§ 4116. — Resident homeownership program.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC4116]
TITLE 12--BANKS AND BANKING
CHAPTER 42--LOW-INCOME HOUSING PRESERVATION AND RESIDENT HOMEOWNERSHIP
SUBCHAPTER I--PREPAYMENT OF MORTGAGES INSURED UNDER NATIONAL HOUSING ACT
Sec. 4116. Resident homeownership program
(a) Formation of resident council
Tenants seeking to purchase eligible low-income housing in
accordance with section 4110 of this title shall organize a resident
council for the purpose of developing a resident homeownership program
in accordance with standards established by the Secretary. The resident
council shall work with a public or private nonprofit organization or a
public body (including an agency or instrumentality thereof). Such
organization or public body shall have experience to enable it to help
the tenants consider their options and to develop the capacity necessary
to own and manage the housing, where appropriate, and shall be approved
by the Secretary.
(b) Other program requirements and limitations
(1) Sales to residents
As a condition of approval of a plan of action involving
homeownership program under this subchapter, the resident council
shall prepare a workable plan acceptable to the Secretary for giving
all residents an opportunity to become owners, which plan shall
identify--
(A) the price at which the resident council intends to
transfer ownership interests in, or shares representing, units
in the housing;
(B) the factors that will influence the establishment of
such price;
(C) how such price compares to the estimated appraised value
of the ownership interests or shares;
(D) the underwriting standard the resident council plans to
use (or reasonably expects a public or private lender to use)
for potential tenant purchasers;
(E) the financing arrangements the tenants are expected to
pursue or be provided; and
(F) a workable schedule of sale (subject to the limitations
of paragraph (8)) based on estimated tenant incomes.
(2) Approval of method of conversion and limitation on
conditions of approval
The Secretary shall approve the method for converting the
housing to homeownership, which may involve acquisition of ownership
interests in, or shares representing, the units in a project under
any arrangement determined by the Secretary to be appropriate, such
as cooperative ownership (including limited equity cooperative
ownership) and fee simple ownership (including condominium
ownership). The Secretary may not require the prepayment of the
mortgage on eligible low-income housing for the approval of a plan
of action involving a homeownership program for the housing.
(3) Required conditions
The Secretary shall require that the form of homeownership
impose appropriate conditions, including conditions to assure that--
(A) the number of initial owners that are very low-income,
lower income, or moderate-income persons at initial occupancy
meet standards required or approved by the Secretary;
(B) occupancy charges payable by the owners meet
requirements established by the Secretary;
(C) the aggregate incomes of initial and subsequent owners
and other sources of funds for the project are sufficient to
permit occupancy charges to cover the full operating costs of
the housing and any debt service;
(D) each initial owner occupies the unit it acquires; and
(E) the low-income affordability restrictions shall continue
to apply to any rental units in the housing for any period
during which such units remain rental units.
(4) Use of proceeds from sales to eligible families
The entity that transfers ownership interests in, or shares
representing, units to eligible families, or another entity
specified in the approved application, may use 50 percent of the
proceeds, if any, from the initial sale for costs of the
homeownership program, including improvements to the project,
operating and replacement reserves for the project, additional
homeownership opportunities in the project, and other project-
related activities approved by the Secretary. The remaining 50
percent of such proceeds shall be returned to the Secretary for use
under section 4110 of this title, subject to availability under
appropriations Acts. Such entity shall keep, and make available to
the Secretary, all records necessary to calculate accurately
payments due the Secretary under this paragraph.
(5) Restrictions on resale by homeowners
(A) In general
(i) Transfer permitted
A homeowner under a homeownership program may transfer
the homeowner's ownership interest in, or shares
representing, the unit, except that a homeownership program
may establish restrictions on the resale of units under the
program.
(ii) Right to purchase
Where a resident management corporation, resident
council, or cooperative has jurisdiction over the unit, the
corporation, council, or cooperative shall have the right to
purchase the ownership interest in, or shares representing,
the unit from the homeowner for the amount specified in a
firm contract between the homeowner and a prospective buyer.
(iii) Promissory note required
The homeowner shall execute a promissory note equal to
the difference, if any, between the market value and the
purchase price, payable to the Secretary, together with a
mortgage securing the obligation of the note.
(B) 6 years or less
In the case of a transfer within 6 years of the acquisition
under the program, the homeownership program shall provide for
appropriate restrictions to assure that an eligible family may
not receive any undue profit. The plan shall provide for
limiting the family's consideration for its interest in the
property to the total of--
(i) the contribution to equity paid by the family;
(ii) the value, as determined by such means as the
Secretary shall determine through regulation, of any
improvements installed at the expense of the family during
the family's tenure as owner; and
(iii) the appreciated value determined by an inflation
allowance at a rate which may be based on a cost-of-living
index, an income index, or market index as determined by the
Secretary through regulation and agreed to by the purchaser
and the entity that transfers ownership interests in, or
shares representing, units to eligible families (or another
entity specified in the approved application), at the time
of initial sale, and applied against the contribution to
equity.
Such an 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.
(C) 6-20 years
In the case of a transfer during the period beginning 6
years after the acquisition and ending 20 years after the
acquisition, the homeownership program shall provide for the
recapture by the Secretary or the program of an amount equal to
the amount of the declining balance on the note described in
subparagraph (A)(iii).
(D) Use of recaptured funds
Any net sales proceeds that may not be retained by the
homeowner under the plan approved pursuant to this paragraph
shall be paid to the HOME Investment Trust Fund for the unit of
general local government in which the housing is located. If the
housing is located in a unit of general local government that is
not a participating jurisdiction (as such term is defined in
section 12704 of title 42), any such net sales proceeds shall be
paid to the HOME Investment Trust Fund for the State in which
the housing is located. With respect to any proceeds transferred
to a HOME Investment Trust Fund under this subparagraph, the
Secretary shall take such actions as are necessary to ensure
that the proceeds shall be immediately available for eligible
activities to expand the supply of affordable housing under
section 12742 of title 42. The Secretary shall require the
maintenance of any records necessary to calculate accurately
payments due under this paragraph.
(6) Protection of nonpurchasing families
(A) Eviction
No tenant residing in a dwelling unit in a property on the
date the Secretary approves a plan of action may be evicted by
reason of a homeownership program approved under this
subchapter.
(B) Rental assistance
If a tenant decides not to purchase a unit, or is not
qualified to do so, the Secretary shall ensure that rental
assistance under section 1437f of title 42 is available for use
by each otherwise qualified tenant (that meets the eligibility
requirements under such section) in that or another property.
Any system for preferences established under section
1437f(d)(1)(A) or 1437f(o)(6)(A) of title 42 shall not apply to
the provision of assistance to such families.
(C) Relocation assistance
The resident council shall also inform each such tenant that
if the tenant chooses to move, the owner will pay relocation
assistance in accordance with the approved homeownership
program.
(7) Qualified management
As a condition of approval of a homeownership program under this
subchapter, the resident council shall have demonstrated its
abilities to manage eligible properties by having done so
effectively and efficiently for a period of not less than 3 years or
by entering into a contract with a qualified management entity that
meets such standards as the Secretary may prescribe to ensure that
the property will be maintained in a decent, safe, and sanitary
condition.
(8) Timely homeownership
Except in the case of limited equity cooperatives, resident
councils shall transfer ownership of the property to tenants within
a specified period of time that the Secretary determines to be
reasonable. During the interim period when the property continues to
be operated and managed as rental housing, the resident council
shall utilize written tenant selection policies and criteria that
are approved by the Secretary as consistent with the purpose of
providing housing for very low-income families. The resident council
shall promptly notify in writing any rejected applicant of the
grounds for any rejection.
(9) Records and audit of resident councils
(A) Maintenance
Each resident council shall keep such records as may be
reasonably necessary to fully disclose the amount and the
disposition by such resident council of the proceeds of
assistance received under this subchapter (including any
proceeds from sales under paragraphs (4) and (5)(D)), the total
cost of the homeownership program in connection with which such
assistance is given or used, and the amount and nature of that
portion of the program supplied by other sources, and such other
sources as will facilitate an effective audit.
(B) Access
The Secretary shall have access for the purpose of audit and
examination to any books, documents, papers, and records of the
resident council that are pertinent to assistance received under
this subchapter.
(C) Audit
The Comptroller General of the United States, or any of the
duly authorized representatives of the Comptroller General,
shall also have access for the purpose of audit and examination
to any books, documents, papers, and records of the resident
council that are pertinent to assistance received under this
subchapter.
(10) Assumption conditions
Any entity that assumes a mortgage covering low-income housing
in connection with the acquisition of the housing from an owner
under this section must comply with any low-income affordability
restrictions for the remaining useful life of the housing as
determined under section 4112(c) of this title.
(Pub. L. 100-242, title II, Sec. 226, as added Pub. L. 101-625, title
VI, Sec. 601(a), Nov. 28, 1990, 104 Stat. 4267; amended Pub. L. 102-550,
title III, Sec. 309, Oct. 28, 1992, 106 Stat. 3765; Pub. L. 105-276,
title V, Sec. 514(b)(2)(A), Oct. 21, 1998, 112 Stat. 2548.)
Amendments
1998--Subsec. (b)(6)(B). Pub. L. 105-276, which directed the
substitution of ``Any system for preferences established under section
1437f(d)(1)(A) or 1437f(o)(6)(A)'' for ``The requirement for giving
preferences to certain categories of eligible families under sections
1437f(d)(1)(A) and 1437f(o)(3)'' in second sentence, was executed by
making the substitution for text which included the word ``preference''
rather than ``preferences'' to reflect the probable intent of Congress.
1992--Subsec. (b)(2). Pub. L. 102-550, Sec. 309(1), inserted ``and
limitation on conditions of approval'' in heading and inserted at end of
text ``The Secretary may not require the prepayment of the mortgage on
eligible low-income housing for the approval of a plan of action
involving a homeownership program for the housing.''
Subsec. (b)(3)(E). Pub. L. 102-550, Sec. 309(2), added subpar. (E).
Subsec. (b)(8). Pub. L. 102-550, Sec. 309(3), substituted ``Except
in the case of limited equity cooperatives, resident'' for ``Resident''.
Subsec. (b)(10). Pub. L. 102-550, Sec. 309(4), struck out ``, as
determined by the Secretary,'' after ``entity that assumes'',
substituted ``4112(c)'' for ``4112(d)'', and struck out at end ``This
requirement shall only apply to an entity, such as a cooperative
association, that, as determined by the Secretary, intends to own the
housing on a permanent basis.''
Section Referred to in Other Sections
This section is referred to in section 4110 of this title; title 42
section 1437f.
