Providing Incentives to Achieve Self-Sufficiency: The Housing Choice Voucher Homeownership Program in Montgomery County, Pennsylvania

Agency: Montgomery County Housing Authority (MCHA), Norristown, Pennsylvania
Housing Choice Voucher Program Size: 2,600 Units
WtW Voucher Program Size: 50 Units

Challenge

With new HUD initiatives focusing on self-sufficiency, PHAs are under increasing pressure to combine traditional housing assistance with case management and supportive services, aimed at providing incentives for low-income families to achieve economic stability. The latest Bush Administration priority of expanding homeownership opportunities, coupled with the implementation of the Housing Choice Voucher Homeownership Program, present exciting challenges and opportunities for PHAs to promote homeownership among low-income families.

Solution

The Montgomery County Housing Authority (MCHA) responded to this challenge and opportunity by implementing the Housing Choice Voucher Homeownership Option (HOO), based on the September 2000 Final Rule. The program builds on the success of its FSS and WtW programs. Additionally, the opportunity to someday "own your own home" provides a real incentive for families to participate in WtW and FSS, as one of the milestones in achieving their self-sufficiency goals.

Implementation

MCHA hired a Homeownership Program Administrator and a part-time Administrative Assistant to manage the program. MCHA's Homeownership Program Administrator has extensive experience in the real estate and mortgage industries. These connections proved to be very useful in implementing the program and developing the partnerships necessary for its success. Other PHAs can partner with local realtors, mortgage lenders and title companies for training and guidance.

MCHA sends written letters of invitation to potentially eligible families, based on income information collected on the HUD-50058, to attend a two-hour meeting to learn about the program. MCHA conducts these introductory meetings twice a year at various locations and times. These meetings are targeted for each Spring and Fall so that families are able to purchase during the two main real estate seasons. At the introductory meeting, MCHA staff works closely with families to answer questions/concerns about the program and complete the following two forms:

• Homeownership Option Eligibility Assessment Form to determine whether or not the family is currently eligible to participate; and
  
• Pledge Form that clearly details the family's obligations and what is expected of them in a step-by-step outline.

Interested families must attend and complete five workshops that are offered in-house:

• Budgeting and Money Management Workshop
• Credit Counseling Workshop
• Fair Housing Workshop
• How to Buy a Home Workshop
• Home Maintenance Workshop

MCHA employees and outside volunteers serve as workshop trainers/speakers. MCHA's FSS Coordinator developed the curriculum and facilitates the Budgeting and Money Management Workshop. The Budget and Credit Workshops could also be taught by a local certified credit counselor. The Homeownership Program Administrator teaches the 2.5 hour workshop on how to buy a home. This could also be taught by local realtors and lenders that are instructed not to promote their companies but to give generic information. MCHA's Deputy Executive Director of Public Housing and Facilities instructs the Maintenance Workshop. Another choice for instructor would be a local home inspector or the PHA's own housing inspectors. Outside speakers include representatives from the Credit Bureau, Fannie Mae, and Freddie Mac.

In addition to providing families with important information, the workshops serve to "weed out" families that are not good candidates for the program. In other words, those individuals that thought the homeownership program would be quick and easy and/or those not willing to "clean up" bad credit never finish the workshops. The families that remain understand that they must commit significant time and effort to achieve the goal of homeownership.

At the end of the fourth workshop on how to purchase a home, the Homeownership Program Administrator meets with each family individually to confirm family status, income, and other HUD-50058 information. At this time, the Homeownership Administrator approximates the amount of assistance the family will receive and mortgage amount for which the family qualifies, based on set numbers for taxes, insurance, utilities, and interest rate. MCHA issues the family a Preliminary Certificate of Assistance (HAP), and the family is instructed to take the HAP Certificate to a lender of their choice and get pre-approved BEFORE searching for a home to buy. In the meantime, the family must attend the final workshop on home maintenance.

New voucher holders have nine months from voucher issuance to purchase a home. For current voucher participants, the homeownership program is an on-going option. Once they are pre-approved for a mortgage, they can take the next step. For some, this is a quick step; for many others, it may take a year or two, especially if they have credit issues to address.

One important key to success is by beginning with realistic expectations regarding the number of home purchases that will occur each year. Equally important, the agency must factor in success rates at each step in the process. In other words, to achieve ten successful settlements, many more than ten families need to be invited to participate in the homeownership program. To illustrate this point, MCHA provides the following statistics:

• MCHA sent 1,200 letters of invitation to a homeownership meeting.
• Of the 1,200 families targeted, 200 responded to the letter of invitation.
• Of the 200 that responded, 104 families attended the introductory meeting.
• By the fourth workshop, about 40 families remained committed.

The requirement that the family must attend each workshop is vital to the family's success. Families are advised that if they are not able to attend all five workshops during the scheduled timeframe, they must call MCHA in six months and obtain the schedule for the next round of workshops.

To help families choose a lender, the Homeownership Program Administrator gives families the business cards of lenders currently participating or expressing an interest in participating in the program. MCHA also encourages families to talk to their banks and credit unions about participating in the program and/or to seek out other lenders. MCHA currently works with more than ten lenders and continuously calls on new lenders to promote the Housing Choice Voucher Homeownership Program to them. HUD field office staff has played an important role in giving credibility to the program by attending MCHA meetings with lenders.

Initially, MCHA did not have special funds to help families with down payments and closing costs. MCHA recommends working with FHA financing because FHA requirements allow the seller to pay up to six percent of the closing costs, which can be very helpful to voucher families. In July of 2002, MCHA received an $88,000 grant from the County Commissioners for closing costs. Families pay up-front costs on their own, including application fees, inspection fees, tests, and homeowner insurance. At settlement, MCHA reimburses any costs exceeding $500 using grant funds.

MCHA also offers families a Family Savings Plan/Individual Development Account (IDA). This savings-matching program, which is administered by another agency, matches dollar for dollar savings up to $2,000 for a maximum of two years. MCHA targets this savings program to families with credit issues so they can begin saving for homeownership while paying off debt.

Results

• To date, MCHA has completed a total of 19 settlements in 8 different townships throughout the county. One additional settlement is pending. The sales prices have ranged from $65,000 to $130,000. Single mothers purchased the large majority of the homes sold through the program. These sales included two purchases using FSS escrow savings.



• One family that purchased a $130,000 home was originally qualified to buy a $40,000 home, but was able to increase the purchase amount by combining Housing Choice Voucher assistance with a 38-year USDA Rural Housing loan at a rate of one percent.



• MCHA provided $57,318 in mortgage assistance in 2002 to 16 of the 19 families.



• The following averages apply to the last three home sales that occurred under Montgomery County's Housing Choice Voucher Homeownership Program:



• Family size: 3 persons
• Head of household: African-American female, age 40
• Unit size: 3 bedroom; 6 rooms; and 1,430 square feet
• PITI (payment to mortgage company): $717/month
• Utilities: $200/month
• Housing Assistance Payment (HAP): $555/month
• Total Tenant Payment (TTP): $443/month
• Interest Rate: 4.9%-6.5%



• To date, Montgomery County has worked with ten lenders: CTX, Guaranty, Northeast, Arlington Capital, Principal Residential, Countrywide, National Penn Bank, Cardinal Financial, First Mutual, USDA, and Superior Mortgage. Another four lenders - Blue Bell Mortgage, Delco Postal Credit Union, Citizen's Bank, and Wachovia - have indicated that they will work with the agency's voucher homeownership program.



• MCHA has worked with the Pennsylvania Housing Finance Agency to offer a program that combines the housing choice voucher subsidy with an FHA loan program, provided the family meets the standard FHA guidelines. This allows voucher program participants more opportunities to secure higher loan amounts.