Policy Name:Affiliate Revolved FundsUse for Homebuyer Grant or Mortgage Policy
Domain: SHOP Program
Date of Adoption:August 20, 2009
Effective Date:August 20, 2009
Date(s) of Revision:None
Reference:Sweat Equity Labor Agreement, Policy
Volunteer Labor Requirement, Policy
Once an Affiliate revolves the initial SHOP investment out of the land from the proceeds of the sale of land or homes constructed on land acquired with initial SHOP investment received from Community Frameworks, it is eligible to be re-used as gap financing in the Affiliate’s sweat equity homeownership program for the benefit of qualified program participants/homebuyers.
A Subsidy(grant) or Deferred Mortgage(secured by mortgages documents) Policy is neededfrom each Affiliate that intends to use SHOP Revolved Funds, which are held in trust by the Affiliate, as grants or mortgages for homebuyer gap financing. This policy is needed to clearly outlinethe use of SHOP Revolved Funds for subsidy or deferred mortgages (aka silent mortgages) so as to be a fair and consistent use.
Technically, CF can only mandate that a policy of this kind exist for how SHOP Revolved Funds are applied, but as a best practice we recommend that a policy exist that covers the entire subsidy lending funds that the Affiliate controls.
Howhomebuyer’s maximum mortgage and grant applications are being determined is a Fair Housing issue. The Fair Housing Act makes it unlawful to engage in the following practices based on race, color, national origin, religion, sex, familial status or handicap (disability):
- Refuse to make a mortgage loan.
- Refuse to provide financing or information about financing to potential buyers.
- Impose different terms or conditions on a loan, such as different interest rates, points, or fees.
- Use different terms of sale, such as closing or down payment requirements.
A written policywill help toprotectour Affiliates against a claim byaparticipant that the decision to not max mortgage their first mortgage or the decision to notprovidethemthe same amount ofsubsidy/deferred mortgages asanother participant wasbased on race, color, national origin, religion, sex, familial status or handicap (disability).
MANDATORY POLICY COMPONENTS:
- SHOP Revolved Funds may only be used to for the benefit of program participants earning 80% of AMI or below.
- Maximum subsidy/deferred mortgages available (per borrower and/or per group)
- How subsidy/deferred mortgage amount is determined (i.e. need basis, front ratio vs. back ratio)
- Sources of subsidy available (HOME, SHOP, etc)
- Terms (interest rate, recapture or forgiveness, etc)
- SHOP subsidy/deferred mortgage cannot exceed the market value of the lot in any single transaction
- Any use of SHOP Revolved Funds for this purpose requires CF concurrence
- Subsidy/Deferred Mortgage documents associated with SHOP Revolved Funds must be approved by CF
- If SHOP Revolved Funds are not coupled with new SHOP funds in the same project, then there must be sweat equity labor contribution that meets minimum SHOP thresholds of 100 hours of family labor for a 2-adult household and 50 hours of family labor for a 1-adult household + a volunteer component (see Sweat Equity Labor Agreement Policy and Volunteer Labor Requirement Policy). In the cases where new SHOP funds are coupled with SHOP Revolved Funds this is not necessary as the participant and the program only need to meet the sweat equity and volunteer component requirements once.
Affiliate Revolved Funds Use for Subsidy or Deferred Mortgage Policy (8/20/09)
Page 1 of 2