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Household Composition on HUD and LIHTC

As compliance consultants who review thousands of HUD and LIHTC files, we have put together some frequently asked questions regarding household composition. We are hoping that the following FAQs will provide you with guidance concerning household composition. Household Composition Q. A married couple qualified at the time they moved into their LIHTC unit. They got divorced a year later, and one spouse moved out of the unit. The remaining spouse has a new roommate, and the roommate's income was verified. Their combined income now exceeds the LIHTC income limit but is still below the 140% level. Do they still qualify for the unit? A. Yes. The household was initially qualified, and the change in household composition does not constitute a new household since an original household member is still residing in the unit. We recommend that you re-qualify the entire household at the time of the roommate addition. One reason for doing this is to determine if the roommate would be income eligible if living in the unit by themselves. If the original occupant moves from the unit leaving just the roommate, you could end up with an over income household. If the roommate would not qualify by themselves, you must take additional action. You can still allow the person to move in, but it is critical that your lease agreement clearly states that th...
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Interim Recertifications & New Overtime Rules

What are the processing guidelines when changes are reported? When a tenant requests an interim recertification or when a tenant reports changes in income or other circumstances as required, the owner must take the following steps when processing an interim recertification. Interview the tenant to obtain information on the reported change. The owner must also review and ask if there have been other changes to family composition, income, assets, or allowances since the most recent certification. Obtain third-party verification of the income or other facts reported as changed since the last recertification and maintain documentation in the tenant file The EIV system must be used at the time a tenant reports a change in employment or income to determine if any information has been provided by the employer or if the tenant had unreported income. However, because of the delay in reporting requirements by state agencies, EIV may not contain data that can be used to verify employment or income for use in processing interim recertifications in instances where tenants report a change in employment or income. In these cases, the owner will need to use another method of verification. Input any changes to the tenant's income or other characteristics in the owner's software program and print the HUD-50059 Document the resulting changes in th...
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Interim Recertifications for HUD Section 8 programs

Interim Recertifications for HUD Section 8 programs - Part 1 Determining when an Interim Recertification (IR) is warranted and what effective date to utilize is often challenging. This portion of our three-part series will provide guidance on reporting requirements and optional changes, processing IRs, refusing IRs and the all-important question of what effective date to utilize. This information applies to HUD Project-Based Section 8 properties only, as IR never apply to the LIHTC program What are tenants required to report? All tenants must notify the owner when: A family member moves out of the unit; The family proposes to move a new member into the unit; NOTE: At a minimum, owners must apply screening criteria for drug abuse and other criminal activity, *including State sex offender registration, and use of the EIV Existing Tenant Search to persons proposed to be added to the household, including live-in aides. The owner must make sure that the person also discloses and provides verification of his or her SSN. An adult member of the family who was reported as unemployed on the most recent certification or recertification obtains employment; or The family's income cumulatively increases by $200 or more per month. What are optional reporting requirements? Tenants may request an IR due to any changes occurring since the last re...
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Handling 401(k) Accounts on Tax Credit Programs

401(k) Accounts in HUD Sec 8 and LIHTC programs Do you know the answers to these questions? If a 401(k) account is only accessible if a hardship is proven, should the asset be considered when determining eligibility for a HUD or LIHTC household? Does investment income based on market fluctuations need to be reflected as income on the asset? Are withdrawals from a 401(k) account considered income? This article will assist in answering some of the common 401(k) questions as it relates to the affordable housing industry, specifically HUD Section 8 and Low Income Housing Tax Credits. What is a 401(k) account? A 401(k) is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before any deductions. Taxes aren't paid until the money is withdrawn from the account. How are 401(k) accounts verified? A 401(k) must be verified directly with the employer or plan administrator. In the affordable housing world, the cash value of assets needs to be reflected on the certification. Therefore, verification of the market value along with verification of costs to convert the asset into cash (taxes/penalties) is necessary. It is also necessary to verify interest/dividends and whether the applicant/tenant is receiving periodic payments. Is the 401(k) account income or an asset? If an applicant/te...
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Student Restrictions: HUD vs. LIHTC vs. HOME

  US Housing Consultants receives numerous inquiries regarding student status and proper documentation of applicant/tenant files to ensure compliance. This article applies to properties with HUD Section 8, Low-Income Housing Tax Credit (LIHTC) and/or HOME funding. Confirming student status requirements are met is a critical piece in determining eligibility. Applying student rules based on funding can be challenging, especially when properties have multiple funding sources in which an applicant/tenant may need to meet separate student-related rules in order to qualify. Here are some guidelines that we hope will be helpful when determining eligibility for a household with a student(s). Why are there student restrictions in affordable housing? For LIHTC… The LIHTC student restrictions were primarily implemented to prevent dormitory and/or transient housing. For HUD… The HUD student restrictions were primarily implemented for two reasons: To address incidents of children of wealthy parents receiving federal housing assistance; and To address incidents of college students obtaining federal housing assistance without their educational financial assistance counted as income for purposes of income eligibility for federal housing assistance. For HOME… In 2013, HUD revised regulations governing the HOME program and decided that HOME ...
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Documenting Applicant Real Estate & Tips for REAC Preparation

In the affordable housing industry, asking the right questions and obtaining proper documentation are imperative when ensuring real estate owned by an applicant/tenant is handled in accordance with HUD and LIHTC requirements. This article focuses on the intricacies involved with properly documenting applicant/tenant files in an effort to accurately calculate the cash value or net income on real estate. (For Low-Income Housing Tax Credit owners/managers, please refer to your state monitoring agency for specific guidance.) Terminology you should be aware of Market Value - Market value is an estimate of the value of real estate based on what a knowledgeable/willing buyer would likely pay for it. There are a number of factors that would affect the market value of real estate, including location and condition of the real estate. Documentation that may be utilized to verify the market value of real estate includes: Appraisal Statement from real estate agent Current tax valuation or assessed value from the Assessor's office only if 100% valuation is used. On-line resources (such as Zillow and/or Trulia) Costs to Convert - In order to determine the cash value of real estate, it is necessary to verify how much it will cost to convert the asset into cash, e.g., settlement costs, real estate commissions, etc. This needs to be done regardle...
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Social Security Income Guidance for HUD & LIHTC

Social Security Income Guidance for Applicants at HUD & LIHTC Properties Has any of you been challenged with the verification and calculation of Social Security (SS) or Supplemental Security Income (SSI) when working with an applicant or tenant who collects or might be entitled to collect these benefits? You would think that this type of income would be easy to verify and calculate, but some of you may be surprised with this month's article that there are challenges when dealing with this type of income for HUD, LIHTC or a combination of both. Verification of SSA Benefits Years ago, the Social Security Administration (SSA) announced it would stop providing Property Managers third party verifications. As a result, Property Managers have to rely on documentation provided by applicants to verify SS and SSI income to determine income eligibility and/or tenant rent. Annual award letters provided by an applicant can be utilized to verify gross Social Security benefits for the applicable year. For example, the award letter recipients received in 2014 stating 2015 benefits can be utilized for certifications effective in 2015. SSA letters are good for the full year because they are not dated and they are provided after a COLA or no COLA has been announced. If an SSA letter is dated, it is likely due to a change in benefits. SSI verif...
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Employment Guidance for HUD and LIHTC Properties

Have you ever noticed that 3rd party Verification of Employment (VOE) forms and paycheck stubs don't always match? What if your applicants don't have 4-6 recent paycheck stubs? It is difficult to determine the best reasonable approach for calculating anticipated income when the information provided to you is insufficient. HUD Section 8 LIHTC HUD Section 8 layered with LIHTC We will provide guidance on what to look for when determining initial (move-in) eligibility based on verifications of employment (VOEs) and paycheck stubs. Ultimately, your files need to be well documented to support your income calculations, ensuring proper rent calculation for HUD as well as income eligibility for both the HUD and LIHTC programs. Remember, owners/agents (O/A) need to use the best reasonable approach to calculating anticipated income. Obtaining the best documentation will assist you with this task. For HUD Section 8 properties, paycheck stubs and Verification of Employment forms received directly from the employer are acceptable as third-party verification if the following criteria are met: The document is dated within 120 days of receipt by owner/agent; An unaltered original is provided; The documentation was complete; and The document is current (for example, documentation of public assistance may be inaccurate if it is not recent and does...
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Working with Self-Employment Income

Of the all the income sources that need to be verified for affordable housing programs, self-employment income has to be one of the most challenging. There are so many factors to consider when determining income for those who are self-employed: Is the person self-employed? Is this new business or existing business? Did they file a tax return? Forms certifying to self-employment can be confusing for the applicant/tenant. It is important for management to have a thorough understanding of the forms they are required to use and the supporting documentation being requested. Required documentation to support self-employment income varies widely and while the following are general guidelines, a review of your state specific requirements is recommended. Types of Self-Employment The first step is to determine just what sort of "self-employed" the household member is. Generally, self-employment household members are either: Owners of businesses Sub-Contractors who are paid by an employer with a 1099 There are times when the individual is not sure if they are considered self-employed. Processing third party verification and additional clarification will assist in understanding if the applicant/tenant is self-employed or an independent contractor. Household Employees vs Self-Employment According to the IRS, applicants/tenants are considered...
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Handling Issues with EIV Discrepancies

How to Handle the Complex World of EIV Discrepancies... In 2001, the President's Management Agenda was released and established the reduction of erroneous payments as a key government-wide priority and required government agencies to measure improper payments annually, develop improvement targets and corrective actions and track results. Based on a HUD study, it was estimated that 3.2 billion dollars (yes, billion!!) of improper payments were being paid out on an annual basis. As a result of this and the President's Management Agenda, HUD established a Rental Housing Integrity Improvement Project, otherwise known as the RHIIP initiative. The goal of the initiative was to address the causes of errors and improper payments and to ensure "the right benefits go to the right persons." To assist in meeting RHIIP's goals, HUD developed and began implementation of the UIV (Upfront Income Verification) which is now known as the Enterprise Income Verification (EIV) system. In the first four years of EIV's implementation, there was a 60% reduction in gross improper payments. Bottom line: EIV is an effective tool and the system has eliminated a huge amount of improper payments. A critical piece of EIV that assists with reducing improper payments is the EIV Income Discrepancy Report. Knowing how to resolve and properly document the tenant fi...
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How to Handle Willful False Statements on Tenant Certifications

Section 1001 of Title 18 of the US Code makes it a criminal offense to make willful false statements or misrepresentations to any Department or Agency of the United States as to any matter within its jurisdiction. Did that get your attention? The determination of "willful" is often a gray area. Was a long-forgotten Christmas Club account not disclosed? Did an applicant make an innocent mistake? Was a long-forgotten Christmas Club account not disclosed? Or was there a deliberate intention to misrepresent circumstances? Did a management representative try and "help" an employer by completing a Verification of Employment, requesting only a signature? Or was an employer signature obtained on a blank form and a manager completed with information that would qualify the household? It happens. Fortunately there are some protections offered if management discovers reports and corrects incidences of fraud. The 8823 Guide states, "The Low-Income Housing Program will not consider there to have been reportable noncompliance if tenant fraud is discovered and addressed by the owner prior to a state agency review or an IRS audit, and the owner satisfies the state agency that: The tenant provided false information; The owner did everything a prudent person would do to avoid fraudulent tenants (due diligence) and has implemented any needed change...
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SSN Requirements HUD vs LIHTC

SSN Requirements in HUD vs. LIHTC Lately, we have had a lot of questions from our Certification Approval clients about the requirements of Social Security Number disclosure on LIHTC vs. HUD programs. The most complex part of performing Move In File Audits on multiple funding programs is helping our clients to understand why the same family is eligible at one property and not at another. We worked with a customer recently whose property is a Project Based Section 8 HUD property with 100% LIHTC. The family, we'll call her "Ms. Jones", has applied to live at the property. Ms. Jones is not an eligible citizen of the US and does not contend eligible immigration status, and she has an infant with legal immigration status (a baby) who has not yet been issued a Social Security number (SSN). She also has two older children who do have SSNs and are legal immigrants. This family would not be eligible due to the HUD Section 8 requirements for SSN Disclosure, but if it was just an LIHTC property, there is no requirement for SSN disclosure. For this scenario, Ms. Jones herself is eligible because she is not contending eligible immigration status and there are other members of the household who are eligible citizens. The baby who doesn't have a SSN is the problem; the lack of SSN would make the entire family ineligible for the subsidy. HUD Not...
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Latest Blogs

13 January 2020
REAC Inspections
Resident Involvement in REAC/NSPIRE Inspection Process​​As part of the NSPIRE pilot process, HUD has announced that additional processes will be added to engage the residents in the REAC/NSPIRE process. You can read the press release on HUD's website...
24 August 2019
REAC Inspections
On August 21, 2019, HUD published a set of proposed rules in the Federal Register "Notice of Demonstration To Assess the National Standards for the Physical Inspection of Real Estate and Associated Protocols" 24 CFR Parts 5 and 200; [Docket No. FR–6...
21 August 2019
REAC Inspections
On August 20, 2019, HUD released the first of the new NSPIRE protocols which will be expected to become active once the pilot/demonstration program has concluded. This is a first look at what deficiencies will look like under NSPIRE, the inspection ...
16 July 2019
REAC Inspections
July 8, 2019 HUD's Office of Multifamily Housing Asset Management and Oversight released a memorandum reiterating the rules surrounding notice prior to entering resident's units, availability of documentation for residents to review, and clarificati...
09 July 2019
REAC Inspections
The House Financial Services Committee passed a bill - the Safe Housing for Families Act of 2019 (H.R. 1690), and it will likely move forward to a full vote in the near future. The bill provides $300 million over three years to fund the installation...

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