[Federal Register Volume 59, Number 217 (Thursday, November 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-27897]
[[Page Unknown]]
[Federal Register: November 10, 1994]
BILLING CODE 4310-55-P
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Part VIII
Department of Housing and Urban Development
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Office of the Assistant Secretary for Public and Indian Housing
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24 CFR Parts 905 and 906
Section 5(h) Homeownership Program for Public and Indian Housing; Final
Rule
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Public and Indian Housing
24 CFR Parts 905 and 906
[Docket No. R-94-1529; FR-2810-F-03]
RIN 2577-AA90
Section 5(h) Homeownership Program for Public and Indian Housing
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Final rule.
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SUMMARY: This final rule makes several changes in the interim rule for
the Section 5(h) Homeownership Program for Public and Indian Housing.
It responds to the public comments received on the interim rule that
was published September 20, 1991, incorporating a few substantive
modifications, as well as some clarifications and editorial revisions.
This rule provides separate regulatory codifications of the Section
5(h) Homeownership Program for public housing and for Indian housing,
as appropriate for each. For Indian Housing Authorities (IHAs), the
rule consists of subpart P of the Consolidated Program Regulations for
Indian Housing (24 CFR Part 905); for Public Housing Agencies (PHAs),
24 CFR Part 906. The language of these two versions is identical,
excepting only appropriate distinctions in terminology and phrasing,
and in references to applicable Federal statutes and regulations on
nondiscrimination and civil rights. In general, the Section 5(h)
Homeownership Program works the same way for both PHAs and IHAs.
EFFECTIVE DATE: December 12, 1994.
FOR FURTHER INFORMATION CONTACT:
With regard to the PHA version of the rule: C. Wayne Hunter, Senior
Homeownership Programs Advisor, Office of Resident Initiatives, Public
and Indian Housing, Department of Housing and Urban Development, 451
Seventh Street, S.W., Room 4112, Washington, DC 20410. Telephone
number, voice (202) 708-4233, TDD (202) 708-0850. (These are not toll-
free numbers.)
With regard to the IHA version of the rule: Dominic Nessi,
Director, Office of Native American Programs, Public and Indian
Housing, Department of Housing and Urban Development, 451 Seventh
Street, S.W., Room B-133, Washington, D.C. 20410. Telephone number,
voice, (202) 755-0032, TDD (202) 708-0850. (These are not toll-free
numbers.)
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act Statement
The information collection requirements contained in this rule were
submitted to the Office of Management and Budget (OMB) for review under
the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520) and have been
approved under control number 2577-0201.
Public Comments
The interim rule for the Section 5(h) Homeownership Program for
Public and Indian Housing was published September 20, 1991 (56 FR
47852), with an effective date of October 21, 1991.
Comments were received from 10 commenters, including six Public
Housing Agencies (PHAs), one national association of PHAs, two legal
services organizations, and one private consultant. All comments have
been considered, as indicated by the discussion below.
Because the texts of the IHA rule (Part 905, subpart P) and the PHA
rule (Part 906) follow a parallel format, with provisions that are
substantially the same, the following discussion applies to both,
except where noted. In most instances, dual section references are
cited, with the section of the IHA regulation followed by the
corresponding section of the PHA regulation, e.g., Secs. 905.1001/906.1
through 905.1021/906.21. Except where differences in the IHA and PHA
versions are indicated, the term ``Housing Authority (HA)'' is used in
the following discussion as a common term of reference to both PHAs and
IHAs.
In General: The Flexibility Issue
The extent to which the regulation should allow flexibility for
Housing Authorities (HAs) and residents in the design of their local
homeownership plans was the subject of greatest concern to the
commenters. While a number of comments addressed this issue in the
context of specific provisions of the regulation, as discussed below,
some urged that the regulation as a whole afford the maximum
flexibility permitted by the statute, pointing out that the statutory
authorities for this program--Sections 5(h) and 6(c)(4)(D) of the
United States Housing Act of 1937 (Act)--are clearly intended to
authorize a high degree of local discretion. Some other commenters,
however, argued for a more restrictive approach, suggesting that local
discretion be curtailed and regulatory requirements be more rigidly
detailed.
The changes that are incorporated in the final rule move in the
direction of more local flexibility, as explained in the section-by-
section analysis below. The overall approach is deliberately brief and
simple, limited to a basic regulatory framework of essential standards
and procedures. No attempt is made to specify the details of everything
that might possibly be required or permitted in all the variety of
local situations. Anything not specifically prohibited is permissible,
if consistent with the three fundamental criteria stated in
Secs. 905.1004/906.4.
The Department intends to develop additional handbook materials to
provide appropriate guidance and administrative instructions for HAs,
residents, and HUD Field Offices concerning the development, processing
and implementation of Section 5(h) homeownership plans.
Comments on Specific Sections
Sections 905.1002/906.2 (Applicability)
In paragraph (a) of Secs. 905.1002/906.2 (Applicability), the final
rule adds clarifying language to explain that, except where otherwise
indicated by the context, the term ``resident'' includes Turnkey III
homebuyers (and, in the IHA version, Mutual Help homebuyers as well),
along with rental tenants of public or Indian housing and Section 8
residents. As suggested by one commenter, language has been added to
make it clear that, unless otherwise indicated, references to sale,
purchase, conveyance and ownership include the types of transactions
and interests that are incident to cooperative ownership, such as
cooperative shares, membership, and occupancy agreements.
As another point of clarification, paragraph (b) of this section
adds an express declaration of nonretroactivity. This responds to one
commenter's question about whether a Section 5(h) homeownership plan
approved under the statutory authority, prior to publication of the
interim rule, would have to be modified to conform to the requirements
of the interim rule. Neither the interim nor final rule imposes any
additional requirements for homeownership plans approved before the
respective effective dates of each rule.
Sections 905.1003/906.3 (General Authority for Sale)
With regard to Secs. 905.1003/906.3 (General authority for sale),
one commenter observed that HUD Field Offices need instructions on how
to release the declaration of trust upon sale of housing units under a
HUD-approved Section 5(h) homeownership plan. The Department agrees
that such instructions are needed, and intends to provide them in the
forthcoming processing handbook. In the IHA version of this section,
the language of the interim rule concerning housing developments that
are subject to project debt under the ACC has been deleted, because, as
a result of loan forgiveness legislation, there are now no Indian
housing developments which are subject to such indebtedness.
Sections 905.1004/906.4 (Fundamental Criteria for HUD Approval)
One commenter urged that resident consultation be added to
Secs. 905.1004/906.4 (Fundamental criteria for HUD approval) as a
fourth criterion. The final rule does not adopt this recommendation.
The three fundamental criteria that are established by this section
merit special emphasis at the outset, because they go to the plan as a
whole, serving as touchstones for weighing and linking the discrete
requirements of all subsequent sections, including the specific
requirements for resident consultation under Secs. 905.1005/906.5.
Sections 905.1005/906.5 (Resident Consultation and Involvement)
Sections 905.1005/906.5 (Resident consultation and involvement)
have been revised to clarify the requirements for resident input at the
initial planning stage, in connection with the HA's development of its
proposed homeownership plan for submission to HUD. This language
responds to the observations of several commenters who aptly pointed
out that the interim rule failed to indicate who must be consulted when
the development is vacant. The final rule addresses this question by
specifying that, where the plan involves an entirely vacant
development, the HA must consult with the HA-wide resident
organization, if any.
One commenter argued that no resident consultation at all should be
required for newly-developed vacant units, but the Department sees no
justification for exempting such units from the requirement that
pertains to vacant units in general.
As a further provision in the direction of more local flexibility,
the final rule deletes the interim rule's requirement for a public
hearing, leaving it to the HA and the residents to work out methods of
consultation that they find most appropriate and productive. While a
public hearing may be advisable for larger undertakings, relatively
informal consultation may be more appropriate in other situations.
One commenter mistakenly asserted that ``there is no mention of
resident involvement prior to implementation''. On the contrary, the
interim rule strongly emphasized the requirement for resident input
during the planning stage, and that requirement remains unchanged in
the final rule.
Sections 905.1006/906.6 (Property That May Be Sold)
In paragraph (a) of Secs. 905.1006/906.6 (Property that may be
sold), the final rule corrects the interim rule's unintended indication
that only conventional rental units would be eligible for sale under
the Section 5(h) Program. The final rule notes that a homeownership
plan may provide for converting Turnkey III homes (and, in the case of
an IHA, Mutual Help homes as well) to Section 5(h) homeownership,
subject to the contractual rights of existing Turnkey III or Mutual
Help homebuyers, and an appropriate ACC amendment. An HA might thus
afford existing Turnkey III or Mutual Help homebuyers the option to
terminate their Turnkey III or Mutual Help homebuyer agreements in
favor of Section 5(h) purchase of their present homes, or might make
vacant Turnkey III or Mutual Help units available for purchase under
the terms of a Section 5(h) plan.
One of the public comments asked whether the regulation applies to
newly-constructed housing. The answer is yes, as expressly stated in
the interim rule and restated in the final rule at paragraph (a) of
Secs. 905.1006/906.6. As a clarification, however, the final rule adds
a cautionary note regarding a question that may arise in rare
situations where the HA wants to consider Section 5(h) sale of units
developed as replacement housing for public or Indian housing
demolished or disposed of under the regulations implementing section 18
of the Act (for IHAs, subpart M of 24 CFR part 905; for PHAs, 24 CFR
part 970). This calls attention to the fact that the demolition-
disposition regulations require selection of the initial occupants of
such replacement units solely on the basis of the requirements
governing rental occupancy (or, in the case of replacement of Indian
housing with new Mutual Help units, the homebuyer occupancy
requirements of the Mutual Help Program).
Paragraph (b) of these sections amplifies the provisions concerning
the physical condition of the property, adding the Section 8 housing
quality standards as an alternative measure for cases where no local
code exists, along with a cross-reference to the regulatory
requirements for accessibility by purchasers with disabilities. One
commenter objected to the option for post-conveyance repair. The
Department believes that this option should be retained, subject to the
kind of protections for the homebuyer that are stipulated, including
the final rule's addition of a maximum period of two years for
completion of the work needed to satisfy the regulatory standard. As a
further clarification, the option for a sound sweat equity arrangement
has been added as another example of permissible means for making post-
sale improvements.
Sections 905.1007/906.7 (Methods of Sale and Ownership)
In Secs. 905.1007/906.7 (Methods of sale and ownership), language
has been inserted in subparagraph (b)(2)(ii) to make it clear that, in
the context of sale of a multifamily building or a group of single-
family dwellings via a resident-controlled entity, the prohibition
against encumbrances applies only to encumbrances by the resident
entity, prior to conveyance of individual units to residents. Thus, it
would not be necessary to obtain additional HA consent for mortgages or
other encumbrances that are incident to the purchase and financing of
individual units, pursuant to the provisions of the homeownership plan
and the agreement between the HA and the resident-controlled entity.
Sections 905.1008/906.8 (Purchaser Eligibility and Selection)
Several changes have been made in Secs. 905.1008/906.8 (Purchaser
eligibility and selection). In response to comments, the final rule
allows HAs more flexibility concerning how they may wish to formulate
the particulars of the eligibility and preference provisions of their
homeownership plans. It also incorporates a number of clarifications
and editorial revisions, including reordering the paragraphs in a more
logical sequence.
In paragraph (b) of these sections, language has been inserted to
make it clear that Turnkey III homebuyers (and, in the case of IHAs,
Mutual Help homebuyers as well) are within the overall class of public
or Indian housing residents who are eligible to purchase under the
Section 5(h) Homeownership Program, should they elect to terminate
their existing homebuyer agreements in favor of purchase under a
Section 5(h) plan. A homeownership plan might thus allow Turnkey III or
Mutual Help homebuyers the individual option to switch over to Section
5(h) purchase of their present homes. As another possibility, a plan
might allow such a homebuyer to vacate the present Turnkey III or
Mutual Help unit and purchase a vacant unit that is offered for sale
under the Section 5(h) plan.
One comment objected to the option to include Section 8 residents.
The Department believes that the statute was intended to allow that
option, at HA discretion, subject to the minimum residency requirement
and the requirements for admission to public or Indian housing.
One commenter objected to the 30-day minimum residency requirement,
while another suggested that a minimum one-year period be prescribed.
Because Section 5(h) of the Act authorizes an HA to sell to ``its
tenants'', some initial period of public or Indian housing or Section 8
residency is a statutory precondition for purchaser eligibility, and
the Department believes that 30 days is the shortest period that
satisfies the statute. Each HA is, however, free to include in its
homeownership plan a longer minimum period for such tenure.
One objection was expressed about the further option (as now
reflected in paragraph (c) of these sections) for the HA to extend
eligibility to applicants who are not public or Indian housing or
Section 8 residents at the time of application, subject to the
preference for existing public and Indian housing residents and the
requirement for a minimum period of public or Indian housing residency
prior to conveyance. The Department believes that the HA should have
this option to extend eligibility to families on its waiting lists, or
to other low-income families who may wish to apply, or to both of those
categories, if the HA considers that they are needed to make up a
sufficient pool of eligible applicants for purchase of the vacant units
that will be offered for sale. Such nonresident applicants would also
be subject to the requirements for admission to public or Indian
housing, including the income limits and Federal preferences for
admission, as prescribed by applicable regulations. (Those admission
requirements do not, however, apply to applicants who are already
residents of public or Indian housing.)
The first sentence of Secs. 905.1008(d)/906.8(d) modifies the
interim rule's provision restricting eligibility to applicants who have
been current in their lease obligations for a period of at least six
months. If a family has been in residence for less than six months, the
homeownership plan may now allow eligibility on the basis of lease
compliance for that lesser period. The final rule also adds language
that is appropriate in this context to existing Turnkey III or Mutual
Help homebuyers who may elect to terminate their present Turnkey III or
Mutual Help homebuyer agreements in favor of purchase under a Section
5(h) homeownership plan.
In response to several comments, the affordability standard of
Secs. 905.1008(e)/906.8(e) has been modified. In the interim rule, the
cost-to-income ratio--based on mortgage principal and interest, plus
insurance and real estate taxes (PITI)--was 30 percent, but a
percentage figure of 35 percent was allowed with special justification.
As aptly pointed out by some commenters, the interim rule did not say
what was required to justify the 35 percent exception ratio or how
maintenance, utilities and (if applicable) common ownership fees were
to be taken into account. The final rule's revised formula now states
that the average monthly estimate for the total amount of all of the
stated types of homeownership costs--including maintenance and
utilities and (if applicable) cooperative, condominium or homeownership
association fees, as well as PITI--may not exceed 35 percent of the
applicant's adjusted income.
One commenter urged that separate affordability standards be
adopted for single-family and multifamily properties, with the latter
to take into account cooperative or condominium carrying charges, as
well as debt service payments on individual mortgages or share loans.
For single-family houses, this commenter recommended that a PITI cost-
to-income ratio of more than 35 percent be authorized, citing the fact
that, in the general housing market, the current ratio among first-time
homebuyers tends to be higher. For multifamily properties, a two-part
affordability standard was recommended: (1) the ability of homebuyers
to meet their financial obligations on an individual family basis; and
(2) the ability of the homebuyers involved to meet their financial
obligations on an aggregated basis.
Because the prospective purchasers under the Section 5(h) Program
are low-income families, the Department believes that it would be
imprudent to allow a cost-income ratio of more than 35 percent for
either single-family or multifamily housing. The final rule requires
that, if applicable, cooperative, condominium or other homeownership
association fees must be taken into account. This is sufficient to
address the financial viability of multifamily properties on both an
individual and aggregated basis.
Paragraph (g) of these sections simplifies the requirements
concerning preference among the various residency-based categories of
potentially eligible applicants. This affords each HA broad discretion
in defining, on the basis of present residency status, which categories
of residents are eligible to apply under the particular homeownership
plan, and in establishing preferences among those categories.
For occupied units, the rule continues to require a preference for
the existing occupants. If such occupants cannot meet the other
eligibility requirements, or do not desire to purchase their units, a
further provision of the rule (Secs. 905.1010/906.10) prohibits their
involuntary displacement to make the units available for sale to other
families. Consequently, the question of other residency-based
eligibility and preference categories is pertinent only if the
homeownership plan contemplates sale of vacant units, or if an existing
occupant voluntarily agrees to vacate and relocate, pursuant to
Secs. 905.1010/906.10.
For vacant units, the only residency-based preference category that
is mandated by the final rule consists of residents of the HA's other
public or Indian housing units. The HA may limit eligibility to
applicants in that category only, in which case the question of further
residency-based eligibility or preference categories will not arise.
Alternatively, subject to the preference for families who are
already residents of public or Indian housing, the homeownership plan
may, at the option of an HA, also allow application for purchase of
vacant units by families in either or both of the other residency-based
categories permitted under paragraphs (b) and (c) of this section: (1)
Section 8 residents, and (2) other low-income families who are neither
public or Indian housing nor Section 8 residents at time of application
or selection, subject to their completion of the prescribed minimum
period of public or Indian housing or Section 8 residence prior to
conveyance. For example, families in the second category--families who
are not presently public or Indian housing or Section 8 residents--
would have to take occupancy of the Section 5(h) unit under a lease-
purchase agreement, providing for completion of an initial period of
public or Indian housing tenancy (30 days or more, as prescribed by the
homeownership plan) prior to conveyance.
As noted in Secs. 905.1008(h)/906.8(i), the rule does not preclude
any other types of eligibility and preference factors that the HA may
wish to establish in its homeownership plan, if consistent with
statutory and regulatory requirements. For example, in a situation
where vacant units comprising only a portion of an otherwise occupied
development are to be offered for sale, the homeownership plan could
limit eligibility to the other residents of the same development, or
give them preference over the residents of other HA developments. As
another example, with reference to families that are not already public
or Indian housing or Section 8 residents, the HA would have the option
to restrict eligibility to families who are already on the HA's waiting
lists for other programs, or to give such waiting list families a
preference over other nonresident applicants.
One question was raised about Sec. 906.8(h) of the PHA rule, which
mandates a preference for residents who have completed self-sufficiency
and job training programs. (There is no parallel provision in the IHA
rule). The commenter asked whether a resident who completes such a
program in one PHA may qualify for the preference under another PHA's
Section 5(h) homeownership plan. That is a matter for local
determination. In general, a plan should allow for recognition of sound
self-sufficiency and job training programs, regardless of where
completed, but the regulation leaves each HA discretion to define the
standards for acceptability.
Sections 905.1009/906.9 (Counseling, Training, and Technical
Assistance)
One commenter recommended that HUD set minimum standards for
counseling, in connection with the requirements of Secs. 905.1009/906.9
(Counseling, training, and technical assistance).
Detailed regulatory requirements on this subject would be
inappropriate for the wide variety of local situations that may be
presented by particular Section 5(h) homeownership plans. While the
rule establishes basic standards, it is intended to allow due
flexibility for HAs to design the kinds of counseling, training and
technical assistance activities that are necessary and appropriate for
each local situation.
Sections 905.1010/906.10 (Nonpurchasing Residents)
Two commenters recommended that Secs. 905.1010/906.10
(Nonpurchasing residents) be changed to delete the prohibition against
involuntary displacement of nonpurchasing residents. The final rule
retains that prohibition. Another commenter urged that assistance under
the Uniform Relocation Assistance and Real Property Acquisition Act of
1970 (URA) be extended to residents who relocate voluntarily. The final
rule does not adopt that recommendation. The rule mandates that
nonpurchasing residents be provided the opportunity to relocate to
another suitable and affordable unit, with counseling and advisory
services, along with payment of moving expenses. However, it is noted
that the rule also provides that a violation of the prohibition against
involuntary displacement may trigger a requirement that the HA provide
URA relocation assistance.
Some changes have nevertheless been made in this section, largely
editorial revisions to clarify the requirements that were reflected in
the interim rule. In paragraph (b) of the PHA version only, familial
status has been added to the list of nondiscrimination factors. (The
IHA version covers nondiscrimination by cross-reference to
Sec. 905.115.) In both the IHA and PHA versions, a new paragraph (c)
has been added to clarify requirements for temporary relocation of
nonpurchasing residents in connection with repair or rehabilitation.
This prohibition applies only against displacement for the specific
purpose of making the unit available for Section 5(h) sale to another
family. It is not intended to prohibit a permanent move for any other
reason required or authorized by the existing occupant's lease (or
homebuyer agreement), consistent with applicable statutes and HUD
occupancy regulations. For example, where the size of the unit in
relation to family size results in overhousing or underhousing, a
family may be required to move to another unit of suitable size,
pursuant to the HA's assignment policy.
Sections 905.1011/906.11 (Nonroutine Maintenance Reserve)
In Secs. 905.1011/906.11 (Nonroutine maintenance reserve), the
interim rule's references to ``maintenance reserve'' have been changed
to ``nonroutine maintenance''. This clarifying change was prompted by
the suggestion of one commenter that the term ``capital improvement and
replacement reserve'' be used. Two other commenters objected to this
section entirely as an undue restriction on local discretion. The
Department believes that, considering the flexibility allowed, this
reserve requirement is justified by the financial viability test that
is implicit in Section 5(h) of the Act, and expressly stated in Sec.
6(c)(4)(D) of the Act.
Sections 905.1014/906.14 (Limitation on Resale Profit)
One commenter pointed out that the last sentence of paragraph (a)
of Secs. 905.1014/906.14 (Limitation on resale profit) seemed to
contradict the authorization for limited equity or shared equity
arrangements. In the final rule, this sentence has been revised to make
it clear that, under a limited or shared equity arrangement, the resale
provisions may limit the seller to a portion of the resale profit
attributable to appreciation in value. Language to similar effect has
also been inserted in the limited equity option under paragraph (c) of
this section.
Another commenter urged that the regulation be modified to require
or strongly encourage restriction of resale to low-income families
only. The final rule does not adopt this recommendation. Although the
regulation allows HA discretion to design limited equity arrangements
with such resale restrictions, the statute does not authorize the
Department to mandate that for all cases.
Sections 905.1016/906.16 (Replacement Housing)
With regard to Secs. 905.1016/906.16 (Replacement housing), one
commenter objected to the inclusion of replacement options other than
development of additional public or Indian housing units. As an
alternative to such a narrow restriction, the commenter suggested that
the options included in the interim rule be given priority in the order
listed. Other commenters objected to the options for rehabilitation of
vacant public or Indian housing units and for use of Section 8
certificates and vouchers.
The final rule makes no change in the replacement options stated in
the interim rule. Those options are statutory, and the Department has
no authority to change them by regulation.
Two commenters addressed the question of funding for replacement
housing. One recommended that such funding be built into the Section
5(h) Program itself, while another suggested a priority for Major
Rehabilitation of Obsolete Projects (MROP) funding. The Department has
not adopted those recommendations. Although special funding priorities
for replacement housing in connection with Section 5(h) homeownership
plans may be established in the contexts of the other HUD programs from
which the funding becomes available, no provision for such funding is
incorporated in the Section 5(h) Homeownership Program itself.
One commenter recommended that the regulation set a time limit on
the actual provision of replacement housing. In recognition of the
different factual situations that may affect the time required to have
replacement units ready for occupancy, the Department believes that it
would be unwise to set a rigid time limitation by regulation. However,
reasonable time frames for this and all other major steps must be
established in the timetable to be included in the homeownership plan.
The same commenter argued against the flexibility afforded by the
interim rule for the HA to address the community's current priority
housing needs, urging that the regulation impose a rigid requirement to
replace with units of the same sizes as those sold, regardless of
current needs. The Department believes that such rigidity would risk
absurd results, in those local situations where identical replacement
would be at odds with intelligent prioritization by the HA of the
community's current housing needs. One commenter urged that the
replacement housing requirements be applied retroactively to plans
approved or pending before publication of the interim rule. That point
is addressed in paragraph (d) of this section, which, as in the interim
rule, reflects the legislative mandate in Section 5(h) of the Act that
the replacement housing provisions shall not apply to ``applications''
(proposed homeownership plans) that were submitted to HUD prior to
October 1, 1990--the effective date of the legislation that added the
replacement requirement to Section 5(h).
Section 906.17 (Records, Reports and Audits)
In Sec. 906.17 of the PHA rule only (Records, reports and audits),
language has been added to specify that, as evidence of compliance with
fair housing and equal opportunity requirements, the sale and financial
records maintained in the files of the PHA must contain information on
the racial and ethnic characteristics of purchasers. (No such
requirement applies to Indian housing.)
Sections 905.1018/906.18 (Submission and Review of Homeownership Plan)
In paragraph (b) of Secs. 905.1018/906.18 (Submission and review of
homeownership plan), the phrase, ``in a format prescribed by HUD,'' has
been inserted. While allowing for due flexibility, HUD will issue
administrative instructions and guidelines regarding the format and
processing of homeownership plans.
Sections 905.1020/906.20 (Content of Homeownership Plan)
In Secs. 905.1020/906.20 (Content of homeownership plan), the order
of some items has been changed, for a more logical sequence that places
administrative items after those that describe the principal provisions
of the plan. In the PHA rule only, a provision on affirmative marketing
(applicable only if the plan allows purchase of vacant units by
families who are not public housing residents or already on the PHA's
waiting lists for those programs) has been added to paragraph
Sec. 906.20(c). (There is no affirmative marketing requirement for
IHAs.)
Sections 905.1021/906.21 (Supporting Documentation)
In paragraph (a) of Secs. 905.1021/906.21 (Supporting
documentation), the final rule explains that the purpose of the
property value estimate is merely to assist HUD in determining whether
the plan adequately addresses the risks of fraud and abuse and the
potential for windfall profit. For this item of supporting
documentation, a rough estimate is sufficient, backed by information to
support its reasonableness. Submission of a formal appraisal is not
required at this point, because the Department does not believe that
such an expense is justified for the purpose of HUD review of the
proposed homeownership plan. (Note, however, that this is a matter
involving only the initial process of preparation and review of the
HA's proposal. It is not intended to contradict the rule's separate
requirement, in Secs. 905.1014(e)/906.14(e), for the appraisal of
individual dwelling units at the point of sale, made with the distinct
purpose of calculating the amount of resale profit that would be
payable to the PHA by the individual purchaser.)
Section 906.21(f) (Nondiscrimination Certification)
In the PHA rule only, language has been inserted in
Sec. 906.21(f)--the requirement for the PHA's nondiscrimination
certification--to add citations to Title VI of the Civil Rights Act of
1964, Executive Order 11063, and implementing regulations. (The
parallel provision of the IHA rule (Sec. 905.1021(f)) remains
unchanged, citing the different nondiscrimination requirements that
apply to Indian housing under Sec. 905.115.)
Comments on Other Issues
One commenter observed that the interim rule contained no explicit
mention as to whether the Section 5(h) authority can be used in
conjunction with other public housing homeownership programs, such as
HOPE. Such questions will be addressed in the context of the other
programs involved, on a case-by-case basis.
It was also observed that the interim rule contained no explicit
mention of whether Section 5(h) can be used in conjunction with the
Low-Income Housing Tax Credit (LIHTC). The Department believes that
this is not an appropriate matter for rulemaking at this time. The
Department has not received any Section 5(h) proposals involving
LIHTCs, and no determination has been made as to whether it would be
possible to design a feasible proposal of that nature. If warranted by
future experience, the Department will consider this question for
further rulemaking.
One commenter recommended that the rule incorporate a specific list
of all statutes and regulations that must be complied with. A list of
all of the multitude of Federal statutes and regulations that might
possibly be applicable to all of the variety of possible features of
all of the many possible types of homeownership plans would be
excessively lengthy for inclusion in a regulation. While cross-
references are cited for some especially important Federal
requirements--notably, as to fair housing and nondiscrimination--the
possible variations among local homeownership plans make it impossible
to present a standard matrix of applicable legal requirements. As
emphasized in the requirement for the HA to include in its supporting
documentation a legal opinion from its own counsel (Secs. 905.1021(g)/
906.21(g)), it is the responsibility of the HA to ascertain for itself
just what requirements of Federal, State, Tribal and local law are
pertinent to the facts of each particular homeownership plan.
Compliance with State, Tribal and local laws and regulations on real
estate transactions is one of the critical points that must be
carefully reviewed by the HA's counsel.
Other Matters
Environmental Review
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR Part 50,
which implement Section 102(2)(C) of the National Environmental Policy
Act of 1969. This finding is available for public inspection between
7:30 a.m. and 5:30 p.m. weekdays in the Office of the Rules Docket
Clerk, Office of the General Counsel, Department of Housing and Urban
Development, Room 10276, 451 Seventh Street, SW., Washington, DC 20410.
Regulatory Planning and Review
This rule has been reviewed by the Office of Management and Budget
(OMB) under Executive Order 12866, Regulatory Planning and Review. Any
changes to the rule resulting from this review are available for public
inspection between 7:30 a.m. and 5:30 p.m. weekdays in the Office of
the Rules Docket Clerk, room 10276, 451 Seventh Street, S.W.,
Washington, DC.
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule does not have a significant
economic impact on a substantial number of small entities. The rule
creates homeownership opportunities for low-income residents of public
and Indian housing with, at most, an incidental effect on small
businesses.
Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
Order 12606, the Family, has determined that this rule would not have
potential significant impact on family formation, maintenance, and
general well-being and therefore is not subject to review under the
order. The rule would have an indirect, though positive, impact on
families to the extent that it would provide opportunities for families
residing in public and Indian housing to own their own homes.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under Section 6(a)
of Executive Order 12612, Federalism, has determined that this rule
would not have substantial, direct effects on States, on their
political subdivisions, or on their relationship with the Federal
government, or on the distribution of power and responsibilities
between them and other levels of government. The rule's major effects
would be on individuals; any involvement of States or their political
subdivisions is limited to their cooperative efforts in promoting
homeownership among public and Indian housing residents.
This rule was listed as Item No. 1695 in the Department's
Semiannual Agenda of Regulations published on April 25, 1994, (59 FR
20424, 20472) pursuant to Executive Order 12866 and the Regulatory
Flexibility Act.
The Catalog of Federal Domestic Assistance program numbers are
14.146 and 14.147.
List of Subjects
24 CFR Part 905
Aged, Energy conservation, Grant programs--housing and community
development, Grant programs--Indians, Indians, Individuals with
disabilities, Lead poisoning, Loan programs--housing and community
development, Loan programs--Indians, Low and moderate income housing,
Public housing, Reporting and recordkeeping requirements.
24 CFR Part 906
Grant programs--housing and community development, Low and moderate
income housing, Public housing, Reporting and recordkeeping
requirements.
For the reasons set out in the preamble, parts 905 and 906 of title
24 of the Code of Federal Regulations are amended as set forth below.
PART 905--INDIAN HOUSING PROGRAMS
1. The authority citation for 24 CFR part 905 continues to read as
follows:
Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437a, 1437aa, 1437bb,
1437cc, 1437ee, and 3535(d).
2. Subpart P of part 905 is revised to read as follows:
Subpart P--Section 5(h) Homeownership Program
Sec.
905.1001 Purpose.
905.1002 Applicability.
905.1003 General authority for sale.
905.1004 Fundamental criteria for HUD approval.
905.1005 Resident consultation and involvement.
905.1006 Property that may be sold.
905.1007 Methods of sale and ownership.
905.1008 Purchaser eligibility and selection.
905.1009 Counseling, training, and technical assistance.
905.1010 Nonpurchasing residents.
905.1011 Nonroutine maintenance reserve.
905.1012 Purchase prices and financing.
905.1013 Protection against fraud and abuse.
905.1014 Limitation on resale profit.
905.1015 Use of sale proceeds.
905.1016 Replacement housing.
905.1017 Records, reports, and audits.
905.1018 Submission and review of homeownership plan.
905.1019 HUD approval and IHA-HUD implementing agreement.
905.1020 Content of homeownership plan.
905.1021 Supporting documentation.
Subpart P--Section 5(h) Homeownership Program
Sec. 905.1001 Purpose.
This part codifies the provisions of the Section 5(h) Homeownership
Program for Indian housing, as authorized by sections 5(h) and
6(c)(4)(D) of the United States Housing Act of 1937 (Act) and
administered by the Department of Housing and Urban Development (HUD).
Sec. 905.1002 Applicability.
(a) General applicability. This subpart applies to low-income
housing owned by Indian Housing Authorities (IHAs), subject to Annual
Contributions Contracts (ACCs) under the Act. The terms ``housing'' or
``low-income housing'', as used in this subpart, refer to the types of
properties described in the preceding sentence, except as indicated by
the particular context. In reference to housing properties,
``development'' means the same as ``project'' (as defined in the Act).
Except where otherwise indicated by the context, ``resident'' means the
same as ``tenant'', as the latter term is used in the Act, including
Mutual Help and Turnkey III homebuyers, as well as rental tenants of
low-income housing and Section 8 residents, and references to sale,
purchase, conveyance and ownership include the types of interests and
transactions that are incident to cooperative ownership.
(b) Nonretroactivity. In the case of a Section 5(h) homeownership
plan that was approved by HUD before the effective date of the interim
rule under this subpart (October 21, 1991) no modifications or
additional requirements will be imposed under the provisions of the
interim or final rule, except for reasonable administrative procedures
prescribed by HUD. Similarly, in the case of a plan that was approved
under the interim rule, but before the effective date of the final rule
(December 12, 1994), no modifications or additional requirements will
be imposed under the provisions of the final rule, except for such
reasonable administrative procedures.
Sec. 905.1003 General authority for sale.
An IHA may sell all or a portion of a development to eligible
residents, as defined under Sec. 905.1008, for purposes of
homeownership, according to a homeownership plan approved by HUD under
this subpart. Upon sale in accordance with the HUD-approved
homeownership plan, HUD will execute a release of the title
restrictions prescribed by the ACC. Because the property will no longer
be subject to the ACC after sale, it will cease to be eligible for
further HUD funding for operating subsidies or modernization under the
Act upon conveyance of title by the IHA. (That does not preclude any
other types of post-sale subsidies that may be available, under other
Federal, Tribal, State, or local programs, such as the possibility of
available assistance under Section 8 of the Act, in connection with a
plan for cooperative homeownership, if authorized by the Section 8
regulations.)
Sec. 905.1004 Fundamental criteria for HUD approval.
HUD will approve an IHA's homeownership plan if it meets all three
of the following criteria:
(a) Workability. The plan must be practically workable, with sound
potential for long-term success. Financial viability, including the
capability of purchasers to meet the financial obligations of
homeownership, is a critical requirement.
(b) Legality. The plan must be consistent with law, including the
requirements of this part and any other applicable Federal, Tribal,
State, and local statutes and regulations, and existing contracts.
Subject to the other two criteria stated in this section, any provision
that is not contrary to those legal requirements may be included in the
plan, at the discretion of the IHA, whether or not expressly authorized
in this subpart.
(c) Documentation. The plan must be clear and complete enough to
serve as a working document for implementation, as well as a basis for
HUD review.
Sec. 905.1005 Resident consultation and involvement.
(a) Resident input. In developing a proposed homeownership plan,
and in carrying out the plan after HUD approval, the IHA shall consult
with residents of the development involved, and with any resident
organization that represents them, as necessary and appropriate to
provide them with information and a reasonable opportunity to make
their views and recommendations known to the IHA. If the plan
contemplates sale of units in an entirely vacant development, the IHA
shall consult with the IHA-wide resident organization, if any. While
the Act gives the IHA sole legal authority for final decisions, as to
whether or not to submit a proposed homeownership plan and the content
of such a proposal, the IHA shall give residents and their resident
organizations full opportunity for input in the homeownership planning
process, and full consideration of their concerns and opinions.
(b) Resident initiatives. Where individual residents, a Resident
Management Corporation (RMC), or another form of resident organization
may wish to initiate discussion of a possible homeownership plan, the
IHA shall negotiate with them in good faith. Joint development and
submission of the plan by the IHA and RMC, or other resident
organization, is encouraged. In addition, participation of an RMC or
other resident organization in the implementation of the plan is
encouraged. (Approved by the Office of Management and Budget under
control number 2577-0201).
Sec. 905.1006 Property that may be sold.
(a) Types of property. Subject to the workability criterion of
Sec. 905.1004(a) (including, for example, consideration of common
elements and other characteristics of the property), a homeownership
plan may provide for sale of one or more dwellings, along with
interests in any common elements, comprising all or a portion of one or
more housing developments. A plan may provide for conversion of
existing housing to homeownership or for homeownership sale of newly-
developed housing. (However, for low-income housing units developed as
replacement housing for units demolished or disposed of pursuant to
subpart M of this part, that subpart requires that the initial
occupants be selected solely on the basis of the requirements governing
rental occupancy (or Mutual Help occupancy, if applicable), without
reference to any additional homeownership eligibility or selection
requirements under this subpart.) Mutual Help or Turnkey III
homeownership units may be converted to Section 5(h) homeownership,
upon voluntary termination by any existing Mutual Help or Turnkey III
homebuyers of their contractual rights and amendment of the ACC, in a
form prescribed by HUD.
(b) Physical condition of property. The property must meet local
code requirements (or, if no local code exists, the housing quality
standards established by HUD for the Section 8 Housing Assistance
Payments Program for Existing Housing, under 24 CFR part 882) and the
requirements for elimination of lead-based paint hazards in HUD-
associated housing, under subpart C of 24 CFR part 35. When a
prospective purchaser with disabilities requests accessible features,
the features must be added in accordance with 24 CFR parts 8 and 9.
Further, the property must be in good repair, with the major components
having a remaining useful life that is sufficient to justify a
reasonable expectation that homeownership will be affordable by the
purchasers. This standard must be met as a condition for conveyance of
a dwelling to an individual purchaser, unless the terms of sale include
measures to assure that the work will be completed within a reasonable
time after conveyance, not to exceed two years (e.g., as a part of a
mortgage financing package that provides the purchaser with a home
improvement loan or pursuant to a sound sweat equity arrangement).
Sec. 905.1007 Methods of sale and ownership.
(a) Permissible methods. Any appropriate method of sale and
ownership may be used, such as fee-simple conveyance of single-family
dwellings or conversion of multifamily buildings to resident-owned
cooperatives or condominiums.
(b) Direct or indirect sale. An IHA may sell dwellings to residents
directly or (with respect to multifamily buildings or a group of
single-family dwellings) through another entity established and
governed by, and solely composed of, residents of the IHA's low-income
housing, provided that:
(1) The other entity has the necessary legal capacity and practical
capability to carry out its responsibilities under the plan.
(2) The respective rights and obligations of the IHA and the other
entity will be specified by a written agreement that includes:
(i) Assurances that the other entity will comply with all
provisions of the HUD-approved homeownership plan;
(ii) Assurances that the IHA's conveyance of the property to the
other entity will be subject to a title restriction providing that the
property may be resold or otherwise transferred only by conveyance of
individual dwellings to eligible residents, in accordance with the HUD-
approved homeownership plan, or by reconveyance to the IHA, and that
the property will not be encumbered by the other entity without the
written consent of the IHA;
(iii) Protection against fraud or misuse of funds or other property
on the part of the other entity, its employees and agents;
(iv) Assurances that the resale proceeds will be used only for the
purposes specified by the HUD-approved homeownership plan;
(v) Limitation of the other entity's administrative and overhead
costs, and of any compensation or profit that may be realized by the
entity, to amounts that are reasonable in relation to its
responsibilities and risks;
(vi) Accountability to the IHA and residents for the recordkeeping,
reporting and audit requirements of Sec. 905.1017;
(vii) Assurances that the other entity will administer its
responsibilities under the plan in accordance with applicable civil
rights statutes and implementing regulations, as described in
Sec. 905.115; and
(viii) Adequate legal remedies for the IHA and residents, in the
event of the other entity's failure to perform in accordance with the
agreement.
Sec. 905.1008 Purchaser eligibility and selection.
Standards and procedures for eligibility and selection of the
initial purchasers of individual dwellings shall be consistent with the
following provisions:
(a) Applications. Persons who are interested in purchase must
submit applications for that specific purpose, and those applications
shall be handled separately from applications for other IHA programs.
For vacant units, applications shall be dated as received by the IHA
and, subject to eligibility and preference factors, selection shall be
made in the order of receipt. Application for homeownership shall not
affect an applicant's place on any other IHA waiting list.
(b) Eligibility threshold. Subject to any additional eligibility
and preference standards that are required or permitted under this
section, a homeownership plan may provide for the eligibility of
residents of low-income housing owned or leased by the seller IHA
(including Mutual Help and Turnkey III homebuyers, who may elect to
terminate their existing homebuyer agreements in favor of purchase
under the Section 5(h) homeownership plan) and residents of other
housing who are receiving housing assistance under Section 8 of the
Act, under an ACC administered by the seller IHA; provided that the
resident has been in lawful occupancy for a minimum period specified in
the plan (not less than 30 days prior to conveyance of title to the
dwelling to be purchased). For residents of other housing who are
receiving housing assistance under Section 8, the minimum occupancy
requirement may be satisfied in the unit for which the family is
receiving Section 8 assistance or the Indian housing unit. If the
family is to meet part or all of the minimum occupancy requirement in
the Indian housing unit, the Section 8 assistance must be terminated
before the family moves into the Indian housing unit. Indian housing
units are ineligible for Section 8 certificate and voucher assistance
as long as they remain under the ACC as Indian housing.
(c) Applicants who do not meet minimum residency requirement for
eligibility. (1) A homeownership plan, at IHA discretion, may also
permit eligibility for applicants who do not meet the minimum residency
requirement of paragraph (b) of this section (30 days or more, as
prescribed by the homeownership plan) at the time of application,
provided that their selection is conditioned upon completion of the
minimum residency requirement prior to conveyance of title. A plan may
thus allow satisfaction of the threshold requirements for eligibility
by:
(i) Existing low-income housing or Section 8 residents with less
than the minimum period of residency;
(ii) Families who are already on the IHA's waiting lists; and
(iii) Other low-income families who are neither low-income housing
nor Section 8 residents at the time of application or selection.
(2) Applicants who are not already low-income housing residents,
however, must also satisfy the requirements for admission to such
housing.
(d) Compliance with lease obligations. Eligibility shall be
limited, however, to residents who have been current in all of their
lease obligations (in the case of Mutual Help or Turnkey III
homebuyers, obligations under their homebuyer agreements) over a period
of not less than six months prior to conveyance of title (or, if so
provided by the homeownership plan, such lesser period as has elapsed
since the beginning of low-income housing or Section 8 tenure),
including, but not limited to, payment of rents (or homebuyer's monthly
payments) and other charges and reporting of all income that is
pertinent to determination of rents (or homebuyer's monthly payments).
At the IHA's discretion, the homeownership plan may allow a resident to
remedy under-reporting of income, provided that proper reporting of
income would not have resulted in ineligibility for admission to low-
income housing or for Section 8 assistance, by payment of the resulting
underpayment for rent (or homebuyer's monthly payments) prior to
conveyance of title to the homeownership dwelling, either in a lump sum
or in installments over a reasonable period. Alternatively, the plan
may permit payment within a reasonable period after conveyance of
title, under an agreement secured by a mortgage on the property.
(e) Affordability standard. Eligibility shall be further limited to
residents who are capable of assuming the financial obligations of
homeownership, under minimum income standards for affordability, taking
into account the unavailability of operating subsidies and
modernization funds after conveyance of the property by the IHA. A
homeownership plan may, however, take account of any available subsidy
from other sources (e.g., in connection with a plan for cooperative
ownership, assistance under Section 8 of the Act, if available and
authorized by the Section 8 regulations). Under this affordability
standard, an applicant must meet the following requirements:
(1) On an average monthly estimate, the amount of the applicant's
payments for mortgage principal and interest, plus insurance, real
estate taxes, utilities, maintenance, and other regularly-recurring
homeownership costs (such as condominium, cooperative, or other
homeownership association fees) will not exceed the sum of 35 percent
of the applicant's adjusted income, as defined in this part.
(2) The applicant can pay any amounts required for closing, such as
a downpayment (if any) and closing costs chargeable to the purchaser,
in accordance with the homeownership plan.
(f) Option to restrict eligibility. A homeownership plan may, at
the IHA's discretion, restrict eligibility to one or more residency-
based categories (e.g., for occupied units, eligibility may be
restricted to the existing residents of the units to be sold; for
vacant units, eligibility may be restricted to low-income housing
residents only, or to low-income housing residents plus any one or more
of the other residency-based categories that may be established under
paragraphs (b) and (c) of this section), as may be reasonable in view
of the number of units to be offered for sale and the estimated number
of eligible applicants in various categories provided that the
residency-based preferences mandated by paragraph (g) of this section
are observed.
(g) Residency-based preferences. For occupied units, a preference
shall be given to the existing residents of each of the dwellings to be
sold. For vacant units (including units which are voluntarily vacated),
a preference shall be given to residents of other low-income housing
units owned or leased by the seller IHA (over any other residency-based
categories that may be established by a homeownership plan for Section
8 residents or for nonresident applicants).
(h) Other eligibility or preference standards. If consistent with
the other provisions of this section, a homeownership plan may include
any other standards for eligibility or preference, or both, at the
discretion of the IHA, that are not contrary to law.
(Approved by the Office of Management and Budget under control
number 2577-0201).
Sec. 905.1009 Counseling, training, and technical assistance
Appropriate counseling shall be provided to prospective and actual
purchasers, as necessary for each stage of implementation of the
homeownership plan. Particular attention must be given to the terms of
purchase and financing, along with the other financial and maintenance
responsibilities of homeownership. In addition, where applicable,
appropriate training and technical assistance shall be provided to any
entity (such as an RMC, other resident organization, or a cooperative
or condominium entity) that has responsibilities for carrying out the
plan.
Sec. 905.1010 Nonpurchasing residents
(a) Nonpurchasing resident's options. If an existing resident of a
dwelling authorized for sale under a homeownership plan is ineligible
for purchase, or declines to purchase, the resident shall be given the
choice of either relocation to other suitable and affordable housing or
continued occupancy of the present dwelling on a rental basis, at a
rent no higher than that permitted by the Act. Displacement (permanent,
involuntary move), in order to make a dwelling available for sale, is
prohibited. In addition to applicable program sanctions, a violation of
the displacement prohibition may trigger a requirement to provide
relocation assistance in accordance with the Uniform Relocation and
Real Property Acquisition Act of 1970 and implementing regulations at
49 CFR part 24. Where continued rental occupancy by a nonpurchasing
resident is contemplated after conveyance of the property, the
homeownership plan must include provision for any rental subsidy
required (e.g., Section 8 assistance, if available and authorized by
the Section 8 regulations). As soon as feasible after they can be
identified, all nonpurchasing residents shall be given written notice
of their options under this section.
(b) Relocation assistance. A nonpurchasing resident who chooses to
relocate pursuant to this section shall be offered the following
relocation assistance:
(1) Advisory services to assure full choices and real opportunities
to obtain relocation within a full range of neighborhoods where
suitable housing may be found, including timely information,
counseling, and explanation of the resident's rights under applicable
civil rights statutes and implementing regulations, as specified in
Sec. 905.115, and referrals to suitable, safe, sanitary and affordable
housing (at a rent no higher than permitted by the Act), which is of
the resident's choice, on a nondiscriminatory basis, in accordance with
applicable civil rights statutes and implementing regulations, as
specified in Sec. 905.115. This requirement will be met if the
applicant is offered the opportunity to relocate to another suitable
unit in other low-income housing, under any of the housing assistance
programs under Section 8 of the Act, or any other Federal, Tribal,
State or local program that is comparable, as to standards of housing
quality, admission and rent, to the programs under the Act, and
provides a term of assistance of at least five years; and
(2) Payment for actual, reasonable moving and related expenses.
(c) Temporary relocation. A nonpurchasing resident who must
relocate temporarily to permit work to be carried out shall be provided
suitable, decent, safe and sanitary housing for the temporary period
and reimbursed for all reasonable out-of-pocket expenses incurred in
connection with the temporary relocation, including the cost of moving
to and from the temporarily occupied housing and any increase in
monthly rent and utility costs.
Sec. 905.1011 Nonroutine maintenance reserve.
(a) When reserve is required. A nonroutine maintenance reserve
shall be established for all multifamily properties sold under a
homeownership plan. For single-family dwellings, such a reserve shall
not be required if the availability of the funds needed for nonroutine
maintenance is adequately addressed under the affordability standard
prescribed by the plan.
(b) Purpose of reserve. The purpose of this reserve shall be to
provide a source of reserve funds for nonroutine maintenance (including
replacement), as necessary to ensure the long-term success of the plan,
including protection of the interests of the homeowners and the IHA.
The amounts to be set aside, and other terms of this reserve, shall be
as necessary and appropriate for the particular homeownership plan,
taking into account such factors as prospective needs for nonroutine
maintenance, the homeowners' financial resources, and any special
factors that may aggravate or mitigate the need for such a reserve.
Sec. 905.1012 Purchase prices and financing.
(a) Below-market terms. To ensure affordability by eligible
purchasers, by the standard adopted under Sec. 906.8(e) of this
chapter, a homeownership plan may provide for below-market purchase
prices or below-market financing, or a combination of the two.
Discounted purchase prices may be determined on a unit-by-unit basis,
based on the particular purchaser's ability to pay, or may be
determined by any other fair and reasonable method (e.g., uniform
prices for a group of comparable dwellings, within a range of
affordability by a group of potential purchasers).
(b) Types of financing. Any type of private or public financing may
be used (e.g., conventional, Federal Housing Administration (FHA),
Department of Veterans Affairs (VA), Farmers' Home Administration
(FmHA), or a Tribal, State or local program). An IHA may finance or
assist in financing purchase by any methods it may choose, such as
purchase-money mortgages, guarantees of mortgage loans from other
lenders, shared equity, or lease-purchase arrangements.
Sec. 905.1013 Protection against fraud and abuse.
A homeownership plan shall include appropriate protections against
any risks of fraud or abuse that are presented by the particular plan,
such as collusive purchase for the benefit of nonresidents, extended
use of the dwelling by the purchaser as rental property, collusive sale
that would circumvent the resale profit limitation of Sec. 905.1014.
Sec. 905.1014 Limitation on resale profit.
(a) General. If a dwelling is sold to the initial purchaser for
less than fair market value, the homeownership plan shall provide for
appropriate measures to preclude realization by the initial purchaser
of windfall profit on resale. ``Windfall profit'' means all or a
portion of the resale proceeds attributable to the purchase price
discount (the fair market value at date of purchase from the IHA less
the below-market purchase price), as determined by one of the methods
described in paragraphs (b) through (d) of this section. Subject to
that requirement, however, purchasers should be permitted to retain any
resale profit attributable to appreciation in value after purchase (or
a portion of such profit under a limited or shared equity arrangement),
along with any portion of the resale profit that is fairly attributable
to improvements made by them after purchase.
(b) Promissory note method. Where there is potential for a windfall
profit because the dwelling unit is sold to the initial purchaser for
less than fair market value, without a commensurate limited or shared
equity restriction, the initial purchaser shall execute a promissory
note, payable to the IHA, along with a mortgage securing the obligation
of the note, on the following terms and conditions:
(1) The principal amount of indebtedness shall be the lesser of:
(i) The purchase price discount, as determined by the definition in
paragraph (a) of this section and stated in the note as a dollar
amount; or
(ii) The net resale profit, in an amount to be determined upon
resale by a formula stated in the note. That formula shall define net
resale profit as the amount by which the gross resale price exceeds the
sum of:
(A) The discounted purchase price;
(B) Reasonable sale costs charged to the initial purchaser upon
resale; and
(C) Any increase in the value of the property that is attributable
to improvements paid for or performed by the initial purchaser during
tenure as a homeowner.
(2) At the option of the IHA, the note may provide for automatic
reduction of the principal amount over a specified period of ownership
while the property is used as the purchaser's family residence,
resulting in total forgiveness of the indebtedness over a period of not
less than five years from the date of conveyance, in annual increments
of not more than 20 percent. This does not require an IHA's plan to
provide for any such reduction at all, or preclude it from specifying
terms that are less generous to the purchaser than those stated in the
foregoing sentence.
(3) To preclude collusive resale that would circumvent the intent
of this section, the IHA shall (by an appropriate form of title
restriction) condition the initial purchaser's right to resell upon
approval by the IHA, to be based solely on the IHA's determination that
the resale price represents fair market value or a lesser amount that
will result in payment to the IHA, under the note, of the full amount
of the purchase price discount (subject to any accrued reduction, if
provided for by the homeownership plan pursuant to paragraph (b)(2) of
this section). If so determined, the IHA shall be obligated to approve
the resale.
(4) The IHA may, in its sole discretion, agree to subordination of
the mortgage that secures the promissory note, in favor of an
additional lien granted by the purchaser as security for a loan for
home improvements or other purposes approved by the IHA.
(c) Limited equity method. As a second option, the requirement of
this section may be satisfied by an appropriate form of limited equity
arrangement, restricting the amount of net resale profit that may be
realized by the seller (the initial purchaser and successive purchasers
over a period prescribed by the homeownership plan) to the sum of:
(1) The seller's paid-in equity;
(2) The portion of the resale proceeds attributable to any
improvements paid for or performed by the seller during homeownership
tenure; and
(3) An allowance for a portion of the property's appreciation in
value during homeownership tenure, calculated by a fair and reasonable
method specified in the homeownership plan (e.g., according to a price
index factor or other measure).
(d) Third option. The requirements of this section may be satisfied
by any other fair and reasonable arrangement that will accomplish the
essential purposes stated in paragraph (a) of this section.
(e) Appraisal. Determinations of fair market value under this
section shall be made on the basis of appraisal within a reasonable
time prior to sale, by an independent appraiser to be selected by the
IHA.
Sec. 905.1015 Use of sale proceeds.
(a) General authority for use. Sale proceeds may, after provision
for sale and administrative costs that are necessary and reasonable for
carrying out the homeownership plan, be retained by the IHA and used
for housing assistance to low-income families (as such families are
defined under the Act). The term ``sale proceeds'' includes all
payments made by purchasers for credit to the purchase price (e.g.,
earnest money, downpayments, payments out of the proceeds of mortgage
loans, and principal and interest payments under purchase-money
mortgages), along with any amounts payable upon resale under
Sec. 905.1014, and interest earned on all such receipts. (Residual
receipts, as defined in the ACC, shall not be treated as sale
proceeds.)
(b) Permissible uses. Sale proceeds may be used for any one or more
of the following forms of housing assistance for low-income families,
at the discretion of the IHA and as stated in the HUD-approved
homeownership plan:
(1) In connection with the homeownership plan from which the funds
are derived, for purposes that are justified to ensure the success of
the plan and to protect the interests of the homeowners, the IHA and
any other entity with responsibility for carrying out the plan.
Nonexclusive examples include nonroutine maintenance reserves under
Sec. 905.1011, a reserve for loans to homeowners to prevent or cure
default or for other emergency housing needs; a reserve for any
contingent liabilities of the IHA under the homeownership plan (such as
IHA guaranty of mortgage loans); and a reserve for IHA repurchase,
repair and resale of homes in the event of defaults.
(2) In connection with another HUD-approved homeownership plan
under this part, for assistance to purchasers and for reasonable
planning and implementation costs.
(3) In connection with a Tribal, State or local homeownership
program for low-income families, as described in the homeownership
plan, for assistance to purchasers and for reasonable planning and
implementation costs. Under such programs, sales proceeds may be used
to construct or acquire additional dwellings for sale to low-income
families, or to assist such families in purchasing other dwellings from
public or private owners.
(4) In connection with the IHA's other low-income housing that
remains under ACC, for any purposes authorized for the use of operating
funds under the ACC and applicable provisions of the Act and Federal
regulations, as included in the HUD-approved operating budgets.
Examples include maintenance and modernization, augmentation of
operating reserves, protective services, and resident services. Such
use shall not result in the reduction of the operating subsidy
otherwise payable to the IHA for its other low-income housing.
(5) In connection with any other type of Federal, Tribal, State, or
local housing program for low-income families, as described in the
homeownership plan.
Sec. 905.1016 Replacement housing.
(a) Replacement requirement. As a condition for transfer of
ownership under a HUD-approved homeownership plan, the IHA must obtain
a funding commitment, from HUD or another source, for the replacement
of each of the dwellings to be sold under the plan. Replacement housing
may be provided by one or any combination of the following methods:
(1) Development by the IHA of additional low-income housing under
this part (by new construction or acquisition).
(2) Rehabilitation of vacant low-income housing owned by the IHA.
(3) Use of five-year, tenant-based certificate or voucher
assistance under Section 8 of the Act.
(4) If the homeownership plan is submitted by the IHA for sale to
residents through an RMC, resident organization or cooperative
association which is otherwise eligible to participate under this
subpart, acquisition of nonpublicly-owned housing units, which the RMC,
resident organization or cooperative association will operate as rental
housing, comparable to IHA-owned low-income housing as to term of
assistance, housing standards, eligibility, and contribution to rent.
(5) Any other Federal, Tribal, State, or local housing program that
is comparable, as to housing standards, eligibility and contribution to
rent, to the programs referred to in paragraphs (a)(1) through (a)(3)
of this section, and provides a term of assistance of not less than
five years.
(b) Funding commitments. Although a HUD funding commitment is
required if the replacement housing requirement is to be satisfied
through any of the HUD programs listed in paragraph (a) of this
section, HUD's approval of a Section 5(h) homeownership plan on the
expectation that such a funding commitment will be forthcoming shall
not constitute a binding obligation to make such a commitment. Where
the requirement is to be satisfied under a Tribal, State or local
program, or a Federal program not administered by HUD, a funding
commitment shall be required from the proper authority.
(c) Use of sale proceeds to fund replacement housing. Sale proceeds
that are generated under the homeownership plan may be used under some
of the replacement housing options under paragraph (a) of this section
(e.g., rehabilitation of vacant public housing units, or an eligible
local program). Where a homeownership plan provides for sale proceeds
to be used for replacement housing, HUD approval of the plan and
execution of the IHA-HUD implementing agreement shall satisfy the
funding commitment requirement of paragraph (a) of this section, with
regard to the amount of replacement housing to be funded out of sale
proceeds.
(d) Consistency with current housing needs. Replacement housing may
differ from the dwellings sold under the homeownership plan, as to unit
sizes or family or elderly occupancy, if the IHA determines that such
change is consistent with current local housing needs for low-income
families.
(e) Inapplicability to prior plans. This section shall not apply to
homeownership plans that were submitted to HUD under the Section 5(h)
Homeownership Program prior to October 1, 1990.
Sec. 905.1017 Records, reports, and audits.
The IHA shall be responsible for the maintenance of records
(including sale and financial records) for all activities incident to
implementation of the homeownership plan. Until all planned sales of
individual dwellings have been completed, the IHA shall submit to HUD
annual sales reports, in a form prescribed by HUD. The receipt,
retention, and expenditure of the sale proceeds shall be covered in the
regular independent audits of the IHA's housing operations, and any
supplementary audits that HUD may find necessary for monitoring. Where
another entity is responsible for sale of individual units, pursuant to
Sec. 905.1007(b), the IHA must ensure that the entity's
responsibilities include proper recordkeeping and accountability to the
IHA, sufficient to enable the IHA to monitor compliance with the
approved homeownership plan, to prepare its reports to HUD, and to meet
its audit responsibilities. All books and records shall be subject to
inspection and audit by HUD and the General Accounting Office (GAO).
(Approved by the Office of Management and Budget under control
number 2577-0201)
Sec. 905.1018 Submission and review of homeownership plan.
Whether to develop and submit a proposed homeownership plan is a
matter within the discretion of each IHA. An IHA may initiate a
proposal at any time, according to the following procedures:
(a) Preliminary consultation with HUD staff. Before submission of a
proposed plan, the IHA shall consult informally with the appropriate
HUD Field Office to assess feasibility and the particulars to be
addressed by the plan.
(b) Submission to HUD. The IHA shall submit the proposed plan,
together with supporting documentation, in a format prescribed by HUD,
to the appropriate HUD Field Office.
(c) Conditional approval. Conditional approval may be given, at HUD
discretion, where HUD determines that to be justified. For example,
conditional HUD approval might be a necessary precondition for the IHA
to obtain the funding commitments required to satisfy the requirements
for final HUD approval of a complete homeownership plan. Where
conditional approval is granted, HUD will specify the conditions in
writing.
(Approved by the Office of Management and Budget under control
number 2577-0201)
Sec. 905.1019 HUD approval and IHA-HUD implementing agreement.
Upon HUD notification to the IHA that the homeownership plan is
approvable (in final form that satisfies all applicable requirements of
this part), the IHA and HUD will execute a written implementing
agreement, in a form prescribed by HUD, to evidence HUD approval and
authorization for implementation. The plan itself, as approved by HUD,
shall be incorporated in the implementing agreement. Any of the items
of supporting documentation may also be incorporated, if agreeable to
the IHA and HUD. The IHA shall be obligated to carry out the approved
homeownership plan and other provisions of the implementing agreement
without modification, except with written approval by HUD.
(Approved by the Office of Management and Budget under control
number 2577-0201)
Sec. 905.1020 Content of homeownership plan.
The homeownership plan must address the following matters, as
applicable to the particular factual situation:
(a) Property description. A description of the property, including
identification of the development and the specific dwellings to be
sold.
(b) Repair or rehabilitation. If applicable, a plan for any repair
or rehabilitation required under Sec. 905.1006, based on the assessment
of the physical condition of the property that is included in the
supporting documentation.
(c) Purchaser eligibility and selection. The standards and
procedures to be used for homeownership applications and the
eligibility and selection of purchasers, consistent with the
requirements of Sec. 905.1008.
(d) Sale and financing. Terms and conditions of sale and financing
(see, particularly, Secs. 905.1011 through 905.1014).
(e) Future consultation with residents. A plan for consultation
with residents during the implementation stage (See Sec. 905.1005). If
appropriate, this may be combined with the plan for counseling.
(f) Counseling. Counseling, training, and technical assistance to
be provided in accordance with Sec. 905.1009.
(g) Sale via other entity. If the plan contemplates sale to
residents via an entity other than the IHA, a description of that
entity's responsibilities and information demonstrating that the
requirements of Sec. 905.1007 have been met or will be met in a timely
fashion.
(h) Nonpurchasing residents. If applicable, a plan for
nonpurchasing residents, in accordance with Sec. 905.1010.
(i) Sale proceeds. An estimate of the sale proceeds and an
explanation of how they will be used, in accordance with Sec. 905.1015.
(j) Replacement housing. A replacement housing plan, in accordance
with Sec. 905.1016.
(k) Administration. An administrative plan, including estimated
staffing requirements.
(l) Recordkeeping, accounting and reporting. A description of the
recordkeeping, accounting and reporting procedures to be used,
including those required by Sec. 905.1017.
(m) Budget. A budget estimate, showing the costs of implementing
the plan, and the sources of the funds that will be used.
(n) Timetable. An estimated timetable for the major steps required
to carry out the plan.
(Approved by the Office of Management and Budget under control
number 2577-0201)
Sec. 905.1021 Supporting documentation.
The following supporting documentation shall be submitted to HUD
with the proposed homeownership plan, as appropriate for the particular
plan:
(a) Estimate of value. An estimate of the fair market value of the
property, including the range of fair market values of individual
dwellings, with information to support the reasonableness of the
estimate. (The purpose of this information is merely to assist HUD in
determining whether, taking into consideration the estimated fair
market value of the property, the plan adequately addresses any risks
of fraud and abuse, pursuant to Sec. 905.1013, and windfall profit on
resale, pursuant to Sec. 905.1014. A formal appraisal need not be
submitted with the proposed homeownership plan.)
(b) Physical assessment. An assessment of the physical condition of
the property, based on the standards specified in Sec. 905.1006.
(c) Workability. A statement demonstrating the practical
workability of the plan, based on analysis of data on such elements as
purchase prices, costs of repair or rehabilitation, homeownership
costs, family incomes, availability of financing, and the extent to
which there are eligible residents who are expected to be interested in
purchase. (See Sec. 905.1004(a).)
(d) IHA commitment and capability. Information to substantiate the
commitment and capability of the IHA and any other entity with
substantial responsibilities for implementing the plan.
(e) Resident planning input. A description of resident consultation
activities carried out pursuant to Sec. 905.1005 before submission of
the plan, with a summary of the views and recommendations of residents
and copies of any written comments that may have been submitted to the
IHA by individual residents and resident organizations, and any other
individuals and organizations.
(f) Nondiscrimination certification. The IHA's certification that
it will administer the plan on a nondiscriminatory basis, in accordance
with applicable civil rights laws and implementing regulations, as
described in Sec. 905.115 of this part, and will assure compliance with
those requirements by any other entity that may assume substantial
responsibilities for implementing the plan.
(g) Legal opinion. An opinion by legal counsel to the IHA, stating
that counsel has reviewed the plan and finds it consistent with all
applicable requirements of Federal, Tribal, State, and local law,
including regulations as well as statutes. In addition, counsel must
identify the major legal requirements that remain to be met in
implementing the plan, if approved by HUD as submitted, indicating an
opinion about whether those requirements can be met without special
problems that may disrupt the timetable or other features contained in
the plan.
(h) Board resolution. A resolution by the IHA's Board of
Commissioners, evidencing its approval of the plan.
(i) Other information. Any other information that may reasonably be
required for HUD review of the plan. Except for the IHA-HUD
implementing agreement under Sec. 905.1019, HUD approval is not
required for documents to be prepared and used by the IHA in
implementing the plan (such as contracts, applications, deeds,
mortgages, promissory notes, and cooperative or condominium documents),
if their essential terms and conditions are described in the plan.
Consequently, those documents need not be submitted as part of the plan
or the supporting documentation.
(Approved by the Office of Management and Budget under control
number 2577-0201)
3. Part 906, consisting of Secs. 906.1 through 906.21, is revised
to read as follows:
PART 906--SECTION 5(h) HOMEOWNERSHIP PROGRAM
Sec.
906.1 Purpose.
906.2 Applicability.
906.3 General authority for sale.
906.4 Fundamental criteria for HUD approval.
906.5 Resident consultation and involvement.
906.6 Property that may be sold.
906.7 Methods of sale and ownership.
906.8 Purchaser eligibility and selection.
906.9 Counseling, training, and technical assistance.
906.10 Nonpurchasing residents.
906.11 Nonroutine maintenance reserve.
906.12 Purchase prices and financing.
906.13 Protection against fraud and abuse.
906.14 Limitation on resale profit.
906.15 Use of sale proceeds.
906.16 Replacement housing.
906.17 Records, reports, and audits.
906.18 Submission and review of homeownership plan.
906.19 HUD approval and PHA-HUD implementing agreement.
906.20 Content of homeownership plan.
906.21 Supporting documentation.
Authority: 42 U.S.C. 1437c, 1437d and 3535(d).
Sec. 906.1 Purpose.
This part codifies the provisions of the Section 5(h) Homeownership
Program for public housing, as authorized by sections 5(h) and
6(c)(4)(D) of the United States Housing Act of 1937 (Act) and
administered by the Department of Housing and Urban Development (HUD).
Sec. 906.2 Applicability.
(a) General applicability. This part applies to public housing
owned by public housing agencies (PHAs) (excluding Indian Housing
Authorities (IHAs)) subject to Annual Contributions Contracts (ACCs)
under the Act. In reference to housing properties, ``development''
means the same as ``project'' (as defined in the Act). Except where
otherwise indicated by the context, ``resident'' means the same as
``tenant'', as the latter term is used in the Act, including Turnkey
III homebuyers, if applicable, as well as rental tenants of public
housing and Section 8 residents, and references to sale, purchase,
conveyance and ownership include the types of interests and
transactions that are incident to cooperative ownership.
(b) Nonretroactivity. In the case of a Section 5(h) homeownership
plan that was approved by HUD prior to the effective date of the
interim rule under this part (October 21, 1991), no modifications or
additional requirements will be imposed under the provisions of the
interim or final rule, except for reasonable administrative procedures
prescribed by HUD. Similarly, in the case of a plan that was approved
under the interim rule, before the effective date of the final rule
(December 12, 1994), no modifications or additional requirements will
be imposed under the provisions of the final rule, except for such
reasonable administrative procedures.
Sec. 906.3 General authority for sale.
A PHA may sell all or a portion of a public housing development to
eligible residents, as defined under Sec. 906.8, for purposes of
homeownership, according to a homeownership plan approved by HUD under
this part. If the development is subject to indebtedness under the ACC,
HUD will continue to make any debt service contributions for which it
is obligated under the ACC, and the property sold will not be subject
to the encumbrance of that indebtedness. (In the case of a development
with financing restrictions (such as a bond-financed development),
however, sale is subject to the terms and conditions of the applicable
restrictions.) Upon sale in accordance with the HUD-approved
homeownership plan, HUD will execute a release of the title
restrictions prescribed by the ACC. Because the property will no longer
be subject to the ACC after sale, it will cease to be eligible for
further HUD funding for public housing operating subsidies or
modernization under the Act upon conveyance of title by the PHA. (That
does not preclude any other types of post-sale subsidies that may be
available, under other Federal, State, or local programs, such as the
possibility of available assistance under Section 8 of the Act, in
connection with a plan for cooperative homeownership, if authorized by
the Section 8 regulations.)
Sec. 906.4 Fundamental criteria for HUD approval.
HUD will approve a PHA's homeownership plan if it meets all three
of the following criteria:
(a) Workability. The plan must be practically workable, with sound
potential for long-term success. Financial viability, including the
capability of purchasers to meet the financial obligations of
homeownership, is a critical requirement.
(b) Legality. The plan must be consistent with law, including the
requirements of this part and any other applicable Federal, State, and
local statutes and regulations, and existing contracts. Subject to the
other two criteria stated in this section, any provision that is not
contrary to those legal requirements may be included in the plan, at
the discretion of the PHA, whether or not expressly authorized in this
part.
(c) Documentation. The plan must be clear and complete enough to
serve as a working document for implementation, as well as a basis for
HUD review.
Sec. 906.5 Resident consultation and involvement.
(a) Resident input. In developing a proposed homeownership plan,
and in carrying out the plan after HUD approval, the PHA shall consult
with residents of the development involved, and with any resident
organization that represents them, as necessary and appropriate to
provide them with information and a reasonable opportunity to make
their views and recommendations known to the PHA. If the plan
contemplates sale of units in an entirely vacant development, the PHA
shall consult with the PHA-wide resident organization, if any. While
the Act gives the PHA sole legal authority for final decisions, as to
whether or not to submit a proposed homeownership plan and the content
of such a proposal, the PHA shall give residents and their resident
organizations full opportunity for input in the homeownership planning
process, and full consideration of their concerns and opinions.
(b) Resident initiatives. Where individual residents, a Resident
Management Corporation (RMC), or another form of resident organization
may wish to initiate discussion of a possible homeownership plan, the
PHA shall negotiate with them in good faith. Joint development and
submission of the plan by the PHA and RMC, or other resident
organization, is encouraged. In addition, participation of an RMC or
other resident organization in the implementation of the plan is
encouraged.
(Approved by the Office of Management and Budget under control
number 2577-0201)
Sec. 906.6 Property that may be sold.
(a) Types of property. Subject to the workability criterion of
Sec. 906.4(a) (including, for example, consideration of common elements
and other characteristics of the property), a homeownership plan may
provide for sale of one or more dwellings, along with interests in any
common elements, comprising all or a portion of one or more public
housing developments. A plan may provide for conversion of existing
public housing to homeownership or for homeownership sale of newly-
developed public housing. (However, for public housing units developed
as replacement housing for units demolished or disposed of pursuant to
24 CFR part 970, that part requires that the initial occupants be
selected solely on the basis of the requirements governing rental
occupancy, without reference to any additional homeownership
eligibility or selection requirements under this part.) Turnkey III
homeownership units may be converted to Section 5(h) homeownership,
upon voluntary termination by any existing Turnkey III homebuyers of
their contractual rights and amendment of the ACC, in a form prescribed
by HUD.
(b) Physical condition of property. The property must meet local
code requirements (or, if no local code exists, the housing quality
standards established by HUD for the Section 8 Housing Assistance
Payments Program for Existing Housing, under 24 CFR part 882) and the
requirements for elimination of lead-based paint hazards in HUD-
associated housing, under subpart C of 24 CFR part 35. When a
prospective purchaser with disabilities requests accessible features,
the features must be added in accordance with 24 CFR parts 8 and 9.
Further, the property must be in good repair, with the major components
having a remaining useful life that is sufficient to justify a
reasonable expectation that homeownership will be affordable by the
purchasers. These standards must be met as a condition for conveyance
of a dwelling to an individual purchaser, unless the terms of sale
include measures to assure that the work will be completed within a
reasonable time after conveyance, not to exceed two years (e.g., as a
part of a mortgage financing package that provides the purchaser with a
home improvement loan or pursuant to a sound sweat equity arrangement).
Sec. 906.7 Methods of sale and ownership.
(a) Permissible methods. Any appropriate method of sale and
ownership may be used, such as fee-simple conveyance of single-family
dwellings or conversion of multifamily buildings to resident-owned
cooperatives or condominiums.
(b) Direct or indirect sale. A PHA may sell dwellings to residents
directly or (with respect to multifamily buildings or a group of
single-family dwellings) through another entity established and
governed by, and solely composed of, residents of the PHA's public
housing, provided that:
(1) The other entity has the necessary legal capacity and practical
capability to carry out its responsibilities under the plan; and
(2) The respective rights and obligations of the PHA and the other
entity will be specified by a written agreement that includes:
(i) Assurances that the other entity will comply with all
provisions of the HUD-approved homeownership plan;
(ii) Assurances that the PHA's conveyance of the property to the
other entity will be subject to a title restriction providing that the
property may be resold or otherwise transferred only by conveyance of
individual dwellings to eligible residents, in accordance with the HUD-
approved homeownership plan, or by reconveyance to the PHA, and that
the property will not be encumbered by the other entity without the
written consent of the PHA;
(iii) Protection against fraud or misuse of funds or other property
on the part of the other entity, its employees, and agents;
(iv) Assurances that the resale proceeds will be used only for the
purposes specified by the HUD-approved homeownership plan;
(v) Limitation of the other entity's administrative and overhead
costs, and of any compensation or profit that may be realized by the
entity, to amounts that are reasonable in relation to its
responsibilities and risks;
(vi) Accountability to the PHA and residents for the recordkeeping,
reporting and audit requirements of Sec. 906.17;
(vii) Assurances that the other entity will administer its
responsibilities under the plan on a nondiscriminatory basis, in
accordance with the Fair Housing Act and implementing regulations; and
(viii) Adequate legal remedies for the PHA and residents, in the
event of the other entity's failure to perform in accordance with the
agreement.
Sec. 906.8 Purchaser eligibility and selection.
Standards and procedures for eligibility and selection of the
initial purchasers of individual dwellings shall be consistent with the
following provisions:
(a) Applications. Persons who are interested in purchase must
submit applications for that specific purpose, and those applications
shall be handled separately from applications for other PHA programs.
For vacant units, applications shall be dated as received by the PHA
and, subject to eligibility and preference factors, selection shall be
made in the order of receipt. Application for homeownership shall not
affect an applicant's place on any other PHA waiting list.
(b) Eligibility threshold. Subject to any additional eligibility
and preference standards that are required or permitted under this
section, a homeownership plan may provide for the eligibility of
residents of public housing owned or leased by the seller PHA
(including Turnkey III homebuyers who may elect to terminate their
existing Turnkey III homebuyer agreements in favor of purchase under
the Section 5(h) homeownership plan) and residents of other housing who
are receiving housing assistance under Section 8 of the Act, under an
ACC administered by the seller PHA, provided that the resident has been
in lawful occupancy for a minimum period specified in the plan (not
less than 30 days prior to conveyance of title to the dwelling to be
purchased). For residents of other housing who are receiving housing
assistance under Section 8, the minimum occupancy requirement may be
satisfied in the unit for which the family is receiving Section 8
assistance or the public housing unit. If the family is to meet part or
all of the minimum occupancy requirement in the public housing unit,
the Section 8 assistance must be terminated before the family moves
into the public housing unit. Public housing units are ineligible for
Section 8 certificate and voucher assistance as long as they remain
under ACC as public housing.
(c) Applicants who do not meet minimum residency requirement for
eligibility. (1) A homeownership plan, at PHA discretion, may also
permit eligibility for applicants who do not meet the minimum residency
requirement of paragraph (b) of this section (30 days or more, as
prescribed by the homeownership plan) at the time of application,
provided that their selection is conditioned upon completion of the
minimum residency requirement prior to conveyance of title. (A plan may
thus allow satisfaction of the threshold requirements for eligibility
by:
(i) Existing public housing or Section 8 residents with less than
the minimum period of residency;
(ii) Families who are already on the PHA's waiting lists; and
(iii) Other low-income families who are neither public housing nor
Section 8 residents at the time of application or selection.)
(2) Applicants who are not already public housing residents,
however, must also satisfy the requirements for admission to such
housing.
(d) Compliance with lease obligations. Eligibility shall be limited
to residents who have been current in all of their lease obligations
(in the case of Turnkey III homebuyers, obligations under their Turnkey
III homebuyer agreements) over a period of not less than six months
prior to conveyance of title (or, if so provided by the homeownership
plan, such lesser period as has elapsed since the beginning of public
housing or Section 8 tenure), including, but not limited to, payment of
rents (or homebuyer's monthly payments) and other charges, and
reporting of all income that is pertinent to determination of rental
charges (or homebuyer's monthly payments). At the PHA's discretion, the
homeownership plan may allow a resident to remedy under-reporting of
income, provided that proper reporting of income would not have
resulted in ineligibility for admission to public housing or for
Section 8 assistance, by payment of the resulting underpayment for rent
(or homebuyer's monthly payments) prior to conveyance of title to the
homeownership dwelling, either in a lump-sum or in installments over a
reasonable period. Alternatively, the plan may permit payment within a
reasonable period after conveyance of title, under an agreement secured
by a mortgage on the property.
(e) Affordability standard. Eligibility shall be limited to
residents who are capable of assuming the financial obligations of
homeownership, under minimum income standards for affordability, taking
into account the unavailability of public housing operating subsidies
and modernization funds after conveyance of the property by the PHA. A
homeownership plan may, however, take account of any available subsidy
from other sources (e.g., in connection with a plan for cooperative
ownership, assistance under Section 8 of the Act, if available and
authorized by the Section 8 regulations). Under this affordability
standard, an applicant must meet the following requirements:
(1) On an average monthly estimate, the amount of the applicant's
payments for mortgage principal and interest, plus insurance, real
estate taxes, utilities, maintenance and other regularly recurring
homeownership costs (such as condominium, cooperative, or other
homeownership association fees) will not exceed the sum of:
(i) 35 percent of the applicant's adjusted income as defined in 24
CFR Part 913; and
(ii) Any subsidy that will be available for such payments.
(2) The applicant can pay any amounts required for closing, such as
a downpayment (if any) and closing costs chargeable to the purchaser,
in accordance with the homeownership plan.
(f) Option to restrict eligibility. A homeownership plan may, at
the PHA's discretion, restrict eligibility to one or more residency-
based categories (e.g., for occupied units, eligibility may be
restricted to the existing residents of the units to be sold; for
vacant units, eligibility may be restricted to public housing residents
only, or to public housing residents plus any one or more of the other
residency-based categories that may be established under paragraphs (b)
and (c) of this section), as may be reasonable in view of the number of
units to be offered for sale and the estimated number of eligible
applicants in various categories, provided that the residency-based
preference requirements mandated by paragraph (g) of this section are
observed.
(g) Residency-based preferences. For occupied units, a preference
shall be given to the existing residents of each of the dwellings to be
sold. For vacant units (including units which are voluntarily vacated),
a preference shall be given to residents of other public housing units
owned or leased by the seller PHA (over any other residency-based
categories that may be established by the homeownership plan for
Section 8 residents and any categories of nonresident applicants).
(h) Self sufficiency preference. For vacant units, a further
preference shall be given to those applicants who have completed self-
sufficiency and job training programs, as identified in the
homeownership plan, or who meet equivalent standards of economic self-
sufficiency, such as actual employment experience, as specified in the
homeownership plan.
(i) Other eligibility or preference standards. If consistent with
the other provisions of this section, a homeownership plan may include
any other standards for eligibility or preference, or both, at the
discretion of the PHA, that are not contrary to law.
(Approved by the Office of Management and Budget under control
number 2577-0201)
Sec. 906.9 Counseling, training, and technical assistance.
Appropriate counseling shall be provided to prospective and actual
purchasers, as necessary for each stage of implementation of the
homeownership plan. Particular attention must be given to the terms of
purchase and financing, along with the other financial and maintenance
responsibilities of homeownership. In addition, where applicable,
appropriate training and technical assistance shall be provided to any
entity (such as an RMC, other resident organization, or a cooperative
or condominium entity) that has responsibilities for carrying out the
plan.
Sec. 906.10 Nonpurchasing residents.
(a) Nonpurchasing resident's options. If an existing resident of a
dwelling authorized for sale under a homeownership plan is ineligible
for purchase, or declines to purchase, the resident shall be given the
choice of either relocation to other suitable and affordable housing or
continued occupancy of the present dwelling on a rental basis, at a
rent no higher than that permitted by the Act. Displacement (permanent,
involuntary move) in order to make a dwelling available for sale, is
prohibited. In addition to applicable program sanctions, a violation of
the displacement prohibition may trigger a requirement to provide
relocation assistance in accordance with the Uniform Relocation
Assistance and Real Property Acquisition Act of 1970 and implementing
regulations at 49 CFR Part 24. Where continued rental occupancy by a
nonpurchasing resident is contemplated after conversion of the property
to cooperative or condominium ownership, the homeownership plan must
include provision for any rental subsidy required (e.g., Section 8
assistance, if available and authorized by the Section 8 regulations).
As soon as feasible after they can be identified, all nonpurchasing
residents shall be given written notice of their options under this
section.
(b) Relocation assistance. A nonpurchasing resident who chooses to
relocate pursuant to this section shall be offered the following
relocation assistance:
(1) Advisory services to assure full choices and real opportunities
to obtain relocation within a full range of neighborhoods where
suitable housing may be found, in and outside areas of minority
concentration, including timely information, counseling, explanation of
the resident's rights under the Fair Housing Act, and referrals to
suitable, safe, sanitary and affordable housing (at a rent no higher
than permitted by the Act), which is of the resident's choice, on a
nondiscriminatory basis, without regard to race, color, religion
(creed), national origin, handicap, age, sex, or familial status, in
compliance with applicable Federal and State law. This requirement will
be met if the resident is offered the opportunity to relocate to other
suitable housing under the Public Housing Program, any of the housing
assistance programs under Section 8 of the Act, or any other Federal,
State or local program that is comparable, as to standards of housing
quality, admission and rent, to the programs under the Act, and
provides a term of assistance of at least five years; and
(2) Payment for actual, reasonable moving and related expenses.
(c) Temporary relocation. A nonpurchasing resident who must
relocate temporarily to permit work to be carried out shall be provided
suitable, decent, safe and sanitary housing for the temporary period
and reimbursed for all reasonable out-of-pocket expenses incurred in
connection with the temporary relocation, including the cost of moving
to and from the temporarily occupied housing and any increase in
monthly rent and utility costs.
Sec. 906.11 Nonroutine maintenance reserve.
(a) When reserve is required. A nonroutine maintenance reserve
shall be established for all multifamily properties sold under a
homeownership plan. For single-family dwellings, such a reserve shall
not be required if the availability of the funds needed for nonroutine
maintenance is adequately addressed under the affordability standard
prescribed by the plan.
(b) Purpose of reserve. The purpose of this reserve shall be to
provide a source of reserve funds for nonroutine maintenance (including
replacement), as necessary to ensure the long-term success of the plan,
including protection of the interests of the homeowners and the PHA.
The amounts to be set aside, and other terms of this reserve, shall be
as necessary and appropriate for the particular homeownership plan,
taking into account such factors as prospective needs for nonroutine
maintenance, the homeowners' financial resources, and any special
factors that may aggravate or mitigate the need for such a reserve.
Sec. 906.12 Purchase prices and financing.
(a) Below-market terms. To ensure affordability by eligible
purchasers, by the standard adopted under Sec. 906.8(e), a
homeownership plan may provide for below-market purchase prices or
below-market financing, or a combination of the two. Discounted
purchase prices may be determined on a unit-by-unit basis, based on the
particular purchaser's ability to pay, or may be determined by any
other fair and reasonable method (e.g., uniform prices for a group of
comparable dwellings, within a range of affordability by a group of
potential purchasers).
(b) Types of financing. Any type of private or public financing may
be used (e.g., conventional, Federal Housing Administration (FHA),
Department of Veterans Affairs (VA), Farmers' Home Administration
(FmHA), or a State or local program). A PHA may finance or assist in
financing purchase by any methods it may choose, such as purchase-money
mortgages, guarantees of mortgage loans from other lenders, shared
equity, or lease-purchase arrangements.
Sec. 906.13 Protection against fraud and abuse.
A homeownership plan shall include appropriate protections against
any risks of fraud or abuse that are presented by the particular plan,
such as collusive purchase for the benefit of nonresidents, extended
use of the dwelling by the purchaser as rental property, or collusive
sale that would circumvent the resale profit limitation of Sec. 906.14.
Sec. 906.14 Limitation on resale profit.
(a) General. If a dwelling is sold to the initial purchaser for
less than fair market value, the homeownership plan shall provide for
appropriate measures to preclude realization by the initial purchaser
of windfall profit on resale. ``Windfall profit'' means all or a
portion of the resale proceeds attributable to the purchase price
discount (the fair market value at date of purchase from the PHA less
the below-market purchase price), as determined by one of the methods
described in paragraphs (b) through (d) of this section. Subject to
that requirement, however, purchasers should be permitted to retain any
resale profit attributable to appreciation in value after purchase (or
a portion of such profit under a limited or shared equity arrangement),
along with any portion of the resale profit that is fairly attributable
to improvements made by them after purchase.
(b) Promissory note method. Where there is potential for a windfall
profit because the dwelling unit is sold to the initial purchaser for
less than fair market value, without a commensurate limited or shared
equity restriction, the initial purchaser shall execute a promissory
note, payable to the PHA, along with a mortgage securing the obligation
of the note, on the following terms and conditions:
(1) The principal amount of indebtedness shall be the lesser of:
(i) The purchase price discount, as determined by the definition in
paragraph (a) of this section and stated in the note as a dollar
amount; or
(ii) The net resale profit, in an amount to be determined upon
resale by a formula stated in the note. That formula shall define net
resale profit as the amount by which the gross resale price exceeds the
sum of:
(A) The discounted purchase price;
(B) Reasonable sale costs charged to the initial purchaser upon
resale; and
(C) Any increase in the value of the property that is attributable
to improvements paid for or performed by the initial purchaser during
tenure as a homeowner.
(2) At the option of the PHA, the note may provide for automatic
reduction of the principal amount over a specified period of ownership
while the property is used as the purchaser's family residence,
resulting in total forgiveness of the indebtedness over a period of not
less than five years from the date of conveyance, in annual increments
of not more than 20 percent. This does not require a PHA's plan to
provide for any such reduction at all, or preclude it from specifying
terms that are less generous to the purchaser than those stated in the
foregoing sentence.
(3) To preclude collusive resale that would circumvent the intent
of this section, the PHA shall (by an appropriate form of title
restriction) condition the initial purchaser's right to resell upon
approval by the PHA, to be based solely on the PHA's determination that
the resale price represents fair market value or a lesser amount that
will result in payment to the PHA, under the note, of the full amount
of the purchase price discount (subject to any accrued reduction, if
provided for by the homeownership plan pursuant to paragraph (b)(2) of
this section). If so determined, the PHA shall be obligated to approve
the resale.
(4) The PHA may, in its sole discretion, agree to subordination of
the mortgage that secures the promissory note, in favor of an
additional lien granted by the purchaser as security for a loan for
home improvements or other purposes approved by the PHA.
(c) Limited equity method. As a second option, the requirement of
this section may be satisfied by an appropriate form of limited equity
arrangement, restricting the amount of net resale profit that may be
realized by the seller (the initial purchaser and successive purchasers
over a period prescribed by the homeownership plan) to the sum of:
(1) The seller's paid-in equity;
(2) The portion of the resale proceeds attributable to any
improvements paid for or performed by the seller during homeownership
tenure; and
(3) An allowance for a portion of the property's appreciation in
value during homeownership tenure, calculated by a fair and reasonable
method specified in the homeownership plan (e.g., according to a price
index factor or other measure).
(d) Third option. The requirements of this section may be satisfied
by any other fair and reasonable arrangement that will accomplish the
essential purposes stated in paragraph (a) of this section.
(e) Appraisal. Determinations of fair market value under this
section shall be made on the basis of appraisal within a reasonable
time prior to sale by an independent appraiser, to be selected by the
PHA.
Sec. 906.15 Use of sale proceeds.
(a) General authority for use. Sale proceeds may, after provision
for sale and administrative costs that are necessary and reasonable for
carrying out the homeownership plan, be retained by the PHA and used
for housing assistance to low-income families (as such families are
defined under the Act). The term ``sale proceeds'' includes all
payments made by purchasers for credit to the purchase price (e.g.,
earnest money, downpayments, payments out of the proceeds of mortgage
loans, and principal and interest payments under purchase-money
mortgages), along with any amounts payable upon resale under
Sec. 906.14, and interest earned on all such receipts. (Residual
receipts, as defined in the ACC, shall not be treated as sale
proceeds.)
(b) Permissible uses. Sale proceeds may be used for any one or more
of the following forms of housing assistance for low-income families,
at the discretion of the PHA and as stated in the HUD-approved
homeownership plan:
(1) In connection with the homeownership plan from which the funds
are derived, for purposes that are justified to ensure the success of
the plan and to protect the interests of the homeowners, the PHA and
any other entity with responsibility for carrying out the plan.
Nonexclusive examples include nonroutine maintenance reserves under
Sec. 906.11; a reserve for loans to homeowners to prevent or cure
default or for other emergency housing needs; a reserve for any
contingent liabilities of the PHA under the homeownership plan (such as
PHA guaranty of mortgage loans); and a reserve for PHA repurchase,
repair and resale of homes in the event of defaults.
(2) In connection with another HUD-approved homeownership plan
under this part, for assistance to purchasers and for reasonable
planning and implementation costs.
(3) In connection with a State or local homeownership program for
low-income families, as described in the homeownership plan, for
assistance to purchasers and for reasonable planning and implementation
costs. Under such programs, sales proceeds may be used to construct or
acquire additional dwellings for sale to low-income families, or to
assist such families in purchasing other dwellings from public or
private owners.
(4) In connection with the PHA's other public housing that remains
under ACC, for any purposes authorized for the use of operating funds
under the ACC and applicable provisions of the Act and Federal
regulations, as included in the HUD-approved operating budgets.
Examples include maintenance and modernization, augmentation of
operating reserves, protective services, and resident services. Such
use shall not result in the reduction of the operating subsidy
otherwise payable to the PHA under 24 CFR part 990.
(5) In connection with any other type of Federal, State, or local
housing program for low-income families, as described in the
homeownership plan.
Sec. 906.16 Replacement housing.
(a) Replacement requirement. As a condition for transfer of
ownership under a HUD-approved homeownership plan, the PHA must obtain
a funding commitment, from HUD or another source, for the replacement
of each of the dwellings to be sold under the plan. Replacement housing
may be provided by one or any combination of the following methods:
(1) Development by the PHA of additional public housing under 24
CFR part 941 (by new construction or acquisition).
(2) Rehabilitation of vacant public housing owned by the PHA.
(3) Use of five-year, tenant-based certificate or voucher
assistance under Section 8 of the Act.
(4) If the homeownership plan is submitted by the PHA for sale to
residents through an RMC, resident organization or cooperative
association which is otherwise eligible to participate under this part,
acquisition of nonpublicly-owned housing units, which the RMC, resident
organization or cooperative association will operate as rental housing,
comparable to public housing as to term of assistance, housing
standards, eligibility, and contribution to rent.
(5) Any other Federal, State, or local housing program that is
comparable, as to housing standards, eligibility and contribution to
rent, to the programs referred to in paragraphs (a)(1) through (a)(3)
of this section, and provides a term of assistance of not less than
five years.
(b) Funding commitments. Although a HUD funding commitment is
required if the replacement housing requirement is to be satisfied
through any of the HUD programs listed in paragraph (a) of this
section, HUD's approval of a Section 5(h) homeownership plan on the
expectation that such a funding commitment will be forthcoming shall
not constitute a binding obligation to make such a commitment. Where
the requirement is to be satisfied under a State or local program, or a
Federal program not administered by HUD, a funding commitment shall be
required from the proper authority.
(c) Use of sale proceeds to fund replacement housing. Sale proceeds
that are generated under the homeownership plan may be used under some
of the replacement housing options under paragraph (a) of this section
(e.g., rehabilitation of vacant public housing units, or an eligible
local program). Where a homeownership plan provides for sale proceeds
to be used for replacement housing, HUD approval of the plan and
execution of the PHA-HUD implementing agreement shall satisfy the
funding commitment requirement of paragraph (a) of this section, with
regard to the amount of replacement housing to be funded out of sale
proceeds.
(d) Consistency with current housing needs. Replacement housing may
differ from the dwellings sold under the homeownership plan, as to unit
sizes or family or elderly occupancy, if the PHA determines that such
change is consistent with current local housing needs for low-income
families.
(e) Inapplicability to prior plans. This section shall not apply to
homeownership plans that were submitted to HUD under the Section 5(h)
Homeownership Program prior to October 1, 1990.
Sec. 906.17 Records, reports, and audits.
The PHA shall be responsible for the maintenance of records
(including sale and financial records, which must include information
on the racial and ethnic characteristics of the purchasers) for all
activities incident to implementation of the HUD-approved homeownership
plan. Until all planned sales of individual dwellings have been
completed, the PHA shall submit to HUD annual sales reports, in a form
prescribed by HUD. The receipt, retention, and expenditure of the sale
proceeds shall be covered in the regular independent audits of the
PHA's public housing operations, and any supplementary audits that HUD
may find necessary for monitoring. Where another entity is responsible
for sale of individual units, pursuant to Sec. 906.7(b), the PHA must
ensure that the entity's responsibilities include proper recordkeeping
and accountability to the PHA, sufficient to enable the PHA to monitor
compliance with the approved homeownership plan, to prepare its reports
to HUD, and to meet its audit responsibilities. All books and records
shall be subject to inspection and audit by HUD and the General
Accounting Office (GAO).
(Approved by the Office of Management and Budget under control
number 2577-0201)
Sec. 906.18 Submission and review of homeownership plan.
Whether to develop and submit a proposed homeownership plan is a
matter within the discretion of each PHA. A PHA may initiate a proposal
at any time, according to the following procedures:
(a) Preliminary consultation with HUD staff. Before submission of a
proposed plan, the PHA shall consult informally with the appropriate
HUD Field Office to assess feasibility and the particulars to be
addressed by the plan.
(b) Submission to HUD. The PHA shall submit the proposed plan,
together with supporting documentation, in a format prescribed by HUD,
to the appropriate HUD Field Office.
(c) Conditional approval. Conditional approval may be given, at HUD
discretion, where HUD determines that to be justified. For example,
conditional HUD approval might be a necessary precondition for the PHA
to obtain the funding commitments required to satisfy the requirements
for final HUD approval of a complete homeownership plan. Where
conditional approval is granted, HUD will specify the conditions in
writing.
(Approved by the Office of Management and Budget under control
number 2577-0201)
Sec. 906.19 HUD approval and PHA-HUD implementing agreement.
Upon HUD notification to the PHA that the homeownership plan is
approvable (in final form that satisfies all applicable requirements of
this part), the PHA and HUD will execute a written implementing
agreement, in a form prescribed by HUD, to evidence HUD approval and
authorization for implementation. The plan itself, as approved by HUD,
shall be incorporated in the implementing agreement. Any of the items
of supporting documentation may also be incorporated, if agreeable to
the PHA and HUD. The PHA shall be obligated to carry out the approved
homeownership plan and other provisions of the implementing agreement
without modification, except with written approval by HUD.
(Approved by the Office of Management and Budget under control
number 2577-0201)
Sec. 906.20 Content of homeownership plan.
The homeownership plan must address the following matters, as
applicable to the particular factual situation:
(a) Property description. A description of the property, including
identification of the development and the specific dwellings to be
sold.
(b) Repair or rehabilitation. If applicable, a plan for any repair
or rehabilitation required under Sec. 906.6, based on the assessment of
the physical condition of the property that is included in the
supporting documentation.
(c) Purchaser eligibility and selection. The standards and
procedures to be used for homeownership applications and the
eligibility and selection of purchasers, consistent with the
requirements of Sec. 906.8. If the homeownership plan allows
application for purchase of vacant units by families who are not
presently public housing or Section 8 residents and not already on the
PHA's waiting lists for those programs, the plan must include an
affirmative fair housing marketing strategy for such families,
including specific steps to inform them of their eligibility to apply,
and to solicit applications from those in the housing market who are
least likely to apply for the program without special outreach.
(d) Sale and financing. Terms and conditions of sale and financing
(see, particularly, Secs. 906.11 through 906.14).
(e) Future consultation with residents. A plan for consultation
with residents during the implementation stage (See Sec. 906.5). If
appropriate, this may be combined with the plan for counseling.
(f) Counseling. Counseling, training, and technical assistance to
be provided in accordance with Sec. 906.9.
(g) Sale via resident-controlled entity. If the plan contemplates
sale to residents via an entity other than the PHA, a description of
that entity's responsibilities and information demonstrating that the
requirements of Sec. 906.7(b) have been met or will be met in a timely
fashion.
(h) Nonpurchasing residents. If applicable, a plan for
nonpurchasing residents, in accordance with Sec. 906.10.
(i) Sale proceeds. An estimate of the sale proceeds and an
explanation of how they will be used, in accordance with Sec. 906.15.
(j) Replacement housing. A replacement housing plan, in accordance
with Sec. 906.16.
(k) Administration. An administrative plan, including estimated
staffing requirements.
(l) Records, accounts and reports. A description of the
recordkeeping, accounting and reporting procedures to be used,
including those required by Sec. 906.17.
(m) Budget. A budget estimate, showing the costs of implementing
the plan, and the sources of the funds that will be used.
(n) Timetable. An estimated timetable for the major steps required
to carry out the plan.
(Approved by the Office of Management and Budget under control
number 2577-0201)
Sec. 906.21 Supporting documentation.
The following supporting documentation shall be submitted to HUD
with the proposed homeownership plan, as appropriate for the particular
plan:
(a) Property value estimate. An estimate of the fair market value
of the property, including the range of fair market values of
individual dwellings, with information to support the reasonableness of
the estimate. (The purpose of this data is merely to assist HUD in
determining whether, taking into consideration the estimated fair
market value of the property, the plan adequately addresses any risks
of fraud and abuse pursuant to Sec. 906.13 and of windfall profit upon
resale, pursuant to Sec. 906.14. A formal appraisal need not be
submitted with the proposed homeownership plan.)
(b) Physical assessment. An assessment of the physical condition of
the property, based on the standards specified in Sec. 906.6.
(c) Workability. A statement demonstrating the practical
workability of the plan, based on analysis of data on such elements as
purchase prices, costs of repair or rehabilitation, homeownership
costs, family incomes, availability of financing, and the extent to
which there are eligible residents who are expected to be interested in
purchase. (See Sec. 906.4(a)).
(d) Commitment and capability. Information to substantiate the
commitment and capability of the PHA and any other entity with
substantial responsibilities for implementing the plan.
(e) Resident planning input. A description of resident consultation
activities carried out pursuant to Sec. 906.5 before submission of the
plan, with a summary of the views and recommendations of residents and
copies of any written comments that may have been submitted to the PHA
by individual residents and resident organizations, and any other
individuals and organizations.
(f) Nondiscrimination certification. The PHA's certification that
it will administer the plan on a nondiscriminatory basis, in accordance
with the Fair Housing Act, Title VI of the Civil Rights Act of 1964,
Executive Order 11063, and implementing regulations, and will assure
compliance with those requirements by any other entity that may assume
substantial responsibilities for implementing the plan.
(g) Legal opinion. An opinion by legal counsel to the PHA, stating
that counsel has reviewed the plan and finds it consistent with all
applicable requirements of Federal, State, and local law, including
regulations as well as statutes. In addition, counsel must identify the
major legal requirements that remain to be met in implementing the
plan, if approved by HUD as submitted, indicating an opinion about
whether those requirements can be met without special problems that may
disrupt the timetable or other features contained in the plan.
(h) Board resolution. A resolution by the PHA's Board of
Commissioners, evidencing its approval of the plan.
(i) Other information. Any other information that may reasonably be
required for HUD review of the plan. Except for the PHA-HUD
implementing agreement under Sec. 906.19, HUD approval is not required
for documents to be prepared and used by the PHA in implementing the
plan (such as contracts, applications, deeds, mortgages, promissory
notes, and cooperative or condominium documents), if their essential
terms and conditions are described in the plan. Consequently, those
documents need not be submitted as part of the plan or the supporting
documentation.
Dated: September 20, 1994.
Joseph Shuldiner,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 94-27897 Filed 11-9-94; 8:45 am]
BILLING CODE 4210-33-P
