Helping Public Housing Residents Buy Homes

By: Owusu Kizito, EA/MBA

Part B        

Sale via Purchase and Resale Entity (PRE) – If plans are to use a PRE for the sale of units, the PHA must provide the firm’s qualifications, marketing plan, and a description of that entity’s responsibilities as well as information demonstrating that the written agreement between the PRE and PHA contains or will contain the rights and responsibilities of parties; assurances of compliance with program requirements; assurances of deed restrictions on acquisition and resale of units; description of how the net proceeds will be determined and used; protections against fraud and misuse; limitations on overhead and profit; record keeping/reporting requirements; assurances of non-discrimination against eligible purchasers; adequate legal remedies; assurances of sale only to low-income households; a five-year limit on sale to eligible buyers; and the notification process to households (relocation, environmental review).

Non-Purchasing Residents – The PHA must provide a relocation plan for non-purchasing public housing residents for purposes of transferring possession of the unit. The PHA must provide a notice 90 days before displacing the resident, provide for payment of actual costs and reasonable relocation expenses, ensure that the resident is offered comparable housing and counseling.

Section 32 Sales Proceeds Guidance – A PHA may realize gross sales proceeds in connection with selling homes under a Section 32 homeownership program. As part of the homeownership plan submitted to HUD, the PHA must describe the sources from which it will likely realize gross sale proceeds, along with its intended use of those proceeds. Gross sales proceeds will likely derive from the two primary sources: (1) payments made by homebuyers for credit to the purchase price (e.g. earnest money, down payments, payments out of the proceeds of mortgage loans, payments made under a lease-purchase arrangement, principal and interest payments under a purchase-money mortgage, etc.); and (2) payments made to the PHA upon resale of the homeownership units, including any earned interest.

A PHA may use gross sale proceeds to pay for the costs related to the sale of the homeownership units (costs may include payments of construction costs, developer fees, counseling agency fees, etc). If any net proceeds remain after these costs have been paid, a PHA may use those remaining net sale proceeds as provided in its HUD-approved homeownership plan. HUD will approve the use of proceeds in a homeownership plan if the PHA evidences that the proceeds will be used for purposes related to low-income housing, as defined by the Act. The Act defines low-income housing as decent, safe, and sanitary dwellings assisted under the Act. Therefore, PHAs are only permitted to use Section 32 homeownership program proceeds in connection with public housing units under an ACC, housing assisted by the Housing Choice Voucher Program, or to fund a homeownership plan under the Act.

A non-exhaustive list of some of the acceptable HUD-approved uses of net sale proceeds from a Section 32 homeownership program include: (1) repair or rehabilitation of existing ACC units; (2) development and/or acquisition of new ACC units; (3) provision of social services for PHA residents; (4) implementation of a preventative and routine maintenance strategy for specific ACC units; and (5) modernization of a portion of a residential building in the PHA’s inventory to develop a recreation room, laundry room, or day-care facility for PHA residents; (5) modernization of a portion of a residential building in the PHA’s inventory to develop a recreation room, laundry room, or day-care facility for PHA residents; and (6) funding of another HUD-approved homeownership program authorized under Section 32, 9, 24 or any other Section of the Act, for assistance to purchasers, for reasonable planning and implementation costs, and for acquisition and/or development of homeownership units; (7) in connection with the homeownership plan from which the proceeds 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 (e.g. a reserve for the PHA to repurchase, repair and resell the homes in the event of defaults) (8) leveraging of proceeds in order to partner with a private entity for the purpose of developing mixed-finance housing (that will include ACC units) under 24 CFR 941 (Subpart F).

If the homeownership plan utilizes a PRE, the PHA may opt to have the PRE return sale proceeds to the PHA or may permit the PRE to use them for low-income housing purposes.

Sale Proceeds and Asset Management (Section 32 Homeownership Proceeds) – In its written approval of a Section 32 homeownership plan, the SAC will restrict the use of any proceeds that a PHA may realize from Section 32 homeownership proceeds to a specific low-income housing purpose (e.g. ACC, Section 32, or Section 8). Accordingly, under asset management, Section 32 homeownership proceeds will always be restricted program assets and will always maintain their federalized identity.

When a PHA realizes net proceeds from Section 32 homeownership plan, it should recognize any gain or loss on sale on the income statement associated with the balance sheet where that asset is recorded. If approval has been obtained to use the sales proceeds for activities outside the original AMP, the PHA should then, when the time is appropriate, transfer those proceeds to the other project or program where the use has been permitted. For example, if the SAC approves the use of Section 32 proceeds for the modernization of a certain AMP, the PHA should, first, recognize the gain on the income statement of the original project but then transfer the funds to the project where the modernization work will occur. Any retained sales proceeds should be reflected as a ?restricted? asset on the balance sheet (restricted for the uses specifically approved by the SAC). A PHA must use net proceeds in accordance with the spending and financial reporting requirements under the revised 24 CFR Part 990. Please consult a HUD financial manager for additional guidance and/or clarification of these reporting requirements.

Records, Accounts and Reports – The PHA must provide a description of its record keeping, accounting, and reporting procedures that will be used under the Homeownership Program relative to administrative, purchase and financial records, and include a plan for annual reporting on sales to HUD/PIC and in the Annual Plan.

Budget – The PHA must submit a budget for the proposed Homeownership program. The budget should itemize rehabilitation or repair costs, any financing assistance, specific program administrative costs to implement the program (i.e., management, relocation, counseling, legal, etc.), and the sources of funds that will be used to implement the Homeownership program even if paid from the Operating Reserves. The PHA should use the sources and uses budget format similar to Appendix 3 and 4.

Additionally, the PHA must consider sale price, income, and subsidy contributions when discussing budget assumptions under the Section 32 Homeownership program. If financial commitments are being considered from other fund providers as part of the Homeownership Program, the PHA must provide firm written commitments that such funds are in place, including their source, type and amount.

Timetable – The PHA must provide an estimated timeframe for program performance, progress and completion relative to the major steps required to implement the Homeownership program.

PHA and PRE Performance in Homeownership – The PHA must provide a statement describing its capability to successfully implement a homeownership program. The statement must describe the PHA’s and its partners’, if applicable, experience in implementing homeownership programs for low-income families. If the PHA has not previously implemented a homeownership program, a description of the PHA’s experience in implementing public housing modernization and development projects is required.

The required homeownership plan components above, along with the required supporting documentation contained at 24 CFR Part 906.40, are intended to provide HUD with all the necessary information to assess the workability and legality of the proposed program and the PHA’s capacity to implement it. Generally, the homeownership plan should serve as a roadmap for the program’s implementation.

Reference

www.hud.gov

Posted by admin on Sep 16 2013. Filed under Community News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry