[Federal Register Volume 64, Number 83 (Friday, April 30, 1999)]
[Proposed Rules]
[Pages 23488-23502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10465]



[[Page 23487]]

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Part VI





Department of Housing and Urban Development





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24 CFR Part 982



Section 8 Homeownership Program; Proposed Rule

  Federal Register / Vol. 64, No. 83 / Friday, April 30, 1999 / 
Proposed Rules  

[[Page 23488]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 982

[Docket No. FR-4427-P-01]
RIN 2577-AB90


Section 8 Homeownership Program

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule amends the regulations for the Section 8 
tenant-based rental voucher program at 24 CFR part 982. These 
amendments implement Section 8(y) of the United States Housing Act of 
1937, as amended by Section 555 of the Quality Housing and Work 
Responsibility Act of 1998. Section 8(y) authorizes a public housing 
agency to provide tenant-based assistance for an eligible family that 
purchases a dwelling unit that will be occupied by the family.

DATES: Comments due date: Comments on the proposed rule and the 
proposed information collection requirements are due on or before: June 
29, 1999.

ADDRESSES: Interested persons are invited to submit written comments 
regarding this proposed rule to the Rules Docket Clerk, Office of 
General Counsel, Room 10276, Department of Housing and Urban 
Development, 451 Seventh Street, SW, Washington, DC 20410. Comments 
should refer to the above docket number and title. A copy of each 
comment submitted will be available for public inspection and copying 
between 7:30 a.m. and 5:30 p.m. weekdays at the above address. 
Facsimile (FAX) comments will not be accepted.

FOR FURTHER INFORMATION CONTACT: Gerald J. Benoit, Office of Public and 
Indian Housing, Department of Housing and Urban Development, Room 4220, 
451 Seventh Street, SW, Washington, DC 20410; telephone (202) 708-0477 
(this is not a toll-free number). Hearing or speech impaired 
individuals may access this number via TTY by calling the toll-free 
Federal Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. General Description of Homeownership Option

    This rule implements the ``homeownership option'' under Section 
8(y) of the United States Housing Act of 1937 (42 U.S.C. 1437f(y)) (the 
``1937 Act''). Section 8(y) authorizes Section 8 tenant-based 
assistance for an eligible family that occupies a home purchased and 
owned by members of the family. Although Section 8(y) was originally 
enacted by section 185 of the Housing and Community Development Act of 
1992 (Pub. L. 102-550, approved October 28, 1992; 106 Stat. 3672), 
Section 8 homeownership was never implemented because the program was 
unworkable without statutory change. Section 8(y) was amended by 
section 555 of the Quality Housing and Work Responsibility Act of 1998 
(Pub. L. 105-276, approved October 21, 1998; 112 Stat. 2461).
    This rule implements the section 8(y) homeownership option by 
adding a new ``special housing type'' under 24 CFR part 982, subpart M, 
of the unified rule for the Section 8 tenant-based voucher and 
certificate programs. Subpart M describes program requirements for 
variants from the basic Section 8 tenant-based rental assistance 
programs.
    Homeownership assistance offers a new option for families that 
receive Section 8 tenant-based assistance. As for other special housing 
types, HUD does not provide any additional or separate funding for 
homeownership assistance under Section 8(y). If a Public Housing Agency 
(PHA) chooses to offer Section 8 tenant-based assistance under the new 
homeownership option, a qualified family may freely choose whether to 
request rental assistance or to instead request homeownership 
assistance.
    An applicant admitted to the tenant-based programs may receive 
Section 8 voucher assistance to purchase, rather than rent, a home. A 
participant receiving Section 8 tenant-based rental assistance may 
purchase a home with continued assistance under the homeownership 
option.
    In general, a PHA that administers Section 8 tenant-based 
assistance has the choice whether to offer homeownership assistance as 
an option for qualified applicants and participants in its agency's 
Section 8 tenant-based program. The PHA may choose to make 
homeownership assistance freely available for any qualified applicant 
or participant, or to restrict homeownership assistance to families or 
purposes defined by the agency. (The PHA is only required to offer 
homeownership assistance if needed as a reasonable accommodation for a 
family member who is a person with disabilities.)
    As required by law, the homeownership option is not available for 
units receiving Section 8 project-based assistance. By law, 
homeownership assistance under Section 8(y) may only be provided for 
families receiving ``tenant-based assistance'' (42 U.S.C. 1437f(y)(1)).
    In implementing the homeownership option, HUD wishes to strike a 
balance that expands homeownership opportunities, while minimizing 
defaults that negatively impact assisted homeowners and their 
neighborhoods. HUD hopes to improve on past homeownership programs by 
learning from prior errors and building upon the successful features of 
similar programs. HUD believes the regulatory proposals contained in 
this rule achieve these goals, and welcomes public comment on ways to 
improve the implementation of the Section 8 homeownership option.

II. Overview of How the Section 8 Homeownership Program Works

    An overview of how the Section 8 homeownership program works 
follows. Additional detail will be provided elsewhere in the preamble 
and regulation text.
    PHA administration of the Section 8 homeownership program differs 
from the tenant-based rental program in many ways. A PHA may use the 
certificate and voucher program funding already under Annual 
Contributions Contract (ACC) or new tenant-based Section 8 funding for 
rental or homeownership purposes. The PHA may opt to limit the number 
of Section 8 homeownership vouchers or not implement the homeownership 
option. There is no separate or additional funding for the 
homeownership program.
    At the briefing of families selected to participate in the tenant-
based Section 8 program, the PHA must discuss any homeownership option. 
Family participation in the homeownership program is voluntary. 
Although the homeownership program is open to both Section 8 applicants 
and participants, not every Section 8 tenant-based family may receive 
homeownership assistance. The PHA may limit the number of homeownership 
families and there are statutory family eligibility requirements such 
as a minimum level of non-welfare income and a history of full-time 
employment. (The employment history requirement is not applicable to 
elderly and disabled families, and there is a modified income 
requirement for elderly and disabled families.) The program is 
generally limited to first-time homeowners. The PHA may add other local 
eligibility requirements such as participation in the FSS program.
    Once a family has been determined by the PHA to be eligible for 
Section 8 homeownership assistance, the family must attend 
homeownership counseling sessions. The counseling may be done by PHA 
staff or another entity such as

[[Page 23489]]

a HUD-approved housing counseling agency.
    The PHA must advise the family of any deadlines on locating a home, 
securing financing, and purchasing the home. The PHA does not issue a 
certificate or voucher to the family. If the family is unable to locate 
a home to purchase within the PHA established deadlines, the PHA may 
issue the family a rental certificate or voucher.
    The family is free to select an existing (not under construction) 
home of their choice located within the PHA jurisdiction. If the family 
qualifies for portability, the family may also select a home in the 
jurisdiction of another PHA, if the receiving PHA is approving units 
under the Section 8 homeownership option. The receiving PHA may absorb 
the family into their Section 8 program or bill the initial PHA for the 
housing assistance payments. The receiving PHA will arrange for any 
necessary counseling. The receiving PHA homeownership policies will 
apply to the portable family.
    The home chosen by the family must pass an initial PHA Housing 
Quality Standards (HQS) inspection. (The HQS used for the Section 8 
rental program is applicable to the homeownership program.) In 
addition, the family must hire an independent, professional home 
inspector to inspect the home selected by the family to identify 
physical defects and the condition of the major building systems and 
components. A copy of the independent inspection report must be given 
to the PHA. The family and the PHA must determine if any prepurchase 
repairs are necessary.
    The family will enter into a contract of sale with the seller. The 
family must secure their own financing for the home purchase. There is 
no prohibition against using local or State Community Development Block 
Grant (CDBG) or other subsidized financing in conjunction with the 
Section 8 homeownership program. The PHA may prohibit certain forms of 
financing, require a minimum cash downpayment, or determine that the 
family cannot afford the proposed financing. (There are no Section 8 
funds for home purchase financing. Instead, the Section 8 housing 
assistance will be provided monthly to help the family meet 
homeownership expenses.)
    It is anticipated that mortgage lenders will consider the Section 8 
assistance as a source of family income when underwriting the loan. If 
purchase of the home is financed with Federal Housing Administration 
(FHA)-insured mortgage financing, such financing is subject to FHA 
mortgage insurance credit underwriting requirements. If purchase of the 
home is financed (in whole or in part) without FHA-insured mortgage 
financing, the PHA must require that the underwriting procedures used 
by the lender comply with the basic mortgage insurance credit 
underwriting requirements for FHA-insured single family mortgage loans. 
The FHA single family underwriting standards are described in HUD 
Handbook 4155.1 (titled ``Mortgage Credit Analysis for Mortgage 
Insurance on One-to-Four Family Properties.'') HUD specifically invites 
public comment on whether the final rule should require the use of the 
FHA underwriting standards, or whether this requirement would unduly 
restrict the homeownership option.
    Homeownership housing assistance payments may be made directly to 
the family or to lender on behalf of the family. (Two-party checks to 
the family and lender are not authorized because such a practice is 
incompatible with typical lending documents and practices.) Before the 
housing assistance begins, the family and the PHA must execute a 
``statement of homeowner obligations.'' The Section 8 tenant-based 
housing assistance payments (HAP) contract, request for lease approval 
and lease addendum are not applicable to the Section 8 homeownership 
program.
    The amount of the housing assistance payment will be calculated 
using a modified voucher program payment standard approach. The 
homeownership housing assistance payment will equal the lower of (1) 
the payment standard minus the total tenant payment or (2) the monthly 
homeownership expenses minus the total tenant payment. The family is 
responsible for the monthly homeownership expenses not reimbursed by 
the housing assistance payment. (Total tenant payment is higher of the 
minimum rent, 10 percent of monthly income, 30 percent of monthly 
adjusted income, or the welfare rent.) There is no shopping incentive 
in the homeownership option.
    The PHA must use the utility allowance schedule and payment 
standard schedules applicable to the Section 8 voucher rental program.
    After the homeownership housing assistance payments begin, the PHA 
will annually reexamine family income and composition and make 
appropriate adjustments to the amount of the monthly housing assistance 
payment. There is no requirement for the PHA to conduct an annual HQS 
inspection.
    Except for elderly and disabled families, Section 8 homeownership 
assistance may only be paid for a maximum period of up to ten years. 
The PHA may establish a shorter maximum assistance term. Elderly and 
disabled families are exempt from subsidy time limits. HUD invites 
public comment on the reasonableness of the ten year limit on Section 8 
homeownership assistance. Specifically, commenters are invited to 
submit their thoughts on whether HUD should lengthen or shorten the ten 
year limit proposed in this rule.
    The head of household, and any spouse of the head of household, 
that has previously defaulted on a mortgage obtained through the 
homeownership option is barred from receiving future Section 8 
homeownership assistance.
    HUD specifically invites comments on whether, or under what 
conditions, a family that has defaulted on a mortgage securing debt to 
purchase a home under the homeownership option should be permitted to 
receive Section 8 rental assistance after the mortgage default. Such 
conditions may include requiring that the family be returned to the 
waiting list.
    The PHA will earn the same administrative fees as in the tenant-
based rental program. The administrative fee is earned for each month 
that homeownership assistance is paid.
    A PHA opting to administer the Section 8 homeownership program must 
establish local homeownership policies. The following policies must be 
described in the PHA administrative plan: Any local eligibility 
criteria (Secs. 982.626(b) and 982.627(a)(5)); any minimum income 
requirements (Sec. 982.627(b)); any minimum cash downpayment or equity 
requirements; any requirements for financing purchase of a home, 
including requirements concerning qualification of lenders (for 
example, prohibition of seller financing or case-by-case approval of 
seller financing), terms of financing (for example, a prohibition of 
balloon payment mortgages and establishment of a minimum homeowner 
equity requirement), and financing affordability (Sec. 982.631); the 
maximum homeownership assistance term (Sec. 982.633); PHA policy for 
payment of the HAP to the family or lender (Sec. 982.634(d); PHA policy 
about issuing the family a rental voucher if the family does not find a 
suitable house to buy, or defaults on the home mortgage loan 
(Secs. 982.628(c) and 982.636); PHA maximum times to locate and 
purchase a home (Sec. 982.628); and any PHA requirements for 
continuation of homeownership assistance (Sec. 982.632(b)(7)).

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III. Who Is Assisted

A. General

    The homeownership option is used to assist families in two types of 
housing:
    1. A unit owned by the family--One or more family members hold 
title to the home.
    2. A cooperative unit--One or more family members hold membership 
shares in the cooperative.

B. Assistance for Homeowner

    Before enactment of Section 8(y), Section 8 assistance could be 
paid on behalf of a renter or cooperative member, but not for a family 
that owns fee title to its home. Section 8 rental assistance terminates 
when the family takes title to the home. By contrast, Section 8(y) is 
specifically designed to authorize assistance for a ``homeowner''--a 
family that owns title to the home.
    The law provides that the public housing agency may provide 
assistance for:
    1. A ``first-time homeowner'';
    2. A family that owns or is acquiring shares in a cooperative; and
    3. ``Any other family, as the Secretary may prescribe.'' (In the 
law, this third, open-ended category is formally included in the 
definition of ``first-time homeowner.'')
    By law and this rule, the homeownership option is designed to 
promote and support homeownership by a ``first-time'' homeowner--a 
family that moves for the first time from rental housing to a family-
owned home. Section 8 payments supplement the family's own income to 
facilitate the transition from rental to homeownership. The initial 
availability of these assistance payments helps the family pay the 
costs of homeownership, and may provide additional assurance for a 
lender, so that the family can finance purchase of the home.
    Section 8 homeownership assistance for cooperative homeowners is 
specifically authorized for both a family that is a first time 
cooperative homeowner and a family that owned their cooperative unit 
prior to receiving Section 8 assistance. Cooperative homeowners were 
eligible for tenant-based assistance prior to passage of the Quality 
Housing and Work Responsibility Act of 1998. Congress intends that 
cooperative homeowners continue to be eligible for tenant-based 
assistance regardless of their status as a first time homeowner.
    To qualify as a ``first-time homeowner,'' the assisted family may 
not include any person who owned a ``present ownership interest'' in 
the residence of any family member in the last three years (regulatory 
definition at Sec. 982.4; statutory definition at 42 U.S.C. 
1437f(y)(7)(A)). Such interest includes ownership of title or of 
cooperative membership shares. The restriction to ``first-time'' 
homeowners is intended to direct homeownership assistance to ``new'' 
homeowners who may be unable to purchase a home without this 
assistance, but to discourage use of Section 8 subsidy on behalf of 
families who have achieved homeownership independently, without benefit 
of the Federal Section 8 subsidy. In addition, the head of household, 
and any spouse of the head of household, that has previously defaulted 
on a mortgage obtained through the homeownership option is barred from 
receiving future Section 8 homeownership assistance.
    Under the law, HUD is authorized to permit Section 8 homeownership 
assistance for ``any other family'' as the Secretary may prescribe `` 
that is, for a family other than a first-time homebuyer. HUD requests 
comments concerning whether HUD should exercise the statutory authority 
to exempt any categories of families from the first-time homeowner 
requirement. For example, a possible exemption from the first-time 
homeowner eligibility requirement is a divorced spouse who does not 
currently own a home but had joint ownership of a home with their ex-
spouse in the last three years.

C. Assistance for Cooperative Member

    Section 8(y) authorizes homeownership assistance for a family that 
``owns or is acquiring shares in a cooperative.'' Thus, the law allows 
assistance for a family that already owns cooperative shares before 
commencement of Section 8 homeownership assistance, not just for a 
family that acquires cooperative shares for the first time with the 
support of such assistance. In this respect, the law treats ownership 
of cooperative membership different from ownership of title to the 
home. In the latter case, the law authorizes assistance for a first 
time homeowner only (and for additional families only in circumstances 
prescribed by the Secretary). The rule specifies that cooperative 
membership shares may be purchased at or before commencement of 
homeownership assistance (see the definition of ``membership shares'' 
at Sec. 982.4).
    Before this rule, HUD has provided essentially the same Section 8 
rental assistance for a cooperative member as for a family that chooses 
to rent a unit in conventional rental housing. Since the origin of the 
Section 8 program, the law has provided that with respect to members of 
a cooperative, ``rent'' means the charges under the occupancy 
agreements between the members and the cooperative (42 U.S.C. 
1437f(f)(5)). Thus Section 8 assistance is paid to cover the difference 
between the cooperative occupancy charges and the income-based tenant 
rent.
    Under the existing rules for the Section 8 tenant-based program, 
assistance for a family that chooses to reside in a cooperative is 
largely subject to the same rules and contractual requirements as for a 
family that chooses a rental housing unit. Under these existing rules, 
the cooperative occupancy agreement (between the family and the 
cooperative) is treated like the lease between the family and the owner 
in standard rental housing. The cooperative occupancy agreement must 
include the requirements of the standard program ``lease addendum,'' 
including requirements concerning lease term, grounds for eviction, and 
owner responsibility of unit maintenance. Cooperative carrying charges 
are treated like rent to owner (contract rent), and requirements 
including annual rent adjustments for units assisted in the certificate 
program are applicable.
    In short, assistance for cooperative residents under the old rule 
is not designed from the ground up as a form of homeownership 
assistance. The old Section 8 requirements do not fit the normal 
structure of occupancy and responsibility in cooperative housing. In 
particular, while a cooperative member is normally responsible for 
maintenance of the individual unit, the Section 8 regulations and 
contracts provide that the ``owner'' `` including a cooperative--is 
largely responsible for unit maintenance.
    The mismatch between Section 8 rental program requirements and 
normal cooperative procedures reduces availability of cooperative units 
for occupancy by Section 8 families. Cooperatives may be unable or 
unwilling to grant separate and special treatment for Section 8 
families that does not apply to other cooperative members, for example, 
differences concerning the amount of cooperative carrying charges, 
procedures or grounds for termination of cooperative membership, or 
enforcement of member maintenance obligations. Cooperatives are 
accustomed to use standard forms of occupancy agreement and other legal 
documentation governing the rights of members and of the cooperative 
entity. The cooperatives may decline to accommodate modifications to 
meet requirements of the Section 8 program,

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or to enter into a contract with the PHA (the HAP contract), as 
required for the normal Section 8 rental program.
    In the future, the PHA may provide assistance for a cooperative 
member either under the new homeownership option or under the special 
procedures for cooperative housing within the Section 8 tenant-based 
rental program (Sec. 982.619). Each form of assistance is designated as 
a separate special housing type under the Section 8 voucher program. 
The PHA may elect to offer either or both of these forms of cooperative 
assistance in its voucher program, and to define the appropriate role 
of each available form of cooperative assistance in the local Section 8 
program.
    In the new homeownership option, Section 8 assistance is paid on 
behalf of a cooperative member, but there is no requirement that the 
cooperative enter into any agreement or any direct relationship with 
the PHA that provides Section 8 assistance for the cooperative member. 
The cooperative is not asked to modify any ordinary requirement for 
cooperative membership or occupancy, nor asked to modify any 
requirement concerning assessment or collection of the cooperative 
carrying charge, maintenance of the unit or sanctions for violation of 
cooperative requirements.
    For clarity, in describing requirements for homeownership 
assistance to a cooperative member, the new rule supplements existing 
definitions. As in the past, the term ``cooperative'' refers to housing 
owned by a nonprofit corporation or association, and where a member of 
the corporation or association has the right to reside in a particular 
apartment, and to participate in management of the housing 
(Sec. 982.4). The rule also adds the following two new definitions:
    1. Cooperative member. A family of which one or more members owns 
membership shares in a cooperative.
    2. Membership shares. Shares in a cooperative. By owning such 
cooperative shares, the share-owner has the right to reside in a 
particular apartment in the cooperative, and the right to participate 
in management of the housing.
    The existing HUD rules for cooperative housing in the tenant-based 
rental program were codified in April 1998. These rules provide that a 
family may only receive assistance in a cooperative that has adopted 
requirements to maintain continued affordability for lower income 
families after transfer of a member's interest. This affordability 
requirement was based on a provision of the prior voucher law that was 
removed in the October 1998 statutory amendments. There is now no such 
statutory affordability requirement for Section 8 tenant-based 
assistance to cooperative residents--whether such assistance is 
provided under the rental assistance program or under the new Section 
8(y) homeownership option--and there is no such requirement under this 
rule.
    HUD believes that such a continuing affordability requirement would 
restrict housing choice of Section 8 families among available 
cooperative units. Such a requirement would also diminish a major 
advantage of homeownership--the incentive for an assisted family to 
maintain and improve the housing and to receive full value upon a 
future sale of the home. This rule removes the federal mandate for 
existing continuing affordability requirements for rental assistance in 
cooperative housing.
    In addition, this rule modifies the allocation of maintenance 
responsibility between the cooperative and the family. In the regular 
rental assistance program, the owner is responsible for most 
maintenance of a unit. Under the old rule, this principle also applies 
to rental assistance for Section 8 cooperative housing. However, in a 
conventional cooperative, the member is generally responsible for 
maintenance of the individual apartment, and the cooperative entity is 
only responsible for maintenance of common areas and systems. The 
cooperative agreement defines the division of maintenance obligations 
between the member and the cooperative.
    The existing regulation is amended by this rule to reflect the 
normal division of maintenance responsibility in cooperative housing 
for which rental (not homeownership) assistance is being provided 
(Sec. 982.619(d)(3)). The revised rule provides that the family is 
responsible for a breach of the HQS caused by failure to perform 
maintenance in accordance with the cooperative occupancy agreement 
between the family and the cooperative. The PHA must take prompt and 
vigorous action to enforce the family maintenance obligation, and may 
terminate assistance for failure to perform maintenance in accordance 
with the cooperative occupancy agreement (Sec. 982.619(d)(4)).
    During the term of the HAP contract between the PHA and the 
cooperative, the unit and premises must be maintained in accordance 
with the Section 8 HQS. If the contract unit and premises are not 
properly maintained, the PHA may exercise all available remedies, 
regardless of whether the family or the owner is responsible for such 
breach of the HQS. PHA remedies for breach of the HQS include recovery 
of overpayments, suspension of housing assistance payments, abatement 
or other reduction of housing assistance payments, termination of 
housing assistance payments and termination of the HAP contract 
(Sec. 982.619(d)(1)).
    In the new homeownership cooperative option under Section 8(y), 
there is no HAP contract (between the PHA and the cooperative as unit 
``owner'') and no lease (between the cooperative and the family). The 
unit is only inspected before the commencement of assistance. There is 
no requirement that the family or cooperative assure that the unit 
continues to satisfy HQS during the continuation of assisted occupancy. 
Consequently, there is no need to specify any allocation of maintenance 
responsibility between the cooperative and the family.

D. Lease-Purchase Agreement

    The law and rule explicitly permit Section 8 homeownership 
assistance for a family that purchases a home that the family 
previously occupied under a ``lease-purchase agreement''--generally a 
lease with option to purchase. Section 8(y) provides that the PHA may 
provide Section 8 homeownership assistance for an eligible family that 
purchases ``a unit under a lease-purchase agreement'' (42 U.S.C. 
1437f(y)(1)).
    Prior to enactment of the Quality Housing and Work Responsibility 
Act of 1998, a family that received Section 8 rental subsidy could 
exercise an option to purchase the unit under a lease-purchase 
agreement. However, there were problems in applying the rent 
reasonableness requirements and, as noted above, Section 8 rental 
subsidy terminated when the family took title to the home. Thus the 
prospective loss of subsidy discouraged the family from taking title, 
and moving from rental to homeownership. However, Section 8(y) now 
provides a vehicle for continuation of Section 8 assistance after the 
family takes title to the home.
    To qualify as a first-time homeowner (as noted above) the family 
may not have owned title to a principal residence in the last three 
years. The rule specifies, however, that the right to purchase title 
under a lease-purchase agreement does not constitute a prohibited 
``present ownership interest.'' A family that holds an option to 
purchase may exercise the option and receive assistance under the new 
homeownership option.
    A new Sec. 982.317 is added to describe the requirements for lease-
purchase agreements. The housing assistance payment for a lease-
purchase unit may

[[Page 23492]]

not exceed the amount that would be paid on behalf of the family if the 
rental unit was not subject to a lease-purchase agreement. Any 
``homeownership premium'' included in the rent to the owner that would 
result in a higher subsidy amount than would otherwise be paid by the 
PHA must be absorbed by the family. ``Homeownership premium'' is 
defined as an increment of value attributable to the value of the 
lease-purchase right or agreement such as an extra monthly payment to 
accumulate a downpayment or reduce the purchase price. Families are 
permitted to pay an extra amount out-of-pocket to the owner for 
purchase related expenses.
    Section 982.317 also provides that in determining whether the rent 
to owner for a unit subject to a lease-purchase agreement is a 
reasonable amount, any ``homeownership premium'' paid by the family to 
the owner must be excluded when the PHA determines rent reasonableness.
    Lease-purchase agreements are considered rental, and all the normal 
tenant-based Section 8 rental rules are applicable. The family will be 
subject to the homeownership regulatory requirements at the time the 
family is ready to exercise the homeownership option under the lease-
purchase agreement. At that point in time, the PHA will determine 
whether the family is eligible for Section 8 homeownership assistance 
(e.g., whether the family meets the income and employment thresholds 
and any other criteria established by the PHA). If determined eligible 
for a homeownership voucher, the family will then arrange for an 
independent home inspection, attend counseling sessions, and obtain 
financing. Homeownership assistance will begin when the family 
purchases the home and after all of the requirements of the 
homeownership option are met.
    HUD requests comments on whether the family should be subject to 
any of the homeownership requirements prior to entering into a lease-
purchase arrangement, instead of delaying the requirements until the 
family is ready to purchase the home.

IV. How To Qualify for Homeownership Assistance

A. General

    To qualify for assistance under the homeownership option, a family 
must meet the general requirements for admission to the PHA's Section 8 
tenant-based voucher program, and additional special requirements for 
homeownership assistance (Sec. 982.627). At commencement of 
homeownership assistance, the family must meet homeownership assistance 
requirements concerning:
    1. Any PHA minimum income requirements;
    2. Family employment;
    3. Prior default on a mortgage securing debt to purchase a home 
under the homeownership option; and
    4. Other initial requirements established by the PHA.

B. Minimum Income Requirement

    To enter the Section 8 voucher program, a family must be income-
eligible (i.e., below the maximum income cutoff). However, to qualify 
for the homeownership option in the voucher program, a PHA may require 
the family to demonstrate sufficient income to meet a minimum income 
standard, which is intended to assure that a family will have 
sufficient income to pay homeownership and other family expenses not 
covered by the Section 8 subsidy.
    Section 8(y) provides that a family may not receive homeownership 
assistance unless the family demonstrates that gross monthly income is 
at least two times the voucher ``payment standard'' or an ``other 
amount'' established by the Secretary (Section 8(y)(1)(B), 42 U.S.C. 
1437f(y)(1)(B)). The rule provides that the family must demonstrate 
that the head of household and spouse have qualified monthly income of 
not less than any amount established in the PHA administrative plan. 
(Sec. 982.627(b)(1)).
    The law does not specify whether the minimum income requirement is 
only applied at initial qualification for commencement of homeownership 
assistance, or is also a continuing requirement that must be maintained 
so long as the family is receiving assistance under the homeownership 
option. (By contrast, the law explicitly provides that the statutory 
employment requirement only applies at the time the family initially 
receives homeownership assistance.) HUD has decided that any minimum 
income requirement will only be applied to determine initial 
qualification to purchase a particular home, not as a continuing 
requirement. This policy gives assurance to the family, and possibly to 
a potential mortgage lender, that the stream of homeownership 
assistance payments will not be disrupted because of a drop in family 
income. Any minimum income requirement will only apply again if the 
family purchases a subsequent home with Section 8 homeownership 
assistance.
    The law provides that the income counted in meeting any minimum 
income requirement under the homeownership option must come from 
sources other than ``public assistance.'' Thus, PHAs may limit 
homeownership assistance to families with substantial non-welfare 
income available to pay housing and non-housing costs. However, the law 
provides that HUD may count public assistance in determining 
availability of voucher homeownership assistance for an elderly or 
disabled family (in which the household head or spouse is an elderly or 
disabled person). The rule defines the meaning of ``public assistance'' 
(Sec. 982.4), thereby identifying the types of income that may not be 
included in determining whether a family meets the homeownership 
minimum income standard.
    The rule also clarifies that the requirement to disregard public 
assistance income (as defined in this proposed rule) only applies in 
determining whether a family has the minimum income to qualify for 
homeownership assistance. However, public assistance income is counted 
for other program purposes: in determining income-eligibility for 
admission to the voucher program, and in calculating the amount of the 
monthly homeownership assistance payment for a family assisted under 
the homeownership option (Sec. 982.627(b)(2)(ii)).
    Under the law, HUD may permit PHAs to count public assistance 
income of an ``elderly family'' or a ``disabled family''--a family 
whose head or spouse is elderly or disabled (definitions of these terms 
are found in section 3(b)(3)(B) of the 1937 Act; 42 U.S.C. 
1437a(b)(3)(B))--in determining whether a family has the minimum income 
to qualify for homeownership assistance. On consideration of this 
issue, and recognizing the special needs of such families, the rule 
requires that the PHA count public assistance of an elderly or disabled 
family in determining whether the family meets the minimum income 
requirement for homeownership assistance (Sec. 982.627(b)(2)). This 
requirement to count public assistance incomes in determining whether a 
family has the minimum income to qualify for homeownership assistance 
only applies, however, to families which satisfy the statutory 
definition of an elderly or disabled family. In particular, as required 
by the law, the requirement to count public assistance income does not 
apply in the case of a family that includes a disabled person other 
than the household head or spouse (and

[[Page 23493]]

where the household head or spouse are not elderly or disabled).

C. Family Employment

    Section 8(y) provides that, except as provided by HUD, the family 
must be able to demonstrate, at the time that the family initially 
receives homeownership assistance, that one or more adult members of 
the family have achieved employment for the time period established by 
HUD (42 U.S.C. 1437f(y)(1)(B)).
    The rule provides at Sec. 982.627(c) that a family seeking 
homeownership assistance must demonstrate that the head of household or 
spouse is currently employed on a full-time basis, and have been 
continuously so employed during the year before commencement of 
homeownership assistance. The one-year employment requirement, coupled 
with any minimum income requirement as discussed above indicate that 
the family is a good candidate for homeownership (i.e., that the family 
has the economic resources to handle the responsibilities of 
homeownership). HUD is requiring consideration of the employment 
history of the head of household or spouse, rather that any adult 
family member, to ensure that this important requirement is applicable 
to the family members who will be executing the contract of sale and 
mortgage or loan documents.
    Under the law, HUD has broad authority to allow exceptions to the 
statutory employment requirement. As in the case of any minimum income 
requirement, the rule provides that the employment requirement does not 
apply to an elderly or disabled family (Sec. 982.627(c)(2)). In 
addition, the rule provides that if a family other than an elderly or 
disabled family includes a person with disabilities, the PHA must grant 
exemption from the employment requirement if required as a reasonable 
accommodation for a disabled person under HUD rules.

D. Discussion of Other Requirements

1. Homeownership Counseling
    Section 8(y) provides that a family that receives assistance under 
the homeownership option must participate in a homeownership and 
housing counseling program provided by the PHA (42 U.S.C. 
1437f(y)(1)(D)). The rule provides that before commencement of 
homeownership assistance the family must attend and satisfactorily 
complete the pre-assistance counseling program required by the PHA 
(Sec. 982.629(a)).
    The PHA pre-assistance counseling program must cover: Home 
maintenance, budgeting and money management, credit counseling, how to 
negotiate the purchase price of a home, how to get homeownership 
financing (including pros and cons of different types of financing), 
how to find a home (including information about homeownership 
opportunities, schools, and transportation) and advantages of 
purchasing and how to locate a home in an area that does not have a 
high concentration of low-income families (Sec. 982.629(b)).
    The extent of counseling may be tailored to each family's needs. 
For example, neither a cooperative member or a family exercising a 
lease-purchase option need counseling on how to find a home.
    The counseling may be provided by the PHA, another entity such as a 
HUD-approved housing counseling agency, or by both the PHA and another 
entity. HUD-approved housing counseling agencies provide free 
counseling. The HUD field office will provide the PHA with a list of 
the HUD-approved counseling agencies.
    Experience with low-income homeownership programs has demonstrated 
that quality counseling is imperative for successful homeownership and 
prevention of mortgage defaults. In addition, counseling will assist 
families in making informed decisions when selecting the home they wish 
to purchase.
2. Financing Purchase of Home
    Families selected to participate in the Section 8 homeownership 
program must secure their own financing. If the family applies for a 
mortgage or loan (including an FHA mortgage), all regular lender 
underwriting and property inspection requirements apply.
    The rule provides that a PHA may establish requirements for 
financing purchase of a home to be assisted under the homeownership 
option (Sec. 982.631). If purchase of the home is financed (in whole or 
in part) without FHA-insured mortgage financing, the PHA must require 
that the underwriting procedures used by the lender comply with the 
basic mortgage insurance credit underwriting requirements for FHA-
insured single family mortgage loans (HUD Handbook 4155.1).
    All PHA financing or affordability requirements must be described 
in the PHA administrative plan.
    The PHA may set requirements concerning qualifications of lenders 
and terms of financing. For example, a PHA may determine that mortgages 
with balloon payments and certain kinds of variable interest rate loans 
are not in the best interest of the family because it is unlikely the 
family could afford the payments in a couple of years. In addition, the 
PHA could opt to prohibit seller financing, or to only allow seller 
financing in cases when the seller is a nonprofit or the purchase price 
can be clearly supported by an independent appraisal. Another purpose 
of the PHA financing review would be to determine whether the monthly 
mortgage or loan payment is affordable after considering other family 
expenses. PHAs may wish to establish minimum initial equity 
requirements to ensure that the family has a personal financial stake 
in the home, thus helping to minimize mortgage loan defaults (for 
example, the PHA may require that the family use its own resources to 
make the entire initial downpayment, or a percentage of the initial 
downpayment).
    Although PHAs have local discretion in approving the home purchase 
financing arrangement, PHAs are cautioned not to use this discretion in 
a way that restricts the use of viable financing resources and unfairly 
penalizes the homebuyer. It is noted that variable interest rate loans 
are now commonplace and homeowners often refinance to later secure a 
fixed rate or a lower monthly payment.
3. Home Inspections
    Two kinds of physical inspections are required in the homeownership 
option (in addition to, and separate from, any lender required 
inspections): (a) an HQS inspection by the PHA and (b) an ``independent 
professional home inspection'' by an inspector that is used in the 
private market by homebuyers. (Sec. 982.630).
    The PHA inspection is the normal initial HQS inspection conducted 
by the PHA for the tenant-based rental assistance program. This 
inspection will indicate the current physical condition of the unit and 
any repairs necessary to ensure that the unit is safe and otherwise 
habitable. The PHA HQS inspection does not include an assessment of the 
adequacy and life span of the major building components, building 
systems, appliances and other structural components.
    The only difference between the HQS inspection requirements for the 
tenant-based rental and homeownership programs is that the PHA will not 
conduct annual inspections. The exemption from annual HQS homeownership 
inspections is authorized by the statute. The initial (prior to the 
commencement of housing assistance) HQS inspection is the only PHA 
inspection required for homeownership units during the entire

[[Page 23494]]

time the family is receiving Section 8 homeownership assistance.
    The other inspection required by this proposed rule is a statutory 
requirement that is consistent with private real estate practice. The 
``independent professional home inspection'' is conducted by a private 
market home inspector (not PHA staff) that is experienced and qualified 
to conduct prepurchase inspections for homebuyers. The purpose of the 
home inspection is the identification of home defects and an assessment 
of the adequacy and life span of the major building components, 
building systems, appliances and other structural components. The 
requirement for an inspection arranged by the buyer and satisfactory to 
the buyer is a typical contingency clause in contracts of sale. The 
section 8 family selects the home inspector and pays the home 
inspector's fees. (The source of funds for family payment of the home 
inspection may be a gift, family savings or an inheritance, or sources 
other than family savings.) A copy of the inspection report is provided 
to the family and the PHA.
    Although the PHA may not require the family to use a particular 
inspector, the PHA may establish standards for qualification of the 
home inspector selected by the family. For example, the PHA may require 
the use of a home inspector certified by the American Society of Home 
Inspectors, or a similar national organization.
    The PHA must review the home inspector's report to determine 
whether repairs are necessary prior to purchase, and to generally 
assess whether the purchase transaction makes sense in light of the 
overall condition of the home and the likely costs of repairs and 
capital expenditures. For example, the home inspector's report might 
reveal foundation instability, and a defective roof and heating system 
that needs immediate replacement at great cost. Confronted with these 
facts the PHA would discuss the inspection results with the family and 
decide whether to disapprove the unit for assistance under the 
homeownership option because of the major physical problems and 
substantial correction costs, or whether it is feasible to have the 
necessary repairs accomplished prior to sale.
    HUD specifically requests comments on whether a separate HQS and 
home inspector inspection should be required for the Section 8 
homeownership program.
4. Switching From Section 8 Homeownership Voucher Assistance to Rental 
Voucher Assistance, and Vice-Versa, After a Mortgage Default and at 
Other Times
    There are a number of circumstances under which a family may switch 
between rental and homeownership assistance under the voucher program. 
Various scenarios are described below.
    a. A Section 8 participant receiving certificate or voucher 
assistance may request a PHA operating a homeownership program to 
determine whether the family is eligible for Section 8 homeownership 
assistance. If the family is determined eligible for homeownership 
assistance, the PHA may authorize the family to search for a home to 
purchase. The family would continue to receive rental assistance until 
the family vacates the rental unit (consistent with the lease).
    b. A Section 8 applicant selected from the PHA waiting list goes to 
the briefing and learns of the homeownership option. The PHA determines 
the family is eligible for homeownership and the family is given two 
months to find a home to purchase. At the end of the two months the PHA 
extends the search period for an additional month because the family 
has found a unit. However, the purchase never occurs due to problems 
qualifying for a loan. The family opts to rent an apartment and try 
homeownership at a later time after they have increased their savings. 
The PHA issues the family a rental voucher.
    c. The family purchases a home under the Section 8 homeownership 
option. After several years the family decides that they prefer to live 
in a rental apartment. If there is no mortgage loan default and the 
family has met all obligations under the Section 8 program, the PHA may 
issue the family a rental voucher. If there is a default on an FHA 
mortgage (and assuming the family has met all the family obligations 
under the Section 8 program other than not causing a mortgage default), 
the PHA may exercise the PHA option to issue the family a rental 
voucher only if the family vacates the home and conveys the title in 
accordance with Sec. 982.636(b)(3). If there is a non-FHA mortgage loan 
default, the PHA has discretion to issue the family a rental voucher or 
terminate assistance.
    As noted above, HUD is considering establishing conditions on the 
ability of a family to receive Section 8 rental assistance after a 
mortgage default. HUD invites public comment on what types of 
restrictions and conditions may be appropriate. Any such conditions 
will be described in the final rule. HUD also requests comments on 
whether the incentives provided for rapid possession and title 
conveyance for homes with FHA mortgage defaults should be extended to 
all lenders including secondary market agencies.
5. Portability
    Families that are determined eligible for homeownership assistance 
may exercise the homeownership option outside of the initial PHA's 
jurisdiction if the receiving PHA is administering a Section 8 
homeownership program, and is accepting new families into the receiving 
PHA's homeownership program. See Sec. 982.635.
    The receiving PHA may absorb the homeownership family or bill the 
initial PHA for the homeownership housing assistance using the normal 
portability billing process. Communications between the initial and 
receiving PHA are necessary. As is the case for Section 8 rental 
portable families, all of the receiving PHA's administrative policies 
are applicable to the homeownership family. The family will be required 
to attend the briefing and counseling sessions required by the 
receiving PHA. The receiving PHA, not the initial PHA, will determine 
whether the financing for and the physical condition of the unit are 
acceptable.
6. Buying Another Home With Section 8 Assistance
    A homeownership family may purchase another home with Section 8 
assistance provided there is no mortgage loan default.
    There are no Section 8 sale recapture provisions; the family may 
keep any profits or proceeds from the sale of the home (assuming there 
are no recapture provisions associated with the family's home 
financing). However, most of the homeownership requirements applicable 
to the first home purchase remain applicable to a subsequent purchase. 
For example, the family must once again meet the employment threshold. 
The necessity of any counseling will be determined by the PHA. An 
independent home inspection will be conducted and the PHA will 
determine the acceptability of the financing. The PHA established time 
limit for homeownership (10 years or less) applies to the cumulative 
time the family receives homeownership assistance. The only exception 
to eligibility requirements applicable to initial receipt of 
homeownership assistance is that the family need not meet the first-
time homebuyer requirement. (See Sec. 982.636(c).)

[[Page 23495]]

7. Applicability of the Section 8 Tenant-Based Certificate and Voucher 
Requirements to the Homeownership Option
    Section 982.638 details the portions of the certificate and voucher 
regulations that apply to the homeownership special housing type. PHAs 
should carefully review this section of the regulations.
    It is noted that all civil rights laws applicable to the Section 8 
certificate and voucher programs are applicable to the homeownership 
program (see Sec. 982.53 for a listing of the equal opportunity 
requirements applicable to the Section 8 tenant-based programs). PHAs 
must comply with all equal opportunity and nondiscrimination 
requirements imposed by contract or Federal law. In addition, PHAs are 
reminded that ``finders-keepers'' applies to homeownership assistance; 
PHAs may not steer families to particular units or neighborhoods. 
Further, as in the tenant-based rental voucher program, PHAs must 
provide assistance to expand housing opportunities. The PHA briefing 
for both rental and homeownership families must explain:
    a. Where the family may lease or purchase a unit;
    b. How portability works (if the family qualifies to lease or 
purchase a unit outside the PHA jurisdiction under portability 
procedures); and
    c. The advantages of moving to an area that does not have a high 
concentration of poor families (if the family is currently living in a 
high poverty census tract within the jurisdiction of the PHA).
    Further, if the family includes any person with disabilities, the 
PHA must take appropriate steps to ensure effective communication 
during the briefing in accordance with 24 CFR 8.6.
8. Link Between Section 8 Homeownership and the Family Self-Sufficiency 
(FSS) Program
    PHAs may wish to link Section 8 homeownership with the FSS program. 
For example, participation in the FSS program could be a PHA 
eligibility requirement (see Secs. 982.626(b) and 982.627(a)(5)). The 
PHA may also opt to incorporate the homeownership goal into the 
family's FSS contract of participation so any FSS escrow could be 
advanced for purchase of a home or home maintenance/improvement 
purposes. It is noted that FSS families must meet the homeownership 
income and employment thresholds.
9. PHA Determination of ``Homeownership Expense''
    Section 982.634(c) details the expenses that the PHA will include 
when determining the family's homeownership expenses. The principal and 
interest amount is the debt service amount for the initial (original) 
mortgage debt, any mortgage insurance premium, and any refinancing of 
such debt. HUD requests comments on whether homeownership expense 
should exclude any ``owner cashout'' associated with refinancing of the 
original mortgage debt.
    The utility allowance is the same utility allowance schedule as 
used in the rental certificate and voucher programs.
    The PHA allowance for maintenance expenses is the amount the PHA 
thinks is appropriate for routine maintenance for a home. The PHA 
allowance for major repairs and replacements is the amount the PHA 
thinks is appropriate for a replacement ``reserve'' for a home. These 
two maintenance allowances should not be based on the condition of the 
home, similar to how utility allowances work. It is recommended that a 
PHA contact counseling agencies, local realtors and relevant national 
organizations for advice on the appropriate level for these local 
allowances. (Families are not required to put the amount set aside for 
these two maintenance allowances in the bank or in escrow. Further, it 
is not expected that the monthly amounts for these allowances will 
cover all maintenance and capital expenditures.) Comments are requested 
on suggested ways to determine the allowance for maintenance expenses 
and the allowance for major repairs and replacements.

V. Findings and Certifications

Paperwork Reduction Act

    The homeownership option is a special housing type under 24 CFR 
part 982, subpart M, of the unified rule for the Section 8 tenant-based 
voucher and certificate program. The information collection 
requirements of the Section 8 rental certificate and voucher programs 
approved by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) are not increased 
by the implementation of this new special housing type. While the rule 
substitutes several variations to existing requirements under the 
normal Section 8 tenant-based program, the homeownership option does 
not increase the total reporting and recordkeeping burden resulting 
from the collection of information for the Section 8 certificate and 
voucher programs.
    As noted earlier in this preamble, the PHA does not issue the 
family a rental voucher or certificate or execute a housing assistance 
payment contract with an owner of rental property on behalf of the 
family participating in the homeownership option. Instead, the family 
and PHA execute a statement of homeowner obligations. Under the 
homeownership option the family provides the PHA with a copy of the 
contract of sale rather than submitting a Request for Lease Approval 
and a copy of the proposed lease. The homeownership option does require 
an independent pre-purchase inspection in addition to the initial HQS 
inspection; however, this burden is off-set by the removal of the 
requirement that the unit be subsequently inspected no less than 
annually.
    The OMB approval number for the Section 8 tenant-based assistance 
program is 2577-0169, which expires on April 30, 2001. An agency may 
not conduct or sponsor, and a person is not required to respond to, a 
collection of information unless the collection displays a valid 
control number.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
was made in accordance with HUD regulations in 24 CFR part 50 that 
implement section 102(2)(C) of the National Environmental Policy Act of 
1969 (42 U.S.C. 4223). The Finding is available for public inspection 
between 7:30 a.m. and 5:30 p.m. weekdays in the Office of the Rules 
Docket Clerk, Office of General Counsel, Room 10276, Department of 
Housing and Urban Development, 451 Seventh Street, SW, Washington, DC.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This proposed rule does not impose 
any Federal mandates on any State, local, or tribal governments or the 
private sector within the meaning of Unfunded Mandates Reform Act of 
1995.

Executive Order 12866

    The Office of Management and Budget (OMB) reviewed this proposed 
rule under executive Order 12866, Regulatory Planning and Review. OMB 
determined that this proposed rule is a ``significant regulatory 
action,'' as

[[Page 23496]]

defined in section 3(f) of the Order (although not economically 
significant, as provided in section 3(f)(1) of the Order). Any changes 
made to the proposed rule subsequent to its submission to OMB are 
identified in the docket file, which is available for public inspection 
in the office of the Department's Rules Docket Clerk, Room 10276, 451 
Seventh Street, SW, Washington, DC 20410-0500.

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)) (the RFA), has reviewed and approved this proposed rule 
and in so doing certifies that this rule will not have a significant 
economic impact on a substantial number of small entities. The reasons 
for HUD's determination are as follows:
(1) A Substantial Number of Small Entities Will Not Be Affected
    The proposed rule is exclusively concerned with public housing 
agencies that administer tenant-based housing assistance under section 
8 of the United States Housing Act of 1937. Specifically, the proposed 
rule will permit a public housing agency to provide Section 8 tenant-
based assistance to an eligible family that purchases a dwelling unit 
that will be occupied by the family. Under the definition of ``Small 
governmental jurisdiction'' in section 601(5) of the RFA, the 
provisions of the RFA are applicable only to those few public housing 
agencies that are part of a political jurisdiction with a population of 
under 50,000 persons. The number of entities potentially affected by 
this rule is therefore not substantial
(1) No Significant Economic Impact
    The proposed regulatory amendments will not change the amount of 
funding available under the Section 8 voucher program. Accordingly, the 
economic impact of this rule will not be significant, and it will not 
affect a substantial number of small entities.
    Notwithstanding HUD's determination that this rule will not have a 
significant economic effect on a substantial number of small entities, 
HUD specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official for HUD under 
section 6(a) of Executive Order 12612, Federalism, has determined that 
this rule will not have federalism implications concerning the division 
of local, State, and Federal responsibilities. This proposed rule is 
exclusively concerned with the establishment of an alternative use of 
Section 8 rental voucher assistance. Specifically, the rule will 
authorize a public housing agency to provide tenant-based assistance 
for an eligible family that purchases a dwelling unit that will be 
occupied by the family. No programmatic or policy change will result 
from this rule that will affect the relationship between the Federal 
government and State and local governments.

Catalog of Domestic Assistance Numbers

    The Catalog of Domestic Assistance numbers for the programs 
affected by this proposed rule are 14.146, 14.147, 14.850, 14.851, 
14.852, and 15.141.

List of Subjects in 24 CFR Part 982

    Grant programs--housing and community development, Housing, Rent 
subsidies, Reporting and recordkeeping requirements.

    For the reasons discussed in the preamble, HUD proposes to amend 24 
CFR parts 982 as follows:

PART 982--SECTION 8 TENANT-BASED ASSISTANCE: UNIFIED RULE FOR 
TENANT-BASED ASSISTANCE UNDER THE SECTION 8 VOUCHER PROGRAM

    1. The authority citation for 24 CFR part 982 continues to read as 
follows:

    Authority: 42 U.S.C. 1437f and 3535(d).

    2. Amend Sec. 982.4(b) as follows:
    a. Revise the definitions of Cooperative, and Special housing 
types;
    b. Remove the definition of Mutual housing; and
    c. Add the definitions of Cooperative member, Family, First-time 
homeowner, Home, Homeowner, Homeownership assistance, Homeownership 
expenses, Homeownership option, Interest in the home, Membership 
shares, Public assistance, and Statement of homeowner obligations in 
alphabetical order.


Sec. 982.4  Definitions.

* * * * *
    (b) * * *
    Cooperative. Housing owned by a nonprofit corporation or 
association, and where a member of the corporation or association has 
the right to reside in a particular apartment, and to participate in 
management of the housing.
    Cooperative member. A family of which one or more members owns 
membership shares in a cooperative.
* * * * *
    Family. A person or group of persons, as determined by the PHA, 
approved to reside in a unit with assistance under the program. See 
discussion of family composition at Sec. 982.201(c).
* * * * *
    First-time homeowner. In the homeownership option: A family of 
which no member owned any present ownership interest in a principal 
residence of any family member during the three years before 
commencement of homeownership assistance for the family. ``Present 
ownership interest'' in a residence includes title, in whole or in 
part, to a residence, or ownership, in whole or in part, of membership 
shares in a cooperative. ``Present ownership interest'' in a residence 
does not include the right to purchase title to the residence under a 
lease-purchase agreement.
* * * * *
    Home. In the homeownership option: A dwelling unit for which the 
PHA pays homeownership assistance.
    Homeowner. In the homeownership option: A family of which one or 
more members owns title to the home.
    Homeownership assistance. In the homeownership option: Monthly 
homeownership assistance payments by the PHA. Homeownership assistance 
payment may be paid to the family, or to a mortgage lender on behalf of 
the family.
    Homeownership expenses. In the homeownership option: A family's 
allowable monthly expenses for the home, as determined by the PHA in 
accordance with HUD requirements (see Sec. 982.634).
    Homeownership option. Assistance for a homeowner or cooperative 
member under Sec. 982.625 to Sec. 982.638. A special housing type.
* * * * *
    Interest in the home. In the homeownership option (see 
Sec. 982.632(b)(3)):
    (1) In the case of assistance for a homeowner, ``interest in the 
home'' includes title to the home, any lease or other right to occupy 
the home, or any other present interest in the home.
    (2) In the case of assistance for a cooperative member, ``interest 
in the home'' includes ownership of membership shares in the 
cooperative, any lease or other right to occupy the home, or any other 
present interest in the home.
* * * * *

[[Page 23497]]

    Membership shares. In the homeownership option: shares in a 
cooperative. By owning such cooperative shares, the share-owner has the 
right to reside in a particular apartment in the cooperative, and the 
right to participate in management of the housing.
* * * * *
    Public assistance. In the homeownership option (see 
Sec. 982.627(b)): Income assistance from Federal, state or local 
welfare programs. Public assistance includes: Federal housing 
assistance or the housing component of a welfare grant; assistance 
under Temporary Assistance for Needy Families (TANF); Supplemental 
Security Income (SSI) that is subject to an income eligibility test; 
food stamps; general assistance or other assistance provided under a 
Federal, state or local program that provides assistance available to 
meet Family living or housing expenses.
* * * * *
    Special housing types. See subpart M of this part 982. Subpart M of 
this part states the special regulatory requirements for: SRO housing, 
congregate housing, group home, shared housing, manufactured home 
(including manufactured home space rental), cooperative housing (rental 
assistance for cooperative member) and homeownership option 
(homeownership assistance for cooperative member or first-time 
homeowner).
    Statement of homeowner obligations. In the homeownership option: 
The family's agreement to comply with program obligations.
* * * * *
    3. Add Sec. 982.305(b)(4) to read as follows:


Sec. 982.305  PHA approval to lease a unit.

* * * * *
    (b) * * *
    (4) In the case of a unit subject to a lease-purchase agreement, 
the PHA must provide written notice to the family of the environmental 
requirements that must be met before commencing homeownership 
assistance for the family (see Sec. 982.626(c)).
* * * * *
    4. Add Sec. 982.317 to read as follows:


Sec. 982.317  Lease-purchase agreements.

    (a) A family leasing a unit with assistance under the program may 
enter into an agreement with an owner to purchase the unit. So long as 
the family is receiving such rental assistance, all requirements 
applicable to families otherwise leasing units under the tenant-based 
program apply. Any homeownership premium (e.g., increment of value 
attributable to the value of the lease-purchase right or agreement such 
as an extra monthly payment to accumulate a downpayment or reduce the 
purchase price) included in the rent to the owner that would result in 
a higher subsidy amount than would otherwise be paid by the PHA must be 
absorbed by the family.
    (b) In determining whether the rent to owner for a unit subject to 
a lease-purchase agreement is a reasonable amount in accordance with 
Sec. 982.503, any homeownership premium paid by the family to the owner 
must be excluded when the PHA determines rent reasonableness.
    5. Revise 982.352(a)(6) to read as follows:


Sec. 982.352  Eligible housing.

    (a) * * *
    (6) A unit occupied by its owner or by a person with any interest 
in the unit.
* * * * *

Subpart M--Special Housing Types

    6. Amend Sec. 982.601 as follows:
    a. Revise paragraphs (a), (b)(1), and (b)(2);
    b. Redesignate paragraphs (c) and (d) as paragraphs (d) and (e) 
respectively; and
    c. Add new paragraph (c).


Sec. 982.601  Overview.

    (a) Special housing types. This subpart describes program 
requirements for special housing types. The following are the special 
housing types:
    (1) Single room occupancy (SRO) housing;
    (2) Congregate housing;
    (3) Group home;
    (4) Shared housing;
    (5) Manufactured home;
    (6) Cooperative housing (excluding families that are not 
cooperative members); and
    (7) Homeownership option.
    (b) PHA choice to offer special housing type. (1) The PHA may 
permit a family to use any of the following special housing types in 
accordance with requirements of the program: single room occupancy 
(SRO) housing, congregate housing, group home, shared housing, 
manufactured home when the family owns the home and leases the 
manufactured home space, cooperative housing or homeownership option.
    (2) In general, the PHA is not required to permit families 
(including families that move into the PHA program under portability 
procedures) to use any of these special housing types, and may limit 
the number of families using special housing types.
* * * * *
    (c) Program funding for special housing types. HUD does not provide 
any additional or designated funding for special housing types, or for 
a specific special housing type (e.g, the homeownership option). 
Assistance for special housing types is paid from program funding 
available for the PHA's tenant-based program under the consolidated 
annual contributions contract.
* * * * *
    7. Amend Sec. 982.619 as follows:
    a. Revise paragraph (a);
    b. Redesignate paragraph (d) as paragraph (e); and
    c. Add new paragraph (d).


Sec. 982.619  Cooperative housing.

    (a) Assistance in cooperative housing. This section applies to 
rental assistance for a cooperative member residing in cooperative 
housing. However, this section does not apply to:
    (1) Assistance for a cooperative member under the homeownership 
option pursuant to Sec. 982.625 through Sec. 982.638; or
    (2) Rental assistance for a family that leases a cooperative 
housing unit from a cooperative member (such rental assistance is not a 
special housing type, and is subject to requirements in other subparts 
of this part 982).
* * * * *
    (d) Maintenance. (1) During the term of the HAP contract between 
the PHA and the cooperative, the dwelling unit and premises must be 
maintained in accordance with the HQS. If the dwelling unit and 
premises are not maintained in accordance with the HQS, the PHA may 
exercise all available remedies, regardless of whether the family or 
the cooperative is responsible for such breach of the HQS. PHA remedies 
for breach of the HQS include recovery of overpayments, abatement or 
other reduction of housing assistance payments, termination of housing 
assistance payments and termination of the HAP contract.
    (2) The PHA may not make any housing assistance payments if the 
contract unit does not meet the HQS, unless any defect is corrected 
within the period specified by the PHA and the PHA verifies the 
correction. If a defect is life-threatening, the defect must be 
corrected within no more than 24 hours. For other defects, the defect 
must be corrected within the period specified by the PHA.
    (3) The family is responsible for a breach of the HQS that is 
caused by any of the following:

[[Page 23498]]

    (i) The family fails to perform any maintenance for which the 
family is responsible in accordance with the terms of the cooperative 
occupancy agreement between the cooperative member and the cooperative;
    (ii) The family fails to pay for any utilities that the cooperative 
is not required to pay for, but which are to be paid by the cooperative 
member;
    (iii) The family fails to provide and maintain any appliances that 
the cooperative is not required to provide, but which are to be 
provided by the cooperative member; or
    (iv) Any member of the household or guest damages the dwelling unit 
or premises (damages beyond ordinary wear and tear).
    (4) If the family has caused a breach of the HQS for which the 
family is responsible, the PHA must take prompt and vigorous action to 
enforce such family obligations. The PHA may terminate assistance for 
violation of family obligations in accordance with Sec. 982.552.
    (5) Section 982.404 does not apply to assistance for cooperative 
housing under this section.
* * * * *
    8. Add Secs. 982.625 through 982.638 under a new undesignated 
heading ``Homeownership Option'' to read as follows:

Homeownership Option

982.625  Homeownership option: General.
982.626  Homeownership option: Initial requirements.
982.627  Homeownership option: Homeownership option: How to qualify 
for homeownership assistance.
982.628  Homeownership option: Additional PHA requirements for 
family search and purchase.
982.629  Homeownership option: Homeownership counseling.
982.630  Homeownership option: Home inspections and contract of 
sale.
982.631  Homeownership option: Financing purchase of home; 
affordability of purchase.
982.632  Homeownership option: Continued assistance requirements; 
Family obligations.
982.633  Homeownership option: Maximum term of homeownership 
assistance.
982.634  Homeownership option: Amount and distribution of monthly 
homeownership assistance payment.
982.635  Homeownership option: Portability.
982.636  Homeownership option: Move with continued tenant-based 
assistance.
982.637  Homeownership option: Administrative fees.
982.638  Homeownership option: Applicability of other requirements.

Homeownership Option


Sec. 982.625   Homeownership option: General.

    (a) The homeownership option is used to assist a family residing in 
an existing home purchased and owned by one or more members of the 
family. The assisted family must be:
    (1) A first-time homeowner; or
    (2) A cooperative member.
    (b) A family assisted under the homeownership option may be a newly 
admitted or existing participant in the program.
    (c) The PHA must approve a live-in aide if needed as a reasonable 
accommodation so that the program is readily accessible to and useable 
by persons with disabilities in accordance with 24 CFR part 8. (See 
Sec. 982.316 concerning occupancy by a live-in aide.)


Sec. 982.626  Homeownership option: Initial requirements.

    (a) List of Federal requirements. Before commencing homeownership 
assistance for a family, the PHA must determine that all of the 
following initial requirements have been satisfied:
    (1) The family is qualified to receive homeownership assistance 
(see Sec. 982.627).
    (2) The family has satisfactorily completed the PHA program of 
required pre-assistance homeownership counseling (see Sec. 982.629).
    (3) The unit is eligible. (See Sec. 982.352. Paragraphs (a)(6), 
(a)(7) and (b) of Sec. 982.352 do not apply.)
    (4) The unit has been inspected by a PHA inspector and by an 
independent inspector designated by the family (see Sec. 982.630).
    (5) The unit satisfies the HQS (see Sec. 982.401 and Sec. 982.630).
    (6) The family is a first-time homeowner or cooperative member (see 
definitions of these terms at Sec. 982.4) and neither the head of 
household or spouse has defaulted on a mortgage obtained through the 
homeownership option.
    (7) Except for cooperative members who have acquired cooperative 
membership shares prior to commencement of homeownership assistance, 
the family has entered a contract of sale in accordance with 
Sec. 982.630(c).
    (8) In the case of assistance for a cooperative member, the 
cooperative membership shares may be acquired at or before commencement 
of homeownership assistance.
    (b) Additional PHA requirements. The PHA may prescribe additional 
initial requirements for commencement of homeownership assistance for a 
family. Any such additional requirements must be described in the PHA 
administrative plan.
    (c) Environmental requirements. The PHA is responsible for 
complying with the authorities listed in 24 CFR 58.6 requiring the 
purchaser to obtain and maintain flood insurance for units in special 
flood hazard areas, prohibiting assistance for acquiring units in the 
coastal barriers resource system, and requiring notification to 
purchaser of units in airport runway clear zones and airfield clear 
zones.
    (d) PHA disapproval of seller. The PHA may not commence 
homeownership assistance for occupancy of a home if the PHA has been 
informed (by HUD or otherwise) that the seller of the home is debarred, 
suspended, or subject to a limited denial of participation under 24 CFR 
part 24.


Sec. 982.627  Homeownership option: How to qualify for homeownership 
assistance.

    (a) Determination whether family is qualified. The PHA may not 
provide homeownership assistance for a family unless the PHA determines 
that the family satisfies all of the following initial requirements at 
commencement of homeownership assistance for the family:
    (1) At admission to the voucher program, the family is eligible for 
assistance (determined in accordance with Sec. 982.201).
    (2) The family satisfies any minimum income requirement (described 
in paragraph (b) of this section).
    (3) The family satisfies the employment requirements (described in 
paragraph (c) of this section).
    (4) The family has not defaulted on a mortgage securing debt to 
purchase a home under the homeownership option (see paragraph (d) of 
this section).
    (5) The family also satisfies any other initial requirements 
established by the PHA. Any such additional requirements must be 
described in the PHA administrative plan.
    (b) Minimum income requirements. (1) At commencement of 
homeownership assistance for the family, the family must demonstrate 
that the head of household and spouse have qualified monthly income 
(gross income), as determined in accordance with Sec. 5.609, that is 
not less than any minimum amount established by the PHA in accordance 
with the administrative plan.
    (2)(i) Except in the case of an elderly family or a disabled family 
(see the definitions of these terms at 24 CFR 5.403(b)), the PHA shall 
not count any public assistance received by the family in determining 
qualified monthly income under this section.

[[Page 23499]]

    (ii) The disregard of public assistance income under paragraph 
(b)(2)(i) of this section only affects the determination of minimum 
monthly income used to determine if a family initially qualifies for 
commencement of homeownership assistance in accordance with this 
section, but does not affect:
    (A) The determination of income-eligibility for admission to the 
voucher program;
    (B) Calculation of the amount of the family's total tenant payment 
(gross family contribution); or
    (C) Calculation of the amount of homeownership assistance payments 
on behalf of the family.
    (iii) In the case of an elderly family or a disabled family, the 
PHA shall count public assistance in determining qualified monthly 
income.
    (c) Employment requirements. (1) Except as provided in paragraph 
(c)(2) of this section, the family must demonstrate that the head of 
household or spouse is currently employed on a full-time basis, and has 
been continuously so employed during the year before commencement of 
homeownership assistance for the family.
    (2) The employment requirement in paragraph (c)(1) of this section 
does not apply to an elderly family or a disabled family (see the 
definitions of these terms at 24 CFR 5.403(b)). Furthermore, if a 
family, other than an elderly family or a disabled family, includes a 
person with disabilities, the PHA shall grant an exemption from the 
employment requirement if the PHA determines that an exemption is 
needed as a reasonable accommodation so that the program is readily 
accessible to and usable by persons with disabilities in accordance 
with 24 CFR part 8.
    (d) Prohibition against mortgage defaults. The PHA shall not 
commence homeownership assistance for a family if the head of household 
or spouse has previously received assistance under the homeownership 
option, and has defaulted on a mortgage securing debt incurred to 
purchase the home.


Sec. 982.628  Homeownership option: Additional PHA requirements for 
family search and purchase.

    (a) The PHA may establish the maximum time for a family to locate a 
home to purchase, and to purchase the home.
    (b) The PHA may require periodic family reports on the family's 
progress made to purchase in finding and purchasing a home.
    (c) If the family is unable to purchase a home within the maximum 
time established by the PHA, the PHA may issue the family a voucher to 
lease a unit or place the family's name on the waiting list for a 
voucher.


Sec. 982.629  Homeownership option: Homeownership counseling.

    (a) Before commencement of homeownership assistance for a family, 
the family must attend and satisfactorily complete the pre-assistance 
homeownership and housing counseling program required by the PHA (pre-
assistance counseling).
    (b) The PHA pre-assistance counseling program must cover these 
subjects:
    (1) Home maintenance (including care of the grounds);
    (2) Budgeting and money management;
    (3) Credit counseling;
    (4) How to negotiate the purchase price of a home;
    (5) How to obtain homeownership financing and loan preapprovals, 
including a description of types of financing that may be available, 
and the pros and cons of different types of financing;
    (6) How to find a home, including information about homeownership 
opportunities, schools, and transportation in the PHA jurisdiction.
    (7) Advantages of purchasing a home in an area that does not have a 
high concentration of low-income families and how to locate homes in 
such areas.
    (c) The PHA may adapt pre-assistance counseling for a family to the 
family's needs.
    (d) The PHA may also offer additional counseling after commencement 
of homeownership assistance (ongoing counseling). If the PHA offers a 
program of ongoing counseling for participants in the homeownership 
option, the PHA shall have discretion to determine whether the family 
is required to participate in the ongoing counseling.


Sec. 982.630  Homeownership option: Home inspections and contract of 
sale.

    (a) HQS inspection by PHA. The PHA may not commence homeownership 
assistance for a family until the PHA has inspected the unit and has 
determined that the unit passes HQS.
    (b) Independent inspection. (1) The unit must also be inspected by 
an independent professional inspector selected by and paid by the 
family.
    (2) The independent inspection must cover major building systems 
and components, including foundation and structure, housing interior 
and exterior, and the roofing, plumbing, electrical, and heating 
systems. The independent inspector must be qualified to report on 
property conditions, including major building systems and components.
    (3) The PHA may not require the family to use an independent 
inspector selected by the PHA. The independent inspector may not be a 
PHA employee or contractor,or other person under control of the PHA. 
However, the PHA may establish standards for qualification of 
inspectors selected by families under the homeownership option.
    (4) The independent inspector must provide a copy of the inspection 
report both to the family and to the PHA. The PHA may not commence 
homeownership assistance for the family until the PHA has reviewed the 
inspection report of the independent inspector. Even if the unit 
otherwise complies with the HQS (and may qualify for assistance under 
the PHA's tenant-based rental voucher program), the PHA shall have 
discretion to disapprove the unit for assistance under the 
homeownership option because of information in the inspection report.
    (c) Contract of sale. (1) Before commencement of homeownership 
assistance, a member or members of the family must enter into a 
contract of sale with the seller of the unit to be acquired by the 
family. The family must give the PHA a copy of the contract of sale 
(see also Sec. 982.626(a)(7)).
    (2) The contract of sale must specify:
    (i) The price and other terms of sale by the seller to the 
purchaser.
    (ii) That the purchaser will arrange for a pre-purchase inspection 
of the dwelling unit by an independent inspector selected by the 
purchaser.
    (iii) That the purchaser is not obligated to purchase the unit 
unless the inspection is satisfactory to the purchaser.
    (iv) That the purchaser is not obligated to pay for any necessary 
repairs.


Sec. 982.631  Homeownership option: Financing purchase of home; 
affordability of purchase.

    (a) The PHA may establish requirements for financing purchase of a 
home to be assisted under the homeownership option. Such PHA 
requirements may include requirements concerning qualification of 
lenders (for example, prohibition of seller financing or case-by-case 
approval of seller financing), or concerning terms of financing (for 
example, a prohibition of balloon payment mortgages, or establishment 
of a minimum homeowner equity requirement from personal resources).
    (b) If purchase of the home is financed with FHA-insured mortgage 
financing, such financing is subject to FHA mortgage insurance credit 
underwriting requirements. If purchase of the home is

[[Page 23500]]

financed (in whole or in part) without FHA-insured mortgage financing, 
the PHA must require that the underwriting procedures used by the 
lender comply with the basic mortgage insurance credit underwriting 
requirements for FHA-insured single family mortgage loans.
    (c) The PHA may disapprove proposed financing if the PHA determines 
that the debt for purchase of the home is unaffordable. In making this 
determination, the PHA may take into account other family expenses, 
such as child care, unreimbursed medical expenses, homeownership 
expenses, and other family expenses as determined by the PHA.
    (d) All PHA financing or affordability requirements must be 
described in the PHA administrative plan.


Sec. 982.632  Homeownership option: Continued assistance requirements; 
Family obligations.

    (a) Occupancy of home. Homeownership assistance may only be paid 
while the family is residing in the home. If the family moves out of 
the home, the PHA may not continue homeownership assistance after the 
month when the family moves out. The family or lender is not required 
to refund to the PHA the homeownership assistance for the month when 
the family moves out.
    (b) Family obligations. To continue to receive homeownership 
assistance, a family must comply with the following family obligations:
    (1) Ongoing counseling. To the extent required by the PHA, the 
family must attend and complete ongoing homeownership and housing 
counseling.
    (2) Compliance with mortgage. The family must comply with the terms 
of any mortgage securing debt incurred to purchase the home, and any 
refinancing of such debt.
    (3) Prohibition against conveyance or transfer of home. (i) So long 
as the family is receiving homeownership assistance, use and occupancy 
of the home is subject to Sec. 982.551(h) and (i). The family may not 
sell, convey or transfer any interest in the home to any entity or 
person other than a member of the assisted family residing in the home.
    (ii) In the case of assistance for a homeowner, the family may 
grant a mortgage on the home for debt incurred to finance purchase of 
the home or any refinancing of such debt.
    (iii) Upon death of a family member who holds, in whole or in part, 
title to the home or ownership of cooperative membership shares for the 
home, homeownership assistance may continue pending settlement of the 
decedent's estate, notwithstanding transfer of title by operation of 
law to the decedent's executor or legal representative, so long as the 
home is solely occupied by remaining family members in accordance with 
Sec. 982.551(h).
    (4) Supplying required information. (i) The family must supply 
required information to the PHA in accordance with Sec. 982.551(b).
    (ii) In addition to other required information, the family must 
supply any information as required by the PHA or HUD concerning:
    (A) Any mortgage or other debt incurred to purchase the home, and 
any refinancing of such debt (including information needed to determine 
whether the family has defaulted on the debt, and the nature of any 
such default), and information on any satisfaction or payment of the 
mortgage debt;
    (B) Any sale or other transfer of any interest in the home; or
    (C) The family's homeownership expenses.
    (5) Notice of move-out. The family must notify the PHA before the 
family moves out of the home.
    (6) Notice of mortgage default. The family must notify the PHA if 
the family defaults on a mortgage securing any debt incurred to 
purchase the home.
    (7) Additional PHA requirements. The PHA may establish additional 
requirements for continuation of homeownership assistance for the 
family. The family must comply with any such requirements.
    (8) Other family obligations. The family must comply with the 
obligations of a participant family described in Sec. 982.551. However, 
the following provisions do not apply to assistance under the 
homeownership option: Sec. 982.551(c), (d), (e), (f), (g) and (j).
    (c) Statement of homeowner obligations. Before commencement of 
homeownership assistance, the family must execute a statement of family 
obligations in the form prescribed by HUD. In the statement, the family 
agrees to comply with all family obligations under the homeownership 
option.


Sec. 982.633  Homeownership option: Maximum term of homeownership 
assistance.

    (a) Except in the case of an elderly family or a disabled family, 
the family shall not receive assistance under the homeownership option 
for more than ten years in total. If the family has received such 
assistance for different homes, or from different PHAs, the total of 
such assistance terms is subject to the ten year maximum.
    (b) At any time, the PHA may establish a shorter maximum term.


Sec. 982.634  Homeownership option: Amount and distribution of monthly 
homeownership assistance payment.

    (a) Amount of monthly homeownership assistance payment. While the 
family is residing in the home, the PHA shall pay a monthly 
homeownership assistance payment on behalf of the family that is equal 
to the lower of:
    (1) The payment standard minus the total tenant payment; or
    (2) The family's monthly homeownership expenses minus the total 
tenant payment.
    (b) Payment standard for family. (1) The payment standard for a 
family is the lower of:
    (i) The payment standard for the family unit size; or
    (ii) The payment standard for the size of the home.
    (2) If the home is located in an exception rent area, the PHA must 
use the appropriate payment standard for the exception rent area.
    (3) The payment standard for a family is the greater of:
    (i) The payment standard (as determined in accordance with 
paragraphs (b)(1) and (b)(2) of this section) at the commencement of 
homeownership assistance for occupancy of the home; or
    (ii) The payment standard (as determined in accordance with 
paragraphs (b)(1) and (b)(2) of this section) at the most recent 
regular reexamination of family income and composition since the 
commencement of homeownership assistance for occupancy of the home.
    (4) The PHA may not establish a separate payment standard for 
assistance under the homeownership option. The PHA must use the payment 
standards on the PHA payment standard schedule established pursuant to 
Sec. 982.505.
    (c) Determination of homeownership expenses. (1) The PHA shall 
adopt policies for determining the amount of homeownership expenses to 
be allowed by the PHA in accordance with HUD requirements.
    (2) Homeownership expenses for a homeowner may only include amounts 
allowed by the PHA to cover:
    (i) Principal and interest on initial mortgage debt and any 
mortgage insurance premium incurred to finance purchase of the home and 
any refinancing of such debt;
    (ii) Real estate taxes and public assessments on the home;
    (iii) Home insurance;

[[Page 23501]]

    (iv) The PHA allowance for maintenance expenses;
    (v) The PHA allowance for costs of major repairs and replacements;
    (vi) The PHA utility allowance for the home; and
    (vii) Principal and interest on mortgage debt incurred to finance 
major repairs, replacements or improvements for the home.
    (3) Homeownership expenses for a cooperative member may only 
include amounts allowed by the PHA to cover:
    (i) The cooperative charge under the cooperative occupancy 
agreement including payment for real estate taxes and public 
assessments on the home;
    (ii) Principal and interest on initial debt incurred to finance 
purchase of cooperative membership shares and any refinancing of such 
debt or other mortgage debt;
    (iii) Home insurance;
    (iv) The PHA allowance for maintenance expenses;
    (v) The PHA allowance for costs of major repairs and replacements;
    (vi) The PHA utility allowance for the home; and
    (vii) Principal and interest on debt incurred to finance major 
repairs, replacements or improvements for the home.
    (d) Payment to lender or family. The PHA must pay homeownership 
assistance payments either directly to the family or, at the discretion 
of the PHA, to a lender on behalf of the family.
    (e) Automatic termination of homeownership assistance. 
Homeownership assistance terminates automatically 180 calendar days 
after the last homeownership assistance payment on behalf of the 
family.


Sec. 982.635  Homeownership option: Portability.

    A family may qualify to move outside the initial PHA jurisdiction 
with continued assistance under the voucher program in accordance with 
portability procedures in Sec. 982.353 and Sec. 982.355. However, 
Sec. 982.354 is not applicable. Such continued assistance under 
portability procedures is subject to Sec. 982.636.


Sec. 982.636  Homeownership option: Move with continued tenant-based 
assistance.

    (a) Move to new unit. A family receiving homeownership assistance 
may move to a new unit with continued tenant-based assistance in 
accordance with this section. The family may move either with voucher 
rental assistance (in accordance with rental assistance program 
requirements) or with voucher homeownership assistance (in accordance 
with homeownership option program requirements).
    (b) When PHA may deny permission to move with continued 
assistance--(1) Lack of sufficient funding. The PHA may deny permission 
to move with continued voucher assistance if the PHA does not have 
sufficient funding to provide continued assistance.
    (2) Termination of assistance. At any time, the PHA may deny 
permission to move with continued voucher assistance in accordance with 
Sec. 982.552 (grounds for denial or termination of assistance), 
including termination of assistance for violation of any family 
obligations described in Sec. 982.632.
    (3) Default on FHA-insured mortgage. If the family defaults on an 
FHA-insured mortgage, the PHA may deny the family permission to receive 
rental assistance, in accordance with the policies contained in the PHA 
administrative plan. Further, in the event of a default on an FHA-
insured mortgage, the PHA must deny the family permission to move with 
continued voucher assistance unless the family demonstrates that:
    (i) The family has conveyed title to the home, as required by HUD, 
to HUD or HUD's designee, and
    (ii) The family has moved from the home within the period 
established or approved by HUD.
    (c) Continued homeownership assistance. For each move to a new unit 
with continued voucher assistance under the homeownership option, the 
PHA must determine that all initial requirements listed in Sec. 982.626 
have been satisfied. However, the following requirements do not apply:
    (1) The requirement for pre-assistance counseling 
(Sec. 982.626(a)(2) and Sec. 982.629) is not applicable. However, the 
PHA may require that the family complete additional counseling (before 
or after moving to a new unit with continued assistance under the 
homeownership option).
    (2) In the case of assistance for a homeowner, the requirement that 
a family must be a first-time homeowner (Sec. 982.625 and Sec. 982.626) 
is not applicable.


Sec. 982.637  Homeownership option: Administrative fees.

    The ongoing administrative fee described in Sec. 982.152(b) is paid 
to the PHA for each month that homeownership assistance is paid by the 
PHA on behalf of the family.


Sec. 982.638  Homeownership option: Applicability of other 
requirements.

    (a) General. The following types of provisions (located in other 
subparts of this part 982) do not apply to assistance under the 
homeownership option:
    (1) Any provisions concerning the Section 8 owner or the HAP 
contract between the PHA and owner;
    (2) Any provisions concerning the assisted tenancy or the lease 
between the family and the owner;
    (3) Any provisions concerning PHA approval to lease a unit;
    (4) Any provisions concerning rent to owner or reasonable rent; and
    (5) Any provisions concerning the issuance or term of a certificate 
or voucher.
    (b) Subpart G requirements. The following provisions of this part 
982, subpart G do not apply to assistance under the homeownership 
option:
    (1) Section 982.302 (Issuance of certificate or voucher);
    (2) Section 982.303 (Term of certificate or voucher);
    (3) Section 982.305 (PHA approval to lease);
    (4) Section 982.306 (PHA disapproval of owner);
    (5) Section 982.307 (Owner screening of tenants);
    (6) Section 982.308 (Leases);
    (7) Section 982.309 (Term of tenancy);
    (8) Section 982.310 (Owner termination of tenancy);
    (9) Section 982.311 (When assistance is paid) (except that 
Sec. 982.311(c)(3) is applicable to assistance under the homeownership 
option);
    (10) Section 982.313 (Security deposit); and
    (11) Section 982.314 (Move with continued tenant-based assistance) 
(except that Sec. 982.314(c) and (d)(2) are applicable).
    (c) Subpart H requirements. The following provisions of this part 
982, subpart H do not apply to assistance under the homeownership 
option:
    (1) Section 982.352(a)(6) (Prohibition of owner-occupied assisted 
unit);
    (2) Section 982.352(b) (PHA owned housing);
    (3) Sections 982.353(b)(1), (2), and (3) (Where family can lease a 
unit); and
    (4) Section 982.354 (Administration by initial PHA under 
portability).
    (d) Subpart I requirements. The following provisions of this part 
982, subpart I do not apply to assistance under the homeownership 
option:
    (1) Section 982.403 (Unit too big or small);
    (2) Section 982.404 (Responsibility for maintenance during assisted 
occupancy); and
    (3) Section 982.405 (PHA periodic unit inspection).
    (e) Subpart J requirements. The requirements of this part 982, 
subpart J (Housing Assistance Payments Contract and Owner 
Responsibility) (Secs. 982.451-457) do not apply to assistance under 
the homeownership option.

[[Page 23502]]

    (f) Subpart K requirements. Except for those sections listed below, 
the requirements of this part 982, subpart K (Rent and Housing 
Assistance Payment) (Secs. 982.501-517) do not apply to assistance 
under the homeownership option:
    (1) Section 982.504 (Maximum subsidy; FMR/exception rent limit);
    (2) Section 982.516 (Examination of family income and composition); 
and
    (3) Section 982.517 (Utility allowance).
    (g) Subpart L requirements. The following provisions of this part 
982, subpart L, do not apply to assistance under the homeownership 
option:
    (1) Section 982.551(c) (HQS breach caused by family);
    (2) Section 982.551(d) (Allowing HQS inspection); and
    (3) Section 982.551(j) (Interest in unit).

    Dated: April 7, 1999.
Harold Lucas,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 99-10465 Filed 4-29-99; 8:45 am]
BILLING CODE 4210-33-P