Section 5(h) Homeownership Program for Public and Indian Housing; Final Rule DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

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