(h) Eligibility for continued occupancy. (1) A homebuyer shall cease to be eligible for continued occupancy with the aid of HUD annual contributions when the LHA determines that his adjusted monthly income has reached the level, and is likely to continue at such level, at which the current amount of his required monthly payment equals or exceeds the monthly housing cost (see paragraph (h) (2) of this section). In such event, if the LHA determines, with HUD approval, that suitable financing is available, the LHA shall notify the homebuyer that he shall either (i) purchase the home or (ii) move from the development; provided, however, that if the LHA determines that, due to special circumstances, the homebuyer is unable to find decent, safe and sanitary housing within his financial reach although making every reasonable effort to do so, the homebuyer may be permitted to remain for the duration of such a situation if he pays an increased monthly payment consistent with his adjusted monthly income; provided that this monthly payment shall not exceed the maximum provided in § 1270.107(j) (1). Such an increased monthly payment shall also be payable by the homebuyer if he continues in occupancy without purchasing the home because suitable financing is not available.

(2) The term "monthly housing cost," as used in this paragraph, means the sum of: (i) The monthly debt service amount shown on the Purchase Price Schedule (except where the homebuyer can purchase the home by the method described in § 1270.113(c) (1) below): (ii) one-twelfth of the annual real property taxes which the homebuyer will be required to pay as a homeowner; (iii) onetwelfth of the annual premium attributable to fire and extended coverage insurance carried by the LHA with respect to the home; (iv) the current monthly per unit amount budgeted for routine maintenance (EHPA), and for routine maintenance-common property; and (v) the current LHA and HUD approved monthly allowance for utilities paid for directly by the homebuyer plus the monthly cost of utilities supplied by the LHA.

§ 1270.105 Counseling of homebuyers. The LHA shall provide counseling and training as provided in subpart C of this part, with funding as provided in § 1270.206 of this part. Applicants for

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(a) Repair, maintenance and use of home. The homebuyer shall be responsible for the routine maintenance of the home to the satisfaction of the HBA and the LHA. This routine maintenance includes the work (labor and materials) of keeping the dwelling structure, grounds and equipment in good repair, condition and appearance so that they may be utilized continually at their designed capacities and at the satisfactory level of efficiency for their intended purposes, and in conformity with the requirements of local housing code and applicable regulations and guidelines of HUD. It includes repairs (labor and materials) to the dwelling structure, plumbing fixtures, dwelling equipment (such as range and refrigerator), shades and screens, water heater, heating equipment and other component parts of the dwelling. It also includes all interior painting and the maintenance of grounds (lot) on which the dwelling is located. It does not include maintenance and replacements provided for by the NRMR described in § 1270.111.

(b) Repair of damage. In addition to the obligation for routine maintenance, the homebuyer shall be responsible for repair of any damage caused by him, members of his family, or visitors.

(c) Care of home. A homebuyer shall keep the home in a sanitary condition; cooperate with the LHA and the HBA in keeping and maintaining the common areas and property, including fixtures and equipment, in good condition and appearance; and follow all rules of the LHA and of the HBA concerning the use and care of the dwellings and the common areas and property.

(d) Inspections. A homebuyer shall agree to permit officials, employees, or agents of the LHA and of the HBA to inspect the home at reasonable hours and intervals in accordance with rules established by the LHA and the HBA.

(e) Use of home. A homebuyer shall not (1) sublet the home without the prior written approval of the LHA and HUD, (2) use or occupy the home for any unlawful purpose nor for any purpose deemed hazardous by insurance companies on account of fire or other risks, or (3) provide accommodations (unless approved by the HBA and the LHA) to boarders or lodgers. The homebuyer shall agree to use the home only as a place to live for the family (as identified in the initial application or by subsequent amendment with the approval of the LHA), for children thereafter born to or adopted by members of such family, and for aged or widowed parents of the homebuyer or spouse who may join the household.

(f) Obligations with respect to other persons and property. Neither the homebuyer nor any member of his family shall interfere with rights of other occupants of the development, or damage the common property or the property of others, or create physical hazards.

(g) Structural changes. A homebuyer shall not make any structural changes in or additions to the home unless the LHA has first determined in writing that such change would not (1) impair the value of the unit, the surrounding units, or the development as a whole, or (2) affect the use of the home for residential purposes, or (3) violate HUD requirements as to construction and design.

(h) Statements of condition and repair. When each homebuyer moves in, the LHA shall inspect the home and shall give the homebuyer a written statement, to be signed by the LHA and the homebuyer, of the condition of the home and the equipment in it. Should the homebuyer vacate the home, the LHA shall inspect it and give the homebuyer a writ

ten statement of the repairs and other work, if any, required to put the home in good condition for the next occupant (see § 1270.110(j) (1)). The homebuyer, his representative, and a representative of the HBA may join in any such inspections by the LHA.

(i) Maintenance of common property. The homebuyer may participate in nonroutine maintenance of his home and in maintenance of common property as discussed in § 1270.110 (d) and § 1270.111 (c). (j) Homebuyer's required monthly payment. (1) The term "required monthly payment" as used herein means the monthly payment the homebuyer is required to pay as lease rental to the LHA on or before the first day of each month. Although the total monthly housing cost consists of the sum of the breakeven amount (see § 1270.108) and the debt service (payments of principal and interest) on the applicable share of the capital cost of the development, the homebuyer, so long as he qualifies as low income, is not required to pay the full amount, but is assisted by HUD annual contributions. The homebuyer's required monthly payment, which is based upon his income, shall be an amount in accordance with the schedule established by the LHA and approved by HUD in accordance with the U.S. Housing Act of 1937 (P.L. 412, 75th Cong., 50 Stat. 888, 42 U.S.C. 1401 et seq.), taking into account a monthly allowance for those utilities which the homebuyer pays for directly computed in accordance with HUD requirements; provided, however, that the maximum required monthly payment, including any monthly allowance for utilities, shall be the sum of the monthly break-even amount plus the monthly debt service amount shown on the Purchase Price Schedule for the home, except that if the rent, including utilities, for comparable unsubsidized housing in the locality is lower, such lower amount may be established as the maximum if the LHA determines with HUD approval that this would be in the best interest of the project.

(2) The required monthly payment may be adjusted as a result of the LHA's regularly scheduled or specially scheduled reexamination of the family income and composition. Interim changes may be made in accordance with the LHA's policy on reexaminations, or under unusual circumstances, at the request of the homebuyer, if both the LHA and the HBA agree that such action is warranted.

(3) The required monthly payment may also be adjusted by changes in the required percentage of income to reflect (i) changes in operating expense as described in § 1270.109 and (ii) changes in utility allowances.

(4) The LHA shall not refuse to accept monthly payments because of any other charges (i.e., other than overdue monthly payments) owed by the homebuyer to the LHA; however, by accepting monthly payments under such circumstances, the LHA shall not be deemed to have waived any of its rights and remedies with respect to such other charges.

(k) Application of monthly payment. The LHA shall apply the homebuyer's monthly payment as follows:

(1) To the credit of the homebuyer's EHPA (see § 1270.110);

(2) To the credit of the homebuyer's NRMR (see § 1270.111); and

(3) For payment of monthly operating expense including contribution to operating reserve (see § 1270.109).

(1) Assignment and survivorship. Until such time as the homebuyer obtains title to the home, it shall be used only to house a family of low income. Therefore:

(1) A homebuyer shall not assign any right or interest in the home or under the Homebuyers Ownership Opportunity Agreement without the prior written approval of the LHA and HUD;

(2) In the event of death, mental incapacity or abandonment of the family by the homebuyer, the person designated as the successor in the Homebuyers Ownership Opportunity Agreement shall succeed to the rights and responsibilities under the Agreement if that person is an occupant of the home at the time of the event and is determined by the LHA to meet all of the standards of potential for homeownership as set forth in § 1270.104 (e) (2). Such person shall be designated by the homebuyer at the time the Homebuyers Ownership Opportunity Agreement is executed. This designation may be changed by the homebuyer at any time. If there is no such designation or the designee is no longer an occupant of the home or does not meet the standards of potential for homeownership, the LHA may consider as the homebuyer any family member who was an occupant at the time of the event and who meets the standards of potential for homeownership.

(3) If there is no qualified successor in accordance with paragraph (1) (2) of this

section, the LHA shall terminate the Agreement and another family shall be selected except under the following circumstances: where a minor child or children of the homebuyer family are in occupancy, then in order to protect their continued occupancy and opportunity for acquisition of ownership of the home, the LHA may approve as occupants of the unit, an appropriate adult(s) who has been appointed legal guardian of the children with a duty to perform the obligations of the Homebuyers Ownership Opportunity Agreement in their interest and behalf.

(m) Termination by LHA. (1) In the event the homebuyer should breach the Homebuyers Ownership Opportunity Agreement by failure to make the required monthly payment within ten days after its due date, by misrepresentation or withholding of information in applying for admission or in connection with any subsequent reexamination of income and family composition, or by failure to comply with any of the other homebuyer obligations under the Agreement, the LHA may terminate the Agreement 30 days after giving the homebuyer notice of its intention to do so in accordance with paragraph (m)(3) of this section.

(2) Notice of termination by the LHA shall be in writing. Such notice shall state (i) the reason for termination, (ii) that the homebuyer may respond to the LHA, in writing or in person, within a specified reasonable period of time regarding the reason for termination, (iii) that in such response he may be represented or accompanied by a person of his choice, including a representative of the HBA, (iv) that the LHA will consult the HBA concerning this termination, and (v) that unless the LHA rescinds or modifies the notice, the termination shall be effective at the end of the 30-day notice period.

(n) Termination by the homebuyer, The homebuyer may terminate the Homebuyers Ownership Opportunity Agreement by giving the LHA 30 days notice in writing of his intention to terminate and vacate the home. In the event that the homebuyer vacates the home without notice to the LHA, the Agreement shall be terminated automatically and the LHA may dispose of, in any manner deemed suitable by it, any items of personal property left by the homebuyer in the home.

(0) Transfer to rental unit. (1) Inasmuch as the homebuyer was found eligible for admission to the Project on the basis of having the necessary elements of potential for homeownership, continuation of eligibility requires continuation of this potential, subject only to temporary unforeseen changes in circumstances. Accordingly, in the event it should develop that the homebuyer no longer meets one or more of these elements of homeownership potential, the LHA shall investigate the circumstances and provide such counseling and assistance as may be feasible in order to help the family overcome the deficiency as promptly as possible. After a reasonable time, not to exceed 30 days from the date of evaluation of the results of the investigation, the LHA shall make a re-evaluation as to whether the family has regained the potential for homeownership or is likely to do so within a further reasonable time, not to exceed 30 days from the date of the reevaluation. Further extension of time may be granted in exceptional cases, but in any event, a final determination shall be made no later than 90 days from the date of evaluation of the results of the initial investigation. The LHA shall invite the HBA to participate in all investigations and evaluations.

(2) If the final determination of the LHA, after considering the views of the HBA, is that the homebuyer should be transferred to a suitable dwelling unit in an LHA rental project, the LHA shall give the homebuyer written notice of the LHA determination of the loss of homeownership potential and of the offer of transfer to a rental unit. The notice shall state that the transfer shall occur as soon as a suitable rental unit is available for occupancy, but no earlier than 30 days from the date of the notice, provided that an eligible successor for the homebuyer unit has been selected by the LHA. The notice shall also state that if the homebuyer should refuse to move under such circumstances, the family may be required to vacate the homebuyer unit, without further notice. The notice shall include a statement (i) that the homebuyer may respond to the LHA in writing or in person, within a specified reasonable time, regarding the reason for the determination and offer of transfer, (ii) that in such response he may be represented or accompanied by a person of his choice including a representative of the HBA, and (iii) that the LHA has

consulted the HBA concerning this determination and offer of transfer.

(3) When a Homebuyers Ownership Opportunity Agreement is terminated pursuant to this paragraph (o), the amount in the homebuyer's EHPA shall be paid in accordance with the provisions of § 1270.110(j).

§ 1270.108 Break-even amount.

(a) Definition. The term "break-even amount" as used herein means the minimum average monthly amount required to provide funds for the items listed in the illustration below. A separate breakeven amount shall be established for each size and type of dwelling unit, as well as for the Project as a whole. The break-even amount for EHPA and NRMR will vary by size and type of dwelling unit; similar variations as to other line items may be made if the LHA deems this equitable.

Illustration. The following is an illustration of the computation of the break-even amount based upon hypothetical amounts. (1) Operating Expense (see § 1270.109):

(2) Earned Home Payments Account (see § 1270.110)–

(3) Nonroutine Maintenance Reserve (see § 1270.111) –

12.00

7.50

Break-Even Amount--------- 46,50

The break-even amount does not include the monthly allowance for utilities which the homebuyer pays for directly, nor does it include any amount for debt service on the Project notes.

(b) Excess over break-even. When the homebuyer's required monthly payment (see § 1270.107(j)) exceeds the applicable break-even amount, the excess shall constitute additional Project income and shall be deposited and used in the same manner as other Project income.

(c) Deficit in monthly payment. When the homebuyer's required monthly payment is less than the applicable breakeven amount, the deficit shall be applied as a reduction of that portion of the monthly payment designated for operating expense (i. e., as a reduction of

Project income). In all such cases, the EHPA and the NRMR shall be credited with the amount included in the breakeven amount for these accounts.

§ 1270.109 Monthly operating expense.

(a) Definition and categories of monthly operating expense. The term "monthly operating expense" means the monthly amount needed for the following purposes:

(1) Administration. Administrative salaries, travel, legal expenses, office supplies, postage, telephone and telegraph, etc.;

ex

(2) Homebuyer services. LEA penses in the achievement of social goals, including costs such as salaries, publications, payments to the HBA to assist its operation, contract and other costs;

(3) Utilities. Those utilities (such as water), if any, to be furnished by the LHA as part of operating expense;

(4) Routine property. For community building, grounds, and other common areas, if any. The amount required for routine maintenance of common property depends upon the type of common property included in the development and the extent of the LHA's responsibility for maintenance (see also § 1270.109 (c));

maintenance-common

(5) Protective services. The cost of supplemental protective services paid by the LHA for the protection of persons and property;

(6) General expense. Premiums for fire and other insurance, payments in lieu of taxes to the local taxing body, collection losses, payroll taxes, etc.;

(7) Nonroutine maintenance-common property (Contribution to operating reserve). Extraordinary maintenance of equipment applicable to the community building and grounds, and unanticipated items for non-dwelling structures (see § 1270.112).

(b) Monthly operating expense rate. The monthly operating expense rate for each fiscal year shall be established on the basis of the LHA's HUD-approved operating budget for that fiscal year. The operating budget may be revised during the course of the fiscal year in accordance with HUD requirements. If it is subsequently determined that the actual operating expense for a fiscal year was more or less than the amount provided by the monthly operating expense established for that fiscal year, the rate of monthly operating expenses to be established for the next fiscal year may

be adjusted to account for the difference (see 1270.112(b)). Such adjustment may result in a change in the required monthly payment, see § 1270.107(j) (3).

(c) Provision for common property maintenance. During the period the LHA is responsible for the maintenance of common property, the annual operating budget and the monthly operating expense rate shall include the amount re.. quired for routine maintenance of all common property in the development, even though a number of the homes may have been acquired by homebuyers. During such period, this amount shall be computed on the basis of the total number of homes in the development (i. e., the annual amount budgeted for routine maintenance of common property shall be divided by the number of homes in the development, resulting in the annual amount for each home; this figure shall in turn be divided by 12 to determine the monthly amount to be included in the monthly operating expense (and in the break-even amount) for routine maintenance of common property). After the home owners association assumes responsibility for maintenance of common property, the monthly operating expense (and break-even amount) shall include an amount equal to the monthly assessment by the homeowners association for the remaining homes owned by the LHA (see § 1270.112(b) for nonroutine maintenance of common property).

(d) Posting of monthly operating expense statement. A statement showing the budgeted monthly amount allocated in the current operating budget to each operating expense category shall be provided to the HBA and copies shall be provided to homebuyers upon request. § 1270.110 Earned Home Payments Account (EHPA).

(a) Credits to the account. The LHA shall establish and maintain a separate EHPA for each homebuyer. Since the homebuyer is responsible for maintaining the home, a portion of his required monthly payment equal to the LHA's estimate, approved by HUD, of the monthly cost for such routine maintenance, taking into consideration the relative type and size of the homebuyer's home, shall be set aside in his EHPA. In addition, this account shall be credited with (1) any voluntary payments made pursuant to § 1270.110 (f), and (2)