1. (a) The Department has elected to utilize the recapture provision under 24 CFR §92.254(a)(5)(ii) as its primary method of recapturing HOME funds.

2. (b) The Department has established the recapture provisions described in paragraphs (1) - (4) of this subsection to ensure affordability as defined in 24 CFR §92.254(a)(5)(ii).

   1. (1) In the event that a federal affordability period is required and the assisted property is rented or leased, or otherwise ceases to be the Principal Residence of the Household, the forgiveness of the Loan, if applicable, will cease and the entire HOME investment is subject to recapture.
   2. (2) In the event that a federal affordability period is required and the unit is sold, including through a short sale or foreclosure, prior to the end of the affordability period, the Department will recapture the shared net proceeds available based on the requirements of 24 CFR §92.254 and as outlined in the State's One Year Action Plan.
   3. (3) The Household can sell the unit to any willing buyer at any price. In the event of sale to a subsequent low-income purchaser of a HOME-assisted homeownership unit, the low-income purchaser may assume the existing HOME Loan and recapture obligation entered into by the original buyer if no additional HOME assistance is provided to the subsequent homebuyer. In cases in which the subsequent homebuyer needs HOME assistance in excess of the balance of the original HOME Loan, the HOME subsidy (the direct subsidy as described in 24 CFR §92.254) to the original homebuyer must be recaptured. A separate HOME subsidy must be provided to the new homebuyer, and a new affordability period must be established based on that assistance to the buyer.
   4. (4) If there are no net proceeds from the sale, no repayment will be required of the Household and the balance of the Loan shall be forgiven as outlined in the State's applicable One Year Action Plan.

3. (c) The Department has established the resale provisions described in paragraphs (1) - (7) of this subsection, in the event that the Department must impose the resale provisions of 24 CFR §92.254(a)(i).

   1. (1) Resale is defined as the continuation of the affordability period upon the sale or transfer, rental or lease, refinancing, or the initial Household is no longer occupying the property as their Principal Residence.
   2. (2) In the event that a federal affordability period is required and the assisted property is rented or leased, or is otherwise ceases to be the Principal Residence of the initial Household, the entire HOME investment must be repaid.
   3. (3) In the event that a federal affordability period is required and the assisted property is sold, foreclosed, or transferred in lieu of foreclosure to a qualified low income buyer at an affordable price, the HOME Loan balance shall be transferred to the subsequent qualified buyer and the affordability period shall remain in force to the extent allowed by law.
   4. (4) The resale provisions shall remain in force from the date of Loan closing until the expiration of the required affordability period.

   5. (5) The Household is required to sell the home at an affordable price to a reasonable range of low income homebuyers that will occupy the home as their Primary Residence. Affordable to a reasonable range of low-income buyers is defined as targeting households that have a family income between 70 and 80 percent of the area median family income and meet all program requirements.

      1. (A) The seller will be afforded a fair return on investment defined as the sum of down payment and closing costs paid from the initial seller's cash at purchase, closing costs paid by the seller at sale, the principal payments only made by the initial homebuyer in excess of the amount required by the Loan, and any documented capital improvements in excess of $500.
      2. (B) Fair return on investment is paid to the seller at sale once first mortgage debt is paid and all other conditions of the initial written agreement are met. In the event there are no funds for fair return, then fair return does not exist. In the event there are partial funds for fair return, then the appropriate partial fair return shall remain in force.

   6. (6) The appreciated value is the affordable sales price less first mortgage debt less fair return.

      1. (A) If appreciated value is zero, or less than zero, then no appreciated value exists.
      2. (B) The initial homebuyer's initial investment of down payment and closing costs divided by the Department's HOME investment equals the percentage of appreciated value that shall be paid to the initial homebuyer. The balance of appreciated value shall be paid to the Department.
   7. (7) The property purchased by the initial homebuyer will be encumbered with a lien for the full affordability period.
4. (d) In the event that a federal affordability period is not required and the housing unit transfers by devise, descent, or operation of law upon the death of the assisted homeowner, forgiveness of installment payments under the Loan may continue until maturity or the grant amount under the conditional grant agreement may be forgiven, if the heir or remainderman Household qualifies for assistance in accordance with this subchapter.
5. (e) Forgiveness of installment payments under the Loan may continue until maturity or the grant amount under conditional grant agreement may be forgiven if the housing unit is sold by the decedent's estate to a purchasing Household that qualifies for assistance in accordance with this chapter.

Source Note:The provisions of this §23.29 adopted to be effective October 31, 2012, 37 TexReg 8477; amended to be effective January 5, 2014, 38 TexReg 9494.