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2023 - 2024 LEGISLATURE
2023 ASSEMBLY BILL 1094
February 16, 2024 - Introduced by Representatives KRUG, GOYKE and ARMSTRONG,
cosponsored by Senators KNODL and L. JOHNSON. Referred to Committee on
Housing and Real Estate.
***AUTHORS SUBJECT TO CHANGE***
AN ACT to create 234.665 of the statutes; relating to: a workforce home loan
program.
Analysis by the Legislative Reference Bureau
This bill establishes a revolving loan program administered by the Wisconsin
Housing and Economic Development Authority for the purpose of issuing loans,
which the bill terms “workforce home loans,” to eligible applicants to provide gap
financing to supplement a conventional mortgage for the purchase of a single-family
residence in Wisconsin, whether new construction or an existing residence and
whether detached or attached, that will be the eligible applicant's primary residence.
The bill requires WHEDA to use repayments of workforce home loans to fund
additional loans under the program.
The bill prohibits WHEDA from charging any interest for a workforce home
loan, and workforce home loans are not forgivable in whole or in part. Each
workforce home loan must be secured as a second lien real estate mortgage. The loan
term is 30 years, except that the loan term may be extended to 40 years for certain
applicants who qualify for limited workforce home loan payment deferral, as
provided in the bill, and a workforce home loan may be prepaid in whole or in part
at any time without penalty. Under the bill, the total amount of unpaid principal on
a workforce home loan becomes due and payable upon the occurrence of any of the
following:
1. The recipient of the workforce home loan sells the home.
2. No recipient of the workforce home loan continues to reside in the home as
a primary residence.
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Under the bill, a lender authorized by WHEDA or a local housing authority or
community-based organization or other qualified local organization, as determined
by WHEDA, certifies that a loan applicant is eligible to receive a workforce home
loan, subject to WHEDA's approval. An applicant is eligible for a workforce home
loan under the bill if all of the following are satisfied:
1. The applicant has not had any ownership interest in residential real
property for the three consecutive years immediately preceding the date of the
application.
2. The applicant's annual household compliance income equals 100 percent or
less of the area median family income for the county in which the home is located,
not adjusted for family size, as established by the Federal Housing Finance Agency.
Under the bill, household compliance income means the anticipated combined
income, as determined by WHEDA according to its conventional first-time home
buyer first mortgage program underwriting guidelines (underwriting guidelines), of
all individuals age 18 or older who intend to occupy the residence subject to a
workforce home loan, regardless of whether the individual is an applicant for the
workforce home loan and regardless of the individual's relationship to the applicant
for the workforce home loan.
3. The applicant's debt-to-income ratio, calculated by WHEDA as provided in
the bill, satisfies WHEDA's underwriting guidelines.
4. The applicant's credit score, rating, or other classification, as determined by
WHEDA, satisfies WHEDA's underwriting guidelines.
5. Unless payments on a workforce home loan are deferred for at least 60
months, the applicant's minimum financial reserves after down payment and closing
costs for the applicant's conventional mortgage for the purchase of the residence
subject to the workforce home loan satisfy WHEDA's underwriting guidelines.
6. The applicant's conventional first mortgage for the purchase of the residence
subject to the workforce home loan is a fully amortizing, fixed-rate qualified
mortgage loan with a term of 30 or fewer years.
7. The applicant satisfies all eligibility requirements with respect to citizenship
or resident alien status, social security number validity, home buyer education and
counseling, and payment of child support or maintenance if owed, as provided in
WHEDA's underwriting guidelines.
Under the bill, WHEDA may not issue a workforce home loan that exceeds the
lesser of the following:
1. $60,000, adjusted for inflation.
2. Twenty-five percent of the purchase price or fair market value of the home,
whichever is less.
The bill establishes different repayment rules for workforce home loans
depending on an eligible applicant's household compliance income. Specifically, if
WHEDA issues a workforce home loan to an eligible applicant whose household
compliance income is 80 percent or less, but more than 60 percent, of the area median
income, the repayment of principal on the loan must be deferred for 60 months
following the issuance date of the workforce home loan after which time the
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However, if WHEDA issues a workforce home loan to an eligible applicant whose
household compliance income is 60 percent or less of the area median income, the
repayment of principal on the loan must be deferred until the first-lien real estate
mortgage loan on the home is paid in full after which time the repayment of principal
on a monthly basis commences, amortized over 10 years. No more than $25,000,000
in such loans may be outstanding at any time and the bill requires WHEDA to
allocate at least $20,000,000 for such loans.
Finally, the bill requires that WHEDA subordinate an outstanding workforce
home loan to a new first mortgage loan obtained by the recipient of the workforce
home loan on the basis of rules provided in the bill.
Because this bill may increase or decrease, directly or indirectly, the cost of the
development, construction, financing, purchasing, sale, ownership, or availability of
housing in this state, the Department of Administration, as required by law, will
prepare a report to be printed as an appendix to this bill.
For further information see the state and local fiscal estimate, which will be
printed as an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SECTION 1. 234.665 of the statutes is created to read:
234.665 Workforce home loan revolving loan program. (1) DEFINITIONS.
In this section:
(a) “Applicant” means each person who is a member of a household and who is
applying for a workforce home loan on behalf of that household.
(b) “Area median income” means the area median family income in the county
in which the residence is located, not adjusted for family size, as determined by the
federal housing finance agency.
(c) “Household compliance income” means the anticipated combined income,
as determined by the authority according to its underwriting guidelines, of all
individuals age 18 or older who intend to occupy the residence subject to a workforce
home loan, regardless of whether the individual is the applicant for the workforce
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home loan and regardless of the individual's relationship to the applicant for the
workforce home loan.
(d) “Qualified organization” means an authorized lender, as defined in s. 234.59
(1) (a), or a housing authority, as defined in s. 16.301 (2) (a), a community based
organization, as defined in s 16.301 (1), or another qualified local organization, as
determined by the authority.
(e) “Qualifying income” means the sum of the income of all eligible applicants
in the household for purposes of assessing the combined ability of all applicants in
the household to repay the workforce home loan, as determined by the authority
according to its underwriting guidelines.
(f) “Underwriting guidelines” means the authority's conventional first-time
home buyer first mortgage program underwriting guidelines.
(g) “Workforce home loan” means a loan issued by the authority under sub. (4)
(a).
(2) ESTABLISHMENT OF PROGRAM. The authority shall establish and administer
a workforce home loan revolving loan program for the purpose of awarding loans
under this section.
(3) CERTIFICATIONS. (a) A qualified organization may certify that an applicant
is eligible to receive a workforce home loan in an amount determined by the qualified
organization, subject to the approval of the authority.
(b) An applicant for a workforce home loan is eligible if the applicant satisfies
all of the following:
1. The applicant has not had any ownership interest in residential real
property for the 3 consecutive years immediately preceding the date of the
application.
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2. The applicant's annual household compliance income equals 100 percent or
less of the area median income.
3. The applicant's debt-to-income ratio, based on qualifying income, satisfies
the underwriting guidelines, except that if the payments on a workforce home loan
are deferred for at least 60 months, no future workforce home loan payment may be
included in the debt-to-income ratio calculation and the maximum debt-to-income
ratio for manual underwriting shall be 40 percent of the qualifying income.
4. The applicant's credit score, rating, or other classification, as determined by
the authority, satisfies the underwriting guidelines, except that if the payments on
a workforce home loan are deferred for at least 60 months, the minimum qualifying
credit score, rating, or other classification shall be the lowest eligible score, rating,
or other classification published in the underwriting guidelines.
5. The applicant's minimum financial reserves, as determined by the authority,
after down payment and closing costs for the applicant's conventional mortgage for
the purchase of the residence subject to the workforce home loan satisfy the
underwriting guidelines. This subdivision does not apply if the payments on a
workforce home loan are deferred for at least 60 months.
6. The applicant's conventional first mortgage for the purchase of the residence
subject to the workforce home loan is a fully amortizing, fixed-rate qualified
mortgage loan with a term of 30 or fewer years consistent with Regulation Z under
the federal Truth in Lending Act, 12 CFR 226.
7. The applicant satisfies all eligibility requirements with respect to citizenship
or resident alien status, social security number validity, home buyer education and
counseling, and payment of child support or maintenance if owed, as provided in the
underwriting guidelines.
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(c) The authority shall adopt policies and procedures to facilitate the
preapproval of applicants for workforce home loans and the encumbrance of
workforce home loan funds for preapproved applicants for a period of up to 90 days
for preapproved applicants seeking to purchase existing single-family residences
and up to 180 days for applicants seeking to purchase new construction
single-family residences.
(4) LOAN ISSUANCE; REPAYMENT. (a) 1. Subject to pars. (b) to (g), the authority
may issue a loan to an eligible applicant certified by a qualified organization under
sub. (3).
2. The authority may not charge interest for any workforce home loan, and the
loan term shall be 30 years, except that in the case of applicants who qualify for
payment deferral under par. (f), the loan term shall be 40 years, and except that a
workforce home loan may be prepaid in whole or in part at any time without penalty.
3. No workforce home loan shall be forgivable in whole or in part.
4. Each workforce home loan shall be secured as a 2nd lien real estate
mortgage.
5. The authority shall use all repayments of workforce home loans to fund
additional workforce home loans under this section.
(b) The authority may issue a workforce home loan only for the purpose of
providing gap financing to supplement a conventional mortgage for the purchase of
a single-family residence in this state, whether new construction or an existing
residence and whether detached or attached, that will be the eligible applicant's
primary residence.
(c) The authority may not issue a workforce home loan that exceeds the lesser
of the following:
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1. $60,000, adjusted for inflation annually beginning on the effective date of
this subdivision .... [LRB inserts date].
2. Twenty-five percent of the purchase price or fair market value of the home,
whichever is less.
(d) If the authority issues a workforce home loan to an eligible applicant whose
household compliance income is 100 percent or less, but more than 80 percent, of the
area median income, the repayment of principal on a monthly basis shall commence
on the first day of the 2nd month following the issuance date of the loan, amortized
over 30 years.
(e) If the authority issues a workforce home loan to an eligible applicant whose
household compliance income is 80 percent or less, but more than 60 percent, of the
area median income, the repayment of principal on the loan shall be deferred for 60
months following the issuance date of the workforce home loan after which time the
repayment of principal on a monthly basis shall commence, amortized over 25 years.
(f) If the authority issues a workforce home loan to an eligible applicant whose
household compliance income is 60 percent or less of the area median income, the
repayment of principal on the loan shall be deferred until the first-lien real estate
mortgage loan on the home is paid in full after which time the repayment of principal
on a monthly basis shall commence, amortized over 10 years. No more than
$25,000,000 in loans subject to this paragraph may be outstanding at any time and
the authority shall allocate at least $20,000,000 for loans subject to this paragraph.
(g) The total amount of unpaid principal on a workforce home loan shall become
due and payable upon the occurrence of any of the following:
1. The recipient of the workforce home loan sells the home.
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2. No recipient of the workforce home loan resides in the home as a primary
residence.
(5) SUBORDINATION TO NEW FIRST MORTGAGE. The authority shall subordinate an
outstanding workforce home loan to a new first mortgage loan obtained by the
recipient of the workforce home loan, using the same documentation requirements
and charging the same subordination review fee as for the authority's other 2nd
mortgage loan programs, if the authority determines that all of the following apply:
(a) The home continues to be the primary residence of any recipient of the
outstanding workforce home loan.
(b) The combined loan-to-value ratio, calculated using the sum of the amount
of the proposed new first mortgage loan and the outstanding balance of the workforce
home loan, divided by the fair market value of the subject property at the time of the
subordination request, as determined by the authority, is equal to or less than the
combined loan-to-value ratio at the time the workforce home loan was first issued,
calculated using the sum of the conventional first mortgage loan used to purchase
the residence and the amount of the original workforce home loan, divided by the
original fair market value of the subject property at the time the workforce home loan
was first issued.
(c) The proposed new first mortgage loan is a fully amortizing, fixed-rate
qualified mortgage loan with a term of 30 or fewer years, consistent with Regulation
Z under the federal Truth in Lending Act, 12 CFR 226.
(d) The workforce home loan recipient continues to satisfy sub. (3) (b) 3., 4., 5.,
and 7.
(END)
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