Section 8 Homeownership Program

SUMMARY: This proposed rule amends the regulations for the Section 8

tenant-based rental voucher program at 24 CFR part 982. These

amendments implement Section 8(y) of the United States Housing Act of

1937, as amended by Section 555 of the Quality Housing and Work

Responsibility Act of 1998. Section 8(y) authorizes a public housing

agency to provide tenant-based assistance for an eligible family that

purchases a dwelling unit that will be occupied by the family.

DATES: Comments due date: Comments on the proposed rule and the

proposed information collection requirements are due on or before: June

29, 1999.

ADDRESSES: Interested persons are invited to submit written comments

regarding this proposed rule to the Rules Docket Clerk, Office of

General Counsel, Room 10276, Department of Housing and Urban

Development, 451 Seventh Street, SW, Washington, DC 20410. Comments

should refer to the above docket number and title. A copy of each

comment submitted will be available for public inspection and copying

between 7:30 a.m. and 5:30 p.m. weekdays at the above address.

Facsimile (FAX) comments will not be accepted.

FOR FURTHER INFORMATION CONTACT: Gerald J. Benoit, Office of Public and

Indian Housing, Department of Housing and Urban Development, Room 4220,

451 Seventh Street, SW, Washington, DC 20410; telephone (202) 708-0477

(this is not a toll-free number). Hearing or speech impaired

individuals may access this number via TTY by calling the toll-free

Federal Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. General Description of Homeownership Option

This rule implements the ``homeownership option'' under Section

8(y) of the United States Housing Act of 1937 (42 U.S.C. 1437f(y)) (the

``1937 Act''). Section 8(y) authorizes Section 8 tenant-based

assistance for an eligible family that occupies a home purchased and

owned by members of the family. Although Section 8(y) was originally

enacted by section 185 of the Housing and Community Development Act of

1992 (Pub. L. 102-550, approved October 28, 1992; 106 Stat. 3672),

Section 8 homeownership was never implemented because the program was

unworkable without statutory change. Section 8(y) was amended by

section 555 of the Quality Housing and Work Responsibility Act of 1998

(Pub. L. 105-276, approved October 21, 1998; 112 Stat. 2461).

This rule implements the section 8(y) homeownership option by

adding a new ``special housing type'' under 24 CFR part 982, subpart M,

of the unified rule for the Section 8 tenant-based voucher and

certificate programs. Subpart M describes program requirements for

variants from the basic Section 8 tenant-based rental assistance

programs.

Homeownership assistance offers a new option for families that

receive Section 8 tenant-based assistance. As for other special housing

types, HUD does not provide any additional or separate funding for

homeownership assistance under Section 8(y). If a Public Housing Agency

(PHA) chooses to offer Section 8 tenant-based assistance under the new

homeownership option, a qualified family may freely choose whether to

request rental assistance or to instead request homeownership

assistance.

An applicant admitted to the tenant-based programs may receive

Section 8 voucher assistance to purchase, rather than rent, a home. A

participant receiving Section 8 tenant-based rental assistance may

purchase a home with continued assistance under the homeownership

option.

In general, a PHA that administers Section 8 tenant-based

assistance has the choice whether to offer homeownership assistance as

an option for qualified applicants and participants in its agency's

Section 8 tenant-based program. The PHA may choose to make

homeownership assistance freely available for any qualified applicant

or participant, or to restrict homeownership assistance to families or

purposes defined by the agency. (The PHA is only required to offer

homeownership assistance if needed as a reasonable accommodation for a

family member who is a person with disabilities.)

As required by law, the homeownership option is not available for

units receiving Section 8 project-based assistance. By law,

homeownership assistance under Section 8(y) may only be provided for

families receiving ``tenant-based assistance'' (42 U.S.C. 1437f(y)(1)).

In implementing the homeownership option, HUD wishes to strike a

balance that expands homeownership opportunities, while minimizing

defaults that negatively impact assisted homeowners and their

neighborhoods. HUD hopes to improve on past homeownership programs by

learning from prior errors and building upon the successful features of

similar programs. HUD believes the regulatory proposals contained in

this rule achieve these goals, and welcomes public comment on ways to

improve the implementation of the Section 8 homeownership option.

II. Overview of How the Section 8 Homeownership Program Works

An overview of how the Section 8 homeownership program works

follows. Additional detail will be provided elsewhere in the preamble

and regulation text.

PHA administration of the Section 8 homeownership program differs

from the tenant-based rental program in many ways. A PHA may use the

certificate and voucher program funding already under Annual

Contributions Contract (ACC) or new tenant-based Section 8 funding for

rental or homeownership purposes. The PHA may opt to limit the number

of Section 8 homeownership vouchers or not implement the homeownership

option. There is no separate or additional funding for the

homeownership program.

At the briefing of families selected to participate in the tenant-

based Section 8 program, the PHA must discuss any homeownership option.

Family participation in the homeownership program is voluntary.

Although the homeownership program is open to both Section 8 applicants

and participants, not every Section 8 tenant-based family may receive

homeownership assistance. The PHA may limit the number of homeownership

families and there are statutory family eligibility requirements such

as a minimum level of non-welfare income and a history of full-time

employment. (The employment history requirement is not applicable to

elderly and disabled families, and there is a modified income

requirement for elderly and disabled families.) The program is

generally limited to first-time homeowners. The PHA may add other local

eligibility requirements such as participation in the FSS program.

Once a family has been determined by the PHA to be eligible for

Section 8 homeownership assistance, the family must attend

homeownership counseling sessions. The counseling may be done by PHA

staff or another entity such as

[[Page 23489]]

a HUD-approved housing counseling agency.

The PHA must advise the family of any deadlines on locating a home,

securing financing, and purchasing the home. The PHA does not issue a

certificate or voucher to the family. If the family is unable to locate

a home to purchase within the PHA established deadlines, the PHA may

issue the family a rental certificate or voucher.

The family is free to select an existing (not under construction)

home of their choice located within the PHA jurisdiction. If the family

qualifies for portability, the family may also select a home in the

jurisdiction of another PHA, if the receiving PHA is approving units

under the Section 8 homeownership option. The receiving PHA may absorb

the family into their Section 8 program or bill the initial PHA for the

housing assistance payments. The receiving PHA will arrange for any

necessary counseling. The receiving PHA homeownership policies will

apply to the portable family.

The home chosen by the family must pass an initial PHA Housing

Quality Standards (HQS) inspection. (The HQS used for the Section 8

rental program is applicable to the homeownership program.) In

addition, the family must hire an independent, professional home

inspector to inspect the home selected by the family to identify

physical defects and the condition of the major building systems and

components. A copy of the independent inspection report must be given

to the PHA. The family and the PHA must determine if any prepurchase

repairs are necessary.

The family will enter into a contract of sale with the seller. The

family must secure their own financing for the home purchase. There is

no prohibition against using local or State Community Development Block

Grant (CDBG) or other subsidized financing in conjunction with the

Section 8 homeownership program. The PHA may prohibit certain forms of

financing, require a minimum cash downpayment, or determine that the

family cannot afford the proposed financing. (There are no Section 8

funds for home purchase financing. Instead, the Section 8 housing

assistance will be provided monthly to help the family meet

homeownership expenses.)

It is anticipated that mortgage lenders will consider the Section 8

assistance as a source of family income when underwriting the loan. If

purchase of the home is financed with Federal Housing Administration

(FHA)-insured mortgage financing, such financing is subject to FHA

mortgage insurance credit underwriting requirements. If purchase of the

home is financed (in whole or in part) without FHA-insured mortgage

financing, the PHA must require that the underwriting procedures used

by the lender comply with the basic mortgage insurance credit

underwriting requirements for FHA-insured single family mortgage loans.

The FHA single family underwriting standards are described in HUD

Handbook 4155.1 (titled ``Mortgage Credit Analysis for Mortgage

Insurance on One-to-Four Family Properties.'') HUD specifically invites

public comment on whether the final rule should require the use of the

FHA underwriting standards, or whether this requirement would unduly

restrict the homeownership option.

Homeownership housing assistance payments may be made directly to

the family or to lender on behalf of the family. (Two-party checks to

the family and lender are not authorized because such a practice is

incompatible with typical lending documents and practices.) Before the

housing assistance begins, the family and the PHA must execute a

``statement of homeowner obligations.'' The Section 8 tenant-based

housing assistance payments (HAP) contract, request for lease approval

and lease addendum are not applicable to the Section 8 homeownership

program.

The amount of the housing assistance payment will be calculated

using a modified voucher program payment standard approach. The

homeownership housing assistance payment will equal the lower of (1)

the payment standard minus the total tenant payment or (2) the monthly

homeownership expenses minus the total tenant payment. The family is

responsible for the monthly homeownership expenses not reimbursed by

the housing assistance payment. (Total tenant payment is higher of the

minimum rent, 10 percent of monthly income, 30 percent of monthly

adjusted income, or the welfare rent.) There is no shopping incentive

in the homeownership option.

The PHA must use the utility allowance schedule and payment

standard schedules applicable to the Section 8 voucher rental program.

After the homeownership housing assistance payments begin, the PHA

will annually reexamine family income and composition and make

appropriate adjustments to the amount of the monthly housing assistance

payment. There is no requirement for the PHA to conduct an annual HQS

inspection.

Except for elderly and disabled families, Section 8 homeownership

assistance may only be paid for a maximum period of up to ten years.

The PHA may establish a shorter maximum assistance term. Elderly and

disabled families are exempt from subsidy time limits. HUD invites

public comment on the reasonableness of the ten year limit on Section 8

homeownership assistance. Specifically, commenters are invited to

submit their thoughts on whether HUD should lengthen or shorten the ten

year limit proposed in this rule.

The head of household, and any spouse of the head of household,

that has previously defaulted on a mortgage obtained through the

homeownership option is barred from receiving future Section 8

homeownership assistance.

HUD specifically invites comments on whether, or under what

conditions, a family that has defaulted on a mortgage securing debt to

purchase a home under the homeownership option should be permitted to

receive Section 8 rental assistance after the mortgage default. Such

conditions may include requiring that the family be returned to the

waiting list.

The PHA will earn the same administrative fees as in the tenant-

based rental program. The administrative fee is earned for each month

that homeownership assistance is paid.

A PHA opting to administer the Section 8 homeownership program must

establish local homeownership policies. The following policies must be

described in the PHA administrative plan: Any local eligibility

criteria (Secs. 982.626(b) and 982.627(a)(5)); any minimum income

requirements (Sec. 982.627(b)); any minimum cash downpayment or equity

requirements; any requirements for financing purchase of a home,

including requirements concerning qualification of lenders (for

example, prohibition of seller financing or case-by-case approval of

seller financing), terms of financing (for example, a prohibition of

balloon payment mortgages and establishment of a minimum homeowner

equity requirement), and financing affordability (Sec. 982.631); the

maximum homeownership assistance term (Sec. 982.633); PHA policy for

payment of the HAP to the family or lender (Sec. 982.634(d); PHA policy

about issuing the family a rental voucher if the family does not find a

suitable house to buy, or defaults on the home mortgage loan

(Secs. 982.628(c) and 982.636); PHA maximum times to locate and

purchase a home (Sec. 982.628); and any PHA requirements for

continuation of homeownership assistance (Sec. 982.632(b)(7)).

[[Page 23490]]

III. Who Is Assisted

A. General

The homeownership option is used to assist families in two types of

housing:

1. A unit owned by the family--One or more family members hold

title to the home.

2. A cooperative unit--One or more family members hold membership

shares in the cooperative.

B. Assistance for Homeowner

Before enactment of Section 8(y), Section 8 assistance could be

paid on behalf of a renter or cooperative member, but not for a family

that owns fee title to its home. Section 8 rental assistance terminates

when the family takes title to the home. By contrast, Section 8(y) is

specifically designed to authorize assistance for a ``homeowner''--a

family that owns title to the home.

The law provides that the public housing agency may provide

assistance for:

1. A ``first-time homeowner'';

2. A family that owns or is acquiring shares in a cooperative; and

3. ``Any other family, as the Secretary may prescribe.'' (In the

law, this third, open-ended category is formally included in the

definition of ``first-time homeowner.'')

By law and this rule, the homeownership option is designed to

promote and support homeownership by a ``first-time'' homeowner--a

family that moves for the first time from rental housing to a family-

owned home. Section 8 payments supplement the family's own income to

facilitate the transition from rental to homeownership. The initial

availability of these assistance payments helps the family pay the

costs of homeownership, and may provide additional assurance for a

lender, so that the family can finance purchase of the home.

Section 8 homeownership assistance for cooperative homeowners is

specifically authorized for both a family that is a first time

cooperative homeowner and a family that owned their cooperative unit

prior to receiving Section 8 assistance. Cooperative homeowners were

eligible for tenant-based assistance prior to passage of the Quality

Housing and Work Responsibility Act of 1998. Congress intends that

cooperative homeowners continue to be eligible for tenant-based

assistance regardless of their status as a first time homeowner.

To qualify as a ``first-time homeowner,'' the assisted family may

not include any person who owned a ``present ownership interest'' in

the residence of any family member in the last three years (regulatory

definition at Sec. 982.4; statutory definition at 42 U.S.C.

1437f(y)(7)(A)). Such interest includes ownership of title or of

cooperative membership shares. The restriction to ``first-time''

homeowners is intended to direct homeownership assistance to ``new''

homeowners who may be unable to purchase a home without this

assistance, but to discourage use of Section 8 subsidy on behalf of

families who have achieved homeownership independently, without benefit

of the Federal Section 8 subsidy. In addition, the head of household,

and any spouse of the head of household, that has previously defaulted

on a mortgage obtained through the homeownership option is barred from

receiving future Section 8 homeownership assistance.

Under the law, HUD is authorized to permit Section 8 homeownership

assistance for ``any other family'' as the Secretary may prescribe ``

that is, for a family other than a first-time homebuyer. HUD requests

comments concerning whether HUD should exercise the statutory authority

to exempt any categories of families from the first-time homeowner

requirement. For example, a possible exemption from the first-time

homeowner eligibility requirement is a divorced spouse who does not

currently own a home but had joint ownership of a home with their ex-

spouse in the last three years.

C. Assistance for Cooperative Member

Section 8(y) authorizes homeownership assistance for a family that

``owns or is acquiring shares in a cooperative.'' Thus, the law allows

assistance for a family that already owns cooperative shares before

commencement of Section 8 homeownership assistance, not just for a

family that acquires cooperative shares for the first time with the

support of such assistance. In this respect, the law treats ownership

of cooperative membership different from ownership of title to the

home. In the latter case, the law authorizes assistance for a first

time homeowner only (and for additional families only in circumstances

prescribed by the Secretary). The rule specifies that cooperative

membership shares may be purchased at or before commencement of

homeownership assistance (see the definition of ``membership shares''

at Sec. 982.4).

Before this rule, HUD has provided essentially the same Section 8

rental assistance for a cooperative member as for a family that chooses

to rent a unit in conventional rental housing. Since the origin of the

Section 8 program, the law has provided that with respect to members of

a cooperative, ``rent'' means the charges under the occupancy

agreements between the members and the cooperative (42 U.S.C.

1437f(f)(5)). Thus Section 8 assistance is paid to cover the difference

between the cooperative occupancy charges and the income-based tenant

rent.

Under the existing rules for the Section 8 tenant-based program,

assistance for a family that chooses to reside in a cooperative is

largely subject to the same rules and contractual requirements as for a

family that chooses a rental housing unit. Under these existing rules,

the cooperative occupancy agreement (between the family and the

cooperative) is treated like the lease between the family and the owner

in standard rental housing. The cooperative occupancy agreement must

include the requirements of the standard program ``lease addendum,''

including requirements concerning lease term, grounds for eviction, and

owner responsibility of unit maintenance. Cooperative carrying charges

are treated like rent to owner (contract rent), and requirements

including annual rent adjustments for units assisted in the certificate

program are applicable.

In short, assistance for cooperative residents under the old rule

is not designed from the ground up as a form of homeownership

assistance. The old Section 8 requirements do not fit the normal

structure of occupancy and responsibility in cooperative housing. In

particular, while a cooperative member is normally responsible for

maintenance of the individual unit, the Section 8 regulations and

contracts provide that the ``owner'' `` including a cooperative--is

largely responsible for unit maintenance.

The mismatch between Section 8 rental program requirements and

normal cooperative procedures reduces availability of cooperative units

for occupancy by Section 8 families. Cooperatives may be unable or

unwilling to grant separate and special treatment for Section 8

families that does not apply to other cooperative members, for example,

differences concerning the amount of cooperative carrying charges,

procedures or grounds for termination of cooperative membership, or

enforcement of member maintenance obligations. Cooperatives are

accustomed to use standard forms of occupancy agreement and other legal

documentation governing the rights of members and of the cooperative

entity. The cooperatives may decline to accommodate modifications to

meet requirements of the Section 8 program,

[[Page 23491]]

or to enter into a contract with the PHA (the HAP contract), as

required for the normal Section 8 rental program.

In the future, the PHA may provide assistance for a cooperative

member either under the new homeownership option or under the special

procedures for cooperative housing within the Section 8 tenant-based

rental program (Sec. 982.619). Each form of assistance is designated as

a separate special housing type under the Section 8 voucher program.

The PHA may elect to offer either or both of these forms of cooperative

assistance in its voucher program, and to define the appropriate role

of each available form of cooperative assistance in the local Section 8

program.

In the new homeownership option, Section 8 assistance is paid on

behalf of a cooperative member, but there is no requirement that the

cooperative enter into any agreement or any direct relationship with

the PHA that provides Section 8 assistance for the cooperative member.

The cooperative is not asked to modify any ordinary requirement for

cooperative membership or occupancy, nor asked to modify any

requirement concerning assessment or collection of the cooperative

carrying charge, maintenance of the unit or sanctions for violation of

cooperative requirements.

For clarity, in describing requirements for homeownership

assistance to a cooperative member, the new rule supplements existing

definitions. As in the past, the term ``cooperative'' refers to housing

owned by a nonprofit corporation or association, and where a member of

the corporation or association has the right to reside in a particular

apartment, and to participate in management of the housing

(Sec. 982.4). The rule also adds the following two new definitions:

1. Cooperative member. A family of which one or more members owns

membership shares in a cooperative.

2. Membership shares. Shares in a cooperative. By owning such

cooperative shares, the share-owner has the right to reside in a

particular apartment in the cooperative, and the right to participate

in management of the housing.

The existing HUD rules for cooperative housing in the tenant-based

rental program were codified in April 1998. These rules provide that a

family may only receive assistance in a cooperative that has adopted

requirements to maintain continued affordability for lower income

families after transfer of a member's interest. This affordability

requirement was based on a provision of the prior voucher law that was

removed in the October 1998 statutory amendments. There is now no such

statutory affordability requirement for Section 8 tenant-based

assistance to cooperative residents--whether such assistance is

provided under the rental assistance program or under the new Section

8(y) homeownership option--and there is no such requirement under this

rule.

HUD believes that such a continuing affordability requirement would

restrict housing choice of Section 8 families among available

cooperative units. Such a requirement would also diminish a major

advantage of homeownership--the incentive for an assisted family to

maintain and improve the housing and to receive full value upon a

future sale of the home. This rule removes the federal mandate for

existing continuing affordability requirements for rental assistance in

cooperative housing.

In addition, this rule modifies the allocation of maintenance

responsibility between the cooperative and the family. In the regular

rental assistance program, the owner is responsible for most

maintenance of a unit. Under the old rule, this principle also applies

to rental assistance for Section 8 cooperative housing. However, in a

conventional cooperative, the member is generally responsible for

maintenance of the individual apartment, and the cooperative entity is

only responsible for maintenance of common areas and systems. The

cooperative agreement defines the division of maintenance obligations

between the member and the cooperative.

The existing regulation is amended by this rule to reflect the

normal division of maintenance responsibility in cooperative housing

for which rental (not homeownership) assistance is being provided

(Sec. 982.619(d)(3)). The revised rule provides that the family is

responsible for a breach of the HQS caused by failure to perform

maintenance in accordance with the cooperative occupancy agreement

between the family and the cooperative. The PHA must take prompt and

vigorous action to enforce the family maintenance obligation, and may

terminate assistance for failure to perform maintenance in accordance

with the cooperative occupancy agreement (Sec. 982.619(d)(4)).

During the term of the HAP contract between the PHA and the

cooperative, the unit and premises must be maintained in accordance

with the Section 8 HQS. If the contract unit and premises are not

properly maintained, the PHA may exercise all available remedies,

regardless of whether the family or the owner is responsible for such

breach of the HQS. PHA remedies for breach of the HQS include recovery

of overpayments, suspension of housing assistance payments, abatement

or other reduction of housing assistance payments, termination of

housing assistance payments and termination of the HAP contract

(Sec. 982.619(d)(1)).

In the new homeownership cooperative option under Section 8(y),

there is no HAP contract (between the PHA and the cooperative as unit

``owner'') and no lease (between the cooperative and the family). The

unit is only inspected before the commencement of assistance. There is

no requirement that the family or cooperative assure that the unit

continues to satisfy HQS during the continuation of assisted occupancy.

Consequently, there is no need to specify any allocation of maintenance

responsibility between the cooperative and the family.

D. Lease-Purchase Agreement

The law and rule explicitly permit Section 8 homeownership

assistance for a family that purchases a home that the family

previously occupied under a ``lease-purchase agreement''--generally a

lease with option to purchase. Section 8(y) provides that the PHA may

provide Section 8 homeownership assistance for an eligible family that

purchases ``a unit under a lease-purchase agreement'' (42 U.S.C.

1437f(y)(1)).

Prior to enactment of the Quality Housing and Work Responsibility

Act of 1998, a family that received Section 8 rental subsidy could

exercise an option to purchase the unit under a lease-purchase

agreement. However, there were problems in applying the rent

reasonableness requirements and, as noted above, Section 8 rental

subsidy terminated when the family took title to the home. Thus the

prospective loss of subsidy discouraged the family from taking title,

and moving from rental to homeownership. However, Section 8(y) now

provides a vehicle for continuation of Section 8 assistance after the

family takes title to the home.

To qualify as a first-time homeowner (as noted above) the family

may not have owned title to a principal residence in the last three

years. The rule specifies, however, that the right to purchase title

under a lease-purchase agreement does not constitute a prohibited

``present ownership interest.'' A family that holds an option to

purchase may exercise the option and receive assistance under the new

homeownership option.

A new Sec. 982.317 is added to describe the requirements for lease-

purchase agreements. The housing assistance payment for a lease-

purchase unit may

[[Page 23492]]

not exceed the amount that would be paid on behalf of the family if the

rental unit was not subject to a lease-purchase agreement. Any

``homeownership premium'' included in the rent to the owner that would

result in a higher subsidy amount than would otherwise be paid by the

PHA must be absorbed by the family. ``Homeownership premium'' is

defined as an increment of value attributable to the value of the

lease-purchase right or agreement such as an extra monthly payment to

accumulate a downpayment or reduce the purchase price. Families are

permitted to pay an extra amount out-of-pocket to the owner for

purchase related expenses.

Section 982.317 also provides that in determining whether the rent

to owner for a unit subject to a lease-purchase agreement is a

reasonable amount, any ``homeownership premium'' paid by the family to

the owner must be excluded when the PHA determines rent reasonableness.

Lease-purchase agreements are considered rental, and all the normal

tenant-based Section 8 rental rules are applicable. The family will be

subject to the homeownership regulatory requirements at the time the

family is ready to exercise the homeownership option under the lease-

purchase agreement. At that point in time, the PHA will determine

whether the family is eligible for Section 8 homeownership assistance

(e.g., whether the family meets the income and employment thresholds

and any other criteria established by the PHA). If determined eligible

for a homeownership voucher, the family will then arrange for an

independent home inspection, attend counseling sessions, and obtain

financing. Homeownership assistance will begin when the family

purchases the home and after all of the requirements of the

homeownership option are met.

HUD requests comments on whether the family should be subject to

any of the homeownership requirements prior to entering into a lease-

purchase arrangement, instead of delaying the requirements until the

family is ready to purchase the home.

IV. How To Qualify for Homeownership Assistance

A. General

To qualify for assistance under the homeownership option, a family

must meet the general requirements for admission to the PHA's Section 8

tenant-based voucher program, and additional special requirements for

homeownership assistance (Sec. 982.627). At commencement of

homeownership assistance, the family must meet homeownership assistance

requirements concerning:

1. Any PHA minimum income requirements;

2. Family employment;

3. Prior default on a mortgage securing debt to purchase a home

under the homeownership option; and

4. Other initial requirements established by the PHA.

B. Minimum Income Requirement

To enter the Section 8 voucher program, a family must be income-

eligible (i.e., below the maximum income cutoff). However, to qualify

for the homeownership option in the voucher program, a PHA may require

the family to demonstrate sufficient income to meet a minimum income

standard, which is intended to assure that a family will have

sufficient income to pay homeownership and other family expenses not

covered by the Section 8 subsidy.

Section 8(y) provides that a family may not receive homeownership

assistance unless the family demonstrates that gross monthly income is

at least two times the voucher ``payment standard'' or an ``other

amount'' established by the Secretary (Section 8(y)(1)(B), 42 U.S.C.

1437f(y)(1)(B)). The rule provides that the family must demonstrate

that the head of household and spouse have qualified monthly income of

not less than any amount established in the PHA administrative plan.

(Sec. 982.627(b)(1)).

The law does not specify whether the minimum income requirement is

only applied at initial qualification for commencement of homeownership

assistance, or is also a continuing requirement that must be maintained

so long as the family is receiving assistance under the homeownership

option. (By contrast, the law explicitly provides that the statutory

employment requirement only applies at the time the family initially

receives homeownership assistance.) HUD has decided that any minimum

income requirement will only be applied to determine initial

qualification to purchase a particular home, not as a continuing

requirement. This policy gives assurance to the family, and possibly to

a potential mortgage lender, that the stream of homeownership

assistance payments will not be disrupted because of a drop in family

income. Any minimum income requirement will only apply again if the

family purchases a subsequent home with Section 8 homeownership

assistance.

The law provides that the income counted in meeting any minimum

income requirement under the homeownership option must come from

sources other than ``public assistance.'' Thus, PHAs may limit

homeownership assistance to families with substantial non-welfare

income available to pay housing and non-housing costs. However, the law

provides that HUD may count public assistance in determining

availability of voucher homeownership assistance for an elderly or

disabled family (in which the household head or spouse is an elderly or

disabled person). The rule defines the meaning of ``public assistance''

(Sec. 982.4), thereby identifying the types of income that may not be

included in determining whether a family meets the homeownership

minimum income standard.

The rule also clarifies that the requirement to disregard public

assistance income (as defined in this proposed rule) only applies in

determining whether a family has the minimum income to qualify for

homeownership assistance. However, public assistance income is counted

for other program purposes: in determining income-eligibility for

admission to the voucher program, and in calculating the amount of the

monthly homeownership assistance payment for a family assisted under

the homeownership option (Sec. 982.627(b)(2)(ii)).

Under the law, HUD may permit PHAs to count public assistance

income of an ``elderly family'' or a ``disabled family''--a family

whose head or spouse is elderly or disabled (definitions of these terms

are found in section 3(b)(3)(B) of the 1937 Act; 42 U.S.C.

1437a(b)(3)(B))--in determining whether a family has the minimum income

to qualify for homeownership assistance. On consideration of this

issue, and recognizing the special needs of such families, the rule

requires that the PHA count public assistance of an elderly or disabled

family in determining whether the family meets the minimum income

requirement for homeownership assistance (Sec. 982.627(b)(2)). This

requirement to count public assistance incomes in determining whether a

family has the minimum income to qualify for homeownership assistance

only applies, however, to families which satisfy the statutory

definition of an elderly or disabled family. In particular, as required

by the law, the requirement to count public assistance income does not

apply in the case of a family that includes a disabled person other

than the household head or spouse (and

[[Page 23493]]

where the household head or spouse are not elderly or disabled).

C. Family Employment

Section 8(y) provides that, except as provided by HUD, the family

must be able to demonstrate, at the time that the family initially

receives homeownership assistance, that one or more adult members of

the family have achieved employment for the time period established by

HUD (42 U.S.C. 1437f(y)(1)(B)).

The rule provides at Sec. 982.627(c) that a family seeking

homeownership assistance must demonstrate that the head of household or

spouse is currently employed on a full-time basis, and have been

continuously so employed during the year before commencement of

homeownership assistance. The one-year employment requirement, coupled

with any minimum income requirement as discussed above indicate that

the family is a good candidate for homeownership (i.e., that the family

has the economic resources to handle the responsibilities of

homeownership). HUD is requiring consideration of the employment

history of the head of household or spouse, rather that any adult

family member, to ensure that this important requirement is applicable

to the family members who will be executing the contract of sale and

mortgage or loan documents.

Under the law, HUD has broad authority to allow exceptions to the

statutory employment requirement. As in the case of any minimum income

requirement, the rule provides that the employment requirement does not

apply to an elderly or disabled family (Sec. 982.627(c)(2)). In

addition, the rule provides that if a family other than an elderly or

disabled family includes a person with disabilities, the PHA must grant

exemption from the employment requirement if required as a reasonable

accommodation for a disabled person under HUD rules.

D. Discussion of Other Requirements

1. Homeownership Counseling

Section 8(y) provides that a family that receives assistance under

the homeownership option must participate in a homeownership and

housing counseling program provided by the PHA (42 U.S.C.

1437f(y)(1)(D)). The rule provides that before commencement of

homeownership assistance the family must attend and satisfactorily

complete the pre-assistance counseling program required by the PHA

(Sec. 982.629(a)).

The PHA pre-assistance counseling program must cover: Home

maintenance, budgeting and money management, credit counseling, how to

negotiate the purchase price of a home, how to get homeownership

financing (including pros and cons of different types of financing),

how to find a home (including information about homeownership

opportunities, schools, and transportation) and advantages of

purchasing and how to locate a home in an area that does not have a

high concentration of low-income families (Sec. 982.629(b)).

The extent of counseling may be tailored to each family's needs.

For example, neither a cooperative member or a family exercising a

lease-purchase option need counseling on how to find a home.

The counseling may be provided by the PHA, another entity such as a

HUD-approved housing counseling agency, or by both the PHA and another

entity. HUD-approved housing counseling agencies provide free

counseling. The HUD field office will provide the PHA with a list of

the HUD-approved counseling agencies.

Experience with low-income homeownership programs has demonstrated

that quality counseling is imperative for successful homeownership and

prevention of mortgage defaults. In addition, counseling will assist

families in making informed decisions when selecting the home they wish

to purchase.

2. Financing Purchase of Home

Families selected to participate in the Section 8 homeownership

program must secure their own financing. If the family applies for a

mortgage or loan (including an FHA mortgage), all regular lender

underwriting and property inspection requirements apply.

The rule provides that a PHA may establish requirements for

financing purchase of a home to be assisted under the homeownership

option (Sec. 982.631). If purchase of the home is financed (in whole or

in part) without FHA-insured mortgage financing, the PHA must require

that the underwriting procedures used by the lender comply with the

basic mortgage insurance credit underwriting requirements for FHA-

insured single family mortgage loans (HUD Handbook 4155.1).

All PHA financing or affordability requirements must be described

in the PHA administrative plan.

The PHA may set requirements concerning qualifications of lenders

and terms of financing. For example, a PHA may determine that mortgages

with balloon payments and certain kinds of variable interest rate loans

are not in the best interest of the family because it is unlikely the

family could afford the payments in a couple of years. In addition, the

PHA could opt to prohibit seller financing, or to only allow seller

financing in cases when the seller is a nonprofit or the purchase price

can be clearly supported by an independent appraisal. Another purpose

of the PHA financing review would be to determine whether the monthly

mortgage or loan payment is affordable after considering other family

expenses. PHAs may wish to establish minimum initial equity

requirements to ensure that the family has a personal financial stake

in the home, thus helping to minimize mortgage loan defaults (for

example, the PHA may require that the family use its own resources to

make the entire initial downpayment, or a percentage of the initial

downpayment).

Although PHAs have local discretion in approving the home purchase

financing arrangement, PHAs are cautioned not to use this discretion in

a way that restricts the use of viable financing resources and unfairly

penalizes the homebuyer. It is noted that variable interest rate loans

are now commonplace and homeowners often refinance to later secure a

fixed rate or a lower monthly payment.

3. Home Inspections

Two kinds of physical inspections are required in the homeownership

option (in addition to, and separate from, any lender required

inspections): (a) an HQS inspection by the PHA and (b) an ``independent

professional home inspection'' by an inspector that is used in the

private market by homebuyers. (Sec. 982.630).

The PHA inspection is the normal initial HQS inspection conducted

by the PHA for the tenant-based rental assistance program. This

inspection will indicate the current physical condition of the unit and

any repairs necessary to ensure that the unit is safe and otherwise

habitable. The PHA HQS inspection does not include an assessment of the

adequacy and life span of the major building components, building

systems, appliances and other structural components.

The only difference between the HQS inspection requirements for the

tenant-based rental and homeownership programs is that the PHA will not

conduct annual inspections. The exemption from annual HQS homeownership

inspections is authorized by the statute. The initial (prior to the

commencement of housing assistance) HQS inspection is the only PHA

inspection required for homeownership units during the entire

[[Page 23494]]

time the family is receiving Section 8 homeownership assistance.

The other inspection required by this proposed rule is a statutory

requirement that is consistent with private real estate practice. The

``independent professional home inspection'' is conducted by a private

market home inspector (not PHA staff) that is experienced and qualified

to conduct prepurchase inspections for homebuyers. The purpose of the

home inspection is the identification of home defects and an assessment

of the adequacy and life span of the major building components,

building systems, appliances and other structural components. The

requirement for an inspection arranged by the buyer and satisfactory to

the buyer is a typical contingency clause in contracts of sale. The

section 8 family selects the home inspector and pays the home

inspector's fees. (The source of funds for family payment of the home

inspection may be a gift, family savings or an inheritance, or sources

other than family savings.) A copy of the inspection report is provided

to the family and the PHA.

Although the PHA may not require the family to use a particular

inspector, the PHA may establish standards for qualification of the

home inspector selected by the family. For example, the PHA may require

the use of a home inspector certified by the American Society of Home

Inspectors, or a similar national organization.

The PHA must review the home inspector's report to determine

whether repairs are necessary prior to purchase, and to generally

assess whether the purchase transaction makes sense in light of the

overall condition of the home and the likely costs of repairs and

capital expenditures. For example, the home inspector's report might

reveal foundation instability, and a defective roof and heating system

that needs immediate replacement at great cost. Confronted with these

facts the PHA would discuss the inspection results with the family and

decide whether to disapprove the unit for assistance under the

homeownership option because of the major physical problems and

substantial correction costs, or whether it is feasible to have the

necessary repairs accomplished prior to sale.

HUD specifically requests comments on whether a separate HQS and

home inspector inspection should be required for the Section 8

homeownership program.

4. Switching From Section 8 Homeownership Voucher Assistance to Rental

Voucher Assistance, and Vice-Versa, After a Mortgage Default and at

Other Times

There are a number of circumstances under which a family may switch

between rental and homeownership assistance under the voucher program.

Various scenarios are described below.

a. A Section 8 participant receiving certificate or voucher

assistance may request a PHA operating a homeownership program to

determine whether the family is eligible for Section 8 homeownership

assistance. If the family is determined eligible for homeownership

assistance, the PHA may authorize the family to search for a home to

purchase. The family would continue to receive rental assistance until

the family vacates the rental unit (consistent with the lease).

b. A Section 8 applicant selected from the PHA waiting list goes to

the briefing and learns of the homeownership option. The PHA determines

the family is eligible for homeownership and the family is given two

months to find a home to purchase. At the end of the two months the PHA

extends the search period for an additional month because the family

has found a unit. However, the purchase never occurs due to problems

qualifying for a loan. The family opts to rent an apartment and try

homeownership at a later time after they have increased their savings.

The PHA issues the family a rental voucher.

c. The family purchases a home under the Section 8 homeownership

option. After several years the family decides that they prefer to live

in a rental apartment. If there is no mortgage loan default and the

family has met all obligations under the Section 8 program, the PHA may

issue the family a rental voucher. If there is a default on an FHA

mortgage (and assuming the family has met all the family obligations

under the Section 8 program other than not causing a mortgage default),

the PHA may exercise the PHA option to issue the family a rental

voucher only if the family vacates the home and conveys the title in

accordance with Sec. 982.636(b)(3). If there is a non-FHA mortgage loan

default, the PHA has discretion to issue the family a rental voucher or

terminate assistance.

As noted above, HUD is considering establishing conditions on the

ability of a family to receive Section 8 rental assistance after a

mortgage default. HUD invites public comment on what types of

restrictions and conditions may be appropriate. Any such conditions

will be described in the final rule. HUD also requests comments on

whether the incentives provided for rapid possession and title

conveyance for homes with FHA mortgage defaults should be extended to

all lenders including secondary market agencies.

5. Portability

Families that are determined eligible for homeownership assistance

may exercise the homeownership option outside of the initial PHA's

jurisdiction if the receiving PHA is administering a Section 8

homeownership program, and is accepting new families into the receiving

PHA's homeownership program. See Sec. 982.635.

The receiving PHA may absorb the homeownership family or bill the

initial PHA for the homeownership housing assistance using the normal

portability billing process. Communications between the initial and

receiving PHA are necessary. As is the case for Section 8 rental

portable families, all of the receiving PHA's administrative policies

are applicable to the homeownership family. The family will be required

to attend the briefing and counseling sessions required by the

receiving PHA. The receiving PHA, not the initial PHA, will determine

whether the financing for and the physical condition of the unit are

acceptable.

6. Buying Another Home With Section 8 Assistance

A homeownership family may purchase another home with Section 8

assistance provided there is no mortgage loan default.

There are no Section 8 sale recapture provisions; the family may

keep any profits or proceeds from the sale of the home (assuming there

are no recapture provisions associated with the family's home

financing). However, most of the homeownership requirements applicable

to the first home purchase remain applicable to a subsequent purchase.

For example, the family must once again meet the employment threshold.

The necessity of any counseling will be determined by the PHA. An

independent home inspection will be conducted and the PHA will

determine the acceptability of the financing. The PHA established time

limit for homeownership (10 years or less) applies to the cumulative

time the family receives homeownership assistance. The only exception

to eligibility requirements applicable to initial receipt of

homeownership assistance is that the family need not meet the first-

time homebuyer requirement. (See Sec. 982.636(c).)

[[Page 23495]]

7. Applicability of the Section 8 Tenant-Based Certificate and Voucher

Requirements to the Homeownership Option

Section 982.638 details the portions of the certificate and voucher

regulations that apply to the homeownership special housing type. PHAs

should carefully review this section of the regulations.

It is noted that all civil rights laws applicable to the Section 8

certificate and voucher programs are applicable to the homeownership

program (see Sec. 982.53 for a listing of the equal opportunity

requirements applicable to the Section 8 tenant-based programs). PHAs

must comply with all equal opportunity and nondiscrimination

requirements imposed by contract or Federal law. In addition, PHAs are

reminded that ``finders-keepers'' applies to homeownership assistance;

PHAs may not steer families to particular units or neighborhoods.

Further, as in the tenant-based rental voucher program, PHAs must

provide assistance to expand housing opportunities. The PHA briefing

for both rental and homeownership families must explain:

a. Where the family may lease or purchase a unit;

b. How portability works (if the family qualifies to lease or

purchase a unit outside the PHA jurisdiction under portability

procedures); and

c. The advantages of moving to an area that does not have a high

concentration of poor families (if the family is currently living in a

high poverty census tract within the jurisdiction of the PHA).

Further, if the family includes any person with disabilities, the

PHA must take appropriate steps to ensure effective communication

during the briefing in accordance with 24 CFR 8.6.

8. Link Between Section 8 Homeownership and the Family Self-Sufficiency

(FSS) Program

PHAs may wish to link Section 8 homeownership with the FSS program.

For example, participation in the FSS program could be a PHA

eligibility requirement (see Secs. 982.626(b) and 982.627(a)(5)). The

PHA may also opt to incorporate the homeownership goal into the

family's FSS contract of participation so any FSS escrow could be

advanced for purchase of a home or home maintenance/improvement

purposes. It is noted that FSS families must meet the homeownership

income and employment thresholds.

9. PHA Determination of ``Homeownership Expense''

Section 982.634(c) details the expenses that the PHA will include

when determining the family's homeownership expenses. The principal and

interest amount is the debt service amount for the initial (original)

mortgage debt, any mortgage insurance premium, and any refinancing of

such debt. HUD requests comments on whether homeownership expense

should exclude any ``owner cashout'' associated with refinancing of the

original mortgage debt.

The utility allowance is the same utility allowance schedule as

used in the rental certificate and voucher programs.

The PHA allowance for maintenance expenses is the amount the PHA

thinks is appropriate for routine maintenance for a home. The PHA

allowance for major repairs and replacements is the amount the PHA

thinks is appropriate for a replacement ``reserve'' for a home. These

two maintenance allowances should not be based on the condition of the

home, similar to how utility allowances work. It is recommended that a

PHA contact counseling agencies, local realtors and relevant national

organizations for advice on the appropriate level for these local

allowances. (Families are not required to put the amount set aside for

these two maintenance allowances in the bank or in escrow. Further, it

is not expected that the monthly amounts for these allowances will

cover all maintenance and capital expenditures.) Comments are requested

on suggested ways to determine the allowance for maintenance expenses

and the allowance for major repairs and replacements.

V. Findings and Certifications

Paperwork Reduction Act

The homeownership option is a special housing type under 24 CFR

part 982, subpart M, of the unified rule for the Section 8 tenant-based

voucher and certificate program. The information collection

requirements of the Section 8 rental certificate and voucher programs

approved by the Office of Management and Budget (OMB) under the

Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) are not increased

by the implementation of this new special housing type. While the rule

substitutes several variations to existing requirements under the

normal Section 8 tenant-based program, the homeownership option does

not increase the total reporting and recordkeeping burden resulting

from the collection of information for the Section 8 certificate and

voucher programs.

As noted earlier in this preamble, the PHA does not issue the

family a rental voucher or certificate or execute a housing assistance

payment contract with an owner of rental property on behalf of the

family participating in the homeownership option. Instead, the family

and PHA execute a statement of homeowner obligations. Under the

homeownership option the family provides the PHA with a copy of the

contract of sale rather than submitting a Request for Lease Approval

and a copy of the proposed lease. The homeownership option does require

an independent pre-purchase inspection in addition to the initial HQS

inspection; however, this burden is off-set by the removal of the

requirement that the unit be subsequently inspected no less than

annually.

The OMB approval number for the Section 8 tenant-based assistance

program is 2577-0169, which expires on April 30, 2001. An agency may

not conduct or sponsor, and a person is not required to respond to, a

collection of information unless the collection displays a valid

control number.

Environmental Impact

A Finding of No Significant Impact with respect to the environment

was made in accordance with HUD regulations in 24 CFR part 50 that

implement section 102(2)(C) of the National Environmental Policy Act of

1969 (42 U.S.C. 4223). The 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 General Counsel, Room 10276, Department of

Housing and Urban Development, 451 Seventh Street, SW, Washington, DC.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.

1531-1538) establishes requirements for Federal agencies to assess the

effects of their regulatory actions on State, local, and tribal

governments and the private sector. This proposed rule does not impose

any Federal mandates on any State, local, or tribal governments or the

private sector within the meaning of Unfunded Mandates Reform Act of

1995.

Executive Order 12866

The Office of Management and Budget (OMB) reviewed this proposed

rule under executive Order 12866, Regulatory Planning and Review. OMB

determined that this proposed rule is a ``significant regulatory

action,'' as

[[Page 23496]]

defined in section 3(f) of the Order (although not economically

significant, as provided in section 3(f)(1) of the Order). Any changes

made to the proposed rule subsequent to its submission to OMB are

identified in the docket file, which is available for public inspection

in the office of the Department's Rules Docket Clerk, Room 10276, 451

Seventh Street, SW, Washington, DC 20410-0500.

Impact on Small Entities

The Secretary, in accordance with the Regulatory Flexibility Act (5

U.S.C. 605(b)) (the RFA), has reviewed and approved this proposed rule

and in so doing certifies that this rule will not have a significant

economic impact on a substantial number of small entities. The reasons

for HUD's determination are as follows:

(1) A Substantial Number of Small Entities Will Not Be Affected

The proposed rule is exclusively concerned with public housing

agencies that administer tenant-based housing assistance under section

8 of the United States Housing Act of 1937. Specifically, the proposed

rule will permit a public housing agency to provide Section 8 tenant-

based assistance to an eligible family that purchases a dwelling unit

that will be occupied by the family. Under the definition of ``Small

governmental jurisdiction'' in section 601(5) of the RFA, the

provisions of the RFA are applicable only to those few public housing

agencies that are part of a political jurisdiction with a population of

under 50,000 persons. The number of entities potentially affected by

this rule is therefore not substantial

(1) No Significant Economic Impact

The proposed regulatory amendments will not change the amount of

funding available under the Section 8 voucher program. Accordingly, the

economic impact of this rule will not be significant, and it will not

affect a substantial number of small entities.

Notwithstanding HUD's determination that this rule will not have a

significant economic effect on a substantial number of small entities,

HUD specifically invites comments regarding any less burdensome

alternatives to this rule that will meet HUD's objectives as described

in this preamble.

Executive Order 12612, Federalism

The General Counsel, as the Designated Official for HUD under

section 6(a) of Executive Order 12612, Federalism, has determined that

this rule will not have federalism implications concerning the division

of local, State, and Federal responsibilities. This proposed rule is

exclusively concerned with the establishment of an alternative use of

Section 8 rental voucher assistance. Specifically, the rule will

authorize a public housing agency to provide tenant-based assistance

for an eligible family that purchases a dwelling unit that will be

occupied by the family. No programmatic or policy change will result

from this rule that will affect the relationship between the Federal

government and State and local governments.

Catalog of Domestic Assistance Numbers

The Catalog of Domestic Assistance numbers for the programs

affected by this proposed rule are 14.146, 14.147, 14.850, 14.851,

14.852, and 15.141.

List of Subjects in 24 CFR Part 982

Grant programs--housing and community development, Housing, Rent

subsidies, Reporting and recordkeeping requirements.

For the reasons discussed in the preamble, HUD proposes to amend 24

CFR parts 982 as follows:

PART 982--SECTION 8 TENANT-BASED ASSISTANCE: UNIFIED RULE FOR

TENANT-BASED ASSISTANCE UNDER THE SECTION 8 VOUCHER PROGRAM

1. The authority citation for 24 CFR part 982 continues to read as

follows:

Authority: 42 U.S.C. 1437f and 3535(d).

2. Amend Sec. 982.4(b) as follows:

a. Revise the definitions of Cooperative, and Special housing

types;

b. Remove the definition of Mutual housing; and

c. Add the definitions of Cooperative member, Family, First-time

homeowner, Home, Homeowner, Homeownership assistance, Homeownership

expenses, Homeownership option, Interest in the home, Membership

shares, Public assistance, and Statement of homeowner obligations in

alphabetical order.

Sec. 982.4 Definitions.

* * * * *

(b) * * *

Cooperative. Housing owned by a nonprofit corporation or

association, and where a member of the corporation or association has

the right to reside in a particular apartment, and to participate in

management of the housing.

Cooperative member. A family of which one or more members owns

membership shares in a cooperative.

* * * * *

Family. A person or group of persons, as determined by the PHA,

approved to reside in a unit with assistance under the program. See

discussion of family composition at Sec. 982.201(c).

* * * * *

First-time homeowner. In the homeownership option: A family of

which no member owned any present ownership interest in a principal

residence of any family member during the three years before

commencement of homeownership assistance for the family. ``Present

ownership interest'' in a residence includes title, in whole or in

part, to a residence, or ownership, in whole or in part, of membership

shares in a cooperative. ``Present ownership interest'' in a residence

does not include the right to purchase title to the residence under a

lease-purchase agreement.

* * * * *

Home. In the homeownership option: A dwelling unit for which the

PHA pays homeownership assistance.

Homeowner. In the homeownership option: A family of which one or

more members owns title to the home.

Homeownership assistance. In the homeownership option: Monthly

homeownership assistance payments by the PHA. Homeownership assistance

payment may be paid to the family, or to a mortgage lender on behalf of

the family.

Homeownership expenses. In the homeownership option: A family's

allowable monthly expenses for the home, as determined by the PHA in

accordance with HUD requirements (see Sec. 982.634).

Homeownership option. Assistance for a homeowner or cooperative

member under Sec. 982.625 to Sec. 982.638. A special housing type.

* * * * *

Interest in the home. In the homeownership option (see

Sec. 982.632(b)(3)):

(1) In the case of assistance for a homeowner, ``interest in the

home'' includes title to the home, any lease or other right to occupy

the home, or any other present interest in the home.

(2) In the case of assistance for a cooperative member, ``interest

in the home'' includes ownership of membership shares in the

cooperative, any lease or other right to occupy the home, or any other

present interest in the home.

* * * * *

[[Page 23497]]

Membership shares. In the homeownership option: shares in a

cooperative. By owning such cooperative shares, the share-owner has the

right to reside in a particular apartment in the cooperative, and the

right to participate in management of the housing.

* * * * *

Public assistance. In the homeownership option (see

Sec. 982.627(b)): Income assistance from Federal, state or local

welfare programs. Public assistance includes: Federal housing

assistance or the housing component of a welfare grant; assistance

under Temporary Assistance for Needy Families (TANF); Supplemental

Security Income (SSI) that is subject to an income eligibility test;

food stamps; general assistance or other assistance provided under a

Federal, state or local program that provides assistance available to

meet Family living or housing expenses.

* * * * *

Special housing types. See subpart M of this part 982. Subpart M of

this part states the special regulatory requirements for: SRO housing,

congregate housing, group home, shared housing, manufactured home

(including manufactured home space rental), cooperative housing (rental

assistance for cooperative member) and homeownership option

(homeownership assistance for cooperative member or first-time

homeowner).

Statement of homeowner obligations. In the homeownership option:

The family's agreement to comply with program obligations.

* * * * *

3. Add Sec. 982.305(b)(4) to read as follows:

Sec. 982.305 PHA approval to lease a unit.

* * * * *

(b) * * *

(4) In the case of a unit subject to a lease-purchase agreement,

the PHA must provide written notice to the family of the environmental

requirements that must be met before commencing homeownership

assistance for the family (see Sec. 982.626(c)).

* * * * *

4. Add Sec. 982.317 to read as follows:

Sec. 982.317 Lease-purchase agreements.

(a) A family leasing a unit with assistance under the program may

enter into an agreement with an owner to purchase the unit. So long as

the family is receiving such rental assistance, all requirements

applicable to families otherwise leasing units under the tenant-based

program apply. Any homeownership premium (e.g., increment of value

attributable to the value of the lease-purchase right or agreement such

as an extra monthly payment to accumulate a downpayment or reduce the

purchase price) included in the rent to the owner that would result in

a higher subsidy amount than would otherwise be paid by the PHA must be

absorbed by the family.

(b) In determining whether the rent to owner for a unit subject to

a lease-purchase agreement is a reasonable amount in accordance with

Sec. 982.503, any homeownership premium paid by the family to the owner

must be excluded when the PHA determines rent reasonableness.

5. Revise 982.352(a)(6) to read as follows:

Sec. 982.352 Eligible housing.

(a) * * *

(6) A unit occupied by its owner or by a person with any interest

in the unit.

* * * * *

Subpart M--Special Housing Types

6. Amend Sec. 982.601 as follows:

a. Revise paragraphs (a), (b)(1), and (b)(2);

b. Redesignate paragraphs (c) and (d) as paragraphs (d) and (e)

respectively; and

c. Add new paragraph (c).

Sec. 982.601 Overview.

(a) Special housing types. This subpart describes program

requirements for special housing types. The following are the special

housing types:

(1) Single room occupancy (SRO) housing;

(2) Congregate housing;

(3) Group home;

(4) Shared housing;

(5) Manufactured home;

(6) Cooperative housing (excluding families that are not

cooperative members); and

(7) Homeownership option.

(b) PHA choice to offer special housing type. (1) The PHA may

permit a family to use any of the following special housing types in

accordance with requirements of the program: single room occupancy

(SRO) housing, congregate housing, group home, shared housing,

manufactured home when the family owns the home and leases the

manufactured home space, cooperative housing or homeownership option.

(2) In general, the PHA is not required to permit families

(including families that move into the PHA program under portability

procedures) to use any of these special housing types, and may limit

the number of families using special housing types.

* * * * *

(c) Program funding for special housing types. HUD does not provide

any additional or designated funding for special housing types, or for

a specific special housing type (e.g, the homeownership option).

Assistance for special housing types is paid from program funding

available for the PHA's tenant-based program under the consolidated

annual contributions contract.

* * * * *

7. Amend Sec. 982.619 as follows:

a. Revise paragraph (a);

b. Redesignate paragraph (d) as paragraph (e); and

c. Add new paragraph (d).

Sec. 982.619 Cooperative housing.

(a) Assistance in cooperative housing. This section applies to

rental assistance for a cooperative member residing in cooperative

housing. However, this section does not apply to:

(1) Assistance for a cooperative member under the homeownership

option pursuant to Sec. 982.625 through Sec. 982.638; or

(2) Rental assistance for a family that leases a cooperative

housing unit from a cooperative member (such rental assistance is not a

special housing type, and is subject to requirements in other subparts

of this part 982).

* * * * *

(d) Maintenance. (1) During the term of the HAP contract between

the PHA and the cooperative, the dwelling unit and premises must be

maintained in accordance with the HQS. If the dwelling unit and

premises are not maintained in accordance with the HQS, the PHA may

exercise all available remedies, regardless of whether the family or

the cooperative is responsible for such breach of the HQS. PHA remedies

for breach of the HQS include recovery of overpayments, abatement or

other reduction of housing assistance payments, termination of housing

assistance payments and termination of the HAP contract.

(2) The PHA may not make any housing assistance payments if the

contract unit does not meet the HQS, unless any defect is corrected

within the period specified by the PHA and the PHA verifies the

correction. If a defect is life-threatening, the defect must be

corrected within no more than 24 hours. For other defects, the defect

must be corrected within the period specified by the PHA.

(3) The family is responsible for a breach of the HQS that is

caused by any of the following:

[[Page 23498]]

(i) The family fails to perform any maintenance for which the

family is responsible in accordance with the terms of the cooperative

occupancy agreement between the cooperative member and the cooperative;

(ii) The family fails to pay for any utilities that the cooperative

is not required to pay for, but which are to be paid by the cooperative

member;

(iii) The family fails to provide and maintain any appliances that

the cooperative is not required to provide, but which are to be

provided by the cooperative member; or

(iv) Any member of the household or guest damages the dwelling unit

or premises (damages beyond ordinary wear and tear).

(4) If the family has caused a breach of the HQS for which the

family is responsible, the PHA must take prompt and vigorous action to

enforce such family obligations. The PHA may terminate assistance for

violation of family obligations in accordance with Sec. 982.552.

(5) Section 982.404 does not apply to assistance for cooperative

housing under this section.

* * * * *

8. Add Secs. 982.625 through 982.638 under a new undesignated

heading ``Homeownership Option'' to read as follows:

Homeownership Option

982.625 Homeownership option: General.

982.626 Homeownership option: Initial requirements.

982.627 Homeownership option: Homeownership option: How to qualify

for homeownership assistance.

982.628 Homeownership option: Additional PHA requirements for

family search and purchase.

982.629 Homeownership option: Homeownership counseling.

982.630 Homeownership option: Home inspections and contract of

sale.

982.631 Homeownership option: Financing purchase of home;

affordability of purchase.

982.632 Homeownership option: Continued assistance requirements;

Family obligations.

982.633 Homeownership option: Maximum term of homeownership

assistance.

982.634 Homeownership option: Amount and distribution of monthly

homeownership assistance payment.

982.635 Homeownership option: Portability.

982.636 Homeownership option: Move with continued tenant-based

assistance.

982.637 Homeownership option: Administrative fees.

982.638 Homeownership option: Applicability of other requirements.

Homeownership Option

Sec. 982.625 Homeownership option: General.

(a) The homeownership option is used to assist a family residing in

an existing home purchased and owned by one or more members of the

family. The assisted family must be:

(1) A first-time homeowner; or

(2) A cooperative member.

(b) A family assisted under the homeownership option may be a newly

admitted or existing participant in the program.

(c) The PHA must approve a live-in aide if needed as a reasonable

accommodation so that the program is readily accessible to and useable

by persons with disabilities in accordance with 24 CFR part 8. (See

Sec. 982.316 concerning occupancy by a live-in aide.)

Sec. 982.626 Homeownership option: Initial requirements.

(a) List of Federal requirements. Before commencing homeownership

assistance for a family, the PHA must determine that all of the

following initial requirements have been satisfied:

(1) The family is qualified to receive homeownership assistance

(see Sec. 982.627).

(2) The family has satisfactorily completed the PHA program of

required pre-assistance homeownership counseling (see Sec. 982.629).

(3) The unit is eligible. (See Sec. 982.352. Paragraphs (a)(6),

(a)(7) and (b) of Sec. 982.352 do not apply.)

(4) The unit has been inspected by a PHA inspector and by an

independent inspector designated by the family (see Sec. 982.630).

(5) The unit satisfies the HQS (see Sec. 982.401 and Sec. 982.630).

(6) The family is a first-time homeowner or cooperative member (see

definitions of these terms at Sec. 982.4) and neither the head of

household or spouse has defaulted on a mortgage obtained through the

homeownership option.

(7) Except for cooperative members who have acquired cooperative

membership shares prior to commencement of homeownership assistance,

the family has entered a contract of sale in accordance with

Sec. 982.630(c).

(8) In the case of assistance for a cooperative member, the

cooperative membership shares may be acquired at or before commencement

of homeownership assistance.

(b) Additional PHA requirements. The PHA may prescribe additional

initial requirements for commencement of homeownership assistance for a

family. Any such additional requirements must be described in the PHA

administrative plan.

(c) Environmental requirements. The PHA is responsible for

complying with the authorities listed in 24 CFR 58.6 requiring the

purchaser to obtain and maintain flood insurance for units in special

flood hazard areas, prohibiting assistance for acquiring units in the

coastal barriers resource system, and requiring notification to

purchaser of units in airport runway clear zones and airfield clear

zones.

(d) PHA disapproval of seller. The PHA may not commence

homeownership assistance for occupancy of a home if the PHA has been

informed (by HUD or otherwise) that the seller of the home is debarred,

suspended, or subject to a limited denial of participation under 24 CFR

part 24.

Sec. 982.627 Homeownership option: How to qualify for homeownership

assistance.

(a) Determination whether family is qualified. The PHA may not

provide homeownership assistance for a family unless the PHA determines

that the family satisfies all of the following initial requirements at

commencement of homeownership assistance for the family:

(1) At admission to the voucher program, the family is eligible for

assistance (determined in accordance with Sec. 982.201).

(2) The family satisfies any minimum income requirement (described

in paragraph (b) of this section).

(3) The family satisfies the employment requirements (described in

paragraph (c) of this section).

(4) The family has not defaulted on a mortgage securing debt to

purchase a home under the homeownership option (see paragraph (d) of

this section).

(5) The family also satisfies any other initial requirements

established by the PHA. Any such additional requirements must be

described in the PHA administrative plan.

(b) Minimum income requirements. (1) At commencement of

homeownership assistance for the family, the family must demonstrate

that the head of household and spouse have qualified monthly income

(gross income), as determined in accordance with Sec. 5.609, that is

not less than any minimum amount established by the PHA in accordance

with the administrative plan.

(2)(i) Except in the case of an elderly family or a disabled family

(see the definitions of these terms at 24 CFR 5.403(b)), the PHA shall

not count any public assistance received by the family in determining

qualified monthly income under this section.

[[Page 23499]]

(ii) The disregard of public assistance income under paragraph

(b)(2)(i) of this section only affects the determination of minimum

monthly income used to determine if a family initially qualifies for

commencement of homeownership assistance in accordance with this

section, but does not affect:

(A) The determination of income-eligibility for admission to the

voucher program;

(B) Calculation of the amount of the family's total tenant payment

(gross family contribution); or

(C) Calculation of the amount of homeownership assistance payments

on behalf of the family.

(iii) In the case of an elderly family or a disabled family, the

PHA shall count public assistance in determining qualified monthly

income.

(c) Employment requirements. (1) Except as provided in paragraph

(c)(2) of this section, the family must demonstrate that the head of

household or spouse is currently employed on a full-time basis, and has

been continuously so employed during the year before commencement of

homeownership assistance for the family.

(2) The employment requirement in paragraph (c)(1) of this section

does not apply to an elderly family or a disabled family (see the

definitions of these terms at 24 CFR 5.403(b)). Furthermore, if a

family, other than an elderly family or a disabled family, includes a

person with disabilities, the PHA shall grant an exemption from the

employment requirement if the PHA determines that an exemption is

needed as a reasonable accommodation so that the program is readily

accessible to and usable by persons with disabilities in accordance

with 24 CFR part 8.

(d) Prohibition against mortgage defaults. The PHA shall not

commence homeownership assistance for a family if the head of household

or spouse has previously received assistance under the homeownership

option, and has defaulted on a mortgage securing debt incurred to

purchase the home.

Sec. 982.628 Homeownership option: Additional PHA requirements for

family search and purchase.

(a) The PHA may establish the maximum time for a family to locate a

home to purchase, and to purchase the home.

(b) The PHA may require periodic family reports on the family's

progress made to purchase in finding and purchasing a home.

(c) If the family is unable to purchase a home within the maximum

time established by the PHA, the PHA may issue the family a voucher to

lease a unit or place the family's name on the waiting list for a

voucher.

Sec. 982.629 Homeownership option: Homeownership counseling.

(a) Before commencement of homeownership assistance for a family,

the family must attend and satisfactorily complete the pre-assistance

homeownership and housing counseling program required by the PHA (pre-

assistance counseling).

(b) The PHA pre-assistance counseling program must cover these

subjects:

(1) Home maintenance (including care of the grounds);

(2) Budgeting and money management;

(3) Credit counseling;

(4) How to negotiate the purchase price of a home;

(5) How to obtain homeownership financing and loan preapprovals,

including a description of types of financing that may be available,

and the pros and cons of different types of financing;

(6) How to find a home, including information about homeownership

opportunities, schools, and transportation in the PHA jurisdiction.

(7) Advantages of purchasing a home in an area that does not have a

high concentration of low-income families and how to locate homes in

such areas.

(c) The PHA may adapt pre-assistance counseling for a family to the

family's needs.

(d) The PHA may also offer additional counseling after commencement

of homeownership assistance (ongoing counseling). If the PHA offers a

program of ongoing counseling for participants in the homeownership

option, the PHA shall have discretion to determine whether the family

is required to participate in the ongoing counseling.

Sec. 982.630 Homeownership option: Home inspections and contract of

sale.

(a) HQS inspection by PHA. The PHA may not commence homeownership

assistance for a family until the PHA has inspected the unit and has

determined that the unit passes HQS.

(b) Independent inspection. (1) The unit must also be inspected by

an independent professional inspector selected by and paid by the

family.

(2) The independent inspection must cover major building systems

and components, including foundation and structure, housing interior

and exterior, and the roofing, plumbing, electrical, and heating

systems. The independent inspector must be qualified to report on

property conditions, including major building systems and components.

(3) The PHA may not require the family to use an independent

inspector selected by the PHA. The independent inspector may not be a

PHA employee or contractor,or other person under control of the PHA.

However, the PHA may establish standards for qualification of

inspectors selected by families under the homeownership option.

(4) The independent inspector must provide a copy of the inspection

report both to the family and to the PHA. The PHA may not commence

homeownership assistance for the family until the PHA has reviewed the

inspection report of the independent inspector. Even if the unit

otherwise complies with the HQS (and may qualify for assistance under

the PHA's tenant-based rental voucher program), the PHA shall have

discretion to disapprove the unit for assistance under the

homeownership option because of information in the inspection report.

(c) Contract of sale. (1) Before commencement of homeownership

assistance, a member or members of the family must enter into a

contract of sale with the seller of the unit to be acquired by the

family. The family must give the PHA a copy of the contract of sale

(see also Sec. 982.626(a)(7)).

(2) The contract of sale must specify:

(i) The price and other terms of sale by the seller to the

purchaser.

(ii) That the purchaser will arrange for a pre-purchase inspection

of the dwelling unit by an independent inspector selected by the

purchaser.

(iii) That the purchaser is not obligated to purchase the unit

unless the inspection is satisfactory to the purchaser.

(iv) That the purchaser is not obligated to pay for any necessary

repairs.

Sec. 982.631 Homeownership option: Financing purchase of home;

affordability of purchase.

(a) The PHA may establish requirements for financing purchase of a

home to be assisted under the homeownership option. Such PHA

requirements may include requirements concerning qualification of

lenders (for example, prohibition of seller financing or case-by-case

approval of seller financing), or concerning terms of financing (for

example, a prohibition of balloon payment mortgages, or establishment

of a minimum homeowner equity requirement from personal resources).

(b) If purchase of the home is financed with FHA-insured mortgage

financing, such financing is subject to FHA mortgage insurance credit

underwriting requirements. If purchase of the home is

[[Page 23500]]

financed (in whole or in part) without FHA-insured mortgage financing,

the PHA must require that the underwriting procedures used by the

lender comply with the basic mortgage insurance credit underwriting

requirements for FHA-insured single family mortgage loans.

(c) The PHA may disapprove proposed financing if the PHA determines

that the debt for purchase of the home is unaffordable. In making this

determination, the PHA may take into account other family expenses,

such as child care, unreimbursed medical expenses, homeownership

expenses, and other family expenses as determined by the PHA.

(d) All PHA financing or affordability requirements must be

described in the PHA administrative plan.

Sec. 982.632 Homeownership option: Continued assistance requirements;

Family obligations.

(a) Occupancy of home. Homeownership assistance may only be paid

while the family is residing in the home. If the family moves out of

the home, the PHA may not continue homeownership assistance after the

month when the family moves out. The family or lender is not required

to refund to the PHA the homeownership assistance for the month when

the family moves out.

(b) Family obligations. To continue to receive homeownership

assistance, a family must comply with the following family obligations:

(1) Ongoing counseling. To the extent required by the PHA, the

family must attend and complete ongoing homeownership and housing

counseling.

(2) Compliance with mortgage. The family must comply with the terms

of any mortgage securing debt incurred to purchase the home, and any

refinancing of such debt.

(3) Prohibition against conveyance or transfer of home. (i) So long

as the family is receiving homeownership assistance, use and occupancy

of the home is subject to Sec. 982.551(h) and (i). The family may not

sell, convey or transfer any interest in the home to any entity or

person other than a member of the assisted family residing in the home.

(ii) In the case of assistance for a homeowner, the family may

grant a mortgage on the home for debt incurred to finance purchase of

the home or any refinancing of such debt.

(iii) Upon death of a family member who holds, in whole or in part,

title to the home or ownership of cooperative membership shares for the

home, homeownership assistance may continue pending settlement of the

decedent's estate, notwithstanding transfer of title by operation of

law to the decedent's executor or legal representative, so long as the

home is solely occupied by remaining family members in accordance with

Sec. 982.551(h).

(4) Supplying required information. (i) The family must supply

required information to the PHA in accordance with Sec. 982.551(b).

(ii) In addition to other required information, the family must

supply any information as required by the PHA or HUD concerning:

(A) Any mortgage or other debt incurred to purchase the home, and

any refinancing of such debt (including information needed to determine

whether the family has defaulted on the debt, and the nature of any

such default), and information on any satisfaction or payment of the

mortgage debt;

(B) Any sale or other transfer of any interest in the home; or

(C) The family's homeownership expenses.

(5) Notice of move-out. The family must notify the PHA before the

family moves out of the home.

(6) Notice of mortgage default. The family must notify the PHA if

the family defaults on a mortgage securing any debt incurred to

purchase the home.

(7) Additional PHA requirements. The PHA may establish additional

requirements for continuation of homeownership assistance for the

family. The family must comply with any such requirements.

(8) Other family obligations. The family must comply with the

obligations of a participant family described in Sec. 982.551. However,

the following provisions do not apply to assistance under the

homeownership option: Sec. 982.551(c), (d), (e), (f), (g) and (j).

(c) Statement of homeowner obligations. Before commencement of

homeownership assistance, the family must execute a statement of family

obligations in the form prescribed by HUD. In the statement, the family

agrees to comply with all family obligations under the homeownership

option.

Sec. 982.633 Homeownership option: Maximum term of homeownership

assistance.

(a) Except in the case of an elderly family or a disabled family,

the family shall not receive assistance under the homeownership option

for more than ten years in total. If the family has received such

assistance for different homes, or from different PHAs, the total of

such assistance terms is subject to the ten year maximum.

(b) At any time, the PHA may establish a shorter maximum term.

Sec. 982.634 Homeownership option: Amount and distribution of monthly

homeownership assistance payment.

(a) Amount of monthly homeownership assistance payment. While the

family is residing in the home, the PHA shall pay a monthly

homeownership assistance payment on behalf of the family that is equal

to the lower of:

(1) The payment standard minus the total tenant payment; or

(2) The family's monthly homeownership expenses minus the total

tenant payment.

(b) Payment standard for family. (1) The payment standard for a

family is the lower of:

(i) The payment standard for the family unit size; or

(ii) The payment standard for the size of the home.

(2) If the home is located in an exception rent area, the PHA must

use the appropriate payment standard for the exception rent area.

(3) The payment standard for a family is the greater of:

(i) The payment standard (as determined in accordance with

paragraphs (b)(1) and (b)(2) of this section) at the commencement of

homeownership assistance for occupancy of the home; or

(ii) The payment standard (as determined in accordance with

paragraphs (b)(1) and (b)(2) of this section) at the most recent

regular reexamination of family income and composition since the

commencement of homeownership assistance for occupancy of the home.

(4) The PHA may not establish a separate payment standard for

assistance under the homeownership option. The PHA must use the payment

standards on the PHA payment standard schedule established pursuant to

Sec. 982.505.

(c) Determination of homeownership expenses. (1) The PHA shall

adopt policies for determining the amount of homeownership expenses to

be allowed by the PHA in accordance with HUD requirements.

(2) Homeownership expenses for a homeowner may only include amounts

allowed by the PHA to cover:

(i) Principal and interest on initial mortgage debt and any

mortgage insurance premium incurred to finance purchase of the home and

any refinancing of such debt;

(ii) Real estate taxes and public assessments on the home;

(iii) Home insurance;

[[Page 23501]]

(iv) The PHA allowance for maintenance expenses;

(v) The PHA allowance for costs of major repairs and replacements;

(vi) The PHA utility allowance for the home; and

(vii) Principal and interest on mortgage debt incurred to finance

major repairs, replacements or improvements for the home.

(3) Homeownership expenses for a cooperative member may only

include amounts allowed by the PHA to cover:

(i) The cooperative charge under the cooperative occupancy

agreement including payment for real estate taxes and public

assessments on the home;

(ii) Principal and interest on initial debt incurred to finance

purchase of cooperative membership shares and any refinancing of such

debt or other mortgage debt;

(iii) Home insurance;

(iv) The PHA allowance for maintenance expenses;

(v) The PHA allowance for costs of major repairs and replacements;

(vi) The PHA utility allowance for the home; and

(vii) Principal and interest on debt incurred to finance major

repairs, replacements or improvements for the home.

(d) Payment to lender or family. The PHA must pay homeownership

assistance payments either directly to the family or, at the discretion

of the PHA, to a lender on behalf of the family.

(e) Automatic termination of homeownership assistance.

Homeownership assistance terminates automatically 180 calendar days

after the last homeownership assistance payment on behalf of the

family.

Sec. 982.635 Homeownership option: Portability.

A family may qualify to move outside the initial PHA jurisdiction

with continued assistance under the voucher program in accordance with

portability procedures in Sec. 982.353 and Sec. 982.355. However,

Sec. 982.354 is not applicable. Such continued assistance under

portability procedures is subject to Sec. 982.636.

Sec. 982.636 Homeownership option: Move with continued tenant-based

assistance.

(a) Move to new unit. A family receiving homeownership assistance

may move to a new unit with continued tenant-based assistance in

accordance with this section. The family may move either with voucher

rental assistance (in accordance with rental assistance program

requirements) or with voucher homeownership assistance (in accordance

with homeownership option program requirements).

(b) When PHA may deny permission to move with continued

assistance--(1) Lack of sufficient funding. The PHA may deny permission

to move with continued voucher assistance if the PHA does not have

sufficient funding to provide continued assistance.

(2) Termination of assistance. At any time, the PHA may deny

permission to move with continued voucher assistance in accordance with

Sec. 982.552 (grounds for denial or termination of assistance),

including termination of assistance for violation of any family

obligations described in Sec. 982.632.

(3) Default on FHA-insured mortgage. If the family defaults on an

FHA-insured mortgage, the PHA may deny the family permission to receive

rental assistance, in accordance with the policies contained in the PHA

administrative plan. Further, in the event of a default on an FHA-

insured mortgage, the PHA must deny the family permission to move with

continued voucher assistance unless the family demonstrates that:

(i) The family has conveyed title to the home, as required by HUD,

to HUD or HUD's designee, and

(ii) The family has moved from the home within the period

established or approved by HUD.

(c) Continued homeownership assistance. For each move to a new unit

with continued voucher assistance under the homeownership option, the

PHA must determine that all initial requirements listed in Sec. 982.626

have been satisfied. However, the following requirements do not apply:

(1) The requirement for pre-assistance counseling

(Sec. 982.626(a)(2) and Sec. 982.629) is not applicable. However, the

PHA may require that the family complete additional counseling (before

or after moving to a new unit with continued assistance under the

homeownership option).

(2) In the case of assistance for a homeowner, the requirement that

a family must be a first-time homeowner (Sec. 982.625 and Sec. 982.626)

is not applicable.

Sec. 982.637 Homeownership option: Administrative fees.

The ongoing administrative fee described in Sec. 982.152(b) is paid

to the PHA for each month that homeownership assistance is paid by the

PHA on behalf of the family.

Sec. 982.638 Homeownership option: Applicability of other

requirements.

(a) General. The following types of provisions (located in other

subparts of this part 982) do not apply to assistance under the

homeownership option:

(1) Any provisions concerning the Section 8 owner or the HAP

contract between the PHA and owner;

(2) Any provisions concerning the assisted tenancy or the lease

between the family and the owner;

(3) Any provisions concerning PHA approval to lease a unit;

(4) Any provisions concerning rent to owner or reasonable rent; and

(5) Any provisions concerning the issuance or term of a certificate

or voucher.

(b) Subpart G requirements. The following provisions of this part

982, subpart G do not apply to assistance under the homeownership

option:

(1) Section 982.302 (Issuance of certificate or voucher);

(2) Section 982.303 (Term of certificate or voucher);

(3) Section 982.305 (PHA approval to lease);

(4) Section 982.306 (PHA disapproval of owner);

(5) Section 982.307 (Owner screening of tenants);

(6) Section 982.308 (Leases);

(7) Section 982.309 (Term of tenancy);

(8) Section 982.310 (Owner termination of tenancy);

(9) Section 982.311 (When assistance is paid) (except that

Sec. 982.311(c)(3) is applicable to assistance under the homeownership

option);

(10) Section 982.313 (Security deposit); and

(11) Section 982.314 (Move with continued tenant-based assistance)

(except that Sec. 982.314(c) and (d)(2) are applicable).

(c) Subpart H requirements. The following provisions of this part

982, subpart H do not apply to assistance under the homeownership

option:

(1) Section 982.352(a)(6) (Prohibition of owner-occupied assisted

unit);

(2) Section 982.352(b) (PHA owned housing);

(3) Sections 982.353(b)(1), (2), and (3) (Where family can lease a

unit); and

(4) Section 982.354 (Administration by initial PHA under

portability).

(d) Subpart I requirements. The following provisions of this part

982, subpart I do not apply to assistance under the homeownership

option:

(1) Section 982.403 (Unit too big or small);

(2) Section 982.404 (Responsibility for maintenance during assisted

occupancy); and

(3) Section 982.405 (PHA periodic unit inspection).

(e) Subpart J requirements. The requirements of this part 982,

subpart J (Housing Assistance Payments Contract and Owner

Responsibility) (Secs. 982.451-457) do not apply to assistance under

the homeownership option.

[[Page 23502]]

(f) Subpart K requirements. Except for those sections listed below,

the requirements of this part 982, subpart K (Rent and Housing

Assistance Payment) (Secs. 982.501-517) do not apply to assistance

under the homeownership option:

(1) Section 982.504 (Maximum subsidy; FMR/exception rent limit);

(2) Section 982.516 (Examination of family income and composition);

and

(3) Section 982.517 (Utility allowance).

(g) Subpart L requirements. The following provisions of this part

982, subpart L, do not apply to assistance under the homeownership

option:

(1) Section 982.551(c) (HQS breach caused by family);

(2) Section 982.551(d) (Allowing HQS inspection); and

(3) Section 982.551(j) (Interest in unit).

Dated: April 7, 1999.

Harold Lucas,

Assistant Secretary for Public and Indian Housing.

[FR Doc. 99-10465 Filed 4-29-99; 8:45 am]

BILLING CODE 4210-33-P