PART 1. TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS
CHAPTER 20. SINGLE FAMILY PROGRAMS UMBRELLA RULE
10 TAC §§20.1 - 20.16
The Texas Department of Housing and Community Affairs (the "Department") adopts the repeal of 10 TAC Chapter 20, concerning the Single Family Programs Umbrella Rule, §§20.1 - 20.16 without changes to the text as proposed in the May 12, 2017, issue of the Texas Register (42 TexReg 2473). The rules are adopted for repeal in connection with the adoption of new 10 TAC Chapter 20 concerning the Single Family Programs Umbrella Rule, which was published concurrently in the May 12, 2017, issue of the Texas Register (42 TexReg 2474).
REASONED JUSTIFICATION. The repeal of 10 TAC Chapter 20 concerning the Single Family Programs Umbrella Rule will allow for the concurrent adoption of new 10 TAC Chapter 20 concerning the Single Family Programs Umbrella Rule.
COMMENTS. No comments concerning the proposed repeals were received.
STATUTORY AUTHORITY. The repeal is adopted pursuant to Tex. Gov't Code §2306.053, which authorizes the Department to adopt rules.
The repeal affects no other code, article or statute.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on August 4, 2017.
Timothy K. Irvine
Texas Department of Housing and Community Affairs
Effective date: August 24, 2017
Proposal publication date: May 12, 2017
For further information, please call: (512) 475-4828
The Texas Department of Housing and Community Affairs (the "Department") adopts new 10 TAC Chapter 20, Single Family Programs Umbrella Rule, §§20.1 - 20.16. This new rule is being adopted concurrently with the repeal of existing 10 TAC Chapter 20, Single Family Programs Umbrella Rule. Sections 20.1, 20.9, and 20.13 are adopted with changes to the proposed text as published in the May 12, 2017, issue of the Texas Register (42 TexReg 2474) and will be republished.
REASONED JUSTIFICATION. The new rule clarifies applicability of the Rule; updates definitions; further clarifies Household Eligibility requirements; states Affirmative Fair Housing Marketing Plan submission requirements; clarifies inspection requirements with respect to condemned and extremely substandard properties and addresses instances for waivers of final inspection/pending corrections; expands Loan, Lien and Mortgage Requirements; and simplifies limits for increases in award amounts.
SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS. The public comment period was from May 12, 2017, through June 12, 2017. Comments were accepted in writing and via email, with comments received from: (1) Judge Robert Blaschke of Refugio County, (2) Judge Carlos Urias of Culberson County, (3) Judge Pedro "Pete" Trevino, Jr., of Jim Wells County, (4) Roderick Hutto of City of Kountze, (5) Mayor Billy Slaughter of City of Trinity, (6) Mayor Mark Bricker of City of Bay City, (7) Lamar Schulz of City of Carrizo Springs, (8) Mayor Scott Martinez of City of O'Donnell, (9) Mayor Michael S. Wolfe, Sr., of City of Hempstead, (10) Sam A. Listi of City of Belton, (11) Sylvia Rucka of City of Eagle Lake, (12) Judge Stephanie Moreno of Bee County, (13) Mayor Gerald Sandusky of City of Bronte, (14) Melissa Truelove of City of Eldorado, (15) Mayor Pro-Tem Joe Holt of City of Josephine, (16) Mayor Sharion Scott of City of Wolfe City, (17) Brad Stafford of City of Navasota, (18) Charles Cloutman of Meals on Wheels Central Texas, (19) Rosa Gonzalez-Abrego of Easter Seals Central Texas, (20) Karen Rego of Langford Community Management Services, (21) Judy Telge of Coastal Bend Center for Independent Living, and (22) Cassie Allred of Webb County Self-Help Center.
COMMENT SUMMARY: Commenter 19 stated that the applicability of the Single Family Programs Umbrella Rule to the State Housing Trust Fund's Amy Young Barrier Removal Program for people with disabilities should be excluded. Otherwise the requirements of the rule will make the program more difficult to administer and disproportionately harm people with disabilities in rural areas.
STAFF RESPONSE: While some of the Single Family Programs Umbrella Rule's applicability extends to the Amy Young Barrier Removal Program, there are significant portions of the rule that do not apply, such as: §20.10 Inspection Requirements for Construction Activities; §20.11 Survey Requirements; §20.12 Insurance Requirements; and §20.13 Loan, Lien and Mortgage Requirements for Activities (because the Amy Young Barrier Removal Program is a grant program). In addition, staff has modified §20.9(b)(3) Fair Housing, Affirmative Marketing and Reasonable Accommodations for the Amy Young Barrier Removal Program, which is further described below.
COMMENT SUMMARY: Commenter 18 stated that by defining the State Housing Trust Fund's Amy Young Barrier Removal Program as it is written in the board-approved Program Rule, instead of as it is written by a staff-approved Notice of Funding Availability, the program will be more inflexible and difficult to administer.
STAFF RESPONSE: The mirroring of program rules with program implementation is intended to incorporate public input and greatly simplify the interpretation and administration of programs. The HTF staff is currently drafting proposed amendments to the Housing Trust Fund Rule, which extends to the Amy Young Barrier Removal Program, and they will be presented for public comment prior to final approval. No changes to this section of the rule will be made in response to this comment.
§20.8. SINGLE FAMILY HOUSING UNIT ELIGIBILITY REQUIREMENTS.
COMMENT SUMMARY: Commenters (1) through (17) and Commenter (20) all stated that it is infeasible to require applying households that may owe property taxes to be current with any taxing authority-approved payment plans for at least 6 consecutive months prior to date of initial application. This creates a delay in program implementation and could interfere with meeting interim program benchmarks (deadlines). Instead, the Commenters propose that applying households be allowed to demonstrate that they are current with property tax payment plans on a monthly basis after date of initial application date and through date of Department approval.
STAFF RESPONSE: The purpose of this amendment is to reduce the likelihood that assisted households will face imminent tax foreclosure and possibly lose their home, and to stabilize the Department's single family loan portfolio. Due to the length of time it takes for administrators to complete environmental reviews and prepare applications, building in six months of successful participation in a property tax payment plan is not infeasible. It also demonstrates to the Department and the administrators that the household has the ability to manage the responsibilities of homeownership and housing-related debt. It should be noted that this rule has been proposed specifically in reaction to a noted trend of single family loans within the Department's portfolio not paying taxes. No changes to this section of the rule will be made in response to this comment.
§20.9. FAIR HOUSING, AFFIRMATIVE MARKETING AND REASONABLE ACCOMMODATIONS.
COMMENT SUMMARY: Commenters (1) through (21) all stated that it is infeasible to require a 30-day application cycle with a "neutral random selection process" because it could hinder the timely expenditure of funds and interfere with meeting other program benchmarks and requirements(such as title clearing) in a timely manner. The commenters requested that the HOME's Homeowner Rehabilitation Assistance Program be exempt from rule 20.9(b)(3) and/or that administrators be able to use the first complete-first served method as it is allowed by HUD.
STAFF RESPONSE: HUD program participants are required to establish application and selection processes that treat applicants equitably and determine program eligibility effectively. In HUD Notice H 2014-16 issued November 28, 2014, HUD published additional options for waitlist management and affirmative marketing in multifamily housing properties, stating that a random technique may "be appropriate in scenarios where individuals unable to apply in person at the onset of the opening would be at a distinct disadvantage in their placement on the waiting list."
Staff agrees that the first-come, first-served method has been acceptable to HUD, but it may still pose an impediment to applicants such as persons with disabilities or with limited English proficiency who could face obstacles to getting their application in first. The neutral random selection process is more likely than the first-come, first-served method to reach populations that are least likely to apply. Many of TDHCA's single family program activities, including the Homeowner Rehabilitation Assistance Program, are extremely competitive. Providing a 30-day application period followed by a neutral random selection process ensures that there is an equitable opportunity for all households to participate in the program.
Lastly, there is often a 30-day period between an administrator receiving award notification and receiving a contract for execution. Administrators may begin the 30-day period during this time to ensure the timely expenditure of funds, and administrators may start vetting applications within the 30-day application cycle. HOME staff may consider amending contracts and benchmarks to allow for an additional 30 days. No changes to this section of the rule will be made in response to this comment.
COMMENT SUMMARY: Commenter (20) requested that the Affirmative Marketing plan cover the length of the contracts and Reservation System Participation agreements, which are three years, instead of two years. This commenter also expressed concern over meeting the HOME requirement to assist one in every four homes with a household at a specific income level.
STAFF RESPONSE: Staff agrees and has revised §20.9(b) accordingly. The new rule (revision in italics) is "(b) Affirmative Marketing and Procedures. An Administrator receiving Federal or state funds must have an Affirmative Marketing Plan. The AFHMP must be submitted to the Department each time the Administrator applies for a new contract or a new type of activity. The plan must be submitted at a minimum of every three years if the Administrator continues to accept new applications."
In addition, staff have clarified in the rule that the HOME requirement to assist households at a specific income level can be rolled into the preferences allowed under the rule. Applicants will be selected randomly from those meeting the defined preference.
COMMENT SUMMARY: Commenters (18), (19) and (21) stated that affirmative marketing efforts are redundant and unnecessary for the Amy Young Barrier Removal Program because this program is only available to eligible people with disabilities, a special population for whom administrators already make accommodations. Also, commenters stated that the 30-day open intake period for neutral, random selection followed by a first-come, first-served method goes against administrators' existing, effective priority systems already in place to serve those with urgent needs. Commenters requested that the Amy Young Barrier Removal Program be exempt from the requirements of the Single Family Umbrella Rule or exempt from this section of the rule.
STAFF RESPONSE: The Amy Young Barrier Removal Program assists persons with disabilities, one of seven protected classes in Texas. The Department may not exempt any housing provider from the requirements of the federal or Texas Fair Housing Act.
A neutral system for intake allows for affirmative marketing efforts to reach populations least likely to apply, including individuals who face barriers to submitting an application first, such as persons with disabilities or with limited English proficiency. It also avoids giving an advantage to persons that may be friends or family members of the Administrator, and thus more likely to hear about the program at an earlier date. However, staff agrees with commenters regarding the neutral, random selection process and has revised §20.9(b)(3) accordingly. The new rule (revision in italics) is "(3) After the required outreach efforts have been made, all Administrators must accept applications from possible eligible Applicants for a minimum of a 30-day period rather than a first-come, first-served basis when selecting among eligible Applicants. At the close of the 30-day period Administrators will select Applicants through a neutral random selection process developed by the Administrator. After Administrators have allowed for a 30-day period to accept applications and used a neutral random selection process to assist Households, they may accept applications on a first-come, first-served basis. HOME Tenant Based Rental Assistance Reservation System Participants with disaster funds may request to be exempt from the 30-day period and the neutral random selection process, as necessary to respond to the disaster."
Staff also notes that under §20.9(b)(2)(B), Administrators with an existing list of applications are already exempt from affirmative marketing: "Administrators that currently have an existing list of Applicants and are not accepting new Applicants or establishing a waiting list are not required to affirmatively market that portion of their program, but must develop a plan as described below."
Staff also recognizes that some Amy Young Barrier Removal Program Administrators would like employ a preference in order to prioritize households that may be forced to reside in institutions if their homes are not made accessible. As a result, staff has revised §20.9(b)(4) to allow Administrators of the Amy Young Barrier Removal Program to have a preference prioritizing Households to prevent displacement from permanent housing, or to foster returning to permanent housing related to inaccessible features of the unit.
§20.13. LOAN, LIEN AND MORTGAGE REQUIREMENTS FOR ACTIVITIES.
COMMENT SUMMARY: Commenter (22) stated that the credit requirements are too stringent for the credit poor colonia population of Laredo and the target populations the Webb County Colonia Self-Help Centers is mandated to serve.
STAFF RESPONSE: The purpose of the mortgage requirements section of this rule is to decrease delinquencies, defaults and foreclosures so that Households do not lose their homes, and to stabilize the Department's single family loan portfolio. Such underwriting requirements better ensure that participating households have the ability to manage the responsibilities of homeownership and housing-related debt. The Colonia Self-Help Center Program provides forgivable loans and grants and this section of the rule does not apply. No changes to this section of the rule will be made in response to this comment.
STATUTORY AUTHORITY. The new rule is adopted pursuant to Tex. Gov't Code §2306.053, which authorizes the Department to adopt rules.
The new rule affects no other code, article or statute.
This Chapter sets forth the common elements of the Texas Department of Housing and Community Affairs' (the "Department") single family Programs, which include the Department's HOME Investment Partnerships Program (HOME), State Housing Trust Fund (SHTF or HTF), Texas Neighborhood Stabilization (NSP), and Office of Colonia Initiatives (OCI) Programs and other single family Programs as developed by the Department. Single family Programs are designed to improve and provide affordable housing opportunities to low-income individuals and families in Texas and in accordance with Chapter 2306 of the Texas Government Code and any applicable statutes and federal regulations. Excluded from this Chapter are loans facilitated by the Department's pass through first-time homebuyer Programs utilizing bond financing structures or mortgage credit certificates that have no other Department funding.
§20.9.Fair Housing, Affirmative Marketing and Reasonable Accommodations.
(a) In addition to Chapter 1, Subchapter B of this Title, Administrators must comply with all applicable state and federal rules, statutes, or regulations, involving accessibility including the Fair Housing Act, Section 504 of the Rehabilitation Act of 1973, Title II of the Americans with Disabilities Act, and the Architectural Barriers Act as well as state and local building codes that contain accessibility requirements; where local, state, or federal rules are more stringent, the most stringent rules shall apply. Administrators receiving Federal or state funds must comply with the Age Discrimination Act of 1975.
(b) Affirmative Marketing and Procedures. An Administrator receiving Federal or state funds must have an Affirmative Marketing Plan. The AFHMP must be submitted to the Department each time the Administrator applies for a new contract or a new type of activity. The plan must be submitted at a minimum of every three years if the Administrator continues to accept new applications.
(1) Administrators must use HUD Form 935.2B, the form on the Department's website, or create an equivalent AFHMP that includes:
(A) Identification of the population "least likely to apply" for the Administrator's Program(s) without special outreach efforts. Administrators may use the Department's single family affirmative marketing tool to determine populations "least likely to apply." If Administrators use another method to determine the populations "least likely to apply" the AFHMP must provide a detailed explanation of the methodology used. Persons with Disabilities must always be included as a population least likely to apply.
(B) Identification of the methods of outreach that will be used to attract persons identified as least likely to apply. Outreach methods must include identification of a minimum of three organizations with whom the Administrator plans to conduct outreach, and whose membership or clientele consists primarily of protected class members. If the Administrator is unable to locate three such groups, the reason must be documented in the file.
(C) Identification of the methods to be used for collection of data and periodic evaluation to determine the success of the outreach efforts. If efforts have been unsuccessful, the Administrator's AFHMP should be revised to include new or improved outreach efforts.
(D) Description of the fair housing trainings required for Administrator staff, including delivery method, training provider and frequency. Training must include requirements of the Fair Housing Act relating to financing and advertising, expected real estate broker conduct, as well as redlining and zoning for all programs, and discriminatory appraisal practices for programs involved in homebuyer transactions.
(E) A description for the provision of applicable counseling programs and educational materials that will be offered to Applicants. Administrators offering acquisition programs must require that potential home purchasers receive homeownership counseling and education at the time assistance is approved.
(A) Affirmative marketing is required as long as an Administrator is accepting applications and/or until all dwelling units are sold in the case of single family homeownership programs.
(B) Administrators that currently have an existing list of Applicants and are not accepting new Applicants or establishing a waitlist are not required to affirmatively market until preparing to accept new Applications, but must develop a plan as described above. EXAMPLE: An Administrator has an active HOME Reservation System Participation Agreement with a closed waiting list. The Administrator must develop an affirmative marketing plan, but does not have to affirmatively market that portion of its program. The Administrator should serve its waitlist. When the Administrator is nearing the bottom of the waitlist it should begin to affirmatively market the program, open up the program to new Applicants, finish serving the existing Households on the waitlist, and all new Applicants will be held for 30 calendar days, and then selected based on the neutral random selection process.
(C) Administrators providing assistance in more than one service area must provide a separate plan for each market area in which the housing assistance will be provided.
(3) After the required outreach efforts have been made, all Administrators must accept applications from possible eligible Applicants for a minimum of a 30 calendar day period rather than a first-come, first-served basis when selecting among eligible Applicants. At the close of the 30 day period Administrators will select Applicants through a neutral random selection process developed by the Administrator. After Administrators have allowed for a 30 calendar day period to accept applications and used a neutral random selection process to assist Households, they may accept applications on a first-come, first-served basis. HOME Tenant Based Rental Assistance Reservation System Participants with disaster funds may request to be exempt from the 30 calendar day period and the neutral random selection process, as necessary to respond to the disaster.
(4) Administrators must include as an attachment to HUD Form 935.2B or equivalent AFHMP, a waitlist policy including any Department approved preferences used in selecting Applicants from the list. Administrators of the Amy Young Barrier Removal Program may have a preference prioritizing Households to prevent displacement from permanent housing, or to foster returning to permanent housing related to inaccessible features of the unit. Administrators who have defined preferences in their written waitlist procedures or tenant selection plans, as applicable, will employ preferences first and select Applicants from the list of Applicants meeting the defined preference still using the neutral random selection process. Administrators of federally funded programs may only request to establish preferences included in Department planning documents, specifically the One Year Action Plan or Consolidated Plan, or as otherwise allowed for CDBG funded Activities. EXAMPLE: A HOME Program Administrator has specific program requirements to assist one in every four Households at 30% area median family income. This Administrator should use a neutral random selection process to rank Applicants, and select going down the list. When the Administrator must assist a Household at or below 30% area median income they will then go down the list and select, in order, a Household at the 30% income level.
(5) Administrators offering homeownership or rental assistance that allow the Household to relocate from their current residence must provide the Household access to mobility counseling. For homeownership, mobility counseling may be included in homeownership counseling and education trainings.
(A) Mobility counseling must, at a minimum, include easily understandable information that the Household can use in determining areas of opportunity within a service area, it must at minimum provide the following: poverty rates, average income information, school ratings, crime statistics, available area services, public transit, and other items the Administrator deems appropriate to fair housing. Administrators may use resources offered by "Community Commons" as a tool in identifying areas of opportunity in their community. This data resource can be located at https://www.communitycommons.org/.
(B) Information provided for mobility counseling may be offered via the Administrator's website or in paper form.
(C) Administrators must collect signed certifications from Applicants acknowledging the receipt of information. Certifications may be collected as a standalone form or may be integrated into existing program forms.
(6) An analysis of the AFHMP must be conducted at the close out of the contract or Activity and attached to any subsequent AFHMP submitted for the same program.
(7) In the case of any Applicant denial, a letter providing the specific reason for the denial must be provided to the applicant within seven calendar days of the denial. Administrators must keep a record of all denied Applicants including the basis for denial. Such records must be retained for the record retention period described by the Agreement or other sources.
(8) Administrators must provide Applicants with eligibility criteria, which shall include the procedures for requesting a reasonable accommodation to the Administrator's rules, policies, practices, and services, particularly as it relates to the application process.
(9) Administrators must include the Equal Housing Opportunity logo and slogan on any commercial and other media used in marketing outreach.
(10) Copies of all outreach and media ads must be kept in a separate record and made available to the Department upon request.
(c) A copy of all reasonable accommodation requests and the Administrator's responses to such requests must be kept in addition to responses sent by the Administrator.
(d) Provisions Related to Limited English Proficiency.
(1) Administrators must have a Language Assistance Plan that ensures persons with Limited English Proficiency ("LEP") have meaningful access and an equal opportunity to participate in services, activities, programs, and other benefits.
(2) Materials that are critical for ensuring meaningful access to an Administrator's major activities and programs, including but not limited to Applications, mortgage loan applications, consent forms and notices of rights, should be translated for any population considered least likely to apply that meets the threshold requirements of Safe Harbor LEP provisions as provided by HUD and published on the Department's website. Materials considered critical for ensuring meaningful access should be outlined in the Administrator's Language Assistance Plan.
(3) If the Administrator is required to translate vital documents under Safe Harbors guidelines, they must include in their Language Assistance Plan how such translation services will be provided (e.g., whether the Administrator will use voluntary or contracted qualified translation services, telephonic services, or will identify bilingual staff that will be available to assist Applicants in completing vital documents and/or accessing vital services). If the Administrator plans to use bilingual staff in its translation services, contact information for bilingual staff members must be provided.
(4) The plan must be submitted to the Department upon request and be available for review during monitoring visits.
(5) Administrators must offer reasonable accommodations information and Fair Housing rights information in both English and Spanish, and other languages as required by the inclusion of "least likely to apply" groups to reach populations identified as least likely to apply.
(e) The plans noted in subsections (b)(1) and (d)(1) of this section, any documentation supporting the plans, and any changes made to the plans, must be kept in accordance with recordkeeping requirements for the specific Program, and in accordance with 10 TAC §1.409, relating to Records Retention.
§20.13.Loan, Lien and Mortgage Requirements for Activities.
(a) The term "borrower" in this section means the individual or Household who is borrowing funds from or through the Department for the acquisition, new construction and/or rehabilitation of a Principal Residence.
(b) The fees to be paid by the Department or borrower upfront or through the closing must be reasonable for the service rendered, in accordance with the typical fees paid in the market place for such activities and:
(1) Fees charged by third party Mortgage lenders are limited to the greater of two percent (2%) of the Mortgage Loan amount or $3,500, including but not limited to origination, loan application, and/or underwriting fees, and
(2) Fees paid to other parties that are supported by an invoice and/or reflected on the Closing Disclosure will not be included in the limit in paragraph (1) of this subsection.
(c) Mortgage Loan Underwriting Requirements. The requirements in this paragraph shall apply to all non-forgivable amortizing Mortgage Loans.
(1) Total Debt-to-Income Ratio. The applicant's total Debt-to-Income Ratio shall not exceed 45 percent of Qualifying Income (unless otherwise allowed or dictated by a participating lender providing a fixed rate Mortgage Loan that is insured or guaranteed by the federal government or a conventional Mortgage Loan that adheres to the guidelines set by Fannie Mae and Freddie Mac.) A potential borrower's spouse who does not apply for the Mortgage Loan will be required to execute the information disclosure form(s) and the deed of trust as a "non-purchasing" spouse. The "non-purchasing" spouse will not be required to execute the note. For credit underwriting purposes all debts and obligations of the primary potential borrower(s) and the "non-purchasing" spouse will be considered in the potential borrower's total Debt-to-Income Ratio.
(2) Credit Qualifications.
(A) Potential borrowers must have a credit history that indicates reasonable ability and willingness to meet debt obligations. In order for the Department to make a reasonable determination, all borrowers must provide a credit release form. The Department may utilize credit reports if less than 90 days old as part of the loan application or obtain tri-merge credit reports on all potential borrowers submitted to the Department for approval at the time of loan application. In addition to the initial credit report, the Department may at its discretion obtain one or more additional credit reports before loan closing to ensure the potential borrower still meets Program requirements. Acceptable outstanding debt means that all accounts are paid as agreed and are current.
(B) Unacceptable Credit. Applicants meeting one or more of the following criteria will not be qualified to receive a single family Program loan from the Department.
(i) A credit history reflecting payments on any open consumer, retail and/or installment account (e.g., auto loans, signature loans, payday loans, credit cards or any other type of retail and/or installment loan, with the exception of a medical account) which have been delinquent for more than 30 days on two or more occasions within the last 12 months and must be current for the six months immediately preceding the loan application date.
(ii) A foreclosure or deed-in-lieu of foreclosure or a potential borrower in default on a mortgage at the time of the short sale any of which had occurred or been completed within the last 24 months prior to the date of loan application.
(iii) An outstanding Internal Revenue Service tax lien or any other outstanding tax liens where the potential borrower has not entered into a satisfactory repayment arrangement and been current for at least 12 months prior to the date of loan application.
(iv) A court-created or court-affirmed obligation or judgment caused by nonpayment that is outstanding at the date of loan application or any time prior to closing of the Mortgage Loan.
(v) Any account (with the exception of a medical account) that has been placed for "collection," "profit and loss" or "charged off" within the last 24 months prior to the date of loan application.
(vi) Any reported delinquency on any government debt at the date of loan application.
(vii) A bankruptcy that has been filed within the past 24 months prior to the date of loan.
(viii) Any reported child support payments in arrears unless the potential borrower has satisfactory payment arrangements for at least 12 months prior to the date of loan.
(C) Mitigation for Unacceptable Credit. The following exceptions will be considered as mitigation to the unacceptable credit criteria in subparagraph (B) of this paragraph:
(i) The potential borrower is a Domestic Farm Laborer and receives a substantial portion of his/her income from the production or handling of agriculture or aquacultural products, and has demonstrated the ability and willingness to meet debt obligations as determined by the Department.
(ii) The potential borrower has medical accounts that are delinquent or that have been placed for collection.
(iii) The potential borrower provides documentation to evidence that the outstanding delinquency or unpaid account has been paid or settled or the potential borrower has entered into a satisfactory repayment arrangement or debt management plan and been current for at least 12 consecutive months prior to the date of loan.
(iv) The potential borrower submits to the Department a written explanation of the cause for the previous delinquency, which is acceptable to the Executive Director or his or her designee.
(v) Any and all outstanding judgments must be released prior to closing of Mortgaged Loan.
(vi) If a potential borrower is currently participating in a debt management plan, the trustee or assignee provides a letter to the Department stating they are aware and agree with the potential borrower applying for a Mortgage Loan. If a potential borrower filed a bankruptcy, the bankruptcy must have been discharged or dismissed more than 12 months prior to the date of loan application and the potential borrower has re-established good credit with at least one existing or new active consumer account or credit account that is in good standing with no delinquencies for at least 12 months prior to the date of loan application.
(vii) If a Chapter 13 Bankruptcy was filed, a potential borrower must have satisfactorily made 12 consecutive payments and obtain court trustee's written approval to enter into Mortgage Loan.
(i) The potential borrower's liabilities include all revolving charge accounts, real estate loans, alimony, child support, installment loans, and all other debts of a continuing nature with more than ten (10) monthly payments remaining. Debts for which the potential borrower is a co-signer will be included in the total monthly obligations. For payments with ten or fewer monthly payments remaining, there shall be no late payments within the past 12 months or the debt will be included into the debt ratio calculation. Payments on installment debts which are paid off prior to funding are not included for qualification purposes. Payments on all revolving debts (e.g., credit cards, payday loans, lines of credit, unsecured loans) and certain types of installment loans that appear to be recurring in nature will be included in the Debt-to-Income Ratio calculation, even if the potential borrower intends to pay off the accounts, since the potential borrower can reuse those credit sources, unless the account is paid off and closed. If the credit report shows a revolving account with an outstanding balance but no specific minimum payment, the payment must be calculated as the greater of 5% of the outstanding balance or $10. If the potential borrower provides a copy of the current statement reflecting the monthly payment that amount may be used for the debt ratio calculation.
(ii) Payments on any type of loan that have been deferred or have not yet commenced, including accounts in forbearance will be calculated using one percent (1%) of the outstanding balance or monthly payment reported on the potential borrower's credit report for student loans, whichever is less. Other types of loans with deferred payment will be calculated using the monthly payment shown on the potential borrower's credit report. If the credit report does not include a monthly payment for the loan, the monthly payment shown in the loan agreement or payment statement will be utilized. If a potential borrower provides written evidence that debt will be deferred at least 12 months from the date of closing, the debt will not be included in the debt ratio calculation.
(E) Non-Traditional Credit and Insufficient Credit. Applicants must provide three lines of nontraditional credit such as utility payments, auto insurance, cell phone payments, child care or other credit, as approved by the Department, listed in their name and reflecting no more than one 30 day delinquency on payments due to nontraditional creditors within the last 12 months and meet the requirements of subparagraph (B) of this paragraph.
(F) Equal Credit Opportunity Act. The Department and/or the Administrator on behalf of the Department will comply with all federal and state laws and regulations relating to the extension of credit, including the Equal Credit Opportunity Act (ECOA) (15 U.S.C. 1691 et seq.) and its implementing regulation at 12 CFR Part 1002 (Regulation B) when qualifying potential borrower to receive a single family Program loan from the Department.
(d) The Department reserves the right to deny assistance in the event that the senior lien conditions are not to the satisfaction of the Department, as outlined in the Program Rules.
(e) Lien Position Requirements.
(1) A Mortgage Loan made by the Department shall be secured by a first lien on the real property if the Department's Mortgage Loan is the largest Mortgage Loan secured by the real property; or
(2) The Department may accept a Parity Lien position if the original principal amount of the leveraged Mortgage Loan is equal to or greater than the Department's Mortgage Loan; or
(3) The Department may accept a subordinate lien position if the original principal amount of the leveraged Mortgage Loan is at least fifty-five percent (55%) of the combined loans; however liens related to other subsidized funds provided in the form of grants and non-amortizing Mortgage Loans, such as deferred payment or Forgivable Loans, must be subordinate to the Department's payable Mortgage Loan.
(f) Loan Terms. All loan terms must meet all of the following criteria:
(1) May not exceed a term of 30 years;
(2) May not be for a term of less than five years; and
(3) Interest rate may be as low as zero percent as provided in the Program Rules.
(g) Loan Assumption. A Mortgage Loan may be assumable if the Department determines the potential borrower assuming the Mortgage Loan is eligible according to the underwriting criteria of this section and complies with all Program requirements in effect at the time of the assumption.
(h) Cash Assets. Applicant with unrestricted cash assets in excess of $25,000 must use such excess funds towards the acquisition of the property in lieu of loan proceeds. Unrestricted cash assets for this purpose are Net Family Assets defined in 24 CFR §5.603.
(1) An appraisal is required by the Department on each property that is part of an acquisition Activity, except for down payment assistance only, prior to closing to determine the current market value.
(2) The appraisal must conform to the Uniform Standards of Professional Appraisal Practice (USPAP) as adopted by the Appraisal Standards Board of the Appraisal Foundation.
(3) The Appraiser must have an active and current license by the Texas Appraisal Licensing and Certification Board.
(j) Combined Loan to Value. The Combined Loan to Value ratio of the property may not exceed 100 percent of the cost to acquire the property. The lien amounts of Forgivable Loans shall be included when determining the Combined Loan to Value ratio. The cost to acquire the property may exceed the appraised value only to the extent of closing costs but in no case may result in cash back to the borrower or exceed the limits under subsection (b)(1) of this section.
(k) Escrow Accounts.
(1) An escrow account must be established if:
(A) the Department holds a first lien Mortgage Loan which is due and payable on a monthly basis to the Department; or
(B) the Department holds a subordinate Mortgage Loan and the first lien lender does not require an escrow account, the Department may require an escrow account to be established.
(2) If an escrow account held by the Department is required under one of the provisions described in this subsection, then the following provisions described in subparagraphs (A) - (F) of this paragraph are applicable:
(A) The borrower must contribute monthly payments to cover the anticipated costs, as calculated by the Department, of real estate taxes, hazard and flood insurance premiums, and other related costs as applicable;
(B) Escrow reserves shall be calculated based on land and completed improvement values;
(C) The Department may require up to two months of reserves for hazard and/or flood insurance, and property taxes to be collected at the time of closing to establish the required escrow account;
(D) In addition, the Department may also require that the property taxes be prorated at the time of closing and those funds be deposited with the Department;
(E) The borrower will be required to deposit monthly funds to an escrow account with the Mortgage Loan servicer in order to pay the taxes and insurance. This will ensure that funds are available to pay for the cost of real estate taxes, insurance premiums, and other assessments when they come due;
(F) These funds are included in the borrower's monthly payment to the Department or to the servicer; and
(G) The Department will establish and administer the escrow accounts in accordance with the Real Estate Settlement and Procedures Act of 1974 (RESPA) under 12 U.S.C. §2601 and its implementing regulations at 12 CFR §1024 (Regulation X), as applicable.
(l) Requirements for Originating Mortgage Loans for the Department.
(1) Any Administrator or staff member of an Administrator originating Mortgage Loans for the Department must be properly licensed and registered as a residential mortgage loan originator in accordance with Chapters 157 and 180 of the Texas Finance Code and its implementing regulations at Chapter 81, Part 4 of Title 7 of the Texas Administrative Code, unless exempt from licensure or registration pursuant to the applicable state and federal laws and regulations regarding residential mortgage loans.
(A) The Department reserves the right to reject any Mortgage Loan application originated by an Administrator or individual that is not properly licensed or registered.
(B) The Department will not reimburse any expenses related to a rejected Mortgage Loan application received from an Administrator or individual that is not properly licensed or registered.
(2) Only Administrators approved by the Department may issue initial mortgage disclosures, including the Loan Estimate and other integrated disclosures for Mortgage Loans made by the Department as required under RESPA, Regulation X, the Dodd Frank Wall Street Reform and Consumer Protection Act (Dodd Frank) at 124 Stat.1375, the Truth in Lending Act (TILA) at 15 U.S.C. §1601 and its implementing regulations at 12 CFR §1026 (Regulation Z), and any applicable Texas laws, statutes, and regulations regarding consumer disclosures for residential mortgage loan transactions.
(A) The Department reserves the right to reject any application for Mortgage Loan and Loan Estimate submitted by an Administrator that has not received Department approval because the loan product as disclosed is not offered or the borrower does not qualify for that loan product.
(B) The Department will not reimburse any expenses related to a Loan Estimate or Application received from an Administrator that does not have Department approval.
(3) Only Administrators approved by the Department may issue final mortgage disclosures, including the Closing Disclosures and other integrated disclosures, for Mortgage Loans made by the Department as required under RESPA, Regulation X, Dodd Frank, TILA, Regulation ), and any applicable Texas laws, statutes, and regulations regarding consumer disclosures for residential mortgage loan transactions.
(A) The Department reserves the right to reject any Closing Disclosure issued by an Administrator or title company without Department approval.
(B) The Department reserves the right to refuse to fund a Mortgage Loan with a Closing Disclosure that does not have Department approval.
(4) The Department will not allow disbursement of any portion of the Department's Mortgage Loan for acquisition until seller delivers to the borrower a fully executed deed to the property. After execution of the deed, the deed must be recorded in the records of the county where the property is located.
(5) The first monthly mortgage payment upon closing of the Mortgage Loan with monthly scheduled payments will be due one full month after the last day of the month in which the Mortgage Loan closed. For example, if the Mortgage Loan closed on May 10th or May 30th, the first Mortgage payment will be due July 1st.
(m) Principal Residence. Loans are only permitted for potential borrowers who will occupy the property as their Principal Residence. The property must be occupied by the potential borrower within the later of 60 days after closing or completion of the final Draw of Department funds for rehabilitation or reconstruction and remain their Principal Residence as defined in the Mortgage Loan documents or in the case of Forgivable Loans, until the forgiveness period has concluded in accordance with the Mortgage documents.
(n) Life-of-Loan Flood Certifications will be required to monitor for FEMA flood map revisions and community participation status changes for the term of the Mortgage Loan.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on August 4, 2017.
Timothy K. Irvine
Texas Department of Housing and Community Affairs
Effective date: August 24, 2017
Proposal publication date: May 12, 2017
For further information, please call: (512) 475-4828