Homeowner Services and Repair Products 101. Oregon/Washington/Hawaii State Conference October 24, 2015

Transcription

1 Homeowner Services and Repair Products 101 Oregon/Washington/Hawaii State Conference October 24, 2015 Tera Doak Associate General Counsel Habitat for Humanity International Iris Dooling Thrivent ODC Habitat for Humanity International

2 Topics for Today Initial Considerations Where do Repair Products fit in Habitat Toolbox Why should Affiliates consider Repair Products Getting Started: Basic Principles and Practical Tips Homeowner Selection Criteria Sweat Equity for Repair Products Determining Cost vs. Price vs. Payment for Repair Products Legal Issues applicable to all Repair Products Different Payment Models: Benefits and Challenges Enforcement Techniques 2

3 Spectrum of Habitat Construction Services Repairs Rehabs New Homes Home Preservation Weatherization Critical Home Repair 3

4 Types of Repairs Home Preservation Weatherization Critical Home Repair Short-term, exterior work that includes painting, patching, minor repair and landscaping on owner occupied homes. A Brush With Kindness (ABWK) is 1 home preservation product Work done to improve the energy efficiency/air quality Scope of work defined by an energy audit Includes a homeowner education component Extensive interior or exterior work performed to address health and safety issues or code violations 4

5 A note on terminology In an effort to bring consistency to our terminology, and alignment with the reporting processes, HFHI uses the term Home Preservation to categorize any exterior work that includes painting, patching, minor repair, landscaping and replacement of exterior building materials for maintaining good or sound condition 5

6 Why do repairs? 1. Increase the # of families living in safe, decent, affordable housing. 2. Increase volunteer opportunities for current volunteers 3. Expand base of volunteers by providing a different type of activity 4. Keep current sponsors engaged. 5. Increase # of new sponsors. 6. As part of Neighborhood Revitalization 7. Helps your Affiliate stay in compliance. 6

7 Getting Started: Basic Principles for Repairs Follows same model that all Habitat services follow. Not a parallel or separate service. We serve individuals with: A demonstrated need Ability to pay Willingness to partner Areas of adjustment: Family Selection Sweat Equity Costing /Admin. Payment/Financing 7

8 Getting Started: Practical Tips Go slowly. Take on less than you think you can handle. Use HFH Partner Families. You already have a personal and financial relationship with them. Get referrals. City, churches, neighborhood associations, other social service agencies, etc. (this is why NR is a perfect fit with Home Preservation). 8

9 Set program parameters Decide whether your program will Work on houses than need foundation repair? Cross the threshold and do interior repairs? Have cost limitations on the projects? Do major and minor repairs on the exterior? Work on homes that are more than two-stories? Put volunteers on roofs? Limit ourselves to painting and paint related repairs? Do landscaping? Do yard clean-up? Do concrete work? Work on pre-1978 homes? Have geographic restrictions? Work on mobile/prefabricated homes? 9

10 Set program parameters A Program Scope of Work allows you to: Plan - both financially and programmatically. Communicate - with staff, the Board, volunteers, homeowners, donors, and referring organizations. Know - that what you do, you can do well. Keeps you from getting in over your head. Be - proactive instead of reactive! 10

11 Homeowner Selection Criteria Homeowner Selection is key to successful Home Preservation Project - Just like with home sales! Need Ability to Pay Willingness to Partner Affiliates must have policies and procedures and apply them consistently. How does Homeowner Selection differ for repairs? 11

12 Homeowner Selection Criteria Need Home must be owner-occupied Financial Need may serve lower AMI than home sales - but still must have ability to pay Property Condition Inspection Challenges of homeowner in performing repairs - e.g., age or disability 12

13 Homeowner Selection Criteria Ability to Pay Consider overall Debt-to-Income Ratio: this repayment, plus other recurring monthly debt no more than 43% of gross income. May consider housing cost ratio (30% of gross income for all housing costs). Review credit history consider a full report, at least find out if they pay housing expenses on time (home mortgage, utilities). 13

14 Homeowner Selection Criteria Willingness to Partner We want to create partners, ambassadors, volunteers and donors (and willingly pay back the price for the work). Will you require any education courses? Any other program requirements (i.e. paying off certain debts)? What sweat equity requirement is appropriate for the work? 14

15 Sweat Equity Sweat equity is a core tenet of Habitat s ministry and is Habitat s most valuable tool in building the partnership among families, affiliate staff and volunteers. For Repairs, the number of sweat-equity hours is based on the scope of the project, with a minimum of eight hours. A portion of hours should be completed before the work begins on the home. All present, physically capable household members must take an active role in the work. Use creative sweat equity ideas for older adults and folks with physical challenges. 15

16 Why we charge for Repair Products As we move forward in this work, and I think this has been one of the secrets of success of Habitat for Humanity, every person who receives a home through this ministry is recruited to become a part of passing it on to others Now this is revolutionary. We teach people that their house payment is a religious act. ~Millard Fuller,

17 Why we charge for our Construction Why we charge for Repair Products Products Partnering with families is foundational to our work and our ministry. Financial contributions give families a sense of pride in what they accomplished and it gives them a truer sense of ownership, whether it be of the house or of the improvement that s being made to the house. ~Larry Gluth Senior Vice President of United States and Canada 17

18 Why we charge for our Construction Why we charge for Repair Products Products For our ministry to be sustainable and indeed to expand, we have to stick with the principle that says we offer a hand up, not a hand out. That's not always the easiest way to execute our programs, but payment for repair products is critical to our long-term viability and the mission to serve even more families in need of a safe and affordable home to live. ~Larry Gluth Senior Vice President of United States and Canada 18

19 Why we charge for Repair Products Just like new construction 1. It is our very identity. Who we are as Habitat for Humanity. 2. It creates dignity and success for Habitat homeowners. 3. It provides sustainability for the affiliate and for the growth of Habitat programs through the revolving Fund for Humanity. 19

20 Determining Cost of Repair Products Project costs should include: Cost of purchased building materials, professional services, and contracted labor Value of donated building materials and professional services Direct or allocated labor cost for the affiliate in supervision and coordination, including transportation, material storage, and insurance Loan origination, closing, and servicing costs Permits Indirect costs including staff time and office overhead 20

21 Determining Price for Repair Products Affiliate must develop policy. Suggested models include: 100% of cost no subsidy Sliding Scale based on income Fixed Price Fixed Percentage 21

22 Determining Payment Structure Two Basic Options: for Repair Products Payment in full upon completion (with or without some deposit) Finance all or part of the payment - Unsecured, or - Secured by mortgage lien on property 22

23 Legal Issues: State Regulations Home improvement work may require different or additional license, insurance, bond vs. new home construction. State regulations may require specific disclosures (e.g., process for filing a complaint, license/registration info). State laws may provide increased protections for vulnerable populations (seniors, disabled) or disaster response areas. UDAP: Know your state s unfair and deceptive acts and practices. If you experience a problem you cannot resolve with your contractor, file a complaint with the Construction Contractors Board or contact the Attorney General s Consumer Hotline at from 8:30 a.m. to 4:30 p.m., or complete an online Consumer Complaint Form anytime. OR DoJ 23

24 Legal Issues: Homeowner Agreement Clarifies the understandings and expectations of the homeowner and affiliate regarding their respective obligations scope of work; consider excluding work not included (e.g., mold evaluation/remediation, foundation work) Payment, regardless of amount or method Consumer protections (cooling off period, no blanks when signed) Other obligations (e.g., access to premises, use of volunteers) Check prohibited provisions under state law (e.g., mandatory arbitration, waiver of jury trial, limitations of liability) Template is starting point: make sure it is modified for any required or prohibited provisions, or formatting requirements under local law. Use local legal counsel! Include certificate of completion evidence of homeowner s acceptance of work as completed 24

25 Legal Issues: Federal Regulations Credit means the right granted by a creditor to an applicant to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment therefor. Consumer credit means credit extended to a natural person primarily for personal, family, or household purposes. Creditor means a person who, in the ordinary course of business, regularly participates in a credit decision, including setting the terms of the credit. **If an affiliate finances the payment of a repair product by deferring payments by the homeowner, then federal consumer protections apply ECOA, TILA, UDAAP, FTC, FCRA **If the payment is secured with a mortgage lien on the homeowner s home, then RESPA also applies 25

26 Legal Issues: Federal Regulations If financing the payment, affiliate must: Provide notice of status of application with 30 days of submission of application Acceptance, Denial or Incomplete Application Provide notice of action taken within 30 days after receipt of the completed application Acceptance or Denial Note, notice of any denial required within 30 days after any decision, even if application is incomplete. Provide initial Truth in Lending disclosure notice once application is accepted See Payment for Repairs Checklist for more details 26

27 Payment Models Distinguish payment from costing and pricing see program guidelines for recommendations Basically, two options: Prepayment/Payment upon Completion, or Finance the payment after completion May have some deposit or down payment but watch for State law restrictions Early payment incentive (optional) Secured or unsecured obligation (affiliate s choice) 27

28 Payment Models: Payment Upon Completion Prepayment or deposit held by affiliate until earned, per the Homeowner Agreement Hold funds in escrow Be prepared to return if work is interrupted or family does not complete eligibility conditions Local laws may limit how much can be collected in advance 28

29 Payment Models: Finance the Payment Promissory note is a signed document that establishes an enforceable promise to pay. Contains lender and borrower info, principal amount and repayment information. Original required for enforcement. Must confirm Ability to Pay. Must provide Truth in Lending Disclosure a consumer debt. Must comply with all other applicable consumer lending protections (e.g., no discrimination, provide notices of action taken under ECOA). Include FTC Holder Rule Notice (See Section 10 of template). Check for particular state requirements. 29

30 Payment Models: Securing the Payment Obligation Loan may be unsecured (no collateral) or secured by the home through a mortgage. The mortgage grants the affiliate the right to take the property if the loan is not paid or upon other, specified triggering events. Mortgage also provides ongoing obligations of homeowner to protect the home. Must provide same initial and closing disclosures as purchase money loans. Must also include TILA Right of Rescission (2 copies, to each owner of record). Beware due on sale mortgages. 30

31 While we re talking about securing What is a lien anyway? payment A lien is an official claim or charge against a person s property for payment of a debt or an amount owed for services rendered. A mortgage (including any deed of trust or deed to secure debt, depending on the jurisdiction) is a type of lien that is agreed upon by the property owner and filed against real property for the purpose of securing payment of a debt. It provides for ongoing obligations to maintain the property and remedies upon nonpayment, including foreclosure. Other types of liens may be imposed unilaterally and involuntarily when a debt is owed, including mechanic s liens (to secure payment for work or materials provided by a workman, contractor or supplier), judgment liens (to secure payment of a judgment obtained from a court proceeding), homeowner s association liens (to secure payment of HOA assessments), and tax liens (for unpaid taxes). Liens usually must be released in order to convey marketable title to real property, and are generally enforced (i.e., paid) according to the order in which they are recorded. 31

32 What About Protecting the Subsidy? If pricing model subsidizes the repair, how can you protect that subsidy? Consider setting the principal payment obligation at full cost, but forgiven over a determined period of time unless the home is sold or otherwise transferred during that period (subject to available net proceeds). If the homeowner sells the property within a specified period of time after completion of the repair, the full price would be payable from the sales proceeds. 32

33 Other Enforcement Options Automated Clearinghouse (ACH) payments Mechanics/Materialmens liens Suit on note to obtain a judgment Can be reduced to lien against property Allows for garnishment, possible payment upon sale of property 33

34 Resources Homeowner Selection AOM Homeowner Support AOM Home Preservation Handbook Pricing and Payment for Repairs Collection MPAR University Affiliate Support Center: or