Residual Receipts to be Used to Offset Vouchers

HUD Notice 2012-14 was issued on this topic on August 3, 2012.  The Notice becomes effective 60 days after issuance, and provides procedures for using any excess Residual Receipts toward voucher payments.

This notice only affects Section 8 “new regulation” contracts.  These are:

• Section 202/8 projects, Section 8 New Construction and Section 8 Substantial Rehabilitation properties which are subject to 24 CFR parts 880.205(e), 881.205(e), and 883.306(e).
•  New regulations are as follows:  24 C.F.R. Part 880 in effect as of November 5, 1979; 24 C.F.R. Part 881 in effect as of February 20, 1980; and 24 C.F.R. Part 883 in effect as of February 29, 1980.
• These contracts have verbiage which permits HUD or a State Housing Agency to require that excess project funds be deposited into an interest-bearing account to be used to reduce housing assistance payments or for other project purposes.

Properties can keep $250 per unit in the Residual Receipts account, to use for project purposes (Retained Balance).  Any amount over that total is considered “excess”.  According to the procedures in the Notice, the first step is for each property to determine the amount of any excess Residual Receipts.

If so, the property would run its voucher, and submit a HUD 9250 (Request for Residual Receipts) to HUD at the same time that the voucher is transmitted.  The 9250 would be for an amount up to the full voucher amount, depending of the amount of excess RR.

For example:  No Arms Apartments has a Section 8 “New Regulation” contract for 100 units.  It has $55,000 in its Residual Receipts.  100 x $250 ($25,000) can be kept for project uses.  This leaves $30,000 as excess.  The property’s November voucher requests $35,000.  The site would do an FORQ (Field Office Request) manual adjustment (titled RR Offset) for -30,000, and submit it to HUD when the November voucher is transmitted.  The property would get $5,000 through LOCCS and $30,000 from its Residual Receipts, totaling the $35,000 voucher request.

If No Arms Apartments’ voucher was for $20,000, the FORQ would be for -20,000.  The following month, more of the $30,000 excess would be applied to that voucher, and this process would continue until the excess was used up.

At the end of the project’s fiscal year, all surplus cash after payment of distributions must be deposited into Residual Receipts. If that makes the Residual Receipts have excess funds again, this process of applying the excess toward voucher payments would begin again, and continue until the new excess amount has been used up.

However, there are many parts of the procedure outlined in the Notice that are not clear.  And, the timing requirements (i.e. HUD providing the CA with a 45-day notice that the Form 9250 was approved) seem to create untenable situations for mortgage payments.  Several industry partners have submitted lengthy lists of detailed questions to HUD about the timing, process and consequences of failing to participate.

So, HUD plans to issue an FAQ (Frequently Asked Questions) document very shortly to address these issues.  There has also been some talk about delaying the implementation until the process has been clarified.

For now, DO determine whether your property has a “New Regulation” contract, or not.  DO find out how much money is in your Residual Receipts account.  DO calculate your excess, if any.  Watch for more updates on this process soon.