Sec. 8205 - Use of Funds

ยง 8205. Use of Funds

(a) Eligible activities by cities, counties and CHDOs for use of HOME funds shall be one or more of the following:

(1) first-time homebuyer programs, as defined in Section 8201;

(2) owner-occupied rehabilitation programs, as defined in Section 8201;

(3) rental rehabilitation and/or acquisition programs, as defined in Section 8201;

(4) tenant-based rental assistance programs, as defined in Section 8201;

(5) rental new construction projects, as defined in Section 8201;

(6) rental rehabilitation and/or acquisition projects, as defined in Section 8201;

(7) first-time homebuyer projects, as defined in Section 8201.

(b) Eligible activities by Developers for use of HOME funds shall be one or more of the following:

(1) rental rehabilitation and/or acquisition projects, as defined in Section 8201(ee);

(2) rental new construction projects, as defined in Section 8201(cc);

(3) first-time homebuyer projects developed on Native American Lands as defined in Section 8201(o).

(c) HOME funds for cities, counties and CHDOs, shall only be used to pay for eligible costs as described in 24 CFR Sections 92.206 through 92.209.

(1) All HOME assistance shall be in the form of loans, except for funds used for the activities listed in subsections (2) and (3).

(A) Loans financed from the CHDO set-aside pursuant to 24 CFR Section 92.300(a)(1) shall comply with the financing provisions as required for the following activities:

(i) for land acquisition for first-time homebuyer projects shall bear zero interest.

(ii) Loans to first-time homebuyers shall bear a simple interest rate of 3 percent per annum, computed from the date the Deed of Trust is recorded on the property. Interest and payments shall be deferred for the term of the loan. Commencing on the 11th anniversary of the recordation date, an amount equal to 10 percent of the accrued interest shall be forgiven each year, so that on the 20th anniversary of the recordation date, all interest will have been forgiven if the borrower is in compliance with the requirements stated in the Department's loan documents.

(iii) Loans to rental projects shall bear a simple interest rate of 3 percent. An interest rate of less than 3% may also be permitted by the Department for projects receiving tax credits if necessary to prevent tax credit losses from exceeding the amount of equity invested in the project.

(B) Loans financed from CHDO proceeds pursuant to Section 8206.1(c) shall comply with the following financing provisions as required for the following activities:

(i) Loans assisting first-time homebuyers and homeowners whose homes are being rehabilitated shall bear simple interest rates ranging from 0 to 3 percent per annum, and interest and payments shall be deferred for the term of the loan. The CHDO may forgive some or all of the accrued interest.

(ii) Loans made by CHDOs for rental projects shall bear a simple interest rate of 3 percent. An interest rate of less than 3% may also be permitted by the Department for projects receiving tax credits if necessary to prevent tax credit losses from exceeding the amount of equity invested in the project.

(C) Loans made by State Recipients shall comply with the financing provisions as required for the following activities:

(i) Loans assisting first-time homebuyers and homeowners whose homes are being rehabilitated shall bear simple interest rates ranging from 0 to 3 percent per annum, and interest and payments shall be deferred for the term of the loan. The State Recipient may forgive some or all of the accrued interest.

(ii) Loans made by State Recipients for rental projects shall bear simple interest rates of 3 percent. An interest rate of less than 3% may also be permitted by the Department for projects receiving tax credits if necessary to prevent tax credit losses from exceeding the amount of equity invested in the project.

(2) Funds used for the following shall be provided in the form of a grant:

(A) funds used for tenant based rental assistance, as described in 24 CFR Section 92.209,

(B) relocation payments,

(C) funds necessary to provide the difference between work that is customarily performed and the minimally-required work necessary, using the least cost alternative, to comply with federal lead-based paint regulations in HOME-funded rehabilitation of owner-occupied housing or acquisition of housing for first-time homebuyers, and

(D) funds used for administrative costs eligible pursuant to 24 CFR Sections 92.206(d)(6), 92.206(f)(2), 92.207 and 92.208.

(3) In rehabilitation activities performed as part of a First-time homebuyer program or Owner-occupied rehabilitation program as defined in Section 8201, if necessary to complete the project when the total of all project indebtedness equals or exceeds the projected after-rehabilitation appraised value, HOME funds may be provided in the form of a grant in an amount of up to 25 percent of the applicable HUD per-unit subsidy limit established pursuant to 24 CFR 92.250(a). This grant amount is in addition to any grant funds provided pursuant to subsection (b)(2).

(4) HOME funds may be used to pay the actual costs of administering a local program as described in 24 CFR Section 92.207. The amount of HOME funds used by a State Recipient or CHDO for administrative expenses shall be limited to the amount specified in the NOFA issued by the Department pursuant to Section 8210.

(5) Costs must be necessary and must be consistent with the lowest reasonable cost taking into consideration a project's scope and area.

(6) If a State Recipient or a CHDO has received a grant for administrative costs described in 24 CFR Section 92.206(d)(6) or 92.206(f)(2), the State Recipient or CHDO shall not charge, nor shall it permit its employees or contractors to charge, any fees, or otherwise seek reimbursement for those costs.

(7) In the event that a project is not completed, or a project completion report is not submitted to the Department for the project, a State Recipient or Developer shall repay funds granted for rehabilitation work performed pursuant to subsection (3), relocation payments, lead-based paint work, and administrative costs pursuant to 24 CFR Sections 92.206(d)(6) and 92.206(f)(2), and a CHDO shall repay funds granted for rehabilitation work performed pursuant to subsection (3), relocation payments and lead-based paint work.

(d) A CHDO may request that up to ten percent of the CHDO's project-specific funds be made available for loans pursuant to 24 CFR Section 92.301.

(e) Pursuant to 24 CFR Section 92.208, up to five percent of the total amount of funds made available by HUD to the Department for any funding cycle may be used to pay for the operating expenses of CHDOs with which the Department has entered into standard agreements.

(f) HOME funds shall not be used to pay for prohibited activities or costs described in 24 CFR Section 92.214.

(g) Under the Department's administered HOME program, any funding to a Developer will be in the form of a loan.

(h) HOME funds for Developers shall only be used to pay for eligible costs as described in 24 CFR Sections 92.206.

(1. New section filed 7-2-92 as an emergency; operative 7-2-92 (Register 92, No. 28). A Certificate of Compliance must be transmitted to OAL 10-30-92 or emergency language will be repealed by operation of law on the following day. 2. New section refiled 10-23-92 as an emergency; operative 10-30-92 (Register 92, No. 43). A Certificate of Compliance must be transmitted to OAL 2-23-93 or emergency language will be repealed by operation of law on the following day. 3. New section refiled 3-2-93 as an emergency; operative 3-2-93 (Register 93, No. 10). A Certificate of Compliance must be transmitted to OAL 6-30-93 or emergency language will be repealed by operation of law on the following day. 4. Certificate of Compliance as to 3-2-93 order including renumbering and amendment of former section 8204 to section 8205 with amendment of Note and renumbering of former section 8205 to section 8206 transmitted to OAL 5-26-93 and filed 7-7-93 (Register 93, No. 28). 5. Amendment of section heading, section and Note filed 3-14-97; operative 3-14-97 pursuant to Government Code section 11343.4(d) (Register 97, No. 11). 6. Amendment of subsection (b)(1) and new subsections (b)(1)(A)-(D) and (b)(4)-(5) filed 12-19-2001; operative 12-19-2001 pursuant to Government Code section 11343.4 (Register 2001, No. 51). 7. Amendment filed 9-9-2004; operative 9-9-2004 pursuant to Government Code section 11343.4 (Register 2004, No. 37). 8. Amendment of section and Note filed 10-10-2012; operative 10-10-2012 pursuant to Government Code section 11343.4(Register 2012, No. 41). 9. Amendment of subsection (a), new subsections (b)-(b)(3) and (g)-(h), subsection relettering and amendment of newly designated subsections (c) and (c)(7) filed 10-31-2016; operative 1-1-2017 (Register 2016, No. 45).)

Note: Authority cited: Sections 50406 and 50896.3(b), Health and Safety Code. Reference: 24 CFR part 40; 24 CFR Sections 92.206, 92.301, 92.353 and 92.355; and 42 USC 12742.

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