Rural Development recently published an Unnumbered Letter (UL) dated August 19, 2024, called, “Housing Opportunity Through Modernization Act (HOTMA).” The UL provides an overview of HOTMA tenant income and asset calculation changes and the projected implementation timeline for those changes.
Effective January 1, 2025, all tenant certifications must implement the changes outlined in the UL (and the Frequently Asked Questions included in the UL). This does not mean that every tenant must be recertified by January 1, 2025. Instead, new move-ins with tenant certifications effective January 1, 2025, or later will follow the HOTMA regulations and tenant recertifications that are effective January 1, 2025, or later will follow HOTMA regulations. Prior to January 1, 2025, RD will not penalize multifamily owners for HOTMA-related tenant file errors during Supervisory reviews.
US Housing Consultants will be providing HOTMA training to the National USDA Rural Housing Service office.
HIGHLIGHTS
Implementation Timeline
The USDA Rural Development (RD) has outlined the timeline for implementing the Housing Opportunity Through Modernization Act (HOTMA) changes, particularly those found in 24 CFR 5.609(a) and (b) and 24 CFR 5.611, which will impact the RD Multifamily Housing (MFH) portfolio. The timeline is as follows:
September 2024:
- RD will release updated Management Interactive Network Connection (MINC)/Industry Interface specifications for software providers. These new specifications will be available on the MINC home page.
October 2024:
- RD will publish an updated Form RD 3560-8 Tenant Certification, incorporating the changes mandated by HOTMA and offering additional gender identification options. This updated form is required for all tenant certifications effective on or after January 1, 2025. The current Form RD 3560-8 will continue to be valid for certifications effective before this date.
- RD will also update the Handbook, HB-2-3560, to reflect the HOTMA-related changes found in 24 CFR 5.609(a) and (b) and 24 CFR 5.611.
January 2025:
- The Multifamily Information Systems (MFIS) and MINC systems will be updated to account for HOTMA changes, including those subject to annual inflation adjustments (e.g., imputing asset thresholds and deductions).
- All tenant certifications effective on or after January 1, 2025, must implement HOTMA provisions
HOTMA Provisions Applicability
The following HOTMA provisions will apply to USDA Rural Housing Programs:
- Adjustments to household size definitions.
- Changes to the asset threshold for imputation.
- Redefinition of net family assets.
- Revised asset exclusions.
- Modifications to income exclusions.
- Changes to adjusted income calculations, including phased-in relief and hardship waivers.
HOTMA Provisions Not Applicable to USDA Rural Housing Programs
The following HOTMA provisions will not be implemented within USDA Rural Housing Programs:
- Income determination at recertification using the last 12 months of actual income.
- Safe Harbor Income Determination and Verification Method.
- De Minimus Error Provision.
- Changes in the Interim Recertification Threshold.
- Streamlined Income Determination Method.
- Asset Limitation.
- Self-Certification of Assets.
Considerations for Projects with Layered Funding
RD has provided flexibility for owners of properties with layered funding programs during the calendar year 2024. No penalties will be imposed for implementing provisions of HOTMA prior to January 1, 2025. Examples include, but are not limited to:
- Passbook Savings Rate: Using a rate of 0.06% instead of the updated 0.40%.
- Imputed Asset Income: Utilizing a $50,000 threshold instead of $5,000.
- Elderly Deduction: Utilizing a $525 deduction instead of $400.
In October 2024, USDA/RD is expected to publish a new Form RD 3560-8 Tenant Certification that must be used for all tenant certifications with an effective date of January 1, 2025, or later. RD will also update Handbook HB-2-3560 to reflect the HOTMA changes found in 24 CFR 5.609(a) and (b) and 24 CFR 5.611.
