The secondary residence is a property the borrower occupies in addition to his or her principal residence. Secondary residences are only permitted when the appropriate Home Ownership Center (HOC) agrees that an undue hardship exists, meaning that affordable rental housing that meets the needs of the family is not available for lease in the area or within reasonable commuting distance to work, and the maximum loan amount is 85 percent of the lesser of the appraised value or sales price. Direct Endorsement (DE) lenders are not authorized to grant hardship exceptions. Any
request for a hardship exception must be submitted by the lender in writing to the appropriate HOC. HOC jurisdictions are listed in Appendix I of HUD Handbook 4155.1 REV-5. A borrower may have only one secondary residence at any time. All the following conditions must be met for secondary residences:

A. The secondary residence must not be a vacation home or otherwise used primarily for recreational purposes; and

B. The borrower must obtain the secondary residence because of seasonal employment, employment relocation, or other circumstances not related to recreational use of the residence; and

C. There must be a demonstrated lack of affordable rental housing meeting the needs of the borrower in the area or within a reasonable commuting distance of the borrower's employment. Documentation to support this must include:

1. A satisfactory explanation from the borrower of the need for a secondary residence and the lack of available rental housing in the area that meets the need.

2. Written evidence from local real estate professionals who verify a lack of acceptable rental housing in the area.