12 U.S.C. § 4116 — Resident homeownership program

(a) Tenants seeking to buy eligible housing under section 4110 must organize a resident council^* to develop a resident homeownership program in accordance with standards established by the Secretary^*. The council must work with a private or public nonprofit organization^* or public body, including its agency or instrumentality, that has experience enabling it to help tenants consider their options and develop the capacity needed to own and manage the housing when appropriate. That organization or public body must be approved by the Secretary. (b)(1) For approval, the council must provide a workable plan giving every resident a chance to become an owner^*. The plan must state^* (A) intended transfer price; (B) factors affecting price; (C) comparison with estimated appraised value; (D) planned or expected lender underwriting standards; (E) expected or offered financing; and (F) a workable sales schedule based on estimated tenant incomes, subject to paragraph (8). (2) The Secretary must approve an appropriate conversion method, such as cooperative, limited-equity cooperative, fee-simple, or condominium ownership, and may not require mortgage prepayment as a condition. (3) The Secretary must require conditions ensuring (A) the required number of initial very-low-, low-, or moderate-income owners; (B) Secretary-required occupancy charges; (C) enough owner income and other project funds to cover full operating costs and debt service; (D) each initial owner occupies the acquired unit; and (E) affordability restrictions continue on units that remain rentals. (4) The transferring entity may use half of initial-sale proceeds for program costs, project improvements, operating or replacement reserves, more ownership opportunities, and other approved project activities. The other half must be returned to the Secretary for section 4110 use, subject to appropriations. Records must be kept and made available to calculate the amount owed. (5)(A)(i) A homeowner may transfer the ownership interest or shares, subject to program resale limits. (ii) If a resident management corporation, resident council, or cooperative has jurisdiction, it may buy the interest or shares for the amount in a firm contract with a prospective buyer. (iii) The homeowner must sign a note to the Secretary for any difference between market value and purchase price, secured by a mortgage. (B) For a transfer within six years, restrictions must prevent undue profit. The family’s consideration is limited to (i) its equity contribution; (ii) the regulated value of improvements it paid for during ownership; and (iii) appreciation calculated by an inflation allowance based on a cost-of-living, income, or market index selected by the Secretary and agreed to at initial sale, applied to the equity contribution. At initial sale, the entity may cap that appreciation by agreement. (C) For a transfer after six and through 20 years, the Secretary or program must recapture the declining balance on that note. (D) net proceeds not retained by the homeowner go to the HOME Investment Trust Fund for the local government where the housing is located, or, if it is not a participating jurisdiction, the State fund. The Secretary must make transferred proceeds immediately available for eligible affordable-housing activities under section 12742 and require records for accurate payment calculations. (6)(A) A tenant living in a unit when the Secretary approves the plan may not be evicted because of the program. (B) If a tenant does not buy or is not qualified, the Secretary must ensure section 1437f assistance is available for that tenant in the same or another property if otherwise eligible; preference systems under the specified section 1437f provisions do not apply. (C) The council must tell the tenant that, if the tenant moves, the owner will pay relocation assistance under the approved program. (7) The council must show it can manage eligible properties effectively and efficiently for at least three years, or contract with a qualified management entity meeting Secretary standards for decent, safe, and sanitary maintenance. (8) Except for limited-equity cooperatives, the council must transfer ownership to tenants within a reasonable Secretary-set period. Until then, it must use Secretary-approved written tenant-selection policies consistent with housing very-low-income families and promptly give rejected applicants written reasons. (9)(A) Each council must keep records showing assistance proceeds and their disposition, including sales proceeds, total program cost, amounts and nature supplied by other sources, and other information needed for an effective audit. (B) The Secretary must have audit access to relevant council books and records. (C) The Comptroller General and authorized representatives must also have that access. (10) An entity assuming a housing mortgage in the acquisition must maintain the low-income affordability restrictions^* for the remaining useful life^* under section 4112(c).