The Section 8 Homeownership Program Final Rule, issued September 12, 2000, amends the regulations for the Section 8 tenant-based rental voucher program to allow Section 8 payments to be made for homeownership purposes under specified circumstances and at the discretion of the PHA. A PHA may, at its option, use a portion of its Section 8 vouchers for homeownership purposes. The Homeownership Program does not require additional vouchers. The Preamble gives PHAs the option of making the program available to applicants and/or current beneficiaries of Section 8 tenant-based assistance eligible for homeownership assistance. There are income and work requirements for applicants to the Homeownership program that do not pertain to the Section 8 voucher rental program. The PHA not only has the option to decide whether to allow its voucher program to be used for homeownership (they do not have an option when homeownership is necessary as a reasonable accommodation for persons with disabilities or the elderly) but may also specify additional eligibility and other requirements. The purchase and lending procedures would be those of other FHA or conventional loans; lenders would use their own underwriting standards and other requirements.
This Rule incorporates many of these civil rights-related program requirements and other fair housing concerns:
The Preamble states that all civil rights laws applicable to tenant-based vouchers also apply to this Rule, and PHAs must comply with all contractual civil rights and fair housing requirements. Since "finders-keepers" also applies to homeownership, "steering" families to particular neighborhoods or units is prohibited.
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. [982.625(c)]
The Rule gives PHAs broad administrative authority to establish eligibility requirements that are not applicable to the Section 8 housing Choice Voucher Program. PHAs may thus limit assistance to types of families or purposes defined by the PHA. Given this fact, it is not clear whether PHAs are allowed to establish residency requirements or preferences that are prohibited in the tenant-based assistance program. [982.626(b)]
The program is limited to "first-time homebuyers." However, the definition of first-time homebuyer incorporates, among other "exceptions", a family in which one member is a person with disabilities and use of the homeownership option is needed as a reasonable accommodation, so that the program is readily accessible to and usable by such persons; [982.627(b)(3)]
The Rule requires all participants to undergo homeownership counseling prior to receiving assistance.
The Preamble suggests a number of topics for PHAs to address during that counseling. These include the advantages of purchasing in a low-poverty area, fair lending, local fair housing enforcement agencies; [982.630 (b)(7)-(8)] and information on how to avoid loans with oppressive terms and conditions known as predatory lending. [983.629 (b)(9)]
The Rule also that PHAs use HUD-approved housing counseling agencies for their counseling programs and requires that those that do not ensure that its counseling program is consistent with homeownership counseling provided under HUD's Housing Counseling program. [982.630(e)]
The program requires both an initial Housing Quality Standards inspection by a PHA-selected inspector and an independent professional home inspection by an inspector selected by the family. Requiring two inspections protects the buyer, especially in instances where major repairs are required; [982.631 (a)-(b)]
Predatory lending: A PHA may review lender qualifications and loan terms before authorizing homeownership assistance. [982.632(d)] The Preamble also encourages PHAs to analyze each loan before providing assistance to determine whether the lender and its loan terms meet the PHAs qualifications. It tells PHAs to be particularly careful of loans with high financing costs, high credit insurance premiums, balloon payments (especially high ones); interest rates that are higher than conventional mortgage rates; long-term pre-payment penalties; high ratio of debt to family income; loans based on unverified sources of income or without regard to the borrower's ability to repay, excessive fees or fees packed into the loan amount.
There is a maximum term of fifteen years for homeownership assistance to the family, but this does not apply to elderly or disabled families who meet certain conditions. [982.634(c)]
Where a member of the family is a person with disabilities, mortgage debt incurred to finance costs for major repairs or replacements can include debt needed for modifications to make the home accessible for the person with the disability, if the PHA determines that the allowance is needed as reasonable accommodation; [982.635(c)(3)(vii)]
The Section 8 Housing Choice Voucher portability procedures apply in instances where the receiving PHA also operates a Section 8 Homeownership assistance program and is accepting new homeownership families. [982.636)]. In addition, the Preamble says that the PHA briefing must explain how the Program's portability procedures work.
The Preamble says that the Rule does not prohibit discrimination based on source of income. It notes, however, that lenders must comply with the Equal Credit Opportunity Act (ECOA) and its implementing regulations issued by the Federal Reserve Board when evaluating these loans. The ECOA prohibits discrimination based on welfare. Although there are no references to the ECOA in the Rule itself.