1. Participant Eligibility. Participants must be first time homebuyers, m eet certain income requirements and complete a homebuyer education class.

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1 NSP-3 Homebuyer Assistance Program Updated 2/25/2013 This program is made available through Neighborhood Stabilization Program (NSP-3) funding provided to the City of Chandler (CITY). NEWTOWN is administering the program and will provide Homebuyer Assistance to eligible first time homebuyers to purchase a primary residence within the designated NSP-3 target areas in Chandler. Assistance will be provided to twenty (20) households which will be secured with a five-year forgivable lien on the purchased property. 1. Participant Eligibility. Participants must be first time homebuyers, m eet certain income requirements and complete a homebuyer education class. a. First time homebuyer is defined according to the Federal Housing Administration (FHA). A first time homebuyer is an individual who has had no ownership in a principal residence during the three year period ending on the date of purchase of the property. This three year period excludes; (1) A single parent who has only owned a primary residence with a former spouse while married; or (2) An individual who is a displaced homemaker and has only owned a primary residence with a spouse. b. Participants' gross household income must not exceed 120% of the area median income (adjusted for household size) for the Phoenix-Mesa-Scottsdale Metropolitan Statistical Area (MSA). These figures are established by the US Department of Housing and Urban Development (HUD), and are updated on a yearly basis. 2. Property Requirements. All properties purchased using NSP-3 Home Buyer Assistance (HBA) funds must be used as the buyer's primary residence and the properties must be foreclosed or abandoned according to NSP-3 definitions: a. Foreclosed: A property is eligible if the property is at least 60 days delinquent on its mortgage and the owner has been notified; or the property owner is 90 days or more delinquent on tax payments; or under state or local law, foreclosure proceedings have been initiated or completed; or foreclosure proceedings have been completed and title has been transferred to an intermediary aggregator or servicer that is not an NSP grantee, subrecipient, developer, or end user. Page 1 of 6

2 b. Abandoned: A home is abandoned where no mortgage or tax payments have been made by the property owner for at least 90 days or a code enforcement inspection has determined that the property is not habitable and the owner has taken no corrective actions within 90 days of notification of the deficiencies. c. NEWTOWN Properties. Eligible properties may also include properties acquired by NEWTOWN through the National Community Stabilization Trust (NCST) for resale to eligible buyers. The properties must meet all other Property Requirements as stated above. Acquisition of such properties by NEWTOWN must be conditional upon satisfactory completion of environmental review under 24 CFR Part 58. The CITY will provide the environmental review of the properties. 3. Purchase Price for eligible properties must be at least 1% below the current market appraised value as established by an appraisal that meets the following requirements: a. The appraisal must have been completed within 60 days of the offer made for the property (we have advised that an initial offer can be made, subject to the completion of the appraisal within 60 days of a final offer). b. The appraisal must meet the URA definition of an appraisal (see 49 CFR 24.2(a)(3) and the five following requirements (see 49 CFR (a)(2)): (1) An adequate description of the physical characteristics of the property being appraised (and, in the case of a partial acquisition, an adequate description of the remaining property), including items identified as personal property, a statement of the known and observed encumbrances, if any, title information, location, zoning, present use, an analysis of highest and best use, and at least a 5-year sales history of the property. (2) All relevant and reliable approaches to value. If the appraiser uses more than one approach, there shall be an analysis and reconciliation of approaches to value used that is sufficient to support the appraiser's opinion of value. (3) A description of comparable sales, including a description of all relevant physical, legal, and economic factors such as parties to the transaction, source and method of financing, and verification by a party involved in the transaction. (4) A statement of the value of the real property to be acquired and, for a partial acquisition, a statement of the value of the damages and benefits, if any, to the remaining real property, where appropriate. (5) The effective date of valuation, date of appraisal, signature, and certification of the appraiser. Page 2 of 6

3 d. The appraiser shall disregard any decrease or increase in the fair market value of the real property caused by the project for which the property is to be acquired or by the likelihood that the property would be acquired for the project, other than that due to physical deterioration within the reasonable control of the owner. Homes purchased with NSP Down Payment Assistance Funds. 4. Housing Quality Standards. Properties purchased using NSP-3 HBA funds must meet Housing Quality Standards prior to the loan closing. The CITY will perform the required HQS inspection and will report all deficiencies to the buyer s realtor and NEWTOWN. All deficiencies must be corrected prior to closing. 5. Home Inspection. The Participant must order an independent inspection from a licensed residential home inspector. The applicant or the seller must pay for this inspection. A copy of the report must be provided to NEWTOWN. 6. Vacancy and Occupancy Certification. The purchase contract for properties purchased using NSP-3 HBA funds must include documentation of compliance with the vacancy and tenant protection requirements for the NSP-3Program (see Attachment A - Voluntary Acquisition of Foreclosed Property). 7. NSP-3 Target Area. All properties purchased using NSP-3 HBA funds must be within the NSP-3 service areas; Census Tracts , , and See Attachment B - Census Tract Map. 8. Mortgage Requirements. Participants must obtain a fixed-rate mortgage at the prevailing interest rate. Points and lender fees cannot exceed 6% of the loan amount. Debt ratios for Participants must not exceed 33% for housing expense and 41% for total debt to income. The housing expense ratio must be at least 24%. (1) Housing expense includes principal, interest, homeowners insurance, property taxes, homeowner association fees, and mortgage insurance. (2) Total debt to income includes the housing expense and all other debts such as credit cards, car loans, and student loans. 9. Eligible Use of Funds. Home Buyer Assistance (HBA) funds may be used for down payment, closing costs, interest rate buy-downs, principal write-downs and payment of private mortgage insurance premiums. 10. Maximum Assistance. The maximum amount of assistance per Participant is Ten Thousand Dollars ($10,000.00). Down payment assistance is capped at 50 percent of the down payment required by the participating lender. The Participant s housing expense ratio must be at least 24%. If the ratio is less than 24% then the amount of assistance must be reduced so that the housing expense ratio is at least 24%. Page 3 of 6

4 11. Terms of Assistance. Home Buyer Assistance will be provided as a zero interest, nonamortized, forgivable loan for a term of five years (5) and will be secured as a second position lien by a recorded Deed of Trust and Note naming the CITY as beneficiary. As long as the homebuyer continuously uses the home as his/her primary residence during the term of the loan, the loan will be forgiven at the end of the term and the lien will be released. a. Any refinancing that allows for cash/equity to be taken out of the property, regardless of the purpose, requires full repayment of the assistance. b. The CITY will only subordinate its second position for a favorable change in rate and/or term. c. Upon transfer of title, the assistance is due immediately in full (usually from sale proceeds). d. Upon disclosure to or discovery by the CITY that the property is no longer the primary residence of the borrower, the assistance is due in full within 30 days of notification by the CITY to the borrower; primary residence is defined as occupation of the residence by the homeowner for a minimum of ten months per calendar year. 12. Property Succession. The lien may be assumed by income-eligible heirs (<120% of area median) if using the property as a primary residence; heirs need not be first-time homebuyers or graduates of a homebuyer education class. 13. Recapture Provisions. If the original buyer sells the assisted property during the affordability period or if the housing does not continue to be the principal residence of the family for the duration of the period of affordability, then the following rules apply: a. The CITY will recapture the entire amount of NSP assistance to the buyer, subject to the amount of the net proceeds from the sale of the property per HOME affordability provisions (24 CFR (a)(5)(ii)(A)(1). Net Sales Proceeds is defined as the sales price minus loan repayment (other than NSP3 funds) and closing costs. b. Repayment of NSP-3 Home Buyer Assistance will be required to be paid to the CITY. 14. Participant Requirements. Participant must contribute the greater of $1,000 or 1% of the purchase price. a. If the first mortgage product requires more than $1,000 or 1% of the purchase price, it satisfies this requirement. b. Participant s funds may be used for down payment or closing costs. Page 4 of 6

5 c. Participant s minimum contribution must come from Participant s personal accounts, they may not be gifted. d. Participants may use other sources of assistance such as NEWTOWN's Individual Development Account (IDA) funds. 15. Income and Eligibility Certification. NEWTOWN shall verify and certify that Participants meet all income and other eligibility requirements. a. Income eligibility will be verified using W-2 statements, tax returns, Verification of Employment forms (3rd party verification) in conjunction with recent pay stubs, and Verification of Deposit forms in conjunction with recent bank statements. b. Government issued photo ID's and social security cards or birth certificates for all family members will be used to verify and document household size. 16. Purchase Contract Approval. As soon as a Participant has an accepted purchase contract a fully executed copy must be provided to NEWTOWN for review and approval. If approved NEWTOWN will provide a copy of the contract, Participant information and a worksheet that includes a detailed estimate of the transaction to the CITY. a. The CITY will then complete the HQS inspection and provide a copy of the report to NEWTOWN. b. The CITY will also provide approval of the transaction, with any contingencies. 17. Payment of Funds. NEWTOWN will provide Home Buyer Assistance funds for Participants at close of escrow; funds will be put into an escrow account. 18. Deed of Trust and Note. NEWTOWN will have the title company prepare the deed of trust and note, naming the CITY as beneficiary. 19. Outreach Activities / Targeted Marketing. NEWTOWN will provide targeted marketing to public service employee groups including, but not limited to, Veterans, nurses, teachers, public employees, police, fire, and emergency medical technicians in order to ensure individuals that serve in this capacity are aware and have the opportunity to apply for DPA assistance available under this Agreement. Much like HUD's Good Neighbor Next Door Program, the CITY seeks to encourage public servants to become homeowners in revitalization areas. Public service employee groups applying for Home Buyer assistance under this Agreement must meet all NSP eligibility requirements to be eligible to receive assistance. 20. Homebuyer Education and Counseling. All Participants must complete homebuyer education and enroll in NEWTOWN s Homebuyer Assistance Program. Minimum requirements include the following: Page 5 of 6

6 a. Participants must complete an 8-hour homebuyer education class provided by NEWTOWN within one-year of executing a purchase contract. b. Participants must complete a Homebuyer Assistance Program Application, provide all required documentation, pay a non-refundable $40 application fee, and meet with a NEWTOWN Housing Counselor to determine their eligibility and buying power. Participants must provide updates for all income and other documentation as required by NEWTOWN. c. Participants must provide their NEWTOWN Housing Counselor a copy of their Conditional Loan Approval an all related loan documents for review and approval. d. As soon as a Participant has an accepted purchase contract, a fully executed copy must be provided to the NEWTOWN Housing Counselor for review and approval. e. The NEWTOWN Housing Counselor must receive and review with Participant all closing documents prior to closing (HUD-1, etc.). NEWTOWN must receive a final HUD-1 for the transaction. 21. Counseling Fees. Participants will pay NEWTOWN a $ counseling fee through escrow at the time of closing. The counseling fee is in addition to the application fee and the IDA Admin fee (if applicable). Attachments: A. Voluntary Acquisition of Foreclosed Property B. Chandler NSP-3 Census Tract Map Page 6 of 6