SHIP Frequently Asked Questions

Income Qualification Questions

2010-02-18T07:26:00.000-08:00

Question:
An applicant has a 17 year old son who works. His income is excluded right now, but do I start counting it once he turns 18 sometime in the next 12 months?
Answer:
Yes. You correctly note that you do not count the employment income of children under the age of 18 years, as required by 24 Code of Federal Regulations (CFR) Part 5F (c)(1). Once the applicant's son turns 18, however, count the employment income for the remainder of months in the next 12 month period for which you are estimating annual household income. For example, an administrator may estimate a household's income on March 1st, 2011. The applicant's son will turn 18 in June, 2011. The administrator will not count the son's income until June, but will count his employment income from the date of his birthday until February 28th, 2012.

Question:
An applicant is separated, but not divorced. Do I count the income of the estranged spouse who is no longer living in the house as part of household income?
Answer:
Florida law does not legally recognize separation. When an applicant is married and separated, count the estranged spouse’s income as part of the annual household income. Consult with your city or county attorney to determine if the spouse should sign any SHIP recapture provisions. This is the rule that also applies to cases of temporary separation when a spouse does not live in the house due to military service, attendance in college, offshore work, or other instances where a family member is temporarily residing in another location. In some situations, it seems clear that the applicant has no plan to reunite with the estranged spouse and the separation is permanent. In such a case, the applicant is essentially divorced for purposes of SHIP income eligibility determination. The spouse’s income should not be counted as part of the annual household income, and the spouse should not be counted as a household member. The Florida Housing Finance Corporation’s compliance division has noted that local housing administrators have the discretion to determine if an applicant’s separation is permanent. In making this determination, the administrator should obtain as many details as possible to document that the SHIP recipient’s separation is permanent. In cases of permanent separation, for example, the applicant and the estranged spouse maintain separate residences and file separate tax returns. Documentation that the separation has been ongoing for a long time further strengthens the case that the separation is permanent. The Florida Housing Coalition and the compliance division at the Florida Housing Finance Corporation (call 850 488-4197) are available for consultation on this subject. In cases where a separated applicant is requesting SHIP assistance with purchasing a house, Florida’s joint property laws should be considered. Unless legally divorced, the State’s laws will likely entitle the estranged spouse to legal claim of ownership of the new house being purchased. SHIP administrators should ensure that applicants are aware of this.

Question:
An applicant's adult son is reluctant to sign an affidavit of unemployment. On the affidavit, the applicant indicates whether or not he is seeking employment. If he is looking for work, the form asks what rate of pay he anticipates he will receive with his new job. Do I have to wait until the individual gets a job before I can fully count anticipated income and determine if the household is income eligible for assistance?
Answer:
He is not required to sign an affidavit of unemployment. Administrators can use the information on the applicant's signed SHIP application to as the sole documentation that an adult living in the household is unemployed. Several local jurisdictions across the state may currently be using an "unemployed affidavit" form. This is not a requirement of the SHIP program. You should, however, check for and document all sources of income that the unemployed adult is providing to the household, including social security and unemployment compensation. In addition, if the applicant is a home buyer, you can verify the employment information provided in the SHIP application compared to the first mortgage lender's application. Administrators determine income eligibility by annualizing only sources of income that are currently verifiable. Even if an unemployed individual anticipates that he or she will soon secure a new job, it is not necessary to delay the income certification process until this occurs and can be documented. If, however, you learn that an unemployed member of the household has started a new job before the household has received SHIP assistance, you are obligated to count and verify the income from this employment.

Question:
Anticipated Gross Annual Income: Just how much do we have to anticipate?
Answer:
The SHIP program calculates anticipated income rather than past income, and there is a reason for this. It was thought to be better for the applicant not to be penalized based upon previous circumstances which may have changed significantly. Consider, for example, an applicant who is starting his/her life over after a divorce and now has only one wage-earner in the household.
How do you document an applicant’s income before it is received? Project what an applicant’s income will be over the next 12 months. Annualize current income. As far as the rule is concerned, what someone is currently earning is what they will be earning over the next 12 months. It does not matter that they received a three percent raise last April - you do not assume that they will get another raise next April. The only exception to this is if you have verification that an application's income is about to change, such as an employer verifying that the applicant will receive a $0.50 per hour raise in four weeks. In this case, you would calculate four weeks at their current rate, and 48 weeks at their new rate, and add the two numbers together. The sum is the anticipated annual income.
In some instances, the information provided by an employer on the Verification of Employment (VOE) form may seem to contradict information available from a pay stub. The stub may indicate, for example, that overtime is a regular income source, while the VOE does not include any income from overtime. Remember that pay stubs are not the proper documentation for determining an applicant's income in the next 12 months. Pay stubs are not required to be included in a SHIP applicant's files. However, when they are included in there and when they provide information about overtime that contradicts what you are reading on a VOE form, you should contact the employer and amend the VOE form with some explanation for the discrepancy in information.

Question:
How should I estimate overtime? Should I use the information I have from what is reported on the household’s income tax return?
Answer:
Do not use a tax return to obtain overtime estimates. It only provides information about past overtime earned and you need an estimate of overtime to be earned in the next 12 months. Instead, you must rely on the estimated overtime information provided to you by the employer on the Verification of Employment form. Verification forms are the primary source documentation for determining an applicant’s annual income. The questions on this verification form should ask the employer to estimate all of the earned income that the applicant is expected to receive during the next twelve months. The form should include a question specifically asking about the amount of overtime that is expected to be earned. For some jobs, it is easy for the employer to provide an estimate for future overtime, based on the applicant’s past history of receiving overtime and the employer’s knowledge of future work to be performed. In other cases, however, an employer may indicate on the verification form that it is not possible to estimate future overtime. In such a case, you may wish to call the employer, explain the importance of fully estimating the applicant’s income, and request that he or she make an informed guess about overtime earnings. If the employer is still not able to provide an estimate of overtime after this discussion, however, do not count any overtime earnings.

Question:
Do I count earned income tax credits as a source of income when determining the household's annual income?
Answer:
No. This subject is addressed in HUD Handbook 4350.3, one of the guidebooks to outline the federal regulations that govern income qualification topics for the SHIP program. Section B of the handbook lists what income sources are excluded from annual income. Item 19(i) states:"19. Income excluded by Federal statute: Any earned income tax credit to the extent it exceeds income tax liability. (26 U.S.C. 32(j))"

Question:
Do I delay the income eligibility process until the applicant learns whether or not she is hired for the new job?
Answer:
It is not necessary to delay the income eligibility process. Proceed with the collection of income verification forms and then sign an income certification form if the household is currently income eligible. You may learn that the applicant has received a higher paying job at some time before the applicant has been assisted with SHIP funds (i.e. before the applicant has signed a rehabilitation contractor's construction contract, or the applicant has closed on a loan, or before SHIP funds have been provided for some other form of assistance to the household). In such a case, you are obligated to re-verify and re-certify the applicant's income to determine if the household is still eligible for assistance.

Question:
I know that I only count the first $480.00 of earnings for each full-time student in a household who is 18 years old or older. What if the student is receiving Social Security Disability as income? Does this rule still apply or do I count the full amount of the disability benefit?
Answer:
The rule to which you are referring is outlined in 24CFR, Section 5.609(6)(4). It only directs you to count the first $480.00 of employment earnings for full time students. Social Security Disability, on the other hand, is a source of entitlement income. 24CFR notes that you must include in your income calculations "the full amount of periodic amounts received from Social Security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts" for all family members. So you must count the full amount of the Disability payment in this case.

Question:
An applicant was income certified a year and a half ago for our jurisdiction’s Purchase Assistance Program and is now applying for the Single Family Rehabilitation Program. Does the applicant have to be re-income certified?
Answer:
The SHIP monitors and Florida Housing’s compliance staff indicate that an applicant
must receive assistance within one year of the date of the Income Certification Form. Therefore, a re-certification of income will depend on the date of the Income Certification Form associated with the Purchase Assistance Program and the schedule of the rehabilitation work to be completed. It sounds like a re-certification will need to be completed.

Question:
I understand the policy for documenting child support income. Most of our applicants have initiated a file with the Child Support Enforcement Office, which provides a printout of the money it has collected for those people who have initiated files with their office. This printout often shows that no money has been collected. The Child Support Enforcement office can only provide this printout for individuals who have initiated a file with their office. For this reason, can I use this printout as the documentation that the applicant’s child support is not being received and that the applicant has made every attempt possible to collect it?
Answer:
Yes, you can use this printout. The Coalition has discussed this issue with the compliance office at the Florida Housing Finance Corporation. FHFC staff confirmed that the Child Support Enforcement Office’s printout is acceptable documentation that a file has been initiated and that child support is not being received. Briefly stated, the SHIP program requires that the full amount of court-ordered child support be counted as household income regardless of the amount being received. This is true unless you can document that the applicant has exhausted all legal means of obtaining the support. If all legal means have been exhausted, then the actual amount received is counted as income. Your question pertains to the specific documentation that you must collect to document that child support is not being collected and that all legal means of obtaining the support have been exhausted. In Florida, there are two methods available to pursue child support that is not being received–filing a contempt of court hearing or establishing a file with the office of Child Support Enforcement. Either option meets the requirement of exhausting all legal means. If an applicant is pursuing the first option, the applicant must provide the SHIP office with documentation that a contempt of court hearing has been scheduled. If the applicant is pursuing the matter through Child Support Enforcement, adequate documentation is the printout mentioned above or a letter from the Child Support Enforcement Office stating that the applicant has initiated a file. By including any of this documentation in your file, you are demonstrating that the applicant has exhausted all legal means of attempting to obtain the child support. If, after all legal means have been exhausted, the support is still not being received, it is not included as income.

Question:
Should I count non-court ordered child support as a source of income? If I do count it, what documentation would be acceptable to verify this income source? Answer:
You should count non-court ordered child support only when the household is actually receiving it regularly. Document the income source by having the provider of the child support complete a verification form for regular cash contributions. This process is in contrast to the policy for court ordered child support, which states that the full amount of court ordered child support must be included in household income whether or not it is regularly received by the household. The difference in these policies results from the court’s involvement in court ordered child support. A divorce decree is a legal document mandating the payment of child support. A household that is not receiving court ordered child support has legal recourse to force payment of the support. They can schedule a contempt of court hearing or contact the Department of Revenue’s Child Support Enforcement office (the contact phone number is 1 (800) 622-5437). Court ordered child support that is not being received can only be disregarded once you document that a household has exhausted legal means for trying to obtain the support. In contrast, there is no legal document associated with non-court ordered child support. If it is not being received, it is simply not a source of income to be included in overall household income.

Question:
If a person does not live in a unit to be assisted, but his or her name appears on the deed as a co-owner, do we count his or her income toward the computation for income eligibility?
Answer:
No, unless the co-signer is an estranged spouse, because the State of Florida does not recognize legal separations. The income guidelines state that if someone is permanently removed from the household, you do not have to count his or her income, but the applicant must provide proof that the spouse is no longer a part of the household by providing a copy of the divorce decree or restraining order. In the case of a parent or other relative who co-owns the unit but does not legally reside there, use only the incomes of those persons residing in the unit. However, if a lien is to be placed on the property in the amount of SHIP assistance, consult with your city or county attorney, since you may likely want the co-owner to sign the lien as well as the resident co-owner.

Question:
Is combat pay counted as part of household income?
Answer:
It is not counted. This issue is address in Chapter 25, Part 5 of the Code of Federal Regulations, commonly referred to as “24CFR”. The Code is used by almost all SHIP communities to outline the income sources that are and are not included in the calculation of annual household income when calculating SHIP income eligibility. Section 5.609 (b)(8) specifically notes that household income must include “all regular pay, special pay and allowances of a member of the Armed Forces (except as provided in paragraph (c)(7) of this section). Paragraph (c)(7) then outlines that “the special pay to a family member serving in the Armed Forces who is exposed to hostile fire” is not included as part of household income.

Question:
One of my SHIP home buyer applicants is participating in a housing authority Section 8 Homeownership Voucher program. Through this program, the housing authority will pay a certain portion of the monthly mortgage payment. Do I count this mortgage contribution as a source of income when determining the household's annual income?
Answer:
No. Staff at the Florida Housing Finance Corporation reviewed the information provided by Fannie Mae and HUD for the Section 8 Homeownership Voucher program. The information included a recapture agreement with a loan forgiveness clause that the applicant must sign to receive the Section 8 subsidy. The compliance staff concluded that this mortgage contribution is a deferred payment loan and that it should be excluded from annual income. The main intent of the Section 8 Homeownership Voucher program is to help increase the affordability of a low income home buyer's mortgage payment. Counting the mortgage payment subsidy as a source of income might simply defeat the purpose of enabling an applicant to receive additional assistance from SHIP, since the additional income may push the applicant's income beyond the eligible range.

Question:
One of our applicants is seasonally employed. His employer has verified that he will work six months during the next 12 months. He has had a similar work schedule for several years. In the past, he has collected unemployment benefits in the other months of the year. However, since he is currently working for the employer and is not currently collecting unemployment, this is not a verifiable source of income. Should I still count the unemployment benefits as a source of income during the next 12 months, based on what I know about his income from past tax returns and past unemployment payment documentation?Answer:
Normally you would annualize income based only on what the applicant is currently collecting. During the 2000 session, the Florida Legislature changed the definition of "annual gross income" in Section 420.9071(4), F.S. from "projecting the prevailing annual rate of income" to calculating income by "annualizing verified sources of income" for the household as the amount to be received during the 12 months following the effective date of the determination. However, the compliance office of the Florida Housing Finance Corporation recognizes that the applicant in your situation will likely receive unemployment payments some time in the next 12 months. If the seasonal employer can provide a statement verifying the applicant's start and stop dates of employment, and you have tax returns from prior years verifying the amount of unemployment benefits, you may use these sources to calculate his anticipated income.

Question:
Income from a Business: A husband and wife are applying for purchase assistance, and their scheduled closing is ten days from now. The wife has a regular job and the husband is starting up a business. He anticipates that the business will soon become profitable, but it is currently not earning income. How do I document this situation and how much income should I count from this business?
Answer:
You should count no income from the business, since it is currently not earning a profit.
On any given day when we work to complete the income qualification process, we are simply taking a ‘snapshot in time’ of household income. Income increases or decreases with some regularity—the wife may soon receive a raise, or may lose her job. The business may soon turn a profit, or may fail for lack of income. Your task is simply to document the current situation. Currently, you cannot estimate any particular income from the business in the next 12 months. Consider a similar situation: an applicant’s 18-year-old son has recently graduated and is looking for a job. Although he tells you that he anticipates locating a job earning $25 an hour, he is currently unemployed and there is no guarantee that he will earn that anticipated wage. Guidance on this matter is provided in the definition of “annual gross income” in the SHIP Statute, which notes “counties and eligible municipalities shall calculate income by annualizing verified sources of income for the household.” The son cannot verify income from a job that he does not yet have. Similarly, your applicant cannot verify business income based on the current documentation of the business. You cannot count any business income to be earned in the next 12 months. In your situation, you should finish the income qualification process today and complete an income certification form. Count only the sources of household income that can be verified today, complete your income eligibility determination, and move on to preparing the applicants for their closing.

Question:
An applicant is applying for purchase assistance. I have signed his income certification
form and have provided an award letter indicating that he is a moderate income applicant with a household income of 81% of the area median income (AMI). We provide moderate income homebuyers with a maximum of $30,000 of purchase assistance,while low-income households may receive up to $40,000. Before the date of his closing, I received the new income limits chart from Florida Housing. The area median income for my county has increased slightly, and the applicant earns 79% of the new area median income. This applicant’s income has not increased or decreased at all since my initial intake and verification of income. However, should I now count him as a low-income household, and is he eligible for up to $40,000 of down payment assistance?
Answer:
Yes, the applicant’s household is low-income on the day when you provide assistance,
and is eligible for the higher level of down payment assistance. During the beginning months of each year, Florida Housing Finance Corporation distributes new income guidelines for purposes of determining income eligibility. You should use the new, updated income limits as soon as they are received, regardless of which allocation year the assistance comes from. The income limits charts are based on information on median family income provided by HUD. The latest estimates of median family income are based on 2000 Census data on family incomes. This has been updated annually since 2005 using Census American Community Survey data from approximately three million households to identify changes in state median family incomes.
Remember that it is likely that this situation is uncommon. Comparing the two most recent years of income limits charts, the area median income generally increases slightly by less than $2000 from year to year. In some unusual cases, AMI decreases. Because of the relatively small change in AMI, it should be uncommon for an applicant to be eligible for a different amount of assistance once the new income guidelines are received—even if your SHIP program offers a graduated series of maximum awards for
different income categories.
The SHIP income limits establish the maximum income for households that can be assisted. Yet each jurisdiction must identify the level of income where the market fails to meet each citizen’s need for affordable housing. If you believe that the income levels provided to you by Florida Housing do not adequately assist you in targeting assistance to those most in need, your commission can place additional restrictions on the local SHIP program. You may discover that even moderate-income households experience financial difficulty with housing costs. They may not qualify for enough mortgage money to purchase an average priced home in your community, for example. On the other hand, you may conclude that moderate-income households do not experience hardships, once you have considered the relationship between housing costs and income levels. Some communities have written their Local Housing Assistance Plans to indicate that SHIP assistance is only available to Low and Very Low-income households, not those with Moderate Incomes.

Question:
A staff person in our housing assistance department is income eligible and needs foreclosure assistance. Is there any rule that would prevent her from applying for SHIP assistance?
Answer:
This is not an uncommon question as it appears that similar cases have occurred in other jurisdictions. To avoid any concerns about conflict or favoritism, make sure that the applicant is held to the same application standards and overall qualification process as any other applicant. In addition, it is recommended that Personnel Policies and Procedures are reviewed since some jurisdictions prohibit employees from benefiting from their assistance programs.

Assets & Other Qualification Topics

2010-02-17T07:28:00.000-08:00

INCOME QUALIFICATION PROCESS: ASSETS AND OTHER TOPICS

Question:
Is a monthly payment of $1,500 from a 401K retirement account included among sources of household income when calculating the income eligibility of an applicant?
Answer:
The 401K is an asset owned by the applicant. The monthly payment is, therefore, income from an asset. The monthly payment will be included as income unless the applicant can demonstrate that the amounts received do not exceed the amount of the original 401K investment. HUD Handbook, 43350.3, Section 5-6 (N) addresses the topic of “Withdrawal of Cash or Assets from an Investment.” The withdrawal of cash or assets from an investment received as periodic payments should be counted as income unless an applicant can document that the amounts withdrawn are reimbursement of amounts invested. When an applicant is making regular withdrawals from an account in which he/she has made an investment, the withdrawals will count as income only after the amount invested has been totally paid out. An example to consider is as follows:
Josefina and Rodrigo Gomez have received $300 a month from an annuity for 9.5 years. The Gomez’s paid $36,000 for the annuity when they purchased it years ago. Six months after the current annual recertification becomes effective, the Gomez’s will have reclaimed the full amount of their investment. For the second 6 months of the coming year, therefore, the owner will include the $300 monthly payment from the annuity as income. Remember, this $300 monthly payment is income from an asset and must be documented properly. On the income certification page, list the 401K among the household’s assets on the bottom of the first page. List the cash value of this retirement account and then list the actual income from the asset. In this case, $300 x 6 months= $1,800.

Question:
I am documenting an applicant’s assets for purposes of determining his income eligibility. The applicant has a retirement account into which his employer makes contributions. The money in this account cannot be withdrawn until the applicant leaves this job. Since the applicant could conceivably quit his job in the upcoming 12 months, should I count the retirement account as an asset?
Answer:
Do not count this retirement account as an asset. The answer to this question is addressed directly in Chapter 5 of the HUD Handbook 4350.3. Section G provides a helpful guide for documenting and counting a wide variety of assets. Section G-4 specifically addresses retirement accounts. It notes that “balances held in retirement accounts are counted as assets if the money is accessible to the family member… Amounts that would be accessible only if the person retired are not counted… While an individual is employed, count only amounts the family can withdraw without retiring or terminating employment.”

Question:
I have discovered that an applicant recently gave $1500 cash gifts to each of her three adult children. Do I count the amount of these cash gifts as one of the applicant’s assets? Is this considered an “asset disposed of for less than fair market value”?
Answer:
Yes, in this case you will count the cash gifts provided to these adult children as an asset of this household. This issue is outlined in the HUD Handbook 4350.3, Chapter 5. Look in the section entitled 5-7 “Calculating Income from Assets” and refer to subsection G. 6, which notes that “any asset that is disposed of for less than its full value is counted, including cash gifts”. You must consider this section for any asset that the applicant has deposed of during the past two year. There is even an example that follows this section that describes cash gifts provided to adult children. The Handbook indicates that you must count these cash gifts if they amount to more than $1000 in value.

Question:
A SHIP client has an IRA rollover account which provides her with $300 on income each month. I am accustomed to recording IRAs as assets, but is this case different? Should I record this $300 of monthly income among other sources of regular income, like social security payments or employment income? Or should I count the IRA as both an asset and a regular income source?
Answer:
At first glance, this scenario might seem to be a case where you have to record the IRA as both an asset and as a source of a steady stream of income. Yet you should only record the IRA as an asset. On the first page of the income certification form, list the cash value of the IRA. You must also record the actual income from the asset—in this case, the actual income is the $300 monthly payment that the applicant receives from the IRA. If the total value of this and the applicant’s other assets is over $5000, you will also need to calculate the imputed income from this asset. In the end, you will record either the actual income or the imputed income (whichever is greater) as one of the household’s sources of income on the second page of the income certification form. In most cases, like the one you discuss, the amount of actual income paid by the IRA will be a larger sum of money than the imputed income from the asset, so the actual income will be reported on the second page of the income certification form as the income from this asset.

Question:
Please help me calculate the annual income from a SHIP applicant who has a 401K retirement account. The applicant is retired and she withdraws $1500 monthly from the retirement account. The current account balance for the 401K is $30,000. Is this the figure I should use for the cash value of the 401K asset? Or should the cash value be less, to take into account that $18,000 will be paid to the applicant over the course of a year?
Answer:
The cash value of this 401K asset is the anticipated balance of the account at the end of the year, including interest earned. The answer to this question comes directly from Chapter 5 of HUD Handbook 4350.3, which outlines the income qualification process for the SHIP program. The
Coalition can provide you with a free electronic copy of the HUD Handbook, if you would like to request this lengthy document. Section 1, Part 5-7 of the Handbook addresses the calculation of
income from assets. In this section, item G. “Calculating Income from Specific Assets” provides the answer to your first question about the cash value as part of the following example:
“Stephen King is retired. Each month he withdraws $1,000 from his IRA account. The balance in his IRA account is $200,000. The balance in his IRA at the end of the year, including interest earned, will be $194,000. That is the amount that should be counted as an asset” (HUD Handbook, Section 1, Part 5-7, G. 2. b. (2)).

Question:
An applicant has guardianship of a grandchild. There is a savings account that the applicant does not have access to unless a court order is provided. Do I count the savings account as an asset?
Answer:
No, HUD 4350.3 requires you to only count assets for which the person has access. In this
case, the applicant does not have access even though they he/she has guardianship of the child.

Question:
An applicant has custody of her children for only part of the year. Do I count the children as part of the number of individuals in the household?
Answer:
You count the children in the household if they live with the applicant for 50 percent or more of the year. Properly document this with school records, court documents, or other records that indicate that the child's permanent address is with the applicant. If an applicant has joint custody of his or her children for 50 percent of the year, you can count the children as a household member. Each parent in a joint custody arrangement has significant expenses for children. They must provide clothing, a bed and perhaps a room, food and other items for the children. For this reason, the children should be included among the members in a household.

Question:
An increasing number of employers are not directly responding to our verification for employment forms. Instead, these employers subcontract this income verification activity to a company that requires SHIP administrators to pay a fee for receiving verification information. On occasion, I have to call a 1 (900) telephone number to contact the verification company. How should I proceed with my verification process in cases like these?
Answer:
The SHIP program requires that the primary source of income eligibility documentation is third party verification forms. It should be a priority to receive third party income verification in written form or—if necessary—oral confirmation over the phone. Fortunately, SHIP administration expenses can be used to pay for any fees associated with paying for this information—including telephone fees for a (900) telephone number to contact a verification company. These fees are a cost of properly implementing the SHIP program and are, therefore, eligible administrative expenses. Some SHIP communities have had success in getting a verification company to waive this fee, since the information is being requested to assist by a “social service organization” offering assistance to an employee. If, for some reason, you are not physically able to make a (900) telephone call from your office, other options are available. Recruit your applicant to help you. He or she may be able to appeal to a supervisor to fill out the verification form. Alternatively, you may be able to get the needed verification information by phone from the supervisor. On rare occasions, none of these options is available. As an absolute last resort, use whatever written documentation is available—including pay stubs and tax returns—to document an applicant’s employment income. You must fully document in the applicant’s file all of your attempts to obtain third party verification.

Question:
How do we treat assets when computing annual income?
Answer:
All income from assets must be added to anticipated annual income, regardless of the cash value or combined cash value of the asset(s). If the value of a single asset or combined value of multiple assets is greater than $5000, then an imputed value is taken (multiply value by 2 percent) and then compared to actual income earned - the higher number is then added to the other forms of income to get the total anticipated annual income. If the value of an asset or combined assets does not exceed $5000 and the actual income is not known, then the amount of asset income added to annual income is zero. In all cases, always document the file that the calculation was done both ways.

Question:
If an applicant owns a second home which is occupied by relatives, and receives no rents on the home, is it counted as an asset when computing total household income?
Answer:
Yes. All real property is counted as an asset. The value of this second home must be listed among other assets on the first page of the SHIP income certification form. In this case, no rent is received, so indicate that there is no income from this asset.

Question:
One of the applicants for my rehabilitation strategy has a second home that she rents out. I know that this second home is considered an asset and that the rent she collects is the actual income derived from this asset. Should I deduct the mortgage payments and maintenance costs that the applicant pays from this source of asset income and only count the net income after expenses? Answer:
Yes. HUD has recently provided clarification on how to treat income from rental property. Appendix 15 of the newly revised HUD Handbook 4350.3 addresses this issue. It notes that you can use the IRS’s Schedule E of the 1040 form as a guide for subtracting expenses from gross rent. Schedule E outlines a variety of expenses that can be deducted from gross rent payments, including mortgage interest paid to banks, taxes, insurance, cleaning and maintenance, repairs, advertising and utilities. These are, therefore, the expenses that can be deducted from gross rent payments to be received in the 12 months. Refer to section 15-C (M) of the Handbook appendix for a list of acceptable documents to collect to verify this asset income. These materials will document the applicant’s recent rental expenses and help estimate expenses for the next 12 months. It is likely that the largest expense will be mortgage interest that is paid to banks. Look at the bank amortization schedules provided by your applicant to calculate the exact amount of interest that will be paid in the next 12 months. Rely on reasonable estimates to calculate the deductions for taxes, insurance, repairs and other expenses.
The income from rental properties should be handled in a different manner if the applicant receives a majority of her income from rental property management. Exhibit 5-2 in Chapter 5 of the HUD Handbook addresses this scenario, “NOTE: If the person’s main business is real estate, then count any income as business income under paragraph 5-6 G of the chapter. Do not count it both as an asset and business income.” (HUD Handbook 4350.3, Ch. 5, Exhibit 5-2 (A)(3)).
Remember, once you have calculated the actual income from the rental property asset, you will have to compare this to the "imputed income" if the total value of the applicant’s assets exceed $5,000. The cash value of a rental property asset is its market value minus reasonable costs that would be incurred in selling or converting the asset to cash. You must also subtract the remaining mortgage on the rental property to derive the cash value.

Question:
When I work to determine the income eligibility of an applicant, I sometimes find
situations when I am unsure whether or not to count certain individuals as household members in order to properly determine the size of the household. Where can I look
for guidance when these questions come up?
Answer:
It is important to accurately determine the size of a household, since the household’s income eligibility is adjusted for family size. The income eligibility level is lower for households having fewer than four people, for example, and higher for households having more members.
You start the process of determining household size by reviewing the household members that the applicant has listed on the application form. Count individuals who will permanently live in
the household during the next 12 months as household members, unless given guidance to the contrary. You count individuals even if they are not relatives of the applicant—for example, an
applicant may have a boyfriend who lives in the house. He is a household member and his income must be included in the calculation of overall household income.
Chapter 3 of the HUD Handbook 4350.3 provides written guidance on many situations where you may be unclear about whether or not to count an individual. Section 3-6, subsection E, provides a list of types of individuals to count or exclude as household members. This section notes, for example, that household members include children who are away at school but who live with the family during school recesses. In addition, count children with joint custody arrangements who are present in the household 50% or more of the time, and document the custody with a divorce decree or written statements from the parents. Conversely, the Handbook notes that you will not count foster children or foster adults, since they are only temporarily living with the household. “Unborn children” of pregnant women are counted as part of the household, as well as children in the process of being adopted. Some household members may be counted even if they are temporarily absent from the home for a work assignment, training or some other reason. The Handbook even outlines a case involving persons permanently confined to a hospital or
nursing home. This is the only instance in which the Handbook gives the SHIP applicant a choice as to whether or not to include the person as part of the household. Naturally, if the person is
counted, then his or her income will be added to overall household income.

The Handbook discusses at some length the status of a live-in aide. Such a person resides with one or more elderly persons, near-elderly persons, or persons with disabilities, but is not considered a household member. The aide is excluded even if he or she is a family member, so long as the aide can demonstrate that he or she “is not obligated for the support of the person(s) and would not be living in the unit except to provide the necessary supportive services.”

One final scenario should be considered. In some situations, an applicant is planning to get married sometime in the 12 months following receipt of SHIP assistance. Staff at the Florida Housing Finance Corporation has indicated that a fiancée who is not currently living with the applicant should not be counted as a household member. The fiancée is not counted because the upcoming marriage has not yet happened and cannot be verified. However, there is an exception to this policy. If the SHIP applicant is buying a home and has applied for a first mortgage along with the fiancée, then the SHIP administrator now has sufficient documentation to demonstrate that the fiancée will reside in the house. In this case the fiancée is counted as a household member. Determining the correct size of an applicant’s household can sometimes be a complicated matter. Refer to Section 3-6 (E) of the HUD Handbook 4350.3 for written guidance. In addition, the Florida Housing Coalition is available for consultation on this subject. Call (850) 488-4197 with your questions.

Question:
Our community is still providing assistance with our 2009/2010 SHIP allocation dollars. When calculating an applicant's income eligibility, should we use the 2009 income limit chart for our area, or the more recent chart that we have received?
Answer:
Always use the most recent, updated income chart to calculate an applicant's eligibility for the SHIP program. The new income guidelines are distributed by the Florida Housing Finance Corporation (usually between February and April of each year) and should be used as your new, updated guidelines as soon as they are received, regardless of which allocation year the assistance comes from. Some communities use SHIP funds for rental strategies that require them to check tenants for income eligibility each year for fifteen years. In these cases also, the newest income guidelines should be used each year when annual re-certification takes place.

Question:
What is the "120 day clock?" Does the letter of commitment legally require a SHIP jurisdiction to provide assistance even if the applicant’s change in income now places him or her above the level of income eligibility?
Answer:
The "120 day clock" refers to the period of time during which third party income and asset verification forms are considered to be up-to-date and valid. The HUD Handbook 4350.3 recognizes that verification forms can only be considered accurate and current for a certain length of time: "Verifications are valid for 90 days from the date received. If the information is orally updated by the source, these verifications may stand for an additional 30 days. You may not rely on verifications that are more than 120 days old." Source: HUD Handbook 4350.3, Chapter 3 Section 2 Subsection C. Part 3-32 a. (2) If more than 120 days passes from the time that you have received a verification form, you must get a new, updated verification form.
Here are activities that will "stop the 120 day clock." Any one of the following activities will enable you to turn your attention from getting current household income information to proceeding with the other activities involved in helping the applicant. The 120 day clock will stop when: 1.The local government issues an award letter (also called a letter of commitment) to the applicant after a certification form has been executed. This letter will encumber SHIP funds to this specific household, or 2.The local government and applicant sign a construction contract to proceed with rehabilitation services on the applicant's home.
Once an award letter is issued or a rehabilitation contract is executed, the 120 day clock stops and you do not have to obtain new, updated verification forms, even if you have not completed your assistance to the client within 120 days. You never again have to ask the applicant income-related questions. Of course, an applicant can also be fully assisted within the 120 day period. In such a case, it is also possible to verify income, certify a household as income eligible, and then not issue a commitment letter, but assist an applicant and fully expend SHIP funds before 120 days expires. In such a case, the 120 day rule is moot.
On occasion, an application may provide information that the household size or income has changed since the 120 day clock stopped. In such instances, contact the Florida Housing Coalition or the compliance office at the Florida Housing Finance Corporation to determine on a case by case basis whether or not to re-calculate the applicant's income and eligibility.

Learning More About The “120 Day Clock”
Please help me clarify my understanding of the “120 day clock” used during the SHIP income qualification process. My co-worker believes that an award letter stops the 120 day clock, but that the income qualification work she has completed for a household only remains updated and accurate for the next 12 months. Is this true?
Answer:
Your co-worker’s approach is considered a “best business practice.” To understand why,
it is important to first review the role of the “120 day clock.” The “120 day clock” refers to the period of time during which third party income and asset verification forms are considered to be up-to-date and valid. If more than 120 days passes from the time that you have received a verification form, you must get a new, updated verification form. For a more detailed explanation of the 120 day clock, read the SHIP FAQ on the Coalition’s Web site: www.flhousing.org. Often, a SHIP administrator will issue the eligible applicant an award letter to “stop the clock” and allow the administrator to proceed with the other activities involved in helping the applicant. Remember, however, that you must re-calculate income eligibility if you learn about a change in household income before the applicant has been assisted with SHIP funds—even if you have already issued an award letter. Now consider your question: What if an applicant has still not received SHIP assistance a year after receiving an award letter? It is a “best practice” for SHIP staff to re-verify that a household is income eligible for SHIP assistance if more than 12 months have elapsed since the city presented the household with an award letter. This makes sense: ultimately, you can only provide assistance to income eligible households. Income can change in a year–you would be wise to re-verify that an applicant is still eligible if he or she has been waiting for such a long period of time.

Follow-Up Question: I understand the best practice that you describe. However, adopting this practice would greatly affect the way we implement our local SHIP program. When we receive a new SHIP allocation each summer, we accept a larger number (over 50) of new applications for assistance. We determine each applicant’s income eligibility on the front end and issue award letters. With so many households requesting assistance, however, some people with award letters will not receive assistance for well over a year. How can we avoid the extra and required work that you describe for re-calculating a household’s eligibility?
Answer:
In the future, you could implement an alternative practice: Place people on a waiting list, but do not complete the formal income verification and certification process on all these applicants at one time. Instead, perform the income qualification process on the first five or 10 people on this list, and provide them assistance in a timely manner. When you are almost finished assisting them, perform the income qualification process on the next handful of applicants on the list... and so on. In this manner, you will issue award letters only to the applicants who will receive assistance within the next month or two. With less time transpiring between the determination of income eligibility and the provision of SHIP assistance, it will be less likely that the applicant’s income has changed. This should reduce the time you devote to updating and re-calculating an applicant’s income eligibility. Explain to those put on the waiting list that they have not been approved for SHIP funding until the formal income qualification process is complete.

Question:
In a previous SHIP Clip answer, you outlined a scenario when an administrator learns that an applicant’s income has changed after a letter of commitment was provided but before the applicant received SHIP assistance. You noted that a SHIP administrator is obligated to re-verify and re-certify the applicant’s income to determine if the household is still eligible for assistance. What about the letter of commitment in such a case? Does this letter legally require a SHIP jurisdiction to provide assistance even if the applicant’s change in income now places him or her above the level of income eligibility? After all, the applicant was income eligible for SHIP assistance on the date when the letter of commitment was signed and mailed.
Answer:
The Florida Housing Finance Corporation’s legal counsel has concluded that SHIP jurisdictions should deny assistance to applicants discovered to be income ineligible after a Commitment Letter has been issued. Ultimately, it is most important for administrators to ensure that all households receiving SHIP assistance are income eligible. This is stated in section 420.9075 (4)(j) of the SHIP Statute, which notes that “the benefit of assistance provided through the State Housing Initiatives Partnership Program must accrue to eligible persons occupying eligible housing.” Even after you have signed an income certification form and issued an award letter indicating that an applicant is income eligible, you may receive new information indicating that household income has changed. An applicant may inform you that she has just received a raise or lost her job. Alternatively, the applicant’s first mortgage lender may inform you that the applicant has a second job that you did not know about. In all such cases, you must document the new income information with a verification form and re-calculate income eligibility if you learn about a change in household income before the applicant has been assisted with SHIP funds (i.e. before the applicant has signed a rehabilitation contractor’s construction contract, or the applicant has closed on a loan, or before SHIP funds have been provided for some other form of assistance to the household).
This is not to say that a SHIP administrator needs to actively look for changes in an applicant's income once the income certification form is signed. Rather, the administrator must act on any information that is brought to him or her from any source. The Florida Housing Finance Corporation’s legal counsel has reviewed a sample letter of commitment and has concluded that such a letter could not legally force a SHIP jurisdiction to provide assistance to a household that is discovered to be income ineligible before assistance is provided. The legal council does, however, recommend that SHIP administrators add a sentence to the letter to give applicants notice of this aspect of the income qualification process. The letter should note that a household’s annual income will be re-calculated based on changes all the way up until the date when assistance is provided.

Eligible Use & Proper Expenditure

2010-02-16T07:18:00.000-08:00

Question:
Are relocation expenses eligible SHIP costs? Is there a limit on the amount of relocation costs per family we can spend, or are there any standards for what should be spent?
Answer:
Yes, relocation expenses are eligible costs under the SHIP program if expended in conjunction with a rehabilitation assistance program. What you spend for temporary relocation will depend upon your local policies. You should decide in advance what will be paid as reasonable and customary in terms of temporary shelter and moving expenses and incorporate it as policy so as to avoid potential abuses.

Question:
Can I help an applicant more than once with the SHIP program?
Answer:
There is nothing in the SHIP rule or statute that specifically addresses this issue. It is a local policy decision. Many local communities have added a provision to their LHAP noting that an applicant cannot be assisted more than once with the SHIP program. If only one-time assistance is available, however, it is important to consider if the SHIP assistance provided is thorough and fully addresses an applicant’s needs. If an applicant purchases an existing home, for example, are there resources available to make needed repairs, or might the applicant be back soon to apply for assistance from your rehabilitation strategy. Similarly, when providing rehabilitation services, you should review the initial home inspection and consider whether repair priorities—including health hazard concerns, code violations, upgrading of electrical systems, and even energy efficiency—can be addressed with one-time assistance. As you consider limiting applicants to one-time assistance, you may need to increase your per unit subsidy level and other policies in order to ensure that a one-time recipient of services has been comprehensively assisted. This issue and many other policy considerations are discussed in two of the Coalition’s workshops entitled “A Quantitative Analysis of the SHIP Program” and “Enhancing Your Housing Strategies”. Refer to the workshop section of the Coalition’s website, www.flhousing.org, to learn when these trainings will be offered next.

Question:
Can SHIP funds be used for demolition and site clearance?
Answer:
Yes, as long as an eligible unit which serves an eligible household is moved to or constructed on the site. At the end of every project, we must be able to document specific housing assistance offered to a specific household. Therefore, demolition may only be part of a larger project to then construct housing on the cleared land after demolition.

Question:
The local lender has notified one of our SHIP awardees that there is a shortage in his escrow account. The notice was given after closing and the lender now wants to increase the monthly payment to cover the shortage. Can SHIP funds be used to pay for a shortage in the escrow account for a homebuyer?
Answer:
SHIP funds can be used to pay for any and all costs associated with closing, unless otherwise specified in the local HAP. Since the closing has already occurred, it would be difficult to award these funds without another closing. Minimum escrow balances are mandated by Federal laws and/or the mortgage agreements. Since the lender made the error, you should encourage the homeowner to negotiate a more reasonable amount for escrow. Since the increased monthly mortgage payment may result in putting the homeowner in a potential default position on the first mortgage, the lender should be agreeable to alternative arrangements.

Question:
Is the installation of central air conditioning an eligible SHIP expense?
Answer:
Yes. In most parts of Florida air conditioning is a necessity for the health and safety of the occupants living in the units. Previous experience with housing programs that do not allow for the installation of air conditioning has shown that people will find a way to cool their home. This often means the purchase of very old, very inefficient window units. These window air conditioners can greatly increase a family's monthly utility bills, drastically reducing a family's ability to meet their other monthly bills.

Question:
Funds have been encumbered for housing rehabilitation, and some funds have been spent on a first draw from the contractor. The housing activity is not complete. Are the funds expended?
Answer:
No, funds are only encumbered until the rehabilitation activities are completed, the work is inspected, the contractor is paid, and the unit is occupied by an eligible person. Refer to the definition of “expenditure” in the SHIP Rule, 67-37.002 (8), which notes that funds are considered expended "when the project is completed as evidenced by documentation of final payment to the contractor and release of all lien waivers, issuance of the certificate of occupancy by the local building department, and occupancy by an eligible person or eligible household.”

Question:
Please explain: "First Dollar In, First Dollar Out?"
Answer:
The SHIP rule requires that all program funds from a SHIP distribution be spent within 3 years of their initial receipt. Exceptions to this expenditure deadline are very limited. Many communities have Housing Assistance Plans that continue paying for the same strategies from one distribution to another. In these instances, SHIP administrators should consider spending all of the money from a distribution before moving on to subsequent years' distributions.

Question:
There are leftover funds in an escrow account that were not used on a project. The funds were allocated from the 2008/2009 cycle. The bank wants to give the funds back to the SHIP program. Can we take the funds? What should we do with them?
Answer:
The bank should cut the County a check for the leftover funds and the funds need to be re-allocated to a SHIP recipient, to be spent on eligible activities within the expenditure deadline of three years from the date when your community first started receiving its allocation. In this case, for example, the 2008/2009 allocation was first received on July 1, 2008 and must be expended no later than June 30, 2011.

Question:
What are the time limits on expenditure of interest earned on our local trust fund account?
Answer:
Interest earned falls under the same time limits as all other SHIP funds. The interest earned must be spent within 24 months from the end of the applicable State fiscal year in which the interest was earned. The "applicable State fiscal year" is determined by when the interest was earned. For example, the bank interest collected in the local housing trust fund from July 1, 2010 to June 30, 2011 is associated with the 10/11 SHIP distribution. It must be spent by June 30, 2011 which is 24 months from the end of the 10/11 State fiscal year.

Recapture Policy

2010-02-15T07:15:00.000-08:00

Question:
At what point in the process of rehabilitating a house should I place a security instrument on the homeowner's property?
Answer:
As a best business practice, we recommend that you secure the property prior to starting rehabilitation. This is the same practice that any home improvement contractor would follow. It prohibits the home owner from selling his or her house while construction is in process without resolving the debt incurred using public funds. Before your contractor starts repairs, have the home owner sign a security agreement for the amount of the contractor's bid. To be fair to the home owner and to be mindful of careful spending of public funds, you should always file an updated security instrument when the final cost of repairs is actually less than initially anticipated. In some instances, however, change orders will increase the final cost of the rehabilitation. You can choose to file an updated security instrument that accurately records the larger repair amount, especially if the additional amount is several hundred dollars or more. You can, however, choose to simply leave the original security instrument in place and provide the extra SHIP funds in the form of a grant. (This is a different policy than federal programs like CDBG or HOME, which require the security instrument to accurately document the final cost of repairs).

Question:
Can we award both grant funds and also deferred payment loans on a single unit?
Answer:
Yes. It is common, for instance to make the amount spent on the actual activity a deferred payment loan, while making the cost of fees to cover the filing the security instrument (lien) a grant.

Question:
Do any SHIP communities have due upon sale clauses attached to their SHIP assistance? What are the advantages and disadvantages of due upon sale? Isn't the administrative burden of due upon sale rather onerous?
Answer:
Many communities have due upon sale clauses in their down payment assistance programs. There are many advantages to such an arrangement, the biggest being that you are establishing a program where, over time, funds will constantly be reinvested into the SHIP program. Even if the note is not repaid for 15 years, the purchasing power of the assistance provided will still be around half of what it was at the time of the original assistance. Due upon sale can be less of an administrative burden than notes which are satisfied after a certain length of time. Many communities in which the assistance is forgiven over time have second mortgages that must be satisfied by the local government. This takes time, and an elaborate tickler file. With due upon sale, the second mortgage is recorded, and can be virtually forgotten. When the property is sold, the title company notifies the city that a check will be forthcoming. There are also some disadvantages with due upon sale, not the least of which is what happens if the home is sold, and the proceeds from the sale are not enough to cover both the first and second mortgage. This situation can be addressed by having the second mortgage state that the second mortgage reverts to an unsecured note if the net proceeds from the sale are not enough to satisfy the first mortgage. Another issue is the local jurisdiction's philosophy toward affordable housing. Is it the public sector's role to provide low-income families with decent safe and affordable housing, or is it the public sector's role to also provide people with the potential for future equity. One unavoidable consequence with due upon sale clauses is that they have the potential to leave people with very little equity at the time of sale. This is an issue that the local jurisdiction must resolve for itself.

Question:
When SHIP is invested in rental housing property, does the local SHIP office have to monitor the property for 15 years? Is there a way to do this without monitoring? What happens if the property is sold before 15 years?
Answer:
You must monitor a SHIP assisted rental property for a minimum of 15 years to ensure that income-eligible tenants occupy the units assisted with SHIP funds. These monitoring requirements are outlined in the Section 420.9075(3)(e), F.S. The only way that your SHIP office would not have to monitor is if the Florida Housing Finance Corporation (FHFC) has also provided funding to finance this property. During its 2000 session, the Florida Legislature added new language to the SHIP statute which states "to the extent the FHFC provides the same monitoring and determination," the SHIP jurisdiction 'may rely on such monitoring and determination of tenant eligibility." Sometimes the requirements for SHIP and the FHFC's program differ, however. For example, a SHIP-funded unit may rent to a SHIP eligible recipient with an income as high as 120% of the area median income, while FHFC requirements may require tenants to have incomes at or below 60% of the area median income. Local SHIP staff will have to monitor any program compliance that is not monitored specifically by Florida Housing’s staff.

Question:
My community's SHIP second mortgage states that if the property is sold, refinanced, or transferred, the owner or estate must repay the entire amount of the loan. There is nothing specific about paying off the loan at the end of 30 years, however. If one of our homebuyers lived in a home for 30 years and paid off the first mortgage, does he or she have to pay back the funds borrowed from SHIP?
Answer:
Section 95.281(1)(b), F.S., states that a lien without a specified term automatically terminates after 20 years, unless it is renewed by the lien holder. In this case, the lien had no term and was not renewed after 20 years. Therefore, no SHIP assistance would be repaid.(01.6)

Question:
One of the homeowners that we have previously assisted is requesting that the city subordinate its SHIP second mortgage on her house. What are some of the reasons why homeowners request subordinations? What is the subordination policy of the SHIP program?
Answer:
There is no SHIP rule or statute that addresses this subordination issue. Each SHIP jurisdiction has the responsibility of formulating its own subordination policy. Put the policy in writing to fairly address all subordination requests. The Florida Housing Coalition recommends that local governments subordinate a SHIP loan if doing so will lower the homeowner’s interest rate, lower the home owner’s monthly housing cost, or increase the affordability of the housing. Furthermore, it is important to require any refinancing to lower the monthly payment by an amount that will allow the closing costs and fees to be recovered within a specified, reasonable number of years. Finally, the Coalition strongly advises against allowing recipients to receive cash back from refinancing.
There are several reasons why homeowners request a SHIP subordination. Some wish to make room for a debt consolidation loan. Such a loan commonly secures credit card obligations, car loans and similar debt with the equity in the property. In most cases, the equity in the house is primarily SHIP funds from the down payment assistance. SHIP funds are intended to help provide affordable housing, not secure consumer debt. Since debt consolidation loans do nothing to lower monthly housing costs, this type of subordination request should be denied.
In other instances, homeowners may be working with a predatory lender whose refinancing proposal will only lower the mortgage interest rate by a fraction of a percentage, while charging the homeowner excessive fees. In this scenario, the monthly mortgage payment will go down, but only slightly. It will take a long time for this slight monthly savings to make up for the upfront fees charged. This is why SHIP administrators should require refinancing to produce interest rate reductions that are significant enough to compensate for closing costs and fees within a short timeframe.
Other homeowners may be faced with a growing household. The houses they purchased are no longer big enough for their families, and the homeowner may want to add a room onto the home with a home improvement loan. Even though this loan will increase the homeowner’s overall housing costs, it may still be the most affordable option for addressing the changing housing needs of the household. After helping the homeowner consider options, a SHIP administrator may conclude that it is best to subordinate the SHIP loan.

Homebuyer & Rehabilitation Strategy questions

2010-02-14T07:11:00.000-08:00

HOME BUYER STRATEGY TOPICS
Question:
A lender is requiring a purchase assistance applicant to have a family member co-sign on the first mortgage loan. The co-signer is simply doing this to aid the applicant; he will not live in the home being purchased. Is this a permitted practice? Should I count the co-signer as a household member, count his income, and have him sign the SHIP mortgage?
Answer:
There is nothing in the SHIP statute or rule that prohibits co-signers. It is not uncommon for SHIP-assisted buyers to have co-signers. Co-signers are not household members, so their income will not be counted in household income when determining income eligibility. There is one exception: the co-signer’s income must be counted if he or she is the spouse of the applicant. In all other cases, you should document that the co-signer maintains a separate residence. Another important issue must be considered. Check who owns the home once it is purchased. Naturally, the co-signer’s name and signature will be included on the first mortgage, since the co-signer is assuring the first mortgage provider that he or she will assume mortgage payments if the applicant fails to stay current on the mortgage. However, the co-signer should not be included on the title to the house. Ownership of the house must be fully in the SHIP applicant’s name.

Question:
May we provide our down payment assistance on a construction-perm loan?
Answer:
Yes. If you do provide the assistance at the construction loan closing, which is before the unit is built, you cannot count funds as expended until the unit is finished and occupied.

Question:
I have a question about first-time homebuyer status. We have a divorced applicant who still co-owns a home with her ex-husband, even though she doesn't live in it. The divorce decree gives the home to the ex-husband, but her name is still on the mortgage and loan note. She is applying to the SHIP program for down payment assistance. Can we consider her a first-time homebuyer, and should we give her assistance with purchasing a new home?
Answer:
The SHIP Statute and Rule do not define "first-time homebuyer" and this is not a fundamental requirement of the SHIP program. The local government has the flexibility to establish a first-time buyer policy and a definition must then be created locally. Many communities with such a policy include displaced homemakers and divorced persons in their local definition. If you decide to consider a person in this situation for assistance as a first-time homebuyer, remember that if the balance of the first home is shown as a debt on her credit report, she may be responsible for the balance if something happens which prevents the ex-husband from repaying the loan amount of the first mortgage. This may result in an increase of her debt ratio and place her in a potentially dangerous situation for default on her current mortgage if she does not have enough income to cover both the original mortgage note and the mortgage amount of her current residence. Lenders consider each applicant on a case by case basis, and as a general rule, if the first mortgage lender is willing to provide financing, then SHIP assistance should be considered favorably.

Question:
I met another SHIP administrator who has used the “safe harbor limits” provided by the U.S. Department of Treasury to set a $220,000 maximum sales price or value limit for her community. How can a SHIP jurisdiction justify setting such a high price? It is just not affordable.
Answer:
In recent years, many communities have increased the maximum sales price or value
limit for their SHIP programs. Your question illustrates a common misconception of the maximum
limit, which is not intended to represent an “affordable” home value. Instead, it indicates the house sales price at and below which SHIP eligible homebuyers may find an adequate supply of homes to purchase.

First, some background information is needed. The SHIP Statute requires jurisdictions to set an upper limit on the value of a home that will be considered “eligible housing” for purposes of SHIP
assistance. This requirement is outlined in section 420.9075 (4)(c) of the SHIP Statute: “The sales price or value of new or existing eligible housing may not exceed 90 percent of the average area purchase price in the statistical area in which the eligible housing is located.” The SHIP
Rule further addresses this topic in section 67-37.007 (4)(d) 6: “The local government at its discretion may set the sales price or value below the 90 percent benchmark. The maximum area purchase price used must be that established by the U.S. Department of Treasury or that calculated in accordance with Section 420.9075(4)(c), F.S.”, which states that the “average area
purchase price may be that calculated for any 12-month period beginning not earlier than the fourth calendar year prior to the year in which the award occurs.” A SHIP jurisdiction, therefore, has the flexibility to justify its maximum purchase price or value based on one of three sources: A local study of sales price levels in the past 12 months, Florida Housing’s bond study—which reports recent price levels for Florida’s metropolitan statistical areas, or the U.S. Department of
Treasury’s data, called the “safe harbor limits.” If a SHIP jurisdiction needs a copy of either of the latter two studies, they can request them from the Coalition by calling (850) 878-4219.

A community’s maximum sales price or value should be set at a realistic level to represent the sales price at which there are an adequate number of homes to buy. Affordable housing professionals do not have the power to control the sales price of homes—housing prices are established by the interaction of buyers and sellers in the open market. For the most part, we rely on the private sector to build the single family houses that low-income buyers will purchase with assistance. There must be an adequate supply of homes for these buyers to purchase, and
so the actual price of available homes for sale must be considered when setting the maximum sales price or value. As housing prices rise, communities must increase their maximum sales prices. If they do not raise this price to keep up with the market, SHIP eligible buyers will not
be able to find any homes to purchase. The market is not producing houses at a price
that SHIP eligible buyers can afford. This is why the SHIP subsidy is needed. It is the combination of a buyer’s first mortgage money and this subsidy that makes the equation of home purchase truly affordable. As housing prices continue to outpace the annual increase in household incomes, it will take larger levels of subsidy to keep this equation affordable. Call the Florida Housing Coalition for additional assistance on considering the level at which to set your community’s maximum sales price or value.

Question:
Housing sales prices are on the rise, and our jurisdiction needs to increase its maximum purchase price. When will Florida Housing Finance Corporation release another bond study with average sales prices for my area that I can use to justify an increase to our maximum purchase price?
Answer:
Regardless of when Florida Housing next issues another sales price study, a study is not absolutely required to justify an increase to your jurisdiction’s purchase price. In the past several years, the U.S. Department of Treasury has regularly issued updated versions of its “safe harbor limits”. These are the figures referenced in section 67-37.007 (4)(d) 6 of the SHIP Rule, which states “the maximum area purchase price used must be that established by the United States Department of Treasury.” The SHIP Statute requires jurisdictions to set an upper limit on the value of a home that will be considered “eligible housing” for purposes of SHIP assistance. This requirement is outlined in section 420.9075 (4)(c) of the SHIP Statute:
“The sales price or value of new or existing eligible housing may not exceed 90 percent of the average area purchase price in the statistical area in which the eligible housing is located…. The average area purchase price may be that calculated for any 12-month period beginning not earlier than the fourth calendar year prior to the year in which the award occurs”.
A SHIP jurisdiction, therefore, has the flexibility to justify its maximum purchase price or value based on one of three sources: a local study of sales price levels in the past 12 months, Florida Housing’s bond study—which reports recent price levels for Florida’s metropolitan statistical areas, or the U.S. Department of Treasury’s safe harbor limits. If a county or city opts to pay for a local average home price study, Florida Housing must approve the methodology for this study. To obtain a copy of the most recent safe harbor limits, call the Coalition at 1 (800) 677-4548. Set your community’s maximum sales price or value at a realistic level that represents the sales price at which there are an adequate number of homes to buy. If this sales price is set too low, a SHIP homebuyer may be unable to locate a home in the local housing market. When housing prices rise or fall, communities must adjust their maximum sales prices accordingly.
Caution your commission, staff and applicants against the belief that your maximum sales price or value represents the local price tag for an “affordable house.” On the contrary, this price level is unaffordable—the price simply indicates the current value of modest homes in the local market. Several housing markets in Florida are not producing houses at a price that SHIP eligible buyers can afford—this is why they need SHIP subsidy. It is the combination of a buyer’s first mortgage money and this subsidy that makes the equation of home purchase truly affordable.

Question:
SHIP’s definition of “affordable”is confusing to me. Does it state that housing costs must be less than 30 percent of the homebuyer’s monthly income?
Answer:
The answer to this question is no, and it reveals a lesson about a central concept defined in the
SHIP Statute. The definition of “affordable” is in the definition section of the SHIP Statute. It means that “monthly rents or monthly mortgage payments including taxes and insurance do not
exceed 30 percent of that amount which represents the percentage of the median annual gross income for the households as indicated in subsection (19), subsection (20), or subsection (28).” This definition makes reference to the 19th, 20th and 28th definitions in the SHIP Statute, which respectively address the definitions of a low-income, a moderate-income and a very low-income household. Each definition cites a percentage—80 percent in the case of low-income, for example—that represents the maximum percentage of the area median income that a household can earn and still qualify to be in that income category. Now reconsider the definition of “affordable.” When addressing a low income household, for example, affordable means that housing costs do not exceed 30 percent of that amount which represents 80 percent of area median income. This definition is similar but distinct from another way that housing professionals commonly talk about affordable. We commonly talk about devoting up to 30 percent of a household’s income to housing costs. We might, for example, discuss the mortgage payment of
a low-income family earning 60 percent of the area median income. If we know that 60 percent of the monthly area median income is $1500, we would calculate that monthly housing cost of no more than about $450 is affordable for the family under consideration. Using the SHIP definition of affordable, however, we would conclude that an even higher housing cost is consistent with the definition in the statute. Considering the income of the same family, the SHIP definition would conclude that a housing cost of up to $600 is affordable. Although the household in this example has income equivalent to 60 percent of the area median income, SHIP’s definition of affordable housing for a low-income family means that housing costs do not exceed 30 percent of that amount which represents 80 percent of area median income. In this example, 80 percent of the monthly area median income is $2,000 and 30 percent of this income is $600.

Question:
Follow-up question: I understand what you are saying. In fact, SHIP’s definition of
“affordable” continues on with an additional sentence that notes that “it is not the intent to limit an individual household’s ability to devote more than 30 percent of its income for housing.” How does this second half of the definition relate to what you are saying above about affordability?
Answer:
The final part of the definition notes that “housing for which a household devotes more than 30
percent of its income shall be deemed affordable if the first institutional mortgage lender is satisfied that the household can afford mortgage payments in excess of the 30 percent benchmark.” This brings up the other important lesson in the definition. It indicates that a SHIP administrator may rely on the guidance of a mortgage officer who concludes that a specific buyer can afford monthly payments that are higher than 30 percent. After all, lenders are in the business of assessing risk on the loans they offer. It is conceivable that a lender could approve a mortgage payment representing 32 percent, 34 percent or maybe 36 percent of a buyer’s monthly income; some buyers can demonstrate that they have consistently and successfully made high rent payments for years. They can now do the same with a mortgage. SHIP staff must also assess risk, however. There is risk involved with simply relying on a first mortgage lender to tell you what is a truly affordable payment. When the Florida Legislature modified the SHIP definition of affordable in 1994, there were few examples of lenders engaging in “predatory practices.” It seemed more reasonable to solely rely on a lender’s assessment of risk. In recent years, we
are increasingly faced with lenders who provide unfavorable lending terms and conditions that can set up a buyer to fail. To protect the interests of SHIP-assisted homebuyers, a growing number of SHIP administrators have worked with their most active lenders to establish local “lenders guidelines.” These guidelines define the terms of what would locally be considered an acceptable first mortgage for a SHIP-assisted buyer. The lenders guidelines in most communities set an upper limit for the front-end ratio, the percentage of monthly income devoted to a mortgage payment. Guidelines may also set an upper limit for the mortgage interest rate and for the closing fees associated with the loan. In this way, lenders guidelines provide the protection needed to ensure that SHIP buyers do not over-commit themselves to mortgage payments. The guidelines supplement SHIP’s definition of affordability to avoid the need for SHIP administrators to rely on the assessment of lenders in each individual case. Now consider the SHIP definition of “affordable” as a whole. What implications do these lessons about this definition have for our work? On the positive side, housing administrators may have more flexibility than they may have originally thought to help applicants purchase houses. On the other hand, the definition could possibly set up homebuyers to fail by allowing them to take on unaffordable high mortgage payments. SHIP administrators reduce the risk of foreclosure by working with the buyer and the lender to discuss the reality of what maximum mortgage payment is affordable for each buyer. If desired, a local SHIP jurisdiction can add language to its local housing assistance plan stating the percentage of each specific household’s monthly income that housing costs cannot exceed. In addition, lenders guidelines can provide the formal written guidance that establishes the true definition of affordability for a specific community. The Coalition can provide you with additional direction on how to address this issue in your SHIP program.

Question:
Does the SHIP Rule prohibit providing assistance to a person who is obtaining a first mortgage from an individual rather than through a lending institution?
Answer:
No, the SHIP Rule does not expressly require that the lender be institutional in nature, and allows for this lending arrangement, known as "Purchase Money Mortgages." In a traditional lending situation the lender or first mortgage holder has the responsibility of ensuring that the applicant has the ability to pay the monthly payments on the mortgage, as well as numerous other responsibilities, including arranging for insurance, termite inspections, surveys and doc stamps, and ensuring clear title. As you know, assuring that a low-income homebuyer can afford a monthly payment is critical to a successful affordable housing program. Without a mortgage lender in the process, however, the local jurisdiction's SHIP administrator will need to take on the above responsibilities in order to protect the low income borrower, as well as evaluate the borrower's income, assets, and ability to pay prior to approving the loan for the second mortgage for the down payment assistance. These could prove to be burdensome tasks for a busy SHIP administrator who must, in addition to the above, verify and certify that the applicant is income-eligible to receive assistance. As stated in the SHIP act, the Legislature intends for the SHIP program to provide the maximum flexibility to local governments to determine the use of funds for housing programs, while ensuring accountability for the efficient use of public resources and guaranteeing that benefits are provided to those in need. In the spirit of the law, the Florida Housing Finance Agency Staff suggest that good, common-sense business practices be employed when awarding funds and managing your program. Should a local jurisdiction decide that "Purchase Money Mortgages" are a viable alternative to the more traditional approach, a system needs to be developed and maintained to enable the jurisdiction to take on the additional responsibilities outlined above.

Question:
May a person who currently owns a mobile home but is requesting assistance to replace the mobile home be counted as a first-time homebuyer?
Answer:
The SHIP Rule does not define first-time homebuyer, but leaves that definition up to each local jurisdiction. The Federal Mortgage Revenue Bond program defines a first-time homebuyer as someone who has not owned a home for the last three years. This definition can be used as a guide. Several programs also include displaced homemakers as eligible first time buyers. The HOME program defines a displaced homemaker as an adult that has not worked full time, full year in the labor force for a number of years, but has, during such years, worked primarily without renumeration to care for the home and family, and who is unemployed or underemployed and is experiencing difficulty in obtaining or upgrading employment. Many communities have targeted mobile homes for replacement, and allow assistance to mobile home owners under their definition of first-time homebuyer.

Question:
Do I pay documentary stamps and intangible taxes on my SHIP second mortgage when I assist a home buyer?
Answer:
Documentary stamps must be paid on SHIP second mortgages. However, intangible taxes do not have to be paid on SHIP second mortgages. The statutory basis for this is outlined in Chapters 199 and 201, F.S. Section 199.183 (1), F.S., addresses the intangible tax. It states that "intangible personal property owned by this state or any of its political subdivisions or municipalities shall be exempt from taxation under this chapter." Regarding SHIP transactions, conversations with the Florida Department of Revenue have confirmed that SHIP funds are the property of the state's municipalities and are considered to be "intangible personal property" discussed in this statute. Therefore, SHIP second (or third) mortgages are exempt from intangible taxation. Section 201.08 (1), F.S., addresses the documentary stamp tax. The State requires that all notes or mortgages be subject to this tax and that the Florida Legislature must explicitly state if a certain type of transaction is exempt from the tax. The Legislature has not provided an exemption for SHIP transactions.

Question Regarding CLT Purchase: Every time we assist a homebuyer with purchase assistance, we confirm that the sales price of the purchased unit does not exceed our community’s maximum purchase price. Our community is now one of several Florida communities beginning to build housing using the Community Land Trust (CLT) model. When checking the maximum purchase price, it does not seem fair to include the value of land for a CLT house, since the buyer does not purchase the land. That is one of the fundamental methods that CLTs use to keep home prices affordable. Do I count land value when confirming that the sales price of a CLT house does not exceed our community’s maximum purchase price?
Answer:
No, you do not count the value of land in the purchase price of a community land trust unit. The answer to this question may be found in the SHIP Rule. Section 67-37.005 addresses the details of the Local Housing Assistance Plan. Subsection (5) outlines the information to be provided for each use of SHIP funds, including the maximum purchase price or value of a unit that may be considered eligible housing. This value “can be lower but may not exceed 90 percent of median area purchase price established by the U.S. Treasury Department, or as required by Section 420.9075(5)(c), F.S.” This area of the SHIP Rule was expanded in 2006 to address the topic of community land trusts. Subsection (5)(d) now states, “for community land trust purposes the value of the land is not included in the purchase price.”

REHABILITATION TOPICS
Question:
A rehabilitation applicant has a masonry house that was originally a mobile home. The unit's roof and walls have been built around the mobile home, and more rooms have been added outside the mobile home perimeter. Is this considered eligible housing for the SHIP program?
Answer:
According to the Codes and Standards office at the Florida Department of Community Affairs, the house in question does not meet Chapter 553 standards since it does not comply with plumbing, electrical, venting and structural code requirements. As of 2009, a newer mobile home is considered eligible housing for SHIP assistance. Addressing the needs of the home in question is an eligible SHIP activity, so long as the unit was manufactured in 1994 or after. This house will undoubtedly require significant rehabilitation. Consider if the expense involved might justify providing a replacement house as an alternative. For more information to determine if a house meets Chapter 553 standards, contact the DCA Codes and Standards office at (850) 487-1824.

Question:
An applicant has requested rehabilitation assistance for a duplex. The applicant’s daughter lives in the other half of the duplex and she pays rent. There is one legal description for the duplex and only one insurance policy. The daughter’s name does not appear on the deed. Can I provide assistance to this unit?
Answer:
Yes, you can provide rehabilitation assistance, but several conditions must be met. First, the daughter’s half of the duplex is considered a rental unit—even though she does not pay rent—since the applicant does not reside in that portion of the duplex. In order to provide rehabilitation assistance, your Local Housing Assistance Plan (LHAP) must include a rental rehabilitation strategy. Any repairs to the rental portion of the duplex must be attributed to the rental rehabilitation strategy. Moreover, the rental unit is subject to all the requirements for using SHIP funds with rental housing, as outlined in Section 420.9074, subsections 3(e) and 4(f). Specifically, the rental unit must be “reserved for (a SHIP income) eligible persons for 15 years or the term of the assistance, whichever period is longer.” Also, if the rehabilitation loan is more than $3000, the rental unit must be annually monitored to determine tenant income eligibility and to ensure that the rent is at an affordable level. Other requirements must also be met. The value of the home cannot exceed the value limit listed in your LHAP. Also, the rent that the daughter pays must be included in the applicant’s household income when determining income eligibility.

Question:
At what point in the process of rehabilitating a house should I place a security instrument on the homeowner's property?
Answer:
As a best business practice, secure the property prior to starting rehabilitation. This is the same practice that a home improvement contractor would follow. It prohibits the home owner from selling his or her house while construction is in process without resolving the debt incurred using public funds. Before your contractor starts repairs, have the home owner sign a security agreement for the amount of the contractor's bid. To be fair to the home owner and to be mindful of careful spending of public funds, always file an updated security instrument when the final cost of repairs is actually less than initially anticipated. In some instances, however, change orders will increase the final cost of the rehabilitation. You can choose to file an updated security instrument that accurately records the larger repair amount, especially if the additional amount is several hundred dollars or more. You can, however, choose to simply leave the original security instrument in place and provide the extra SHIP funds in the form of a grant. Note that this is a different policy than those of federal programs like CDBG or HOME, which require the security instrument to accurately document specific final cost of repairs.

Question:
A rehabilitation applicant has asked if the SHIP program can purchase a washer and dryer for her home. Is this an eligible expense, and have other SHIP jurisdictions used their funds in this manner?
Answer:
Ultimately, SHIP funds must be used to provide eligible housing for eligible persons. Section 67-37.002(12) of the SHIP Rule states that “rehabilitation means repairs or improvements which are needed for safe or sanitary habitation, correction of substantial code violations, or the creation of additional living space. Local plans may more specifically define local rehabilitation standards.” This definition justifies the purchase of refrigerators and stoves, which are often considered necessary for safe and sanitary habitation. Washers and dryers, however, do not pass this same standard of justification. The Coalition is not aware of any SHIP jurisdiction that purchases washers and dryers with SHIP funds as part of its rehabilitation strategy, although some use their funds to purchase refrigerators and stoves.

Question:
Does the State require that all SHIP-assisted units carry hazard insurance? Should we require it? What if the homeowner can't afford it?
Answer:
No. The State does not require that all units assisted with SHIP funds be covered under an insurance policy and it is not uncommon for very low and low income persons not to have insurance on their home. It is probably a good idea to require that the homeowner who receives substantial rehabilitation assistance to carry hazard insurance, at a minimum. This will cover the cost of potential loss due to fire or other disasters, and will help protect the jurisdiction's investment in the unit. But this approach is not without its administrative burdens. Consider potential difficulties enforcing a provision requiring that insurance be maintained on repaired homes. A mortgage would have to be filed with a standard hazard insurance clause, insuring that the mortgagor (the SHIP program) will be notified if insurance ever lapses. Also, the SHIP program would need to have a remedy available if the owner fails to maintain the insurance. SHIP funds may be used to purchase hazard insurance, although you must arrange to pay for the coverage upfront in a lump sum; some jurisdictions have successfully purchased up to three years of insurance upfront. This allowed them to file a SHIP lien, complete assistance to the repaired unit, and close the file.

The decision to make insurance a requirement of rehab eligibility should be weighed against the amount of SHIP subsidy, the additional administrative burden in maintaining that the policy does not lapse. Consider the homeowner's need to maintain the unit as affordable, and also the cost of insurance if SHIP funds are used to purchase it as a last resort.

Question:
Is construction management which is outsourced considered a project soft cost?
Answer:
Yes, construction management activities, including work write-ups, inspections, and contractor oversight are all related to project delivery, and are considered to be soft costs. Soft costs can be paid with program funds rather than tapping into the very limited SHIP administrative funds. There is one notable exception of this policy: if a feasibility test results in a "no-go" decision, then the construction management costs for that unit cannot be paid from program funds, because there is no work performed on the unit. It must instead be charged to administrative funds.
Here is a soft cost example: an owner-occupied rehabilitation job is estimated to cost $20,000 in materials and labor. Your construction management company charges you $500 to manage the project, perform the work write-ups and inspections, and provide contractor oversight. The total amount of the job is now $20,500.
If you have a maximum per unit cap of $20,000, then you must reduce the amount of work to be done by $500, so that the total job cost is $20,000. If for some reason this is not feasible, then the construction management fee of $500 must be paid from the administrative portion of your SHIP funds. As an alternative, you may get the approval of the local governing body on a case by case basis to exceed the maximum per unit amount. Documentation of this approval must be retained in the individual applicant file.

Question:
What are the requirements for lead based paint abatement on a SHIP assisted unit?
Answer:
SHIP assisted units must meet Chapter 553 F.S. Building Construction Standards, which does not require lead based paint abatement. However, if the unit will also be assisted with SHIP in conjunction with any federal housing dollars, then lead based paint requirements apply. If the local jurisdiction has adopted local building construction standards which require abatement of lead-based paint in its Local Housing Assistance Plan, then staff must conduct lead-based paint abatement procedures on the SHIP units.

Question:
What are the rules regarding rehabilitation of a unit located in a flood zone?
Answer:
If the cost of the rehabilitation is greater than 50 percent of the value of the home, excluding the land, then the home must be elevated so that it is above the 100 year base flood level. This is federal law in conjunction with the National Flood Insurance Program administered by the Federal Emergency Management Agency. In the velocity zone, the cost of the repairs made to the home is required to be tracked on a cumulative basis over five years. If the cost of the rehabilitation over this five year period is greater than 50 percent of the cost of the home, excluding the land, then the home must be elevated. This is state law. SHIP administrators should be aware of these, and any other local codes which govern construction-related practices within their communities. However, the responsibility for implementing these laws and practices ultimately falls to local building department officials.

Question:
Is the installation of central air conditioning an eligible SHIP rehabilitation expense?
Answer:
Yes. In most parts of Florida air conditioning is a necessity for the health and safety of the occupants living in the units. Previous experience with housing programs that do not allow for the installation of air conditioning has shown that people will find a way to cool their home. This often means the purchase of very old, very inefficient window units. These window air conditioners can greatly increase a family's monthly utility bills, drastically reducing a family's ability to meet their other monthly bills.

Question:
When we rehabilitated a house, we were unprepared for the number of change orders that have come up. Now, in order to complete the repair work, the cost will exceed the maximum per unit amount set in the local Housing Assistance Plan. How can we proceed?
Answer:
You may exceed the maximum per unit amount, with approval from the local governing body, on a case-by-case basis. However, if this occurs frequently, you may need to either evaluate the completeness and accuracy of the initial work write-up or update your local housing assistance plan to raise your per unit maximum award. In some communities, it is a common practice to build a contingency amount into each work write-up to address these situations.

Question:
We have an elderly couple who have applied for rehabilitation assistance. Their home is a life estate. Is this considered owner-occupied?
Answer:
Generally yes. It is common for elderly persons to place their property in trust as a means of providing for their children after they are gone. Local governments can decide how they want to define ownership. In some communities, the local government has decided to tightly define ownership and in many cases will not provide assistance to a home if the deed is held in another family member's name, or if there are judgments against the owner, such as those in favor of the local government for payment of back taxes. While this may seem like a prudent and wise use of public funds, these types of policies do little to address the furtherance of overall community improvement through affordable housing activities, not to mention that the households which are denied assistance in these instances may have no choice but to continue to live in substandard units.

AHAC Affordable Housing Advisory Committee

2010-02-13T07:05:00.000-08:00

Question:
What are the responsibilities of a local Housing Advisory Committee? Is my community required to have this Committee?
Answer:
An Affordable Housing Advisory Committee (AHAC) is appointed by governing board of a local jurisdiction as required by Section 420.9076, F.S. Its purpose is to provide recommendations for strategies to reduce regulatory barriers to developing affordable housing in the community. The statute requires that the recommendations be presented to the local governing body, which must amend the Local Housing Assistance Plan (LHAP) to incorporate Local Housing Incentive Strategies. These strategies must be adopted within one year of adopting the LHAP. Furthermore, every three years, the jurisdiction’s AHAC must review the housing incentive strategies in the Local Housing Assistance Plan. They should consider that the SHIP plan may also include other regulatory reforms, such as those enumerated in s. 420.9076 or those recommended by the advisory committee, if they are adopted by the local governing body. There is one exception: local governments that receive the minimum allocation under the SHIP program shall perform an initial review and report in 2008, but may elect to not perform the triennial review thereafter. In such a minimum distribution jurisdiction, the advisory committee could be discharged from service.
Many communities, however, have chosen to maintain their advisory committees and charge them with additional responsibilities. Some committees serve to review new local policies for their impact on the development of affordable housing. Other committees may work with SHIP staff to consider ways to enhance the housing strategies outlined in the Local Housing Assistance Plan. The AHAC in some communities serves as a more formalized version of the local housing partnership of lenders, builders, contractors and citizens that advises on implementation of the LHAP. It becomes an entity that provides the SHIP administrator with input and feedback from the community so that the SHIP program is highly responsive to local needs. Another way the AHAC is used is in the creation of locally adopted guidelines, policies and procedures that the SHIP staff follow to implement the housing strategies. For example, some AHACs have participated in the development of lending guidelines for a down payment assistance program. The implementation of the guidelines and policies is the responsibility of the SHIP Administrator, however. The AHAC should be exclusively advisory, and as such, an AHAC should not play an operational role.

Question:
Please clarify the role of the local housing partnerships and distinguish it from the local affordable housing advisory committee.
Answer:
Since the SHIP statute addresses both entities, it is easy to become confused on this issue. Section 420.907, Florida Statutes-the SHIP statute- details specific information about the formation, powers and duties, and required membership of the affordable housing advisory committee. Advisory committee members must be appointed by local government resolution, must follow all laws related to government in the sunshine, and has as its specific statutory charge the recommendation of local housing incentive strategies to the local governing body. After the incentive strategies have been recommended, the duties of the Advisory Committee are fulfilled, and the statute makes no further requirements from the local government of the committee. Having no further responsibilities, the local government may sunset the advisory committee, or may elect to maintain the committee for the express purpose of reviewing the implementation of the incentive strategies and recommending additional incentive strategies to expedite the production of additional affordable units. The Florida Housing Finance Agency has stated that if the local government wishes to amend its incentives that were adopted in the original HIP, the advisory committee shall be a part of that process.
The Affordable Housing Partnership While the presence of a locally formed affordable housing partnership is an integral part of the SHIP program, the statute gives no specific powers and duties to this partnership, but does give general information as to its membership. The legislative intent is to combine local resources to the extent that the effort will reduce the cost of producing or providing decent and affordable housing. It is important to note that the statute does not intend for the partnership to be formally constituted as a corporate body. The Legislative intent is to encourage partnerships in order to secure the benefits of cooperation of the public and private sectors and to reduce the cost of housing by effectively combining all available resources and cost-saving measures. Implementation of Intent Each community utilizes its partnership differently. While providing technical assistance in communities throughout the state, I have noticed that the most successful partnerships are those in which the membership is broad and inclusive and each member brings a service or product to the table which maximizes the value while reducing the cost of affordable housing within the community. I have also noticed that in many successful communities the partnership functions in an oversight capacity only, assisting with setting the direction of the program through suggesting policy to the local governing body and making specific recommendations for improving the overall program and amending the local housing assistance plan. Many of these successful partnerships may also review the internal administrative policies and procedures of the local program, and make suggestions for improvement directly to the program administrator, as well as to the local governing board. In most cases, quarterly meetings are adequate to perform these functions. In some communities, the appointed advisory committee functions as the partnership, with expanded responsibilities such as serving as a loan committee or otherwise assisting with applicant processing and other administrative duties. This type of arrangement can be counter-productive to a program, adding another layer of bureaucracy to the process. This additional layer of review often results in a poorly-run program, less production of affordable units, potential conflict of interest issues, negative attitudes and NIMBYism by the community at large and the target population, and potential program compliance problems. I would encourage local jurisdictions who have maintained their originally constituted advisory committees to utilize the individual member expertise and enthusiasm of advisory committee members through their participation in a local partnership. No matter what name is given to this partnership, it should include appropriate representation of all related industry and community interests. The statute states that the specific participants in partnership activities may vary according to the community's resources and the nature of the local housing assistance plan. Since each community's program and resources are unique, there is no Aright way to form and utilize your partnership. The Coalition stands ready to assist you with tailoring your community partnership to best meet local needs. Should the local governing board wish to maintain the original formalized affordable housing advisory committee as constituted by local resolution, this committee should actually participate as a sub-set of the broader partnership, having the responsibility of a watchdog over efforts to reduce regulatory barriers which have a negative impact on the overall production of affordable housing. Regardless of which approach is used, having your community partners actively participate in your affordable housing program will enhance local government efforts to provide decent, safe, and affordable housing for low-income people in your community.
The SHIP Statute also addresses the role of the Advisory Committee. Section 420.9076, Florida Statutes, states that the governing board from each community which receives a direct distribution of funds from the state shall appoint the members of the affordable housing advisory committee by resolution, such members being specifically representative of certain industries related to affordable housing. The advisory committee will review all established policies, procedures, ordinances, land development regulations, and adopted local comprehensive plan and make specific recommendations of initiatives to the governing board to encourage or facilitate affordable housing. The appointment of the committee and the adoption of the housing incentive strategies must take place within 12 months after the original adoption of the Housing Assistance Plan. The Partnership: Section 420.9072, F.S., states that "the Legislature finds that affordable housing is most effectively produced by combining available public and private resources to conserve and improve existing housing and provide new housing for very low, low, and moderate income households. The Legislature intends to encourage partnerships in order to secure the benefits of cooperation of the public and private sectors and to reduce the cost of housing for the target group by effectively combining all available resources and cost-saving measures." The intent is to "achieve this combination of resources by encouraging active partnerships between government, lenders, builders and developers, real estate professionals, advocates for low-income persons, and community groups to produce affordable housing and provide related services." Section 420.9075 (2)(a) F.S., further states that "each county and each eligible municipality participating in the SHIP program shall encourage the involvement of appropriate public sector entities as partners . . ." and details the specific representation of the partnership. Section 420.9075(2)(b) F.S., states that "The specific participants in partnership activities may vary according to the community's resources and the nature of the local housing assistance plan."

Question:
How does the Sunshine Law apply to our SHIP advisory committees?
Answer:
When dealing with advisory committees it is very important to keep in mind the requirements of Florida's open meetings laws. Any Board of County Commission appointed committee that is part of a fact finding commission, or any board or committee that has final decision making authority is covered by these laws. There is a strong legislative and judicial presumption in favor of openness. If you have any questions about these requirements, consult with your city attorney, county attorney, or other appropriate legal counsel.

Question:
Do I have to use the AHAC Report Template provided by the Housing Coalition (first developed in 2008)?
Answer:
No, this report outline is available for use, but not required. However, the FHFC staff asked that we remind everyone that the Incentive items A through K as outlined in the statute must be included in the report along with the advisory committee’s recommendation.

Question:
Our Advisory Committee report is going to the Board of County Commissioners on November 12 before a December 31st deadline. Will November 12th mark the start of our 90-day clock for the Board to adopt any incentives or do we still have until March 31 of next year?
Answer:
Your 90-day clock begins when the Advisory Committee presents their report to the Board. The last day allowed by statute to submit the report to the governing body is December 31, making the 90-day deadline March 31 of the next year. According to FS 420.9076 (6) “Within 90 days after the date of receipt of the local housing incentive strategies recommendations from the advisory committee, the governing body of the appointing local government shall adopt an amendment to its local housing assistance plan to incorporate the local housing incentive strategies it will implement within its jurisdiction. The amendment must include, at a minimum, the local housing incentive strategies required under s. 420.9071(16). The local government must consider the strategies specified in paragraphs (4)(a)-(k) as recommended by the advisory committee.”

Question:
I am reviewing the dates that are in the timeline created by the Housing Coalition. Are the dates listed just suggested or are they required by rule and statute?
Answer:
The SHIP statute and rule are very clear regarding due dates for meeting the requirements of the AHAC committee. Some items, such as the Public Hearing, are suggested to give the AHAC members enough time to advertise, hold the public hearing and submit the final report by the statutorily defined December 31 deadline.

Question:
Our Affordable Housing Advisory Committee does not want to make any changes to the LHAP now, but wants to wait until January since we have a new LHAP due in May.
Is this acceptable?
Answer:
No. The Affordable Housing Advisory Committee is required by FS 420.9076 to meet every three years to review regulatory barriers to affordable housing. The AHAC must make recommendation on items A through K and submit a report to the governing board by December 31 on a three year cycle. Incentives shall be adopted by amending the LHAP within 90 days and then forwarded to FHFC by May 2. They should follow the statute and rule time line.

Question:
Can the County Commissioners approve the incentives and adopt the amendment to the LHAP at the same time or do they have to approve the incentives before adoption into the LHAP?
Answer:
There is nothing in the statute or rule that requires the incentives to be adopted prior to amending your LHAP. However, the incentives that will be adopted may require a Comprehensive Plan Amendment, Ordinance or policy change that will need to be approved by your Board separately. FS 420.9076 states: (6) Within 90 days after the date of receipt of the local housing incentive strategies recommendations from the advisory committee, the governing body of the appointing local government shall adopt an amendment to its local housing assistance plan to incorporate the local housing incentive strategies it will implement within its jurisdiction.

Question:
Is it the approval of the incentives that has to be by resolution or the adoption of the amendment to the LHAP that has to be the resolution?
Answer:
The amendment to the LHAP must be adopted by Resolution.

Question:
Can we split our AHAC committee into two sub-committees; one to review items a-k and another to review our LHAP since it is due on May 2 of the following year?
Answer:
The statute is clear in its intent and AHAC membership, therefore the entire committee should meet in accordance with FS 420 9076 (4),
“ ... the advisory committee shall review the established policies and procedures, ordinances, land development regulations, and adopted local government comprehensive plan of the appointing local government and shall recommend specific actions or initiatives to encourage or facilitate affordable housing while protecting the ability of the property to appreciate in value. The recommendations may include the modification or repeal of existing policies, procedures, ordinances, regulations, or plan provisions; the creation of exceptions applicable to affordable housing; or the adoption of new policies, procedures, regulations, ordinances, or plan provisions, including recommendations to amend the local government comprehensive plan and corresponding regulations, ordinances, and other policies. At a minimum, each advisory committee shall submit a report to the local governing body that includes recommendations on, and triennially thereafter evaluates the implementation of, affordable housing incentives…”
However the statute and rule do not require the LHAP to be reviewed by the AHAC. This is a local decision only. If your city/county decides that it wants the AHAC to review the new LHAP, there will be ample time since the Incentive Strategy Report is due in December and your new LHAP is due over four months later.

Question:
When my Commission approves the AHAC incentive plan, does there have to be a public hearing?
Answer:
The statute only requires a public hearing when the Advisory Committee takes its vote on the local housing incentive strategies recommendations. Section 420.9076 (5) of the SHIP Statute provides the following information regarding the public hearing:
“The approval by the advisory committee of its local housing incentive strategies recommendations and its review of local government implementation of previously recommended strategies must be made by affirmative vote of a majority of the membership of the advisory committee taken at a public hearing. Notice of the time, date, and place of the public hearing of the advisory committee to adopt final local housing incentive strategies recommendations must be published in a newspaper of general paid circulation in the county. The notice must contain a short and concise summary of the local housing incentives strategies recommendations to be considered by the advisory committee. The notice must state the public place where a copy of the tentative advisory committee recommendations can be obtained by interested persons.”
The rule and statute do not require an additional public hearing when the Commission votes on the recommendations, so unless your local policy dictates otherwise you can have the incentives adopted by an amending resolution to your Local Housing Assistance Plan during a regular board meeting.

Question:
When we advertise the public hearing for our AHAC incentives, how much notice are we required to give?
Answer:
Both the rule and the statute are silent on this issue, so check to see if you have any local policies that govern advertisement of public hearings. If not, 15 to 30 days notice would provide sufficient time for the public to review the plan and make arrangements to attend.

Question:
What will be required if the AHAC does not make recommendations on changes to the current incentives or recommends new incentives? Also, what if the Board does not adopt any new incentives and keeps the current two required incentives as they currently exist in the LHAP.
Answer:
You must produce an Advisory Committee’s report which provides evidence that the incentives listed in 420.9076(4), F.S. have at least been reviewed and the AHAC made the recommendation that no changes be made. This must be provided to FHFC and your City or County Commission. A copy of the report must be submitted to FHFC as outlined by 420.9076 (7):
“The governing board of the county or the eligible municipality shall notify the corporation by certified mail of its adoption of an amendment of its local housing assistance plan to incorporate local housing incentive strategies. The notice must include a copy of the approved amended plan” and 67-37.010 (3) “The county or eligible municipality shall transmit to the Corporation an electronic copy of the report which has been submitted to the local governing board for consideration by May 2 of the year following the report due date.”
Each local government LHAP currently includes the two required incentives. If the local government decides that no new incentives, other than the two required incentives are needed at this time, then no amendment is required. However, if there are changes to the two required incentives including policies or procedures, then a technical revision to the plan to incorporate those changes would be required. In addition, if the local governing body decides to implement any of the other incentives listed in 420.9076, F.S., then an amendment to include the new incentives in the LHAP would be required. By definition of Plan Amendment in 420.9071(22), F.S.:
(22) “Plan amendment” means the addition or deletion of a local housing assistance strategy or local housing incentive strategy. Plan amendments must at all times maintain consistency with program requirements and must be submitted to the corporation for review pursuant to s. 420.9072(3). Technical or clarifying revisions may not be considered plan amendments but must be transmitted to the corporation for purposes of notification.”

Advertising Questions

2010-02-12T07:04:00.000-08:00

Question:
Do I have to advertise if the city later funds a strategy that is currently unfunded, like our disaster strategy?
Answer:
Yes, you should advertise. When you first advertise upon receiving your new SHIP allocation in July, you can advertise that the city has a disaster strategy that will be funded pending a disaster or need. This will fulfill the requirement in Florida Statutes: "The county or eligible municipality or its administrative representative shall advertise the notice of funding availability in a newspaper of general circulation and periodicals serving ethnic and diverse neighborhoods, at least 30 days before the beginning of the application period. If no funding is available due to a waiting list, no notice of funding availability is required." Section 420.9075 (3)(b)Florida Statutes However, even in this case, you might still want to further advertise and inform your community about the disaster strategy once a disaster occurs.

Question:
Can I advertise for my next year's funds at the beginning of June, so I can take applications 30 days later on July 1 when I start to receive funds from the next allocation year?
Answer:
Yes you can. The advertisement requirements are outlined in the Statute and in greater detail in the Rule: 67-37.005 (6)(a).

Question:
After the last hurricane, we made use of the State’s SHIP disaster strategy to provide recovery assistance. Should we prepare now for the possibility of a future disaster by advertising that SHIP funds may be used for disaster response if such a disaster occurs?
Answer:
Since your jurisdiction is not currently experiencing a disaster, you have not currently budgeted
any funds for disaster recovery. Yet it may be a good practice to advertise now, as you suggest, for the possibility that SHIP funds may be spent for disaster recovery if such a disaster occurs in the next year. After all, the SHIP Statute requires you to advertise the specific ways you will use your SHIP funds at least 30 days before accepting applications for a specific type of assistance. In the past, you made use of the State’s general SHIP disaster strategy, which was created in response to the hurricane disasters of 2004. For the period when an executive order or emergency rule is active, any jurisdiction may provide all the types of disaster assistance that are outlined in the State’s disaster strategy—even if the same type of assistance does not exist in the jurisdiction’s current local housing assistance plan. Remember, however, that Florida Housing now requires each SHIP jurisdiction to include a disaster strategy within its local housing assistance plan. This requirement was recently added to section 67-37.005(7) of the SHIP Rule. You could consider adopting Florida Housing’s standard strategy language. If you do this, make sure to omit any emergency rule language about assistance that is not normally allowed under the regular SHIP Rule or Statute.

In the past, the Housing Coalition has offered a workshop on Disaster Preparedness. The three stages of disaster recovery are Emergency Response (providing emergency shelter), Relief (short-term housing) and Recovery (rebuilding). The design and requirements of most housing funds used by the workshop participants do not allow them to be first responders. While SHIP funds may be used to purchase blue plastic tarps, for example, the purchase of generators and gasoline is outside the boundary of eligible expenditures. Instead, affordable housing program resources are most valuable during the Recovery phase of emergency response. Many housing strategies that have become common across Florida are focused on long-term housing recovery , including rehabilitation, housing replacement, and the new construction of multi- and single family housing.

Disaster preparedness involves adopting a disaster strategy that offers a variety of aid, from temporary repair and payment of insurance deductibles, to rental deposit assistance. Advertise its availability now. In addition, prepare a Request for Quote (RFQ) to identify contractors, document their rates, and prepare to quickly mobilize them to help clean up after a disaster. It becomes more difficult to locate competent contractors once disaster strikes. Several workshop participants have witnessed this first hand. They have observed the recent decline in contractor interest for participating in their emergency repair and rehabilitation programs. Some, including the housing staff in Highlands County, have successfully attracted contractor attention by “bundling” together several repair jobs. Highlands County bid out 20 single-family units for rehabilitation, and received competitive responses from six contractors. Effective disaster response begins with planning. Contact the Coalition at (800) 677-4548 for further assistance with considering how to prepare your community.

Question:
On July 1, my county will begin receiving its new allocation of SHIP funds. I know that the county is required to advertise the availability of funds and begin taking new applications, but I have long waiting lists for all of my SHIP strategies. Will this give new applicants unrealistic expectations, when it will actually be some time before they receive assistance?
Answer:
In your community’s case, you do not have to advertise at this time, since you have a waiting
list. This exemption is outlined in section 420.9075 (3)(b) of the SHIP Statute, which addresses local housing assistance plans: “The county or eligible municipality or its administrative representative shall advertise the notice of funding availability… at least 30 days before the beginning of the application period. If no funding is available due to a waiting list, no notice of funding availability is required.” The statute is not specific about exactly how long a waiting list must be before you are not required to advertise. For this reason, your community should create its own policy on this issue. The frequency at which new applications are taken should be based on considerations like the rate at which you expend funds, how long it takes to process applications, the pace of the contractors you work with, and more.
Of course, a community might have a waiting list for one strategy, but not another. In this case, the community must advertise the availability of funding for the strategy with no waiting list. Furthermore, you should consider advertising now for strategies that are currently not funded, in anticipation of funding them sometime within the next year. A disaster mitigation strategy is the most common example of this situation. Such a strategy provides repair assistance in the aftermath of a natural disaster. By advertising now —even if the strategy is currently unfunded — your community will not have to comply with the 30-day advertising requirement at the time when a disaster strikes and a quick response is critical.

Follow-up Question:
If a jurisdiction does not have a waiting list and will advertise the availability of funds, does the jurisdiction have to wait to receive the first check of its next allocation before advertising?
Answer:
No. As noted in the SHIP Statute, you must provide 30 days of notice before taking new applications for SHIP assistance. Since you know that July 1 marks the day when you will begin to receive your new allocation, you may advertise starting as early as June 1. This will allow you to start taking applications on the day you receive new funds.

Additional SHIP Topics

2010-02-11T06:56:00.000-08:00

Question:
Does Florida’s Open Records law include an exemption for documents associated with individuals receiving SHIP housing assistance?
Answer:
No, SHIP housing files are not exempt from the Florida Open Records law. However, the law provides for a very limited exemption of certain information that may be included in the files of your housing assistance applicants. Chapter 119 of the Florida Statutes outlines what is commonly referred to as the open records law. The law is stated most directly in section 119.07:
“Every person who has custody of a public record shall permit the record to be inspected and examined by any person desiring to do so, at any reasonable time, under reasonable conditions, and under supervision by the custodian of the public record or the custodian's designee. The custodian shall furnish a copy or a certified copy of the record upon payment of the fee… of not more than 15 cents per one-sided copy.”
The Florida Statutes also outline a list of exceptions to the open records law. Section (3)(bb)1 of the Florida Statutes outlines several exceptions that are relevant to SHIP housing files: “Medical history records, bank account numbers, credit card numbers, telephone numbers, and information related to health or property insurance furnished by an individual to any agency pursuant to federal, state, or local housing assistance programs are confidential and exempt.” In addition, Section 119.0721 provides an exemption for social security numbers: “Effective October 1, 2002, all social security numbers held by an agency or its agents, employees, or contractors are confidential and exempt.” Despite these exemptions, it is strongly recommended that you check with your legal counsel prior to denying anyone access to a public record.

Question:
A local developer has requested information on all of our qualified applicants for solicitation purposes. Our County Attorney has advised that all our records are to be made available for public review, subject to Florida's open records laws. Please provide guidance.
Answer:
All records, including applicant files, are subject to Florida's open records laws. When an applicant applies for assistance, he should be made aware of this at the time of application. The local jurisdiction may charge a fee for copying, as well as charge for excessive time spent by a city employee who is supervising a person who examines the files. This sometimes acts as a deterrent to reporters or others who wish to use the information for solicitation purposes.

Question:
There are times when I need to add a Doctor’s letter to a SHIP file. For instance, our SHIP Rehabilitation strategy gives priority assistance to applicants that have a disabled household member so we obtain a letter from the applicant’s doctor for certification. Also, when a woman in the applicant’s household is pregnant, I obtain a letter from her doctor to document the unborn child as a household member. Is maintaining this information in a SHIP file, which is covered under Florida’s open record law, a violation of the privacy requirements of HIPAA?
Answer:
HIPAA is the Health Insurance Portability and Accountability Act of 1996. The HIPAA Privacy Rule creates national standards to protect individuals’ medical records and other personal health information. HIPAA includes provisions designed to encourage electronic transactions and also requires new safeguards to protect the security and confidentiality of health information. Health plans, health care clearinghouses, and those health care providers who conduct certain financial and administrative transactions (e.g., enrollment, billing and eligibility verification) electronically are considered covered entities and are required to comply with the provisions of the Privacy Rule. See ww.hhs.gov/news/facts/privacy2007.html for more information. HIPAA does not prohibit housing administrators from requesting and receiving an applicant’s medical information, provided proper authorization is given by the applicant. According to the health and human services’ web site (www.hhs.gov/ocr/hipaa):
"A covered entity is permitted to use or disclose protected health information pursuant to any Authorization that meets the Privacy Rule’s requirements
at 45 CFR 164.508. The Privacy Rule requires that an Authorization contain certain core elements and statements, but does not specify who may draft an Authorization (i.e., it could be drafted by any entity) or dictate any particular format for an Authorization. Thus, a covered entity may disclose protected health information as specified in a valid Authorization that has been created by another covered entity or a third party, such as an insurance company or researcher."
Florida has a very broad open records law. Although SHIP housing files are not exempt from this law it does provide an exemption for medical history records and other certain information that may be included in your housing assistance files. Section (3)(bb)1 of
Chapter 119 of the Florida Statutes reads: “Medical history records, bank account numbers, credit card numbers, telephone numbers, and information related to health or property insurance furnished by an individual to any agency pursuant to federal, state, or local housing assistance programs are confidential and exempt.” Prior to requesting medical history records, housing administrators need to ensure that their Authorization for Release of Information and their file maintenance procedures meet all HIPAA requirements. The HIPAA
rules are extremely complex. We strongly recommended that you check with your legal counsel to ensure compliance.

Question:
Disposition of Land: I know that the Florida Statutes include rules on how a city or county sells land that it owns. Does this prevent my city from donating land for the development of affordable housing?
Answer:
Your city is most definitely not prohibited from donating land. Section 125.35 of the Florida
Statutes outlines the way city or county owned land is to be sold: “No sale of any real property shall be made unless notice thereof is published once a week for at least 2 weeks in some newspaper of general circulation published in the county, calling for bids for the purchase of
the real estate so advertised to be sold.” However, Section 125.35 (3) addresses the issue of providing land in any manner other than selling it for the highest price: “the board of county commissioners may by ordinance prescribe disposition standards and procedures to be used by the county in selling and conveying any real or personal property”. With adoption of an ordinance as indicated in this Statute, a local government may outline a procedure for providing land at no-cost or low-cost for the development of affordable housing.
Additional justification for this activity is provided in Section 125.38 of the Florida Statutes. It notes that a local government, “if satisfied that such property is required for (the purposes of promoting community interest and welfare) and is not needed for county purposes, may thereupon convey or lease the same at private sale to the applicant for such price, whether nominal or otherwise, as such board may fix, regardless of the actual value of the property”.

Each city or county may create its own procedure for providing land for affordable housing. This procedure must be clarified and enacted in an ordinance. Manatee County, for example, references the Florida Statutes in a key section of its ordinance: “WHEREAS, from time to time, pursuant to § 125.38, Florida Statutes, the Board of County Commissioners of Manatee County may determine that property owned by the County is not needed for County purposes and could best be used for multi- or single family housing, and is authorized to convey such property to a not-for-profit organization organized for the purpose of promoting community interest and welfare, and is authorized to convey or lease the same at private sale to an applicant for such property at a price, whether nominal or otherwise, as such Board may fix regardless of the actual value of such property to be put to use to serve the community interest and welfare.” Manatee County’s ordinance continues on to explain that nonprofit organizations must complete an application to be considered for donated land, and land may only be used to develop affordable rental housing. Similarly, the ordinance adopted in Hillsborough County indicates that any group receiving donated land must use it “exclusively for charitable, educational, religious, scientific, character building or patriotic uses and purposes that are also without profit, including the erection thereon of buildings and other improvements necessary to carry out the nonprofit purposes and objects of such organizations”.

Question:
An applicant has asked me if the SHIP assistance she receives is considered taxable income that must be reported on her income taxes.
Answer:
The Florida Housing Finance Corporation (FHFC) has indicated that SHIP assistance would not be considered income. This is based on a similar issue regarding the pilot program using Section 8 funds to help pay for a mortgage. The FHFC compliance office concluded that this Section 8 assistance is not income since the Section 8 program placed a deferred payment loan lien on the recipient's house. Similarly, your SHIP funds are provided as a deferred payment loan. In addition, the legal counsel at the FHFC issued a legal opinion memorandum in 1997 indicating that SHIP assistance is not taxable income. “Because SHIP funds are analogous to a gift rather than a quid pro quo, they can be characterized as general welfare or welfare assistance payments. As such, they are not includible in the recipient’s income and local governments need not file Form 1099-C’s”.

Question:
Can SHIP funds be used for emergency shelters and/or transitional living facilities? How do you report units from a transitional housing facility?
Answer:
Emergency shelters and/or transitional living facilities, provided that they conform to the building construction standards in Chapter 553 of the Florida Statutes, are an eligible SHIP expense. For reporting units under a transitional housing strategy, count the number of beds.

Question:
The City is planning to provide SHIP funds to partially finance the construction of a shelter for children in the foster care system. Since these children are “wards of the state,” are there shortcuts available for documenting that they are SHIP income eligible, or do we have to go through the entire regular income qualification procedures?
Answer:
This question has been considered in other SHIP jurisdictions, where SHIP funds have partially
financed the construction of shelters similar to the one you are considering. In Lee County, for example, SHIP funds have helped build a run-away youth shelter and an addiction services shelter. The SHIP administrator developed a “streamlined intake system” for the youth shelter,
which notes that all the children staying there are automatically eligible for SHIP assistance. They are run-away children who are homeless. The HUD definition of homeless individuals recognizes that they are automatically considered low income since they cannot obtain housing due to a
lack of financial resources. The same intake system could be used for the foster children your question addresses. They also are essentially homeless without the resources to independently obtain their own housing. They automatically qualify for your SHIP assistance. There are two main points to remember: First, the Florida Housing Finance Corporation must review and officially accept the alternative income qualification process that you propose before you start using that process. Second, although the children receiving assistance are automatically income eligible, you must require the shelter managers to provide you periodic reports with demographic information about those children who are assisted at the shelter. You will need this information for your annual report. This report does not have to include the children’s names—shelter managers may want this information to remain confidential. Instead the managers may assign a code for each child’s name.

Question:
Our jurisdiction has a barrier removal grant strategy which provides up to $3,000 of modifications for a rental unit. Does the applicant’s current rent have to fall at or below the rent level listed in the rent limits chart for my jurisdiction?
Answer:
Yes, the applicant’s rent must be within the level allowed by the Rent Limits Chart. You
may find that the applicant is eligible based on income and household size; and yet the monthly rent exceeds the allowable rent in the chart. Rent affordability is still a fundamental factor for determining unit eligibility. In such a case, this rental unit is not eligible for SHIP modification assistance. It is important to note that annual monitoring and determination of tenant eligibility is not required for an original loan or grant in the amount of $3,000 or less as stated in Section 420.9075(3)(e). However, in the rental example provided, the total amount may exceed $3,000 if more than one unit was assisted.

Question:
Is there a requirement to document the citizenship or legal residency of SHIP applicants?
Answer:
No there is not. In 2007, the Florida Housing Finance Corporation addressed the citizenship/legal residency documentation policies found in the HUD Handbook 4350.3 CHG-2. Please note that the Florida Housing Finance Corporation has concluded that the section 3-12 F of HUD Handbook 4350.3 REV-1, CHG-2 does NOT apply to the SHIP Program. Therefore, the following guidance is provided:
If an individual is in the country illegally, it is not good public policy for him or her to benefit from public assistance. It may, in fact, be illegal. Consult your county/city attorney before proceeding further. SHIP administrators should consult with their attorneys in those instances when they are confronted with information that an individual is an undocumented alien. It is not necessary, however, for SHIP administrators to actively ask for proof of citizenship or legal alien status when qualifying applicants for SHIP assistance.

Question:
Do I pay documentary stamps and intangible taxes on my SHIP second mortgage when I assist a home buyer?
Answer:
Documentary stamps must be paid on SHIP second mortgages. However, intangible taxes do not have to be paid on SHIP second mortgages. The statutory basis for this is outlined in Chapters 199 and 201, F.S. Section 199.183 (1), F.S., addresses the intangible tax. It states that "intangible personal property owned by this state or any of its political subdivisions or municipalities shall be exempt from taxation under this chapter." Regarding SHIP transactions, conversations with the Florida Department of Revenue have confirmed that SHIP funds are the property of the state's municipalities and are considered to be "intangible personal property" discussed in this statute. Therefore, SHIP second (or third) mortgages are exempt from intangible taxation. Section 201.08 (1), F.S., addresses the documentary stamp tax. The State requires that all notes or mortgages be subject to this tax and that the Florida Legislature must explicitly state if a certain type of transaction is exempt from the tax. The Legislature has not provided an exemption for SHIP transactions.

Question:
Please clarify the SHIP Rule language effective in 2008 regarding the training of SHIP staff as defined in 67-37.005 (16).
Answer:
The language in 67-37.005(16) is intended to assure that new or inexperienced staff or staff taking on new responsibilities that are involved in the processing of SHIP applications, eligibility determination or other day to day administration of activities governed under the LHAP to be properly trained through the Catalyst Program. It is not intended to force training on staff that are already trained in the SHIP program nor is it intended to require training of local government staff that work in a tangential manner with the program (finance, auditing, etc.). The responsibility of asking for training will still primarily fall on the local SHIP administrators as it is a benefit to you, but the Florida Housing Finance Corporation will have the ability to require training when they see an issue that needs to be resolved.

Question:
Is there a limit to the number of amendments a local jurisdiction may file and does the time frame for filing an amendment to a LHAP ever expire?
Answer:
No. There is no limit to the number of amendments a local jurisdiction may file. Amendments to an approved LHAP must be adopted by local government resolution and a copy submitted to the FHFA's Review Committee within 21 days after adoption by the local government. A local jurisdiction may amend its LHAP at any time if it is determined that a strategy will not be used, or when adding another strategy. Note: an amendment is not necessary when shifting funds between approved strategies in the LHAP, but a copy of the new Housing Delivery Goals Chart reflecting the changes should be submitted to the FHFA.

Question:
Is there a law requiring water management districts to expedite permitting for affordable housing?
Answer:
Yes. This statutory change, along with many others, was adopted into law after the Florida Legislature passed HB 547, considered to be the Affordable Housing Bill of 2002. It resulted from a recommendation of the Affordable Housing Study Commission. The Commission recognized the important incentive offered by local governments to expedite permits for affordable housing, as required under the SHIP program. The Commission further noted, however, that awaiting approval of water management district permits can delay the development of an affordable housing apartment property or subdivision of homes. Obtaining these permits can indeed be time consuming. Water management districts generally issue permits to address flood protection, wetland protection, and the treatment and quality of storm water runoff. Chapter 373.4141 (2) of the Florida Statutes states that water management districts must approve or deny permits “within 90 days after receipt of the original application, the last item of timely requested additional material, or the applicant's written request to begin processing the permit application.” The statutory change enacted recently adds a simple directive to Chapter 373.4141: “Processing of applications for permits for affordable housing projects shall be expedited to a greater degree than other projects.” This legislative mandate to expedite the permitting process can be understood by comparing it to the SHIP program. SHIP requires local governments to expedite permitting. Chapter 420.9076 (4)(a) states that “the processing of approvals of development orders or permits… for affordable housing projects is expedited to a greater degree than other projects.” Several communities implement this SHIP mandate by ensuring that builders of affordable housing jump to the head of the queue in cases when several builders are waiting for their permit requests to be considered. I am concerned about the SHIP Income Limits Chart provided annually by the Florida Housing Finance Corporation for purposes of determining income eligibility. The income limits for my city are based on the income data for a nearby metropolitan statistical area (MSA). Although the median area incomes may accurately reflect the MSA, these income levels are too high for my city. Most of the households in my area would be considered low or moderate income according to the Income Limits Chart. Your city and the rest of your county are clustered in with the metropolitan statistical area due to criteria established by the U.S. Census. Your community met the Census definition for inclusion in the MSA. According to the Census website (www.census.gov), an MSA has a large population nucleus, together with adjacent communities that have a high degree of economic and social integration with that nucleus. An outlying county in an MSA must have a specified level of commuting to the central counties and also must meet certain standards regarding metropolitan character, such as population density, urban population, and population growth. Before you conclude that the income levels outlined in the SHIP Income Limits Chart are too high, you must first research housing costs in your community. It is the relationship between housing costs and income levels that should determine the income levels of the population you will target and serve. You may discover that even moderate income households experience financial difficulty with housing costs. They may not qualify for enough mortgage money to purchase an average priced home in your community, for example. On the other hand, you may conclude that moderate income households do not experience hardships, once you have considered the relationship between housing costs and income levels. There are communities in the state-especially unincorporated areas and small cities-where housing staff are concerned with how they get bundled in with their "richer" neighboring communities. Remember that The SHIP income limits establish the maximum income for households that can be assisted. If you believe that the income levels provided to you by Florida Housing do not adequately assist you in targeting assistance to those most in need, you can place additional restrictions on your program. Specifically, several communities have written their Local Housing Assistance Plans to indicate that SHIP assistance is only available to Low and Very Low-income households, not those with Moderate Incomes.

Question:
Our community is considering lowering the amount of assistance and the house values in order to target lower income people with our SHIP home buyer strategy. Is this a good idea?
Answer:
Lowering the subsidy amount can actually prevent a very low income or low income person from getting into an affordable and decent house. Check with your lender partners to gauge the profile of the typical low income buyer and learn the usual amount of loan that must be provided. Also, check with your real estate professionals for a listing of lower-value homes. Many times the lower value homes need many repairs and will ultimately result in either the low income household living in a substandard unit or faced with repair bills that increase housing costs. To help assure the long-term affordability of the house, consider providing the extra subsidy to bring the unit up to livable standards.

Question:
We have a person on our advisory committee who could benefit from a contract award. Is this a potential conflict of interest?
Answer:
Depending on the circumstances of the award, it might be. To be safe, you may want that member to recuse himself from the decision making process for the award, and document the files accordingly.

Question:
What are the common elements of a disaster strategy?
Answer:
Creating a disaster strategy is an effective way of quickly responding to community needs in the aftermath of a state or nationally declared disaster. A disaster relief strategy can be a new, stand-alone strategy, or it can be incorporated into an existing homeowner rehabilitation strategy. Similar to a homeowner rehabilitation strategy, eligible repairs may include roof repair, window repair or replacement, and the rest. Some communities also allow activities which are responsive to the immediate health and safety needs of the resident. Tree and debris removal, and materials needed to temporarily halt damage caused by wind and rain entering the unit fall into this category. An often overlooked need is payment of insurance deductibles once the need for repairs has been determine, this is an eligible cost associated with repairing a unit. The SHIP rule also allows for payment of relocation costs; however, rental subsidies are expressly prohibited. It is also permissible to use SHIP funds for disaster mitigation activities. Elevating an eligible unit which is located in a flood plain is one example of permissible activities. Some communities may choose to fund the disaster strategy regardless of whether there are other funds available to assist families in these situations, such as FEMA funds. It is important to remember that SHIP dollars can only be used to assist eligible units for eligible persons, those whose household income falls within the allowable income range, whereas FEMA funds provide assistance regardless of income. The traditional income verification and certification process may be cumbersome and difficult to implement in cases where traditional documentation is destroyed and action must be immediate. Local jurisdictions may wish to submit an alternative income certification process to the FHFC Review Committee for review and approval when creating a new strategy or adding language to an existing homeowner rehabilitation strategy. Creating a selection process which is fair and equitable is another important consideration. All local jurisdictions have an applicant selection process in place for serving eligible persons. If the intent is to address the immediate health and safety needs in the event of a disaster through an existing homeowner rehabilitation strategy, (and there is typically a waiting list for rehabilitation assistance) then the local jurisdiction must specify the circumstances and criteria under which an application for assistance can supersede the established process. Remember that funds must be encumbered and disbursed in accordance with the SHIP Rule, regardless of how a disaster-relief strategy is created. As a practical matter, this means that if funds are budgeted for an under-utilized strategy, where there is no need for disaster-relief, then the funds must be re-allocated to a strategy which is being utilized within the time frames established for that fiscal year. Advertise the disaster strategy at the same time as your other strategies, so the requirement to advertise 30 days in advance of taking applications does not become a hindrance.

Question:
Please provide information on the term “Sub Recipient” that must be used in the Annual Reporting.
Answer:
The term “Sub Recipient” was added to the SHIP Rule in 2008 to identify those organizations or individuals that are contracted by the local government to administer a portion of the SHIP
program and are compensated by SHIP “Administrative Expenditures” funds. The Sub Recipients include those in the traditional administrative set aside. Identifying Sub Recipients on the Annual Report will allow the Florida Housing Finance Corporation to know where all Administrative Expenditure funds are being spent. This requirement is not intended to require you to list your lenders, inspectors or other vendors that are involved in the SHIP process that are compensated through program funds.

Question:
What is the difference between a Sub Recipient and a Sponsor in the SHIP program?
Answer:
A 2008 revision to SHIP Rule 67-37 requires SHIP Administrators to list all sub-recipients or consultants and report the administrative expenditures of these sub-recipients separately from the local government’s administration. The rule defines a “Sub Recipient” as a person or non-state organization contracted by a SHIP eligible local government to provide administration of any portion of the SHIP program. The process of awarding funds therefore, requires housing administrators to understand the difference between a SHIP Sponsor and a Sub Recipient.
• A Sponsor receives a SHIP award under a specific strategy to produce affordable units. The Sponsor is developing affordable units whether they are newly constructed or rehabilitated single family homes or rental units. For example, a nonprofit developer may apply for funding from a Rental Development Strategy in the SHIP local housing assistance plan. The Strategy describes the sponsor selection method used by the local government to award funds. If this Sponsor receives a SHIP award, they agree to build several SHIP-funded rental units possibly in conjunction with Tax Credits or other Florida Housing Finance Corporation programs.
• By contrast, a Sub-recipient administers some portion of the local SHIP program and is paid a SHIP service delivery fee for this activity. The Sub Recipient negotiates a contract with the local jurisdiction to administer some part of the local SHIP program; such as Purchase Assistance or Housing Counseling. For this example, a nonprofit organization may fully implement a SHIP Purchase Assistance Strategy. The sub-recipient’s staff may locate buyers, determine their SHIP eligibility and work with them through the day of purchase.

Question:
What are the responsibilities of the local jurisdiction when a qualified sponsor or sub recipient is utilized for performing eligible SHIP activities?
Answer:
The local jurisdiction has ultimate responsibility in assuring that all program requirements are met. Rule 9I-37.002(15) defines an eligible sponsor as a person or private or public for-profit or not-for-profit entity that applies for an award under the Local Housing Assistance Program for the purpose of providing eligible housing for eligible persons. At the local level, the sponsor might be a local chapter of Habitat for Humanity, a Community Action Agency, a Regional Planning Council, a local non-profit organization, CDC, or CHDO, or a local consultant or developer. A qualified sponsor who receives an award from the local SHIP program is required to contractually commit to the local jurisdiction that it will comply with all SHIP requirements, and it is the local jurisdiction's responsibility to ensure that the sponsor follow all state and local program requirements. If the sponsor provides development services to the local jurisdiction's SHIP program, the sponsor may include all development soft costs (work write-ups, inspections, etc.) in the project costs. If the sponsor is providing additional administrative support for the SHIP program, such as applicant income determinations and certifications and referrals to housing counseling services and lenders, then the local jurisdiction should pass through a portion of its administrative funds (from the 5% or 10% held back for program administration) to the sponsor. Alternatively, a jurisdiction may pay a service delivery fee to the group using program dollars instead of administrative dollars.

The local jurisdiction must have a system in place which ensures that all applicant files are complete and that the income verifications and certifications are in order, that there is adequate documentation to support expenditures for work performed, and that all SHIP funds are encumbered and expended in accordance with the deadlines as stated in the SHIP Rule. While daily monitoring of activities should not be necessary, the sponsor should be required to provide adequate information to the local jurisdiction for completion of the annual report, such as household characteristics, amount of SHIP funds expended, as well as use of any other funds on the assisted unit, and appraised or anticipated value of the unit at completion. The local jurisdiction may provide blank copies of the forms used in the annual report to the sponsor so that the sponsor will know exactly what information is required for reporting.

TOPIC: 2007 Changes to Record Retention Requirements for the SHIP Program
The file/record retention requirements are guided by The General Records Schedule for State and Local Government Agencies. The changes are below:

1. Record series consisting of Housing Applications: Non-participating/inactive (Item #273 of the General Records Schedule
for State and Local Government Agencies-GSI-SL) must be retained as follows:
(a) Record copy – 4 fiscal years provided applicable audits have been released and
(b) Duplicates – retained until obsolete, superseded or administrative value is lost.

2. Record series consisting of records documenting housing finance assistance to low-to moderate-income households (General Records Schedule for State and Local Government agencies-GSI-SL - Item #274 must be retained as follows:
(a) Record copy - 5 fiscal years after funds expended and accounted for and/or satisfaction of loans, whichever is later, provided applicable audits have been released.
(b) Duplicates - retained until obsolete, superseded, or administrative value is lost.

TOPIC: 2007 Changes to HUD Handbook 4350.3
Several revisions have been made to HUD Handbook 4350.3. Given that the HUD handbook is the SHIP guidance set forth by the Florida Housing Finance Corporation these revisions affect the SHIP program. The changes are outlined in the HUD transmittal memo for Handbook No.:4350.3 REV-1., Change- 2 “Occupancy Requirements of Subsidized Multifamily Housing Programs”. The changes became effective on June 29, 2007. Several are highlighted below:

Question:
What is the proper way to dispose of files that have been retained as required?
Answer:
HUD Handbook 4350-3 Chapter 4-22(f) states that the owner must dispose of applicant and tenant files and records in a manner that will prevent any unauthorized access to personal information, e.g., burn, pulverize, shred, etc.

Question:
What is the update for pension funds related to payment of a federal pension fund paid to a former spouse?
Answer:
HUD Handbook 4350.3, Paragraph 5-6 K (4) states that Federal government pension funds paid directly to an applicant’s/tenant’s former spouse pursuant to the terms of a court decree of divorce, annulment, or legal separation are not counted as annual
income. The state court has, in the settlement of the parties’ marital assets, determined the extent to which each party shares in the ownership of the pension. That portion of the pension that is ordered by the court and authorized by the Office of Personnel Management (OPM), to be paid to the applicant’s/tenant’s former spouse is no longer an “asset” of the applicant/tenant and therefore is not counted as income. However, any
pension funds authorized by OPM pursuant to a court order to be paid to the former spouse of a Federal government employee, is counted as “income”. Therefore such amount is only counted as “income” and the term “asset” no longer applies.

Question:
What is an acceptable timeframe in verifying information when all attempts to obtain Verification Forms have been exhausted?
Answer:
HUD Handbook 4350.3 Paragraph 5-13 C (1)(b) states that when third-party verification is delayed and is not received within two weeks of its request, owners may consider original documents submitted by the tenant. However, adherence Paragraph 5-19 E
specifies items to be documented when third-party verification is not available. These items include (1) A written note to the file explaining why third-party verification is not possible; or a copy of the date-stamped original request that was sent to the third
party; (2) Written notes or documentation indicating follow-up efforts to reach the third party to obtain verification; and (3) A written note to the file indicating that the request has been outstanding without a response from the third party.

Question:
An applicant has withdrawn $10,000 from his retirement account and placed the
money in his checking account. Should we now count the $10,000 as income, or is it still an asset?
Answer:
You will count the $10,000 as an asset. All that has happened at this point is that
the applicant has moved the money from the retirement account to his checking account. However, the money is still considered an asset-- just like all money in a checking account is considered an asset.

Questions about the Web Reporting System

2010-02-10T08:28:00.000-08:00

Questions about 'Expended Funds’:
On Form 4, I added an amount of expended funds per strategy that exactly matches the figures reported on Form 1. Yet the Review Tab still shows an error. Specifically, it indicates:
“There are no "Expended Funds" records for the "Homebuyer Assistance" strategy listed under the Distributed Funds' "Home Ownership" section on Form 1.”
Please provide guidance.

Answer:
This is a result of an update Florida Housing has made to the web annual report. Florida Housing has now programmed the web system to total up the expended funds for each strategy. Now, a “Summary by Strategy” total appears at the end of the list of expended funds you have added to Form 4.

The error in this case is caused by the fact that this jurisdiction labeled a strategy “Homebuyer Assistance” on Form 1, but called it “Purchase Assistance” next to the name of each buyer listed on Form 4. In order for Florida Housing’s new programming to work properly, the name of each strategy must be identical on Forms 1 and 4. Pay attention to capitalization, since this also makes a difference. In this case, the jurisdiction decided to change the strategy name on Form 1 to “Purchase Assistance” and the error message disappeared.

Question:
I am having difficulty logging onto the webpage for the Annual Report. Please provide guidance.

Answer:
To log on, go to the following webpage: https://apps.floridahousing.org/StandAlone/Extranet/
On the first occasion when a jurisdiction logs on to the web report, one must use the email address of the jurisdiction’s primary SHIP contact person. Identify the email address of the person who usually receives direct SHIP-related emails from Florida Housing. It is likely this email address that must be entered. The generic password to use is ‘password!’. Once logged on, you may add the email addresses of additional staff members who need access to the annual report. In the “User Administration” tab, click the button to ‘create a new user’. Each new user may choose to have a different password.

Question:
On the Form 2 question about rental units, I am having difficulty entering text. The information in this box disappears instead of saving when I click the ‘Save Changes’ button. Please provide guidance.

Answer:
When typing in the rental description, you must fill in all of the fields for Efficiency, 1 bedroom, 2 bedroom, etc. If you leave any field blank, the system will not save the rental description. If some of the unit mix data does not apply, enter 0.00 in the non applicable field.

Question:
I have just completed the data entry on my close out annual report. I went to the ‘Review’ tab, read through the ‘issues identified on the report’ and have corrected these errors. However the report status remains ‘unsubmitted’ and I cannot see how I am supposed to officially submit this report. Please provide guidance.

Answer:
You cannot officially submit your complete close out annual report until you also create complete and error-free reports for the first and second interim distributions. The ‘Review and Submit’ tab on the Second Interim report contains a ‘submit this report to FHFC’ button that will become activated once you have corrected all the identified errors on all three reports.

Question:
I have not yet completed all three of my annual reports. Yet I want to save to my computer a copy of the data I have entered. Is it possible to do this?

Answer:
Yes it is. In the upper right corner of the ‘Review’ tab, choose ‘Click here for a printer-friendly (PDF) copy of this annual report’. You may print this or save it to your computer. The upper right corner of each form also contains this print feature, in case you only want to print the data from one form. Once you have completed and submitted all three of your annual reports, this feature will allow you to save a copy of your reports. This is necessary, since the SHIP program requires you to make the reports available for public inspection and comment. You may also want to email the annual report PDFs to the lenders, contractors and other partners with whom you work.

Question:
When I attempt to ‘Click here for a printer-friendly (PDF) copy of this annual report’, I receive an error message. I am unable to open or save a PDF of my annual report. Please provide guidance.

Answer:
This feature requires users to have Adobe Reader version 8 or above on their computer in order to view or save a report PDF. Fortunately, this product is available for download from the Adobe site for free: http://get.adobe.com/reader/

Question:
Our jurisdiction has a new supervisor who will serve as our main SHIP contact person. How should I inform Florida Housing of this contact change?

Answer:
This may be done using the web reporting system. Change the information in the “SHIP Contact Information” tab, which asks for two types of contacts: 1) the staff person most directly responsible for creating the jurisdiction’s annual reports and 2) the jurisdiction’s main SHIP contact person. The latter name and phone number will be posted by Florida Housing on its SHIP contacts webpage.

Annual Report: Set Aside Questions

2010-02-09T06:03:00.000-08:00

Question:
Are the SHIP set-aside percentage calculations based only on the annual distribution and not on any recaptured funds or interest?

Answer:
No, you must include other revenue sources when calculating set-aside compliance. You calculate compliance with the Homeownership Set-aside and the Construction/Rehab Set-aside based on the sum total of Distribution plus Recaptured Funds. [Keep in mind the 2009 change to the definition of Recaptured Funds, which are now only a repayment that a SHIP jurisdiction receives if it provides SHIP funding for a housing project, but this funding is ultimately not used to assist eligible households.]
Compliance with the Income Set-aside, on the other hand, is calculated based on the total of all sources of SHIP revenue, including carry forward funds and program income.

Question:
The annual report asks for information on Extremely Low Income (ELI) households? Is there a requirement to assist a specific number of ELI applicants? I do not see a space to track ELI on the SHIP tracking spreadsheet.

Answer:
There is not a “Set-Aside” requirement to assist a specific number of ELI applicants. However, ELI households are part of the larger group of Very Low Income (VLI) SHIP recipients, and the Income Set-Aside requires at least 30 percent of all SHIP funds to be dedicated to VLI households. The Coalition has updated the SHIP tracking spreadsheet to include columns for collecting information about ELI households. The free updated version is available for download for the Coalition’s website (http://www.flhousing.org/) and directly from Florida Housing’s online reporting website.

Question:
I have a question about the section of Form 2 that addresses the homeownership and construction/rehabilitation set-asides. The amount of SHIP funds we have expended and committed to compliance with these set-asides is significant. According to the annual report, it even exceeds the amount of the Trust Fund used to calculate set-aside compliance. Do we need to add an explanation as to why this amount is greater than 100% of the Trust Fund?

Answer:
No special explanation is needed. Consider how “Trust Fund” is defined for this question: compliance with these two set-asides is calculated as a percentage of the sum total of the Distribution plus Recaptured Funds. However, several communities receive a significant amount of program income, which they also spend on homeownership and/or construction or rehabilitation activities. Therefore, it is common in many jurisdictions that this percentage exceeds 100% of the Trust Fund. This question illustrates an important lesson about Program Income, which may be expended on activities that do not comply with the homeownership and the construction/rehab set-asides. If your jurisdiction receives a significant amount of program income, you could dedicate it to a rental project, for example.

Question:
I have a Multi-Family Rental Rehabilitation project with a $650,000 SHIP funding agreement on it. SHIP pays $150,000 for acquisition and $500,000 for rehabilitation work. On my tracking spreadsheet and annual report, can I count the entire $650,000 towards compliance with the Construction/Rehab set-aside? Alternatively, should I not count the $150,000 since it pays for acquisition, not construction or repair work?

Answer:
The full $650,000 in this case should be reported towards compliance with the Construction/Rehab set-aside. SHIP funds helped finance a project that included a significant amount of rehabilitation, so the full amount of SHIP assistance counts towards compliance. There is an even more common example of SHIP assistance that follows the same rule. Consider the assistance your jurisdiction provides to help a SHIP household buy an existing house. Your jurisdiction spends only a small amount to repair this house—a majority of SHIP assistance is devoted to down payment and closing cost assistance. Yet the full amount of SHIP assistance counts towards compliance with the Construction/Rehab set-aside, since SHIP helped buy a house that was repaired. Furthermore, in this example it is not even necessary for a portion of SHIP to pay for repairs. Set-aside compliance is interpreted broadly. Compliance is achieved so long as you can document that some source of money paid for repairs, and repairs were completed during the period 12 months prior to through to 12 months after the purchase.

Question:
The Annual Report seems to contradict with the SHIP Statute when it defines what funds to count towards compliance with the homeownership and construction/rehab set-asides. The Statute indicates that only the distribution—not program income or recaptured funds—must comply with these set asides. This is different than the wording on the Annual Report for the Income Set-Aside:
(a) At least 65 percent of the funds made available in each county and eligible municipality from the local housing distribution must be reserved for home ownership for eligible persons.
(b) At least 75 percent of the funds made available in each county and eligible municipality from the local housing distribution must be reserved for construction, rehabilitation, or emergency repair of affordable, eligible housing.
(e)2. At least 30 percent of the funds deposited into the local housing assistance trust fund must be reserved for awards to very-low-income persons

Note that (a) and (b) address the “local housing distribution”. The Distribution is shown to be distinct from Program income and recaptured funds, as seen in this section of 420.9075:
(6) Each county or eligible municipality receiving local housing distribution moneys shall establish and maintain a local housing assistance trust fund. All moneys of a county or an eligible municipality received from its share of the local housing distribution, program income, recaptured funds, and other funds received

Is there a contradiction?

Answer:
The SHIP Statute does address this topic—read further down in the same section of the Statute that you reference. Subsection (k) indicates that program income is exempt from the homeownership and construction/rehab set-aside requirements. Yet this section does not mention recaptured funds, so they are not exempt from the set-aside requirements.

(k) Funds from the local housing distribution not used to meet the criteria established in paragraph (a) or paragraph (b) or not used for the administration of a local housing assistance plan must be used for housing production and finance activities, including, but not limited to, financing the purchase of existing units, providing rental housing, and providing home ownership training to prospective home buyers and owners of homes assisted through the local housing assistance plan. Notwithstanding the provisions of paragraphs (a) and (b), program income as defined in s. 420.9071(24) may also be used to fund activities described in this paragraph.

Furthermore, the SHIP Rule explicitly exempts the expenditure of program income from compliance with these set-asides, and this exemption does not include recaptured funds.

Finally, the SHIP Statute gives Florida Housing authority to clarify SHIP Rules:
420.9072(9) The corporation shall adopt rules necessary to implement ss. 420.907-420.9079.

On the subject of set-aside compliance, Florida Housing has done just that. The annual report—which is authorized by the SHIP Rule—explicitly indicates that recaptured funds must be expended in compliance with the two set-asides.

MORE: There is more to be said about set-aside compliance. Review the following videos on this topic. Each of the videos are about 7 minutes each.
To advance or back-up the video, use your cursor to click on the red dot below the video, hold down and drag it left or right.

Homeownership Set-Aside

Construction Set-Aside

Income Set-Aside

Annual Report: Deadline Questions

2010-02-08T05:58:00.000-08:00

Question:
On the annual report for my close out distribution, I list a small amount of unspent SHIP funds. The amount is only $300 and I listed it in the Unencumbered Column on Form 1. Why do I get the following error messages? “There are "UnEncumbered" dollar amounts listed in a "CloseOut" year report.” “There are "UnEncumbered" units listed in a "CloseOut" year report.”

Answer:
Recognize first that it is common to have a small amount of unspent SHIP funds from a close out distribution and this is not a violation of the expenditure deadline. You are technically correct that this unspent amount is comprised of unencumbered funds. However, the annual report instructions indicate that you must not list these funds in the Unencumbered Column on Form 1. In this way, the Web Annual Report will automatically calculate on the bottom of Form 1 that this amount of money will be carried forward to the next distribution. Similarly, it will include this carry forward as a separate type of revenue on the annual report for this next oldest distribution.

Question:
My jurisdiction has not yet expended all the funds in the close out distribution. How do I request an extension for turning in my annual reports after September 15, so we can quickly finish expending funds?

Answer:
There is no available extension for the annual report, which must be turned in on or before September 15th. On September 15, you must turn in a report that illustrates that your jurisdiction has not yet finished expending funds. You can, however, request an extension to your expenditure deadline for your close out distribution.

First, recognize that it is common to have a small amount of unspent SHIP funds from a close out distribution; this is not a violation of the expenditure deadline. Whether the amount is $300 or $3000, this small unencumbered amount is insufficient to fully assist the next recipient for any of your strategies. In such a case, you may simply “carry forward” these remaining dollars. The new Web Report will identify these unencumbered funds as the carry forward amount and will automatically add this amount as the carry forward revenue on the 07/08 annual report.

In the case at hand, however, the remaining amount of encumbered and unencumbered funds is not considered carry forward funds. Your jurisdiction may have tens or hundreds of thousands of SHIP dollars left to spend. As soon as you discover that you will miss the expenditure deadline, you should request an expenditure deadline extension from Florida Housing. This request must be done in writing. Direct your correspondence to SHIP staff member Terry Auringer.

Your request should include:
*The exact amount of funds still encumbered and/or unencumbered, and the number of months for which an extension is requested.
*A brief explanation of why these funds have not been expended within the three year deadline. Was there, for example, a lack of contractors or materials, or is the jurisdiction still working to achieve some set-aside compliance?
*Outline your plan to expend funds quickly, along with a timeline and estimate of when the funds will be fully expended. Indicate if changes have been made to SHIP strategies to address the delays. If a strategy has not been working, have you redesigned it, replaced it, or reallocated funds to a strategy known to be successful?

Question:
What about the SHIP distribution facing the June 30 encumbrance deadline—can I request an encumbrance deadline extension?

Answer:
Florida Housing does not offer an encumbrance deadline extension, only an extension of the expenditure deadline. If you have not encumbered all of the required funds by the June 30th deadline, call to inform Florida Housing’s SHIP staff members Darlene Raker and Terry Auringer. Since your annual reports include expenses and encumbrances through June 30 of this year, the reports you create will show that your jurisdiction has not met the encumbrance deadline. However, work diligently to commit all the required funds—you may be able to get them all committed before the September 15th deadline. If you do, you can include a cover letter with your reports to provide Florida Housing with this update. If you are not able to encumber all these funds by September, however, your cover letter should indicate a plan to quickly encumber the funds. Florida Housing has the discretion to require that you receive a site visit from the Florida Housing Coalition to help implement a plan to quickly encumber these funds.

Question:
Where exactly does the SHIP statute indicate the encumbrance and expenditure deadlines?

Answer:
The details of these deadlines are outlined in the SHIP Rule Chapter 67-37.005(6)(f)1,2, Florida Administrative Code, states:
“1. The county or eligible municipality to encumber the local housing distribution funds deposited into the local housing assistance trust fund for each State fiscal year by June 30 one year following the end of the applicable State fiscal year; 2. The expenditure of the local housing distribution deposited into the local housing assistance trust fund by any eligible person or eligible sponsor within 24 months of the close of the applicable State fiscal year unless otherwise extended as provided at Subsection 67-37.002 (8), F.A.C.;”

The phrasing of this portion of the SHIP Rule can be confusing. The phrase “within 24 months of the close of the applicable State fiscal year” means three years after you first started receiving this distribution. Consider, for example, that the end of the 08/09 fiscal year is June 30, 2009. 24 months from this date is June 30, 2011, which is three years from when you first received the money.

Question:
Our auditors are questioning the way we are tracking encumbrances for our Multi-Family Rehabilitation strategy. The funds were encumbered before the encumbrance deadline and I have logged them in on the tracking spreadsheet as Recipient 1, 2, 3 etc. We will not know the names of the recipients until the project is complete and the money is fully expended. Is this an acceptable tracking process and have we properly met the encumbrance deadline?

Answer:
Yes, you have met the encumbrance deadline. The process you describe is a common and acceptable method used to keep track of the SHIP funds encumbered but not yet fully expended. During the period between when you commit/encumber SHIP funds to this project and when you record that the funds are fully expended, you may not know the name of the household that will receive the repair assistance. Naturally, all the households that will be listed in the future on your SHIP tracking spreadsheet must be income eligible.

Question:
My jurisdiction is ahead of schedule in meeting its expenditure deadline. Last September, I turned in a 06/07 annual report that showed that these funds were fully expended at the end of two years. This year, should I just turn in reports for the “interim years”: 07/08 and 08/09?

Answer:
No, you must turn in a 06/07 close out annual report which shows the same information as the report last September. However, the annual report form has been updated since last year and you must now enter this information using the new online reporting system.

Question:
I have prepared for the SHIP encumbrance deadline by fully encumbering all of the funds in my County’s “First Interim Distribution” with the exception of the final $5000. This amount is too small to commit to any of our latest projects, which are each commitments of about $30,000. Is it all right to simply report this $5000 as currently unencumbered?

Answer:
No, the annual report for this First Interim Distribution must show that the sum total of your SHIP money is either expended or is encumbered. Therefore, here are several solutions to help you achieve compliance with the encumbrance deadline. First, try an easy solution: Check if you have fully expended the 10 percent administrative budget associated with this distribution. If you have not, then you could encumber this $5000 as some of the remaining money from the 10 percent administrative budget that you plan to expend in the next twelve months. If this is not applicable to your situation, try a second easy solution. Review the projects that currently have fund commitments from the First Interim Distribution. Do any of these commitments fall short of the maximum award amount? If so, perhaps you could increase the commitment for a project by the $5000 in your question.

Sometimes neither of these suggested ‘easy solutions’ may be applicable to your situation. The final solution for addressing your problem is commonly referred to as establishing a “Negative Carry Forward”. Commit funds from the First Interim Distribution to one of the $30,000 projects that you referenced. Yet since there is not $30,000 of revenue remaining in the First Interim Distribution, the sum total of the expenses and encumbrances listed on this distribution’s annual report will be a number that slightly exceeds the revenue on this report. The commitment of this $30,000 is only possible by temporarily ‘borrowing’ money from the next distribution, and the annual report you create for the Second Interim Distribution will include a -$25,000 negative carry forward as a source of revenue. Put another way, the report for the Second Interim Distribution will show a little less revenue available since the report for the previous distribution shows more expenditures plus encumbrances than revenue. This solution is not uncommon, and Florida Housing accepts the practice of temporarily establishing a negative carry forward to show that the First Interim Distribution complies with the encumbrance deadline.

Program Income & Recaptured Funds Questions

2010-02-07T05:56:00.000-08:00

Question:
This question is related to Form 1. Please explain the definition change for Recaptured Funds, which was established in May, 2009. What changes do SHIP administrators need to make?

Answer:
Recaptured Funds are now defined as only one thing: a repayment that a SHIP jurisdiction receives if it provides SHIP funding for a housing project, but this funding is ultimately not used to assist eligible households. Here is the official new definition of Recaptured Funds, now that the SHIP Statute has been changed:

“Recaptured funds” means funds that are recouped by a county or eligible municipality in accordance with the recapture provisions of its local housing assistance plan pursuant to s. 420.9075(5)(h)(g) from eligible persons or eligible sponsors, which funds were not used for assistance to an eligible household for an eligible activity, when there is a default on the terms of a grant award or loan award.”

Now that Senate Bill 360 has changed the definition of recaptured funds, this means that all other types of repayments that a SHIP office may receive are categorized as program income, including money repaid when a SHIP lien it triggered.

SHIP Administrators should change their SHIP lien and LHAP if it makes any reference to recaptured funds that does not meet this new definition. For example, if the LHAP currently indicates that recipients must pay back SHIP assistance as recaptured funds if they sell their house before the end of 10 years, this should be changed to reflect the new definition. This also affects the annual reports. Administrators should use the new definition when reporting on revenue for the Close Out, Interim 1 and Interim 2 distributions.

Question:
I have a question about Program Income and Recaptured Funds. When a formerly assisted household repays money as required by the recapture agreement/SHIP lien, do I count this repayment revenue as recaptured funds or program income?

Answer:
This repayment is Program Income, since Senate Bill 360 was signed into law in May of 2009. This bill changed the statutory definition of Recaptured Funds, which are now defined as only one thing: repayment that a SHIP jurisdiction receives if it provides SHIP funding for a housing project, but this funding is ultimately not used to assist eligible households. Here is the official new definition of Recaptured Funds:

“Recaptured funds” means funds that are recouped by a county or eligible municipality in accordance with the recapture provisions of its local housing assistance plan pursuant to s. 420.9075(5)(h)(g) from eligible persons or eligible sponsors, which funds were not used for assistance to an eligible household for an eligible activity, when there is a default on the terms of a grant award or loan award.”

This definition change means that all other types of repayments that a SHIP office may receive are categorized as program income, including money repaid when a SHIP lien it triggered. Remember, the most significant difference between Program Income and Recaptured Funds is that a small portion of Program Income may be expended on additional administrative expenses—above and beyond a jurisdiction’s 10 percent administrative budget. No Recaptured Funds may be used for this purpose.

Question:
You recently provided an example of the new definition of “Recaptured Funds”. The SHIP Jurisdiction provided a non-profit a check for $100,000 and they paid back $50,000 they could not spend. This $50,000 is to be considered “Recaptured Funds.” What if, by contrast, you have an executed contract with a non-profit for $100,000 and only provide the funds on a reimbursement basis? The nonprofit sends a letter indicating they cannot spend the last half of the encumbered funds. In this case, does the remaining $50,000 of this contract count as “Recaptured Funds”? If not, how is it treated?

Answer:
This is not an example of recaptured funds according to the new definition. In your example, the nonprofit receives funds on a reimbursement basis. The final $50,000 that was encumbered to be paid to the nonprofit has never actually left your Local Housing Trust Fund. The new definition of recaptured funds discusses money “recouped by a county or eligible municipality”. In this case, there is no money that must be repaid or “recouped” by the local SHIP program. Instead, money that is in your trust funds was encumbered but then became unencumbered when the nonprofit’s project fell through. Do not categorize this as recaptured funds. Simply commit this $50,000 to other projects.

Question:
What expenses can program income pay for?

Answer:
Section 420.9075 (6) of the SHIP Statute states:
“The cost of administering the program may not exceed 10 percent of the local housing distribution plus 5 percent of program income deposited into the trust fund, except that small counties, as defined in s. 120.52(17), and eligible municipalities receiving a local housing distribution of up to $350,000 may use up to 10 percent of program income for administrative costs.”

Administrative costs are the same expenses that may be paid for with the 10 percent administrative budget: salary, travel, advertising, and much more. The remainder of your program income must be dedicated to paying for SHIP assistance to applicants, using the strategies in your LHAP.

Annual Report: Carry Forward

2010-02-06T05:56:00.000-08:00

Question:
As I learn about SHIP annual reports, I need more guidance and an explanation of “carry forward” funds.

Answer:
Three years after receiving a SHIP distribution, you must determine if any small amount of funding remains unencumbered. It is common to have a small amount of unspent SHIP funds from a close out distribution and this is not a violation of the expenditure deadline. Yet whether the amount is $300 or $3000, you may find that this small unencumbered amount is insufficient to fully assist the next household waiting for assistance from any of your strategies. In such a case, you may simply “carry forward” these remaining dollars. This means that the small amount should be assigned as a source of revenue on the annual report for the next SHIP distribution. The new online reporting system will automatically identify a close out distribution’s unencumbered funds as the carry forward amount and will add this amount as the carry forward revenue on the annual report for the first interim distribution. In order for the system to successfully accomplish this automated task, do not report these remaining unencumbered funds in the unencumbered column of Form 1. In other words, your close out annual report should not have any dollar amounts reported in the encumbered or unencumbered columns.

Question:
As I review the tracking spreadsheet for my close out distribution, I have discovered that I have “over expended” this distribution. That is to say, the expenses listed on the spreadsheet exceed the revenue by $1200. Please advise me how to proceed.

Answer:
This is not a problem since the annual report instructions indicate that your close out annual report may indicate a carry forward amount that is either a positive or negative number. The new online reporting system will identify this negative carry forward amount and will automatically add this amount to the revenue section of the annual report for the jurisdiction’s first interim distribution.

Annual Report: ‘Form 2, Form 3 & Attachments’

2010-02-05T05:55:00.000-08:00

Form 2 Question:
I have a question about “Recap of Funding Sources” on Form 2. One of the sources listed on this table is “owner equity”. I thought that our SHIP office was supposed to report any money an applicant contributes to pay for his or her overall housing assistance. But my co-worker has told me that we are supposed to calculate the amount of equity that a rehabilitation applicant owns in a house to be repaired. Please provide guidance.

Answer:
You are correct. On the “Recap of Funding Sources”, record only the amounts that an applicant pays to purchase a house, to repair a dwelling, or to in some other way pay for a portion of the housing assistance provided.

Form 2 Question:
I have a question about “Recap of Funding Sources” on Form 2. Our jurisdiction provided SHIP funds to the local Housing Authority to build 30 of the 171 units in a new rental project. By the end of the fiscal year, 30 units were built and occupied. We are assigning 15 of them the close-out distribution, and we will report the SHIP assistance for construction of the other 15 on the annual report for the next distribution. We have split them up in this way to help meet very-low-income set-aside requirements.

When I add up the public and private contributions to the “Recap of Funding Sources”, how much should I attribute to each batch of units on the two separate reports? Should I divide the amount of those funds in half, or should I count them all on both reports?

Answer:
Assign the amount of public and private funds based on the proportion of total units that appear on an annual report. It this case it is simple: each report contains half of the total units, so equally split the public and private funds between the reports. If 10 units were assigned to the close out distribution and 20 to the next distribution, then one third of public and private funds would be added to the former report with the other two thirds on the latter report.

Question:
I have a question on Form 2 about “Project Funding: Expended Funds”
Sometimes our jurisdiction provides SHIP assistance as a loan and grant to the same household. The majority of assistance is a forgivable loan, although a small portion is granted. How would I count this on Form 2, which asks for numbers of Loans and Grants?

Answer:
Since the majority of assistance was a loan, count the full amount of assistance as a loan on the annual report. The reverse would be true if a household received assistance mostly as a grant.

Question:
On the "Regulatory Reform Certification" page that accompanies the Annual Report, how do we calculate the dollar amounts for Sections 3 and 4?

Answer:
Section 67-37.019 (5) of the SHIP Rule outlines the following “Incentive Strategy” requirements for all SHIP jurisdictions:
The local government staff or entity with administrative authority for a local housing assistance plan shall provide documented evidence to the Corporation or its designated monitoring agent, that:
(a) Permits, as defined in Sections 163.3164(7) and (8), F.S., for affordable housing projects are expedited to a greater degree than other projects; and
(b) There is an ongoing process for review of local policies, ordinances, regulations, and plan provisions that increase the cost of housing prior to their adoption.

The “Certification for Implementation of Regulatory Reform Activities Required by SHIP” is one main method that the Florida Housing Finance Corporation uses to document a jurisdiction’s compliance with this SHIP requirement.

Sections 1 and 2: These are simply statements to evidence that the jurisdiction has implemented the incentive Strategies (a) and (b) that are referenced in the SHIP Rule.

Section 3: First, enter the Fiscal Year that is ending this June 30.
Talk with the group or individual in your jurisdiction that performs the “Ongoing Review” SHIP incentive strategy and ask them about their review process during the 12 months of this fiscal year. Include in Section 3 the group’s per unit estimate of housing cost increases for new construction that have resulted from new local policies, ordinances, regulations, and more that were considered during the state fiscal year. If there have been no new policies to increase costs, enter $0.

Section 4: Similar to Section 3, provide in Section 4 the group’s per unit estimate of housing cost increases for rehabilitation activities that have resulted from new local policies, ordinances, regulations and more that were considered during the state fiscal year. If there have been no new policies to increase costs, enter $0.

NOTE: The SHIP Statute and Rule provide no guidance or method by which a local jurisdiction must determine the cost increase that will result from a new rule, ordinance, fee, etc. Such estimates are a local determination, and the jurisdiction should retain back up material to justify the dollar amounts reported on this certification form, which is signed by the jurisdiction’s chief elected official.

Annual Report: Form 4 Questions

2010-02-04T05:54:00.000-08:00

Question about ‘Expended Funds’:
On Form 4, I added an amount of expended funds per strategy that exactly matches the figures reported on Form 1. Yet the Review Tab still shows an error. Specifically, it indicates:
“There are no "Expended Funds" records for the "Homebuyer Assistance" strategy listed under the Distributed Funds' "Home Ownership" section on Form 1.”
Please provide guidance.

Answer:
This is a result of an update Florida Housing has made to the web annual report. Florida Housing has now programmed the web system to total up the expended funds for each strategy. Now, a “Summary by Strategy” total appears at the end of the list of expended funds you have added to Form 4.

The error in this case is caused by the fact that this jurisdiction labeled a strategy “Homebuyer Assistance” on Form 1, but called it “Purchase Assistance” next to the name of each buyer listed on Form 4. In order for Florida Housing’s new programming to work properly, the name of each strategy must be identical on Forms 1 and 4. Pay attention to capitalization, since this also makes a difference. In this case, the jurisdiction decided to change the strategy name on Form 1 to “Purchase Assistance” and the error message disappeared.

Question about ‘Administrative Expenses’:
For this Form 4 question, do you count all of a jurisdiction’s expenses paid for administration and program implementation? In other words, should I include the administrative expenses that our jurisdiction paid with the five percent of our program income, as allowed by the SHIP Statute?

Answer:
No. You must count only the administrative expenses paid with the 10 percent administrative budget. Do not include administrative expenses paid with program income. You should also not count any program dollars that paid for ‘service delivery fees’ when a sub recipient implemented one or more of your SHIP strategies.

Question about ‘Administrative Expenses’:
Form 4 asks for a breakdown of Administrative expenses by the Local Government and by its Sub Recipients. Our city hires an individual to teach our homebuyer classes. We also contract with a housing inspector who handles our rehabilitation inspections on a fee for service basis. Are these individuals considered Sub Recipients?

Answer:
Florida Housing’s staff has provided this answer:
This term was added to identify those organizations or individuals that are contracted by the local government to administer a portion of the SHIP program and are compensated by SHIP “Administrative Expenditures” funds. The list of Sub Recipients will be reported on the annual report to allow Florida Housing to know where all Administrative Expenditure funds are being spent. This requirement is not intended to require you to list your lenders, inspectors or other vendors that are involved in the SHIP process that are compensated through program funds. Here is the simple way to view this: if they are paid by your traditional ten percent administrative budget, then they should be listed.

Question about Incentive Strategies:
In filling out Form 4 of the annual report, I checked our jurisdiction’s old reports, which referenced the Local Housing Assistance Plan (LHAP). Should I reference the LHAP that was in effect for the close out distribution, or the current LHAP which just went into effect?

Answer:
Reference your most recent LHAP for purposes of the question about incentive strategies. You must provide the most updated information about how these incentive strategies are implemented. Commonly, jurisdictions write very little here beyond “strategy is fully implemented.”

Question:
Do I have to complete Form 4 for each of the three distributions reported this September?

Answer:
No, the online reporting system only requires a jurisdiction to complete the data for Form 4 once, when creating the close-out annual report. In the past, jurisdictions were required to answer several Form 4 questions with data specific to each of three distributions. Now Florida Housing will only collect data specific to the closeout distribution for the Form 4 questions about average strategy production costs, administrative expenditures for sub recipients, and sources of recaptured funds and program income.

There is now only one Form 4 question that requires data specific to each of three distributions. As required by SHIP reporting instructions, each local government must provide a list of recipients for whom assistance is complete and funds are fully expended. This data must be provided for each strategy, including names, addresses, zip codes and amounts expended for each fiscal year reporting to Florida Housing.

Question about Defaults and Foreclosures:
Form 4 asks about mortgage foreclosures and mortgage defaults. Please help me understand how to track and report this information.

Answer:
This question only requests information about defaults of the first mortgage on the home of a household that has received SHIP purchase assistance. Do not collect information about defaults of SHIP liens. A default occurs when a homeowner falls behind on paying the first mortgage. By contrast, a foreclosure occurs when a homeowner goes through the legal process and loses his or her house to foreclosure. Not all of those who are in default will eventually foreclose.

You can track this information by maintaining a list whenever you hear that a former SHIP homebuyer has fallen late in payments for the first mortgage on the unit. The recipient may call you to request help. Your county's legal department may receive a “lis pendens” notification. Later on, you should check back to learn if any recipients actually lost their homes to foreclosure. This is all that is required by way of tracking this data.

It is possible that a person may fall into default more than once in the 12 month period on which you are reporting—this household should only be counted as one default during the 12 month period. It is also possible that this household might also default at some time in the next 12 months. In this case, you will count and report this household’s default in the next Annual Report you submit a year from now. Similarly, a household might count as a default in one 12 month period and count as a foreclosure in the next 12 month period.

Annual Audits

2010-02-03T05:53:00.000-08:00

Question:
In addition to the annual reports we submit, is there another report we must submit?

Answer:
Yes, you must submit a copy of your jurisdiction’s annual audit. This is an independent review of the General Ledger, which provides a method for ensure that your SHIP annual reports ultimately reconcile with your jurisdiction’s General Ledger related to SHIP revenue and expenses. The audit is sometimes referred to as a Comprehensive Annual Financial Review (CAFR). Florida Housing’s staff has provided the following guidance on what they specifically look for when reviewing CAFRs:

Separately stated Trust Fund for SHIP and a Separately Trust Fund for HHR (Can Not be combined in the reporting format)

“Findings” section in the FSAA (if applicable)

Florida Housing requests that you email the “link” or attach the document(s) to an email, rather than providing a paper copy.

Properly Tracking SHIP Funds

2010-02-02T05:51:00.000-08:00

Question:
Last September, I had my first experience creating the SHIP annual reports for our county. It took a lot longer than I thought it would to compile the data. What can I do now to prepare for the next reports due next September?

Answer:
The key to creating timely and accurate annual reports is maintaining an accurate SHIP tracking system. The creation of an annual report actually begins 15 months before you have to turn it in. When you first receive a new SHIP allocation on July 1st, create a system to track how this money will be encumbered and then expended. The SHIP administrator in each jurisdiction is required by the SHIP Rule to maintain a tracking system (Rule 67-37.019, FAC). You cannot simply rely on data provided by your finance department. Although they maintain detailed records of SHIP expenditures, finance department staff may not track SHIP encumbrances—and they almost certainly do not track demographic data or compliance with SHIP set-asides. It is essential for you to track this information, and you must do so on a very regular basis. Update your tracking system more often than once a month. Florida Housing’s SHIP staff has indicated that your tracking system should be updated often enough that they can call you on any given day if they need to know how much of your jurisdiction’s SHIP funding is currently expended, encumbered and unencumbered.

Entering updated data into the tracking system is at least a two-step process. After determining an applicant’s eligibility, you provide an award letter that commits SHIP funds specifically to this applicant. This is when you should first enter information about the applicant into your tracking system, along with the amount of the SHIP commitment. It is only later, however, that you start expending these SHIP funds. For example, it is several weeks or over a month later when a home buyer applicant receives SHIP payment assistance at the time of closing. At this time, you should update your tracking system; the funds that had been committed for the applicant are now officially expended.

Each SHIP jurisdiction should document that the annual report it generates reconciles with the general ledger maintained by the jurisdiction’s finance department. This helps document compliance with the Florida Single Audit Act (FSAA), which directs auditors to “determine whether required reports include all activity in the reporting period”. The State Projects Compliance Supplement outlines several suggested audit procedures that an auditor can use to determine whether or not the SHIP reports contain all required activity (and reconcile to the general ledger), including the following: “Select a sample of reports and test specified line items for accuracy and completeness.” (from State Projects Compliance Supplement Part 3, Section H. “Reporting”).
Work with your finance department to ensure your compliance with the FSAA. Set up a way to periodically meet with finance staff to reconcile the general ledger with your SHIP tracking system. Consider suggesting a system to communicate to the finance department whether an expense should be charged to the 04/05 SHIP distribution, for example, or to the 05/06 distribution.

There are many ways that the Coalition can help you reach the goal of creating complete and accurate SHIP annual reports. First, the Coalition has designed an Excel-based SHIP tracking system. It has been used by many SHIP jurisdictions for years, and is available to you at no charge. Call the Coalition for technical assistance on properly setting up a tracking system, accurately updating information, or using the tracking system to create the annual reports that you will submit to Florida Housing. Some questions require more assistance than others; the Coalition may need to visit you in your community to assist you with your tracking and reporting questions. After all, some SHIP administrators have inherited a faulty, unorganized or inaccurate SHIP tracking system. The Coalition can assist you with getting your tracking system back on track by helping you work with your finance department to reconcile your system with the general ledger.

HHRP Related Questions

2010-02-01T05:49:00.000-08:00

Question:
We are one of those counties that need to submit a close out HHR report this September. Should I use the SHIP online reporting system, or is there a separate HHR report I should use?

Answer:
Do not use the online reporting system. There is a separate HHRP annual report form that you can request from Florida Housing.

Question:
Now that we have research the expenditure deadline for HHRP, our jurisdiction has a small amount of HHRP funds remaining. What formal tracking process should administrators follow for remaining HHRP funds assigned to SHIP?

Answer:
Determine if the HHRP funds remaining are Program Income or Recaptured funds rather than the HHRP Allocation you received from Florida Housing Finance Corporation. Program income and recaptured funds are recorded cumulatively from when the HHRP funds were first received on July 1, 2005.

If the amount of the remaining funds does not exceed the sum total of your HHRP Program Income or Recaptured Funds, then according to Emergency Rule 67ER06-45 (10), you may transfer this amount of HHRP unencumbered funds into your SHIP Local Housing Assistance Trust Fund at the termination of the HHR Program. Your jurisdiction will “close out” the local HHR program by providing a final annual report. Any small amount of remaining unencumbered funds should be assigned as a source of revenue for your 08/09 SHIP distribution. These funds should be categorized as program income. When you create an annual report for 08/09, you will answer the final question on Form 4 by indicating that HHRP is the source of this program income revenue.

If, however, the source of your jurisdiction’s remaining unencumbered HHRP funds are from the initial HHR program allocation, then your jurisdiction has failed to meet the HHRP expenditure deadline. Contact the Florida Housing Finance Corporation to explain your situation and receive guidance on how to proceed.

Question:
As I create a HHRP Annual Report I have a question about Form 2, which asks about compliance with the Homeownership Set-Aside. Should I include the ELI allocation as part of the “Trust Fund” amount when calculating homeownership set-aside compliance and the Income Set-aside?

Answer:
Although a minimum of 65 percent of SHIP funds must be expended on homeownership activities, remember that there are three distinct HHRP allocations: Base allocation, ELI allocation and Collaborative Funds. The separate HHR funding allocated for ELI households is entirely exempt from the homeownership set-aside requirement.
For purposes of homeownership set-aside compliance, the trust fund is the sum total of the base allocation, the collaboration allocation and recaptured funds. Exclude the ELI allocation, along with program income. Regarding the income set-aside, the trust fund is the sum total of all funds except the ELI allocation.

As a side note, a local entity may expend less than 65 percent of its base HHR allocation and supplemental community collaboration funds on homeownership activities if previously received FHFC approval to do so at the beginning of its program implementation.

Question:
I know that all of the ELI allocation of HHRP dollars must be expended to assist Extremely Low Income households. Yet is it the case that only 85% of these funds are expended in this fashion, since up to 15% of the funds may be dedicated to administrative budget expenses?

Answer:
Yes. Although all of the ‘program dollars’ from your ELI allocation must be devoted to ELI households, you also have ‘administration dollars’ to expend. Florida Housing’s staff provides this guidance: Local Governments can account for 15% (Admin) less ELI allocation funds on Form 2 of the HHRP Annual Report.