OAR 813-020-0120: Federal Eligibility Requirements

(1) Section 143 of the Internal Revenue Code of 1986, as amended, requires the Department to meet the following requirements for each Mortgage Loan financed by tax-exempt bonds to preserve the federal tax exemption for such bond: (a) The Residence Requirement: The residence financed by a Mortgage Loan must be occupied within 60 days from loan closing as a qualifying principal residence by the borrower; (b) The First-Time Homebuyer Requirement: A person who has held ownership interest in a principal residence at any time within the three years preceding the date of the loan closing may not obtain a Mortgage Loan except as authorized in sections (2) and (3) below of this rule; (c) The Purchase Price Limitation: The acquisition cost of a residence financed by a Mortgage Loan may not exceed the purchase price limits established by the Department in accordance with the Internal Revenue Code of 1986, as amended, for new and existing residences; (d) The New Mortgage Requirement: Only a new mortgage may be financed with a Mortgage Loan, unless the borrower is refinancing an existing construction loan, bridge loan or similar temporary initial financing generally with a loan term of 24 months or less for constructing or rehabilitating a residence. The existing loan to be refinanced also must have been made on or after the commencement date of the commitment term during which the Mortgage Loan is sold to the Department. If a Mortgage Loan is made to refinance such a loan, the Approved Lender shall certify to the Department that construction or rehabilitation has been satisfactorily completed before the delivery of the Mortgage Loan for purchase; and (e) The Income Limitation: A borrower must have an annualized gross household income that does not exceed annual income limits established by the Department in accordance with the Internal Revenue Code of 1986, as amended; and (f) The Assumption Requirement: The assumption of a Mortgage Loan is prohibited unless each person assuming the loan meets the federal eligibility requirements of this section (1). (2) An Approved Lender may approve a Mortgage Loan to a person who has held an ownership interest in a principal residence at any time within the preceding three years, subject to the approval of the Department. Such an approval determination may take into account such factors as the Department deems appropriate, including without limitation the federal restrictions on the aggregate dollar volume of such loans for a specific commitment and the circumstances of the prior ownership. (a) The Department may give preference to applicants who have lost prior ownership interests involuntarily, as through divorce settlements, eminent domain proceedings or similar circumstances. (b) Veteran’s Exemption: Borrowers who have served in active duty and were honorably discharged and have not previously used a mortgage revenue bond program are exempt from the first-time homebuyer requirement. All other requirements remain. (3) In certain targeted areas, a higher maximum acquisition cost may be applicable and the limitation with respect to prior home ownership does not apply. Certain census tract areas are designated as targeted areas by Section 143 of the Internal Revenue Code of 1986, as amended. The Department shall retain a current list of designated targeted areas. (4) The Department is required to establish procedures that ensure compliance with applicable requirements of Section 143 of the Internal Revenue Code of 1986, as amended. Any failure to meet these requirements shall be corrected within a reasonable time. The Department shall grant no exceptions or waivers unless allowed by federal law.