[Federal Register Volume 67, Number 202 (Friday, October 18, 2002)]
[Rules and Regulations]
[Pages 64484-64495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26343]
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Part III
Department of Housing and Urban Development
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24 CFR Part 982
Section 8 Homeownership Program: Downpayment Assistance Grants and
Streamlining Amendments; Final Rule
Federal Register / Vol. 67, No. 202 / Friday, October 18, 2002 /
Rules and Regulations
[[Page 64484]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 982
[Docket No. FR-4670-F-02]
RIN 2577-AC28
Section 8 Homeownership Program: Downpayment Assistance Grants
and Streamlining Amendments
AGENCY: Office of Assistant Secretary for Public and Indian Housing,
HUD.
ACTION: Final rule.
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SUMMARY: This final rule implements section 301 of the American
Homeownership and Economic Opportunity Act of 2000, which amends the
``homeownership option'' under the Housing Choice Voucher Program.
Under section 301, a Public Housing Agency (PHA) may, in lieu of paying
a monthly homeownership assistance payment on behalf of a family,
provide homeownership assistance for the family in the form of a single
grant to be used toward the downpayment required in connection with the
purchase of the home. Implementation of these downpayment assistance
grants is anticipated for Federal Fiscal Year 2003. In addition to
implementation of section 301, this final rule also clarifies and
streamlines several regulatory requirements applicable to both
downpayment grants and monthly homeownership assistance payments
provided under the homeownership option. This final rule follows
publication of a June 13, 2001, proposed rule, and takes into
consideration the public comments received on the proposed rule.
DATES: Effective Date: November 18, 2002.
FOR FURTHER INFORMATION CONTACT: Gerald J. Benoit, Office of Public and
Indian Housing, Department of Housing and Urban Development, Room 4210,
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. Background--HUD's June 13, 2001, Proposed Rule
On June 13, 2001 (66 FR 32198), HUD published a proposed rule for
public comment to implement section 301 of the American Homeownership
and Economic Opportunity Act of 2000 (Pub.L. 106-569, 114 Stat. 2944,
2952, approved December 27, 2000) (AHEOA). Section 301 amends the
``homeownership option'' authorized under section 8(y) of the United
States Housing Act of 1937 (42 U.S.C. 1437f(y)) (1937 Act). Under the
section 8(y) homeownership option, a public housing agency (PHA) may
choose to provide monthly tenant-based assistance to an eligible family
that purchases a dwelling unit that will be occupied by the family.
Section 301 amends section 8(y) to authorize an alternative form of
assistance under the homeownership option--assistance in the form of a
single downpayment assistance grant. Under section 301, a PHA may, in
lieu of paying a monthly homeownership assistance payment on behalf of
a family, provide homeownership assistance for the family in the form
of a single grant to be used toward the downpayment required in
connection with the purchase of the home. Implementation of these
downpayment assistance grants is anticipated for Federal Fiscal Year
2003.
In addition to implementation of downpayment assistance grants, HUD
also proposed to clarify and streamline several regulatory requirements
applicable to both downpayment grants and monthly homeownership
assistance payments provided under the homeownership option.
Specifically, HUD proposed to:
(1) Provide PHAs with the flexibility to establish a higher minimum
income standard than the uniform national requirement described in the
current regulations;
(2) Explicitly reference the eligibility of manufactured homes for
purchase under the homeownership option; and
(3) Remove the requirements providing for the recapture of
homeownership assistance upon the sale or refinancing of the home.
In addition to these three changes, HUD also announced that it was
considering the feasibility of permitting the purchase of new homes not
yet under construction under the homeownership option. The preamble to
the June 13, 2001, proposed rule provides additional details regarding
the proposed changes to HUD's homeownership option regulations.
II. Significant Changes to June 13, 2001, Proposed Rule
This final rule follows publication of the June 13, 2001, proposed
rule, and takes into consideration the public comments received on the
proposed rule. The most significant differences between this final rule
and the June 13, 2001, proposed rule are as follows:
A. Changes to Implementation of Downpayment Assistance Grants
1. Payment of reasonable and customary closing costs with
downpayment grant. This final rule authorizes the use of a downpayment
grant for the payment of reasonable and customary closing costs. If the
PHA permits the downpayment grant to be applied to closing costs, the
PHA must define what fees and charges constitute reasonable and
customary closing costs by providing such a definition in its
administrative plan. However, if the purchase of a home is financed
with FHA mortgage insurance, such financing is subject to FHA mortgage
insurance requirements, including any requirements concerning closing
costs (see Sec. 982.632(b) of the homeownership option regulations
regarding the applicability of FHA requirements to voucher
homeownership assistance and 24 CFR 203.27 regarding allowable fees,
charges and discounts for FHA-insured mortgages).
2. Limitation on eligibility to current voucher families. This
final rule continues to limit eligibility for downpayment assistance
grants to current voucher families. The final rule, however, no longer
requires that a family must have been receiving tenant-based voucher
rental assistance for a specific time period in order to qualify for a
downpayment grant. The proposed rule would have mandated a one-year
period of prior voucher rental assistance.
3. Administrative fee. This final rule announces that the single,
one-time administrative fee for a downpayment assistance grant will
initially be set at an amount equal to six months of the PHA's on-going
regular administrative fee under the voucher program.
4. Return to tenant-based assistance. The final rule permits a
family to apply for and receive tenant-based rental assistance after
receiving a downpayment grant, in accordance with program requirements
and PHA policies. However, the PHA may not commence tenant-based rental
assistance for occupancy of the new unit so long as any family member
owns any title or other interest in the home purchased with
homeownership assistance. Further, 18 months must have passed since the
family's receipt of the downpayment assistance grant.
5. Implementation of downpayment assistance grants. This final rule
clarifies that a PHA may not offer downpayment assistance grants until
HUD publishes a notice in the Federal Register announcing that
appropriated funds are available for this use.
[[Page 64485]]
B. Other Changes to Homeownership Option
1. Family choice of housing. This final rule makes a non-
substantive clarification to Sec. 982.601(d) of the Housing Choice
Voucher Program regulations concerning a family's ability to choose
among the special housing types permitted under the program (including
the homeownership option). The current wording of the provision refers
to a family's choice to ``rent'' housing, which may lead to the
incorrect conclusion that the provisions concerning family choice do
not apply to home purchases under the homeownership option.
Accordingly, the final rule replaces the word ``rent'' in this section
with the more inclusive word ``use.'' This change does not alter any
existing regulatory requirements, but merely clarifies that a family's
ability to choose among the various forms of assistance offered under
the voucher program also includes voucher homeownership assistance.
2. Future receipt of homeownership assistance. This final rule
provides that only adult family members are subject to the restrictions
on the future receipt of homeownership assistance. Specifically, a
family that includes an individual who was an adult member of a family
that previously received either of the two forms of homeownership
assistance may not receive the other form of homeownership assistance
from any PHA. Further, a PHA may not provide homeownership assistance
for a family if any member was an adult member of a family at the time
such family received assistance under the homeownership option and
defaulted on the mortgage securing purchase of the home.
3. Clarification of reasonable accommodation requirement.
Consistent with previous HUD guidance, this final rule clarifies that
it is the sole responsibility of the PHA to determine whether it is
reasonable to implement a homeownership program as a reasonable
accommodation. The PHA will determine what is reasonable based on the
specific circumstances and individual needs of the person with a
disability. The PHA may determine that it is not reasonable to provide
homeownership assistance as a reasonable accommodation in cases where
the PHA has otherwise opted not to implement a homeownership program.
4. Removal of recapture provisions. This final rule adopts the
proposal to remove the recapture provisions contained in the June 13,
2001, proposed rule. In addition, this final rule provides that a PHA
shall not impose or enforce any requirement for the recapture of
voucher homeownership assistance on the sale or refinancing of a home
purchased with assistance under the homeownership option. This change
will ensure that families who purchased their homes prior to issuance
of this final rule also receive the benefit provided by removal of the
onerous recapture requirements.
5. Inclusion of welfare assistance in determining whether elderly
and disabled families meet the minimum income requirement. This final
rule clarifies that, in determining whether an elderly or disabled
family meets the minimum income requirement, welfare assistance shall
be included only for those adult elderly or disabled family members who
will own the home.
6. Revised minimum income standard for disabled families. This
final rule adopts the revisions to the minimum income requirements
contained in the June 13, 2001, proposed rule. Specifically, the final
rule permits a PHA to establish a higher minimum income standard than
the uniform national standard described in the homeownership option
regulations. However, the final rule establishes a separate national
standard for disabled families. This minimum income standard for such
families will be equal to the monthly Federal Supplemental Security
Income (SSI) benefit for an individual living alone (or paying his or
her share of food and housing costs) multiplied by twelve.
PHAs will have the flexibility to establish a higher income
standard for either or both types of families (disabled and non-
disabled). However, as described in the proposed rule, a family that
meets the applicable HUD minimum income requirement, but not the higher
standard established by the PHA, shall be considered to satisfy the
minimum income requirement if the family is able to demonstrate that it
has been pre-qualified or pre-approved for financing. The pre-qualified
or pre-approved financing must meet any PHA established requirements
for financing the purchase of the home (including qualifications of
lenders and terms of financing). The pre-qualified or pre-approved
financing amount must be sufficient to purchase housing that meets
housing quality standards in the PHA's jurisdiction.
7. Timing of new construction. After careful consideration of all
the issues regarding the eligibility of units not yet under
construction, HUD, at this time, is not prepared to authorize the
purchase of such units with voucher homeownership assistance. However,
in order to expand a family's homeownership choices, the final rule
provides that a unit need only be under construction at the time the
family enters into the contract of sale--and not at the time the PHA
determines the family is eligible for homeownership assistance to
purchase the unit, as is currently required by the regulations.
8. Eligibility of housing where the family will not also own fee
title to the real property on which the home is located. The final rule
expands the types of housing eligible for purchase under the
homeownership option to include any housing where the family will not
also own fee title to the real property on which the home is located.
Further, in order to effectuate this change, the final rule revises the
list of homeownership expenses to include land lease payments. However,
the family must have the right to occupy the site for a period of at
least forty years and the home must have a permanent foundation. The
right of occupancy period has been increased to forty years (from the
proposed thirty year period) to conform to FHA mortgage insurance
requirements and manufactured home lending industry practice.
9. PHA disapproval of seller. This final rule clarifies that a PHA,
in its administrative discretion, may deny approval of a seller for any
reason provided for disapproval of an owner under the voucher rental
program regulations (see Sec. 982.306(c)). These reasons include:
violations of the housing assistance payments (HAP) contract;
committing fraud; bribery; or any other corrupt or criminal acts in
connection with any Federal housing program; engaging in drug-related
or violent criminal activity; non-compliance with HUD's housing quality
standards (HQS); failing to meet State or local housing codes; and
failure to pay State or local real estate taxes, fines, or assessments.
The current regulatory language is unclear as to whether PHAs have the
authority to prohibit sellers who engage in these disreputable
activities from participating in the homeownership option. This final
rule closes this ``loophole'' by specifying that the PHA disapproval
provisions of Sec. 982.306(c) apply to both the rental and
homeownership components of the voucher program.
III. Discussion of Public Comments Received on the June 13, 2001,
Proposed Rule
The public comment period on the proposed rule closed on August 13,
2001. HUD received twenty-seven comments on the proposed rule. Comments
were received from: PHAs;
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advocates of low-income housing; legal services providers; national
associations representing realtors, home builders, and mortgage
bankers; state and local housing services and community development
agencies; a housing subsidy recipient; Fannie Mae; the United States
Department of Agriculture-Rural Housing Service; and other commenters.
The following section of the preamble presents a summary of the
significant issues raised by the public commenters on the proposed
rule, and HUD's responses to these issues.
The summary of public comments is organized as follows:
Section IV of the preamble discusses the public comments regarding
the implementation of downpayment assistance grants.
Section V of the preamble discusses the public comments regarding
the proposed streamlining and clarifying amendments to the
homeownership option.
Section VI of the preamble discusses other public comments received
on the proposed rule.
IV. Discussion of Public Comments Regarding the Implementation of
Downpayment Assistance Grants
A. Comments Regarding Types of Homeownership Assistance Offered by PHA
Comment: A PHA that offers downpayment assistance grants should be
required to clarify to the potential homebuyer the benefits of each
option. Several commenters wrote that it is important that any
potential participants have full knowledge of the advantages and
disadvantages of each type of homeownership assistance. The commenters
wrote that those families who are considering giving up their tenant-
based rental assistance to receive a downpayment grant particularly
should be made aware of all anticipated costs and requirements that go
along with homeownership and the financial risks that may result from
termination of their voucher rental assistance.
HUD Response. HUD agrees that families should be made fully aware
of the benefits and disadvantages associated with each type of
homeownership assistance. Before the commencement of either form of
homeownership assistance, families are already required to
satisfactorily complete the pre-assistance homeownership counseling
offered by the PHA (see Sec. 982.630). The regulation at Sec. 982.630
identifies several suggested topics for inclusion in the pre-assistance
counseling, and provides PHAs with the flexibility to adapt the
subjects covered in the counseling to local circumstances and the needs
of individual families. HUD encourages all PHAs who offer both forms of
homeownership assistance to explain to applicants in the pre-assistance
counseling how both forms of assistance work, and the benefits of each
type of homeownership assistance. However, HUD continues to believe
that the topics to be covered in counseling should be selected by the
individual PHAs, who are in the best position to determine the
counseling needs of families within their respective jurisdictions.
Accordingly, HUD has not revised the proposed rule to adopt the
suggestions made by the commenters.
Comment: A PHA that offers downpayment assistance grants should be
required to also offer monthly homeownership assistance payments.
Several commenters wrote that downpayment assistance carries
substantial economic risks for families, since they will be forfeiting
monthly homeownership assistance payments in exchange for a single
downpayment grant. The commenters wrote that for many potential
participants, the major obstacle to homeownership might be the ability
to make monthly payments and not insufficient funds for a downpayment.
However, PHAs may prefer to offer downpayment grants because they
present less administrative burden than monthly homeownership
assistance payments. The commenters suggested that PHAs who offer
downpayment assistance should be required (or at a minimum encouraged)
to also offer monthly homeownership assistance payments.
HUD Response. HUD does not believe it has the statutory authority
to impose the requirement suggested by the commenter. Section 8(y) of
the 1937 Act clearly gives individual PHAs the discretion to decide
whether they will offer homeownership assistance and, if so, whether
one or both forms of assistance will be made available by the PHA.
Additionally, mandating that PHAs offer both types of assistance might
have the negative consequence of discouraging some PHAs from offering
any form of voucher homeownership assistance.
Comment: Support for PHA discretion to offer homeownership
assistance. One commenter supported granting PHAs the flexibility to
offer either or both types of homeownership assistance.
HUD Response. HUD agrees with the commenter. As noted above,
section 8(y) of the 1937 Act makes the determination of whether to
offer voucher homeownership assistance a local PHA decision.
B. Comments Regarding Eligibility for Downpayment Assistance
Comment: Support for restricting eligibility to current program
participants. Several commenters supported limiting eligibility for
downpayment assistance grants to current participants in the tenant-
based voucher program. The commenters wrote that the proposal is
consistent with the legislative history of section 301, and prevents
transforming the voucher program into a short-term downpayment
assistance program.
HUD Response. HUD agrees with the commenters, and the final rule
continues to limit eligibility for downpayment assistance to current
voucher families. Upon re-consideration, however, HUD believes that
mandating at least one year of prior voucher rental assistance may be
unduly prescriptive and unnecessarily delay the ability of families to
move ``up and out'' and become homeowners. Further, eliminating the
one-year requirement will facilitate lease-purchase transactions where
the family is entitled to purchase a home it is leasing. Accordingly,
the final rule no longer requires that a family must have been
receiving tenant-based voucher rental assistance for a specific amount
of time in order to qualify for a downpayment assistance grant.
In most PHA jurisdictions, the initial lease term for a family
participating in the voucher rental program is one year (see Sec.
982.309). The change regarding the amount a time a family must be
receiving voucher rental assistance in order to qualify for a
downpayment grant does not override the initial lease term requirements
of Sec. 982.309, or the family obligation to comply with the terms of
the lease (Sec. 982.551(e)). Neither does it override any PHA
administrative policy restricting moves by the family during the
initial lease term. Rather, one of the goals of the change is to
facilitate use of a downpayment grant where there is mutual agreement
between the family and the owner to terminate the lease prior to the
end of the initial term.
Comment: Proposed eligibility restriction should not apply to
disabled families requesting a reasonable accommodation. One commenter
wrote that eligibility for downpayment assistance should include
individuals with disabilities requesting a reasonable accommodation,
regardless of the length of time they have been receiving tenant-based
voucher rental assistance.
HUD Response. As noted above, this final rule no longer requires
that a family have been receiving tenant-based voucher rental
assistance for a specific
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amount of time in order to qualify for downpayment assistance. Further,
the homeownership option contains several special provisions for
families with a member who is a person with disabilities. For example,
there is no maximum term of homeownership assistance for disabled
families (assistance to other families is limited to a fifteen or ten-
year term) (see Sec. 982.634). As described elsewhere in this
preamble, the final rule establishes a separate, lower national minimum
income standard for disabled families (see Sec. 982.627(c)(1)). The
PHA is also required to count welfare assistance provided to the
disabled family for purposes of determining whether the family
satisfies the minimum income requirements (generally, such assistance
is not counted for other families) (see Sec. 982.627(c)(2)). In
addition, if a PHA determines that a disabled family requires
homeownership assistance as a reasonable accommodation, the first-time
homeowner requirement does not apply (Sec. 982.627(b)). Further, on
June 22, 2001 (66 FR 33610), HUD published an interim rule implementing
the pilot program authorized by section 302 of AHEOA. This pilot
program provides disabled families with certain additional benefits
under the homeownership option (see Sec. 982.642).
C. Comments Regarding Maximum Amount of Downpayment Grant
Comment: Maximum amount of downpayment grant is insufficient. Three
commenters wrote that basing the maximum amount of the downpayment
grant on a single year's worth of homeownership assistance payments
will benefit only a small number of families, particularly in expensive
markets such as New York City. One of the commenters recommended that
the final rule either establish a minimum downpayment grant amount (the
commenter suggested $3,000) or base the maximum grant amount on a
longer time period of subsidy assistance (the commenter suggested 5
years). A second commenter agreed that the time period for determining
the maximum grant amount should be extended, and suggested a 5-10 year
period.
HUD Response. HUD does not have the statutory authority to make the
change suggested by the commenter. The maximum amount of the
downpayment grant is established by section 301 of AHEOA. Specifically,
the statute provides that ``[t]he amount of the downpayment grant * * *
may not exceed the amount that is equal to the sum of the assistance
payments that would be made during the first year of assistance on
behalf of the family * * ''
Comment: The payment standard of the initial PHA should always be
used to calculate the maximum downpayment grant. One commenter made
this suggestion. The commenter wrote that this requirement appears to
impose an unnecessary burden upon the family and the receiving PHA, and
may deny homeownership assistance to a deserving family if the
receiving PHA does not offer downpayment assistance grants. The
commenter urged HUD to require that the policies and procedures of the
initial PHA must be used for determining the maximum downpayment grant,
regardless of where the property being purchased is located.
HUD Response. HUD does not agree with the commenter. HUD believes
the portability requirements should be the same for both monthly
homeownership assistance payments and downpayment assistance grants. A
family determined eligible for either form of homeownership assistance
may purchase a unit outside of the initial PHA's jurisdiction if the
receiving PHA is administering a homeownership program and is accepting
new homeownership families (see Sec. 982.636).
D. Comments Regarding Use of Downpayment Grant
Comment: HUD should permit the use of downpayment assistance to
cover closing costs. Several commenters wrote that closing costs can be
substantial, typically amounting to two or three percent of the
purchase of the home. Accordingly, the commenters suggested that the
final rule authorize the use of downpayment grant funds to cover such
costs.
HUD Response. Upon re-consideration of this issue, HUD has revised
the rule to allow the use of a downpayment grant for the payment of
reasonable and customary closing costs. HUD has determined that
permitting families the option of using a downpayment assistance grant
to cover such costs will facilitate homeownership. If the PHA permits
the downpayment grant to be applied to closing costs, the PHA must
define what fees and charges constitute reasonable and customary
closing costs by providing such a definition in its administrative
plan. However, if the purchase of a home is financed with FHA mortgage
insurance, such financing is subject to FHA mortgage insurance
requirements, including any requirements concerning closing costs (see
Sec. 982.632(b) of the homeownership option regulations regarding the
applicability of FHA requirements to voucher homeownership assistance
and 24 CFR 203.27 regarding allowable fees, charges, and discounts for
FHA-insured mortgages).
E. Comments Regarding Administrative Fee
Comment: HUD should either provide a one-time administrative fee
for both types of homeownership assistance or no fee at all. Several
commenters wrote that the effect of the one-time administrative fee
would be to provide an unfair ``bonus'' to PHAs offering downpayment
assistance grants. The commenters wrote that a PHA that provides a
downpayment grant would receive the one-time administrative fee, as
well as ``freeing-up'' a voucher for use by another family. The PHA
will collect an ongoing administrative fee for this ``freed-up''
voucher. The commenters wrote that HUD does not provide a similar one-
time administrative fee to PHAs offering the existing homeownership
option. Accordingly, PHAs will prefer to offer downpayment assistance
grants rather than monthly homeownership assistance payments. Since
downpayment grants will primarily benefit higher-income Section 8
families, the commenters wrote that the proposed administrative fee may
unfairly penalize lower-income families who might benefit from monthly
homeownership assistance payments. The commenters recommended that HUD
either provide a one-time administrative fee for the administration of
both types of homeownership assistance--or provide no one-time fee at
all.
HUD Response. HUD has not revised the proposed rule in response to
these comments. The administrative fee is a one-time fee paid to
compensate PHAs for the administration of downpayment assistance
grants. This administrative fee is paid in lieu of the monthly fee a
PHA would receive for the administration of other forms of voucher
assistance. The single, one-time fee should not be construed as a
``bonus'' to PHAs for providing downpayment assistance. Further, HUD
disagrees with the commenters that no fee should be paid for the
administration of downpayment assistance grants. PHAs providing
downpayment assistance grants require compensation for the staff work
associated with counseling and other administrative actions in
connection with such grants.
Comment: Administrative fee is inadequate. Several commenters
objected that the proposed one-time administrative fee of $250 is too
low to adequately compensate PHAs for the administration of downpayment
grants. The commenters wrote that the low
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administrative fee will make downpayment assistance an unattractive
option for PHAs, who will prefer to use their voucher funding to
provide monthly tenant-based assistance and earn the higher
administrative fee. Two commenters wrote that given the widely varying
costs experienced by PHAs in different geographical locations, a
flexible administrative fee would be more appropriate than the flat
nationwide fee proposed by HUD. The commenter recommended an
administrative fee equal to six months of a PHA's regular
administrative fee. The commenters wrote that such a fee would be
simple to administer and reflect the varying cost structures of PHAs.
HUD Response. Upon reconsideration, HUD agrees that the proposed
$250 administrative fee did not reflect geographic cost differences
between PHAs. Through publication of this final rule, HUD announces
that the administrative fee is initially set at an amount equal to six
months of a PHA's on-going regular administrative fee (see Sec.
982.152(b) of the Housing Choice Voucher program regulations). HUD will
monitor the adequacy of this fee amount and will make adjustments as
necessary. As is standard practice, any updates to the administrative
fee amount will be announced through HUD notice.
F. Comments Regarding Return to Tenant-Based Assistance
Comment: Final rule should permit a family to return to tenant-
based assistance after receiving a downpayment assistance grant. Two
commenters wrote that a family that receives monthly homeownership
assistance payments may elect to move with continued voucher tenant-
based assistance (see Sec. 982.637). However, the June 13, 2001,
proposed rule does not provide a similar safety net to a family
selecting a one-time downpayment assistance grant. The commenters wrote
that households receiving Section 8 assistance, even at the higher end
of the income spectrum, are financially vulnerable and subject to
personal and economic hardship. Thus, a household that is well
qualified for downpayment assistance initially may find itself in a
difficult financial situation one or more years down the road due to a
loss of employment, illness, or death. The commenters wrote that it
would be unduly harsh to prohibit such a family from returning to
voucher rental assistance simply because it elected to receive a one-
time downpayment grant. One of the commenters wrote that if
disqualification is sought, a more equitable approach would be to
disqualify participating households from receiving tenant-based
assistance for a period equivalent to the number of months used to
calculate the amount of the downpayment assistance grant. The other
commenter suggested that, at a minimum, a family should be allowed to
return to voucher rental assistance within 18 months following the
downpayment assistance grant.
HUD Response. HUD agrees with the commenters that families
receiving a downpayment grant should be permitted to return to tenant-
based rental assistance under certain circumstances. This final rule
permits a family that has received a one-time downpayment assistance
grant to apply for, and receive, tenant-based rental assistance in
accordance with program requirements and PHA policies. However, the PHA
may not commence tenant-based rental assistance for occupancy of the
new unit so long as any family member owns any title or other interest
in the home purchased with homeownership assistance. Further, 18 months
must have passed since the family's receipt of the downpayment
assistance grant.
G. Comments Regarding Voucher Renewals
Comment: Voucher renewal policy for downpayment grants is unclear
and may be inequitable. Two commenters expressed uncertainty regarding
the voucher renewal policy for downpayment grants announced in the June
13, 2001, proposed rule. The commenters requested clarification on
whether downpayment grants are required to be funded from PHA reserves.
The commenters noted that if a PHA uses reserves to assist additional
families, it is not entitled to HUD reimbursement. The commenters wrote
that such a voucher renewal policy would be inequitable and discourage
PHAs from offering downpayment assistance grants.
HUD Response. HUD intends to issue further non-regulatory guidance
on renewal funding in the near future.
H. Miscellaneous Comments Regarding Downpayment Grants
Comment: HUD should require PHAs to take an active role in ensuring
the long-term success of participating families. One commenter wrote
that, although the PHA's involvement with the family ceases once the
downpayment grant is made, the PHA remains in the important position of
being the family's sole safety net if mortgage and maintenance expenses
prove to be unaffordable. According to the commenter, the PHA is also
the last line of defense in preventing a predatory lender from
encouraging the family to move into homeownership. For these reasons,
the commenter suggested that HUD require PHAs to review the
participant's financing, sales contract, appraisal, and any other
documents deemed necessary by the PHA. In this manner, the PHA can
ensure that the sales price of the home and the monthly mortgage
payments are affordable and the borrower is not subject to abusive loan
terms or predatory lending. The commenter also requested that HUD
clarify that new homeowners receiving a downpayment grant are required
to complete all required pre-purchase homeownership counseling and must
obtain the required home inspections (with approval by the PHA) prior
to obtaining the grant. The commenter wrote that HUD should consider
reporting requirements, perhaps through the Section 8 Management
Assessment Program (SEMAP), that would enable HUD to ensure that the
PHA has adopted all necessary safeguards under the homeownership
option.
HUD Response. HUD has not adopted the suggestions made by the
commenter. HUD agrees that families receiving downpayment grants should
be protected from entering into unaffordable financing arrangements and
from abusive lending practices. However, HUD does not believe that
additional regulatory requirements are necessary to accomplish these
goals. Many of the regulatory protections afforded to families
receiving monthly homeownership assistance payments also apply to
downpayment grants. For example, families receiving a downpayment grant
must participate in pre-assistance counseling, and a PHA may establish
requirements for financing purchase of the home. Although PHA
involvement with the family ends once the downpayment grant is
provided, HUD expects that PHAs will undertake the same efforts to
ensure that financing requirements are appropriate for a downpayment
grant as they would for monthly homeownership assistance payments. PHAs
are encouraged to review lender qualifications and the loan terms
before authorizing a downpayment grant. PHAs should disapprove proposed
financing if the PHA determines that the debt is unaffordable or the
lender or the loan terms do not meet PHA qualifications.
Comment: Downpayment assistance option needs to be included in the
PHA Plan template. One commenter wrote that the homeownership component
of the PHA Annual and Five-Year Plan template needs to be revised to
include
[[Page 64489]]
downpayment grants along with monthly homeownership assistance
payments. The commenter suggested that PHAs should be required to
identify whether they offer downpayment grants in addition to monthly
homeownership assistance payments, and their reasons for offering
downpayment assistance. The commenter wrote that including downpayment
assistance grants in the template will better ensure that PHAs,
potential participants, lenders, and others better understand the
program and all of its ramifications in advance.
HUD Response. HUD intends to address downpayment grants through
future amendments to the PHA Plan instructions.
Comment: Downpayment grants will unnecessarily divert scarce
voucher subsidy to higher-income families. One commenter wrote that
downpayment assistance grants will principally benefit higher-income
families who can afford monthly mortgage payments. The commenter wrote
that the proposed rule would, therefore, ``have very minimal impact on
[lower-income] voucher recipients who may wish to become homeowners.''
The commenter also wrote that there are already several available
downpayment assistance resources available to voucher families, such as
HOME program funds, the Federal Home Loan Bank, state housing finance
authority funds, and other state housing funds. The commenter suggested
that PHAs work with their respective state housing and finance
agencies, lending institutions, and local nonprofits to identify and
develop downpayment assistance resources rather than using valuable
voucher assistance for this purpose.
HUD Response. HUD does not agree with the commenter. Downpayment
assistance grants are statutorily authorized by section 8(y). The
statutory language makes clear that the provision of such assistance is
solely at the discretion of individual PHAs. The PHA is in the best
position to assess the availability and amount of other housing
resources in its community and determine whether it is appropriate to
offer downpayment assistance grants. Further, since a family provided a
downpayment grant will no longer receive monthly rental assistance,
implementation of this program will ``free up'' resources to assist
additional families on the PHA waiting list.
V. Discussion of Public Comments Regarding Streamlining and Clarifying
Amendments to Homeownership Option
A. Comments Regarding Minimum Income Requirements
Comment: Support for proposed minimum income revisions. Several
commenters expressed support for the proposed revisions to the minimum
income requirements. The commenter wrote that the flexibility provided
by the proposed rule is both welcome and necessary. According to the
commenters, the current minimum income requirement is well below the
amount necessary to purchase in many areas, and raises false hopes in
voucher families desiring homeownership. The commenters also wrote that
allowing PHAs to establish minimum income requirements that more
accurately reflect local housing costs will encourage lender
participation.
HUD Response. HUD appreciates the support expressed by the
commenters. HUD agrees that increased flexibility is necessary to allow
successful PHA implementation of the homeownership option. This final
rule adopts the proposed changes granting PHAs the flexibility to
establish a higher minimum income standard that more accurately
reflects local housing costs.
Comment: PHAs should have increased flexibility in establishing
minimum income standards, especially for elderly and disabled families.
Several commenters made this suggestion. The commenters wrote that, in
at least some areas of the country, the current minimum income standard
is already too high, especially for the elderly, persons with
disabilities, and others living on fixed incomes or government
benefits. The commenters wrote that lower income families are good
candidates to purchase homes due to favorable underwriting standards
employed by lenders and the secondary market, are also often able to
take advantage of existing local affordable housing programs. The
commenters wrote that although HUD may provide guidance for the
determination of the minimum income requirement, ultimately the PHA
should define the minimum income amount that will be required under the
PHA's program.
HUD Response. HUD agrees that the current uniform national minimum
income standard is too high for disabled families in some areas of the
country. Accordingly, this final rule establishes a separate national
standard for such families equal to the monthly Federal SSI benefit for
an individual living alone (or paying his or her share of food and
housing costs) multiplied by twelve.\1\ HUD agrees that there are a
number of loan products and grant programs tailored for disabled
families that, when combined with voucher homeownership assistance,
would allow families below the current minimum income standard to
successfully purchase a home. The new national standard for disabled
families is based on the SSI benefit, since most families who will
benefit from this change will be receiving such assistance.
---------------------------------------------------------------------------
\1\ The monthly SSI benefit for an individual living alone (or
paying his or her share of food and housing costs) currently equals
$545. Multiplied by twelve, this equals a $6540 minimum income
threshold for a disabled family under this final rule.
---------------------------------------------------------------------------
HUD also continues to believe that the current income standard may
be too low for certain high-cost areas of the country. The minimum
income requirement is included in section 8(y), and is intended to
ensure that families participating in the program have sufficient
resources to meet their monthly mortgage payments and other ongoing
homeownership obligations (such as real estate taxes, repairs, and
other maintenance costs). HUD agrees with the commenters that PHAs are
in the best position to establish a standard that accurately reflects
local housing conditions, while ensuring compliance with the statutory
goal of ensuring that families participating in the homeownership
option have a satisfactory minimum amount of income. Accordingly,
consistent with the June 13, 2001, proposed rule, this final rule
permits a PHA to establish a higher minimum income standard than the
uniform national standard for either or both types of families
(disabled and non-disabled).Although HUD believes that PHAs should have
the flexibility to tailor the minimum income standard to local housing
conditions, it also wants to make sure that PHA-established income
limits do not hinder use of the homeownership option by families who
can qualify for a mortgage from a reputable lending institution.
Accordingly, as described in the proposed rule, a family that meets the
applicable HUD minimum income requirement, but not the higher PHA-
specific income standard shall be considered to satisfy the minimum
income requirement if the family is able to demonstrate that it has
been pre-qualified or pre-approved for financing. The pre-qualified or
pre-approved financing must meet any PHA established requirements for
financing the purchase of the home (including qualifications of lenders
and terms of financing). The pre-qualified or pre-
[[Page 64490]]
approved financing amount must be sufficient to purchase housing that
meets the housing quality standards in the PHA's jurisdiction.
B. Comments Regarding the Eligibility of Units Not Yet Under
Construction
Comment: Support for eligibility of new construction. The
commenters writing on this proposal unanimously endorsed the
eligibility of units not yet under construction for purchase under the
homeownership option. Four of the commenters specifically addressed the
environmental concerns raised in the preamble to the proposed rule.
These commenters wrote that it is the Federal funding obtained by the
developer to construct the units--not the homeownership assistance
provided to the family--that typically triggers any environmental
requirements under the National Environmental Policy Act of 1969 (NEPA)
or environmental authorities. The commenters wrote that individual
units are not deeded to the family until the developer is ready to
begin construction on the units or, in some instances, after
construction of the units is completed. Accordingly, the required
environmental reviews will be performed in connection with the
provision of HOME, Community Development Block Grant (CDBG), Rural
Housing Service, or other Federal construction funding. The commenters
suggested that the final rule simply defer to the environmental
requirements posed by the applicable programs and funding sources for
the underlying development.
HUD Response. After careful review of all the issues regarding the
eligibility of units not yet under construction (including
environmental issues), HUD at this time is not prepared to authorize
the purchase of such units with voucher homeownership assistance. The
environmental requirements for the Housing Choice Voucher Program are
located in 24 CFR part 58. Although, as several of the commenters
noted, part 58 categorically excludes individual actions on one to four
family properties from review under NEPA, it also requires compliance
with other applicable environmental laws (such as those regarding
historic preservation, floodplains and wetlands) (see Sec.
58.35(a)(4)). The broader categorical exclusion for homeownership
assistance at Sec. 58.35(b)(5) explicitly applies only to ``existing
dwelling units and dwelling units under construction.'' Even if other
Federal agencies provide some funding for the units and perform the
required environmental reviews, HUD cannot ensure that the reviews will
be conducted in compliance with HUD's regulations.
Although HUD at this time is not prepared to authorize the use of
the homeownership option for the purchase of units not yet under
construction, it believes that another way to address the concerns
raised by the restriction is to revise the existing requirement
regarding the timing of new construction. The current regulation at
Sec. 982.628 requires that a unit must be under construction at the
time the PHA determines the family is eligible for homeownership
assistance to purchase the unit. Requiring that construction commence
at such an early stage in the homeownership process diminishes the
housing choices available to the family, and is unnecessary to ensure
compliance with applicable environmental requirements since the voucher
family has not yet entered into a binding commitment to purchase the
home with Federal funds. Accordingly, this final rule amends Sec.
982.628 to require that a unit need only be under construction at the
time the family enters into the contract of sale. HUD will consider a
unit to be ``under construction'' if the footers have been poured.
C. Comments Regarding Eligibility of Manufactured Homes
Comment: Support for proposed changes. Several commenters expressed
support for the proposed changes regarding the eligibility of
manufactured homes.
HUD Response. HUD appreciates these favorable comments. As noted
below, HUD has further expanded the types of housing eligible for
purchase under the homeownership option.
Comment: HUD should further expand eligibility to include other
types of housing where the homeowner does not also own the underlying
real property. Three commenters wrote that HUD should expand the types
of eligible housing to include other similar housing types--such as
manufactured homes in resident-owned, or nonprofit owned, manufactured
home parks and units in land trust networks. The commenters wrote that
such a change would expand the housing options for low-income families
and conform to the existing secondary market.
HUD Response. HUD has adopted the change suggested by the
commenters. This final rule expands the types of eligible housing to
include any housing where the family will not also own fee title to the
real property on which the home is located. However, the family must
have the right to occupy the site for a period of at least forty years.
Further, the home must have a permanent foundation. These requirements
are necessary to satisfy the homeownership goals of section 8(y). The
statute contemplates the purchase of real property, which necessitates
long-term site control.
For all practical purposes, the requirement for a permanent
foundation will usually only come into consideration when the purchase
involves a manufactured home. HUD notes that the purchase of a
manufactured home without a permanent foundation and a short-term pad
lease is not eligible for voucher homeownership assistance.
Manufactured home owners with short-term lease arrangements are
eligible for rental assistance for the pad under section 8(o)(12), but
not homeownership assistance under section 8(y).
Comment: HUD must revise list of homeownership expenses to fully
implement manufactured home eligibility. Two commenters wrote that in
order to fully implement these changes, HUD must revise the list of
homeownership expenses for a homeowner other than a cooperative member
at Sec. 982.635(c) to include the cost of pad rental and land lease or
land trust payments. A corresponding change for cooperative members at
Sec. 982.635(c)(3) is unnecessary because these expenses are already
included in the cooperative charges.
HUD Response. HUD has adopted the suggestion made by the commenter.
This final rule revises Sec. 982.635(c) to include land lease
payments. These payments include the cost of leasing the land for both
manufactured homes and other housing types where the family does not
also own the real property on which the home is located.
Comment: HUD should extend right of occupancy requirement to forty
years. One commenter wrote that this change would conform to the
policies of certain lenders regarding the purchase of a manufactured
home where the borrower does not also own the property on which the
home is located. Specifically, these lenders require that the borrower
have a leasehold on the property of at least ten years beyond the term
of the first mortgage loan.
HUD Response. HUD agrees and has revised the proposed rule in
response to this public comment. The revised requirement is consistent
with standard FHA mortgage underwriting practices.
D. Comments Regarding Removal of Recapture Provisions
Comment: Support for removal of recapture provisions. Most
commenters submitting comments on this issue
[[Page 64491]]
applauded HUD's proposal to remove the recapture provisions. The
commenters agreed with HUD that recaptures might discourage
participation in the homeownership option and pose an undue
administrative burden on PHAs.
HUD Response. HUD appreciates the support expressed by these
commenters. This final rule adopts the proposal to remove the recapture
provisions contained in the June 13, 2001, proposed rule. In addition,
this final rule provides that a PHA shall not impose or enforce any
requirement for the recapture of voucher homeownership assistance on
the sale or refinancing of a home purchased with assistance under the
homeownership option. This change will ensure that families who
purchased their homes prior to issuance of this final rule also receive
the benefit provided by removal of the onerous recapture requirements.
Comment: HUD should allow recaptures of downpayment assistance as a
local program option. One commenter wrote that, while the recapture of
long-term mortgage assistance may be complex and serve as a
disincentive for home maintenance, deferred second mortgages for the
principal amount of downpayment assistance are common tools in
homebuyer assistance programs and are important to local political
support for this type of assistance.
HUD Response. HUD has not adopted the suggestion made by the
commenter. As noted, this final rule removes the recapture requirements
for the homeownership option. HUD does not believe it would be
appropriate to establish separate recapture policies for monthly
homeownership assistance payments and downpayment grants. In order to
have a consistent policy concerning recaptures of homeownership
assistance, recaptures of downpayment grants are not authorized.
VI. Discussion of Other Public Comments
Comment: Restrictions on future receipt of homeownership assistance
should only apply to family members listed on the title to the home.
Two commenters wrote that the prohibition of future receipt of
homeownership assistance is unduly harsh for family members who may not
be able to take title to, or own, the previous home (including minor
children who are not legally able to contract for the purchase of a
home). The commenters wrote that any prohibition against receipt of
future homeownership assistance should be directed only to those family
members who are taking title to the property.
HUD Response. HUD agrees with the commenters that the current
prohibitions may be too severe, especially for minor children who are
not able to contract for purchase of the home. However, HUD does not
agree that the restriction on future receipt of homeownership
assistance should be limited to those members of the family who hold
title to the property. The change suggested by the commenters would
permit a family to circumvent the restriction by simply having another
adult family member take title to the home. Accordingly, the final rule
modifies the prohibitions on future receipt of assistance to those
family members who were adults at the time the family received prior
homeownership assistance. Specifically, a family that includes an
individual who was an adult member of a family that previously received
either of the two forms of homeownership assistance may not receive the
other form of homeownership assistance from any PHA. Further, a PHA may
not provide homeownership assistance for a family if any member was an
adult member of a family at the time when such family received
assistance under the homeownership option, and defaulted on the
mortgage securing purchase of the home.
Comment: Reasonable accommodation requirements are onerous. Two
commenters objected to the language of Sec. 982.625(e)(2), which
requires PHAs to offer either form of homeownership assistance as a
reasonable accommodation for a person with disabilities. The commenters
wrote that this provision would require a PHA that has elected not to
offer homeownership assistance to create an entire homeownership
program in order to address a single family's request. The commenters
wrote that this requirement imposes an undue administrative burden on
PHAs and should be removed at the final rule stage.
HUD Response. HUD is cognizant of the financial difficulty of
administering a single unit homeownership program on behalf of a
disabled family. The preamble to HUD's September 17, 2000 (65 FR
55134), final rule implementing the homeownership option provides
useful guidance in this regard. As the preamble noted:
The provision of homeownership assistance as a reasonable
accommodation is determined on a case-by-case basis by the PHA. The
PHA will determine what is reasonable based on the specific
circumstances and individual needs of the person with a disability.
It is the sole responsibility of the PHA to determine whether it is
reasonable to implement a homeownership program as a reasonable
accommodation. For example, depending on the individual
circumstances, the PHA may determine that it is a reasonable
accommodation to provide homeownership assistance when the PHA has
implemented a limited homeownership program and is currently
assisting the maximum number of homeowners in the PHA program. On
the other hand, the PHA may determine that it is not reasonable to
provide homeownership assistance as a reasonable accommodation in
cases where the PHA has otherwise opted not to implement a
homeownership program. (See 65 FR 55145, first column.)
For purposes of clarity, the final rule amends HUD's homeownership
option regulations to codify the preamble guidance quoted above.
Codification will make this language easier to find, since PHAs and
voucher families are more likely to refer to the regulations than to
the preamble of the final rule for policy guidance. Further, HUD
believes that codification of this guidance will clarify the
regulations for voucher families, and better assist PHAs in determining
whether homeownership assistance should be provided as a reasonable
accommodation. HUD emphasizes that inclusion of this language in the
regulations does not establish new procedures or modify existing
policies concerning the reasonable accommodation requirements. Rather,
the final rule simply repeats current HUD guidance on these
requirements.
Comment: Support for reasonable accommodation requirements. One
commenter wrote in support of the reasonable accommodation
requirements. The commenter urged HUD to require PHAs to offer the
homeownership option as a reasonable accommodation, even if the PHA
does not otherwise offer Section 8 homeownership assistance. The
commenter wrote that accessible and affordable rental units are often
difficult to locate. Accordingly, purchase of an accessible unit may be
the only viable option for a person with disabilities.
HUD Response. As noted above, it is the sole responsibility of the
PHA to determine whether it is reasonable to implement a homeownership
program as a reasonable accommodation. The PHA will determine what is
reasonable based on the specific circumstances and individual needs of
the person with a disability.
Comment: Final rule should provide that voucher homeownership
assistance may be used to purchase PHA-owned properties. Two commenters
wrote that HUD should allow the purchase of PHA-owned units under the
homeownership
[[Page 64492]]
option. The commenters also suggested that HUD establish appropriate
procedures for inspection of these units to remove the potential of any
conflict of interest.
HUD Response. HUD has not incorporated the changes suggested by the
commenters in this final rule. Rather, HUD is promulgating the
necessary regulatory procedures regarding the sale of PHA-owned
properties under the homeownership option in a separate rule.
Comment: HUD should establish guidance regarding PHA coordination
in offering the homeownership option. Two commenters wrote that HUD
should encourage smaller PHAs to collaborate with neighboring PHAs that
are offering the homeownership option. The commenters wrote that such
efforts to pool resources will provide families with more housing
choices (including more geographic flexibility on where they can live),
attract more lenders to the program due to increased volume, and create
more efficient homeownership programs.
HUD Response. HUD encourages PHAs to develop strategies to
facilitate efficient use of administrative and other resources in
implementing voucher homeownership assistance. Nothing in the
homeownership option regulations prohibits one or more PHAs from
collaborating to administer a combined homeownership program or to
administer complementary homeownership programs.
Comment: HUD should establish homebuyer education requirement. One
commenter wrote that HUD should require potential homebuyers to partake
in homeownership education before the provision of voucher
homeownership assistance.
HUD Response. The existing homeownership regulations already
address the concerns expressed by the commenter. As noted above in this
preamble, families participating in the homeownership option are
required to attend and satisfactorily complete the pre-assistance
homeownership and housing counseling program offered by the PHA.
Accordingly, no regulatory change is required.
VII. Findings and Certifications
Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866, Regulatory Planning and Review. OMB determined
that this rule is a ``significant regulatory action'' as defined in
section 3(f) of the Order (although not an economically significant
regulatory action under the Order). Any changes made to the rule as a
result of that review are identified in the docket file, which is
available for public inspection 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 20410-0500.
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 final rule does not impose any
Federal mandates on any State, local, or tribal governments or the
private sector within the meaning of the Unfunded Mandates Reform Act
of 1995.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
was made at the proposed rule stage in accordance with HUD regulations
at 24 CFR part 50, which implement section 102(2)(C) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4223). That finding remains
applicable to this final rule and is available for public inspection
between the hours of 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 20410-0500.
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) (RFA), has reviewed and approved this final 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 final 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 final rule
implements an alternative to the basic homeownership option under which
a PHA may elect to provide a one-time downpayment assistance grant to
eligible families. The final rule also makes several clarifying and
streamlining amendments to the regulations governing basic
homeownership voucher assistance, which is also administered by PHAs.
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 PHAs 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.
(2) No Significant Economic Impact. The final rule does not change
the amount of funding available under the Housing Choice Voucher
Program. Accordingly, the economic impact of this rule will not be
significant, and it will not affect a substantial number of small
entities.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on State and local
governments and is not required by statute, or the rule preempts State
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. This final rule is exclusively
concerned with homeownership voucher assistance. This proposed rule
does not have federalism implications and does not impose substantial
direct compliance costs on State and local governments or preempt State
law within the meaning of the Executive Order.
Catalog of Domestic Assistance Number
The Catalog of Domestic Assistance Number for the Housing Choice
Voucher Program is 14.871.
List of Subjects in 24 CFR Part 982
Grant programs--housing and community development, Housing, Rent
subsidies, Reporting and recordkeeping requirements.
Accordingly, for the reasons described in the preamble, HUD amends
24 CFR part 982 as follows:
PART 982--SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE 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. In Sec. 982.4(b), add the definition of ``Downpayment
assistance grant'' in alphabetical order, and revise the definition of
``Homeownership assistance'' to read as follows:
Sec. 982.4 Definitions.
* * * * *
(b) * * *
[[Page 64493]]
Downpayment assistance grant. A form of homeownership assistance in
the homeownership option: A single downpayment assistance grant for the
family. If a family receives a downpayment assistance grant, a PHA may
not make monthly homeownership assistance payments for the family. A
downpayment assistance grant is applied to the downpayment for purchase
of the home or reasonable and customary closing costs required in
connection with purchase of the home.
* * * * *
Homeownership assistance. Assistance for a family under the
homeownership option. There are two alternative and mutually exclusive
forms of homeownership assistance by a PHA for a family: monthly
homeownership assistance payments, or a single downpayment assistance
grant. Either form of homeownership assistance may be paid to the
family, or to a mortgage lender on behalf of the family.
* * * * *
3. Section 982.601(d) is revised to read as follows:
Sec. 982.601 Overview.
* * * * *
(d) Family choice of housing and housing type. The family chooses
whether to use housing that qualifies as a special housing type under
this subpart, or as any specific special housing type, or to use other
eligible housing in accordance with requirements of the program. The
PHA may not restrict the family's freedom to choose among available
units in accordance with Sec. 982.353.
* * * * *
4. Section 982.625 is amended by:
a. Redesignating paragraphs (c) and (d) as paragraphs (f) and (g),
respectively;
b. Adding new paragraphs (c), (d), (e), (h) and (i); and
c. In the introductory paragraph of newly redesignated paragraph
(g), remove the reference to ``(d)(1), (d)(2), or (d)(3)'' and add
``(g)(1), (g)(2), or (g)(3)'' in its place. The additions and revisions
read as follows:
Sec. 982.625 Homeownership option: General.
* * * * *
(c) Forms of homeownership assistance. (1) A PHA may provide one of
two forms of homeownership assistance for a family:
(i) Monthly homeownership assistance payments; or
(ii) A single downpayment assistance grant.
(2) Prohibition against combining forms of homeownership
assistance. A family may only receive one form of homeownership
assistance. Accordingly, a family that includes a person who was an
adult member of a family that previously received either of the two
forms of homeownership assistance may not receive the other form of
homeownership assistance from any PHA.
(d) PHA choice to offer homeownership options. (1) The PHA may
choose to offer either or both forms of homeownership assistance under
this subpart, or choose not to offer either form of assistance.
However, the PHA must offer either form of homeownership assistance if
necessary as a reasonable accommodation for a person with disabilities
in accordance with Sec. 982.601(b)(3).
(2) It is the sole responsibility of the PHA to determine whether
it is reasonable to implement a homeownership program as a reasonable
accommodation. The PHA will determine what is reasonable based on the
specific circumstances and individual needs of the person with a
disability. The PHA may determine that it is not reasonable to offer
homeownership assistance as a reasonable accommodation in cases where
the PHA has otherwise opted not to implement a homeownership program.
(e) Family choice. (1) The family chooses whether to participate in
the homeownership option if offered by the PHA.
(2) If the PHA offers both forms of homeownership assistance, the
family chooses which form of homeownership assistance to receive.
* * * * *
(h) Recapture of homeownership assistance. A PHA shall not impose
or enforce any requirement for the recapture of voucher homeownership
assistance on the sale or refinancing of a home purchased with
assistance under the homeownership option.
(i) Applicable requirements. The following specify what regulatory
provisions (under the heading ``homeownership option'') are applicable
to either or both forms of homeownership assistance (except as
otherwise specifically provided):
(1) Common provisions. The following provisions apply to both forms
of homeownership assistance:
(i) Section 982.625 (General);
(ii) Section 982.626 (Initial requirements);
(iii) Section 982.627 (Eligibility requirements for families);
(iv) Section 982.628 (Eligible units);
(v) Section 982.629 (Additional PHA requirements for family search
and purchase);
(vi) Section 982.630 (Homeownership counseling);
(vii) Section 982.631 (Home inspections, contract of sale, and PHA
disapproval of seller);
(viii) Section 982.632 (Financing purchase of home; affordability
of purchase);
(ix) Section 982.636 (Portability);
(x) Section 982.638 (Denial or termination of assistance for
family); and
(xi) Section 982.641 (Applicability of other requirements).
(2) Monthly homeownership assistance payments. The following
provisions only apply to homeownership assistance in the form of
monthly homeownership assistance payments:
(i) Section 982.633 (Continued assistance requirements; family
obligations);
(ii) Section 982.634 (Maximum term of homeownership assistance);
(iii) Section 982.635 (Amount and distribution of monthly
homeownership assistance payment);
(iv) Section 982.637 (Move with continued tenant-based assistance);
and
(v) Section 982.639 (Administrative fees).
(3) Downpayment assistance grant. The following provision only
applies to homeownership assistance in the form of a downpayment
assistance grant: Section 982.643 (Downpayment assistance grants).
5. Revise Sec. 982.627(c)(1), (c)(2)(iii), (c)(3), and (e) to read
as follows:
Sec. 982.627 Homeownership option: Eligibility requirements for
families.
* * * * *
(c) Minimum income requirements. (1) At commencement of monthly
homeownership assistance payments for the family, or at the time of a
downpayment assistance grant for the family, the family must
demonstrate that the annual income, as determined by the PHA in
accordance with Sec. 5.609 of this title, of the adult family members
who will own the home at commencement of homeownership assistance is
not less than:
(i) In the case of a disabled family (as defined in Sec. 5.403(b)
of this title), the monthly Federal Supplemental Security Income (SSI)
benefit for an individual living alone (or paying his or her share of
food and housing costs) multiplied by twelve; or
(ii) In the case of other families, the Federal minimum wage
multiplied by 2,000 hours.
[[Page 64494]]
(2) * * *
(iii) In the case of an elderly or disabled family, the PHA shall
include welfare assistance for the adult family members who will own
the home in determining if the family meets the minimum income
requirement.
(3) A PHA may establish a minimum income standard that is higher
than those described in paragraph (c)(1) of this section for either or
both types of families. However, a family that meets the applicable HUD
minimum income requirement described in paragraph (c)(1) of this
section, but not the higher standard established by the PHA shall be
considered to satisfy the minimum income requirement if:
(i) The family demonstrates that it has been pre-qualified or pre-
approved for financing;
(ii) The pre-qualified or pre-approved financing meets any PHA
established requirements under Sec. 982.632 for financing the purchase
of the home (including qualifications of lenders and terms of
financing); and
(iii) The pre-qualified or pre-approved financing amount is
sufficient to purchase housing that meets HQS in the PHA's
jurisdiction.
* * * * *
(e) Prohibition against assistance to family that has defaulted.
The PHA shall not commence homeownership assistance for a family that
includes an individual who was an adult member of a family at the time
when such family received homeownership assistance and defaulted on a
mortgage securing debt incurred to purchase the home.
6. Amend Sec. 982.628 as follows:
a. Revise paragraphs (a)(2) and (a)(3);
b. Redesignate paragraph (b) as paragraph (c); and
c. Add new paragraph (b). The revisions and additions read as
follows:
Sec. 982.628 Homeownership option: Eligible units.
(a) * * *
(2) The unit is either under construction or already existing at
the time the family enters into the contract of sale.
(3) The unit is either a one-unit property (including a
manufactured home) or a single dwelling unit in a cooperative or
condominium.
* * * * *
(b) Purchase of home where family will not own fee title to the
real property. Homeownership assistance may be provided for the
purchase of a home where the family will not own fee title to the real
property on which the home is located, but only if:
(1) The home is located on a permanent foundation; and
(2) The family has the right to occupy the home site for at least
forty years.
* * * * *
7. Amend Sec. 982.631 as follows:
a. Revise the section heading;
b. Revise paragraph (a);
c. Revise the second sentence of paragraph (b)(4);
d. Revise the first sentence of paragraph (c)(1); and
e. Add paragraph (d). The revisions and addition read as follows:
Sec. 982.631 Homeownership option: Home inspections, contract of
sale, and PHA disapproval of seller.
(a) HQS inspection by PHA. The PHA may not commence monthly
homeownership assistance payments or provide a downpayment assistance
grant for the family until the PHA has inspected the unit and has
determined that the unit passes HQS.
(b) * * *
(4) * * * The PHA may not commence monthly homeownership assistance
payments, or provide a downpayment assistance grant for the family,
until the PHA has reviewed the inspection report of the independent
inspector.
* * * * *
(c) Contract of sale. (1) Before commencement of monthly
homeownership assistance payments or receipt of a downpayment
assistance grant, 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. * * *
* * * * *
(d) PHA disapproval of seller. In its administrative discretion,
the PHA may deny approval of a seller for any reason provided for
disapproval of an owner in Sec. 982.306(c).
8. Amend Sec. 982.635 as follows:
a. In paragraph (c)(2)(vi), remove the word ``and'';
b. In paragraph (c)(2)(vii), replace the period at the end of the
paragraph with ``; and'';
c. Add paragraph (c)(2)(viii); and
d. In paragraph (e), revise the first sentence. The revisions and
additions read as follows:
Sec. 982.635 Homeownership option: Amount and distribution of monthly
homeownership assistance payment.
* * * * *
(c) * * *
(2) * * *
(viii) Land lease payments (where a family does not own fee title
to the real property on which the home is located; see Sec.
982.628(b)).
* * * * *
(e) Automatic termination of homeownership assistance.
Homeownership assistance for a family terminates automatically 180
calendar days after the last homeownership assistance payment on behalf
of the family. * * *
Sec. 982.640 [Removed]
9. Remove Sec. 982.640.
10. Revise Sec. 982.641(b)(4) to read as follows:
Sec. 982.641 Homeownership option: Applicability of other
requirements.
* * * * *
(b) * * *
(4) Section 982.306 (PHA disapproval of owner) (except that a PHA
may disapprove a seller for any reason described in paragraph (c), see
Sec. 982.631(d)).
* * * * *
11. Add Sec. 982.643 to read as follows:
Sec. 982.643 Homeownership option: Downpayment assistance grants.
(a) General. (1) A PHA may provide a single downpayment assistance
grant for a participant that has received tenant-based or project-based
rental assistance in the Housing Choice Voucher Program.
(2) The downpayment assistance grant must be applied toward the
downpayment required in connection with the purchase of the home and/or
reasonable and customary closing costs in connection with the purchase
of the home.
(3) If the PHA permits the downpayment grant to be applied to
closing costs, the PHA must define what fees and charges constitute
reasonable and customary closing costs. However, if the purchase of a
home is financed with FHA mortgage insurance, such financing is subject
to FHA mortgage insurance requirements, including any requirements
concerning closing costs (see Sec. 982.632(b) of this part regarding
the applicability of FHA requirements to voucher homeownership
assistance and Sec. 203.27 of this title regarding allowable fees,
charges and discounts for FHA-insured mortgages).
(b) Maximum downpayment grant. A downpayment assistance grant may
not exceed twelve times the difference between the payment standard and
the total tenant payment.
(c) Payment of downpayment grant. The downpayment assistance grant
shall be paid at the closing of the family's purchase of the home.
(d) Administrative fee. For each downpayment assistance grant made
by the PHA, HUD will pay the PHA a one-
[[Page 64495]]
time administrative fee in accordance with Sec. 982.152(a)(1)(iii).
(e) Return to tenant-based assistance. A family that has received a
downpayment assistance grant may apply for and receive tenant-based
rental assistance, in accordance with program requirements and PHA
policies. However, the PHA may not commence tenant-based rental
assistance for occupancy of the new unit so long as any member of the
family owns any title or other interest in the home purchased with
homeownership assistance. Further, eighteen months must have passed
since the family's receipt of the downpayment assistance grant.
(f) Implementation of downpayment assistance grants. A PHA may not
offer downpayment assistance under this paragraph until HUD publishes a
notice in the Federal Register.
Dated: October 8, 2002.
Michael M. Liu,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 02-26343 Filed 10-17-02; 8:45 am]
BILLING CODE 4210-33-P