1. (a) Program funds under this subchapter may be used for the acquisition and New Construction or acquisition and Rehabilitation of single family housing that complies with affordability requirements as defined at 24 CFR §92.254.
2. (b) Program funds under this subchapter are only eligible to be administered by a CHDO certified as such by the Department. A separate grant for CHDO operating expenses may be awarded to CHDOs that receive a Contract award if funds are provided for this purpose in the NOFA. A CHDO may not receive more than one grant of CHDO operating funds in an amount not to exceed $50,000 within any one year period, and may not draw more than $25,000 in CHDO operating funds in any 12 month period from any source, including CHDO operating funds from other HOME Participating Jurisdictions.
3. (c) The Household's income must not exceed 80 percent area median family income (AMFI) and the Household must complete a homebuyer counseling program/class. The Household must be income qualified as of the date of signature of the homebuyer's purchase contract.

4. (d) Each unit must meet the design and quality requirements described in paragraphs (1) - (5) of this subsection:

   1. (1) for New Construction and Reconstruction, current applicable International Residential Code, local codes, Rehabilitation standards, ordinances, and zoning ordinances in accordance with the 24 CFR§92.251(a);
   2. (2) include the following amenities: Wired with RG-6 COAX or better and CAT3 phone cable or better to each bedroom and living room; Blinds or window coverings for all windows; Disposal and Energy-Star or equivalently rated dishwasher (must only be provided as an option to each Household); Oven/Range; Exhaust/vent fans (vented to the outside) in bathrooms; Energy-Star or equivalently rated lighting in all rooms, which may include compact florescent bulbs. The living room and each bedroom must contain at least one ceiling lighting fixture and wiring must be capable of supporting ceiling fans; and Paved off-street parking for each unit to accommodate at least one mid-sized car and access to on-street parking for a second car;
   3. (3) contain no less than two bedrooms. Each unit must contain complete physical facilities and fixtures for living, sleeping, eating, cooking, and sanitation;
   4. (4) each bedroom must be no less than 100 square feet; have a length or width no less than 8 feet; be self contained with a door; have at least one window that provides exterior access; and have at least one closet that is not less than 2 feet deep and 3 feet wide and high enough to contain at least 5 feet of hanging space; and
   5. (5) be no less than 800 total net square feet for a two bedroom home; no less than 1,000 total net square feet for a three bedroom and two bathroom home; and no less than 1,200 total net square feet for a four bedroom and two bathroom home.
5. (e) Housing proposed to be constructed under this subchapter must meet the requirements in Chapters 20 and 21 of this title and plans submitted with the Application must be certified by a licensed architect or engineer.

6. (f) The total hard construction costs are limited as described in paragraphs (1) and (2) of this subsection:

   1. (1) Reconstruction and New Construction of site-built housing: The hard construction costs are limited to $90 per square foot of conditioned space and $100,000 or for Households of five or more Persons the lesser of $90 per square foot of conditioned space or $110,000 for a four-bedroom unit; and
   2. (2) Rehabilitation that is not Reconstruction: $60,000, or up to $100,000 for properties listed in or identified as eligible for listing in the National Register of Historic Places.

7. (g) In addition to the Direct Activity Costs allowable under subsection (d) of this section, a sum not to exceed $10,000 may be used to pay for any of the following:

   1. (1) necessary environmental mitigation as identified during the Environmental review process;
   2. (2) installation of an aerobic septic system; or
   3. (3) homeowner requests for accessibility features.
8. (h) Developer fees (including consulting fees) are limited to 15 percent of the total hard construction costs. The developer fee will be reduced by 1 percent per month or partial month that the construction period exceeds the original term of the construction period financing.

9. (i) General Contractor Fees are limited to 15 percent of the total hard construction costs. The General Contractor is defined as one who contracts for the construction or Rehabilitation of an entire development Activity, rather than a portion of the work. The General contractor hires subcontractors, such as plumbing contractors, electrical contractors, etc., coordinates all work, and is responsible for payment to the subcontractors. A prime subcontractor will also be treated as a General Contractor, and any fees payable to the prime subcontractor will be treated as fees to the General Contractor, in the scenarios described in paragraphs (1) and (2) of this subsection:

   1. (1) any subcontractor, material supplier, or equipment lessor receiving more than 50 percent of the contract sum in the construction contract will be deemed a prime subcontractor; or
   2. (2) if more than 75 percent of the contract sum in the construction contract is subcontracted to three or fewer subcontractors, material suppliers, and equipment lessors, such parties will be deemed prime subcontractors.
10. (j) Construction period financing for each unit shall be structured as a zero percent interest loan with a twelve (12) month term, or with a term that coincides with the end date of the Household commitment contract under a Reservation System Participation Agreement. The maximum construction loan amount may not exceed the total development cost less developer fees/profit, homebuyer closing costs, and ineligible Activity costs. Prior to construction loan closing, a sales contract must be executed with a qualified homebuyer.
11. (k) In the instance that the Combined Loan to Value equals more than 100 percent of the appraised value, the portion of the sales price that exceeds 100 percent of the appraised value will be granted to the developer to buy down the purchase price if the homebuyer is receiving downpayment assistance or a first lien mortgage from the Department. The cost to the Developer to close the homebuyer loan may be provided as a grant to the Developer.

12. (l) The HOME assistance to the homebuyer shall be structured as a first and/or second lien loan(s):

    1. (1) the downpayment assistance is limited to ten percent of the total development costs and shall be structured as a ten (10) year deferred, forgivable loan with a subordinate lien; and
    2. (2) a first lien conventional mortgage not provided by the Department must meet the mortgage financing requirements outlined in Chapter 20 of this title. If the Department is providing the first lien mortgage with HOME financing, the loan will be fully amortizing with a thirty (30) year term. The Department will require a debt to income ratio (back-end ratio) not to exceed 45 percent. The total estimated housing payment (including principal, interest, property taxes, and insurance) shall be no less than 20 percent and no greater than 30 percent of the Household's gross monthly income. Should the estimated housing payment be less than 20 percent of the Household's gross income, the Department shall reduce the amount of downpayment assistance and/or charge an interest rate to the homebuyer such that the total estimated housing payment is no less than 20 percent of the homebuyer's gross income. In no instance shall the interest rate charged to the homebuyer exceed 5 percent.
13. (m) Earnest money is limited to no more than $1,000, which may be credited to the homebuyer at closing, but may not be reimbursed as cash. HOME funds may be used to pay other reasonable and customary closing costs that are HOME eligible costs.
14. (n) If a Household should become ineligible or otherwise cease participation and a replacement Household is not located within ninety (90) days of the end of the construction period, all additional funding closings and draws on the award will cease and the Department will require the Applicant to repay any outstanding construction debt in full.
15. (o) The Division Director may approve the use of alternative floor plans or lots from those included in the approved Application, provided the requirements of this section can still be met and such changes do not materially affect the total budget.
16. (p) To ensure affordability, the Department will impose resale or recapture provisions established in this Chapter.

Source Note:The provisions of this §23.71 adopted to be effective August 3, 2017, 42 TexReg 3747.