SECTION 3 (Provisions):

a) Home Buyer Assistance Loan Program

i) The STATE Department of Housing [or comparable state entity] shall administer a home buyer assistance loan program that:

1) assists home buyers to receive low-interest mortgage loans, with down payment and closing cost assistance options, for the purchase of homes; and

2) coordinates with, and matches where appropriate, similar programs offered by private employers and county and municipal governments so as to maximize the total amount that home buyers can receive under the program; and

3) establishes a revolving loan fund that shall consist of funds appropriated by the Legislature, money received from the repayment of loans made from the program, and interest earned.

ii) Loan use and requirements

1) With reference to loans under this program, the DEPARTMENT shall:

(a) allow home buyers to utilize the loans for the purchase of newly constructed or existing homes, including homes held in cooperative or condominium forms of ownership;

(b) require that borrowers under this program do not own other residential real estate at the time of the issuance of the loan;

(c) require a home purchased under this program to be occupied by the home buyer as a principal residence.

iii) Capitalization of revolving loan funds

1) Any proceeds or repayments from loans made under this paragraph shall be returned to the revolving loan fund established under this paragraph to be used for purposes related to this section.

iv) Regulations

1) The DEPARTMENT shall adopt regulations to implement the program established under this section.

b) Homebuyer Education

i) A recipient of a home buyer assistance program loan or SmartBuy Program participant shall complete homebuyer education that meets the requirements of the Department.

ii) The Department’s homebuyer education requirements shall, before signing a contract of sale for a property:

1) Require that a program loan recipient take a homebuyer education course with a HUD-approved counseling agency or complete online homebuyer education with a HUD-approved product; or

2) Allow another State or Local governmental entity’s homebuyer education course that covers substantially similar topics to meet the program loan education requirements; or,

3) Allow that a program loan recipient receive one-on-one counseling for at least 1 hour, in person, by phone, or online, from a HUD-approved counseling agency.

iii) This subtitle does not alter or preempt the authority of a political subdivision to establish homebuyer education or counseling requirements for a down payment assistance program operated by the State or a Local governmental entity. 

iv) Department shall offer participants a no-cost option for fulfilling the qualifying homebuyer education courses and required counseling and may also offer to reimburse the cost of participation for program loan participants.

c) First-Time Home Buyers Savings Accounts

i) The first-time home buyer savings opportunity is established in the  STATE Department of Treasury [or comparable State Department]. The purposes, powers, and duties of the first-time home buyer savings opportunity are vested in and shall be exercised by the STATE Department of Treasury [or comparable State Department].

ii) Participation solely in the first-time home buyer savings account opportunity shall not require satisfaction of the education requirement outlined in section b.

iii) Beginning [DATE] through [DATE], any individual may open an account with a financial institution and designate the account, in its entirety, as a first-time home buyer savings account to be used to pay or reimburse their qualified eligible costs for the purchase of a single-family residence in this State.

iv) An individual may jointly own a first-time home buyer savings account with another person if the joint account holders file a joint state tax return. An individual may be the account holder of more than one first-time home buyer savings account, provided they do not cumulatively exceed allowable overall account balance, as defined in section xv.

v) Only cash and marketable securities may be contributed to a first-time home buyer savings account.

vi) The account holder is responsible for the use or application of funds in a first-time home buyer savings account. The account holder shall not use funds held in an account to pay expenses of administering the account, except that a service fee may be deducted from the account by a financial institution in which the account is held. An account holder may withdraw funds, in whole or in part, from a first-time home buyer savings account and deposit the funds in a new first-time home buyer savings account held by a different financial institution or the same financial institution. If necessary, an account holder may make a hardship withdrawal from the account due to an immediate and heavy financial need of the account holder. However, the amount withdrawn must be limited to the amount necessary to satisfy that need. A hardship withdrawal is not a qualified withdrawal and will be subject to taxation under state law.

vii) An account holder shall submit, with the account holder’s state income tax return, all of the following to the Department, along with the form prescribed by the Department under this act:

1) Account statements that show the contributions made during the tax year and the taxable interest or earnings on the account in the tax year for which the deduction is claimed.

2) The Form 1099 issued by the financial institution for the account for the tax year for which the deduction is claimed.

3) Upon a withdrawal of funds from a first-time home buyer savings account, a copy of the real estate settlement statement that shows that the withdrawal was used for eligible costs.

viii) An account holder shall maintain and keep, for a period of at least 4 years, suitable records and documentation, for each first-time home buyer savings account, including, but not limited to, account statements for all contributions and withdrawals made, a detailed list describing the transactions for the account, and other pertinent records and papers as required by the Department for the administration of this act.

ix) The Department may promulgate rules to implement the program in accordance with state law. The rules shall not apply to, or impose administrative, reporting, or other obligations or requirements on, financial institutions-related accounts for first-time home buyer savings accounts.

x)The Department shall prescribe the form and manner in which a taxpayer shall claim a deduction in accordance with this act and the state tax code on his or her state income tax return. The form shall include, at a minimum all of the following:

1) The account holder’s name. 

2) The name of the financial institution and the account number. 

3) The beginning and end of the year balance of the account. 

4) The amount of the deduction claimed for the tax year.

xi) The Department may prepare and distribute informational materials on the first-time home buyer savings program to financial institutions and potential home buyers to publicize the availability of the program.

xii) A financial institution is not required to do any of the following:

1) Designate an account as a first-time home buyer savings account in the financial institution’s account contracts or systems or in any other way. 

2) Track the use of money withdrawn from a first-time home buyer savings account. 

3) Allocate funds in a first-time home buyer savings account among joint account holders. 

4) Report any information to the department that is not otherwise required by law.

xiii) A financial institution is not responsible or liable for any of the following:

1) Determining or ensuring that an account satisfies the requirements to be a first-time home buyer savings account.

2) Determining or ensuring that funds in a first-time home buyer savings account are used for eligible costs. 

3) Reporting or remitting taxes or penalties related to the use of a first-time home buyer savings account.

xiv) Upon being furnished proof of the death of the account holder and any other information required by the contract governing the first-time home buyer savings account, a financial institution shall distribute the principal and accumulated interest or other income in the account in accordance with the terms of the contract governing the account.

xv) The maximum account balance limit for a first-time home buyer savings account cumulatively across all accounts held by the same account holder shall not exceed 20% of the median home price in the State, as determined by the Department. The Department shall annually adjust for inflation or major housing market disruptions. Accounts may continue to accrue earnings if the total balance has reached the maximum account balance limit and shall not be considered to have exceeded the maximum account balance limit under this subsection.

xvi) Contributions to and interest earned on a first-time home buyer savings account are exempt from taxation as provided in the state tax code.

xvii) Qualified withdrawals made from first-time home buyer savings accounts are exempt from taxation as provided in the state tax code.

xviii) If funds are withdrawn from an account for any purpose other than the payment of eligible costs, such shall not be tax exempt and there shall be a penalty equal to 10% of the amount withdrawn. The penalty shall be paid to the Department.

xiv) The penalty does not apply if the funds withdrawn satisfy any of the following:

1) Withdrawn by reason of the account holder’s death or disability. 

2) A disbursement of assets of the account pursuant to a filing for protection under the United States bankruptcy code, 11 U.S.C. §§101 to 1330. 

3) Transferred from an account established pursuant to this act into another account established pursuant to this act. 

4) Withdrawn by reason of a hardship withdrawal as provided in this act. 

5) Withdrawn by reason of account holder who is a service member who is transferred or deployed out of this state on active duty pursuant to a permanent change of station order and provides proof acceptable to the department that the account holder or their spouse is assigned to a duty station outside this state under a permanent change of station order.

xx) Definitions

1) “Account holder” means an individual who establishes, individually or jointly as provided for in iii) above, an account with a financial institution for which the account holder claims a first-time home buyer savings account status on their income tax return. 

2) “Allowable closing costs” means a disbursement listed on a settlement statement for the purchase of a single-family residence in this state by an account holder. 

3) “Eligible costs” means the down payment and allowable closing costs for the purchase of a single-family residence in this state by a qualified account holder. 

4) “Financial institution” means any bank, trust company, savings institution, industrial loan association, consumer finance company, credit union, or any benefit association, insurance company, safe deposit company, money market mutual fund, broker, or similar entity authorized to do business in this state. 

5) “First-time home buyer” means an individual who is a resident of this state and has not owned or purchased, either individually or jointly, a single-family residence during a period of 3 years prior to the date of the purchase of a single-family residence. 

6) “First-time home buyer savings account” or “account” means an account with a financial institution that an account holder designates as a first-time home buyer savings account on his or her income tax return pursuant to this act for the purpose of paying or reimbursing eligible costs for the purchase of a single-family residence in this state by a qualified beneficiary. 

7) “Principal residence” means that term as defined in the state property tax code. 

8) “Program” means the first-time home buyer savings program established pursuant to this act. 

9) “account holder” means a first-time home buyer who opens a first-time home buyer savings account. 

10) “Qualified withdrawal” means a withdrawal from an account that is not subject to a penalty under this act or taxation under the state income tax act, and that is a withdrawal from an account that is made at least one year after the account was opened and designated as a first-time home buyer savings account and the withdrawal is used to pay the eligible costs the account holder incurred at least one year after the account is designated. 

11) “Settlement statement” means the statement of receipts and disbursements for a transaction related to real estate, including a statement prescribed under state or federal law, or an executed sales agreement for the purchase of a manufactured home being conveyed as personal property.

12) “Single-family residence” means a single-family residence owned and occupied by an account holder as the account holder’s principal residence. Single-family residence includes a manufactured home, trailer, mobile home, condominium unit, or cooperative.

13) “Active duty” means active duty pursuant to an executive order of the President of the United States, an act of Congress, or an order of the governor.

d) SmartBuy Program

i) The [STATE] SmartBuy program is established within the [HOUSING FINANCE AGENCY OR DEPARTMENT] to provide student loan debt relief or medical debt relief for an individual who is a first-time home buyer in [STATE].

ii) The [HOUSING FINANCE AGENCY OR DEPARTMENT] shall develop and implement the [STATE] SmartBuy Program that either awards grants to qualified individuals to pay off student loan debt or medical debt or provides forgivable financing for the qualified individuals to utilize to pay off their student loan debt or medical debt as part of their home purchase. In developing the [STATE] SmartBuy Program, the [HOUSING FINANCE AGENCY OR DEPARTMENT] shall:

1) Administer the program and, in the Agency’s sole discretion, award grants under the program to individuals who submit  completed applications to the agency and meet the eligibility criteria established by the [HOUSING FINANCE AGENCY OR DEPARTMENT]. Eligibility criteria must include at least the following:

(a) First-time homebuyer within the State with qualifying medical or student loan debt from an eligible educational institution of at least $1,000 but not more than the allowable grant award amount;

(b) Has purchased, or is in the process of purchasing, a home within the state;

(c) Completes a home buyer education program that meets the Department of Housing’s requirements for the home buyer assistance program;

(d) Intends to reside in the home as the individual’s primary residence for a minimum of [five] years;

(e) Has an annual household income that does not exceed an income cap to be developed by the [HOUSING FINANCE AGENCY OR DEPARTMENT] within 6 months of enactment, to be at least inflation adjusted annually; and

(f) Additional eligibility requirements as determined by the HOUSING FINANCE AGENCY OR DEPARTMENT].

2) Develop an application that may be used to apply for a grant award or financing under the program.

3) Award grants or provide financing of [$20,000-$40,000] under the program in a geographically diverse manner throughout the State. If grants are awarded, they should be used to pay off the individual’s qualifying medical or student loan debt in full in installments, spread out over [five] years as long as the owner continues to reside in the home.

4) Neither grants nor financing shall exceed 15 percent of the purchase price of an individual’s home.

5) Limit the award of grants or financing to one award per a qualifying individual or mortgage.

6) Additional administrative requirements, including to administer loans or forgivable financing, as determined by the HOUSING FINANCE AGENCY OR DEPARTMENT].

iii) Definitions

1) “Qualifying medical debt” means a medical expense primarily to alleviate or prevent a physical or mental disability or illness. Medical expenses include the costs of diagnosis, cure, mitigation, treatment or prevention of disease, and include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners.

2) “First-time home buyer” means an individual who is a resident of this state and has not owned or purchased a single-family residence in the State.

3) An “eligible educational institution” is an accredited public, nonprofit, or proprietary (privately owned profit-making) college, university, vocational school, or other postsecondary educational institution. The institution must be eligible to participate in a student aid program administered by the U.S. Department of Education.

e) [State] has a compelling interest in protecting privacy and the protection of personal information. In administering this Act, state and local agencies, businesses, and any other entity, shall only request data necessary to administer this Act and retain it only as required to administer and achieve the purposes of the Act. Any personal information or data collected or obtained in the course of administering this Act shall be shared only in a manner that has been deidentified and aggregated to the greatest extent allowable while still in compliance with federal eligibility requirements and every allowable effort shall be made to revoke access to such data should programs be eliminated or should there be an ineligibility determination. Personal information or data collected or obtained in the course of administering this Act shall not be otherwise disclosed without the informed consent of the individual, a warrant signed by a [state] judge or federal judge, lawful court order administered within [state] or a lawful federal court order, or subpoena administered within [state] or federal subpoena, or unless otherwise required by federal or state statute. Personal information or data may be considered deidentified if it cannot reasonably be used to infer information about, or otherwise be linked to, a particular individual or household.

f) The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.