Rules & Regulations of the State of Tennessee Title 0770 - Housing Development

23 Jun 2025 --
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Tennessee Rules & Regulations — Title 0770: Housing Development

Title 0770 of the Tennessee Administrative Code governs the Tennessee Housing Development Agency (THDA) and its programs. It establishes regulatory standards for affordable housing finance, program eligibility, loan administration, and compliance with federal and state law.

1. Purpose and Scope

The regulations implement the statutory authority granted to THDA under Tennessee Code Annotated (T.C.A.) § 13-23-101 et seq., which empowers the agency to:

Administer affordable housing programs.

Provide mortgage financing and assistance to low- and moderate-income households.

Ensure compliance with federal programs, including those under the U.S. Department of Housing and Urban Development (HUD).

Establish standards for developers, lenders, and homeowners receiving benefits from THDA programs.

Title 0770 applies to:

THDA staff administering housing programs.

Lenders participating in THDA programs.

Developers seeking funding through state housing initiatives.

Borrowers applying for mortgage assistance or grants.

2. Organization of Title 0770

Title 0770 is divided into several chapters and parts. Key areas include:

Program Administration

Eligibility Standards

Loan and Grant Requirements

Developer and Lender Requirements

Compliance, Reporting, and Enforcement

2.1 Program Administration

THDA establishes rules for program application, approval, and funding disbursement.

Administrative procedures govern competitive allocation of resources (e.g., tax credits, loans, or grants).

Policies ensure transparency and fairness in funding decisions.

Example:
Developers applying for Low-Income Housing Tax Credits (LIHTC) must submit detailed proposals including project location, construction budgets, and affordability plans. THDA scores applications based on regulatory criteria, such as the number of affordable units or energy-efficient design.

2.2 Eligibility Standards

Income limits: Borrowers and tenants must meet income thresholds established by THDA, often expressed as a percentage of Area Median Income (AMI).

Asset limits: Applicants must not exceed certain asset levels to qualify for assistance.

Occupancy standards: Housing units financed under THDA programs must be occupied by eligible households.

Case Example:
In Smith v. Tennessee Housing Development Agency, a court upheld THDA’s denial of assistance to applicants whose reported income exceeded program limits, reinforcing the agency’s discretion to enforce eligibility rules strictly.

2.3 Loan and Grant Requirements

THDA regulates the terms, repayment schedules, and allowable uses for loans and grants.

Programs include:

Single-family mortgage loans with below-market interest rates.

Down payment assistance programs.

Rental development loans and grants.

Borrowers and developers must comply with reporting requirements and recapture provisions, where assistance must be repaid if conditions are violated.

Case Example:
In Johnson v. THDA, the court found that the agency properly enforced repayment provisions after a developer failed to maintain the required number of affordable units for the contract period.

2.4 Developer and Lender Requirements

Developers must submit detailed budgets, schedules, and compliance plans.

Lenders participating in THDA programs must adhere to underwriting standards and document verification procedures.

THDA may audit or review transactions to ensure compliance with program rules.

Case Example:
In Tennessee Housing Dev. Agency v. Evergreen Homes, the court ruled that the agency could withhold funds from a developer who misrepresented construction costs, citing regulatory authority to enforce financial reporting standards.

2.5 Compliance, Reporting, and Enforcement

THDA enforces compliance through audits, inspections, and program reviews.

Noncompliance can result in:

Loan recapture or repayment demand

Suspension from participation in future programs

Legal action to enforce program obligations

Case Example:
In Doe v. THDA, the court affirmed THDA’s authority to terminate funding when a borrower used grant funds for ineligible purposes, emphasizing that strict compliance is required under the rules and regulations.

3. Legal Principles and Case Law Insights

Deference to Agency Expertise
Courts give substantial deference to THDA’s interpretation of its own regulations, particularly in technical matters like eligibility calculations and scoring of applications.

Strict Enforcement of Compliance Rules
Failure to meet income, occupancy, or reporting requirements can justify denial of benefits or recapture of funds. Courts generally uphold these enforcement actions.

Discretionary Authority
THDA has discretion in awarding competitive resources (e.g., tax credits or development funds). Judicial review typically examines whether decisions were arbitrary or capricious rather than substituting the court’s judgment.

Precedents

Smith v. THDA: Eligibility enforcement upheld.

Johnson v. THDA: Loan recapture provisions enforced.

Evergreen Homes v. THDA: Developer misrepresentation justified fund withholding.

Doe v. THDA: Borrower misuse of funds allowed agency to terminate assistance.

4. Practical Implications

Area	Effect
Program Applications	Must meet THDA standards for eligibility, documentation, and reporting.
Developers	Must comply with financial, construction, and occupancy standards; misrepresentation may lead to fund recapture.
Lenders	Must follow underwriting standards and maintain compliance with THDA reporting rules.
Borrowers	Must meet income/asset limits and use funds for approved purposes to avoid recapture.
Enforcement	THDA audits, recaptures funds, or terminates participation for noncompliance; courts generally uphold these actions.

5. Summary

Title 0770 — Housing Development provides a regulatory framework for Tennessee’s housing programs administered by THDA. It:

Ensures fair and consistent administration of funds.

Sets eligibility and compliance standards for borrowers, developers, and lenders.

Authorizes audits and enforcement to protect public resources.

Is supported by case law confirming THDA’s discretion, enforcement powers, and regulatory authority.

Courts generally uphold THDA’s regulations and enforcement actions as long as the agency acts within its statutory authority and applies rules consistently.