12 CFR § 1807.402 - Affordable Housing—Homeownership.

(a) Purchase with or without Rehabilitation.

(1) A Recipient that uses the CMF Award to finance or support the Purchase of Housing by a qualified Homebuyer must ensure that the Housing and Homebuyer meet the affordability requirements of this subpart as follows:

(i) Single-family housing. The Housing must be a Single-family housing.

(ii) Purchase price limits. The Single-family housing does not exceed the purchase price limits for the area under the HUD FHA Section 203(b) Mortgage Insurance Program, or any other index designated by the CDFI Fund as set forth in the applicable Assistance Agreement; the related mortgage must be originated based upon an assessment of whether the Homebuyer can repay the loan based on terms and conditions that are transparent and understandable to the Homebuyer, and the mortgage is affordable to the Homebuyer over the life of the loan.

(iii) Qualifying Homebuyer. The Single-family housing must be purchased by a qualifying Homebuyer.

(iv) Eligible-Income requirements. A qualifying Homebuyer must have a household income at no greater than Eligible-Income. To determine whether a Homebuyer qualifies as Eligible Income (or at any other income level specified in the Assistance Agreement) under this section, the Recipient must use the Homebuyer's adjusted gross income as defined under Internal Revenue Service (IRS) Form 1040 series for individual Federal annual income tax reporting purposes, or other methodology for determining income eligibility as provided in the Assistance Agreement. Homebuyers of one- to four- unit Single-family housing may rent the additional unit(s) as Permanent Housing if at least one unit is maintained as the principal residence of the Homebuyer.

(v) Periods of affordability. Single-family housing under this section must become the principal residence of the Homebuyer at the time of Purchase and is subject to the affordability requirements during the Affordability Period and as further set forth in § 1807.402(a)(1)(vi). The Affordability Period does not apply to additional units rented as Permanent Housing, as described in § 1807.402(a)(1)(iv).

(vi) Resale. To ensure that the CMF Awards are being used for qualifying Families during the Affordability Period, recoupment, replacement, and/or resale strategies must be established and imposed by the Recipient. A recoupment, replacement, and/or resale strategy must ensure that:

(A) In the event the qualifying Family sells the Housing in five years or less from the date of Purchase, the Housing must be sold to an Eligible-Income Family meeting the qualifications set forth in § 1807.402. Otherwise, the CMF Award investment must be recouped by the Recipient and the Housing replaced with a replacement unit to satisfy the affordability requirement for the remainder of the Affordability Period. If the Housing is replaced, the replacement unit must be sold to an Eligible-Income Family and must also meet the qualifications set forth in § 1807.402.

(B) In the event the qualifying Family sells the Housing any time after five years from the date of Purchase but before the end of the Affordability Period, the Housing must either be sold to a new Eligible-Income Family or, if the Housing is not sold to an Eligible-Income Family, the CMF investment must be recouped as Program Income in a proportional amount from net sale proceeds, as further set forth in the Assistance Agreement. If the Housing is not sold to an Eligible-Income Family after the five-year anniversary of the Purchase date and the Recipient recoups a proportional amount of the CMF Awards as Program Income, the Recipient is not required to replace the sold Housing with a replacement unit.

(2) The Recipient may design and implement its own recoupment, replacement, and/or resale strategy, subject to the requirements of § 1807.402(a)(1)(vi) to maintain compliance with the CMF requirements and the Assistance Agreement. Deed restrictions, covenants running with the land, or other similar instruments may be used as the mechanism to impose a strategy. The Recipient shall report to the CDFI Fund the event of resale and/or recoupment and redeployment of the CMF Award, or an equivalent amount, in the manner described in the Assistance Agreement or other guidance issued by the CDFI Fund.

(3) The affordability restrictions are allowed to terminate upon occurrence of any of the following termination events: foreclosure, transfer in lieu of foreclosure, or assignment of an FHA-insured mortgage to HUD. The termination of the affordability restrictions pursuant to any of the aforementioned terminating events will result in the Housing no longer being subject to a recoupment, replacement, and/or resale strategy as previously imposed by the Recipient. The Recipient may use purchase options, rights of first refusal or other preemptive rights to purchase the Housing before foreclosure to preserve affordability. The affordability restrictions shall be revived according to the original terms if, during the original Affordability Period, the owner of record before the termination event obtains an ownership interest in the Housing.

(b) Rehabilitation not involving purchase. Single-family housing that is currently owned by a qualifying Family, as set forth in § 1807.400, qualifies as Affordable Housing if it meets the following requirements of this paragraph (b):

(1) The estimated value of the Single-family housing, after Rehabilitation, does not exceed the purchase price limits for the area, as used in the HUD FHA Section 203(b) Mortgage Insurance Program, or any other index designated by the CDFI Fund. The underlying mortgage(s) should be affordable for the Homebuyer;

(2) The Single-family housing is owned by a qualifying Family as set forth in § 1807.400 and is the only principal residence of the Family at the time of Project Commitment and remains the principal residence of the Family throughout the Affordability Period as described in paragraph (b)(3) of this section;

(3) Single-family housing under this paragraph (b) must meet the affordability requirements during the Affordability Period upon Project Completion or meet the recoupment, replacement, and/or resale provisions of paragraph (a)(5) of this section; and

(4) Single-family housing under this paragraph (b) currently owned by a qualifying Family may be rehabilitated to convert a portion of the Housing into one to three permanent additional units, each with a separate means of ingress/egress, kitchen, sleeping area, bathing area, and bathroom facilities, independent of the primary dwelling. The additional units may be rented as Permanent Housing as long as the primary dwelling remains the principal residence of the Family. While the Affordability Period applies to the primary dwelling, it does not apply to the additional units discussed in this section.

(c) Ownership interest. The owner must meet the definition of Homebuyer and the ownership in the Single-family housing assisted under this section must meet the definition of Homeownership as defined in § 1807.104.

(d) New construction without Purchase. Newly constructed Single-family housing that is built on property currently owned by a Family that will occupy the Single-family housing upon Project Completion, qualifies as Affordable Housing if it meets the requirements under paragraph (a) of this section.

(e) Converting rental units to Homeownership units for existing tenants. Rental CMF Units may be converted to Homeownership units by selling, donating, or otherwise conveying the units to the existing tenants only under an existing documented rent-to-own program to enable the tenants to become Homebuyers in accordance with the requirements of this section. The Homeownership units are subject to a minimum period of affordability equal to the remaining rental Affordability Period, as further specified in the Assistance Agreement.