Microsoft PowerPoint - 7- Homeownership Nov 2021©2021 NCDA 1
Project Example:  Birmingham, AL “Blitzbuilds” happen in  first week  of June each year  (Homeownership Month) during  which Habitat, a group of licensed  homebuilders and  City cooperate  to buildout a small (1011 lot)  subdivision over a oneweek  timeframe. City HOME dollars  backstop any shortfalls on  materials.
©2021 NCDA 2
1) Homebuyers to purchase and rehabilitate housing;
2) Developers or owners (including CHDOs) to develop  affordable homeownership housing 
PJs must develop written policies and procedures for  homebuyer projects and programs:  See CPD1809  Requirements for HOME Homebuyer Program Policies  and Procedures
Forms of  Assistance  I
Direct assistance to homebuyers
• Rehabilitation costs for purchased  property
• Provided as loans, grants or loan  guarantees
• Most use loans
©2021 NCDA 4
• Acquisition, Construction, Reconstruction,  Rehabilitation, 
• Conversion of nonhousing, 
• Site improvements. 
• Grants
• Equity Investments, interest subsidies, loan  guarantees
HOME Subsidy should allow units to be affordable  without further subsidy. 
©2021 NCDA 5
Homeownership  Affordability  Period 
• Resale or recapture provisions  imposed; and
• HA Units must meet property  standards.
• Affordability period does not apply to  rehabilitation of owneroccupied housing  (not acquired with HOME Assistance)
©2021 NCDA 6
Homeownership Assistance per Unit Minimum period of affordability in years
Under $15,000 5
• Household Assisted must be Low Income (=<80% Area Median Income)
• Homebuyer – by the time of purchase agreement
• New construction or rehab. units – at time of agreement to purchase or lease purchase
• Incomeeligibility requirement only at purchase
• Can remain in property regardless of later income so long as the home is  principal residence
• Principal Residence
• Buyers must use property as their principal residence during affordability period
©2021 NCDA 8
• All HOMEassisted homebuyers must receive housing counseling (Requirements in CPD1809)
• Provided by certified housing counselors who work for organizations  approved to participate in HUD’s Housing Counseling Program. 
• Homebuyers may be charged a reasonable fee for counseling
• HOME funds can be used for counseling costs when the household  purchases unit with HOME assistance (project soft costs or admin)
• If homebuyer is not assisted with HOME funds, counseling must be admin.  cost.
©2021 NCDA 9
Maximum Property Value
• Property must “be modest”
• HOME purchase price (for both New Construction and Existing Housing) or  after purchase & rehab. Limit: 
• 95% of median purchase price for area. Either:
1. Single family mortgage limits at 
• https://www.hudexchange.info/resource/2312/homemaximum purchasepriceafterrehabvalue/ 
2. PJ may determine using procedures in §92.254(a)(2)(iii)
©2021 NCDA 10
11/7/2021
6
State County Name Metropolitan/FMR Area Name 1Unit 2unit 3unit 4unit
Unadjusted 
Median Value 1Unit 2unit 3unit 4unit
Unadjusted 
Median 
Value
AL Jefferson County BirminghamHoover, AL HUD Metro FMR Area $199,000 $254,000 $308,000 $381,000 $209,000 $243,000 $311,000 $377,000 $467,000 $256,000
AL St. Clair County BirminghamHoover, AL HUD Metro FMR Area $195,000 $250,000 $302,000 $375,000 $205,400 $243,000 $311,000 $377,000 $467,000 $256,000
AL Shelby County BirminghamHoover, AL HUD Metro FMR Area $202,000 $258,000 $313,000 $388,000 $212,550 $243,000 $311,000 $377,000 $467,000 $256,000
AL Chilton County Chilton County, AL HUD Metro FMR Area $150,000 $193,000 $233,000 $289,000 $158,350 $243,000 $311,000 $377,000 $467,000 $256,000
AL Walker County Walker County, AL HUD Metro FMR Area $150,000 $193,000 $233,000 $289,000 $158,350 $243,000 $311,000 $377,000 $467,000 $256,000
AL Russell County Columbus, GAAL MSA $150,000 $193,000 $233,000 $289,000 $158,350 $243,000 $311,000 $377,000 $467,000 $256,000
AL Baldwin County DaphneFairhopeFoley, AL MSA $209,000 $268,000 $324,000 $401,000 $220,000 $243,000 $311,000 $377,000 $467,000 $256,000
AL Lawrence County Decatur, AL MSA $152,000 $195,000 $236,000 $292,000 $160,000 $243,000 $311,000 $377,000 $467,000 $256,000
AL Morgan County Decatur, AL MSA $154,000 $197,000 $239,000 $295,000 $162,000 $243,000 $311,000 $377,000 $467,000 $256,000
AL Geneva County Dothan, AL HUD Metro FMR Area $150,000 $193,000 $233,000 $289,000 $158,350 $243,000 $311,000 $377,000 $467,000 $256,000
AL Houston County Dothan, AL HUD Metro FMR Area $151,000 $193,000 $234,000 $290,000 $158,820 $243,000 $311,000 $377,000 $467,000 $256,000
AL Henry County Henry County, AL HUD Metro FMR Area $156,000 $199,000 $241,000 $299,000 $163,750 $243,000 $311,000 $377,000 $467,000 $256,000
AL Colbert County FlorenceMuscle Shoals, AL MSA $154,000 $198,000 $239,000 $296,000 $162,500 $243,000 $311,000 $377,000 $467,000 $256,000
AL Lauderdale County FlorenceMuscle Shoals, AL MSA $154,000 $198,000 $239,000 $296,000 $162,500 $243,000 $311,000 $377,000 $467,000 $256,000
AL Etowah County Gadsden, AL MSA $150,000 $193,000 $233,000 $289,000 $158,350 $243,000 $311,000 $377,000 $467,000 $256,000
AL Limestone County Huntsville, AL MSA $185,000 $237,000 $287,000 $356,000 $195,000 $243,000 $311,000 $377,000 $467,000 $256,000
AL Madison County Huntsville, AL MSA $185,000 $237,000 $287,000 $356,000 $195,000 $243,000 $311,000 $377,000 $467,000 $256,000
AL Mobile County Mobile, AL MSA $152,000 $195,000 $236,000 $292,000 $160,000 $243,000 $311,000 $377,000 $467,000 $256,000
AL Autauga County Montgomery, AL MSA $167,000 $214,000 $259,000 $321,000 $176,000 $243,000 $311,000 $377,000 $467,000 $256,000
AL Elmore County Montgomery, AL MSA $185,000 $237,000 $287,000 $356,000 $195,000 $243,000 $311,000 $377,000 $467,000 $256,000
AL Lowndes County Montgomery, AL MSA $157,000 $201,000 $243,000 $301,000 $165,000 $243,000 $311,000 $377,000 $467,000 $256,000
AL Montgomery CounMontgomery, AL MSA $157,000 $201,000 $243,000 $301,000 $165,000 $243,000 $311,000 $377,000 $467,000 $256,000
AL Hale County Tuscaloosa, AL HUD Metro FMR Area $180,000 $230,000 $279,000 $346,000 $189,500 $243,000 $311,000 $377,000 $467,000 $256,000
AL Tuscaloosa County Tuscaloosa, AL HUD Metro FMR Area $180,000 $231,000 $280,000 $346,000 $189,900 $243,000 $311,000 $377,000 $467,000 $256,000
AL Pickens County Pickens County, AL HUD Metro FMR Area $150,000 $193,000 $233,000 $289,000 $158,350 $243,000 $311,000 $377,000 $467,000 $256,000
HOME and Housing Trust Fund Homeownership Sales Price Limits  FY 2021 (Data through June 2020; New limits effective June 1, 2021)
Existing Homes HOME/HTF Purchase Price Limit New Homes HOME/HTF Purchase Price Limit
©2021 NCDA 11
Exception to Restriction on Subsequent HOME Funding
• Normally, no additional HOME Funds after one year from  project completion. 
• A PJ may use additional HOME funds after one year:
• Before foreclosure or at foreclosure sale to acquire housing through a  purchase option, right of first refusal, or other preemptive right;
• To provide assistance to another HOME eligible homebuyer. 
• Total of  original and additional HOME assistance may not exceed  maximum  perunit subsidy.
©2021 NCDA 12
Homebuyer Unit Transfer Deadline [§92.254(a)(3)] 
• Units acquired, rehabilitated or newly constructed with HOME funds for  homeownership purposes must be sold to an eligible buyer within 9 months  of construction completion.
• If transfer has not occurred, the unit must be converted to a HOME rental unit  and operated in compliance with § 92.252
• If converted to rental, affordability period applicable to rental projects applies  20 years for new construction rental
©2021 NCDA 13
Resale vs. Recapture
• PJ must impose either resale or recapture requirements on  HOMEAssisted homeowner units 
(except owneroccupied rehab, not acquired  w/HOME)
• Must include requirements in Consolidated Plan or Action  Plan and HUD must approve in writing
• Cannot be hybrid, but can use combination in separate PJ  programs
11/7/2021
8
Resale  I 
During  affordability period, on initial and subsequent sales of HOMEAssisted Unit:
• PJimposed deed restriction or covenant running with land, with  following conditions:
• Must be sold to an incomeeligible family
• Must be  principal residence of owner
• Must be affordable to a reasonable range of lowincome homebuyers (usually 70 80% AMI); and
• Must provide  seller with a fair return on their investment including  homeowner’s  investment (downpayment and principal payments) and any capital improvement.
• Fair return defined by PJ (for example: resale price based on changes in Housing  Price Index [HPI])
• Must address how it can be made affordable if return on investment is too high
Resale  II
• Must also have agreement (mortgage, note) w/entity (buyer,  developer) initially receiving funds
• Recommend mortgage assumable by subsequent buyers, which gives  more protection
• Funds repaid under mortgage are not Recaptured Funds but  are PI  (and will reduce amount needed by PJ to repay)
11/7/2021
9
• Provides longterm affordability 
• Useful in areas of rapidly rising housing prices and in highhousingcost areas
• Disadvantages 
• Mortgage financing may be difficult to obtain
• If  property is sold in foreclosure or if buyer defaults on HOME terms,  proceeds might  not cover required repayment of HOME assistance
• Amount repayable is total of HOME assistance to the unit: both development and  buyer
• PJ is on the hook for full amount of HOME assistance
• Buyers may not understand/accept  deed restriction
• Administration is somewhat more complicated
Resale – IV
Deed restrictions may terminate in event of foreclosure
• HOME investment must be repaid if unit no longer meets   affordability requirements
• Restrictions revived if owner of  foreclosed property regains  ownership during  affordability period
• To forestall foreclosure, add purchase options or rights of first refusal  to deed restriction
• See exception to restrictions on subsequent HOME funding (earlier  slide)
11/7/2021
10
Middle City Background
• High housing cost area (median single family home price = $320,000) 
• House affordable to a family of 4 at 80% AMI is $190,000
• Resale price based on changes (up or down) in Housing Price Index
Costbuydown assistance program 
• Downpayment of at least $5,000
• Bought down to a price affordable at 70% of AMI 
• Resale affordable to a reasonable range of homebuyers – i.e. from 70%  80%  of AMI  
• For a family of 4 at 70% of AMI,  affordable price is $180,000
Resale Example, cont.
• Assistance to subsequent buyers (up to max. sub. limit), if necessary,  brings cost back down to that affordable by a 70% AMI family
• Deed restriction with  following requirements:
• Must be sold to a lowincome family and be their principal  residence;
• Resale price is initial purchase price increased by same percentage  as Index (e.g., Housing Price Index – HPI) plus  cost of any capital  improvements
• Mortgage – assumable by subsequent buyers
11/7/2021
11
($320,000 Median Home Price, Aff. House @ 80% AMI= $190,000)
Market Sale Price
HOME Subsidy (Cost
Family)
$300,000 $120,000 $180,000 $5,000 $175,000
Resale Issue #1: Return to Seller (In 10 years HPI has increased 5%)
Resale Price ($180,000 x
Resale 10 Years later –
$189,000 $5,000 $194,000 $142,000 $52,000
(Return $9k on Invest. $10k)
Resale Issue #2: Price to New Income Eligible Buyer Resale Issue #3: Additional Subsidy 
not to exceed Max. Sub. Limit
Sale Price Additional
Max. Subsidy Limit
Final Total Subsidy
Recapture  I 
• Can only be used when providing direct subsidy to  homebuyer 
• During  affordability period, when HA property sold, PJ  collects some or all of HOME assistance from net sale  proceeds
• HOME must be sold to any willing buyer, at any price, at any  time
• PJ decides proportion of net proceeds to seller and to PJ  (Recapture)
• Property no longer subject to HOME Rules after Recapture
©2021 NCDA
Assumption of Recapture Obligations by Subsequent  Homebuyer [§92.254(a)(5)(ii)]
• Subsequent lowincome purchaser of a HA homeownership  unit may assume the existing HOME loan and recapture  obligation when no additional HOME assistance is provided
• Where additional HOME assistance needed, the original  HOME assistance must be recaptured. 
• A separate HOME subsidy must be provided to the new  homebuyer, and a new affordability period must be  established based on that assistance to the buyer.
©2021 NCDA
Recapture  II 
• Easier to administer
• Easier for buyers and banks to understand • May provide additional funding for HOME  activities
• If no net proceeds neither seller nor PJ on hook  for HOME Assistance
Disadvantage
©2021 NCDA
• HOME Amount Subject to Recapture
• Amount of HOME assistance that enabled homebuyer  to buy dwelling unit 
• Includes HOME assistance that reduced purchase  price from fair market value to an affordable price
• Excludes amount between cost of producing unit  and market value of  property (i.e., development  subsidy)
• If HOME assistance only used for development  subsidy, resale option must be used
©2021 NCDA
Recapture  IV
Market value of home (If HA development)
Sales Price of home
= Amount subject to recapture
Does not include HOME $ used for cost of producing unit (development  subsidy)
26©2021 NCDA
• $45,000 HOME second mortgage at 3% interest for 20 years
• $6,000 HOME downpayment assistance: deferred, forgivable loan
• Total direct subsidy: 
• $5,000 HOME downpayment assistance to homebuyer: deferred,  forgivable loan
• $50,000 to CHDO to write down cost to affordable
• Total direct subsidy subject to recapture:
• Affordability Period:
29
• Recapture Amount Limited to Net Proceeds of sale • Net Proceeds are  sales price minus superior loan  repayment (other than HOME funds) and any closing  costs
• Recapture Options 1. Owner Investment Returned First 2. PJ Recaptures Entire Amount 3. Reduction During Affordability Period 4. Shared Net Proceeds
©2021 NCDA
Recapture Option 1 Owner Investment Returned First
• Owner’s entire investment (downpayment and capital  improvements made by  owner since purchase) recovered before  recapturing  HOME investment.
Owner Investment Returned First Example – Insufficient Net Proceeds
HOME Investment = $50,000 Homeowner Investment = $5,000 Total Investment = $55,000 Net Proceeds = $40,000
PJ Recaptures = $35,000 Homeowner Recaptures = $5,000
30©2021 NCDA
HOME Investment = $50,000 Homeowner Investment =
$5,000 Total Investment = $55,000 Net Proceeds = $40,000
PJ Recaptures = $40,000 Homeowner Recaptures = $0
31©2021 NCDA
Recapture  Option 3
Reduction During Affordability  Period 
• HOME investment  repayment amount  reduced on a prorata  basis  during affordability  period
©2021 NCDA 32
PJ May Share Net Proceeds
• If net proceeds not sufficient to Recapture  HOME investment (or a reduced amount from  Reduction During Affordability Period method)  plus
• Allows  homeowner to recover investment  (downpayment and capital improvement)
©2021 NCDA
$5,000 Total Invest.   =      $55,000
Net Proceeds = $40,000
$50,000/($50,000+$5,000) = 91%
Recaptured = $36,363.64
$3,636.36
Homeowner Investment/HOME
34©2021 NCDA
35
HOME funds may be used to assist purchase of “Single Unit” (14  unit) properties with rental units:
1. If HOME used only for unit of buyer as principal residence:  
HOME affordability requirements on that unit only 
2. If HOME used for entire property
• HOME rental affordability requirements on rental units
• If Resale used, affordability requirements during entire  affordability period
• IF Recapture used, affordability requirements may be  terminated (at PJ’s discretion) upon recapture of HOME  investment
3. If HOME used only for rental units
HOME rental affordability requirements on rental units  during entire affordability period
©2021 NCDA