Boston Housing Authority

Policies > Section 8 Admin Plan Ch 16: Homeownership

Section 8 Admin Plan

Chapter 16:Homeownership

16.1 INTRODUCTION

The BHA’s Section 8 Homeownership Option of the Housing Choice Voucher Program (“homeownership program” or “homeownership assistance”) 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.  Under the Homeownership Program,  HCVP Assistance payments supplement the Family's own income to facilitate the transition from rental to homeownership. The initial availability of  assistance payments may also provide additional assurance to lenders.
 
The BHA’s Section 8 Homeownership program is generally limited to First-Time Homeowners who are currently Participants in the Section 8 Tenant-Based Program. At the initial briefing of Section 8 Participant Families, the BHA will inform the Participant Family of the homeownership option.  Family participation in the Homeownership program is voluntary.  However, the BHA may limit the number of homeownership families, and there are statutory Family eligibility requirements such as a minimum level of 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 BHA has chosen to require participation in the Family Self-Sufficiency (FSS) program as a criterion for eligibility unless the Family qualifies for a waiver. See also section 14.3.  Participation in the FSS Program is open to all Section 8 Participants.  Requests for an exception to the FSS requirement will be evaluated on a case-by-case basis.  Families requesting a waiver must meet all other eligibility criteria, including income and employment requirements. Participation in the FSS Program may also be waived if necessary as a Reasonable Accommodation for a Disabled Person.
 
Once a Family has been determined by the BHA to be preliminarily eligible for Homeownership assistance, the Family must attend pre-purchase homeownership counseling sessions conducted by another entity such as a HUD- and BHA-approved housing counseling agency and FSS counseling sessions conducted by BHA staff.
 
If determined eligible for a Homeownership Voucher, the Family will then arrange for an independent home inspection, and seek to obtain financing. Homeownership assistance will begin when the Family purchases the Home and after all of the requirements of the homeownership program are met.
 
All civil rights laws applicable to the Section 8 Housing Choice Voucher Program are applicable to the homeownership program. The BHA must comply with all equal opportunity and nondiscrimination requirements imposed by contract or Federal law. In addition, the BHA may not steer families to particular units or neighborhoods. Further, as in the tenant-based rental Voucher program, the BHA must provide assistance to expand housing opportunities. 
 
If a Family includes any Disabled Person, the BHA will take appropriate steps to ensure effective communication with such Family in accordance with 24 C.F.R. part 8 and to provide Reasonable Accommodation. Except as otherwise provided, no Disabled Person shall be denied the benefits of, excluded from participation in, or otherwise subjected to discrimination because the BHA's facilities are inaccessible to a person with a disability. Accessibility for the hearing impaired is provided by the TDD/TDY telephone number.  The BHA will also take reasonable steps to insure effective communication with people with limited language or English ability.
 
The process for submitting applications or any other documents required for participation in the BHA’s programs shall be accessible to all persons.  All communications that are part of the process should be in plain language that the applicant can understand, in a form that is appropriate to meet the needs of the person with a disability.  If necessary, a format other than written documents will be used.  The BHA shall also prepare such documents in clear and simple language, to the extent possible, to assist persons with learning and cognitive disabilities.  If requested by persons with such disabilities, BHA staff will explain written material verbally, and possibly more than once, and if necessary, assist the individuals or obtain assistance for them in filling out any necessary forms.
 
The BHA shall furnish appropriate auxiliary aids (e.g., qualified sign language and oral interpreters, readers, use of taped materials) where necessary to facilitate communication with an individual who has a disability.  Auxiliary aids shall be furnished in a timely manner.  If a Participant requests an extension of any deadline because of a delay in providing effective communication, such a request shall be considered.  The BHA is not required to provide personal items such as hearing aids, magnifying eyeglasses, or readers for personal study. 

16.1.1  Why Participation in the Family Self-Sufficiency Program? 

The goals of the Homeownership Option are two-fold: to help families achieve the dream of homeownership and to assist them in sustaining this dream for the long term.  Participation in the FSS Program is a requirement for Applicants who do not meet the FSS waiver requirements of the Homeownership program because it is an excellent way to establish the financial foundation necessary for owning a Home.  The path to homeownership begins where the FSS Program begins: with a realistic assessment of income, savings and credit status.  Furthermore, the escrow account component of the FSS Program allows low-income families to accumulate substantial savings over the term of their contract as their income increases.
 
The homebuyer counseling portion of the FSS Program includes in-depth, ongoing sessions on the home buying process including the purchase and sale, the role of the lender, etc.  The sessions will feature guest speakers from lending institutions, attorneys, housing inspectors and appraisers, as well as FSS “graduates” who have purchased homes.
 
The FSS/ Homeownership Counseling will offer long-term assistance to families, enabling them to: 
 
·         Build a good job history
·         Minimize their debt
·         Preserve a good credit rating
·         Accumulate adequate savings
 
Homeownership may provide many individual opportunities for Participant families but it will require that a Family commit to building a strong financial foundation on which those opportunities are preserved for an extended period of time.  The Department of Housing and Urban Development (HUD) emphasizes the need for adequate counseling assistance under this program as the regulations only allow the Family to have one chance at receiving homeownership assistance. HUD regulations state that the Family is not eligible if any Family member has previously received homeownership assistance and defaulted on a mortgage.
 
Initial eligibility for the BHA Section 8 Voucher program has historically been based on the Family’s status both as “low income” and “homeless or imminently in danger of homelessness”.  Thus, families begin participation in the Section 8 program with incomes that are woefully inadequate in terms of qualifying for a mortgage.  Additionally, families who are new to the Section 8 program are initially striving to stabilize their families and recover from the housing-related emergency that qualified them for the program.  Hence, families are generally not prepared to provide potential lenders with a good work history, credit report and evidence of savings.  These things take time to build.
 
The FSS Program is a perfect fit with the Homeownership program as it combines the Family’s plan to achieve clearly articulated financial goals with the opportunity for homeownership.  The ultimate goal for most current FSS Program Participants already under a 5-year FSS Individual Training and Service Plan contract is homeownership.
 
Several FSS Participants have successfully purchased housing after successfully completing their FSS Contract.  All of these families left Section 8 assistance and became private homeowners.  Many of these successful homebuyers required more intensive assistance than the average homebuyer and have recommended that Section 8 families contemplating homeownership be offered a year or more of counseling.  The Neighborworks Network’s 2001 report “Using Section 8 Vouchers for Homeownership”, recorded the following comments regarding the FSS Program:
 
·         Counseling for Section 8 Homeownership can take up to three times longer than for a traditional first-time homebuyer.  The counseling needed is intense and usually takes the form of one-on-one assistance.
 
·         Involvement in the FSS Program is key to creating strong borrowers.
 
·         Due to FSS participation and an FSS escrow account a Family may have a substantial down payment.
 
Homeownership is a nearly universal goal for most Americans.  Unfortunately, many low income families who have been left out of the American economic mainstream may not realize the enormous responsibilities, expenses, and realities that homeownership involves, especially in a tight housing market.  FSS, with its emphasis on goals that move people into employment and help families improve their financial situations, is a natural link between Section 8 families and homeownership.

16.1.2  Keys to a Successful Section 8 Homeownership Program 

Education - The BHA program will work with families very early in the process to alert them to potential barriers to homeownership, and assist families to develop and execute a plan to address those barriers.
 
Partnerships - The BHA FSS/Homeownership counseling program will leverage local resources.  Partnerships between the public and private sectors will enable families to access funds for down payment and closing costs, attend consumer counseling courses to improve credit, and utilize career counseling services to improve income. 

16.2     Eligibility 

16.2.1  How to Qualify for Homeownership Assistance 

To qualify for assistance under the homeownership option, a Family must meet the general requirements for admission to the BHA's Section 8 tenant-based Voucher program and additional requirements for homeownership assistance (See 24 C.F.R. § 982.627). The BHA may not provide homeownership assistance for a Family unless the BHA determines that the Family satisfies all of the following initial requirements at commencement of homeownership assistance for the Family:
    
(a)        The Family satisfies the minimum income requirements described in 24 C.F.R. § 982.627(c);
 
(b)        The Family satisfies the additional income requirements set by the BHA to obtain a waiver from participation in the FSS Program.  The additional income requirements are as follows: 

(1)        Participant Family must be above 50% median income;
 
(2)        Must have at least two years of continuous employment
 
(3)        Must have a down payment (3% total and 1% must be from the Family’s own funds) 

(c)        The Family satisfies the employment requirements described in 24 C.F.R. § 982.627(d);
 
(d)        The Family has not defaulted on a mortgage securing debt to purchase a Home under the homeownership option (see 24 C.F.R. § 982.627(e);
 
(e)        No Family member has a Present Ownership Interest in a residence at the commencement of homeownership assistance for the purchase of any Home, except for Cooperative Members who have acquired Cooperative Membership Shares prior to the commencement of homeownership assistance;
 
(f)         The Family has entered into a contract of sale/purchase and sales agreement in accordance with 24 C.F.R. § 982.631(c), except for Cooperative Members who have acquired Cooperative Membership Shares prior to the commencement of homeownership assistance. 

16.2.2  Family be a First-Time Homeowner 

To qualify as a “First-Time Homeownerr,” no member of the assisted Family may own or have owned a Present Ownership Interest in a residence of any Family member during the three years preceding the commencement of homeownership assistance for the Family (regulatory definition at 24 C.F.R. § 982.4; statutory definition at 42 U.S.C 1437f(y)(7)(A)). Such interest includes ownership of title or of Cooperative Membership Shares.  However, an assisted Family that meets the regulatory definition of "Cooperative Member" found at 24 C.F.R. § 982.4, qualifies to participate in the Section 8 homeownership program under the regulation regarding First-Time Homeowner requirements found at 24 C.F.R. § 982.627. The right to purchase title under a Lease-purchase agreement does not constitute a prohibited Present Ownership Interest. The term First-Time Homeowner includes a single parent or displaced homemaker who, while married, owned a home with his or her spouse, or resided in a home owned by his or her spouse, and includes a Disabled Family, and participation in the Homeownership program is needed as a Reasonable Accommodation so that the program is readily accessible to, and usable by, a Disabled Person.
   
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 BHA may not commence homeownership assistance for a Family if any Family member has previously received assistance under the homeownership program and has defaulted on a mortgage securing debt incurred to purchase the Home. See 24 C.F.R. § 982.627(e).
 
The Section 8 Homeownership program authorizes homeownership assistance for a Family that “owns or is acquiring shares in a Cooperative.”  The program allows assistance for a Family that already owns Cooperative shares in the Unit in which the Section 8 Homeownership assistance will be utilized before commencement of Section 8 homeownership assistance, not just for a Family that acquires the Cooperative shares for the first time with the support of such assistance.
 
The Section 8 Homeownership Program also permits the use of Section 8 homeownership assistance by a Family that purchases a Home that the Family previously occupied under a “Lease-purchase agreement”--generally a Lease with option to purchase.  The Housing Assistance Payment for a Lease-purchase Unit may 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 BHA 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 down payment or reduce the purchase price. Families are permitted to pay an extra amount out-of-pocket to the Owner for purchase related expenses. 
 
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 BHA 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 BHA). 

16.2.3  Minimum Income Requirement 

To enter the HCVP, a Family must be income-eligible (i.e., below the maximum income cutoff). However, to qualify for the Homeownership option in the Voucher program, the Family must 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.
   
The Section 8 Homeownership program provides that a Family may not receive homeownership assistance unless the Family demonstrates that gross annual income of the adult Family members who will own the Home is not less the federal minimum multiplied by 2,000 hours. The adult Family members who will own the Home at the commencement of the homeownership assistance (not only the Head of Household and spouse) (excluding income from any person who is not an adult and Owner) must have annual income (gross income) that is not less than the minimum income requirement. 
 
In the case of a Disabled Family (but not an Elderly Family) the minimum annual income shall be 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 12.
 
Any minimum income requirement will only be applied to determine initial qualification to purchase a particular Home, not as a continuing requirement. The minimum income requirement will only apply again if the Family purchases a subsequent Home with Section 8 homeownership assistance.
 
The income counted in meeting any minimum income requirement under the homeownership program must come from sources other than Welfare Assistance. The BHA 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 Welfare Assistance in determining availability of Voucher homeownership assistance for an Elderly or disabled Family (in which the Head of Household or spouse is an Elderly or Disabled Person). The term “Welfare Assistance” is defined in HUD's regulations at 24 C.F.R. § 5.603 or any succeeding provision, and includes welfare or other payments to individuals or families, based on need, that are made under programs funded, separately or jointly, by Federal, State, or local governments, such as Temporary Aid to Needy Families (TANF), or Supplemental Security Income (SSI).
 
The requirement to disregard Welfare Assistance income only applies in determining whether a Family has the minimum income to qualify for homeownership assistance. However, Welfare Assistance income is counted for other program purposes: in determining income-eligibility for admission to the Voucher program; in calculating the amount of the Family's Total Tenant Payment (gross Family contribution); and in calculating the amount of the monthly homeownership assistance payment for a Family assisted under the homeownership program.
 
For an Elderly or Disabled Family, the BHA will count Welfare Assistance income of the adult Family members who will own the Home in determining whether a Family has the minimum income to qualify for homeownership assistance. This requirement to count Welfare Assistance in determining whether a Family has the minimum income to qualify for homeownership assistance only applies, however, to Families that satisfy the statutory definition of an Elderly or Disabled Family.  The requirement to count Welfare Assistance income does not apply in the case of a Family that includes a Disabled Person other than the Head of Household or spouse (and where the Head of Household or spouse is not Elderly or Disabled).
 
Notwithstanding the minimum income requirement as set by law, the decision as to whether or not a Family actually qualifies for and obtains financing based upon its income is left to the discretion of the lender.           

16.2.4  Family Employment 

Except as provided by HUD, at the time that the Family initially receives homeownership assistance, the Family must demonstrate that one or more adult members of the Family who will own the Home at commencement of homeownership assistance:
 
·         Is currently employed on a full-time basis (the term “full-time employment” is defined to mean not less than an average of 30 hours per week); and
 
·         Has been continuously so employed during the year before commencement of Homeownership assistance for the Family.
 
The BHA has the discretion to determine whether (and to what extent) an employment interruption is considered permissible in satisfying the employment requirement (e.g. maternity leave, or other leave authorized by federal and/or state law). The BHA may consider successive employment during the one-year period and self-employment in a business.
   
The employment requirement does not apply to an Elderly Family or a Disabled Family.  

16.2.5  Participation in the BHA’s Family Self-Sufficiency Program 

The BHA has chosen to require FSS Program participation as a prerequisite to participation in its Homeownership Program unless Participants receive a waiver to FSS participation. Requests for an exception to this policy will be evaluated on a case-by-case basis. Families requesting an exception must still meet all other eligibility criteria, including income and employment requirements. The requirement may also be waived if necessary as a Reasonable Accommodation for a Disabled Person. 
 
Participation in the Family Self-Sufficiency Program is voluntary for Section 8 Participants; current Participants in the Section 8 Voucher program are eligible. The Family Self-Sufficiency Program is designed to promote employment and increase savings among families receiving Section 8 assistance. The Center on Budget and Policy Priorities has referred to it as “HUD’s Best Kept Secret for Promoting Employment and Asset Growth”.
 
There are two main components to FSS: case management and an escrow savings account.
 
(a)        Case Management
 
Each FSS Family works with a case manager who develops an Individual Training and Service Plan and Contract that outlines how the Family will achieve and maintain economic self-sufficiency. Adult Family members who are parties to the FSS contract must obtain and maintain full-time (at least 30 hours per week) employment. No one in the Family may receive public assistance for at least the last year of the five-year contract.  The case manager can help the Family access supportive services to help them achieve success in their plan.  The services may include referrals for job training, education, healthcare, childcare and transportation assistance.  In addition, the FSS Program provides workshops and training sessions on various money management skills including credit education and budgeting.
 
(b)        Escrow Account
 
A Participant in the FSS Program, like most tenants in public or assisted housing, must pay a higher share of the rent when her/his income increases.  Unlike other tenants, the FSS Participant, depending on their income, will have most or all of the increased rental charges put into an escrow savings account.  The increased rental charges, plus interest, will be returned to the Participant upon successful completion of the program.
 
(c)        How the FSS Escrow is Calculated
 
If an FSS Participant receives $400 per month in TANF benefits when she enters the program, and after completing a training program gets a job that pays $1,000 per month (and causes her to lose her TANF benefits), 30% of the increased income (i.e., 30% of $600, which is $180) is deposited in the FSS escrow account each subsequent month.  If the Participant’s earnings increase again during the FSS contract, the escrow deposit will increase as well.  For example, if her earnings increase to $1,200 per month, the escrow deposit will increase to $240 per month (i.e., 30% of $800, the difference between her initial income and her total earnings).  If this Participant worked for 18 months at the initial salary and three years at the increased rate of pay before completing her FSS contract, she would accumulate a total of $11,880 in her escrow account (18 months at $180 per month and 36 months at $240 per month).  Barbara Sard “The Family Self Sufficiency Program,” Center on Budget and Policy Priorities. Page 4. 

16.2.6  Other Eligibility Criteria 

In addition to the above requirements, to qualify for the BHA’s Section 8 Homeownership Program, applicants must:
 
(a)        Be a Participant in good standing in the BHA’s Section 8 tenant-based assistance program. (See glossary for definition of a Participant in Good Standing.) The BHA will determine the BHA Homeownership Program eligibility of families with Homeownership Vouchers from other PHAs according to all of the BHA’s homeownership program policies, as long as the BHA is still accepting new families into its homeownership program.
 
(b)        Have a Section 8 Voucher issued from Boston Housing Authority.
 
(c)        Be a current Participant in, or have successfully completed, the Boston Housing Authority’s Section 8 FSS program. If the Family has completed the FSS Program, eligibility would depend on the Head of Household maintaining full-time employment (not required for Disabled Families), and no non-disabled member of the Family receiving public assistance other than Section 8.
 
(d)        Have successfully completed First-Time Homebuyer Education Classes provided by the City of Boston’s Department of Neighborhood Development or an equivalent program approved by the BHA.
 
(e)        Have successfully completed the FSS homeownership counseling courses.
 
(f)         Have at least one percent (1%) of the purchase price for a down payment, which must come from the Family’s own resources and may include funds from an FSS escrow account, plus a total of three percent (3%) of the purchase price for a down payment which may include grants from public or private agencies.
 
(g)        Have been receiving Section 8 tenant-based rental assistance through the BHA or another PHA for a minimum of one year.
 
(h)        Agree to use the Home purchased with homeownership program assistance as the only residence.
 
Eligibility will be determined through the application process. 

16.3     Application Process 

Final applications for the homeownership program will be given to interested and preliminarily qualified applicants upon request.  Completed final applications will be reviewed for eligibility status. If an applicant is deemed ineligible and is denied, the BHA will afford the Family the right to an informal review regarding such denial.
 
If deemed eligible, the Family will be invited to an informational meeting organized by the FSS Program Coordinator. At this informational meeting, the following timeline will be explained:
 
·         Step 1: Applicants are invited to an informational meeting and are advised of BHA approved first time homebuyer education classes available in the next eight (8) weeks.
 
·         Step 2:  The next step in the process will involve a six (6) to twelve (12) month FSS homeownership counseling course conducted by the BHA FSS Coordinator. At this step an FSS Individual Training and Service Plan and Contract is developed for each Family to address problems for the Family to correct such as poor credit history, low household income or other barriers to obtaining an adequate mortgage.  This step may occur simultaneously with the classes described in Step 1.
 
·         Step 3:   After successfully completing a qualified first-time homebuyer courses and additional FSS counseling courses, the applicant should pre-qualify for a mortgage.  After the applicant presents a certificate of completion of BHA-approved homebuyer classes to the FSS Coordinator the BHA will issue the applicant a homeownership “Voucher”.   Once an applicant is issued a homeownership “Voucher”, the applicant may start to look for a Home to purchase. 

16.4     Homeownership Counseling 

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.
 
Qualified applicants in this program must participate in and satisfactorily complete a qualified BHA approved first-time homebuyer classes before commencement of homeownership assistance. Suggested topics for the BHA-required pre-purchase counseling program include:
 
·         Home maintenance (including care of the grounds);
·         Budgeting and money management;
·         Credit counseling;
·         How to negotiate the purchase price of a Home;
·         How to obtain homeownership financing and loan pre-approvals, including a description of types of financing that may be available, and the pros and cons of different types of financing;
·         How to find a Home, including information about homeownership opportunities, schools, and transportation in the BHA’s Jurisdiction;
·         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; and
·         Information on fair housing, including fair housing lending and local fair housing enforcement agencies; and Information about the Real Estate Settlement Procedures Act (“RESPA”) (12 U.S.C. § 2601, et seq.), state and Federal truth-in-lending laws, and how to identify and avoid loans with oppressive terms and conditions.
 
The BHA may adapt subjects covered in pre-assistance and pre-purchase FSS counseling to local circumstances and the needs of individual families. The BHA will also require program Participants to attend ongoing post-purchase counseling after commencement of homeownership assistance.
 
The counseling will be provided by another entity such as a BHA- and HUD-approved housing counseling agency. HUD-approved housing counseling agencies provide free counseling. The HUD field office will provide the BHA with a list of the HUD-approved counseling agencies. If an applicant does not attend a HUD-approved housing counseling agency to provide the counseling for families participating in the homeownership program, the BHA will ensure that any BHA-approved counseling program is consistent with the homeownership counseling provided by the HUD-approved counseling agencies.
   
First-time homebuyer class time must exceed 10 hours.  Attending all classes, arriving on time, completing all assignments and fulfilling all requirements will lead to successful completion. For a Family with multiple adult members, all adults who will hold title to the property purchased through the program must attend all pre-purchase classes. The Family member(s) may attend separate sessions, and finish the program on different timetables, as their schedules permit.  The BHA does not provide childcare assistance.
 
A qualified class must have been completed in the six (6) months prior to the BHA’s issuance of the homeownership “Voucher”.  If an applicant has completed a qualified course more than six months prior to the issuance of the homeownership “Voucher”, the applicant must provide the BHA with proof that the applicant’s certificate of completion has not expired, or that the applicant has renewed such certificate by taking a BHA-approved “refresher” course. 

16.5     Briefing Session 

After the BHA has determined an applicant finally eligible to participate in the Homeownership program, the BHA will conduct a briefing session at which time it will issue applicants a homeownership “Voucher”.  This homeownership “Voucher” will be issued according to the BHA’s Family Unit Size Subsidy Standards which are applicable to the Housing Choice Voucher Program.  At this briefing session, the BHA must advise the Family of any deadlines on locating a Home, securing financing, and purchasing the Home. In establishing such time limits, the BHA should ensure that a Family who has executed a sales contract is provided reasonable time to close on the purchase of the Home.
 
The BHA briefing for both rental and homeownership families will explain:
 
·         Where the Family may Lease or purchase a unit;
 
·         How Portability works (if the Family qualifies to Lease or purchase a Unit outside the BHA Jurisdiction under Portability procedures); and
 
·         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 BHA).     
 
Further, if the Family includes any Disabled Person or a person with limited English ability, the BHA will take appropriate steps to ensure effective communication during the briefing in accordance with 24 C.F.R. § 8.6. 

16.6     Homeownership Voucher Term 

Upon issuance of Section 8 Homeownership  “Voucher”, the Family will have 180 days to enter into a Purchase and Sales Agreement.  In the event a Family cannot find a Home that meets their needs in the allotted 180 days, BHA will determine if an extension should be granted.  The extensions will be determined on a case-by-case basis. 

16.7     Requirement for an Attorney and Recommendation for a Buyer’s Agent 

The BHA requires that all homeownership program families contract with an attorney prior to the execution of a Purchase and Sales Agreement. The BHA also recommends that families contract with a buyer’s agent early in the process of searching for a Home.  The attorney and, if applicable, the buyer’s agent will ensure that the Family is protected in all aspects of house hunting and the transactions that follow. 

16.8     Eligible Homes

 The BHA will administer the Homeownership voucher for a Family that purchases a home within the area that the BHA administers.  The Home must be the Family’s only residence and be a single Family Home with only one Unit, Cooperative, or condominium.  The Family must be prepared to own and reside in the home for a minimum of one year.
 
The Family may look outside of the City of Boston.  Families may search for Homes in other communities in the area in which the public housing agencies (PHAs) offer the Section 8 Homeownership Program and are accepting new Families in to their program.  A list of cities and towns with homeownership programs will be provided to applicants when the homeownership “Voucher” is issued.
 
In general, the Portability procedures for the Housing Choice Voucher Program apply to the homeownership program. When a Family that has a homeownership Voucher from another public housing authority chooses to purchase a Home in Boston, the BHA will evaluate that Family according to all of the BHA’s homeownership program policies, as long as the BHA is still accepting new families into its homeownership program. The BHA will evaluate whether the Family will be required to attend the briefing and counseling sessions required by the BHA. The BHA will determine whether the financing for and the physical condition of the Unit are acceptable. 

16.9     Down Payments 

The BHA requires a minimum down payment of three percent (3%). One percent (1%) of the down payment must come from the Family’s own resources. A Participant in the FSS Program may use escrow funds toward any part of the down payment, including the one percent (1%) contribution from the Family’s own resources, providing that the Family fulfills the other goals of the FSS Program as stated in the Family’s Individual Training and Service Plan.  There is no prohibition against utilizing several different resources for down payment assistance including grants from public or private agencies. 

16.10   Inspections 

The home chosen by the Family must pass an initial BHA Housing Quality Standards (HQS) inspection. (The HQS used for the Section 8 rental program is applicable to the homeownership program.)  The BHA inspection is the same as the initial HQS inspection conducted by the BHA 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 under HQS standards. The BHA 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 BHA is not required by the regulation to conduct annual inspections.  The initial (prior to the commencement of housing assistance) HQS inspection is the only BHA inspection required for homeownership units during the entire time the Family is receiving Section 8 homeownership assistance.  The BHA reserves the right to conduct additional HQS inspection(s) of a homeownership program Participant’s Unit during the term of homeownership assistance for good cause.
   
In addition, prior to purchase the Family must select and pay for an independent, professional home inspector to conduct a home inspection.  The independent professional home inspection is conducted by a private market home inspector (not BHA staff) that is experienced and qualified to conduct pre-purchase 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, radon and insect infestation.  The BHA, the buyer’s agent and Family will meet and discuss the inspection and corrections that need to be made.
 
The requirement for an inspection arranged by the buyer and satisfactory to the buyer is a required contingency clause in all purchase and sale contracts according to HUD regulations. 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 own resources.) A copy of the inspection report must be provided to the Family and the BHA.
 
The BHA requires that the home inspector is certified by the American Society of Home Inspectors, has a Certified Massachusetts State Home Inspector License, and must carry Errors and Omission Insurance.
 
The BHA will 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 BHA would discuss the inspection results with the Family and decide whether to disapprove the Unit for assistance under the homeownership program because of the major physical problems and substantial correction costs, or whether it is feasible to have the seller make the necessary repairs prior to purchase. 

16.11   Financing and Purchasing Requirements 

A Family selected to participate in the Section 8 Homeownership program must secure their own financing. There are no Section 8 funds available for Home purchase financing. The Section 8 housing assistance will be provided monthly to a lender to help the Family meet Homeownership expenses.
 
The Family enters into a Purchase and Sale contract with the seller and is the party obligated by such contract. A copy of the Purchase and Sale contract must be provided to the BHA. Under federal law the contract must specify: the price and other terms of sale by the seller to the purchaser; provide that the purchaser will arrange for a pre-purchase inspection of the dwelling Unit by an independent inspector selected by the purchaser, provided that the purchaser is not obligated to purchase the Unit unless the inspection is satisfactory to the purchaser; provide that the purchaser is not obligated to pay for any necessary repairs; and contain a certification from the seller that the seller has not been debarred, suspended, or subject to a limited denial of participation under HUD regulations.
 
Under the homeownership program, a borrower may use Section 8 rental assistance to help the borrower quality for a mortgage. It is anticipated that mortgage lenders will consider the Section 8 assistance when underwriting the loan.  If purchase of the Home is financed with FHA-insured mortgage financing, such financing is subject to FHA mortgage insurance credit underwriting requirements.  Otherwise, all traditional underwriting standards apply. The manner in which an individual lender may structure a particular loan product can vary. 
 
The Family has the discretion to choose which lender they use but the BHA must approve the financing before it is finalized.  The BHA may disapprove proposed financing, refinancing, or other debt if the BHA determines that the debt is unaffordable, or if the BHA determines that the lender or loan terms do not meet the BHA’s qualifications. In making this determination, the BHA may take into account other Family expenses, such as childcare, unreimbursed medical expenses, homeownership expenses, and other Family expenses as determined by the BHA. The BHA will not unreasonably withhold approval of financing. Generally, the BHA will withhold approval of financing to prevent the Family from falling victim to predatory lending practices. 
 
It is the responsibility of the Family to secure its own financing for the purchase of the Home.  The BHA will provide supportive services but only related to a Family’s credit score, income and overall viability to obtain mortgage approval.
 
The BHA will conduct a financing review to determine whether the monthly mortgage or loan payment is affordable after considering other Family expenses. The BHA may disapprove proposed financing, refinancing or other debt if the BHA determines that the debt is unaffordable.
 
The BHA will review seller-financing and variable rate financing on a case-by-case basis. The BHA may 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.
 
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 BHA requires a maximum loan to value ratio consistent with standard secondary market guidelines and prohibits balloon payments.  The Family may not refinance, apply for an equity loan, or undertake any other loans using the Home as security without BHA approval. 

16.12   Homeownership Housing Assistance Payment (HAP) 

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, or 30 percent of monthly-adjusted income.) The BHA must use the Utility Allowance schedule and Payment Standard schedules applicable to the Housing Choice Voucher rental program. 
 
BHA homeownership program Housing Assistance Payments will be made directly to the lender on behalf of the Family.  The BHA will pay the excess amount, if any, directly to the Family.
 
Before the Housing Assistance Payments begins, the Family and the BHA must execute a “Statement of Homeowner Obligations.” The Section 8 tenant-based HAP Contract, RTA and Lease addendum are not applicable to the Section 8 Homeownership program.
   
After the homeownership Housing Assistance Payments begin, the BHA
will annually reexamine Family income and composition at a Recertification appointment and make appropriate adjustments to the amount of the monthly homeownership assistance payment.  
 
In calculating the homeownership assistance payments, the BHA will also include an allowance for “Homeownership Expenses”, which may include:
 
·         Principal & Interest on the mortgage debt;
·         Principal & Interest on debt for improvements, if any;
·         Taxes and Insurance;
·         Mortgage Insurance Premium;
·         Condo or Cooperative Fees;
·         Utility Allowance; and
·         Homeownership Allowances.
 
The Homeownership allowances are broken down into two categories, one for routine maintenance and one for major repairs.  The BHA will allot one percent (1%) of the purchase price per year each for major repairs and one-half percent (.5%) for routine maintenance for a total allowance of one and one-half percent (1.5%). 24 C.F.R. § 982.635(c) or any successor provision details the expenses that the BHA will include when determining the Family's homeownership expenses. If the Home is a Cooperative or condominium Unit, homeownership expenses may include Cooperative or condominium operating charges or maintenance fees assessed by the condominium or Cooperative homeowner association.  The principal and interest amount is the debt service amount for the initial (original) mortgage debt, any refinancing of such debt, and any mortgage insurance premium.
 
The Utility Allowance is the same Utility Allowance schedule as used in the Housing Choice Voucher Program. The BHA allowance for maintenance expenses is the amount the BHA determines is appropriate for routine maintenance for a Home.  The BHA allowance for major repairs and replacements is the amount the BHA determines is appropriate for a replacement “reserve” for a Home.  If a member of the Family is a Disabled Person, such debt may include debt incurred by the Family to finance costs needed to make the Home accessible for such person, if the BHA determines that allowance of such costs as homeownership expenses qualifies as a Reasonable Accommodation so that the homeownership program is readily accessible to, and usable by such person, in accordance with 24 C.F.R. Part 8.
 
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.
 
An Example:
 
Major repairs allowance is calculated as follows:
 
Purchase Price              $80,000
                                          x       1%
                                                $800
Divided by 12 months =  $66 per month
 
Routine maintenance uses the same calculation:
 
Purchase Price              $80,000
                                          x      .5%
                                                $400
Divided by 12 months = $33 per month
 
Therefore, the total homeownership allowance per month is $ 99.00.  This would be added to the other expenses to determine total monthly “Homeownership Expenses.” 

16.13   Continued Participation 

Families participating in the Section 8 Homeownership Program must abide by the Rules and Regulations of the Section 8 Program.  The Family is STILL a Section 8 Participant, the only difference is the Family owns the property instead of renting the property.  If a Family violates any of the rules and regulations of the Section 8 Program, they may be terminated from the homeownership program.
 
Annual Recertifications of Household income and Family Composition will be conducted to ensure that the Family is still eligible for assistance.  If the Family is determined ineligible for Section 8 Assistance, their homeownership assistance will be terminated and the Family will be responsible for the entire mortgage. A Family must comply with the Statement of Homeownership Obligations and sign it annually at the Recertification appointment.
 
In the event that the BHA proposes to terminate homeownership program assistance, the BHA will inform the Family that it has a right to an informal hearing pursuant to the hearing procedures applicable to the Housing Choice Voucher Program. In the event the BHA terminates a Family’s participation in the homeownership program, the Family is responsible for the entire mortgage payment and other homeownership expenses. 

16.14   Statement of Homeowner Obligations 

To be eligible to participate in the BHA’s Homeownership Program the Family must agree to adhere to the following program Participant’s Statement of Homeowner Obligations:
 
·         Be a Section 8 Participant in good standing in the BHA’s Section 8 program (see glossary for definition of a Participant in good standing);
 
·         Have been a Family Self Sufficiency program Participant and have remained a Participant in good standing with respect to the contractual goals and requirements of the Family’s FSS Individual Training and Service Plan;
 
·         Have no ownership interest in other property.
 
·         Meet all eligibility criteria as described in the Section 8 Homeownership Program Administrative Plan Amendment.
 
·         Attend homeownership counseling prior to purchase and post-purchase as offered by BHA-approved counseling agencies;
 
·         Secure financing through a lender acceptable to the BHA;
 
·         Provide a down payment of at least three percent (3%) of the purchase price, with one percent (1%) of the down payment supplied from the Family’s own resources;
 
·         Be able to make the monthly payment of the Family’s portion of the mortgage payment;
 
·         Enter into a “Purchase and Sale Agreement” for a Home within 180 days of receiving a homeownership Voucher, provided the financing commitment has not expired prior to that date;
 
·         Enter into this Statement of Homeowner Obligations Agreement and comply with its provisions;
 
·         Sign a certification form stating that they will comply with this “Statement of Homeowner Obligations” annually at the Family’s Recertification appointment;
 
·         Sign a release allowing the BHA to exchange information with the lender and the lender with the BHA;
 
·         Sign an acknowledgment form that the Family becomes obligated for the whole mortgage payment in the event of termination of assistance;
 
·         Sign an acknowledgment form that the Family will continue to comply with the appropriate provisions of the HUD Section 8 Rental Assistance regulations, Family obligations and the BHA’s Section 8 rental assistance and homeownership administrative plans;
 
·         Agree that the Family may not enter into an agreement to sell or refinance the Home unless the BHA has first approved the sale or the refinance;
 
·         Agree to use the Home as the Family’s only residence;
 
·         Agree to supply any information to the BHA regarding any mortgage or other debt incurred to purchase the Home, any refinancing of such debt, any satisfaction or payment of the mortgage debt, and any sale or other transfer of any Interest in the Home;
 
·         Agree to notify the BHA before the Family moves out of the Home;
 
·         Agree that during the period the Family receives homeownership assistance, no Family member may have any ownership interest in any other property receiving a subsidized rental payment; and
 
·         Comply with applicable rules of the Housing Choice Voucher Program such as the requirements contained in the “Family Obligations”, including the rule to fully report household income and Family Composition annually at the Recertification appointment. 

16.15   Maximum Term of Assistance

Except for Elderly and Disabled Families, Section 8 homeownership assistance may only be paid for a maximum period of 15 years if the initial mortgage incurred to finance purchase of the Home has a term that is for 20 years or longer. In all other cases, the maximum term of homeownership assistance is10 years. The BHA has the discretion to grant relief from this requirement in those cases where automatic termination would result in extreme hardship for the Family. The maximum term of homeownership assistance is not capped for Elderly and Disabled families. The maximum term for homeownership assistance applies to any member of the Family who has an ownership interest in the Unit during any time that homeownership payments are made, or is the spouse of any member of the Family who has an ownership interest in the Unit at the time homeownership payments are made.
    
The maximum term for homeownership assistance does not apply to an Elderly or Disabled Family. In the case of an Elderly Family, this exception only applies if the Family qualifies as an Elderly Family at the commencement of homeownership assistance. In the case of a Disabled Family, this exception applies if at any time during receipt of Homeownership assistance the Family qualifies as a Disabled Family.  If, during the course of homeownership assistance, the Family ceases to qualify as a Disabled or Elderly Family, the maximum term becomes applicable from the date homeownership assistance commenced. However, such a Family must be provided at least 6 months of homeownership assistance after the maximum term becomes applicable (provided the Family is otherwise eligible to receive Section 8 homeownership assistance). 

16.16   Relocation with Homeownership Assistance 

The Family may purchase one Home in a one-year period. If the Family moves, the BHA may not begin continued homeownership assistance for occupancy of the new Unit so long as any Family member owns any title or other interest in the prior Home.
 
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 BHA. An independent Home inspection will be conducted and the BHA will determine the acceptability of the financing. The maximum term of homeownership assistance 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 24 C.F.R. § 982.637(b).
 
If the Family decides to sell the property, the BHA must be consulted before the Home is placed on the market and the BHA must approve any sale of the property.
 
The maximum term of assistance described in Section XV above applies cumulatively.  Thus if a Family is eligible for a maximum term of assistance of 15 years and receives benefits for 10 years in one Home, then the Family is eligible for a maximum of 5 years of assistance in a second Home. 

16.17   Defaults 

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.
 
If the Family defaults on a mortgage securing any debt incurred to purchase the Home, the Family must notify the BHA within five days of receipt of a default letter.  The BHA will not allow the Family to continue in or participate in the future in the BHA’s Homeownership Program after a default on the mortgage by any member of the Family. The BHA must terminate Voucher homeownership assistance for any member of a Family that is dispossessed from the Home pursuant to a judgment or order of foreclosure on any mortgage (whether FHA-insured or non-FHA) securing debt incurred to purchase the Home, or any refinancing of such debt. However, the Family may be eligible to receive continued Voucher rental assistance. The BHA may consider mitigating circumstances in determining whether to provide a Family with rental assistance after a mortgage default.
 
The BHA has the discretion to allow a Family to revert to Section 8 Housing Choice Voucher Program rental assistance after a mortgage default through the BHA’s Homeownership Program.  If the BHA denies rental assistance to a Family who defaults on a mortgage through the Section 8 to Homeownership program, the BHA will afford the Family the right to an informal hearing regarding such denial.    

16.18   Prohibition of Ownership in a Second Residence

 No Family member of a Family assisted by Section 8 program Home-ownership assistance may have a Present Ownership Interest in a second residence while receiving homeownership assistance. 

16.19   Automatic Termination of Homeownership Assistance 

Homeownership assistance for a Family terminates automatically 180 calendar days after the last Housing Assistance Payment on behalf of the Family.  However, the BHA has the discretion to grant relief from this requirement in those cases where automatic termination would result in extreme hardship for the Family. 

16.20   Single Downpayment Assistance Program 

The Boston Housing Authority does not offer a single downpayment assistance program as provided for in 24 C.F.R. § 982.625(ii).