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.