6-Attachment D - Policy.docx

Attachment D

Subordinate Shared Appreciation Loan Program Policy Olene Walker Housing Loan Fund

Table of Contents

Definitions

Agency - The Department of Workforce Services Housing and Community Development Division Area Median Income (AMI) - AMI is determined by HUD in accordance with 24 CFR Part 5.609, and is based on the Borrower’s Income and the County based zip code in which the Qualifying Residential Unit is located Applicant - An entity that applies to the Subordinate Shared Appreciation Loan program

Borrower - The individual(s) listed on the mortgage statement(s) and County Primary Residential Real Property tax records for the Qualified Residential Unit. Individual(s) must hold a vested legal or equitable ownership interest in the Qualifying Residential Unit for both the Qualifying Loan and Subordinate Loan

Home Equity Amount - as defined by 63H-8-501

Household Income - The total annual income of all members of the Household per HUD’s definition of “annual income” provided in 24 CFR § 5.609.

First-Time Homebuyer Program (FTHB) - Administered by UHC, in accordance with 63H-8-502

Letter of Intent (LOI) - A preliminary, non-binding agreement that outlines the key terms of a potential transaction

Letter of Commitment (LOC) - A formal, binding agreement that outlines a party’s intent to provide resources or fulfill obligations for a specific Project or purpose

Primary Residence - The Borrower(s) occupying the Qualifying Residential Unit as their Primary Residence (defined as more than 183 days per calendar year) throughout the term of the Subordinate Loan.

Project - A Qualifying Residential Unit or condominium construction development for the intended use of Program funds

Real Property - A Qualifying Residential Unit that qualifies for the State of Utah residential property tax exemption

Shared Appreciation - A proportionate share of the Qualifying Residential Unit’s increase in Home Equity Amount from the date of purchase to the date of sale or refinance

Subordinate Shared Appreciation Loan (Subordinate Loan) - A loan that is provided or purchased by a Qualifying Applicant

Qualifying Applicant - A non-profit entity, according to 501(c)(3) of the Internal Revenue Service, or a partnership of non-profit entities that provides or purchases Subordinate Loan(s)

Qualifying Borrower - An entity, in partnership with a Qualifying Applicant, that utilizes a Subordinate Loan for purchasing construction liability insurance for a condominium Project, as established by UHC in accordance with Section 63H-8-502

Qualifying Mortgage Loan (Qualifying Loan) - A mortgage loan that is originated, purchased, or serviced by a private financial institution or sold to a government-sponsored enterprise, if:

a. The Qualifying Loan conforms to the Borrower’s income, property eligibility, and credit standards;

b. The Qualifying Loan is secured by a recorded deed of trust or other instrument securing a mortgage loan and constituting a lien on Real Property in the county in which the Qualifying Residential Unit is located; and

c. The Qualifying Loan is an amortizing first-mortgage loan

Qualifying Residential Unit - As defined in 63H-8-501

Rural - As defined by 35A-8-501

Threshold Documents - Documents required to be considered a Qualifying Applicant.

Utah Housing Corporation (UHC) - As authorized in 63H-8-101

Policy Effective Date: 07/01/2025 Purpose In the 2025 General Session, the Legislature created the Subordinate Shared Appreciation Loan program (35A-8-504.6) in SB 262. This Program is intended for Borrowers and Qualified Applicants to share in the appreciation in the Home Equity Amount of a Qualifying Residential Unit through utilization of a Subordinate Loan. This Program may also be used for the purpose of assisting Qualifying Borrowers in the purchase of construction liability insurance for a condominium Project, as established by UHC in accordance with 63H-8-502.

Eligibility Criteria Subordinate Loan In order to be considered a Subordinate Loan, it must be a loan that:

a. Is secured by Real Property, occupied as a Primary Residence, where the Borrower agrees to repay the principal balance borrowed plus a proportionate share of the home price appreciation during the term of the Subordinate Loan;

b. Has flexible repayment terms in accordance with applicable state and federal laws;

c. Is non-interest bearing and has no set monthly payment obligation;

d. Does not impose a Shared Appreciation repayment percentage obligation that exceeds the percentage of the home value represented by the amount borrowed at origination;

e. Does not have a combined loan-to-value ratio that exceeds 105%;

f. Does not impose a prepayment fee or penalty;

g. Is subordinate to a first mortgage Qualifying Loan; or

h. Includes a loan to a Qualifying Borrower.

Qualifying Applicant In order to considered a Qualifying Applicant, an organization must:

· Complete an Application;

· Be a non-profit organization or a partnership of non-profit organizations;

· Offer Subordinate Loans that meet the eligibility requirements for Borrowers or Qualified Borrowers; and

· Obtained an LOI or LOC with an entity that is eligible to issue Qualifying Loans or Subordinate Loans.

Borrowers In order to qualify for a Subordinate Loan, the Borrower must:

· Be approved for a Qualifying Loan at the terms set by the primary mortgage lender;

· Hold a vested legal or equitable interest in the Qualifying Residential Unit secured by both the Qualifying Loan and Subordinate Loan.

· Income limit: annual Borrower’s Household Income limit is equal to or less than 140% AMI established under §26 U.S. Code 143(f).

Qualifying Borrowers In order to be considered a Qualifying Borrower, the entity must:

· Provide an LOI or LOC in partnership with a Qualifying Applicant towards utilizing a Subordinate Loan for purchasing construction liability insurance for a condominium Project in accordance with Section 63H-8-502.

Eligible Program Uses Program funds shall only be used for:

· Subordinate Loan, subordinate to a Qualifying Loan, secured by a Qualifying Residential Unit;

· In conjunction with matching private funding that is no less than a 75% private funds and 25% Program funds split;

· Purposes described in Section 63H-8-502, including assisting the Qualifying Borrower in the purchase of construction liability insurance for a condominium Project.

Occupancy Requirements The Borrower(s) shall occupy the Qualifying Residential Unit as their Primary Residence.

a. The Borrower(s) may be absent for up to twelve (12) months for the following circumstances:

i. Serious health conditions of the Borrower(s), the spouse, child, or parent of the Borrower(s);

ii. Divorce of the Borrower;

iii. The Borrower(s) or Borrower’s child is the victim of Domestic Violence; or

iv. Military service requiring relocation.

Maximum Subordinate Loan Award Subordinate Loan amount shall not exceed $150,000 and is limited to one per Qualifying Residential Unit at a time.

Repayment Repayment of the Subordinate Loan to the Qualifying Applicant shall occur in the following circumstances:

a. If a Subordinate Loan on the Qualifying Residential Unit is refinanced or sold, Program funds, including associated fees, used to secure the Subordinate Loan;

b. The Borrower(s) no longer occupy the Qualifying Residential Unit as their Primary Residence; or

c. Monies received by the Qualifying Borrower as a result of an incomplete Project in which the Subordinate Loan was utilized for construction liability insurance for a condominium Project.

Additional Considerations The Agency may, in cooperation with the UHC, promote the Program to Qualifying Applicants to support the FTHB.

Reporting Requirements Agency shall include in the annual report, required by 35A-1-109, the following information:

a. Number of Subordinate Loans approved under the Program;

b. Total dollar amount of Program funds used for approved Subordinate Loans as well as total dollar amount of matching private funds utilized with Subordinate Loans;

c. Total dollar amount of funds reinvested into the Program;

d. Total dollar amount of paid off Subordinate Loans and, if applicable, default of active Subordinate Loans; and

e. Approximate dollar value of the total number of Subordinate Loans provided under the Program based upon the current home price index.

Scoring Threshold categories to determine an eligible Qualifying Applicant include, is the Applicant:

a. Is a non-profit or partnership of non-profit entities;

b. Licensed to conduct business in Utah;

c. Secured an LOI or LOC for matching 3:1 ratio of private funds to Program funds; and

d. Provides or purchases loans that meet the requirements for a Subordinate Loan.

Scoring for Qualifying Applicants is based on the following criteria:

a. Commitment to promote the FTHB program in conjunction with this Program;

b. Experience;

c. Whether the Qualifying Residential Unit or Project is to be located in Rural Utah.

If two or more Qualifying Applicants receive the same score in an Application cycle, as defined by UCA 17-50-501, priority may be given in the following order:

1. Qualifying Residential Unit or Project is located in a County of the sixth class;

2. Qualifying Residential Unit or Project is located in a County of the fifth class;

3. Qualifying Residential Unit or Project is located in a County of the fourth class;

4. Qualifying Residential Unit or Project is located in a County of the third class;

5. Qualifying Residential Unit or Project is located in a County of the second class;

6. Qualifying Residential Unit or Project is located in a County of the first class.

For Borrower(s):

If, after these criteria, two or more Qualifying Applicants receive the same score and priority in an Application cycle, further priority may be determined by the following criteria for the use or Program funds for Qualifying Residential Unit bedroom size:

1. Four (4) bedroom;

2. Three (3) bedroom;

3. Two (2) bedroom;

4. One (1) bedroom;

5. Studio.

For Qualifying Borrower(s):

If, after these criteria, two or more Qualifying Applicants receive the same score and priority in an Application cycle, further priority may be determined by the following criteria for Program funds utilized for the purposes of constructing Qualifying Residential Units in a condominium project that contain the greatest number of bedroom sizes in the following order:

1. Four (4) bedroom;

2. Three (3) bedroom;

3. Two (2) bedroom;

4. One (1) bedroom;

5. Studio.

Internal Procedure Effective Date: 07/01/2025 Application Period Applications will be accepted July 1, 2025 - July 15, 2025. Applications for this Program may not be accepted after July 15, 2025.

Application Review Applications are reviewed by Agency staff in accordance with the Application Scoring checklist.

Documentation Review Agency staff shall review Applications for accuracy and completeness. Should documentation required for the Application or scoring be missing or incomplete, Agency staff will document and reach out to the Applicant, via email or phone call, no fewer than three (3) times. Additional attempts may not be made prior to three business days transpiring since the previous attempt. After at least three (3) attempts are made, and three business days have transpired from the at least third attempt, incomplete Applications will be denied.

Agency staff will review the following Threshold Documents from Applicants:

1. Non-profit or partnership of non-profit entities documentation;

2. Licensed to conduct business in Utah;

3. Secured a LOI or LOC for matching 3:1 of private funds to Program funds; and

4. Authorized to provide or purchase loans that meet the requirements for a Subordinate Loan.

If Threshold Documents do not meet Program requirements the Application will be denied.

Scoring Subordinate Loans shall be awarded to Qualifying Applicants based on scoring. If two or more Qualifying Applicants receive the same score in an Application cycle, as defined by UCA 17-50-501, priority shall be given in the following order:

1. Qualifying Residential Unit or Project is located in a County of the sixth class;

2. Qualifying Residential Unit or Project is located in a County of the fifth class;

3. Qualifying Residential Unit or Project is located in a County of the fourth class;

4. Qualifying Residential Unit or Project is located in a County of the third class;

5. Qualifying Residential Unit or Project is located in a County of the second class; then

6. Qualifying Residential Unit or Project is located in a County of the first class.

For Borrower(s):

If, after these criteria, two or more Qualifying Applicants receive the same score and priority in an Application cycle, further priority may be determined by the following criteria for the use or Program funds for Qualifying Residential Unit bedroom size:

6. Four (4) bedroom;

7. Three (3) bedroom;

8. Two (2) bedroom;

9. One (1) bedroom;

10. Studio.

For Qualifying Borrower(s):

If, after these criteria, two or more Qualifying Applicants receive the same score and priority in an Application cycle, further priority may be determined by the following criteria for Program funds utilized for the purposes of constructing Qualifying Residential Units in a condominium project that contain the greatest number of bedroom sizes in the following order:

6. Four (4) bedroom;

7. Three (3) bedroom;

8. Two (2) bedroom;

9. One (1) bedroom;

10. Studio.

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