24 C.F.R. PART 572—HOPE FOR HOMEOWNERSHIP OF SINGLE FAMILY HOMES PROGRAM (HOPE 3)
Title 24 - Housing and Urban Development
Authority: 42 U.S.C. 3535(d) and 12891.
Source: 58 FR 36526, July 7, 1993, unless otherwise noted.
The purpose of the HOPE for Homeownership of Single Family Homes program (HOPE 3) is to provide homeownership opportunities for eligible families to purchase Federal, State, and local government-owned single family properties. HOPE 3 provides grants to eligible applicants to plan and implement homeownership programs designed to meet the needs of low-income first-time homebuyers. [58 FR 36526, July 7, 1993, as amended at 61 FR 48797, Sept. 16, 1996] The terms HUD, Indian Housing Authority (IHA), NAHA, 1937 Act, NOFA, and Public Housing Agency (PHA) are defined in 24 CFR part 5. Administrative costs means reasonable and necessary costs, as described and valued in accordance with OMB Circular No. A–87 or A–1221 1 See §572.420(a) concerning the availability of OMB Circulars. Applicant means a private nonprofit organization; a cooperative association; or a public body in cooperation with a private nonprofit organization that applies for a HOPE 3 grant under this part. A cooperative association is an eligible applicant only for eligible property it proposes to acquire and transfer ownership interests to eligible families under a homeownership program. Consolidated plan means the document that is submitted to HUD that serves as the planning document of the jurisdiction, in accordance with 24 CFR part 91. Cooperating entity means a private nonprofit organization or public body that the lead applicant has designed in its application to carry out certain functions in the HOPE 3 program. The responsibilities of a cooperating entity must be specified in a memorandum of agreement signed by the lead applicant and the cooperating entity. Cooperative association means an association organized and existing under applicable State, local, territorial, or tribal law primarily for the purpose of acquiring, owning, and operating housing for its members or shareholders, as applicable. Displaced homemaker means as the term is defined in 42 U.S.C. 12704. The individual must not have worked full-time, full-year in the labor force for at least 2 years. Eligible family means a low-income family who is a first-time homebuyer. Eligible property means a single residential property, containing no more than four units, that is owned or held by HUD, the Secretary of Veterans Affairs, the Secretary of Agriculture, the Secretary of Defense, the Secretary of Transportation, the Resolution Trust Corporation, the Federal Deposit Insurance Corporation, the General Services Administration, or any other Federal agency; a State or local government (including any in rem property); or a PHA/IHA (excluding public or Indian housing under the 1937 Act). This definition includes individual condominium units located in multifamily structures owned or held by an eligible source and properties held by institutions within the jurisdiction of the Resolution Trust Corporation. All cooperative units acquired under HOPE 3 must be located in properties containing no more than four units to qualify as eligible property under this part. In the case of two- to four-unit property, only property that may be divided so each unit may be acquired by an eligible family is eligible, except as provided in §572.115(c). For purposes of this definition, the term State or local government means any entity included in the first sentence of the definition of public body. First-time homebuyer means as the term is defined in 42 U.S.C. 12704. Homeownership program means a program for homeownership meeting the requirements under this part. The program must provide for acquisition by eligible families of ownership interests in the units in an eligible property under an ownership arrangement approved by HUD under this part. All eligible properties assisted under the program must be initially acquired by eligible families. Lead applicant means an eligible applicant designated in a HOPE 3 application to assume legal responsibility as the recipient and execute the grant agreement. Lease-purchase means (1) An agreement, enforceable under State (or territorial) and local law, between the recipient or its designee and an eligible family under which the family: (i) Obtains the right to occupy a unit in an eligible property, subject to the payment of rent and other reasonable lease conditions, for a period of not more than two years, except as provided in §572.115(a)(2); and (ii) At the end of such two years has the right to purchase the unit under the terms stated in the lease-purchase agreement, including the completion of any additional rehabilitation required during the lease-purchase period. (2) A lease-purchase agreement qualifies as a transfer of the unit to the eligible family for purposes of the deadline for transfer in §572.115(a), but it is not otherwise an “ownership interest” under this part. The interest that the family acquires at the end of the two-year lease-purchase period must be an ownership interest under this part, and the terms and conditions of the purchase of such interest must meet the affordability requirements of this part. Low-income family means a family or individual qualifying as a low-income family under 24 CFR part 813 (where the recipient is not a PHA/IHA), part 913 (where the recipient is a PHA), or part 905 (where the recipient is an Indian tribe or IHA). A low-income family is generally defined as a family whose annual income does not exceed 80 percent of median income for the area, as determined by HUD with adjustment for family size. HUD may establish income limits higher or lower than 80 percent of median income for the area on the basis of its finding that such variations are necessary because of prevailing construction costs or unusually high or low family incomes. Ownership interest means ownership by an eligible family by fee simple title to a unit in an eligible property (including a condominium unit), ownership of shares of or membership in a cooperative, or another form of ownership proposed and justified by the applicant and approved by HUD pursuant to §572.115(b). Private nonprofit organization means any nonprofit organization that (1) Is organized and exists under applicable Federal, State, territorial, local, or tribal law; (2) Has no part of its net earnings inuring to the benefit of any individual, corporation, or other entity; (3) Has a voluntary board; (4) Has an accounting system or has designated a fiscal agent in accordance with requirements established by HUD; (5) Practices nondiscrimination in the provision of assistance; (6) Is a tax exempt entity under section 501(c) of the Internal Revenue Code of 1986 (26 U.S.C. 501(c)), or for a private nonprofit organization in the Commonwealth of Puerto Rico, is a tax-exempt entity under Puerto Rico law; (7) Is privately controlled and has a governing body that is controlled 51 percent or more by private individuals acting in a private capacity. An individual is considered to be acting in a private capacity if the individual is not an employee of a public body, is not appointed by or acting as the representative of a public body (including the applicant or recipient), and is not being paid by a public body (including the applicant or recipient) while performing functions in connection with the nonprofit organization. Program income means income earned from the program as described in parts 84 and 85 of this title, as applicable, except that program income does not include proceeds from the sale and resale of properties. Such sale and resale proceeds, and interest earned by the recipient or its designee on those proceeds, are governed by §572.135(a) through (c). Public body means any State of the United States; any city, county, town, township, parish, village, or other general purpose political subdivision of a State; the Commonwealth of Puerto Rico, the District of Columbia, Guam, the Northern Mariana Islands, the Virgin Islands, American Samoa, or a general purpose political subdivision thereof; any Indian tribe, as defined in title I of the Housing and Community Development Act of 1974; any public agency or instrumentality of any of the foregoing jurisdictions that is created by or pursuant to State, territorial, local, or tribal law, including a State or local Housing Finance Agency; and any PHA or IHA. For purposes of this definition, an organization that meets the requirements of paragraphs (1) and (2) of the definition of private nonprofit organization, but is controlled 51 percent or more by public officials acting in their official capacities, may qualify as a public body. Recipient means the lead applicant that is approved by HUD to receive a HOPE 3 grant and is legally responsible for the grant. Single parent means as the term is defined in 42 U.S.C. 12896. [58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 61 FR 5209, Feb. 9, 1996; 61 FR 48797, Sept. 16, 1996; 62 FR 34145, June 24, 1997] Assistance under section 8 of the 1937 Act and other rental assistance to the homebuyer will be terminated not later than the date an eligible family acquires an ownership interest in an eligible property or executes a lease-purchase agreement for the property. (a) Minimum number of properties. (1) Each homeownership program must involve acquisition of at least ten units in eligible properties by eligible families. (2) A homeownership program may not result in appreciably reducing in the locality the number of affordable rental housing units of the type to be assisted that would be available to residents currently residing in the types of properties proposed for use under the program or to families who would be eligible to reside in the properties. (b) Maximum acquisition costs. The cost of acquiring an eligible property (by a recipient or other entity for transfer to eligible families or by an eligible family from a recipient or directly from an eligible source) may not exceed the as-is fair market value of the property, plus reasonable and customary closing costs charged for comparable transactions in the market area. The as-is fair market value of a property must be determined in accordance with a recent appraisal conducted under procedures consistent with appraisal standards published by The Appraisal Foundation in the current edition of “Uniform Standards of Professional Appraisal Practice.” (c) Maximum cost of acquisition and rehabilitation. The cost of acquisition and rehabilitation paid for from grant funds or credited as match may not exceed 80 percent of the maximum amount that may be insured in the area under section 203(b) of the National Housing Act, plus reasonable and customary closing costs charged for comparable transactions in the market area. (d) Rehabilitation standards. (1) The recipient is responsible to assure that rehabilitation of eligible property meets local codes applicable to rehabilitation of work in the jurisdiction (but not less than the housing quality standards established under the Section 8 rental voucher program, described in §982.401 of this title). Rehabilitation must also include work necessary to meet applicable federal requirements, including lead-based paint requirements set forth at part 35, subparts A, B, J, K, and R of this title. (2) The property must be rehabilitated to a level that makes it marketable for homeownership in the market area to families with incomes at or below 80 percent of the median for the area. Luxury items (fixtures, equipment, and landscaping of a type or quality that substantially exceeds that customarily used in the locality for properties of the same general type as that being rehabilitated) are not eligible expenses. HUD reserves the right to disapprove improvements or amenities to be paid for from nonprogram funds that it determines are unsuitable for the HOPE 3 program. (3) Rehabilitation costs must comply with the cost standards established by HUD (see paragraph (c) of this section for applicable cost limitations covering both acquisition and rehabilitation). If improvements are made to an eligible property beyond those that qualify as eligible costs, the applicant must assure that the entire cost of the excess improvements will be covered by funds other than the HOPE 3 grant and any amounts contributed toward the match, and that the affordability of the property will not be impaired. (4) Higher standards may be proposed by the applicant or required by lenders. (5) The applicant must adopt written rehabilitation standards. (e) Rehabilitation and transfer of units. (1) The unit must be free from any defects that pose a danger to life, health, or safety before transfer of an ownership interest in the unit to the family or occupancy of a unit by an eligible family under a lease-purchase agreement. The recipient must inspect, or ensure inspection of, each unit to determine that it does not pose an imminent threat to the life, health, or safety of residents and that the property has passed recent fire and other applicable safety inspections conducted by appropriate local officials. (2) The unit must, not later than 2 years after transfer of an ownership interest in the unit to an eligible family, or execution of a lease-purchase agreement for the unit, meet minimum rehabilitation standards under paragraph (d)(1) of this section. The recipient must inspect, or ensure inspection of, each unit to determine that it meets the rehabilitation standards required under paragraph (d)(1) of this section. [58 FR 36526, July 7, 1993, as amended at 62 FR 34145, June 24, 1997; 64 FR 50226, Sept. 15, 1999] (a) Types of financing. (1) Financing may include use of the implementation grant to permit transfer of an ownership interest in a unit to an eligible family for less than fair market value or with assisted financing; or other sources of financing (subject to requirements that apply to those sources), including, but not limited to, conventional mortgage loans, mortgage loans insured under title II of the National Housing Act, and mortgage loans under other available programs, such as Veterans Administration (VA), Farmers Home Administration (FmHA), and Resolution Trust Corporation (RTC) seller-assisted financing. (2) FHA single family mortgage insurance requirements. All regulatory requirements and underwriting procedures established for FHA single family mortgage insurance apply to mortgages insured by FHA on properties assisted under the HOPE 3 program. Exceptions in the regulations specifically for homebuyers under the HOPE 3 program are: (i) The eligible family/mortgagor may obtain a loan for the down payment from a corporation or another person under conditions satisfactory to HUD (24 CFR 203.19(b) and 234.28(c)); (ii) A second mortgage may be placed against the property even though the entity holding a second mortgage is not a Federal, State, or local government agency, if the entity is designated in the homeownership plan of an applicant for an implementation grant (24 CFR 203.32(b) and 234.55(b)); and (iii) Certain restrictions on conveyance may be permissible. Property with restrictions that do not comply with FHA regulations will be ineligible for FHA mortgage insurance, notwithstanding HUD approval under §572.130(e). (b) Financial assistance to homebuyers. Recipients may provide assistance to, or on behalf of, eligible families to make acquisition and rehabilitation of eligible properties affordable. This may include interest rate reductions (“interest rate buy-downs”), payment of all or a portion of closing costs, down payments, mortgage insurance premiums, and other expenses, and other forms of assistance approved by HUD. No mechanisms to financially assist homebuyers that would require grant recipients to make lump sum deposits of HOPE 3 grant funds will be permitted. (a) Selection procedures. (1) Recipients must establish written equitable procedures for identifying and selecting eligible families to participate in the homeownership program, consistent with the affordability standards in §572.120. Except for Indian tribes and IHAs as described in §572.405(a)(2), the recipient must have a procedure to carry out its affirmative fair marketing responsibilities, described in §572.405(e), that apply whenever homeownership opportunities are made available to other than current residents of the property. These procedures must include specific steps to inform potential applicants and solicit applications from eligible families in the housing market area who are least likely to apply for the program without special outreach. (2) The written selection procedures must provide for selection only of families that are creditworthy and have the financial capacity to handle the anticipated costs of homeownership. Any family determined not to have paid the appropriate amount of tenant contribution under a HUD housing assistance program must be required to resolve any deficiency before being selected for homeownership. (b) Preferences. (1) In making selections for the program, each recipient must give first preference to qualified residents who legally occupied units on the date the recipient's application for the implementation grant was submitted to HUD and to persons residing in the units at the time the properties are selected. If the unit occupied by a former resident on the date the implementation grant application was submitted to HUD is occupied by a different resident at the time of property selection, a vacant unit under this program must be offered to the former resident at the earliest possible time. (2) In the case of vacant properties for which the preferences in paragraph (b)(1) of this section do not apply, recipients must give a first preference to otherwise qualified eligible families who reside in public or Indian housing under the 1937 Act. Recipients must use whatever measures are considered appropriate to inform residents of public and Indian housing developments within the housing market area of the preference, such as informing resident councils, PHAs, and IHAs, or other appropriate measures. (3) Recipients must give a second preference to otherwise qualified eligible families who have completed participation in one of the following economic self-sufficiency programs: Project Self-Sufficiency, Operation Bootstrap, Family Self-Sufficiency, JOBS, and any other Federal, State, territorial, or local program approved by HUD as equivalent. (c) Responsibilities of selected families. (1) Each eligible family selected for homeownership must certify at the time it acquires an ownership interest in the unit (or enters into a lease-purchase agreement for the unit) that it intends to occupy the unit as its principal residence during the six-year period from the date it acquires ownership interest in the unit, unless the recipient determines that the family is required to move outside the market area due to a change in employment or an emergency situation or the family sells its ownership interest. The family may permit others to rent space (such as a basement area or a spare bedroom) in the unit occupied by the family as its principal residence. (See §572.115(c) concerning the rental of units in a multi-unit property purchased by a homebuyer under this part.) (2) Any homebuyer that violates the agreement made under paragraph (c)(1) of this section shall be subject to penalties as provided in the transfer documents, as prescribed by HUD. (3) Each eligible family selected for the program must participate in counseling and training of homebuyers and homeowners regarding the general rights and responsibilities of homeownership. (d) Social security numbers; wage and claims information. As a condition of eligibility for homeownership under this part, at the time a family applies for howeownership, the recipient (or other appropriate entity) must: (1) Require the family to meet the requirements for the disclosure and verification of social security numbers, as provided by part 5, subpart B, of this title; and (2) Require the family to sign and submit consent forms for the obtaining of wage and claim information from State Wage Information Collection Agencies, as provided by part 5, subpart B, of this title. (e) Notification of rejected applicant families. Recipients or another appropriate entity must promptly notify in writing any rejected applicant family of the grounds for any rejection. [58 FR 36526, July 7, 1993, as amended at 61 FR 11118, Mar. 18, 1996; 61 FR 48797, Sept. 16, 1996] (a) Deadline for transfer. (1) All units in eligible properties (including in rem properties) must be transferred to eligible families within two years of the effective date of the implementation grant agreement, except as otherwise provided for multi-unit properties in paragraph (c) of this section. The transfer must involve either: (i) Acquisition by an eligible family of an ownership interest in a unit; or (ii) Execution of a lease-purchase agreement for a unit. (2) The HUD Field Office may approve a request for an extension of the deadline in paragraph (a)(1) of this section on a per-program or per-unit basis if the Field Office determines that all program activities will be completed in accordance with the timing requirements of §572.210(f) (including any extension granted under §572.210(f)). (b) Form of ownership. (1) Forms of ownership interests acquired by eligible families under this part may include fee simple ownership (including condominium ownership), cooperative ownership, or another form of ownership interest proposed and justified by the applicant and approved by HUD. HUD will not approve other forms of ownership that would substantially limit the ability of homeowners to realize financial appreciation in the value of their homes as determined by HUD. The type of ownership interest must be consistent with any applicable State (or territorial), local, or tribal law. (2) The ownership interest may be subject only to: (i) The restrictions on resale required or approved under §572.130; (ii) Mortgages, deeds of trust, or other liens or instruments securing the eligible family's purchase money financing as approved by the recipient; or (iii) Any other restrictions or encumbrances that do not impair the good and marketable nature of title to the ownership interest except as otherwise approved by the recipient. In approving the terms of an eligible family's purchase money financing or any other encumbrances on the property under paragraphs (b)(2)(ii) and (iii) of this section, the recipient shall not approve financing terms that do not comply with the affordability standards in §572.120, or mortgage terms and conditions or other encumbrances that in effect constitute resale restrictions that would not be approved by HUD under this part. (3) Mutual housing is eligible only to the extent it provides for the transfer of ownership interests to eligible families. (c) Transfer of multi-unit properties. (1) In the case of a two-to-four unit property, only property that may be divided so that an ownership interest in each unit may be acquired by an eligible family is eligible. HUD may grant an exception to this requirement on a program-by-program basis when it determines that such an exception will serve to further the purposes of the HOPE 3 program. (2) HUD Headquarters will consider and may approve an exception under the following circumstances: (i) The reasonably projected net rental income will be included in the determination of the appraised value of the property at the time of the homebuyer's purchase; (ii) The rent charged by the owner will not exceed the Fair Market Rent established by HUD for the area; (iii) The recipient will provide the homebuyer with counseling and training in property management, and will approve the form of lease used by the homebuyer; and (iv) The recipient will include the family's potential net rental income in calculating the family's initial affordability in accordance with §572.120 of this part. [58 FR 36526, July 7, 1993, as amended at 61 FR 48797, Sept. 16, 1996] (a) Initial affordability. (1) The monthly expenditure for principal, interest, taxes, and insurance by an eligible family that is required under the financing both for the acquisition and for the rehabilitation in accordance with §572.100(d) of a unit (whether the required rehabilitation occurs before or after the family takes title) must be not less than 20 percent and not more than 30 percent of one-twelfth of the annual income of the family used for the purpose of determining eligibility under §572.110(a). (For the purpose of determining affordability of the family, the recipient may, at its option, adjust downward the annual incomes of eligible families using reasonable standards and procedures consistently applied.) HUD may approve a justified request for a floor lower than 20 percent to avoid undue hardship to families, such as where the cost of utilities is high. (2) The 30 percent cap on monthly payments includes closing costs only if closing costs are included in the costs of principal and interest, or are otherwise required to be paid by the homeowner over time after acquisition. (3) Applicants are encouraged to consider the additional monthly costs of utilities and other monthly housing costs, such as condominium and cooperative fees, in determining whether the family can afford to purchase a unit. (b) Continued affordability. The recipient must develop a plan demonstrating reasonable efforts to ensure continued affordability by homeowners in the eligible property. Financing that would impair the continued affordability of the property for homebuyers, such as a mortgage that is not fully amortizing (e.g., a “balloon” mortgage) may not be used. The plan should take into account such program features as long-term financing at reasonable terms, energy conservation, and improvements that will entail low-cost maintenance. [58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995] (a) Purpose. A single replacement reserve may be established for the homeownership program only if HUD determines it is necessary to prevent severe financial hardship to families caused by the failure of a major system or component of the property that would render the unit substandard. Initially, the reserve must be justified by the applicant and approved by HUD as part of the program budget in the application or an amended application. (b) Need for reserve account. In determining the need for a replacement reserve, the applicant or recipient must demonstrate that the financial status of eligible families is insufficient to meet the needs for which the reserve is established, and that the amount proposed for the reserve is reasonable, taking into account the following factors: (1) The size of the implementation grant and the amount of matching contributions; (2) The availability of insurance, and the home maintenance and repair capabilities of the families; and (3) The condition and age of the properties and each of their major systems and components (including at least the heating, plumbing, and electrical systems, the roof, foundation, windows, exterior walls, and common area, if any). (c) Drawdown of reserve funds. Replacement reserve funds may only be drawn down under the Cash and Management Information System when specifically needed to assist a homeowner. At time of program closeout, all funds approved for a replacement reserve may be drawn down to fund a reserve account. The account may not exceed six years estimated replacement cost needs for the properties transferred under the homeownership program. (d) Administration of the reserve account. The recipient must identify the entity that will administer the replacement reserve account at time of program closeout. The entity responsible for administering the account must be bonded and approved by HUD. The account must be interest bearing, if possible, and interest earned thereon must be used for the purposes for which the account is established. Unused funds at the end of the term of the account must be treated as program income in accordance with §572.135(d). (a) Right to transfer. A homeowner may transfer the homeowner's ownership interest in the unit, subject only to the right to purchase under paragraph (b) of this section; the requirement for the purchaser to execute a promissory note, if required under paragraph (d) of this section; and the limitation on the amount of sales proceeds a family may retain upon sale within the first six years, as required under paragraph (c) of this section. (b) Right to purchase. (1) Where a cooperative has jurisdiction over the unit, it has the prior right to purchase the ownership interest in the unit from the initial homeowner for the amount and on the terms specified in a firm contract between the homeowner and a prospective buyer. The cooperative association has 10 days after receiving notice of the firm contract to decide whether to exercise its right and 60 additional days to complete closing of the purchase. (2) If no cooperative has jurisdiction over the unit and if the prospective buyer is not a low-income family, the recipient or a PHA/IHA with jurisdiction for the area in which the unit is located, whichever is specified in the documents under which the initial family acquires an ownership interest in the unit, has the prior right to purchase the ownership interest in the unit for the amount and on the terms specified in a firm contract between the homeowner and a prospective buyer. The recipient or PHA/IHA has 10 days after receiving notice of the firm contract to decide whether to exercise its right and 60 additional days to complete closing of the purchase. (3) Where a recipient, cooperative, or PHA/IHA exercises a right to purchase, it must resell the unit to an eligible family promptly. (4) Unless otherwise provided in the property transfer documents, none of the provisions of paragraph (b) of this section apply in the case of liquidation of a security interest in the property. If FHA has insured a mortgage on the property, the provisions of paragraph (b) of this section shall not apply upon occurrence of an event requiring termination under 24 CFR 203.41(c)(2) or 234.66(c)(2). (c) Limitation on equity interest an initial homeowner may retain from sale during first six years. (1) The HOPE program is designed to assure that an initial or subsequent homeowner does not receive any undue profit from acquiring a unit under the program and that, to the extent the sales price is sufficient, an initial homeowner recovers the equity interest in the property. With respect to any sale by an initial homeowner during the first six years after acquisition, the family may retain only the amount computed under this paragraph. Any excess must be distributed as provided in §572.135(b). The amount of equity an initial homeowner has in the property is determined by computing the sum of the following: (i) The contribution to equity paid by the family (such as any downpayment (in the form of cash or the value of sweat equity) and any amount paid towards principal on a mortgage loan during the period of ownership); (ii) The value of any improvements (not including normal or routine maintenance) installed at the expense of the family during the family's tenure as owner (including improvements made through sweat equity), as determined by the recipient or other entity specified in the approved application based on evidence of amounts spent on the improvements, including the cost of material and labor (or the value of the sweat equity); and (iii) The appreciated value, determined by applying the Consumer Price Index (Urban Consumers) or other HUD approved index against the contribution to equity under paragraphs (d)(i) and (ii) of this section. (2) The recipient (or other entity) may, at the time of initial sale, enter into an agreement with the family to set a maximum amount which this appreciation may not exceed. (3) Amounts that count towards a family's equity may not also count towards the match. (d) Promissory note. (1) If the purchase price of the unit (adjusted, if applicable as described in this paragraph) paid by the initial homebuyer is less than the fair market value of the property (based on an appraisal of the value of the unit after rehabilitation to applicable program standards conducted in accordance with the appraisal requirements in §572.100(b)), the initial homeowner must, at closing, execute a nonamortizing, nonrecourse, noninterest-bearing promissory note, in a form acceptable to HUD, equal to the difference between such fair market value of the unit and the adjusted purchase price, together with a security instrument securing the obligation of the note and recorded in local land records or other applicable system of recordation appropriate to the type of security interest being recorded. The note must be payable to the recipient or other entity designated in the approved homeownership plan. In determining the amount of the promissory note and for that purpose only, the purchase price must be adjusted by deducting all substantial amounts of financial assistance with respect to the family's acquisition or rehabilitation of the unit that would result in an undue profit to the family if it were to sell the unit at the beginning of the 7th year of homeownership. (See paragraph (c) of this section for an additional restriction on return to the homeowner on reasales during the first six years.) For this purpose, “substantial financial assistance” includes all forms of assistance or subsidy from HOPE 3 resources that reduce the cash return (sales proceeds) received by the recipient for the unit below its appraised after-rehabilitation fair market value by more than a total of $4,000, including (without limitation) discounted purchase prices, downpayment assistance, and rehabilitation or purchase money grants or loans that are not repayable on an amortizing basis. Financing to homeowners provided from HOPE 3 resources may not be assumed by subsequent homebuyers. (2) With respect to a sale by an initial homeowner, the note must require payment upon sale by the initial homeowner, to the extent proceeds of the sale remain after paying off other outstanding debt secured by the property that was incurred for the purpose of acquisition or property improvement, paying any other amounts due in connection with the sale (such as closing costs and transfer taxes), and paying the family the amount of its equity in the property, computed in accordance with paragraph (c) of this section. (3) With respect to a sale by an initial homeowner after the first six years after acquisition, through the 20th year, the amount payable under the note must be reduced by (4) Where a subsequent purchaser during the 20-year period, measured by the term of the initial promissory note, purchases the property for less than the then current fair market value (determined in accordance with the appraisal requirements in §572.100(b)), the purchaser must also execute at closing a promissory note and mortgage (to be recorded as stated in paragraph (d)(1) of this section) payable to the recipient or its designee, for the amount of the discount (but no more than the amount payable at the time of the sale on the promissory note by the seller). The term of the promissory note must be the period remaining of the original 20-year period. The note must require payment upon sale by the subsequent homeowner, to the extent proceeds of the sale remain after covering costs of the sale, paying off other outstanding debt secured by the property that was incurred for the purpose of acquisition or property improvement, and paying any other amounts due in connection with the sale. The amount payable on the note must be reduced by a percentage of the original principal amount of the note for each full month of ownership by the subsequent homeowner. The percentage must be computed by determining the percentage of the term of the promissory note the homeowner has owned the property. The remainder may be retained by the subsequent homeowner selling the property. (e) Additional restrictions. Notwithstanding paragraph (a) of this section, an applicant may propose in its application, and HUD may approve, additional reasonable restrictions on the resale of units under the program. HUD does not encourage additional restrictions, but HUD approval will be based on a review of the individual circumstances. However, HUD will not approve restrictions that it determines will substantially limit the ability of homeowners to realize financial appreciation in the value of their homes. [58 FR 36526, July 7, 1993, as amended at 61 FR 48798, Sept. 16, 1996] (a) Proceeds from sales. The recipient or another entity approved by HUD must use the proceeds, if any, from the initial sale for costs of their HOPE 3 program, including additional homeownership opportunities eligible under the HOPE 3 program, improvements to properties under the HOPE 3 program, business opportunities for low-income families participating in the HOPE 3 program, supportive services related to the HOPE 3 program, and other activities approved by HUD, either as part of the approved application or later on request. Such proceeds include the full consideration received by the recipient or other entity for the property, including principal and interest on purchase money loans from HOPE 3 funds or match. (b) Resale proceeds. Fifty percent of any portion of the net sales proceeds that may not be retained by the homeowner under §572.130(c), (d), and (e) must be paid to the recipient, or another entity approved by HUD, for use for additional homeownership opportunities eligible under the HOPE 3 program, improvements to properties under the HOPE 3 program, business opportunities for homeowners under the HOPE 3 program, supportive services related to the HOPE 3 program, and other activities approved by HUD in the approved homeownership program or later on request. The remaining 50 percent must be collected by the recipient and returned to HUD within 15 days of the sale for use under the HOPE 3 program, subject to any limitations contained in appropriations Acts. (c) Requirements for use of sale and resale proceeds. Sale and resale proceeds must be committed for approved activities within one year of receipt. All sale and resale proceeds must be accounted for by the recipient, and 50 percent of all resale proceeds received by the recipient must be returned to HUD, as described in paragraph (b) of this section. Recipients may use up to 15 percent of their sale and resale proceeds for administrative expenses to expand their HOPE 3 program and provide additional homeownership opportunities. Recipients must retain records on the use of these funds to the same level of detail as required of grant funds under the HOPE 3 system or whatever records HUD otherwise prescribes. The recipient, and any other entity approved by HUD to administer the sale and resale proceeds, remain responsible to comply with the requirements of this part, or such other requirements as HUD may prescribe (consistent with then applicable law) in closeout procedures or agreements. (d) Program income. Any program income, as defined in §572.5, received by the recipient may be added to the funds committed to the grant agreement by HUD and the recipient, in accordance with the requirements of parts 84 and 85 of this title, as applicable. [58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 62 FR 34145, June 24, 1997] The rights of third parties are governed by 42 U.S.C. 12895(d) and apply to the requirements of this part. [61 FR 48798, Sept. 16, 1996] (a) Displacement prohibited. (1) No person may be displaced from his or her dwelling as a direct result of a homeownership program under this part. This does not preclude terminations of tenancy for violation of the terms of occupancy of the unit. Each resident of an eligible property on the date the application for an implementation grant was submitted to HUD and each resident at the time the property is selected must be given an opportunity to become a homeowner under this program if the resident qualifies as an eligible family and meets other program requirements. If the resident does not qualify or does not elect to move, the property is not eligible. The protections provided to residents under this section do not apply to the former owner of the property if the property is acquired from him or her as a result of a tax or mortgage foreclosure. (2) In addition to any applicable sanctions under the grant agreement, a violation of paragraph (a)(1) of this section may trigger a requirement to provide relocation assistance in accordance with the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 and governmentwide implementing regulations at 49 CFR part 24. (b) Relocation assistance for residents who elect to move. The recipient must offer each nonpurchasing resident who elects to move relocation assistance in accordance with the approved homeownership program. The program must provide, at least, the following assistance: (1) Advisory services, including timely information, counseling (including the provision of information on a resident's rights under the Fair Housing Act), and referrals to suitable, affordable, decent, safe, and sanitary alternative housing; (2) Payment for actual, reasonable moving expenses; and (3) Financial assistance sufficient to permit relocation to suitable, affordable, decent, safe, and sanitary housing. This requirement is met if the family is provided the opportunity to relocate to suitable, decent, safe, and sanitary housing for which the monthly rent and estimated average utility costs do not exceed the greater of 30 percent of the person's income or the person's monthly rent before relocation and the estimated average monthly utility costs. The homeownership program must specify the period for which replacement housing assistance will be provided to persons who do not receive assistance through a Section 8 rental certificate or voucher or other housing program subsidy. (c) Temporary relocation. The recipient must provide each resident of an eligible property, who is required to relocate temporarily to permit work to be carried out, with suitable, decent, safe, and sanitary housing for the temporary period and must reimburse the resident for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation, including the costs of moving to and from the temporarily occupied housing and any increase in monthly costs of rent and utilities. (d) Notice of relocation assistance. As soon as feasible, each recipient must give each resident of an eligible property a written description of the applicable provisions of this section. Any planning grants made by HUD under the HOPE 3 program will continue to be governed by the provisions in this section in effect immediately before October 16, 1996. When or before HUD announces the availability of funds for planning grants under this part, these provisions will be recodified. [61 FR 48798, Sept. 16, 1996] Any planning grants made by HUD under the HOPE 3 program will continue to be governed by the provisions in this section in effect immediately before October 16, 1996. When or before HUD announces the availability of funds for planning grants under this part, these provisions will be recodified. [61 FR 48798, Sept. 16, 1996] (a) General authority. Any implementation grants for the purpose of carrying out homeownership programs approved under this part will be awarded using a selection process and selection criteria to be published in a NOFA. (b) Deadline for completion. A recipient must spend all implementation grant amounts within 4 years from the effective date of the grant agreement. The appropriate HUD field office may approve a request to extend the deadline when it determines that an extension is warranted. A previously approved grant amount may not be amended to increase the grant amount. (c) Program closeout. Recipients will comply with closeout procedures as issued by HUD. [62 FR 34145, June 24, 1997] Implementation grants may be used for the reasonable costs of eligible activities necessary to carry out a homeownership program under this part. Only costs incurred on or after the effective date of an implementation grant agreement qualify for funding under this part. Eligible activities include: (a) Acquisition of eligible properties by the recipient. Acquisition of eligible properties for the purpose of transferring ownership interests to eligible families in a homeownership program under this part, in accordance with §572.100. (Where the applicant owns the eligible property or where HUD otherwise determines that an “arms length” relationship for acquisition does not exist, program funds may not be used for acquisition of the property for the program. However, if the property is owned by an eligible source, it may be donated as match in accordance with §572.220(b)(4).) (b) Recipient closing costs. Customary and reasonable closing costs of the buyer associated with the purchase of eligible properties under the program. (c) Financial assistance to homebuyers. Provision of assistance to families to make acquisition and rehabilitation of eligible properties affordable, in accordance with §572.105(b). (d) Rehabilitation. Rehabilitation of the eligible property covered by the homeownership program, in accordance with standards and cost limitations established by HUD in §572.100. (e) Architectural and engineering work. Architectural and engineering work, and related professional services required to prepare architectural plans or drawings, write-ups, specifications or inspections, including lead-based paint evaluation. (f) Relocation. Relocation of residents in eligible properties who elect to move, in accordance with §572.145(b). (g) Temporary relocation of homebuyers. Temporary relocation of residents during rehabilitation, in accordance with §572.145(c). (h) Legal fees. Customary and reasonable costs of professional legal services. (i) Replacement reserves. A single replacement reserve for the properties under the program if necessary, in accordance with §572.125. (j) Homebuyer outreach and selection. Reasonable and necessary costs of marketing the program to potential homebuyers and of identifying and selecting homebuyers under the program. These costs may include costs related to implementing the affirmative fair housing marketing strategy required under §572.110. (k) Counseling and training. Counseling and training of only those homebuyers (and their alternates) and homeowners selected under the homeownership program. This may include such subjects as personal financial management, home maintenance, home repair, construction skills (especially where the eligible family will do some of the rehabilitation), property management for owners of multi-unit properties, and the general rights and responsibilities of homeownership. (l) Property management and holding costs. Reasonable and necessary costs related to properly maintaining and securing eligible properties after acquisition or donation and before sale to an eligible homebuyer. These costs may include property insurance expenses, security costs, property taxes, utility charges, and other costs related to sound property management of recipient-owned properties before sale under the program. These costs may not be charged relative to eligible properties donated to the program by the recipient or another entity that HUD determines does not have an “arm's length” relationship with the recipient. (m) Recipient training needs. Defraying costs for ongoing training needs of the recipient for courses of instruction that are directly related to developing and carrying out the homeownership program. (n) Economic development. Economic development activities that promote economic self-sufficiency of homebuyers and homeowners under the homeownership program. The economic development activities must be directly related to the homeownership program, and may only benefit families and individuals who are homeowners or who have been selected as homebuyers under the program. These costs are limited to job training or retraining and day care costs of those participating in job training and retraining activities approved under the HOPE 3 program. The recipient must enter into written agreements with the providers of economic development services specifying the services to be provided, including estimates of the numbers of homebuyers and homeowners to be assisted. The aggregate amount of planning and implementation grants that may be used for economic development activities related to any one program may not exceed $250,000. (o) Administrative costs. Reasonable and necessary costs, as described and valued in accordance with the OMB Circular Nos. A–87 or A–122, as applicable, incurred by a recipient in carrying out the HOPE 3 program. The total amount that may be spent on administrative activities from the implementation grant and any contribution toward the match may not exceed 15 percent of the amount of the grant. For purposes of complying with the 15 percent limitation, administrative costs do not include the cost of activities that are separately eligible under this section. (p) Other activities. Other activities proposed by the applicant, to the extent the applicant justifies them as necessary for the proposed homeownership program and HUD approves them. [58 FR 36526, July 7, 1993, as amended at 64 FR 50226, Sept. 15, 1999] (a) General requirements. (1) Except as provided in paragraph (a)(3) of this section, each recipient must assure that matching contributions equal to not less than 33 percent (or 25 percent for grants awarded after April 11, 1994) of the amount of the implementation grant shall be provided from non-Federal sources to carry out the homeownership program. Amounts contributed to the match must be used for eligible activities or in accordance with the requirements of this section. (2) All contributions toward eligible activities to be counted toward the match must be provided no later than the deadline for completion of program activities established in accordance with §572.210(f), except as permitted under paragraphs (b)(1)(iv) and (b)(3) of this section. (3) When the recipient is an IHA, and the IHA (acting in that capacity) has not received, and will not receive, amounts under title I of the Housing and Community Development Act of 1974 for the fiscal year in which HUD obligates HOPE grant funds, the match requirements under this section will not apply. (b) Form. Contributions may only be in the form of: (1) Cash contributions. (i) Cash contributions from non-Federal resources contributed permanently for uses under the HOPE 3 program by the applicant, non-Federal public entities, private entities, or individuals, except that a cash contribution in the form of a down payment made by an eligible family may not count as a matching contribution. Funds will be considered permanently contributed if all principal, interest, and any other return on the contribution are used for eligible activities in accordance with program requirements. (ii) Non-Federal resources may include: (A) Contribution of trust funds held by Federal agencies for Indian tribes; (B) PHA section 8 operating reserve funds, where approved by HUD; (C) Income from a Federal grant earned after the end of the award period, if no Federal programmatic requirements govern the disposition of the program income. (D) Amounts, determined in accordance with paragraph (b)(1)(iv)(B) of this section, that have been requested by the applicant in an application submitted to the Federal Housing Finance Board for assistance under its affordable housing program, so long as the application is approved within 30 days of HUD's conditional approval of the HOPE 3 application. (iii) Non-Federal resources may not include: (A) Funds from a Community Development Block Grant under section 106(b) or section 106(d), respectively, of the Housing and Community Development Act of 1974, except to the extent permitted for administrative expenses under paragraph (b)(2) of this section; (B) Federal tax expenditures, including low-income housing tax credits. (iv) The grant equivalent of a below-market interest rate loan to the homebuyer from non-Federal resources, where all repayments, interest, and other return will not be permanently contributed to the HOPE 3 program, may be counted as a cash contribution. The grant equivalent of a below market interest rate loan must be calculated in accordance with paragraphs (b)(1)(iv) (A) and (B) of this section— (A) If the loan is made from proceeds of obligations issued by or on behalf of a public body that are exempt from taxation by the United States, the contribution is the present discounted cash value of the difference between payments to be made on the borrowed funds and payments to be received on the loan to the homebuyer, based on a discount rate equal to the interest rate on the borrowed funds; (B) If the loan is made from funds other than under paragraph (b)(1)(iv)(A) of this section, the contribution is the present discounted cash value of the yield forgone, calculated based on a discount rate approved or prescribed by HUD. In determining the yield forgone, the recipient must use as a measure of a market yield one of the following, as appropriate: (1) With respect to housing financed with a fixed interest rate mortgage, a rate equal to the 10-year Treasury note rate plus 200 basis points; or (2) With respect to housing financed with an adjustable interest rate mortgage, a rate equal to the one-year Treasury bill rate plus 250 basis points. (v) Cash contributions may also be made from sales proceeds from the Turnkey III Homeownership and Mutual Help programs, as approved by HUD, or an approved homeownership program under section 5(h) of the 1937 Act. (2) Administrative costs. (i) Contributions of eligible administrative services up to a value equal to 7 percent of the amount of the implementation grant. This limitation is in addition to the 15 percent limitation on administrative costs (see §572.215(o)). (ii) If an applicant proposes to contribute administrative services, HUD will automatically approve an applicant's assurances for matching purposes that it will pay eligible administrative costs from non-Federal sources in an amount up to 7 percent of the implementation grant, and will not require further documentation of those expenditures for purposes of the HOPE 3 program. If a recipient uses more than 8 percent of its implementation grant to pay administrative costs, the amount credited toward the match will be reduced to less than 7 percent to stay within the 15 percent limitation. (iii) Non-Federal resources, for the purposes of counting contributions for administrative costs, may include funds from a Community Development Block Grant under section 106(b) or section 106(d) of the Housing and Community Development Act of 1974 and are subject to the recordkeeping and documentation requirements of that program. (3) Taxes, fees, and other charges. (i) The present value of taxes, fees, or other charges that are normally and customarily imposed but are waived, forgone, or deferred in a manner that facilitates the implementation of a homeownership program assisted under this part. Only amounts that would have been imposed after the date a property is acquired by a recipient or other entity for transfer to eligible families, the effective date of the implementation grant agreement if the recipient already owns the property, or the date after an eligible property is acquired directly from an eligible source by an eligible family, as applicable, may be counted towards the match. (ii) Amounts that would be waived, forgone, or deferred for longer than 20 years from the date a family acquires homeownership interests in the unit may not be counted towards the match. (iii) The present value of taxes, fees, or other charges waived, forgone, or deferred must be computed by discounting the estimated amount that would be otherwise payable over the time period (up to 20 years) based on a discount rate approved or prescribed by HUD. (iv) Where the match includes amounts under paragraph (b)(3) of this section, the documents transferring the homeownership interest to the family must evidence the contribution, to the extent the contribution has not already been received. (4) Real property. Real property contributed for use under an approved homeownership program. To the extent properties were acquired with Federal resources or are donated directly to the program from Federal sources, their value is not an eligible match contribution. (i) The as-is fair market value of eligible property may be counted as a contribution toward the match, determined in accordance with a recent appraisal conducted under procedures established or approved by HUD. The maximum value contributed will be limited as provided in §572.100. (ii) When eligible real property is sold to the recipient or its designee from non-Federal sources at a price below fair market value, the differential between the fair market value and the discounted sales price may be counted toward the match. (iii) Vacant land from any non-Federal source located on existing streets with available utilities (which need not include laterals) may be contributed for use under the program, but only if a structure acquired or donated from an eligible HOPE 3 source will be moved onto it. The total amount of the contribution and any amount paid from HOPE 3 funds for acquisition of the structure, moving, and rehabilitation costs must be within the limits provided in §572.100. (5) Infrastructure. The fair market value of investment (as approved by HUD), not made with Federal resources, in on-site and off-site infrastructure that directly contributes to a homeownership program. The infrastructure investment may be counted toward the match only if it was completed no earlier than 12 months before the deadline date set by HUD in the NOFA for receipt of implementation grant applications. Investment in infrastructure may include such activities as new or repaired utility laterals connecting eligible property to the main line and new or rebuilt walkways, sidewalks, or curbs on or contiguous to the eligible property. If the investment in infrastructure also benefits other properties, only the share of the costs directly benefiting the eligible property under the homeownership program may be counted toward the match. (6) Donated labor. All donated labor, including sweat equity provided by a homebuyer or homeowner, to be valued at $10 an hour or at a rate promulgated by HUD in the NOFA, except for donated professional labor, as approved by HUD, including professional labor by homebuyers and homeowners. The donated professional labor will be valued at the fair market value of the work completed. Professional labor is work ordinarily performed by the donor for payment, such as work by attorneys, electricians, carpenters, and architects that is equivalent to work they do in their occupations. Sweat equity may be counted towards the match only if it is not also counted toward a family's equity. (7) Donated materials and supplies. Donated materials and supplies may be counted toward the match contribution at their fair market value. The recipient must maintain a written enumeration of what donated materials and supplies are being used in the program, as well as documentation of their cost or value. (8) Other in-kind contributions. The reasonable value of in-kind contributions proposed by the applicant in the application and approved by HUD. In reviewing proposed in-kind contributions, HUD will review to ensure: (i) The proposed contribution is to be used for an eligible activity under the proposed homeownership program; (ii) The application demonstrates that the proposed in-kind contribution will actually be provided; and (iii) The proposed value of the contribution is reasonable. In determining whether the value is reasonable, HUD will generally consider the amount such contribution would otherwise cost the program. [58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 61 FR 48798, Sept. 16, 1996] (a) Terms and conditions. After HUD approves an application for a planning grant or an implementation grant under this part, it will enter into a grant agreement with the recipient setting forth the amount of the grant and applicable terms and conditions. The grant agreement will be effective for purposes of this part and funds may be disbursed under the Cash and Management Information (C/MI) System, described in §572.230, after the grant agreement has been executed by the authorized official of the recipient and HUD. Among other things, the grant agreement will provide that the recipient agrees: (1) To carry out the program in accordance with the provisions of this part, applicable law, the approved application, and all other applicable requirements; and (2) To comply with such other terms and conditions, including recordkeeping and reports, as HUD may establish for the purposes of administering, monitoring, and evaluating the program in an effective and efficient manner. (b) Corrective and remedial actions. (1) HUD may withhold, withdraw, or recapture any portion of a grant, terminate the grant agreement, or take other appropriate action authorized under the grant agreement, if HUD determines that the recipient is failing to carry out the approved homeownership program in accordance with the terms of the approved application and this part, including failure to provide the contributions toward the match. Corrective or remedial actions that HUD may instruct the recipient to undertake include; (i) Preparing and following a schedule of actions or a management plan for properly completing the approved activities; (ii) Cancelling or revising the affected activities before expending grant funds for them, revising the grant budget as necessary, and substituting other eligible activities; (iii) Discontinuing draws under the C/MI System, and not incurring further costs for the affected activities; (iv) Reimbursing its HOPE 3 program account in the amount not used in accordance with this part and the grant agreement; and (v) In the case of implementation grants, making additional matching contributions in substitution for contributions not in compliance with this part and the grant agreement or submitting to HUD acceptable evidence that matching contributions sufficient to meet the total match required under this part and the grant agreement will be made, before additional draws are made. (2) If HUD determines that the recipient is not complying with the corrective or remedial actions agreed upon with the recipient, or as otherwise authorized in the grant agreement, HUD may implement the following additional corrective and remedial actions: (i) Changing the method of payment under the C/MI System to a reimbursement basis; (ii) Suspending the recipient's authority to make draws under the C/MI System for affected activities; (iii) Reducing (deobligating) the grant in the amount affected by the performance deficiency, including, in the case of implementation grants, failure to furnish matching contributions in the required amount; (iv) Terminating the grant for all further activities and initiating close-out procedures; (v) Taking action against the recipient under 24 CFR part 24 and Executive Order 12549 (3 CFR, 1986 Comp., p. 189) with respect to future HOPE 3, HUD, or Federal grant awards; and (vi) Taking any other remedial action legally available. (3) If the amount of grant funds that has been disbursed under the C/MI System exceeds the amount finally determined by HUD to be authorized (including any authorized deobligation), the recipient must repay such excess amount to HUD, and will have no right to reclaim or reuse such excess amount. (c) Failure to complete and transfer a property to a homebuyer. If a property assisted under this part or credited as match is not completed and transferred to homebuyers as required under this part, whether voluntarily by the recipient or otherwise, grant expenditures on the property are considered ineligible, and HOPE 3 funds for acquisition and rehabilitation must be repaid to the program account. Preliminary costs (such as architectural and engineering, inspection, and appraisal fees) expended before acquisition are considered general program expenses and need not be repaid. (d) Failure to provide homeownership opportunities under an implementation grant. Failure to provide at least 70 percent of the number of homeownership opportunities proposed in the application for an implementation grant within the timeframe specified in §572.210(f) may result in remedial actions, as described in paragraph (b) of this section, being taken by HUD, including requiring repayment of all or part of the grant. Disbursement of HOPE 3 grant funds is managed through HUD's Cash and Management Information (C/MI) System for the HOPE 3 program. Funds that may be disbursed through the C/MI System include funds awarded to the recipient and obligated through the grant approval letter issued by HUD. HOPE 3 funds are drawn down by the recipient or its authorized designee from a United States Treasury account for the program, using the Treasury Automated Clearinghouse (ACH) System. Any drawdown of HOPE 3 funds from the United States Treasury account is conditioned upon the submission of satisfactory information about the program and compliance with other procedures specified by HUD in HUD's forms and issuances concerning the C/MI System. [62 FR 34145, June 24, 1997] Amendments to the approved program must be documented or approved by HUD in accordance with instructions provided by HUD. When funds are made available for planning grants or implementation grants under this part, HUD will publish a NOFA in the [62 FR 34145, June 24, 1997] Any planning grants made by HUD under the HOPE 3 program will continue to be governed by the provisions in this section in effect immediately before October 16, 1996. When or before HUD announces the availability of funds for planning grants under this part, these provisions will be recodified. [61 FR 48798, Sept. 16, 1996] Applicants must provide a certification of consistency with the approved consolidated plan, in accordance with 24 CFR 91.510. [60 FR 36018, July 12, 1995] In addition to the nondiscrimination and equal opportunity requirements set forth in 24 CFR part 5, the following requirements apply to homeownership programs under this part: (a) Modification of fair housing and nondiscrimination requirements for Indian tribes and IHAs. (1) The Indian Civil Rights Act (25 U.S.C. 1301 et seq.) applies to tribes when they exercise their powers of self-government. Thus, it is applicable in all cases when an IHA has been established by exercise of such powers. In the case of the IHA established pursuant to State law, the applicability of the Indian Civil Rights Act shall be determined on a case-by-case basis. Development subject to the Indian Civil Rights Act must be developed and operated in compliance with its provisions and all implementing HUD requirements, instead of title VI and the Fair Housing Act and their implementing regulations. (2) In the case of Indian tribes and IHAs, compliance with the requirements of this section shall be to the maximum extent consistent, but not in derogation of, the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e(b)). (b) Affirmative fair housing marketing. The recipient must adopt a strategy for informing and soliciting applications from people who are least likely to apply, because of race, color, religion, sex, disability, familial status, or national origin, for the program without special outreach, consistent with the affirmative fair housing marketing requirements. (See 24 CFR 92.351 for an example of an affirmative strategy.) Paragraph (b) of this section does not apply to Indian tribes and IHAs, as described in paragraph (a)(1) of this section. (c) Authority for collection of racial, ethnic, and gender data. HUD requires submission of racial, ethnic, and gender data under this part under the authority of section 562 of the Housing and Community Development Act of 1987 and section 808(e)(6) of the Fair Housing Act. (d) Faith-based activities. (1) Organizations that are religious or faith-based are eligible, on the same basis as any other organization, to participate in the HOPE 3 program. Neither the Federal government nor a State or local government receiving funds under HOPE 3 programs shall discriminate against an organization on the basis of the organization's religious character or affiliation. (2) Organizations that are directly funded under the HOPE 3 program may not engage in inherently religious activities, such as worship, religious instruction, or proselytization, as part of the programs or services funded under this part. If an organization conducts such activities, the activities must be offered separately, in time or location, from the programs or services funded under this part, and participation must be voluntary for the beneficiaries of the HUD-funded programs or services. (3) A religious organization that participates in the HOPE 3 program will retain its independence from Federal, State, and local governments, and may continue to carry out its mission, including the definition, practice, and expression of its religious beliefs, provided that it does not use direct HOPE 3 funds to support any inherently religious activities, such as worship, religious instruction, or proselytization. Among other things, faith-based organizations may use space in their facilities to provide HOPE 3-funded services, without removing religious art, icons, scriptures, or other religious symbols. In addition, a HOPE 3-funded religious organization retains its authority over its internal governance, and it may retain religious terms in its organization's name, select its board members on a religious basis, and include religious references in its organization's mission statements and other governing documents. (4) An organization that participates in the HOPE 3 program shall not, in providing program assistance, discriminate against a program beneficiary or prospective program beneficiary on the basis of religion or religious belief. (5) HOPE 3 funds may not be used for the acquisition, construction, or rehabilitation of structures to the extent that those structures are used for inherently religious activities. HOPE 3 funds may be used for the acquisition, construction, or rehabilitation of structures only to the extent that those structures are used for conducting eligible activities under this part. Where a structure is used for both eligible and inherently religious activities, HOPE 3 funds may not exceed the cost of those portions of the acquisition, construction, or rehabilitation that are attributable to eligible activities in accordance with the cost accounting requirements applicable to HOPE 3 funds in this part. Sanctuaries, chapels, or other rooms that a HOPE 3-funded religious congregation uses as its principal place of worship, however, are ineligible for HOPE 3-funded improvements. Disposition of real property after the term of the grant, or any change in use of the property during the term of the grant, is subject to government-wide regulations governing real property disposition (see 24 CFR parts 84 and 85). (6) If a State or local government voluntarily contributes its own funds to supplement federally funded activities, the State or local government has the option to segregate the Federal funds or commingle them. However, if the funds are commingled, this section applies to all of the commingled funds. [58 FR 36526, July 7, 1993, as amended at 59 FR 33894, June 30, 1994; 61 FR 5209, Feb. 9, 1996; 68 FR 56405, Sept. 30, 2003] (a) Planning grants. HUD has determined that its approval of applications for planning grants under this part is categorically excluded from environmental review and compliance requirements of the National Environmental Policy Act of 1969 (NEPA) and that other Federal environmental laws and authorities listed in 24 CFR 50.4 are not applicable. (b) Implementation grants. (1) Recipients of implementation grants must comply with the applicable environmental laws and authorities at 24 CFR 50.4 and must: (i) Supply HUD with information necessary for it to perform any necessary environmental review of the property (or neighborhood); (ii) Carry out mitigating measures required by HUD or select alternate eligible property; and (iii) Not acquire or otherwise carry out program activities with respect to any eligible property until HUD approval for the property (or neighborhood) is received. (2) Before any amounts under this part are used to acquire or rehabilitate an eligible property, HUD must determine whether the proposed activities trigger applicability thresholds for the applicable Federal environmental laws and authorities. These may apply when the property is: (i) Located within designated coastal barriers; (ii) Listed on, or eligible for listing on, the National Register of Historic Places; or is located within, or adjacent to, an historic district; (iii) Located near hazardous operations handling fuels or chemicals of an explosive or flammable nature; (iv) Contaminated by toxic chemicals or radioactive materials; (v) Located within a runway clear zone at a civil airport or within a clear zone or accident potential zone at a military airfield; or (vi) Located within a special flood hazard area or within a location requiring flood insurance protection. (3) A recipient may choose to make the threshold reviews itself or with assistance from State or local governments or qualified persons or to refer the property to HUD for threshold review. Where the recipient makes the threshold review itself, it must submit the result to HUD. (4) If a recipient chooses not to make the threshold reviews, it must submit information to HUD to permit HUD to make the review. (5) If HUD determines on the basis of the recipient's threshold review or HUD's threshold review that one or more of the thresholds are exceeded, HUD will conduct an environmental review of that issue and, if appropriate, establish mitigating measures that the recipient must carry out for the property unless it decides to select an alternate property. (a) Conflict of interest. In addition to the conflict of interest requirements in OMB Circular A–1101 1 See §572.425(b) concerning availability of OMB Circulars. (b) Exception. HUD may grant an exception to the exclusion in paragraph (a) of this section on a case-by-case basis when it determines that such an exception will serve to further the purposes of the HOPE 3 program and the effective and efficient administration of the local homeownership program. An exception may be considered only after the applicant or recipient has provided a disclosure of the nature of the conflict, accompanied by an assurance that there has been public disclosure of the conflict, a description of how the public disclosure was made, and an opinion of the applicant's or recipient's attorney that the interest for which the exception is sought would not violate State or local law. In determining whether to grant a requested exception, HUD will consider the cumulative effect of the following factors, where applicable: (1) Whether the exception would provide a significant cost benefit or an essential degree of expertise to the local homeownership program that would otherwise not be available; (2) Whether an opportunity was provided for open competitive bidding or negotiation; (3) Whether the person affected is a member of a group or class intended to be the beneficiaries of the activity and the exception will permit such person to receive generally the same interests or benefits as are being made available or provided to the group or class; (4) Whether the affected person has withdrawn from his or her functions or responsibilities, or the decisionmaking process, with respect to the specific activity in question; (5) Whether the interest or benefit was present before the affected person was in a position as described in paragraph (b) of this section; (6) Whether undue hardship will result either to the applicant, recipient, or the person affected when weighed against the public interest served by avoiding the prohibited conflict; and (7) Any other relevant considerations. (a) Application of OMB Circulars. (1) The policies, guidelines, and requirements of OMB Circular Nos. A–87 (Cost Principles Applicable to Grants, Contracts and Other Agreements with State and Local Governments) and 24 CFR part 85 (Administrative Requirements for Grants and Cooperative Agreements to State, Local and Federally Recognized Indian Tribal Governments) apply to the award, acceptance, and use of assistance under this part by applicable entities, and to the remedies for non-compliance, except where inconsistent with the provisions of NAHA, other Federal statutes, or this part. Part 84 of this title (Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations) and OMB Circular Nos. A–122 (Cost Principles Applicable to Grants, Contract and Other Agreements with Nonprofit Institutions) and, as applicable, A–21 (Cost Principles for Educational Institutions) apply to the acceptance and use of assistance under this part by covered organizations, except where inconsistent with the provisions of Federal statutes or this part. Recipients are also subject to the audit requirements of OMB Circular A–128 (Audits of State and Local Governments) implemented at 24 CFR part 44, and OMB Circular A–133 (Audits of Institutions of Higher Learning and Other Nonprofit Institutions), implemented at 24 CFR part 45, as applicable. (2) Copies of OMB Circulars may be obtained from E.O.P. Publications, room 2200, New Executive Office Building, Washington, DC 20503, telephone (202) 395–7332 (this is not a toll-free number). There is a limit of two free copies. (b) Requirements in 24 CFR part 5. The Disclosure requirements; provisions on Debarred, suspended or ineligible contractors; and Drug-Free Workplace requirements, as identified in §5.105 (b), (c), and (d) of this title, apply to this program. (c)–(d) [Reserved] (e) Labor standards. If other Federal programs are used in connection with the HOPE 3 homeownership program, labor standards requirements apply to the extent required by such other Federal programs. (f) Flood insurance. Pursuant to the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001–4128), the recipient may not provide financial assistance for acquisition or rehabilitation of properties located in an area identified by the Federal Emergency Management Agency (FEMA) as having special flood hazards, unless: (1) The community in which the area is situated is participating in the National Flood Insurance program (see 44 CFR parts 59 through 79), or less than one year has passed since FEMA notification regarding such hazards; and (2) Flood insurance is obtained as a condition of the acquisition or rehabilitation of the property. (g) Coastal Barrier Resources Act. Pursuant to the Coastal Barrier Resources Act (16 U.S.C. 3601), HUD will not approve use of properties in the Coastal Barrier Resources System. (h) Lead-based paint activities. The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821–4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851–4856), and implementing regulations at part 35, subparts A, B, J, K and R of this title apply to activities under these programs. [58 FR 36526, July 7, 1993, as amended at 59 FR 2738, Jan. 19, 1994; 61 FR 48798, Sept. 16, 1996; 62 FR 34145, June 24, 1997; 64 FR 50226, Sept. 15, 1999] (a) General records. Each recipient must keep records that will facilitate an effective audit to determine compliance with program requirements and that fully disclose: (1) The amount and disposition by the recipient of the planning and implementation grants received under this part, including sufficient records that document the reasonableness and necessity of each expenditure; (2) The amount and disposition of proceeds from financing obtained in connection with the program, sales to eligible families, and any funds recaptured upon sale by the homeowner; (3) The total cost of the homeownership program; (4) The amount and nature of any other assistance, including cash, property, services, or other items contributed as a condition of receiving an implementation grant; (5) The cost or other value of all in-kind contributions towards the match required by §572.220; and (6) Any other proceeds received for, or otherwise used in connection with, the homeownership program under this part. (b) Family size and income; racial, ethnic, and gender data. The recipient must maintain records on the family size and income, and racial, ethnic, and gender characteristics of families who apply for homeownership and families who become homeowners. (c) Selection procedures. The recipient must maintain a copy of its procedures for identifying and selecting eligible families in accordance with §572.110, and records documenting the eligibility of each family selected for homeownership. (d) Rehabilitation standards. The recipient must maintain written rehabilitation standards required by §572.100(d)(5). (e) Cooperative and condominium agreements. The recipient must maintain a copy of any condominium and cooperative association agreements for properties under a homeownership program approved under this part. (f) Amounts available for reuse. The recipient must keep and make available to HUD all records necessary to calculate accurately payments due to HUD under §572.135(b) and (c). (g) Access by HUD and the Comptroller General. For purposes of audit, examination, monitoring, and evaluation, each recipient must give HUD (including any duly authorized representatives and the Inspector General) and the Comptroller General of the United States (and any duly authorized representatives) access to any books, documents, papers, and records of the recipient that are pertinent to assistance received under this part, including all records required to be kept under this section. (h) Reports. The recipient must submit reports required by HUD.
Title 24: Housing and Urban Development
PART 572—HOPE FOR HOMEOWNERSHIP OF SINGLE FAMILY HOMES PROGRAM (HOPE 3)
Section Contents
§ 572.1 Overview of HOPE 3.
§ 572.5 Definitions.
§ 572.10 Section 8 assistance.
§ 572.100 Acquisition and rehabilitation of eligible properties; rehabilitation standards.
§ 572.105 Financing the purchase of properties by eligible families.
§ 572.110 Identifying and selecting eligible families for homeownership.
§ 572.115 Transfer of homeownership interests.
§ 572.120 Affordability standards.
§ 572.125 Replacement reserves.
§ 572.130 Restrictions on resale by initial homeowners.
§ 572.135 Use of proceeds from sales to eligible families, resale proceeds, and program income.
§ 572.140 Third party rights.
§ 572.145 Displacement prohibited; protection of nonpurchasing residents.
§ 572.200 Planning grants.
§ 572.205 Planning grants—eligible activities.
§ 572.210 Implementation grants.
§ 572.215 Implementation grants—eligible activities.
§ 572.220 Implementation grants—matching requirements.
§ 572.225 Grant agreements; corrective and remedial actions.
§ 572.230 Cash and Management Information (C/MI) System.
§ 572.235 Amendments.
§ 572.300 Notices of funding availability (NOFAs); grant applications.
§ 572.315 Rating criteria for planning grants.
§ 572.400 Consolidated plan.
§ 572.405 Nondiscrimination and equal opportunity requirements.
§ 572.410 Environmental procedures and standards.
§ 572.415 Conflict of interest.
§ 572.420 Miscellaneous requirements.
§ 572.425 Recordkeeping and reports; audit of recipients.
Subpart A—General
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§ 572.1 Overview of HOPE 3.
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§ 572.5 Definitions.
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§ 572.10 Section 8 assistance.
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Subpart B—Homeownership Program Requirements—Implementation Grants
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§ 572.100 Acquisition and rehabilitation of eligible properties; rehabilitation standards.
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§ 572.105 Financing the purchase of properties by eligible families.
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§ 572.110 Identifying and selecting eligible families for homeownership.
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§ 572.115 Transfer of homeownership interests.
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§ 572.120 Affordability standards.
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§ 572.125 Replacement reserves.
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§ 572.130 Restrictions on resale by initial homeowners.
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§ 572.135 Use of proceeds from sales to eligible families, resale proceeds, and program income.
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§ 572.140 Third party rights.
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§ 572.145 Displacement prohibited; protection of nonpurchasing residents.
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Subpart C—Grants
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§ 572.200 Planning grants.
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§ 572.205 Planning grants—eligible activities.
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§ 572.210 Implementation grants.
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§ 572.215 Implementation grants—eligible activities.
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§ 572.220 Implementation grants—matching requirements.
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§ 572.225 Grant agreements; corrective and remedial actions.
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§ 572.230 Cash and Management Information (C/MI) System.
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§ 572.235 Amendments.
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Subpart D—Selection Process
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§ 572.300 Notices of funding availability (NOFAs); grant applications.
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§ 572.315 Rating criteria for planning grants.
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Subpart E—Other Federal Requirements
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§ 572.400 Consolidated plan.
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§ 572.405 Nondiscrimination and equal opportunity requirements.
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§ 572.410 Environmental procedures and standards.
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§ 572.415 Conflict of interest.
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§ 572.420 Miscellaneous requirements.
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§ 572.425 Recordkeeping and reports; audit of recipients.
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