TEXAS REGISTER
AND COMMENTS PROVIDED AT PUBLIC HEARINGS
HELD BY THE DEPARTMENT ON ITEMS THAT RELATE DIRECTLY TO THE TEXAS BOOTSTRAP
LOAN PROGRAM RULES.
§2.1(a) - Purpose
Comment: Lower Valley Housing Corporation, Alianza, Community Development
Corporation Brownsville, El Paso Collaborative, and El Paso County Self-Help
Center - The commentators requested that the Department increase the maximum
amount of repayable loans from $60,000 to an amount set by the Texas Legislature.
Department Response: Staff recommends no change. This rule is pursuant
to §2306.754(b) of the Texas Government Code which states "The total
amount of loans made by the Department and other entities to an Owner-Builder
under the Program may not exceed $60,000." Therefore, the Department has no
authority to make this change.
§2.2(21) - Definitions
Comment: Lower Valley Housing Corporation - The commentator requested that
the Department release an NOFA every year instead of every two years.
Department Response: Staff recommends no change. The Department would like
to reserve the right to release funds in a two-year funding cycle or less.
§2.3(a)(3) - Allocation of Funds
Comment: Lower Valley Housing Corporation - The commentator requested that
the Department increase the amount of funds allocated for nonprofit organizations.
Department Response: Staff recommends no change. This rule is pursuant
to §2306.758(c) of the Texas Government Code, which states that "In a
state fiscal year, the department may use not more than 10 percent of the
revenue available for purposes of this subchapter to enhance the ability of
tax-exempt organizations described by §2306.755(a) to implement the purposes
of this chapter." The Department has no authority to make this change.
§2.4(b) - Applicant Requirements
Comment: Community Development Corporation Brownsville - The commentator
requested that the Department amend the proposed rules regarding deobligated
funds from 24 months to 6 months of the application deadline and to also take
into consideration any extenuating circumstances that may have prevented the
applicant from achieving its goals.
Department Response: It is the Department's intent to expend funds in a
timely and efficient manner; therefore, we recommend no changes to the 24-month
requirement. The Department will deobligate funds for non-performance or non-compliance.
However, the staff recommends the following change due to extenuating circumstances
that are beyond the applicant's control.
§2.4(b) - Applicant Requirements
(b) Ineligible Applicant: The following violations may cause an Applicant,
and any Applications they have submitted, to be ineligible:
§2.4(b)(3) - Applicant Requirements
Comment: Lower Valley Housing Corporation and Community Development Corporation
Brownsville - The commentators requested that the Department not charge any
type of fees on any loans made to an applicant and also for the Department
to clarify the proposed rule.
Department Response: Staff recommends the following changes in order to
clarify when the proposed rule will apply.
(3) Applicants that have failed to make timely payments on debt instruments
held by the Department and for which the Department has initiated formal collections
actions or fee commitments due to the Department;
§2.4(f) - Applicant Requirements
Comment: Lower Valley Housing Corporation and Community Development Corporation
Brownsville - The commentators requested that Department not require an applicant
that is awarded a contract to enter information via the Department's Contract
System.
Department Response: Staff recommends no change. It is the goal of the
Department to utilize the TDHCA's contract system in order to better track
and manage Department Contracts. In the future, awardees may be required to
enter data onto the Contract System in order to draw funds for any Texas Bootstrap
Loan Program projects. However, Department is willing to offer technical assistance,
as needed, to help build capacity for nonprofits for this purpose.
§2.5(b) - Application Limitations
Comment: Val Verde County Self-Help Center, Alianza, Proyecto Azetca, El
Paso Collaborative, and El Paso County Self-Help Center - The commentators
requested that the Department increase the administrative fee from 4% to 10%
on the Texas Bootstrap Loan Program.
Department Response: Staff agrees with increasing the administrative fee
under this program. The nonprofit organization must market the program in
order to identify and qualify families to participate. In most cases, for
every five applications received, only one will qualify to participate in
this program; however, the same amount of work and time is being spent on
the applications that do not meet program guidelines. In addition, the awardees
must gather, review, and submit to the Department all the appropriate documents
for approval. The nonprofit organization must also teach the owner-builder
the basic concepts of construction such as tool safety, reading a measuring
tape, etc. and teaching how to build or rehabilitate their home. The cost
involved in implementing this program supersedes the current four percent
administrative fee. Staff does not recommend increasing the administrative
fee to 10%, but does suggest a 50% increase from 4% to 6%.
Staff recommends the following:
§2.5(b) - Application Limitations. An award amount for the Texas Bootstrap
Loan Program shall not exceed $600,000 plus administrative fees not to exceed
6% of award amount, except as may be otherwise authorized by the Board or
as otherwise stated in the NOFA.
§2.5(b) - Application Limitations
Comment: Community Development Corporation Brownsville - The commentator
requested that the Department consider increasing the maximum amount of an
award from $600,000 to a maximum of 25 homes at the maximum allowable per
household, as set by the Texas Legislature.
Department Response: Staff recommends no changes. The Department desires
to select a diverse group of applicants that will serve various populations
throughout the state. By allowing the maximum amount of an award to remain
at $600,000, staff feels that the Department will be able to award the funds
in a fair and equitable manner throughout the state.
§2.5(c) - Application Limitations
Comment: Community Development Corporation Brownsville - The commentator
requested that the Department increase the term of a contract from 24 months
to 36 months.
Department Response: Staff recommends no changes to this rule. It is the
Department's intent to expend funds in a timely and efficient manner. Currently,
the Department allows a one six-month extension over and above the 24-month
contract if necessary.
§2.5(d) - Application Limitations
Comment: Val Verde County Self-Help Center, Dallas Area Habitat for Humanity,
Lower Valley Housing Corporation, Alianza, Community Development Corporation
Brownsville, El Paso Collaborative, and El Paso County Self-Help Center -
The commentators requested that the Department increase the maximum loan amount
of $30,000 to an amount set by the Texas Legislature.
Department Response: Staff recommends no change. This rule is pursuant
to §2306.754 (a) and (b) of the Texas Government Code which states "The
department may establish the minimum amount of a loan under this subchapter,
but a loan may not exceed $30,000. If it is not possible for an owner-builder
to purchase necessary real property and build adequate housing for $30,000,
the owner-builder must obtain the amount necessary that exceeds $30,000 from
one or more local governmental entities, nonprofit organizations, or private
lenders. The total amount of loans made by the department and other entities
to an owner-builder under this subchapter may not exceed $60,000." Therefore,
the Department has no authority to make this change.
§2.5(e) - Application Limitations
Comment: Lower Valley Housing Corporation and Community Development Corporation
Brownsville - The commentators requested that the Department not set a higher
maximum award amount due to disasters under this program and to treat all
awards equal.
Department Response: Staff recommends no changes. Due to the circumstances
surrounding disasters, additional funds may be needed to assist the affected
areas; and the Department does not want to limit flexibility that may be needed
in these types of extenuating situations.
§2.7 - Prohibited Activities
Comment: Community Development Corporation Brownsville - The commentator
requested that the Department limit the prohibited charges only to the Bootstrap
Loan not to any other loan used in conjunction with the Texas Bootstrap Loan
Program.
Department Response: Staff agrees and recommends following changes:
§2.7 - Prohibited Activities
The following activities are prohibited in relation to the origination
of a Texas Bootstrap Loan Program Loan, but may be charged as an allowable
cost by a third party lender for the origination of all other loans originated
in connection with a Texas Bootstrap Loan Program Loan.
(1) Payment of delinquent property taxes or related fees or charges on
properties to be assisted with Texas Bootstrap Loan Program funds;
(2) Loan Origination Fees;
(3) Application fee;
(4) Discount fees;
(5) Underwriter fee;
(6) Loan Processing fees; and
(7) Other fees not approved by the Department.
§2.9 - Application & Award Process
Comment: Trinity Habitat for Humanity, Rio Grande Habitat for Humanity,
and Habitat for Humanity, Texas - The commentator requested that the Department
modify the scoring for an application received from an applicant with co-applicants.
The organizations feel that the current scoring criteria penalizes applications
received from an applicant with co-applicants. The current process gives the
same weight to one applicant with good internal systems and capacity building
one house as it does to another applicant with sophisticated internal systems
and capacities building ten houses. A recommendation was made to change the
scoring criteria on an application received from an applicant with co-applicants.
Department Response: Staff agrees with the comments and recommends the
following changes:
§2.9 - Application & Award Process
(d) An Application received from an Applicant with Co-Applicants will be
scored accordingly:
(1) Each Applicant and Co-Applicant from an organization must meet the
General Threshold Criteria as outlined in §2.10 of this Chapter and Selection
Criteria outlined in §2.11 of this Chapter. Each Applicant and Co-Applicant
must achieve a minimum threshold score of 70 points based on the Department's
review in order to be considered eligible to receive a funding recommendation.
If an Applicant and/or Co-Applicant does not achieve the minimum threshold
score, that particular Applicant and/or Co-Applicant will be disqualified.
(2) The number of houses each Applicant and/or Co-Applicant plans to build
or rehabilitate will be determined by Department Staff based on the data provided
by the Applicant and Co-Applicant.
(3) The score determined for each Applicant and Co-Applicant will apply
as a score to each house the Applicant and Co-Applicant plans to build or
rehabilitate.
(4) The final score applied to the application will be the average of
all scores weighted by the number of houses per Applicant and Co-Applicant.
§2.10 - General Threshold Criteria
Comment: Community Development Corporation Brownsville - The commentator
made a recommendation to the Department in order to clarify the proposed rule.
Department Response: Staff agrees and recommends the following change:
§ 2.10(3) Financial Design. Applications for funding will be reviewed
for written evidence of the capacity to maintain financial systems, including
the responsibility of accounting staff. The Application must adequately describe
the lead Applicants' and co-Applicants' financial standing for the last three
years. The review will be based on the supporting financial data provided
by Applicants and third party reports such as financial statements and audits
submitted with the Application. Submission of "Independent Auditor's Report"
dated within 12 months of application deadline date, expressing an unqualified
opinion. Report must show evidence of Applicant's capacity to maintain an
effective financial system and the extent to which Applicant has the capability
to manage financial resources, as evidenced by previous experience, documentation
of the Applicant or key staff, and existing financial control procedures.
§2.10 - General Threshold Criteria
Comment: Community Development Corporation Brownsville - A commentator
requested that the Department increase the contract term from 24 months to
36 months.
Department Response: Staff recommends no changes to this rule. It is the
Department's intent to expend funds in a timely and efficient manner. Currently,
the Department allows a one six-month extension over and above the 24-month
contract, if necessary.
§2.11(b)(1) - Selection Criteria for Texas Bootstrap Loan Program
- Income Targeting
Comment: Trinity Habitat for Humanity, Lower Valley Housing Corporation,
Rio Grande Habitat for Humanity, Habitat for Humanity Texas, Proyecto Azetca,
and Community Development Corporation Brownsville. The commentators requested
that the Department delete this paragraph. The comments submitted expressed
that this is double weighted scoring since we are already awarding points
for applicants, giving priority to families earning less than $17,500.
Department Response: Staff agrees with comments and recommends deleting
this paragraph. The Department is required under §2306.753(a) of the
Texas Government Code to give priority to families earning less than $17,500.
Therefore, points will only be awarded to this statutory requirement under §2.11(7)(c)
of the Texas Bootstrap Loan Program Draft Rules.
The 13 points will be distributed to Program Design under §2.11(7)
of the Texas Bootstrap Loan Program Draft Rules. Ten points will be added
to §2.11(7)(a), and the remaining three points will be added to §2.11(7)(c).
§2.11(b)(1) - Selection Criteria for Texas Bootstrap Loan Program
- Previous Awards, Past Performance and First Time Applicants
Comment: Lower Valley Housing Corporation and Community Development Corporation
Brownsville - The commentators requested that the Department not award points
to first time applicants. The commentators are concerned that an inexperienced
applicant will be awarded points without demonstrating the capability of administering
the Program.
Department Response: Staff recommends revising the section as follows to
ensure that first time applicants have experience in self-help construction.
§2.11(b)(1) Previous Award, Past Performance and First Time Applicants.
(Maximum Points: 10) Applicants will receive 10 points for having received
an award from the Bootstrap Program and performed in accordance with their
contracts and Department rules. If performance benchmarks as outlined in contract
have not been met or funds have been deobligated or if Applicant has been
found in noncompliance on any prior award described in §2.12 of this
chapter, a score of zero points will result. Unsatisfactory past performance
on any contract will be forgiven for funding purposes if three years from
the Application deadline date has elapsed and the Department, in its sole
discretion, is satisfied that the conditions of such performance have been
rectified. In an effort to encourage participation in the Texas Bootstrap
Loan Program, first time Applicants will be awarded 10 points if the Applicant
demonstrates at least three years of experience by providing details of previous
projects and/or resumes of persons involved in self-help housing construction
projects. Projects and resumes will be reviewed and verified by the Department
staff.
§2.11(b)(2) - Selection Criteria - Letters of Support
Comment: Trinity Habitat for Humanity and Community Development Corporation
Brownsville - The commentators requested that the Department accept letters
of support to be dated within 12 months of the application deadline. In most
cases, sponsors are obtained at least 10 to 12 months prior to start of a
project.
Department Response: Staff agrees and recommends increasing the requirement
from three months to twelve months.
(2) Letters of support. (Maximum Points: 10) Points will be awarded based
on a review of the letters (up to five letters; 2 points per letter up to
a maximum of 10 points.) submitted from community and/or neighborhood organizations,
local businesses and commercial lenders or private individuals as well as
units of local government who indicate support to the Texas Bootstrap Loan
Program project. To be considered for scoring, the letters must include the
company's name, contact person (full name), address, city, state, and zip
code; signed and dated within 12 months of the application deadline.
§2.11(b)(3) - Selection Criteria - Readiness to Proceed
Comment: Trinity Habitat for Humanity, Lower Valley Housing Corporation,
and Community Development Corporation Brownsville - The commentators requested
that the Department accept commitment letters or letters of interest to be
dated within 12 months of the application deadline. In most cases, potential
homebuyers are pre-qualified at least 10 to 12 months prior to start of a
project.
Another commentator expressed concern in awarding points to applicants
that have families identified and ready to go. The commentator felt that the
applicant cannot risk its reputation and may be liable for "false advertising",
risking legal action if it has any proposed owner-builders sign any type of
form, such as letter of interest, letter of intent, or option of any kind
without first having secured all the financing for the proposed project.
Department Response: Staff agrees with first comments received and recommends
increasing the requirement from three months to 12 months. Staff does not
agree with second comment received. An applicant may issue letters of intent,
letters of interest, or letters of commitment subject to certain conditions
such as a Department Award. Due to the time needed to qualify and build or
rehabilitate a house through self-help, construction time is of the essence;
therefore, staff recommends no additional changes to this rule.
§2.11(b)(3) - Selection Criteria - Readiness to Proceed. (Maximum
Points: 10) Points will be awarded based on a review of the commitment letters
provided to Owner-Builders interested in participating in the Texas Bootstrap
Loan Program. To be considered for scoring, the letters must be on applicant's
letterhead, including: Owner-Builder's name, address, city, state, zip code
and phone number. Letters must be signed by both Owner-Builder and nonprofit
organization and dated within 12 months of application deadline. 2 points
per letter for a maximum of 10 points.
§2.11(4) - Selection Criteria - Level of Homebuyer Counseling for
Homebuyer Assistance
Comment: Lower Valley Housing Corporation and Community Development Corporation
Brownsville - The commentators asked how the Department can award points for
something that is going to take place after the award is granted to the nonprofit.
Department Response: The Department currently awards contracts based on
applications submitted by third parties for projects to be delivered in the
future. Homebuyer counseling is an important component to support successful
homeownership.
§2.11(b)(5) - Lien Position
Comment: Lower Valley Housing Corporation, Alianza, Community Development
Corporation Brownsville, El Paso Collaborative, and El Paso County Self-Help
Center - The commentators requested that the Department delete the word parity
from this proposed rule. The commentators also proposed that TDHCA accept
a second lien position to another lender's first lien position.
Department Response: Staff believes that, by accepting a parity lien, it
protects the Department's investment and recommends no changes to this section
of the rule. However, staff agrees with comments in accepting a second lien
to another lender's first lien position and recommends awarding points to
an Applicant whose first lien amount is greater than the Department's second
lien amount. Staff recommends the following change:
§2.11(b)(5) Lien Position. (Maximum Points: 10) To encourage participation,
the Department may subordinate its lien position if the leveraged loan is
greater or equal than the Department's loan. However, liens related to other
subsidized funds provided in the form of grants and nonamortizing loans, such
as deferred payment or forgivable loan, must be subordinated to the Department's
loan. If the Department is in a first lien or in a parity lien position based
on this standard, the Applicant will be awarded 10 points. If the Department
subordinates its lien and the leveraged loan is greater than the Department's
loan, the Applicant will be awarded 5 points.
§2.12 (c) - Program Administration - Sanctions/Deobligation
Comment: Lower Valley Housing Corporation, Alianza, El Paso Collaborative,
and El Paso County Self-Help Center - The commentators requested that the
Sanction/Deobligation clause be waived for older contracts already in place
and apply the Sanction/Deobligation clause to new contracts after the effective
date of the Rules as adopted.
Staff Response: Staff will work with each respective Technical Assistance
Provider who has an executed contract with the Department and evaluate its
contract performance in order for the Department to be able to apply the appropriate
rule(s) and assist the Technical Assistance Provider with any program issues
in order to avoid taking any Sanction/Deobligation measures against the Technical
Assistance Provider.
§2.12(f)(1) - (7) - Program Administration
Comment: Community Development Corporation Brownsville - The commentator
requested that the Department increase the contract term from 24 months to
36 months.
Department Response: Staff recommends no changes to this rule. It is the
Department's intent to expend funds in a timely and efficient manner. Currently,
the Department allows a one six-month extension over and above the 24-month
contract, if necessary.
§2.12(j) - Program Administration - First Year Consultation Agreement
Comment: The commentator requested that the Department not require the
Technical Assistance Providers to purchase or repurchase the Bootstrap loan
in full. Most nonprofits that participate in this program cannot afford or
agree to this type of recourse.
Department Response: Staff agrees with comments. Technical Assistance Provider
is being required to assist and provide post purchase counseling. In addition,
the Department is also requiring the Technical Assistance Provider to work
with the applicant in bringing the account current. Therefore, staff recommends
the following changes:
§2.12(j) First year consultation agreement. The Technical Assistance
Provider agrees that if notified by the Department Owner-Builder (Mortgagee)
has failed to make a scheduled payment due under the Program Loan, or other
payments due under the Program Loan documents issued under the Contract, within
the first twelve (12) months of funding, the Technical Assistance Provider
will be required to meet with the Owner-Builder and provide counseling and
assistance until the payments are made current. After consultation and in
the event that the Department and Technical Assistance Provider are not able
to reach a consensus about Technical Assistance Provider's effort to bring
the Program Loan current as required under this chapter, the Department, in
accordance with its Administrative Rules, may apply appropriate graduated
sanctions leading up to, but not limited to deobligation of funds and future
debarment from participation in the program.
§2.15. Leveraged Loans
Comment: Lower Valley Housing Corporation and Community Development Corporation
Brownsville - The commentators requested that the Department not require third
party lenders to limit the amount of interest they may charge. The commentators
stated that this requirement may discourage participation in the Texas Bootstrap
Loan Program from private lenders.
Department Response: Since the Texas Bootstrap Loan Program loans are non-interest
bearing, there is no need to offer longer loan terms. Our non-interest bearing
loan applies as long as the owner-builder household income does not exceed
the 60% of the AMFI, so there is no sliding scale such as the one USDA/RD
utilizes. In addition, TDHCA does not recertify the owner-builder's income
in future years; USDA does and if necessary will adjust the interest rate
accordingly. It is the intent of the Department to protect the owner-builder
by limiting the interest rate a lender may charge. If an owner-builder had
"A" credit, they should qualify for market rate not above market rate. While
most would like to call this a high risk loan due to the owner-builder's credit,
the private lender's loan is an asset based loan versus a credit based loan
due to the TDHCA's investment and the sweat equity provided by the owner-builder.
The private lender loan has limited exposure. Since participants in this Program
may not qualify for a conventional mortgage loan due to credit and not discourage
participation from third party lenders, staff recommends the following changes:
§2.15. Leveraged Loans.
(1) The leverage loan interest rate may be no more than 3.5% above the
FHA rate at the time of closing. Also, the lender may not include "points"
to buy down or pre-pay the interest.
§2.16(f)(2) - Property guidelines and related issues - Insurance Requirements
Comment: Lower Valley Housing Corporation and Community Development Corporation
Brownsville - The commentators requested that the Department clarify the proposed
rules regarding property insurance.
Department Response: Staff agrees with comments and in order to clarify
the proposed rule recommends the following changes:
§2.16(f)(2) Property Insurance.
(A) Builder's Risk is required where construction of the residence is being
financed by the Department. At the end of the construction period, the binder
must be endorsed to remove the "pending disbursements" clause.
(B) Hazard Insurance. The Department requires property insurance for protection
against loss or damage from the following perils: fire, windstorm, hail, explosion,
riot, and civil commotion, damage by aircraft, vehicles or smoke. Homeowner's
policies or package policies that provide property and liability coverage
are acceptable. All risk policies are acceptable. The amount of hazard insurance
coverage at the time the loan is funded must be no less than 100% of the current
insurable value of improvements. The Department will require that the premium
for a 12 month homeowner's policy be collected at closing and name the Department
as mortgagee.
The new sections are adopted pursuant to the authority of the
Texas Government Code, Chapter 2306.
§2.4.Applicant Requirements.
(a)
Eligible Applicant. The following organizations or entities
are eligible to apply for the Texas Bootstrap Loan Program:
(1)
Colonia Self Help Centers established under §2306,
Subchapter Z, Texas Government Code; or
(2)
Nonprofit Owner-Builder Housing Program (NOHP) certified
by the Department pursuant to §2306.755 of the Texas Government Code.
(b)
Ineligible Applicant: The following violations may cause
an Applicant, and any Applications they have submitted, to be ineligible:
(1)
Previously funded Applicant(s) whose funds have been partially
or fully deobligated due to failure to meet contractual obligations during
24 month period prior to the Application deadline date;
(2)
Applicants who have not satisfied all eligibility requirements
described in the NOFA, and application guidelines to which they are responding,
and for which Administrative Deficiencies were unresolved;
(3)
Applicants that have failed to make timely payment on debt
instruments held by the Department and for which the Department has initiated
formal collection actions or fee commitments due to the Department;
(4)
Applicants that have been debarred by HUD or the Department;
or
(5)
Applicant, or their staff, violate the state's revolving
door policy.
(c)
Communication with Department Employees. Communication
with Department employees by Applicants that submit an Application must follow
the following requirements. During the period beginning on the date an Application
is filed and ending on the date the Board makes a final decision with respect
to any approval of that Application, the Applicant or a Related Party, and
any Person may communicate with an employee of the Department about the Application
orally or in written form, which includes electronic communications through
the Internet. Communications with Department employees is unrestricted during
any board meeting or public hearing held with respect to that Application.
(1)
The communication must be restricted to technical or administrative
matters directly affecting the Application;
(2)
The communication must occur or be received on the premises
of the Department during established business hours; and
(3)
A record of the communication must be maintained by the
Department and included with the Application for purposes of board review
and must contain the date, time, and means of communication; the names and
position titles of the persons involved in the communication and, if applicable,
the person's relationship to the Applicant; the subject matter of the communication;
and a summary of any action taken as a result of the communication.
(d)
Noncompliance. Each application will be reviewed for its
compliance history by the Department. Applications found to be in Material
Noncompliance, or otherwise violating the compliance rules of the Department,
will be terminated.
(e)
Eligibility requirements. An Applicant must satisfy the
following requirements in order to be eligible to apply for the Texas Bootstrap
Loan Program funding and as more fully described in the NOFA and application
guidelines, when applicable. The applicant must have the capacity to administer
and manage resources as evidence by previous experience of managing state
and/or federal programs based on each of the following preferred experience:
(1)
Applicant must provide names and details, such as number
of houses built, financing structure and construction timeliness of previous
projects in order to show evidence of its ability to carry out the Texas Bootstrap
Loan Program in the areas of property development (including processes related
to surveying, platting and recording of property), home loan processing, financing,
coordinating with private financial institutions, acquiring, rehabilitating,
reconstruction or constructing affordable single-family housing, in managing
self-help housing and volunteer labor projects;
(2)
Applicant must provide copies of program guidelines used
to qualify Owner-Builders and homebuyer course curriculum in order to show
evidence of its experience in qualifying potential Owner-Builders; providing
education classes, counseling and training;
(3)
Applicant must submit any past due audit to the Department
in a satisfactory format on or before the Application deadline;
(4)
Applicants must have met all performance and expenditure
benchmarks as outlined in any existing or prior contracts awarded by the Department;
(5)
Applicant must provide copies of documentation from the
Texas Secretary of State and Comptroller's Office demonstrating Applicant
is in good standing;
(f)
If indicated by the Department, comply with all requirements
to utilize the Department's website to provide necessary data to the Department.
§2.5.Application Limitations.
(a)
The Department reserves the right to reduce the amount
requested in an Application based on program or project feasibility, need
to ensure dispersion of funds, underwriting analysis, or availability of funds:
(b)
An award amount for the Texas Bootstrap Loan Program shall
not exceed $600,000 plus administrative fees not to exceed 6% of award amount,
except as may be otherwise authorized by the Board or as otherwise stated
in the NOFA.
(c)
The contract term for the Texas Bootstrap Loan Program
shall not exceed 24 months, except as may be otherwise authorized by the Board.
(d)
Per household assistance from the Department for any Texas
Bootstrap Loan Program Loans may not exceed $30,000 per-household pursuant
to §2306.754(b) of the Texas Government Code. The Owner-Builder must
obtain the amount necessary that exceeds $30,000 from one or more local governmental
entities, nonprofit organizations, or private lenders. The total amount of
repayable loans made by the Department and other entities to an Owner-Builder
under the Program may not exceed $60,000 pursuant to §2306.754 (b) of
the Texas Government Code.
(e)
An award amount for Disaster Relief shall not exceed $750,000
plus administrative fees not to exceed 6% of award amount per State declared
disaster, or as may be otherwise authorized by the Board.
§2.7.Prohibited Activities.
The following activities are prohibited in relation to the origination
of a Texas Bootstrap Loan Program Loan, but may be charged as an allowable
cost by a third party lender for the origination of all other loans originated
in connection with a Texas Bootstrap Loan Program Loan.
(1)
Payment of delinquent property taxes or related fees or
charges on properties to be assisted with Texas Bootstrap Loan Program funds;
(2)
Loan Origination Fees;
(3)
Application fee;
(4)
Discount fees;
(5)
Underwriter fee;
(6)
Loan Processing fees; and
(7)
Other fees not approved by the Department.
§2.9.Application & Award Process.
(a)
The Department will publish a NOFA in the Texas Register
and on the Department's website. The NOFA may be published as either an Open
or Competitive Application Cycle. The NOFA will establish and define the terms
and conditions for the submission of applications, and may set a deadline
for receiving applications under a Competitive Application Cycle. The NOFA
will also indicate the approximate amount of available funds.
(b)
An Applicant must submit a completed Application to be
considered for funding. Applications containing false information and Applications
not received by the deadline will be disqualified. Disqualified Applicants
are notified in writing. All Applications must be received by the Department
by 5:00 p.m. on the date identified in the NOFA, and Application guidelines,
regardless of method of delivery.
(c)
Applications received by the Department in response to
an Application Cycle NOFA will be handled in the following manner:
(1)
The Department will accept Applications until the Application
deadline date on the NOFA. All Applications must be received during business
hours (8:00 a.m. to 5:00 p.m.) on any business day. The Department may limit
the eligibility of Applications in the NOFA, and application guidelines.
(2)
Each Application will be assigned a "received date" based
on the date and time it is physically received by the Department. Then each
Application will be evaluated against the criteria outlined in this rule.
(3)
The Department will ensure that the Application is reviewed
for all materials required under the NOFA, and Application guidelines. Applications
must comply with all applicable Texas Bootstrap Loan Program and Housing Trust
Fund requirements or regulations established in these rules. Applications
that do not comply with such requirements are disqualified. Disqualified Applicants
are notified in writing.
(4)
Administrative Deficiencies. If an Application contains
deficiencies which, in the determination of the Department staff, require
clarification or correction of information submitted at the time of the application,
the Department staff may request clarification or correction of such Administrative
Deficiencies including both threshold and/or scoring documentation. The Department
staff may request clarification or correction in a deficiency notice in the
form of a facsimile and a telephone call to the Applicant advising that such
a request has been transmitted. An Applicant may not change or supplement
an Application in any manner after the filing deadline, except in response
to a direct request from the Department. Applicants must submit the requested
information to the Department within five business days.
(5)
Applicants will be notified of their score in writing no
later than seven calendar days after all applications have been scored. If
sufficient applications are not received in the set-aside area, any remaining
funds will be redirected to the balance of the state. Applicants may also
receive a partial recommendation for funding. A minimum award amount may be
established to ensure feasibility.
(6)
Upon completion of the applicable final review and scoring,
Applications will be ranked based on set-aside or balance of state and presented
to the Executive Awards Review and Advisory Committee (the Committee). The
Committee will then recommend to the Board awards of funds to specific Applicants.
(7)
The Department may decline to fund any Application if the
proposed activities do not, in the Department's sole determination, represent
a prudent use of the Department's funds. The Department is not obligated to
proceed with any action pertaining to any Applications which are received,
and may decide it is in the Department's best interest to refrain from pursuing
any selection process.
(8)
Subsequently, recommendations for funding will be made
available on the Department's website at least seven calendar days prior to
the Board meeting at which the awards may be approved.
(9)
Applicants may appeal staff's decision regarding their
applications in accordance with § 1.7 of this title.
(10)
In the event of a tie between two or more Applicants,
the Department reserves the right to determine which Application will receive
a recommendation for funding. This decision will be based on housing need
factors and feasibility of the proposed project identified in the Application.
Tied Applicants may also receive a partial recommendation for funding.
(d)
An Application received from an Applicant with Co-Applicants
will be scored accordingly:
(1)
Each Applicant and Co-Applicant from an organization must
meet the General Threshold Criteria as outlined in §2.10 of this chapter
and Selection Criteria outlined in §2.11 of this chapter. Each Applicant
and Co-Applicant must achieve a minimum threshold score of 70 points based
on the Department's review in order to be considered eligible to receive a
funding recommendation. If an Applicant and/or Co-Applicant does not achieve
the minimum threshold score that particular Applicant and/or Co-Applicant
will be disqualified.
(2)
The number of houses each Applicant and/or Co-Applicant
plans to build or rehabilitate will be determined by Department Staff based
on the data provided by the Applicant and Co-Applicant.
(3)
The score determined for each Applicant and Co-Applicant
will apply as a score to each house the Applicant and Co-Applicant plans to
build or rehabilitate.
(4)
The final score applied to the application will be the
average of all scores weighted by the number of houses per Applicant and Co-Applicant.
(e)
Alternative Dispute Resolution Policy. In accordance with §2306.082,
Texas Government Code, it is the Department's policy to encourage the use
of appropriate alternative dispute resolution procedures ("ADR") under the
Governmental Dispute Resolution Act, §2009, and Texas Government Code,
to assist in resolving disputes under the Department's jurisdiction. As described
in Chapter 154, Civil Practices and Remedies Code, ADR procedures include
mediation. Except as prohibited by the Department's ex parte communications
policy, the Department encourages informal communications between Department
staff and applicants, and other interested persons, to exchange information
and informally resolve disputes. The Department also has administrative appeals
processes to fairly and expeditiously resolve disputes. If at anytime an applicant
or other person would like to engage the Department in an ADR procedure, the
person may send a proposal to the Department's Dispute Resolution Coordinator.
For additional information on the Department's ADR Policy, see the Department's
General Administrative Rule on ADR at 10 Texas Administrative Code §1.17.
§2.10.General Threshold Criteria.
At a minimum, the following criteria must be satisfied in the Application
for the Texas Bootstrap Loan Program fund. The applicable criteria are further
delineated in the Application guidelines and NOFA, which are part of the application
package.
(1)
Needs Assessment-Applicant must demonstrate whether the
proposed project meets the demographic, economic and special need characteristics
of the population residing in an underserved area (colonia or Economically
Distressed County as defined within the NOFA or application).
(2)
Operational Capability and Experience of Applicant-Whether
the Applicant has the capacity to administer and manage the proposed program/project,
demonstrated through previous experience either by the Applicant, cooperating
entity or key staff (including other contracted service providers), in program
management, managing self-help housing, volunteer labor projects involving
acquisition, rehabilitation, reconstruction, new construction, home buyer
education classes, real estate finance counseling and training or other activities
relevant to the proposed program.
(3)
Financial Design. Applications for funding will be reviewed
for written evidence of the capacity to maintain financial systems, including
the responsibility of accounting staff. The Application must adequately describe
the lead Applicants and co-Applicants financial standing for the last three
years. The review will be based on the supporting financial data provided
by Applicants and third party reports such as financial statements and audits
submitted with the Application. Submission of "Independent Auditor’s
Report" dated within 12 months of application deadline date expressing an
unqualified opinion. Report must show evidence of Applicant’s capacity
to maintain an effective financial system, and the extent to which Applicant
has the capability to manage financial resources, as evidenced by previous
experience, documentation of the Applicant or key staff, and existing financial
control procedures.
(4)
Leveraging of public and/or private resources. Does the
applicant and/or co-applicant have private-sector support for the project
from community and/or neighborhood organizations, local businesses and commercial
lenders or private individuals as well as units of local government.
(5)
Program Design. Applications for funding will be reviewed
for written evidence of how the Owner-Builders will meet the 60% sweat equity
requirement. Applicant must describe in detail how the program guidelines
will be used to identify and prioritize families earning less than $17,500.
In addition Applicants must provide specific development plans, program schedules
and performance benchmarks that will enable them to build units within a 24
month contract.
§2.11.Selection Criteria for Texas Bootstrap Loan Program.
(a)
Maximum points available is 100. Applications must achieve
a minimum threshold score of 70 points based on the Department’s review
in order to be considered eligible to receive a funding recommendation.
(b)
The following selection criteria point breakdown will be
utilized when scoring Applications:
(1)
Previous Award, Past Performance and First Time Applicants.
(Maximum Points: 10) Applicants will receive 10 points for having received
an award from the Bootstrap Program and performed in accordance with their
contracts and Department rules. If performance benchmarks as outlined in contract
have not been met or funds have been deobligated or if Applicant has been
found in noncompliance on any prior award described in §2.12 of this
chapter, a score of zero points will result. Unsatisfactory past performance
on any contract will be forgiven for funding purposes if three years from
the Application deadline date has elapsed and the Department, in its sole
discretion, is satisfied that the conditions of such performance have been
rectified. In an effort to encourage participation in the Texas Bootstrap
Loan Program, first time Applicants will be awarded 10 points if the Applicant
demonstrates at least three years of experience by providing details of previous
projects and/or resumes of persons involved in self-help housing construction
projects. Projects and resumes will be reviewed and verified by the Department
staff.
(2)
Letters of support. (Maximum Points: 10) Points will be
awarded based on a review of the letters (up to five letters; 2 points per
letter up to a maximum of 10 points.) submitted from community and/or neighborhood
organizations, local businesses and commercial lenders or private individuals
as well as units of local government who indicate support to the Texas Bootstrap
Loan Program project. To be considered for scoring, the letters must include
the company’s name, contact person (full name), address, city, state,
and zip code; signed and dated within twelve months of the application deadline.
(3)
Readiness to Proceed. (Maximum Points: 10) Points will
be awarded based on a review of the commitment letters provided to Owner-Builders
interested in participating in the Texas Bootstrap Loan Program. To be considered
for scoring, the letters must be on applicant’s letterhead, including:
Owner-Builder’s name, address, city, state, zip code and phone number.
Letters must be signed by both Owner-Builder and nonprofit organization and
dated within twelve months of application deadline. 2 point per letter for
a maximum of 10 points.
(4)
Level of Homebuyer Counseling for Homebuyer Assistance.
(Maximum Points: 4) Points will be awarded based on a review of the documentation
submitted describing the level of homebuyer counseling proposed for potential
homebuyers. Maximum of 4 points.
(A)
Copy of curriculum meeting Department requirements as described
in Application, 2 points; and
(B)
Post purchase counseling to be provided, 2 points.
(5)
Lien Position. (Maximum Points: 10) To encourage participation,
the Department may subordinate its lien position if the leveraged loan is
greater or equal than the Department’s loan. However, liens related
to other subsidized funds provided in the form of grants and nonamortizing
loans, such as deferred payment or forgivable loan, must be subordinated to
the Department’s loan. If the Department is in a first lien or in a
parity lien position based on this standard, the Applicant will be awarded
10 points. If the Department subordinates its lien and the leveraged loan
is greater than the Department’s loan, the Applicant will be awarded
5 points.
(6)
Operational Capability and Experience. (Maximum Points:
10) Points will be awarded based on the number of years of experience the
Applicant demonstrates in managing self-help housing and volunteer labor projects,
construction, real estate financing, counseling and other relevant activities.
For each year of experience in managing self-help housing projects Applicant
will be awarded 2 points (maximum of 10 points). Must demonstrate years of
experience by providing details of previous projects and/or resumes of persons
involved in the self-help project must be submitted with the Application.
Project and resumes will be reviewed and verified by the Department staff.
(7)
Program Design. (Maximum Points: 46) Points will be awarded
based on the comprehensive and thorough program design. Points are awarded
only to the extent the design is well planned and a sound proposal is submitted:
(A)
Describe in detail by identifying what construction activities
will be done by the Owner-Builder to meet the 60% sweat equity construction
requirement will be met; (20 points)
(B)
Provide the program guidelines that will be used select
the Owner-Builders (8 points
(C)
Describe how families earning less that $17,500 will be
identified and prioritized (8 points)
(D)
Describe the specific development plans, program/construction
schedule and performance benchmarks that will enable the Applicant to select
and qualify Owner-Builders and build or rehabilitate houses within a 24 month
contract; (10 points)
§2.12.Program Administration.
(a)
Agreement. Upon approval by the Board, Applicants receiving
Texas Bootstrap Loan Program funds shall enter into, execute, and deliver
to the Department all written agreements between the Department and Applicant.
(b)
Amendments. The Department, acting by and through its Executive
Director or his/her designee, may authorize, execute, and deliver modifications
and/or amendments to any Program written agreement provided that:
(1)
in the case of a modification or amendment to the dollar
amount of the award, such modification or amendment does not increase the
dollar amount by more than 25% of the original award or $50,000, whichever
is greater; and
(2)
in the case of all other modifications or amendments, such
modification or amendment does not, in the estimation of the Executive Director,
significantly decrease the benefits to be received by the Department as a
result of the award.
(3)
Modifications and/or amendments that increase the dollar
amount by more than 25% of the original award or $50,000, whichever is greater;
or significantly decrease the benefits to be received by the Department, in
the estimation of the Executive Director, will be presented to the Board for
consideration.
(c)
Sanctions/Deobligation. The Department in accordance with
its Administrative Rules may apply appropriate graduated sanctions leading
up to, but not limited to deobligation of funds and future debarment from
participation in the program in the following situations:
(1)
Technical Assistance Provider has any unresolved compliance
issues on existing or prior contracts with the Department;
(2)
Technical Assistance Provider fails to set-up programs/projects
or expend funds as outlined in the program Contract;
(3)
Technical Assistance Provider defaults on any agreement
by and between Technical Assistance Provider and the Department;
(4)
Technical Assistance Provider misrepresents any facts to
the Department during the Program application process, award of contracts,
or administration of any Department contract;
(5)
Technical Assistance Provider demonstrates the inability
to provide adequate financial support to administer the Program contract or
withdrawal of significant financial support;
(6)
Technical Assistance Provider fails to build or rehabilitate
the number of houses under the contract.
(7)
The Department may use all applicable contract provisions
and/or any relevant rules to assure compliance with these rules or contract
terms.
(d)
Waiver. The Board, in its discretion and within the limits
of federal and state law, may waive any one or more of these Rules if the
Board finds that waiver is appropriate to fulfill the purposes or policies
of Chapter 2306, of the Texas Government Code, or for good cause, as determined
by the Board.
(e)
Additional Funds. In the event the Department has additional
funds in the same funding cycle, the Department, with Board approval, may
elect to distribute funds to other Applicants.
(f)
The Department may terminate a contract in whole or in
part. If Technical Assistance Provider has not achieved performance benchmarks
outlined in contract within six (6) months of the effective date of the contract,
the contract may be terminated. The Department will track substantial progress
during the initial six (6) month period and throughout the contract term.
Performance must be satisfactorily completed during the term of the contract
as follows:
(1)
By the end of the second quarter from the effective date
of the contract period, the Technical Assistance Provider must have submitted
for approval a minimum of 50% of the eligible Owner-Builder applicants to
the Department.
(2)
By the end of the third quarter from the effective date
of the contract period, the Technical Assistance Provider must have submitted
for approval 100% of all eligible Owner-Builder applicants to the Department.
(3)
By the end of the fourth quarter from the effective date
of the contract period, the Technical Assistance Provider must ensure that
50% of the approved Owner-Builder applicants have completed all of the Department's
loan closing documents as applicable and started construction on their home.
(4)
By the end of the fifth quarter from the effective date
of the contract period the Technical Assistance Provider must ensure that
100% of the approved Owner-Builder applicants have completed all of the Department's
loan closing documents as applicable and have started construction on their
home.
(5)
By the end of the sixth quarter from the effective date
of the contract period, Technical Assistance Provider must ensure that 50%
of houses awarded under the contract are completed and meet all applicable
codes and standards.
(6)
By the end of the seventh quarter from the effective date
of the contract period, Technical Assistance Provider must ensure that 100%
of houses awarded under the contract are completed and meet all applicable
codes and standards.
(7)
The eighth quarter is reserved to complete and fund the
remaining houses, project close-out and the Department monitoring functions.
(8)
Loan closing will take place at a title company and the
funds will be disbursed upon receipt of proper documentation from the title
company selected by the Technical Assistance Provider or the Department. All
other draws will be disbursed as described in the Program Documents.
(9)
Quarterly reports are due by the Technical Assistance Provider
to the Department on the 20th of the month following the end of each calendar
quarter. All funding will be suspended until reports are received.
(g)
Lower percentages may be allowed as approved by the Department
due to an extenuating circumstance. An extenuating circumstance is an event
or set of incidents beyond the control of the Technical Assistance Provider
as determined by the Department.
(h)
Roles and responsibilities for administering the program
contract. Technical Assistance Provider's (TAP) are required to:
(1)
Qualify potential Owner-Builders for loans;
(2)
Provide Owner-Builder homeownership education classes;
(3)
Assist Owner-Builders in building and/or rehabilitate housing;
(4)
Facilitate loans made or purchased by the Department under
the Program; and
(5)
Implement and administer the Program on behalf of the Department
(i)
Loan Origination/Loan Servicing. A Technical Assistance
Provider who receives an award or a reservation of funds may request to enter
into a Loan Origination and/or Loan Servicing Agreement with the Department.
The Department may grant the request upon reviewing the Technical Assistance
Provider's capacity to implement those specific functions.
(j)
First Year Consultation Agreement. The Technical Assistance
Provider agrees that if notified by the Department that Owner-Builder (Mortgagee)
has failed to make a scheduled payment due under the Program Loan, or other
payments due under the Program Loan documents issued under the Contract, within
the first twelve (12) months of funding, the Technical Assistance Provider
will be required to meet with the Owner-Builder and provide counseling and
assistance until the payments are made current. After consultation and in
the event that the Department and Technical Assistance Provider are not able
to reach a consensus about Technical Assistance Provider's effort to bring
the Program Loan current as required under this chapter, the Department in
accordance with its Administrative Rules may apply appropriate graduated sanctions
leading up to, but not limited to deobligation of funds and future debarment
from participation in the program.
(k)
Conflict of Interest. The Technical Assistance Provider
shall ensure that no employee, officer, or agent of Technical Assistance Provider
shall participate in the selection, or in the award or administration of a
subcontract supported by funds provided under this program if a conflict of
interest, real or apparent, would be involved. Such conflict of interest would
arise when: the employee, officer, or agent; any member of his or her immediate
family; his or her partner; or, any organization which employs, or is about
to employ any of the above; has a financial or other interest in the firm
or person selected to perform the subcontract. The Technical Assistance Provider
may not accept an application from any of its officers or employees nor any
spouse or person related within the third degree of affinity (marriage) or
consanguinity (blood) to any officer or employee of the Technical Assistance
Provider.
(l)
Administrative Fee. The Technical Assistance Provider may
request 50% of their administrative fee when 100% of all applicants have been
approved by the Department. The remaining 50% may be requested on a unit basis
when each home is 100% completed and funded.
(m)
Blueprints. If Technical Assistance Provider's activity
is interim or residential construction, Technical Assistance Provider must
provide an original copy of the proposed blue prints to be approved by the
Department prior to accepting applications. Blue Prints must include the required
construction requirements pursuant to §2306.514 of the Texas Government
Code.
(n)
Work Write-up. The Technical Assistance Provider must establish
written rehabilitation standards to apply to all rehabilitation projects.
At a minimum, these standards must ensure that the home will meet CHS or HQS.
Work write-ups must be reviewed and approved by the Department, before rehabilitation
is started. The Technical Assistance Provider must also adopt a set of general
specifications that provide detailed guidance to Owner-Builders and contractors
on how to complete specific items in a work write-up.
(o)
Loan program requirements. The Department may purchase
or originate loans that conform to the lending parameters and the specific
loan Program requirements as follows:
(1)
Maximum Loan amount not to exceed $30,000. If it is not
possible for the Owner-Builder to purchase necessary real property and build
adequate housing for $30,000, the Technical Assistance Provider must obtain
additional funding from one or more local governmental entities, nonprofit
organization, or private lender;
(2)
Minimum Loan amount is $1,000;
(3)
The total amount of all repayable loans under the Program
may not exceed $60,000 (repayable amortized loans);
(4)
May not exceed a term of 30 years;
(5)
Minimum loan term of 5 years;
(6)
0% non-interest loans;
(7)
The Department may subordinate to a lien that secures the
amount above $30,000 when necessary as further described in §2.15(3)
of this chapter;
(8)
When refinancing a contract for deed, the Department will
not disburse any portion of the Department's loan until the Owner-Builder
receives a deed to the property;
(9)
Owner-builder(s) must have resided in this State for the
preceding six months prior to the date of application;
(10)
Total Debt-to-Income Ratio: Maximum of 45% (unless otherwise
dictated by the mortgage insurer, if any);
(11)
Liabilities: The Owner-Builder applicant's liabilities
include all revolving charge accounts, real estate loans, alimony, child support,
installment loans, and all other debts of a continuing nature with more than
10 monthly payments remaining. Debts for which the Owner-Builder applicant
is a co-signer will be included in the total monthly obligations unless the
other party to the note provides evidence in the form of 12 months' canceled
checks or bank statements showing that the Owner-Builder applicant has not
been making payments on the co-signed loans. There may be no late payments
within the past 12 months or the debt will be included. Payments on installment
debts which are paid off prior to funding are not included for qualification
purposes. Payments on revolving debt will be included in debt ratio calculation,
even if the Owner-Builder applicant intends to pay off the accounts, since
the Owner-Builder applicant can reuse those credit sources. Any bankruptcy
must have been discharged. If an Owner-Builder has had a foreclosure within
the past 24 months they may not be eligible to participate in the program.
(12)
Must be a detached single-family residence or property
located within the State of Texas. Manufactured homes are not eligible. All
property taxes must be current prior to closing.
(13)
The residence must be occupied as the principal residence
of the Owner-Builder within thirty (30) days of the later of the end of the
construction period or the closing of the loan. Any additional habitable structures
must be removed from the property prior to closing.
(14)
Escrow Account--Besides the loan payments, other costs
associated with being a homeowner include real estate taxes, hazard insurance
and flood insurance premiums, and related costs such as street or water assessments.
The Department has an interest in making certain that these costs are paid
in order to protect the property from tax sale or foreclosure, and to make
certain that funds will be available to repair the property should it be damaged.
The Owner-Builders will be required to deposit monthly funds to an escrow
account with the 1st lien holder in order to pay the taxes and insurance statements.
This will ensure that funds are available to pay for the cost of real estate
taxes, insurance premiums, and other assessments when they come due. These
funds are included in the Owner-Builders monthly payment to the Department.
If the Department is in a 1st lien position the Department will establish
and administer the escrow accounts in accordance with the Real Estate Settlement
and Procedures Act of 1974 (RESPA).
(15)
Non-Purchasing Spouse--An Owner-Builder applicant's spouse
who does not apply for the loan will be required to execute the deed of trust
as a "non-purchasing" spouse and will not be required to execute the note.
For credit underwriting purposes, the Owner-Builder applicant's spouse will
be qualified using obligations for which the Owner-Builder applicant's spouse
is personally or jointly liable. Only the income of the Owner-Builder applicant
spouse will be counted. For program eligibility purposes, the income of a
non-applicant spouse must be included in the calculation of family income.
Tax Returns, W2's and recent pay check stubs, or Verification of Employment
must be submitted to document family income.
(p)
The Department, acting by and through its Executive Director
or his/her designee, may authorize, execute, and deliver modifications and/or
amendments to any Texas Bootstrap Loan Program proposal or written agreement
provided that:
(1)
In the case of a modification or amendment to the dollar
amount of the request or award, such modification or amendment does not increase
the dollar amount by more than 25% of the original request or award, or $50,000,
whichever is greater;
(2)
In the case of all other modifications or amendments, such
modification or amendment does not, in the estimation of the Executive Director,
significantly decrease the benefits to be received by the Department as a
result of the award; and
(3)
Modifications and/or amendments that increase the dollar
amount by more than 25% of the original award or $50,000, whichever is greater;
or significantly decrease the benefits to be received by the Department, in
the estimation of the Executive Director, will be presented to the Board for
approval.
§2.15.Leveraged Loans.
When additional loans are utilized in addition the loan under this
program, lenders are expected to charge reasonable and customary interest
rates and fees. The Technical Assistance Provider may be able to help the
applicant negotiate favorable terms.
(1)
The leverage loan interest rate may be no more than 3.5%
above the FHA rate at the time of closing. Also, the lender may not include
"points" to buy down or pre-pay the interest.
(2)
Loan fees must be minimized and all fees must be reasonable.
"Underwriting fees" and similar add-ons are not permitted. The total fees
paid to the lender may not exceed 3.5% of the lender's loan. (This limitation
on the lender applies regardless of whether the buyer or seller pays the fees.)
In general, the Technical Assistance Provider must assure loan fees are minimized.
The 3.5% is a maximum, not a baseline.
(3)
The Department may accept a parity or subordinate lien
position if the leveraged loan is greater or equal than the Department's loan.
However liens related to other subsidized funds provided in the form of grants
and nonamortizing loans, such as deferred payment or forgivable loans, must
be subordinated to the Department's loan.
§2.16.Property guidelines and related issues.
(a)
At a minimum, properties located in a colonia financed
by the Department must meet Colonia Housing Standards ("CHS") only if no additional
financing options are available. Properties located in all other areas must
meet at a minimum Section 8 Housing Quality Standards (HQS). The applicable
"HQS" or "CHS" Inspection report must be completed for each subject property
where Housing Trust Funds are being utilized for Interim or Residential construction.
(b)
If the Technical Assistance Provider is utilizing program
funds to construct the home they must conform to §2306.514 of the Texas
Government Code.
(c)
If the property is located within an incorporated area
where certain building codes must be met a certificate of occupancy must be
submitted to the Department upon completion of construction. If the property
is located outside of an incorporated area, an inspection by a certified third
party licensed inspector must be completed and submitted to the Department
upon completion of construction. In both instances any deficiencies noted
on the certificate of occupancy or the third party inspector's report must
be corrected prior closing.
(d)
Appraisals will be required by the Department on each loan
prior to funding.
(e)
Surveys are required. Lot and final surveys will be required
to be submitted.
(f)
Insurance requirements:
(1)
Title Insurance. The title insurance must be written by
a title insurer licensed to do business in the jurisdiction where the mortgaged
property is located.
(A)
Title Commitment. A copy of the preliminary title report
including complete legal description, and copies of covenants, conditions
and restrictions, easements, and any supplements thereto is required. The
preliminary title report should not be more than ninety (90) days old at the
time the submission package (Submission or Funding Package) is sent to the
Department.
(B)
Mortgagee's Policy. The Department requires a Mortgagee's
policy of title insurance in the amount of the loan. Loss Payee named shall
be: "Texas Department of Housing and Community Affairs." Required endorsements
include-T-36 Environmental Endorsement for all loans made by the Department.
(2)
Property Insurance.
(A)
Builder's Risk is required where construction of the residence
is being financed by the Department. At the end of the construction period,
the binder must be endorsed to remove the "pending disbursements" clause.
(B)
Hazard Insurance. The Department requires property insurance
for protection against loss or damage from the following perils: fire, windstorm,
hail, explosion, riot, and civil commotion, damage by aircraft, vehicles or
smoke. Homeowner's policies or package policies that provide property and
liability coverage are acceptable. All risk policies are acceptable. The amount
of hazard insurance coverage at the time the loan is funded must be no less
than 100% of the current insurable value of improvements. The Department will
require that the premium for a 12 month homeowner's policy be collected at
closing and name the Department as mortgagee.
(C)
Flood insurance is required for all structures located
in special flood hazard areas where the U.S. Federal Emergency Management
Agency (FEMA) has mandated flood insurance coverage. The Department will require
a life of loan flood certification on all loans. The Department is not originating
the loan, but rather purchasing the loan. The flood certification must be
part of the Submission or Funding Package and must be transferred to the Department.
Flood insurance is not required if the Technical Assistance Provider or Owner-Builder
applicant obtains a Letter of Map Amendment from FEMA stating that the area
is no longer classified as a special flood hazard area. The letter must include
a map illustrating the amended flood hazard area. An Owner-Builder applicant
may elect to obtain flood insurance even though flood insurance is not required.
However, the Owner-Builder applicant may not be coerced into obtaining flood
insurance unless it is required in accordance with this section. Evidence
of insurance must be obtained prior to loan funding. Insurance premiums for
at least 12 months must be paid in advance. The Department must be named as
loss payee or the policy must be endorsed to the Department.
This agency hereby certifies that the adoption
has been reviewed by legal counsel and found to be a valid exercise of the
agency's legal authority.
Filed with the Office of
the Secretary of State on February 21, 2007.
TRD-200700690
Michael Gerber
Executive Director
Texas Department of Housing and Community Affairs
Effective date: March 13, 2007
Proposal publication date: October 27, 2006
For further information, please call: (512) 475-4959