12 U.S.C. § 4116 — Resident homeownership program

Page 1609 TITLE 12—BANKS AND BANKING § 4116 (2) Termination of plan of action Permit the owner to prepay the mortgage and terminate the plan of action and any im- plementing use agreements or restrictions, but only if the owner agrees in writing to com- ply with provisions of section 4113 of this title. At least 30 days before making a request under this subsection, an owner shall notify the Sec- retary of the owner’s intention to submit the re- quest. The Secretary shall have a period of 90 days following receipt of such notice to take ac- tion to extend the rental assistance contract and to continue the binding commitments under section 4112(a)(2) of this title. (Pub. L. 100–242, title II, § 224, as added Pub. L. 101–625, title VI, § 601(a), Nov. 28, 1990, 104 Stat. 4265.) § 4115. Timetable for approval of plan of action (a) Notification of deficiencies Not later than 60 days after receipt of a plan of action, the Secretary shall notify the owner in writing of any deficiencies that prevent the plan of action from being approved. If defi- ciencies are found, such notice shall describe al- ternative ways in which the plan may be revised to meet the criteria for approval. (b) Notification of approval (1) In general Not later than 180 days after receipt of a plan of action, or such longer period as the owner requests, the Secretary shall notify the owner in writing whether the plan of action, including any revisions, is approved. If ap- proval is withheld, the notice shall describe— (A) the reasons for withholding approval; and (B) the actions that could be taken to meet the criteria for approval. (2) Opportunity to revise The Secretary shall subsequently give the owner a reasonable opportunity to revise the plan of action and seek approval. (c) Delayed approval If the Secretary does not approve a plan of ac- tion within the period under subsection (b), the Secretary shall provide incentives and assist- ance under this subchapter in the amount that the owner would have received if the Secretary had complied with such time limitations. The preceding sentence shall not apply if the plan of action was not approved because of deficiencies. An owner may bring an action in the appro- priate Federal district court to enforce this sub- section. (Pub. L. 100–242, title II, § 225, as added Pub. L. 101–625, title VI, § 601(a), Nov. 28, 1990, 104 Stat. 4266.) § 4116. Resident homeownership program (a) Formation of resident council Tenants seeking to purchase eligible low-in- come housing in accordance with section 4110 of this title shall organize a resident council for the purpose of developing a resident homeowner- ship program in accordance with standards es- tablished by the Secretary. The resident council shall work with a public or private nonprofit or- ganization 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 man- age 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 be- come 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 es- tablishment of such price; (C) how such price compares to the esti- mated appraised value of the ownership in- terests 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 ten- ants are expected to pursue or be provided; and (F) a workable schedule of sale (subject to the limitations of paragraph (8)) based on es- timated tenant incomes. (2) Approval of method of conversion and limi- tation 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 deter- mined by the Secretary to be appropriate, such as cooperative ownership (including lim- ited 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 condi- tions, including conditions to assure that— (A) the number of initial owners that are very low-income, lower income, or mod- erate-income persons at initial occupancy meet standards required or approved by the Secretary; (B) occupancy charges payable by the own- ers 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 oper- ating costs of the housing and any debt serv- ice; Page 1610 TITLE 12—BANKS AND BANKING § 4116 (D) each initial owner occupies the unit it acquires; and (E) the low-income affordability restric- tions 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 fami- lies The entity that transfers ownership inter- ests in, or shares representing, units to eligi- ble 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, includ- ing improvements to the project, operating and replacement reserves for the project, addi- tional 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 appropria- tions Acts. Such entity shall keep, and make available to the Secretary, all records nec- essary 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 rep- resenting, the unit, except that a home- ownership program may establish restric- tions on the resale of units under the pro- gram. (ii) Right to purchase Where a resident management corpora- tion, 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 promis- sory note equal to the difference, if any, between the market value and the pur- chase price, payable to the Secretary, to- gether with a mortgage securing the obli- gation 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 el- igible 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 dur- ing 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 in- come index, or market index as deter- mined by the Secretary through regulation and agreed to by the purchaser and the en- tity that transfers ownership interests in, or shares representing, units to eligible families (or another entity specified in the approved application), at the time of ini- tial sale, and applied against the contribu- tion to equity. Such an entity may, at the time of initial sale, enter into an agreement with the fam- ily to set a maximum amount which this ap- preciation 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 pro- gram 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 re- tained by the homeowner under the plan ap- proved 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 govern- ment 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 lo- cated. With respect to any proceeds trans- ferred 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 sec- tion) in that or another property. Any sys- tem for preferences established under sec- tion 1437f(d)(1)(A) or 1437f(o)(6)(A) of title 42 Page 1611 TITLE 12—BANKS AND BANKING § 4117 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 assist- ance in accordance with the approved home- ownership program. (7) Qualified management As a condition of approval of a homeowner- ship program under this subchapter, the resi- dent council shall have demonstrated its abili- ties 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 coopera- tives, resident councils shall transfer owner- ship of the property to tenants within a speci- fied period of time that the Secretary deter- mines to be reasonable. During the interim pe- riod when the property continues to be oper- ated and managed as rental housing, the resi- dent council shall utilize written tenant selec- tion policies and criteria that are approved by the Secretary as consistent with the purpose of providing housing for very low-income fami- lies. The resident council shall promptly no- tify 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 disposi- tion 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 assist- ance received under this subchapter. (C) Audit The Comptroller General of the United States, or any of the duly authorized rep- resentatives of the Comptroller General, shall also have access for the purpose of audit and examination to any books, docu- ments, papers, and records of the resident council that are pertinent to assistance re- ceived under this subchapter. (10) Assumption conditions Any entity that assumes a mortgage cov- ering 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 re- maining useful life of the housing as deter- mined under section 4112(c) of this title. (Pub. L. 100–242, title II, § 226, as added Pub. L. 101–625, title VI, § 601(a), Nov. 28, 1990, 104 Stat. 4267; amended Pub. L. 102–550, title III, § 309, Oct. 28, 1992, 106 Stat. 3765; Pub. L. 105–276, title V, § 514(b)(2)(A), Oct. 21, 1998, 112 Stat. 2548.) Editorial Notes AMENDMENTS 1998—Subsec. (b)(6)(B). Pub. L. 105–276, which directed the substitution of ‘‘Any system for preferences estab- lished under section 1437f(d)(1)(A) or 1437f(o)(6)(A)’’ for ‘‘The requirement for giving preferences to certain cat- egories 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, § 309(1), inserted ‘‘and limitation on conditions of approval’’ in heading and inserted at end of text ‘‘The Secretary may not re- quire the prepayment of the mortgage on eligible low- income housing for the approval of a plan of action in- volving a homeownership program for the housing.’’ Subsec. (b)(3)(E). Pub. L. 102–550, § 309(2), added sub- par. (E). Subsec. (b)(8). Pub. L. 102–550, § 309(3), substituted ‘‘Except in the case of limited equity cooperatives, resident’’ for ‘‘Resident’’. Subsec. (b)(10). Pub. L. 102–550, § 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 hous- ing on a permanent basis.’’ § 4117. Delegated responsibility to State agencies (a) In general In addition to any responsibilities delegated under section 4103(c) of this title, the Secretary shall delegate some or all responsibility for im- plementing this subchapter to a State housing agency if such agency submits a preservation plan acceptable to the Secretary. (b) Approval State preservation plans shall be submitted in such form and in accordance with such proce- dures as the Secretary shall establish. The Sec- retary may approve plans that contain— (1) an inventory of low-income housing lo- cated within the State that is or will be eligi- ble low-income housing under this subchapter within 5 years; (2) a description of the agency’s experience in the area of multifamily financing and re- structuring; (3) a description of the administrative re- sources that the agency will commit to the processing of plans of action in accordance with this subchapter; (4) a description of the administrative re- sources that the agency will commit to the monitoring of approved plans of action in ac- cordance with this subchapter; (5) an independent analysis of the perform- ance of the multifamily housing inventory fi- nanced or otherwise monitored by the agency;