At least one percent of sale price comes from
  familys personal resources.

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PHA Capacity

• Two PHA requires financing for purchase meets
  one of following
• Provided, insured or guaranteed by State or
  Federal Gov.
• Complies with secondary market underwriting
  requirements.
• Complies with generally accepted private sector
  underwriting standards

8
PHA Capacity

• Three PHA demonstrates in Annual Plan it has
  capacity or will acquire capacity to successfully
  operate Homeownership Program.

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Family Eligibility

• Section 8 Eligible Family
• Current program participant
• Eligible for admission to Sec 8 HCV program

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Family Eligibility

• First time Homebuyer
• Single Parent or displace homemakers
• No HO interest in 3 years
• Exception for Family that includes member with
  disability and homeownership is needed as a
  reasonable accommodation.

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Family Eligibility

• Minimum Income 982.627(c)
• Disabled Family Monthly SSI for individual
  living alone x 12.
• Other Families 2000 X National Minimum wage/hr
  (10,300/yr)
• Welfare assistance may not be included.
• Disabled and Elderly Families Welfare
  assistance may be included

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PHA Higher Minimum Income

• A PHA may set a higher minimum income for all
  family types.
• However Family may still qualify with HUD Min.
  income.
• Family that meets HUD minimum income and not PHA
  Minimum shall meet the requirement if
• Pre-qualified or pre-approved for financing
• Financing meets PHA established requirements and
• Financing sufficient to purchase unit that meets
  HQS.

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Family Eligibility

• Employment 982.627(d)
• Disabled and elderly exempt
• One adult member employed continually fulltime
  for year prior to HO assistance.
• One adult currently employed fulltime not less
  than 30 hours
• PHA may not create more restrictive employment
  criteria

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Family Eligibility

• Mortgage Defaults
• Not eligible if any family member has previously
  received Sec 8 HO assistance and defaulted on
  mortgage
• PHA may establish additional requirements for
  family eligibility
• FSS participants

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Homeownership Voucher Option

• Family finds eligible property
• Subsidy to assist with monthly homeownership
  expenses
• PHA may make monthly payment to family or lender

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Pre-Homeownership Counseling 982.630

• Family must attend and satisfactorily complete
  program required by PHA
• Family does not pay for counseling
• PHA staff and/or other entity may conduct
• Consider HUD approved counseling agencies

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Pre Homeownership Counseling 982.630

• PHA may adapt suggestions to meet local
  circumstances and needs of family.
• PHA may offer additional counseling after
  assistance begins.
• If not HUD approved counselor the PHA should
  ensure the program is consistent with HUDs
  Housing Counseling program.

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Pre-Homeownership Counseling

• Suggested Topics
• Home maintenance
• Budgeting
• Credit counseling
• Negotiating the purchase price of a home

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Pre Homeownership Counseling 982.630

• Topics, cont.
• Financing Obtaining and pros and cons of
  different approaches
• Finding a home
• Locating a home in a area without a high
  concentration of low-income families
• Fair housing and state Federal truth in lending
  laws

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Finding a Home

• PHA may establish time limits
• Locating a unit and purchasing
• PHA may not steer family

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Eligible Unit 982.628

• One unit property or single unit in coop or
  condominium
• New Construction
• Seller cannot be debarred, suspended or subject
  to a limited denial of participation by HUD

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Eligible Unit

• Unit in PHA Jurisdiction
• Must pass HQS
• Inspected by 3rd party Independent inspector

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Home Inspections 982.631

• PHA conducts HQS inspection used for Voucher
  program
• Determines condition is decent, safe and
  sanitary.
• No annual HQS inspection required

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Home Inspections

• Independent Professional (3rd Party)
• Selected and hired by family
• Assess adequacy and life span of major systems,
  appliances and other structural components
• Satisfaction of inspection by buyer typical
  contingency clause in contracts of sale.
• PHA may disapprove unit on basis of report

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Home Inspections

• PHA may require additional inspections after
  purchase of unit.

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Voucher Subsidy Available

• Payment standard in Sec. 8 program determines
  maximum subsidy
• No separate HO payment standard schedule
• Same subsidy standards

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Payment Standard

• Payment Standard greater of
• Payment standard at commencement of HO
  assistance.
• Payment standard at most recent reexamination
  since commencement of HO assistance
• Never goes below initial calculation

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Homeownership Assistance Payment

• Family pays at least total tenant payment (TTP),
  may pay more
• Monthly HAP is calculated as the lesser of
• Payment standard minus family TTP
• Families monthly homeownership expenses minus
  family TTP

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Contract of Sale

• Family must provide copy of contract of sale to
  PHA
• Contract of Sale must include
• Prepurchase inspection (buyer satisfaction, buyer
  not obligated to pay repairs)
• Seller certification seller not debarred,
  suspended or subject to limited denial of
  participation.
• Terms and Conditions of sale

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Financing 982.632

• PHA may establish their own financing
  requirements, including
• Lender qualifications and terms of financing
• PHAs encouraged to review financing prior to
  approval of assistance to avoid Predatory Lending
  type situations

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PHA Financing Requirements

• May prohibit certain forms of financing
• Restrictions on other debt secured by home
• Terms of financing
• Minimum downpayment

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PHA Financing Requirements

• Affordability of Purchase
• PHA may disapprove financing or refinancing if it
  determines debt is unaffordable or terms dont
  meet PHA req.
• HUD is working on a Guide Book
• All PHA financing or affordability requirements
  must be described in PHA administrative plan.

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Financing a Purchase 982.632

• Financing a Unit
• PHA may establish their own financing
  requirements, including lender qualifications
  and terms of financing.
• PHAs are encouraged to review financing to avoid
  Predatory Lending before assistance is approved.

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PHA Requirements for Admission 982.626(b)

• PHA may limit HO Assistance to families or
  purposes defined by PHA
• Examples
• FSS participants
• Families in XYZ Non-profit Homeownership program
• (Must include these requirements with the PHA
  Administrative Plan.)

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PHA Requirements 982.629

• PHA may establish a maximum time for a family to
  locate a home and purchase a home
• PHA may require periodic reports on familys
  progress in finding a home
• PHA decides if the family gets a rental voucher
  if a home is not found or put on the waiting
  list.
• Must include these requirements with the PHA
  Administrative Plan

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PHA Requirements

• PHA determines if the HAP will go to the lender
  or the family. 982.635(d)
• PHA determines the number of Section 8 Vouchers
  it will commit to the program.

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Homeownership Expenses 982.635(c)

• The PHA determines amount to be included in the
  HO expenses/costs
• Principal and Interest on mortgage
• Mortgage Insurance Premium (MIP)
• Property Taxes
• Homeowners insurance
• PHA allowance for maintenance expenses
• PHA allowance for major repair and replacement
• PHA utility allowance

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PHA Allowances

• Allowances set for program as a whole, not based
  on actual cost or condition of homes
• PHA may contact counseling agencies and realtors
  for advice

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Homeownership Assistance Payment 982.635

• PHA will make a payment equal to the lower of
• The payment standard (regular Sec. 8 program)
  minus the total tenant payment or
• The familys monthly homeownership expenses minus
  total tenant payment.

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Family Share

• Family Responsible for all HO expenses not
  covered by HAP
• If homeownership expenses exceed the payment
  standard, family pays the difference in addition
  to TTP.
• 40 rule does not apply to HO families
• Law only limits amount paid by family for rent.

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Continued Assistance

• Family Obligations
• Comply with terms of mortgage.
• Use and occupancy
• Familys only residence
• Report changes in composition
• No subletting or leasing

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Continued Assistance

• Comply with other family obligations under the
  voucher program
• Notice of move-out
• Notice of default
• Supply information concerning
• Refinancing
• Sale or transfer of any interest in home
• Homeownership expenses

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Continued Assistance

• Prohibition on ownership interest on second
  residence
• Comply with additional PHA requirements
• Eg. Postpurchase counseling

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Termination of Assistance 982.638

• Termination of Assistance
• PHA may terminate assistance in the case of
  mortgage default (foreclosure)
• PHAs decision on whether family may receive
  rental assistance.
• PHA may terminate if family does not comply with
  family obligations

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Family at Zero HAP 982.635(e)

• Homeownership assistance terminates after 180
  days with zero assistance.
• HOWEVER, PHA has discretion to grant relief where
  termination would result in extreme hardship.

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Time limitations 982.634

• Time limits do not apply to elderly or disabled
  families
• Maximum term
• 10yrs of HAP for a mortgage less than 20 yr
• 15yrs of HAP for mortgage 20 yr and more
• Applies from initial purchase

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Portable 982.636

• Portable
• Receiving PHA must have HO program
• Family and Unit must meet eligibility
  requirements

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Move to New Unit

• Continuation of HO Assistance
• Initial Eligibility requirements apply, except
• First time homeowner
• Pre-assistance counseling

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Example Sec. 8 Purchase

• Family of four purchasing a 3 bedroom home.
• Payment Standard for a 3 BR is 800/month
• Housing expenses include
• Principal, Interest, Taxes, Insurance (PITI)
• Mortgage Insurance Payment (MIP)
• Allowances Total 185
• 35 for maintenance allowance 3/BR
• 50 replacement allowance 3/BR
• 100 utility allowance 3/BR

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Example Sec. 8 Purchase

• Family Adjusted Annual Income is 20,000
• 30 of Adjusted Monthly Income 500
• Monthly Total Tenant Payment 500
• TTP Total Family Share

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Example Sec. 8 Purchase

• Purchase Price 70,000
• FSS Escrow (DP) 5,000
• First Mortgage FHA (30yrs _at_7)
  65,000 ________________________________
  _________
• First Mortgage Payment PITI MIP on 65k 615
• Utility, maintenance and replacement
  allowances 185
• Monthly Homeownership Expenses 800

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Example Sec. 8 Purchase

• Gross Homeownership Costs 800
• PITI MIP 615
• Allowances 185
• Total Family Share
• (185 allowances 315 lender) 500
• Homeownership Assistance Payment 300

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Example Sec. 8 Purchase

• Purchase Price - 90,000
• FSS Escrow (DP) 5,000
• First Mortgage FHA (30yrs _at_7) 85,000
• ___________________________________________
• First Mortgage Payment PITI MIP on 85k 815
• Utility, Maintenance Replacement Allowance 185
• Monthly Homeownership Expenses 1,000

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Example Sec. 8 Purchase

• Gross Homeownership Costs 1,000
• PITI MIP 815
• Allowances 185
• Total Family Share 700
• (185 allowances 515 lender)
• Housing Assistance Payment 300

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Example Sec. 8 Purchase

• Is 700 per month Family Share too high for
  family with 20,000 adjusted annual income?

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Web Site

• HUD Section 8 Homeownership http//www.hud.gov/of
  fices/pih/programs/hcv/homeownership/

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Community Program.

• Lenders and Insured Loans
• Conventional
• Subsidized Loans
• State Housing Finance Authority
• USDA
• Fannie Mae
• FHA

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Community Program..

• Funding for additional subsidy
• Federal Home Loan Bank
• HOME local government or State of Iowa
• CDBG local government or State of Iowa
• 5(h) proceeds (sale of Public Housing)
• Local Housing Trust Funds

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Your Communitys Market

• What is available in your community for sale?
• Are they in good condition?
• What price are they selling for?
• Are the affordable houses concentrated in
  low-income areas?
• Considering your payment standard - will it work
  without additional subsidy?
• Would you increase your payment standard?

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Your Communitys Market

• Rental Housing Market
• What is utilization rate of Section 8 Vouchers?
• What is the need in your community for affordable
  housing?
• How long is the waiting list?