Workforce Housing for Ownership Program

Workforce Housing for Ownership Program is sponsored by North Carolina Department of Commerce, Division of Community Revitalization. This program provides CDBG-DR funding for homeownership opportunities affordable to broader segments of the workforce in HUD-Identified Most Impacted and Distressed (MID) counties in western North Carolina.

It aims to incentivize the workforce to remain in the area and address inadequate housing production. The term “workforce” refers to households up to 80% of AMI. Eligible activities include development, ownership, or management of affordable housing.

Applications are competitively scored based on applicant capacity, community need, development approach, leveraged resources, and projected long-term outcomes.

Workforce Housing for Ownership Policies and Procedures | DCR Use the link below to open and download a PDF version of the current policies and procedures manual for the Workforce Housing for Ownership Program. Workforce Housing for Ownership Policies and Procedures Manual (PDF) Version Number Date Summary of Changes 1.

0 July 7, 2026 Initial version Version history is tracked in the Version History Table, with notes regarding version changes. Dates of each publication are also tracked in this table. Substantive changes in this document that reflect a policy change will result in the issuance of a new version of the document.

For example, a substantive policy change after the issuance of Version 1. 0 would result in the issuance of Version 2. 0, an increase in the primary version number.

Non-substantive changes such as minor wording and editing or clarification of existing policy that do not affect interpretation or applicability of the policy will be included in minor version updates denoted by a sequential number increase behind the primary version number (i.e., Version 2. 1, Version 2. 2, etc.).

Policy clarifications, additions, or deletions may be needed during the Program to more precisely define the rules by which the Program will operate. Policy decisions will be documented and will result in the revision of the document in question. Unless otherwise noted, policy revisions are applied prospectively, made effective on the date of document approval.

A full and comprehensive Glossary of Terms can be found on the North Carolina Department of Commerce – Division of Community Revitalization’s website.

In response to the widespread damage caused by Hurricane Helene in September 2024, the U.S. Department of Housing and Urban Development (HUD) allocated $1,428,120,000 in Community Development Block Grant–Disaster Recovery (CDBG‑DR) funding to the State of North Carolina, as authorized under Public Law 118‑158.

This allocation supports unmet needs and resilient recovery activities within counties designated as Most Impacted and Distressed (MID).

To coordinate recovery and rebuilding across affected communities, the Governor designated the North Carolina Department of Commerce – Division of Community Revitalization (DCR) as the lead agency responsible for directing the use of disaster recovery funds and overseeing implementation across state agencies and local governments.

DCR developed a suite of recovery programs—outlined in the State’s HUD‑approved Action Plan for the Use of CDBG‑DR Funds—to address major unmet needs including housing, infrastructure, and economic recovery. As part of these recovery efforts, the State created the Workforce Housing for Ownership (WHFO) Program to expand affordable homeownership opportunities for households earning up to 80% of Area Median Income (AMI).

This Program Guide outlines WHFO Program policies, procedures, and requirements and serves as the operating manual for creating new affordable homeownership opportunities. 2.

1 Renew NC Workforce Housing for Ownership Program Overview The Renew NC Workforce Housing for Ownership (WHFO) Program allocates $53,380,000 in CDBG‑DR funds to support the development of affordable homeownership opportunities within eligible HUD‑designated MID areas.

Program funding is distributed as follows: $44,066,150 for housing activities $9,313,850 for mitigation activities Awards will be made through a competitive Notice of Funding Opportunity (NOFO) open to eligible applicants. All WHFO investments must occur within HUD‑identified MID areas, and program benefits are restricted to households earning no more than 80% of Area Median Income (AMI).

Applicants must describe in their NOFO submission how they will implement all required program structures, including funding, reimbursement, and homebuyer‑assistance mechanisms. All proposals must include a binding commitment to a minimum affordability period of 15 years. Eligible applicants may receive grant awards between $2 million and $5 million.

2. 3 Per Unit Maximum Subsidy DCR will provide a maximum award of $250,000 per beneficiary or housing unit. 2.

4 Exceptions to Award Limits Exceptions to both the maximum award amount and the per‑unit maximum subsidy may be considered on a case‑by‑case basis when documented cost overruns arise after project implementation has begun. These exceptions may be warranted when applicants receive more or less funding than originally anticipated from other sources, resulting in a change to the DOB calculation.

Exceptions will not be granted at the proposal or award stage and remain subject to available program funds as well as all applicable WHFO rules and approval requirements. All exceptions will be reviewed to ensure they are necessary and reasonable.

The WHFO Program is governed by: HUD’s 2025 Revised CDBG-DR Universal Notice HUD Memorandum 25-02, issued March 19, 2025 The Housing and Community Development Act of 1974 The Disaster Relief Supplemental Appropriations Act, 2025 (Public Law 118-158, Division B, December 21, 2024) 24 CFR Part 570, including Subpart I for state-administered CDBG programs 2 CFR Part 200, Uniform Administrative Requirements Robert T.

Stafford Act provisions Any future or amended HUD guidance Applicable federal environmental, labor, nondiscrimination, relocation, and fair housing regulations The North Carolina Department of Commerce – Division of Community Revitalization (DCR) is the designated lead administrator for the WHFO Program.

DCR ensures compliance with all federal and state mandates and will manage program implementation, oversight, reporting, and monitoring. Summaries of all Federal and State requirements can be found in Appendix A. Mixed‑income and mixed‑use developments may be considered eligible; however, WHFO funds may only be applied to residential units serving eligible LMI households and their directly associated costs.

WHFO funds may not be used for non‑residential components or for residential units that do not serve LMI households. DCR may adjust the final CDBG-DR award amount based on funding availability, project feasibility, and alignment with program objectives. CDBG‑DR funds must be obligated to subrecipients or developers and fully expended within six years from the date HUD obligated the funds to DCR, unless HUD grants a waiver.

Expenditures must also occur within the timeframe specified in each subrecipient or developer agreement. This program guide serves as the authoritative manual for the implementation of the WHFO Program. It is intended for use by applicants, developers, subrecipients, contractors, and other program stakeholders.

Specifically, this guide: Defines eligibility criteria for applicants, sites, and activities Describes the application, evaluation, and award process Outlines program funding limits, underwriting, and affordability requirements Establishes standards for environmental review, construction, and statutory compliance Ensures adherence to all applicable federal and state regulations, including the 2025 Revised CDBG-DR Universal Notice under which this allocation falls The contents of this guide are subject to revision based on HUD guidance or amendments to North Carolina’s Action Plan.

3. Program Oversight and Administration DCR will administer the WHFO Program through direct implementation and contracted support services.

Program activities must comply with the requirements set forth in: HUD’s 2025 Revised Universal Notice, published at 90 FR 1754 (January 8, 2025), and as amended by HUD Memorandum 25-02 (March 19, 2025) 2 CFR Part 200 (to the extent applicable) The State’s HUD-approved CDBG-DR Action Plan for Helene funding 3.

1 Roles and Responsibilities DCR will work with developers, subrecipients, contractors, or any combination of these entities to implement the WHFO Program but must and will designate an entity as a subrecipient or developer (or both) for each project.

In general, for-profit entities may and can be designated as developers; private non-profits can also serve as developers (but also can be a subrecipient); and public non-profits (housing or redevelopment authorities) and public agencies may not act as developers but can be designated as subrecipients.

Per HUD’s 2025 Revised CDBG-DR Universal Notice, subrecipients may include, but are not limited to, nonprofit organizations, units of general local government, partner agencies, subgrantees, and Indian tribes. Subrecipients act as an extension of the grantee and must follow the same rules. 3.

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1 North Carolina Department of Commerce (DCR) Division of Community Revitalization (DCR) Responsibilities Serving as the program administrator and CDBG-DR fund manager Issuing Notices of Funding Opportunity (NOFOs) and application materials Overseeing application intake, eligibility determination, underwriting, and award determinations Conducting cost reasonableness reviews for each application determined responsive to a NOFO Executing necessary documents with selected subrecipients and applicants Providing technical assistance throughout the application and construction process Monitoring construction progress and budgets Ensuring program compliance with all federal and state mandates and managing program implementation and oversight, and Reporting to HUD on program expenditures, milestones, and deliverable outcomes through the Disaster Recovery Grant Reporting (DRGR) system 3.

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2 Applicants/Developers/Subrecipients Responsibilities Submitting complete applications, including all required documentation Demonstrating site control, financial feasibility, and past similar development experience and capacity Complying with all program requirements and cross-cutting federal laws Undertaking construction in accordance with approved plans, codes, and timelines Ensuring timely contribution of any leveraged financial resources consistent with approved application Providing all necessary invoice and cost information to DCR to enable timely payment of CDBG-DR funds to cover project expenses Maintaining documentation of compliance and submitting required reports to DCR; Marketing available housing to targeted eligibles, and Ensuring each assisted home is sold to an income‑qualified household and is placed under a minimum 15‑year affordability period, monitored and enforced by the responsible entity 3.

1. 3 Third-Party Consultants/Contractors Responsibilities (if applicable) Supporting DCR with various tasks, including potentially underwriting, environmental review, and construction inspections Providing application intake support or outreach under DCR direction Assisting with financial or performance monitoring, as assigned by DCR 4. Program Eligibility Requirements 4.

1 Eligible Geographic Area To qualify for assistance under the WHFO Program, properties must be located within a HUD-identified MID area. The eligible HUD MID areas are limited to Ashe, Avery, Buncombe, Burke, Caldwell, Cleveland, Haywood, Henderson, Madison, McDowell, Mitchell, Polk, Rutherford, Transylvania, Watauga, and Yancey Counties. 4.

2 Tie-back to the Storm WHFO Program activities must demonstrate a direct or indirect tie-back to the impacts of Hurricane Helene or be a mitigation activity funded through the mitigation set-aside.

A tie-back refers to a clear and documented connection between the proposed activity and the impacts of the disaster, such as physical damage, increased housing demand due to displacement, or vulnerability revealed or exacerbated by Hurricane Helene. Tie-back must be established through methods such as damage assessments, insurance claims, Federal Emergency Management Agency (FEMA) data, or other verifiable evidence.

HUD has defined mitigation activities as those that increase resilience to disasters and reduce or eliminate the long-term risk of loss of life, injury, damage to and loss of property, and suffering and hardship, by lessening the impact of future disasters. 4. 3 Meeting a National Objective All activities funded through the WHFO Program must meet a national objective as required by CDBG-DR regulations at 24 CFR 570.

483 and the 2025 Revised Universal Notice. For the WHFO Program, DCR specifies the Low- and Moderate-Income Housing (LMH) objective as the pathway for demonstrating eligibility.

To meet the LMH national objective, 100% of assisted units must be: Sold to households at or below 80% of Area Median Income (AMI) at the time of purchase, and Subject to a minimum 15-year affordability agreement Applicants must submit a complete documentation package that includes a unit mix and price schedule demonstrating LMI compliance, an Affordability Plan, a development budget showing the proportional application of CDBG-DR funds, and clearly defined income verification procedures.

Applicants must also describe the mechanisms they will use to enforce the required 15-year affordability period, including how the affordability agreement will be monitored and maintained over time. DCR accepts WHFO Program applications from a range of qualified entities.

Eligible applicants include: For‑profit housing developers Non‑profit housing developers, including CHDOs and CBDOs Community Land Trusts (CLTs) Public housing authorities and local governments Joint ventures among any eligible entities that demonstrate sufficient development capacity and financial management Other applicant types at DCR’s discretion, provided they can demonstrate the ability to develop, own, or manage affordable housing in compliance with CDBG‑DR and WHFO requirements 4.

5 Applicant Requirements: Must be legally organized to develop and convey affordable housing Must demonstrate experience in completing similar affordable housing projects incorporating public funding (DCR may request documentation, e.g., project summaries, references, or funding award letters, during the application review process) Must not be debarred, suspended, or otherwise excluded from participation in federal or state programs 4.

6 Eligible Properties and Sites Eligible property types under the WHFO Program must: Be designed for for‑sale residential use Meet all applicable program construction, accessibility, environmental, zoning, broadband, and energy efficiency requirements. Qualify as real property under North Carolina law, including being permanently affixed to land and transferable by deed.

Not be a manufactured homes or mobile homes located within any flood zone (including 100‑year, 500‑year, or non‑encroachment areas) as these properties are not eligible for funding. 4. 6.

1 Site Eligibility Criteria Sites must be suitable for residential development and must meet all environmental, legal, and zoning requirements prior to award or project initiation. Sites must be zoned for residential use or show a clear and feasible path to rezoning approval within 90 days of a conditional award.

In alignment with the Federal Flood Risk Management Standard (FFRMS), sites located within the 100‑year floodplain, 500‑year floodplain, floodway, or state/federal non‑encroachment areas are ineligible unless the project meets HUD floodplain management requirements.

Applicants must provide evidence of site control through a deed, purchase option, purchase and sale agreement, ground lease, option for ground lease, or other form acceptable to DCR. Documentation must be in the applicant’s name or a related entity within the development structure; relationship documentation must be provided where applicable. 4.

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3 Infrastructure Readiness Sites must have, or have a feasible plan for access to: Water and wastewater services Electricity and other utilities required for occupancy Broadband service, unless DCR grants a waiver due to infeasibility or undue burden Public roadways or easements suitable for site access If off‑site infrastructure improvements are necessary, applicants must: Identify responsible parties and committed funding sources Demonstrate that required improvements will not delay project start or completion 4.

7 Additional Site Considerations Projects involving occupied properties are not eligible for WHFO funding. Any project that would trigger requirements under the Uniform Relocation Assistance and Real Property Acquisition Policies Act (URA) is not eligible.

Projects that involve historic structures must comply with Section 106 of the National Historic Preservation Act and coordinate with the State Historic Preservation Office (SHPO) as necessary. Preference may be given to sites located near public infrastructure, community services, and employment centers. The WHFO Program will fund eligible activities that support the construction and rehabilitation of affordable homeownership housing.

In accordance with Title I of the Housing and Community Development Act of 1974 (42 USC 5305(a)) and the 2025 Revised Universal Notice, the following eligible activities may be funded under the WHFO Program, subject to approval by DCR: §5305(a)(1) – Acquisition §5305(a)(3) – Code Enforcement §5305(a)(4) – Clearance, Rehabilitation, Reconstruction and Construction of Buildings, including housing §5305(a)(5) – Removal of Architectural Barriers §5305(a)(7) – Disposition §5305(a)(8) – Public Services §5305(a)(13) – Administrative Costs §5305(a)(14) – Assistance to Non-Profit Entities §5305(a)(15) – Assistance to Neighborhood-Based Organizations §5305(a)(20) – Housing Services §5305(a)(24) – Direct Assistance for Homeownership Activities §5305(a)(25) – Tornado Shelters §5305(a)(26) – Lead-Based Paint Hazard Evaluation and Reduction Revised Universal Notice - New Housing Construction – Section III.

D. 5. a.

Related infrastructure costs that directly support WHFO‑eligible housing may be permitted when they are necessary, reasonable, and integral to the viability of the project. However, such costs will be evaluated for cost‑effectiveness, and NOFOs may limit or condition eligibility for these expenses based on available funding and program priorities. For additional information, see Section 9.

1 Allowable Costs. 4. 9 Ineligible Activities Unless clearly related to eligible activities and costs described above, all other activities and associated costs are deemed ineligible for WHFO Program funding.

Ineligible activities are defined in 24 CFR 570. 207.

The following are examples of ineligible costs and activities; this list is not exhaustive: Costs incurred prior to environmental clearance (likely disqualifying the project for eligibility) Luxury improvements that are not essential to health and safety (e.g., swimming pools, high-end finishes, etc.) Commercial improvements within mixed-use developments unless costs are clearly separated and allocated to non-WHFO funding sources; Political, lobbying, or legal fees unrelated to program delivery; Costs more than the allowable per-unit subsidy limits, as established by DCR Development in ineligible areas, based on best available data, including: FEMA-designated regulatory floodways, which are ineligible for new construction under 24 CFR Part 55 unless there is no practicable alternative and the project completes HUD’s required 8-step decision-making process with documented mitigation measures; 100-year floodplains (Special Flood Hazard Areas) and 500-year floodplains, unless the project complies with HUD’s floodplain management standards under 24 CFR Part 55, including Elevating residential structures at least 2 feet above Base Flood Elevation (BFE) Areas with known land movement or potential for landslides, such as those identified in FEMA or state geotechnical hazard maps Any site located within a non‑encroachment area Sites failing to comply with required mitigation, siting, or wetland avoidance standards, as outlined in 24 CFR Parts 55 and 58 and applicable local planning or zoning ordinances.

DCR reserves the right to make the final determination on cost eligibility based on federal regulations and program policy. 5. Homebuyer Eligibility Requirements Subrecipients and developers are responsible for determining the eligibility of all homebuyers applying for WHFO Program assistance.

To ensure that WHFO assistance supports households prepared for sustainable homeownership, applicants must meet all homebuyer eligibility requirements described in this section. Household income must be at or below 80% of Area Median Income (AMI), as published annually by HUD and adjusted for household size. The homebuyer must obtain a fixed-rate mortgage loan with a term at least equal to the 15-year Affordability Period.

Homebuyers must comply with all federal Duplication of Benefits (DOB) requirements. Homebuyers must meet federal immigration eligibility requirements under the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), including completion of required verification (e.g., SAVE). Homebuyers may not hold more than $50,000 in liquid assets.

Any liquid assets exceeding this limit must be applied toward the required homebuyer subsidy amount. Retirement accounts—including IRAs, Roth IRAs, 401(k) plans, and similar qualified retirement vehicles—are excluded from this calculation.

Education‑related and health‑related tax‑advantaged accounts, including 529 college savings plans, Coverdell ESAs, Health Savings Accounts (HSAs), and Flexible Spending Accounts (FSAs), are also excluded from the liquid‑asset limit. Asset levels will be verified through required financial documentation, including bank statements and applicable disclosures.

All asset documentation must reflect account balances from the most recent 90‑day period. Retirement accounts, Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), 529 college savings plans, and other qualified tax‑advantaged accounts will be reviewed solely to confirm that they meet the criteria for exclusion. These are to be reviewed by the subrecipient or developers.

5. 1 Homebuyer Education Requirement Homebuyers must complete a HUD-certified pre-purchase homebuyer education course. Certificates of completion must be dated within the last twelve (12) months of the home purchase.

Subrecipients and developers are responsible for verifying completion. 5. 2 Funding Structure for Homebuyers Applicants must describe in their NOFO submission the structure they will use to provide and enforce homebuyer affordability, including the form of subsidy, forgiveness or repayment terms, and compliance controls.

All proposals must include a binding commitment to a minimum 15‑year affordability period for assisted properties or their beneficiaries. Income eligibility applies only at the time of sale. Throughout the affordability period, the assisted property must be maintained as the primary residence of an income‑eligible beneficiary.

The subrecipient or developer is responsible for monitoring compliance with the primary residency requirement and verifying income eligibility for any subsequent beneficiary during the affordability period.

Any sale, transfer, vacancy, or abandonment during the affordability period will trigger the program’s recapture requirements for any unforgiven or outstanding subsidy amount unless: The property is sold to another income‑eligible beneficiary who will occupy the home as their primary residence, or The transfer otherwise meets program requirements or receives prior DCR approval. 5.

3 Buyer Underwriting Criteria Criterion 1 — Buyer Financial Contribution: Participating buyers must contribute to the purchase price toward their down payment and closing costs. Buyers are recommended to maintain savings equal to at least three (3) months of their total housing payment (PITI/HOA) in non‑retirement accounts. Criterion 2 — First Mortgage Structure: Buyers must meet the underwriting criteria of the mortgage lender.

The homebuyer’s primary mortgage must be a fully amortizing loan with a fixed interest rate. Adjustable‑rate, interest‑only, balloon payment, no‑documentation, or other non‑standard loan products are not permitted. Criterion 3 — Housing Debt Evaluation: The homebuyer’s proposed monthly housing costs, including principal, interest, property taxes, and property insurance (PITI), will be evaluated by the primary lender during underwriting.

DCR will conduct independent reviews to determine cost reasonableness. 5. 4 Refinancing and Subordination Requirements If the homebuyer subsidy is structured as a secondary mortgage in the form of a forgivable loan, the loan remains subject to all refinancing and subordination requirements throughout the affordability period.

Any cash‑out refinancing, home‑equity loan, or other loan secured by the property during the affordability period requires prior approval by the subrecipient and must be reported to DCR.

Subordination of the WHFO‑funded subordinate mortgage is generally prohibited but may be approved for: Refinancing to obtain a lower interest rate or monthly payment (no cash‑out permitted) Financing necessary home repairs or rehabilitation when funds are held in escrow Any violation of refinancing or subordination requirements activates loan repayment provisions. 5.

5 Affirmative Fair Housing Market Plan (AFHMP) All developers and property managers participating in the WHFO Program are required to prepare and implement an Affirmative Fair Housing Marketing Plan (AFHMP) in accordance with federal regulations under 24 CFR Part 200, Subpart M. This requirement is applicable to all projects with five or more units receiving federal assistance for construction or rehabilitation.

Developers are encouraged to utilize the Affirmative Fair Housing Marketing Plan (AFHMP) form developed by HUD and must outline proactive steps to inform, attract, and serve members of groups who are least likely to apply without targeted outreach. Each Affirmative Fair Housing Marketing Plan (AFHMP) must present a comprehensive framework for ensuring that all persons have fair and equal access to housing opportunities.

At a minimum, the AFHMP must include a demographic analysis of the project’s market area that identifies groups who may be underrepresented in housing applications, such as racial or ethnic minorities, persons with disabilities, and individuals who are Limited English Proficient (LEP).

Based on this analysis, the plan must describe specific outreach strategies that align with the County’s Citizen Participation Plan (CPP) and Limited English Proficiency requirements. All marketing materials are required to display the Equal Housing Opportunity logo or slogan and must be translated into languages spoken by significant populations in the project area as outlined in the CPP.

The AFHMP must also describe how the application process will be carried out in a non-discriminatory manner. This includes outlining how applications will be accepted, processed, and prioritized, as well as specifying how reasonable accommodations will be provided to applicants as required by law.

To ensure consistent implementation, the plan must demonstrate how all relevant staff will receive fair housing and affirmative marketing training. Additionally, the AFHMP must include a monitoring and recordkeeping strategy that explains how the owner will document outreach activities, track outcomes, and maintain compliance records for review by DCR or its designee.

Submission and approval of the AFHMP are required before any homebuyer marketing or outreach activities may begin. No advertising, promotions, or applicant engagement may occur until the plan has been reviewed and approved by DCR. Failure to submit, obtain approval for, or implement an AFHMP may result in corrective actions consistent with federal regulations at 2 CFR 200.

208 and 200. 339. These actions may include requiring preparation or revision of an AFHMP, imposing additional conditions or monitoring requirements, adjusting or withholding funds, disallowing costs, suspending project activities, terminating the award, or recapturing funds that were improperly used or not adequately supported.

5. 6 Homeowner Selection Plan All WHFO Program‑assisted homeownership projects must adopt and implement a Homeowner Selection Plan (HSP), prepared by the project sponsor, developer, or program administrator and carried out by designated staff.

The HSP governs the process for identifying and selecting eligible homebuyers and must ensure a fair, transparent, and consistent process that complies with all federal requirements and meets program income‑targeting and long‑term affordability objectives. The plan must remain in effect for the full affordability period and be updated as needed to reflect changes in law, policy, or market conditions.

At a minimum, the HSP must define eligibility standards, including income limits, household size considerations, and any project‑specific priorities such as displaced households or community stabilization goals. Where applicable, the HSP must address citizenship or immigration requirements.

Screening procedures must be clearly explained, including the use of credit checks, financial capacity assessments, and verification of homebuyer readiness. The plan must also specify alternative methods for verifying eligibility if standard documentation is unavailable.

The HSP must outline how applicant lists or waiting lists will be established and managed, define procedures for applicant communication and selection, and establish policies for denial or removal from consideration.

It must affirm compliance with the Fair Housing Act, Section 504, and the ADA, include procedures for reasonable accommodations and modifications, and ensure meaningful access for Limited English Proficient (LEP) applicants.

The plan must also confirm compliance with income‑targeting requirements and affordability restrictions, including initial eligibility and any required follow‑up monitoring, and must include a grievance procedure that allows applicants to appeal denials or raise concerns about the selection process.

A draft HSP must be submitted to DCR at least thirty (30) days before the start of buyer outreach or marketing and must receive approval prior to the execution of any purchase agreements for program‑assisted homes. Once approved, the HSP must be maintained at the project site and in the project sponsor’s central records, reviewed annually, and revised as necessary to ensure continued compliance.

Program administrators are responsible for implementing the HSP and must maintain accurate records of all applications, eligibility determinations, waiting list activity, and accommodation requests. Records must be stored securely, retained for at least five years after the end of the affordability period, and made available to DCR upon request. Periodic compliance reports may also be required.

Failure to adopt or comply with an approved HSP may result in corrective actions. 6. Affordability Periods, Resale, and Recapture Requirements 6.

1 Affordability Period Instruments and Requirements Under a standard WHFO structure, the homeowner subsidy may be provided as a second mortgage recorded against the property, accompanied by a recorded Land Use Restriction Agreement (LURA) to ensure compliance with the Affordability Period and all related program requirements. When that model is leveraged, the following restrictions apply: 6. 1.

1 Transfers That Do Not Trigger Repayment If the property is sold, transferred, inherited, or otherwise conveyed to an income‑restricted buyer who meets all program requirements and agrees to assume the remaining Affordability Period obligations, repayment of the second mortgage will not be triggered. The loan continues under its existing terms and forgiveness schedule. The second mortgage remains recorded against the property.

The LURA stays in effect for the remainder of the Affordability Period. 6. 1.

2 Standard Forgiveness Schedule Under the standard structure, the second mortgage will be forgiven at ten percent (10%) per year starting in year six (6). At the end of the Affordability Period: Any remaining mortgage balance is fully forgiven. The second mortgage lien is released.

The LURA is removed in accordance with program requirements. Proposed deviations from the Standard Forgiveness Schedule will be considered as part of a project’s application and may be approved by DCR by way of a resulting subrecipient or developer agreement. 6.

1. 3 Repayment Requirements If the property is sold during the Affordability Period to a household that does not meet income‑eligibility requirements, the subrecipient or developer must recapture from the homebuyer the unforgiven portion of the assistance. All recaptured funds must be returned to DCR unless an alternative use or retention is expressly authorized by the subrecipient or developer agreement.

Any repaid or returned funds must be reinvested in eligible housing activities that meet a CDBG‑DR-compliant housing national objective. Limited to the outstanding principal balance at the time of sale. No interest, penalties, or additional fees may be charged.

Amount is calculated based on the forgiveness schedule in effect at the time of sale. 6. 1.

4 Alternative Affordability Structures Subrecipients or developers may propose alternative funding mechanisms or affordability assistance structures if they: Meet or exceed the required minimum 15‑year affordability period. Provide deeper affordability for lower‑AMI households; proposals that extend affordability to lower‑income households may receive additional consideration or higher scoring in competitive NOFO processes. 6.

1. 5 Hardship‑Related Sales If a sale occurs due to an involuntary event—such as death of the homeowner, divorce requiring sale, or other hardship circumstances—the subrecipient or developer may request a hardship review from DCR or its designee. DCR (or its designee) may, at its sole discretion, approve a partial or full waiver of repayment.

Subrecipients and developers are responsible for ensuring that income eligibility is properly documented. Income must be verified using either the IRS 1040 Long Form – Adjusted Gross Income method or the HUD Part 5 income‑determination method. Subrecipients and developers may select which method to use but must apply it consistently once selected.

All income documentation and calculations are subject to DCR review and approval upon request. Assisted homes must be sold to households earning no more than 80% of Area Median Income (AMI). DCR may set deeper income targeting requirements or priorities (such as 60% AMI) in individual NOFOs based on recovery needs.

Household income must be verified at the time of purchase. DCR will review required documentation, and corrective actions may be imposed if a home is found out of compliance with applicable program standards. 6.

4 Developer and Subrecipient Documentation Requirements Developers, subrecipients, and implementing partners must maintain documentation verifying: Homebuyer income eligibility at the time of purchase Homebuyer selection and eligibility documentation demonstrating adherence to fair housing and program requirements Compliance information to DCR or its designee, as requested, including: Any resale, transfer, or refinancing events during the compliance period Updates regarding changes that could affect compliance with program requirements 6.

4. 1 Responsibilities of DCR or its designee, include: Conducting annual monitoring reviews (desktop and/or onsite) to verify compliance Verifying adherence to the 15-year affordability period and all related program terms. 6.

4. 2 Consequences of noncompliance include but are not limited to: Repayment or recapture of CDBG-DR funds Issuance of monitoring findings or concerns requiring