NEW YORK – Housing and Urban Development Secretary Andrew Cuomo today unveiled a new program that makes the dream of homeownership achievable for more than one million working families now receiving HUD Section 8 rental assistance vouchers. Under the program, Section 8 rental assistance vouchers can be used to purchase homes.

"Homeownership is the best way to build strong, vital neighborhoods," Cuomo said. "Under President Clinton’s leadership, homeownership rates in the U.S. reached record levels. Thanks to the legislation he signed, today we can tell 1.4 million families you don't have to be a renter forever, you can be an owner, and we're going to help you do it." Secretary Cuomo announced the program during a speech today in New York at Columbia University’s prestigious Moran Weston Lecture Series.

The new homeowner program reflects years of work by the Clinton Administration and the program received favorable marks when it was tested last fall in more than a dozen locations including, Syracuse, NY; Danville, VA, Philadelphia, PA; Nashville, TN; Charlottesville, VA; Yonkers, NY; Montgomery County, PA; Suffolk County, NY; Las Vegas, NV; southwest Virginia; and Colorado, Hawaii, Vermont and Mississippi.

"A dozen families have purchased homes during our pilot program and the public comments HUD received were overwhelmingly in favor of expanding use of the vouchers to cover mortgage payments to the entire nation," explained Cuomo. "This program makes good sense, if a person can pay a mortgage for the same amount or less than they could pay the rent, why not allow them?"

Once the program goes into effect in October, vouchers may be used to purchase a new home, an existing single-family home, a home under construction or shares in a cooperative.

The nation’s 2,700 public housing agencies (PHAs) oversee the program, determining eligibility, and enforcing the rules.

To participate in the program, a family must be eligible for the Section 8 voucher program. In addition, a family must be a first-time homebuyer, have an annual household income of at least $10,300 and, except for the elderly or disabled, have at least one adult member who has been employed full-time for a year. In addition, welfare income will only be counted toward the minimum income requirement in the case of the elderly or disabled.

Vouchers may be used for 15 years if the mortgage is for 20 years or longer, and or up to 10 years for a mortgage of shorter duration. The voucher amount for homeownership will be the same as those for rental assistance.

No member of a participating family can be a homeowner for at least three years prior to receiving homeownership assistance, and may not have any financial interest in a second home while receiving assistance.

Prior to receiving assistance, the family must also attend free counseling sessions to better understand home financing, fair housing practices, home maintenance, and money management. PHAs may also require a family to participate in post-ownership counseling programs.

If a family sells or refinances a home purchased under this program during the first 10 years of assistance, a portion of the home’s equity may be returned to the PHA.

Each family is responsible for selecting a lender. The housing authority may review lender qualifications and loan terms before approving assistance, and may disapprove proposed financing or refinancing. Local or state community development block grant funds or other subsidies may also be used in conjunction with the program.

Two inspections must be completed prior to the purchase of a home. The first will be conducted by the PHA to insure that the home meets certain standards, and the second will be conducted by an independent certified home inspector, selected and paid for by the family, to identify any needed repairs.

If a family default on the mortgage while in the program, they may still be eligible to receive Section 8 rental assistance, but the mortgage plan is no longer an option.

HUD recently awarded 60,000 new rental assistance vouchers to some 500 housing authorities that may be used for new homeowner program.