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2012 HOME Program CHDO Application Workshop

2012 HOME Program CHDO Application Workshop. Tennessee Housing Development Agency Community Programs Division. 2012 CHDO Allocation. The amount reserved for CHDOs in 2012 is $2.48 million. This amount includes CHDO operating expenses which average $129,600 per program year.

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2012 HOME Program CHDO Application Workshop

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  1. 2012 HOME Program CHDO Application Workshop Tennessee Housing Development Agency Community Programs Division

  2. 2012 CHDO Allocation • The amount reserved for CHDOs in 2012 is $2.48 million. • This amount includes CHDO operating expenses which average $129,600 per program year.

  3. Highlights for 2012 • Need Score • % of homeowner or tenant households with housing cost burden; • % of low-income households per county; • % of homes built before 1960; • % of homes lacking complete kitchen facilities; • % of homes lacking complete plumbing facilities; and • % of food stamp recipient households in the county.

  4. Highlights for 2012 • CHDO Proceeds • Eliminates the 25% cap on the third use of CHDO proceeds for administration • CHDO proceeds must still be used the first time to develop an additional unit for homeownership • After the first reuse, CHDO proceeds must be used for housing activities for low income households

  5. FY 2012 HUD Appropriations Requirements • Before committing FY 2012 HOME funds, the PJ must certify in IDIS that: • It has conducted an underwriting review; • Assessed developer capacity and fiscal soundness; • Examined neighborhood market conditions to ensure an adequate need for the project. • Similar provisions in the proposed rule.

  6. FY 2012 HUD Appropriations Requirements • CHDO Capacity • THDA may not commit FY 2012 to a CHDO unless it has determined that the non-profit has staff with demonstrated development experience. • Volunteers, board members and consultants are not staff • Applies to FY 2012 CHDO Set-aside Funds. • Similar provision in the proposed rule.

  7. FY 2012 HUD Appropriations Requirements • Project Completion • Grantees will be required to repay funds expended on projects that are not completed and ready for occupancy within 4 years of the date the Working Agreement is executed. • HUD may grant a one year extension. • Similar provision in the proposed rule.

  8. FY 2012 HUD Appropriations Requirements • Deadline for Sale of Homebuyer Units • If a homeownership unit has not been sold to an eligible homebuyer within 6 months of completion of the construction/rehabilitation, it must be converted to a HOME rental unit and rented to an eligible tenant. • Rental requirements of 92.252 for the affordability period apply • 20 years for new construction. • Similar provision in the proposed rule.

  9. Proposed HOME Rule • Published in Federal Register on December 16, 2011 • Contains changes addressing issues that HUD has been raising for several years • PJ accountability and oversight • CHDO capacity and performance • Property standards • Final Rule expected in Spring of 2013 • Will be applicable to 2012 HOME Program as of the HUD determined effective date

  10. Proposed HOME Rule • Changes affecting: • CHDO definition • Commitment of CHDO reserve funds • Property standards • Inspections- initial, progress, final • Major System useful life expectancy • Sales Price Limits • US Census Bureau Median Sales Price • After Rehabilitation Property Values • 95% median purchase price as published by HUD

  11. 2012 CHDO Application Date • CHDO applications will be due on or before 4:30 PM CDT on Friday, May 31, 2013.

  12. Minimum and Maximum Grants • Applicants must apply for at least $100,000. • Maximum grant is $500,000.

  13. CHDO Draw Down Requirements • 2011 Grants 50% • 2010 Grants 75% • 1992-2009 Grants 100%

  14. Draw Down Deadline • There is a deadline of April 30, 2013 to submit pay requests to THDA. However… • 1992-2009 CHDO funds are 100% drawn. • 2010 CHDO funds are 80.5% drawn. • There is only one CHDO with an extended 2010 contract that is ineligible. • 2011 CHDO funds are 96.3% drawn.

  15. Contract Term • Contracts for the 2012 CHDO grants will begin October 1, 2013 and will end September 30, 2016.

  16. Local Participating Jurisdictions (PJs) • Receive own HOME funds directly from HUD. • Projects in Local PJs are not eligible to receive THDA HOME funds.

  17. Tennessee’s Local PJs • Clarksville • Chattanooga • Jackson • Knoxville • Memphis • Nashville-Davidson County • Knox County • Shelby County • NE Consortium (Bristol, Kingsport, Johnson City, Bluff City, Sullivan County, and Washington County, excluding Jonesborough)

  18. CHDOS In Local PJs • CHDOS located in local participating jurisdictions (PJs) are eligible only if the proposed project is outside the local participating jurisdictions.

  19. CHDO Exception • CHDOs proposing projects in the local participating jurisdictions of Clarksville, Jackson, Knox County and Shelby County may apply for State HOME funds. • The proposals will be limited to $500,000 in combined HOME funding from the State and the local participating jurisdiction.

  20. CHDOs ELIGIBILITY • Are organized under Tennessee law with current Certificate of Existence • Have the provision of housing to low-income households as one of its purposes • Have standards of financial accountability • Have IRS 501(c)(3) designation • Additional requirements as noted inAttachment One: Non-Profit Checklist/CHDO Designation

  21. CHDO ELIGIBILITY • Maintains accountability to low income community residents • One-third of the Board must represent the low income community • Has paid staff with demonstrated development experience. • A non-profit does not meet the test of demonstrated capacity based on volunteers, board members or by hiring a consultant. • Has a history of service to the community in which HOME-assisted housing is located

  22. CHDOs in Proposed Rule • A CHDO may be sponsored or created by a for-profit or governmental entity, but • The officers and employees of the for-profit or the governmental entity may not be officers or employees of the CHDO, and the CHDO may not use the office space of the for-profit or governmental entity.

  23. ASSESSING CHDO CAPACITY • CHDOs must submit their most current audit or audited financial statement. • THDA staff will review financial statements to determine acceptable financial ratios including: • Current Ratio • Working Capital Ratio • Cash to Working Capital • Too many Unfavorable Ratios may disqualify the CHDO applicant.

  24. CHDOS • CHDOs may only apply for HOME funds for projects in which the CHDO is the: • Owner • Sponsor • Developer

  25. CHDO Eligible Activities • Homeownership Programs • Rental Housing Programs

  26. Construction financing Acquisition, rehabilitation and resale Homeownership Programs for CHDOS

  27. General Requirements • There must be a buyer pre-approved for a permanent loan BEFORE the HOME activity can begin. • No speculative construction or acquisition is allowed. • Lease-purchase is permitted if necessary • Homebuyer units that are not sold to an eligible homebuyer within 6 months of completion of construction must be converted to a rental unit and leased to an income-eligible tenant.

  28. Homebuyer Contribution • The homebuyer must make a contribution from own funds equal to 1% of purchase price of property.

  29. Homeownership Underwriting • Front end ratios may not exceed 29% • Back end ratios may not exceed 41% • These ratios are the same as the ratios in THDA’s New Start Program

  30. First Mortgage Requirements • Use THDA loan products whenever possible • Other financing must be at a rate which does not exceed the THDA Great Rate by more than two percentage points • Fixed rate, fully amortizing over life of loan • No pre-payment penalty for early pay-offs • Find a better deal than a THDA mortgage? Always use the loan products than are in the best interest of your homebuyer!

  31. Home Buyer Education • All buyers must complete a homeownership education program from a THDA qualified homebuyer education trainer prior to purchase

  32. Affordability Period • HOMEOWNERSHIP PROGRAMS • Five year affordability period. • The HOME lien is forgiven at the end of five years if unit remains the principal residence of the initial homebuyer. • Secured by Grant Note and Deed of Trust.

  33. Neighborhood Market Conditions • Applicants will need to document that neighborhood market conditions demonstrate a need for the project. • Complete Part VI: Market Study Analysis.

  34. Homeownership CHDOs are expected to Guide the homebuyer through the home buying process Develop an ongoing relationship with the homebuyer Provide additional counseling when needed Verify homeowner occupancy requirements on an annual basis Monitor mortgage default issues

  35. Sales Price Limits-Current Rule • The sales price limit homebuyer programs is the Single Family Mortgage Limits under Section 203(b) of the National Housing Act or the PJ determined 95% of area median purchase price for the jurisdiction. • Attachment Two-Property Value Limits are the 2008 203(b) limits currently in effect. • The limit in most counties is $200,160 for a single-family unit.

  36. Sales Price Limits –Proposed Rule • The sales price limits for newly constructed units is the greater of the HUD-issued 95% of median purchase price limit or the Bureau of Census median sales price for single-family houses sold outside MSAs. • 2011 Census Bureau median sales price is $179,900. • ATTACHMENT TWO: Property Value Limits is the FHA 203(b) mortgage limits currently in effect. • Use of the 203(b) limits will be eliminated when the Proposed Rule becomes effective. • THDA has determined its own 95% median purchase price and is seeking HUD approval in the 2013 Action Plan.

  37. CHDO Soft Second Mortgages • Up to $14,999 of HOME funds must remain with the unit as a soft second to qualify the family for permanent mortgage. • Underwriting must determine the amount of home assistance; not everyone will need the same amount. • Forgiven at end of five years if the unit remains in compliance with affordability requirements. • If the unit remains in compliance but is sold during the affordability period, the amount of HOME funds subject to recapture can be reduced by 20% per year. • Recaptured funds are repaid to THDA.

  38. Homeownership Programs and CHDO Proceeds • At the sale of the HOME-assisted unit, the HOME funds, less the soft second mortgage, are repaid to the CHDO as CHDO proceeds. • CHDO proceeds must be used for additional single-family units under homeownership one more times before HOME requirements end.

  39. RENTAL HOUSING PROGRAMS

  40. Types of Rental Programs • New construction of rental units. • Acquisition and/or rehabilitation of existing units.

  41. Ineligible Rental Activities • Assistance to private, for-profit rental property owners through HOME grants to local governments or non-profit agencies • The applicant must be the owner of the property. • HOME grants combined with HUD funding for 811 or 202 rental projects

  42. Rental Application Requirements • Other financing is a threshold requirement if the project can support a debt. • HOME is to be considered as Gap Financing • Complete Attachment Three:Rental Housing Feasibility Worksheet.

  43. Affordability Period • RENTAL HOUSING • Affordability period ranges from 5 to 20 years based on project type and the amount of HOME subsidy per unit. • Secured by a Grant Note, Deed of Trust and Restrictive Covenant. • The HOME lien is forgiven at the end of the affordability period. There is no annual forgiveness feature.

  44. Rent Levels • Rents are controlled throughout the applicable affordability period. • ATTACHMENT FIVE: HOME RENTS

  45. Utility Allowances • For tenant-paid utilities, a utility allowance must be subtracted from the published rent to determine the allowable rents. • Utility allowances are posted on THDA’s website on the Section 8 Rental Assistance page.

  46. Initial and Long-Term Tenant Income and Rent Requirements (see Manual)

  47. Neighborhood Market Conditions • Applicants will need to document that neighborhood market conditions demonstrate a need for the project. • Complete Part VI: Market Study Analysis.

  48. GENERALPROGRAMREQUIREMENTS

  49. Income Limits • HOME funds may only be used to benefit low income households, that is, households below 80% of area median income. • Income of tenants must be re-determined annually in rental projects. • ATTACHMENT FOUR: INCOME LIMITS

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