Reserved Housing Frequently asked questions

Posted on Jul 2, 2021 in Main

Frequently asked questions

 

Do I need HCDA’s approval if I want to refinance my current mortgage?

Yes.  You will need HCDA to execute a Subordination of Equity Sharing Payment Agreement in order to refinance.
Please click here for more information and required documents.

I am outside of my Regulated Term. Do I still need HCDA’s approval if I want to refinance my current mortgage?

Yes.  You will need HCDA to execute a Subordination of Equity Sharing Payment Agreement in order to refinance, regardless of when your Regulated Term expires.
Please click here for more information and required documents.

What is my Regulated Term?

You can look up the length of your Regulated Term in your Unit Deed or Unilateral Declaration documents.  These terms are generally two, five, or 10 years in duration.  The commencement date of the term is the date the Unit Deed was recorded in the Bureau of Conveyances or Land Court.

Where do I find the Deed and Unilateral Declaration information required to complete the Subordination/Release Request Fillable Form?

The information can be found on the first page of your Unit Deed and Unilateral Declaration documents.  Please refer to the yellow highlighted sections in the sample Deed and Unilateral Declaration provided here:
SAMPLE Unit Deed
SAMPLE Unilateral Declaration

Do I need HCDA’s approval to sell my unit on the market if I’m outside of my Regulated Term?

You are free to list your unit at market without approval from the HCDA once your Regulated Term has expired.  However, you will need to pay the Shared Equity due and have the HCDA execute a Release of Unilateral Declaration to release your unit from the Reserved Housing program in order to close on your new sale.
Please click here for more information and required documents.

Can I sell my unit if I’m still within my Regulated Term?

No, Reserved Housing Rules require the HCDA or an entity approved by the HCDA to have the first option to purchase the unit (“Buyback”) if it is sold during the Regulated Term.  The purchase price (“Buyback price”) will be determined by a specific formula by rule and is not negotiable.  A market sale would only be allowed if the HCDA waived its first option to purchase.

Can I rent my unit?

Owner occupancy is required during the Regulated Term.  The only time owner occupancy is not required during the Regulated Term is if the HCDA waives its first option to purchase the unit.

Can I do a HELOC?

  1. The maximum allowable second mortgage amount will be limited to the Original Sales Contract Price plus Any Partial Shared Equity Payments minus the Remaining Mortgage, and
  2. The total allowable first mortgage plus second mortgage cannot exceed the current City and County of Honolulu property tax assessed value, if the current property tax assessed value is less than the Original Sales Contract Price.

 I’d like to add/delete someone on my title. Do I need HCDA’s approval?

Yes, any change in title will trigger a release from the Reserved Housing program and the payment of Shared Equity.  This includes additions due to marriage and removals due to divorce.  You will need the HCDA to execute a Release of Unilateral Declaration to release your unit from the Reserved Housing program prior to the change in title.
Please click here for more information and required documents.

Do I still owe Shared Equity to HCDA if my Regulated Term expired?

Yes, the Shared Equity payment requirement never expires.  The Shared Equity payment will be due to the HCDA at the time you sell or transfer title to your unit, regardless of when your Regulated Term expires.

What is my Shared Equity amount?

For Reserved Housing Units governed by the 2005 and 2011 rules:

The Shared Equity amount can usually be found in your Unilateral Declaration document under Section II. B. Equity Sharing Requirements.  This section also documents your unit’s Original Fair Market Value (FMV) and Original Sales Price.

The Shared Equity amount owed is the HIGHER of the following formulas:

    • Original FMV less the Original Sales Price*
    • (Original FMV – Original Sales Price)/(Original FMV) x (Resale FMV – Original Sales Price – Sales costs)

*The first formula (the fixed amount listed in the Unilateral Declaration document), generally yields the higher number and is therefore the Shared Equity amount.

For Reserved Housing Units governed by the 2018 rules:

The Shared Equity amount is a percentage of the resale FMV of the unit.  That formula is: (Original FMV – Original sale price) / Original FMV, rounded to the nearest one percent.

There is no Shared Equity owed if the above percentage calculation is less than 0.5%, or if the resale FMV is less than the original sales price.

Can I pre-pay my Shared Equity?

Yes, a recent amendment to the Reserved Housing Rules allows for prepayment of the Shared Equity amount due.  The process for paying the Shared Equity and obtaining a Release of Unilateral Declaration is available here: https://dbedt.hawaii.gov/hcda/prepay-shared-equity-for-a-reserved-housing-unit

What is the HCDA’s Buyback process?

If the owner wishes to sell his/her Reserved Housing Unit during the Regulated Term, they must notify the HCDA and provide the following:

    1. Signed request letter or email from the owner indicating that they would like the HCDA to start the buyback process on their Reserved Housing Unit.
    2. A current Certified Appraisal Report on their Reserved Housing Unit.
    3. Copy of the Unit Deed.
    4. Copy of the Unit Unilateral Declaration.

Upon receipt of the above documents, the HCDA will calculate the purchase price (“Buyback price”).  HCDA will then send the owner(s) an Acknowledgement Letter containing the Buyback price and requesting approval to proceed with the Buyback.  The owner(s) will then have 30 days to sign the letter and return to us, indicating their approval of the Buyback price and procedures to proceed with the Buyback. Alternately, the owner is free to decline to proceed with the Buyback at this point. HCDA will not proceed with Buyback process of the unit until we receive the acknowledgement letter signed by the owner(s).

 

What happens if HCDA waives the Buyback of my unit?

If the HCDA or its agent waives, or, decides that it will not buyback the unit, the Reserved Housing Unit owner will be free to sell their unit on the market at the price of their choosing.  Owner occupancy is also waived if the HCDA waives buyback of the unit.

However, you will need to pay the Shared Equity due and have the HCDA execute a Release of Unilateral Declaration to release your unit from the Reserved Housing program in order to close on your new sale.
Please click here for more information and required documents.

What is Reserved Housing/ Regulated Terms?

Reserved Housing Units are units reserved for households making 80-140% of the area median income (AMI), allowing eligible purchasers to buy homes at below market rates.  The Regulated Term, or the period the owner(s) are required to reside in the unit, is tied to unit affordability and spans periods of two, five, or 10 years.

What are the eligibility requirements for a Reserved Housing Unit?

Qualifications may vary project to project, but general requirements are as follows:

    1. Is a United States citizen or permanent resident alien;
    2. Is a resident of the State of Hawaii who currently resides in the State of Hawaii;
    3. Is at least of legal age;
    4. Does not have a majority interest in principal residence or a beneficial interest in a land trust on a principal residence within or without the State (time periods may differ per project);
    5. Shall physically reside in the Reserved Housing Unit purchased for its specified Regulated Term; and
    6. Has sufficient gross income to qualify for the loan to finance the purchase.

 

What is Shared Equity?

Shared Equity refers to the HCDA’s share of the equity in the Reserved Housing unit that provided the buyer an opportunity to purchase their Reserved Housing Unit at below market prices.  Unlike other agencies, the HCDA does not calculate its Shared Equity with a fixed percentage (unless the owner opted in to the 2018 Reserved Housing Rules).  See previous question regarding how the Shared Equity amount is calculated.

Shared Equity will be due to the HCDA upon sale or transfer of the Reserved Housing Unit.  The HCDA uses these funds to subsidize other affordable housing projects for future buyers.

Is HCDA’s Reserved Housing program the same as HHFDC’s Affordable Housing program?

No. HHFDC is HCDA’s sister agency, but operates a separate program with a different set of rules.  All HCDA Reserved Housing Units follow HCDA Rules, not HHFDC Rules.

I am transferring the title of my unit deed to a revocable trust. What’s the process?

In 2019, the HCDA Board authorized the transfer of all Reserved Housing units to Revocable Trusts and defer the payment of Shared Equity and the HCDA’s first option to purchase the unit, provided that the following two (2) conditions are met:

    1. A new unilateral agreement* is executed between HCDA and the revocable trust reinstating HCDA’s Reserved Housing requirements, including the Regulated Term; and
    2. The new deed and trust documents shall be subject to review by the HCDA Executive Director to ensure all applicable provisions are met.

*Note: There are currently no templates for the above referenced unilateral agreements, as no unit owner has gone through this process before. Therefore, reviewing and finalizing of these documents will likely take longer than the standard 4-6 week processing time.

 

For more information about HCDA’s Reserved Housing Program:
Phone: (808) 594-0311
Email: dbedt.hcda.reservedhousing@hawaii.gov