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Module 5: Financing Issues

Module 5: Financing Issues. Module 5 Content. Affordability Financing Mechanisms (Eligible Use A) Types of Assistance Financing Options Program Income. Affordability. Initial Affordability Long-Term Affordability. NSP Recipients Must: Define Affordable Rents

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Module 5: Financing Issues

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  1. Module 5: Financing Issues

  2. Module 5 Content Affordability Financing Mechanisms (Eligible Use A) Types of Assistance Financing Options Program Income

  3. Affordability Initial Affordability Long-Term Affordability

  4. NSP Recipients Must: Define Affordable Rents Ensure Affordability Standards Enforce NSP Mechanisms HOME Affordability Standards are Minimum Initial Affordability

  5. Housing Costs vs. Household Income Housing Costs: 30-35% of Total Family Income Affordability Based On: Purchase Price or Rent Cost of Occupancy Initial Affordability (continued)

  6. Financing Mechanisms

  7. Eligible Use A Allows NSP Funds to Establish Financing Mechanisms Direct Loans Indirect Loans Loss Reserves Soft Second Loans Shared Equity Loans Financing MechanismsEligible Use A

  8. Types of Assistance

  9. NSP Grantee May Provide Downpayment Assistance to Home Buyer NSP Funds May be Used to Reduce Interest Rate Grantee May Use NSP Funds for Loans to Third Parties Loan Terms May Be Specially Structured Shared Equity Arrangements CDBG Can Help Types of Assistance

  10. NSP Financing Options

  11. Sell for Cash Based on Actual Cost Reduce Sales Price Sell at Cost and Provide Second Mortgage Pay Mortgage Insurance Financing OptionsInitial Affordability

  12. Downpayment Assistance Loan Loss Reserve Closing Costs Capitalize Reserves When Condition of Primary Lender (rental) Financing OptionsInitial Affordability (continued)

  13. Homebuyer Requirement Primary Residence for Period of Affordability Rental Requirements Occupancy by Income-Eligible Tenants Affordable Rents Grantee Defines Length of Affordability Period Affordable Rent Levels Long-Term Affordability

  14. Balloon Payment Due on Sales Loans Shared Equity Loans May Reduce Loan for Each Year of Affordability Compliance Financing Options—Homebuyer Long-Term Affordability

  15. No Recapture Option New Buyer Must Continue Affordability Occupancy Rent Restrictions Lien for Period of Affordability Financing Options—Long-Term Affordability Rentals

  16. Applicability of CDBG Requirements CDBG Definitions and Requirements How Program Income Applies to NSP Home Buyer Projects Calculating Program Income on Rental Project Owned by Grantee or Subrecipient Owned by Private Developer Program Income

  17. CDBG Rules Imposed by Recovery Act 570.500(a) Program Income is Revenue Received by a Grantee or Subrecipient from: Sale of Property Loan Repayments Rental Income CDBG Definitions and Requirements

  18. Spend Cash On Hand First NSP Income Only for NSP Uses Income Not Counted Toward Obligation Program Income Rules

  19. Sales Revenue Received by Grantee or Subrecipient Debt Service Payments Made to Grantee or Subrecipient Recaptured Funds Program Income—Homebuyer Transactions

  20. When Owned by Grantee or Subrecipient: Gross rental income minus costs incidental to its generation. Such costs include: Management expenses Property maintenance and repairs Contributions to replacement reserves Taxes and insurance Program Income—Rental Properties

  21. Program Income Does Not Include Revenue from Privately Owned Rental Projects Make Loans, not Grants, Wherever Possible Grantee Should Underwrite to Avoid Undue Enrichment Program Income—Rental Properties (continued)

  22. Module 5 Summary Affordability Financing Mechanisms (Eligible Use A) Types of Assistance Financing Options Program Income

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