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HomeMy WebLinkAboutExhibit ACITY OF MIAMI EXHIBIT "A" Programs designed to help homebuyers may support the acquisition, rehabilitation, or new construction of homes for purchase by low- to moderate -income buyers. The HOME subsidy can be offered to the developer, the homebuyer, or both, and can take various forms, such as low -interest, zero -interest, or deferred payment loans, grants, interest rate subsidies, and other similar options. RESALE PROVISION (for development subsidy) When a homebuyer does not receive direct assistance through the City's First Time Homebuyer Program (FTHB) or a similar program that provides direct subsidies to homebuyers but is instead supported as part of a broader development initiative (such as infill housing, construction financing, land acquisition, etc.), resale provisions will apply to ensure long-term affordability of the units. a. Resale provisions will be formalized through a written agreement with the homebuyer, which will be enforceable through a recorded deed restriction and loan origination Promissory Note. This ensures that the property remains compliant with affordability standards and continues to serve the intended purpose for the community over time. b. Resale provisions will be activated upon any transfer of title, whether voluntary or involuntary, within the designated HOME affordability period. c. In accordance with HOME Program regulations at § 92.254(a)(3), all HOME -assisted homebuyer properties must be acquired by an eligible low-income family, and property must remain the principal residence of that family throughout the affordability period. If the property is transferred, either voluntarily or involuntary, during the period of affordability, it must be resold only to a buyer who qualifies as low-income and use the property as their principal residence. d. The duration of the affordability period is determined by the amount of per -unit HOME assistance provided. As outlined in § 92.254(a)(5)(i) of the HOME Program regulations, the affordability period is directly tied to the total amount of HOME funds invested in the property. This means that the total HOME funding expended for the unit dictates the applicable affordability period. Additionally, any HOME program income used to assist the project is also factored into the determination of the affordability period under the resale provision. Total HOME investment in the unit: Period of Affordability*: Less than $15,000 5 years $15,000 - $40,000 10 years More than $40,000 15 years *NOTE: The City of Miami imposes a longer affordability period (up to 30 years) for direct subsidy to homebuyers. e. The resale price must ensure that the original HOME -assisted homeowner receives a fair return on their investment, while also guaranteeing that the property remains affordable to a reasonable range of low- income homebuyers. ■ Affordable to a reasonable range of low-income buyers means that the principal, interest, taxes and insurance (PITI) shall not exceed 30% of gross income for households at or below 80% of the area median income (AMI). ■ In certain situations, the City may need to provide additional HOME assistance to a subsequent homebuyer to ensure that the original homebuyer receives a fair return, and the unit remains affordable to the designated low-income population. The resale price should not be set based on what is affordable to a specific homebuyer but rather must be structured to accommodate a range or low- income purchasers. f. Fair Return to Initial Buyer — A Fair Return is defined as the reimbursement of the initial homebuyer's original investment (e.g., down payment) along with the cost of eligible capital improvements made to the property. To adjust for inflation, the average change in the Consumer Price Index (CPI) during the period of ownership or other method, as determined, at its sole discretion, by the Department of Housing and Community Development will be applied to the investment basis, if necessary. This Fair Return provision will only apply to sales occurring within the HOME affordability period. It is important to note that in certain circumstances, such as a declining housing market where home values are depreciating, the original homebuyer may not receive a return on their investment if the home sells for less than or the same as the original purchase price. g• Eligible Capital Improvements — Any capital improvements made by the original homebuyer must be substantiated by receipts, contracts, cashed checks, or other proof of payment. All work must comply with local building codes and if a permit is required for the work, it must be on file and approved by the City of Miami Building Department. Improvements made without proper documentation or permits will not be included in the Fair Return calculation. Eligible Capital Improvements include: ■ Energy upgrades such as solar and/or electric hot water systems, heating and cooling systems or increased insulation. ■ Replacement of kitchen and/or bathrooms. ■ Kitchen modernization. ■ Addition of a driveway, sprinkler systems, retaining walls or fences. Excluded items include: ■ Maintenance costs. ■ Cosmetic improvements, such as paint, wallpaper, landscaping lighting, etc. h. Resale Requirement and Deed Restrictions: The City will enforce resale requirements through deed restrictions and the ban origination Promissory Note. These affordability restrictions may terminate under certain circumstances, including foreclosure, transfer in lieu of foreclosure, or assignment of an FHA - insured mortgage to HUD. To preserve affordability, the City may exercise purchase options, rights of first refusal, or other preemptive rights to acquire the property before foreclosure. If the affordability restrictions are terminated, they will be reinstated under the original terms if, during the affordability period, the original owner or the owner of record before the termination event re -acquires an ownership interest in the property. RECAPTURE PROVISION (for direct subsidy to homebuyer) The US Department of Housing and Urban Development (HUD) defines Direct HOME subsidy as the amount of HOME assistance, including program income, that enabled a homebuyer to acquire the property. This subsidy may include downpayment assistance, closing costs, interest subsidies, or other HOME assistance provided directly to the homebuyer. Under the City of Miami's First -Time Homebuyer Program (FTHB), low -mod income borrowers can obtain forgivable loans toward down payment, closing costs, and other related costs to purchase a property, if the owner sells and/ or transfers the property before the end of the HOME affordability period, the City of Miami shall apply the RECAPTURE provisions of 92.254(a)(5)(ii), which unlike the resale approach, recapture permits the original homebuyer to sell the property to any willing buyer during the period of affordability while the PJ is able to recapture all or a portion of the HOME -assistance provided to the original homebuyer. a. If the property is sold prior to the maturity of the HOME affordability period, as may be reflected in the Promissory Note, the City shall recoup all or a portion of the HOME assistance to the homebuyer. The amount of HOME assistance subject to recapture is the direct subsidy that enabled the homebuyer to purchase the property. Duration of the affordability period is 30 years regardless of the amount of HOME investment in the unit. b. If the homebuyer fails to occupy the property as his/her principal residence, transfers the property title, or violates other compliance terms in the HOME agreement, the entire HOME assistance amount must be repaid. Failure to occupy is considered non-compliance and no portion of the loan will be forgiven. The homebuyer is responsible for any applicable legal fees and shall bear an interest rate at the highest rate allowable by law. c. For any `early' sale or transfer, the City shall share in any `gain' realized, based on its pro -rated share of participation in the original purchase. Furthermore, if the sale occurs within the first 3 years, the City shall keep 100% of its pro -rated share of the `gain', from year 4 up to year 20, the City's share of its pro -rated `gain' shall decrease by 5% every year, while in turn, the owner's share shall increase by 5% each year. At year 20 up to the City's loan maturity, the owner shall retain 100% of the City's `gain'. d. This above -mentioned share gain proposal terminates in the event of a foreclosure, with the lender required to provide the City the right of first refusal to purchase the loan at a negotiated price. In the event of a foreclosure, the City will recapture any amount of net proceeds available from the sale of the property. In the case of refinances, the City Manager or his designee will determine the amount that has to be paid back based on the funding source. e. The City will allow a subsequent low-income homebuyer of a HOME -assisted homeownership unit to assume the existing HOME loan and recapture obligation entered by the original buyer when no additional HOME assistance is provided to the subsequent homebuyer (consistent with § 92.254(a)(5)(ii)). The original buyer must submit this request in writing and the City must review and approve the subsequent buyer to determine eligibility. f. Recapture provisions will be documented through a written agreement with the homebuyer and enforced by a deed restriction and loan origination Promissory Note. A description of the guidelines for resale or recapture that ensures the affordability of units acquired with HOME funds? See 24 CFR 92.254(a)(4) are as follows: a. Multifamily Rental projects which have been funded by the City will be monitored according to established procedures during the affordability period and as stated in the Rent Regulatory Agreement (Agreement) signed with the City of Miami. The duration of the affordability period will depend on the total City funding in the project. The Income and Rent monitoring (tenant eligibility) will be based on annual Adjusted Rent and Income Limits as published by U.S. HUD. The monitoring will include confirmation of tenant eligibility and rent structure for the initial lease -up which will be held at the time of the construction close out process. In addition, an annual tenant eligibility monitoring will begin with the first anniversary of the project's Certificate of Occupancy, and as close as possible to the project's anniversary during each following year for the entire term of the affordability. This monitoring will be conducted separately from any property inspections. During the on -site file review, the documentation of a sample of 10% or more of Tenants is analyzed to confirm compliance with all HOME regulations. Upon completion of this review, an exit interview is conducted with the developer/property manager to discuss results. If in non-compliance, potential remedies are discussed to be considered in the Corrective Action Plan (CAP) with specific due dates established for the corrections. If in compliance, the project is certified in compliance for a year. b. For HOME -assisted homeownership units, the City will ensure affordability through a combination of checks to ensure that the homebuyer continues to live in the property. Some of the methods include compliance reviews, deed restrictions, on -site inspections, occupancy affidavits and review of homestead exemption records. By combining these methods, the city can effectively monitor and enforce HOME program homebuyer assistance to ensure that the property remains the homebuyer's primary residence throughout the required affordability period.