U.S. Department of Housing and Urban Development Lease-purchase and NSP What practitioners are saying 1
Introduction Sponsored by HUD Speakers: David Cramer, TDA Donna Majors, CVC Keysha Cuyler, CVC William Brett, CHP 2
Objective e Provide NSP grantees and sub-grantees with practical knowledge to design a short-term Lease Purchase program 3
Agenda Seven crucial elements for success, a summary NSP Lease purchase example - CVC Lease purchase selection and support CVC Sponsor capacity in asset management - CHP Additional resources 4
What is lease purchase? Definition: lease & sales option Lease period length: but for less than one year 1 5 year Long term 15 yr (LIHTC) Types: buyer-driven vs. developer-driven 5
Lease-purchase and NSP Formal and informal lease purchase HOME affordability as safe harbor Homeownership/Lease-purchase vs. Rental regulations DRGR Considerations 6
Seven Tasks to Success 1 2 3 4 5 6 7 Reinvigorate marketing Have a plan Have an exit strategy Have selection criteria Have a lease option agreement with termination ability Capture all costs in a three part pro forma Have sufficient capacity property management
1 Re invigorate i marketing kti The market has changed Leading or following the market Going back to marketing basics 8
DECISION TREE 1. Best efforts at marketing, curb appeal, financing, partners 2. Reduce price, increase downpayment assistance 3. Alternate rental or Lease Purchase Rental implications Lease-purchase implications
2 Have a plan Backing into All on the same page Design = Policies and Procedures manual Coordinating variables Addressing regulatory issues Re-inventing the wheel 10
3 Eit Exit strategy t Terminating lease Non-compliance evict Alternatives ti Prevention Selection criteria Support Financial incentives 11
4 Pre determined d selection criteria i Clear written standards based on objective criteria, e.g. FICO score Balance between prudent rental criteria and current mortgage standards Relate to goals, risk tolerance, success rate 12
5 Renewable lease with set sale price Lease renewed every 6-12 months up to period of leasing Option to purchase determined from beginning Expectations: maintenance, progress Lease-purchaser guidebook URA requirements 13
6 Capture all costs in a three part financial pro forma Three phased pro forma: Development Lease period Sale Affordability and financial incentives 14
7 Sufficient capacity, ie i.e. property management Fiscal viability Homeownership counseling and other support Scattered site property management 15
BREAK FOR QUESTIONS 16
Community Ventures Corporation Experience with NSP and Lease-Purchase Donna Major, Senior Executive Vice President Keysha Cuyler, Director, Homebuyer Education and Counseling 17
Building One Business... One House... One Neighborhood... One Step At a Time
Community Ventures Corporation OUR HOUSING MISSION: To provide safe, affordable housing through New construction Rehabilitation Foreclosure prevention Quality education and counseling Pre and post purchase support
Community Ventures Corporation Neighborhood Stabilization Program (Part I): Original LP program HOME Internal CVC funding Located in one county only (Fayette-Lexington) Production 95 homes
Community Ventures Corporation Basic Structure of NSP/LP: State a critical partner in design and implementation CVC utilized its original LP design for most of the NSP LP program Set up program as a rental program using Fair Market rents Able to set aside funds for HB acquisition
Community Ventures Corporation Lease Purchase Type: Consumer selected property within prescribed criteria including shopping price, location and condition. Customer Purchase Agreement: Client submits good faith and signs purchase agreement Sales price to client included in agreement
Community Ventures Corporation Basic Structure, cont.: Lease Agreement Up to 3 years to qualify, lease is written as 1 year Basic Maintenance & maintenance reserve 100% NSP1 funds for purchase and rehab: Program income at sale returned to state; program income during lease period returned to state on annual basis; leave up to 50% on second mortgage
Community Ventures Corporation Selection of Lease Purchasers: Requirements of lease purchaser including cash, income level Selection criteria including credit How different from direct purchase
Community Ventures Corporation Support: Housing counseling prior to lease Classes (financial i fit fitness) One on One Housing counseling during lease On line Ehome (home buyer) One on One Post-purchase counseling
Community Ventures Corporation Lessons Learned: Make adj djustments if necessary Others
Thank You For Your Interest t For more information, please contact: Donna Major and Keysha Cuyler Community Ventures Corporation 1450 N. Broadway, Lexington, KY 40505 1-800-299-0267 www.communityventurescorporation.org
BREAK FOR QUESTIONS 28
Lessons learned: Asset management capacity Columbus Housing Partnership (CHP) 29
CHP s experience with lease purchase NMTC single-family scattered Near market rate downtown condos 15 year LIHTC 30
Importance of managing an asset Short term balance of managing and encouraging ownership Even with short term it s still an asset 31
Special challenges of scattered-site property management On-site management Different property managers Distance No uniform equipment, e.g. faucets, etc. 32
Tips and lessons learned Examples: Creating eyes and ears Handling lease-purchasers differently in regards to maintenance 33
BREAK FOR QUESTIONS 34
Essential tools: NSP Toolkit Policies and Procedures manual Sample lease agreement Financial pro forma - demonstration Others: see complete list 35
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