The program utilizes funds set-aside this year by the FHLB of Chicago for
statewide homeownership projects.
Realizing that downpayment requirements and closing costs often prohibit low
income families from seeking homeownership opportunities, Downpayment Plus is
specifically directed at these issues. Low income home buyers whose total
annual household incomes are 80% or less than the area median income are eligible
for up to $4,000 in grant assistance for the acquisition and
acquisition/construction/rehab of an owner-occupied one or two family dwelling.
The grants may be used for downpayment assistance, payment of closing costs,
payment of rehab costs associated with the acquisition, and/or reimbursement of
home buyer counseling costs if special criteria are met.
It is the responsibility of participating institutions to make
certain that any and all grants are received by income-qualified
households only. Participating institutions are required to use HUD’s
most recent MSA and county income data as provided by the Federal Home Loan Bank
of Chicago to determine eligibility.
The DPP® funds will be coupled with first mortgage financing
available through participating institutions. Consequently, funding
sources can include both conventional and non-conventional loans, and
other specialized programs offered by member institutions. The exact
amount and type of financing is to be determined by the lender
participants based upon their product availability and prevalent
financing offered in their particular communities. A borrower
accessing the program must make a cash contribution of at least $750
towards the purchase of the home.
The only commitments required in conjunction with the program are
those of the participating financial institutions. Each institution
accessing the program is required to execute a program agreement with
the FHLB of Chicago and the Illinois League of Financial
Institutions.
In addition, participants are to assume written responsibility for
complying with the income restrictions of the program; for
incorporating language in the mortgage documents maintaining the long
term affordability of properties financed through the program; and for
the recapture of any pro-rata portion of the grant should the
properties financed be sold prior to the end of the required retention
period.
All participants must agree to provide the Illinois League of
Financial Institutions and FHLB of
Chicago
all documentation necessary to comply with the program’s requirements.
In the event any participant breaches any applicable regulation with
respect to the AHP program, such institution shall be responsible for
the full reimbursement of any and all grants advanced in conjunction
with the program.
Institutions participating in the program must agree that the
application process through participating institutions will be open to
all qualified households without regard to sex, race, creed, religion,
sexual orientation, or type or degree of disability.
Additionally, participating institutions are encouraged to focus
their marketing efforts on community development organizations,
housing authorities and other not-for-profit entities whose existence
is predicated on promoting fair housing and creating realistic
ownership opportunities.
Participating institutions are required to certify that the
borrower has completed a home buyer counseling program provided by or
based on one provided by an organization recognized as experienced in
home buyer or home owner counseling. Counseling must provide
comprehensive financial literacy education, including information that
alerts borrowers to potential predatory lending practices.
All non-FHA borrowers accessing the program will be required to
sign a promissory note and promissory note rider in the amount of the
actual grant received. Additionally, a junior mortgage will be
recorded as a lien against the property to make certain that any
monies received can be recaptured should the borrower fail to meet the
long-term eligibility requirements. FHA borrowers must sign a
Mortgage, Retention and Subordination Agreement. Participating
institutions that use FHA products with DPP grants must agree to
service the related DPP junior mortgage on behalf of FHLB of
Chicago. The FHLB of Chicago will be the lien holder of the DPP junior mortgage
whenever the first mortgage is FHA-insured.
To assure that the properties financed are retained as affordable
housing, the grants are subject to a five-year retention period.
Language contained within the Promissory Note Rider and Mortgage,
Retention and Subordination Agreement provides for a recapture of the
grant should a borrower dispose of the property prior to the end of
the 5-year retention period.
An amount totaling 1/60 of the total grant amount shall be forgiven
for each month that the borrower maintains the property as their
principal residence. If the borrower sells the property prior to the
end of the retention period and realizes a net gain on the sale, the
gain shall be applied as repayment of any unforgiven amount. The
amount to be repaid shall not exceed the gain on sale. For the
purposes of administering the program, lenders are to consider the
anniversary date of the loan closing for the first mortgage advanced
by the lender to finance the property in forgiving and/or pro-rating
the grant. No credit will be given for partial months of ownership or
residency.
All program participants by virtue of their co-sponsorship agree to
extend all grant monies to income-qualified home buyers only as set
forth in the program’s parameters, and assume liability for the
recapture of any grant misapplied or to be refunded in conjunction
with the long term affordability provisions.
