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Issue 87: HUD REAC Presentation Recap & ARs for Layered HUD/TC Communities

HUD REAC Presentation Summary

HUD has released a new PowerPoint presentation as of March 9, 2017, as part of their Dine & Learn series. Many of these clarifications are reiterations of existing rules. Many of the rules that need clarification and reinforcement are a little surprising, as the issues are not new and the clarifications are really reinforcing basic rules. It appears that these clarifications are the result of some observations made through reviews of photographs from REAC Inspections as well as observations made by Quality Assurance REAC Inspectors.

  • Recording Same Issue Twice: For example, if a bedroom door was missing the hardware, some inspectors were recording both Level 2 for inoperable hardware and Level 3 for surface damage because there was a hole greater than 1”. They are to record one of the two deficiencies, and they must choose the higher-level deficiency, in this example: The Level 3 hole.
  • Two Issues on Exterior Walls in Same Vicinity: Much like the doors, building exterior walls were another discussion in the webinar with REAC. When there are both cracks and gaps, and missing pieces/holes/spalling in one area of an exterior wall, the inspectors are to only record one of the two deficiencies and choose the highest severity level; the only time in which two to record two is if there is an associated Health and Safety deficiency.
  • Erosion is displaced or runoff of soil: Grounds without ground cover is not necessarily erosion. Inspectors must be sure that they see signs of runoff such as rutting or gathering of sand/dirt on walkways or driveways instead of recording erosion based only on the grass not growing in certain areas. To clarify, if a section of the lawn has been worn down as tenants or others have used the lawn as a path of travel, it should not be recorded as a deficiency unless the soil has been displaced or a rut/groove has developed.
  • Tenant Owned Items Creating Hazards: During a REAC inspection, all hazards created by resident owned personal property (except blocked egress and improperly stored flammables) is to be recorded under Health and Safety – Hazards-Other for any defects that could cause bodily harm. It is important to know that any items recorded under Health and Safety Hazards-Other are non-point scoring. It should be noted that appliances (stoves, fridges, air conditioners) are always inspected with the assumption that the property owns the appliances.
  • Gaps in Breaker Panels: Breaker Panels will be recorded for a deficiency if there is a gap of more than one quarter of an inch ONLY between the breakers and the interior panel cover. The inspectors must now physically measure each gap in front of the property representative. A visual determination without a measuring device is no longer acceptable.

The presentation also included a list of examples of pictures that provided clarification on certain situations for REAC Inspectors. Some of these include:

  • Holes in a Door from Removed Hardware: If a self-closing device that was removed by someone at the property, but the screws remained, creating a deficiency of inoperable hardware. You must eliminate the screws and bolts, fill in the holes, sand then paint the door. Bathroom sink and tub stoppers are only an L1 deficiency and not a Level 3 for missing hardware.
  • Loose Outlet Covers: Inspectors are no longer allowed to pull on the plastic switch and outlet covers to create a gap, but loose and damaged outlet covers are still a Level 1 deficiency if observed without a physical test.
  • Stairs without Handrails: When counting stairs that require handrails, inspectors are to count the risers; if there are three steps and a landing, then that would have four risers and require a handrail. A property only needs to have a handrail on one side of the stairs, but if two are present, both will be inspected.
  • Homemade heater covers: Makeshift or homemade panel or space heater covers are no longer acceptable, and you must try to locate the appropriate heater covers and end caps to match the existing components.

With these recent changes, it is more important than ever that properties take every inspection seriously, regardless of how you may have performed on past inspections. Contact US Housing Consultants at www.us-hc.com or by calling (603) 223-0003 to schedule your next Pre-REAC or a REAC Training to make sure that your property has the acceptable repairs and is compliant with the new Industry Standards.

Useful Tips regarding Annual Recertifications for layered HUD/LIHTC Communities

As compliance consultants who review thousands of HUD and LIHTC files, we have put together some frequently asked questions regarding Annual Recertifications (ARs) and required forms. We are hoping that the following FAQs will provide you with guidance with regard to ARs and the paperwork.

Annual Recertifications

Q When should ARs be started?

A 120 days in advance of the effective date; however, check with the State Agency to determine how long verifications are valid. Some State Agencies require verifications to be dated within 90 days of the effective date.

 

Q I’m completing recertifications for residents at my property. Do I have to get third-party verification of everyone’s income?

A It depends on the State Agency. HUD now considers documents provided by the tenant that were generated from a third party source as third party verification. Some State Agencies have also adopted this practice; others require traditional third party verification. Note also that it is permissible for a tenant to hand deliver verifications as long as management contacts the verifier to confirm the information.

 

Q Can I use income/asset information from the 50059 to generate the TIC?

A It depends on the State Agency. Some State Agencies do allow and even prefer for TICs and 50059s to match. Typically, first year LIHTC annual recertifications need to be a full recertification. Many State Agencies allow for self-certification after the first full annual recertification. Check with your State Agency for guidance.

 

Q What happens if I find out at recertification that one of my residents was over income at the time they moved in to my LIHTC property?

A If an Owner/Management Company discovers non-compliance, they should contact the State Agency for the community and let them know what they found and how they plan to correct the non-compliance. In most cases, non-compliance that is found and corrected prior to a state agency review being scheduled does not need to be reported to the IRS as long as it is disclosed and corrected.

EIV

Q Can EIV be used for the LIHTC Program?

A No. EIV cannot be used for any programs other than specific HUD programs.

 

Q At what point should the EIV Income Report be obtained?

A At time of AR appointment. That way, you can attempt to resolve any discrepancies during the AR appointment.

Documents Needed at AR – HUD

  • Executed form HUD 50059
  • Notice of Rent Change
  • Recertification Interview/Verification Record (not mandatory)
  • Tenant Recertification Paperwork, (completed by the tenant, not mandatory)
  • Consent Forms: HUD-9887 and HUD-9887-A
  • Student Status Certification and/or Verification (if applicable)
  • Third-party verifications, including documentation, in the following order:
  • Zero Income Certification (if applicable), if the household claimed zero income
  • EIV Reports, Income, Assets, and Deduction verifications
  • Disposition of Assets
  • Annual Acknowledgment of Head of Household’s receipt of:
  • Resident Rights and Responsibilities Brochure, form HUD 9887/9887-A Fact Sheet, the Fact Sheet for HUD Assisted Residents – Project Based Section 8, HUD Form 1121 Is Fraud Worth It? and EIV and You Brochure. Note that residents should be provided an opportunity to update HUD 92006 at time of each AR
  • Recertification notices:
    • Initial Notice (Annually), First Reminder Notice (120 day), and Second and Third Reminder Notices (if applicable)

Documents Needed at AR – LIHTC

  • Executed TIC
  • Tenant Recertification Checklist (completed by the tenant)
  • Student Status Certification and/or Verification (if applicable)
  • Zero Income Certification (if applicable), if the household claimed zero income
  • Unemployed Affidavit (if applicable)
  • Child Support/Alimony Affidavit (if applicable)
  • Under $5k Asset Certification (if applicable)
  • Income and Asset Verifications
  • Calculation sheet (not mandatory, but helpful)
  • Recertification reminder notices
  • Any additional forms required by the State Agency

 

Contact Us

  • US Housing Consultants
  • 160 Dover Road# 6, Chichester, NH, 03258
  • Phone: (603) 223-0003
  • Fax: (603) 736-4777
  • Email: info@us-hc.com
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U.S. Housing Consultants, Real Estate Consultants, Epsom, NH