HUD guidance continues to evolve as restrictions are lifted



May 21, 2020

Affordable Housing Alert

Author(s): Deborah VanAmerongen

Throughout the time of the national emergency, HUD has provided guidance in the form of Frequently Asked Questions (FAQs). They may continue to provide guidance related to property operations and asset management as the national restrictions are lifted. In the following section we explain some of the allowances HUD has made for owners and managers and residents during the national emergency and also lay out some issues related to HUD-assisted properties that parties need to be thinking of as restrictions are lifted.

Recertification

Depending on the circumstances at an individual property, there may have been delays in processing annual or interim recertifications. HUD has recognized that there are extenuating circumstances but has stated that all certifications should be completed within 90 days. HUD has also allowed families to do self-certification of income in cases where proper paperwork could not be submitted and acceptance of electronic or copies of signatures where original “wet” ink signatures would normally be required. In cases where the family did a self-certification, HUD does expect that the owner/manager would document the file as to why proper paperwork was not available. They do not require, but say that owners may seek, the original paperwork when circumstances allow. Where another form of signature was used, HUD does require that original signatures be obtained when possible.

Real Estate Assessment Center (REAC) physical inspections

In mid-March HUD suspended REAC inspections until further notice. It is unclear at this time when HUD will start doing REAC inspections again.  Although HUD 3rd party RCS providers have contacted some owners/managers and are saying that if there are sufficient vacant units to inspect to provide an adequate sample they may conduct the inspection.

Management & Occupancy Reviews (MORs)

HUD has also suspended the requirement that the Performance-Based Contract Administrators (PBCAs) perform MORs until the PBCA determines that local conditions no longer limit or prevent the PBCA from performing MORs safely. HUD is looking into a flexible model that would allow PBCAs to adapt to local conditions in a way that allows them to continue MORs on a modified basis to ensure acceptable conditions in HUD properties. HUD has stated that additional guidance will be forthcoming. In the interim owners and managers are advised to review their files in preparation for an MOR, particularly if site offices were closed and any of the alternative asset management procedures HUD has allowed during this time were utilized.

Contract renewals

All HUD rental assistance contracts should have been renewed in a timely fashion during the national emergency. However, for contract renewals that would typically require the owner to submit a Rent Comparability Study (RCS) and the owner cannot obtain one, HUD has stated that they will, until June 30, 2020 (or such later date as HUD may determine), approve all renewals as short-term renewals with a 12-month term at current rents. In addition, in a situation where an owner’s RCS has triggered the need for a HUD RCS, HUD is not conducting RCS’s in areas that are under a state or nationally declared emergency or where public health officials have imposed limited travel. Since late March, HUD has stated that they will be providing new guidance on this topic in the upcoming weeks.

Filling vacancies

HUD has stated that owners and agents may choose to conduct the interviews remotely using available technology or barriers (e.g., windows) as may be recommended by the CDC to prevent transmission of the virus. Owners may accept electronic signatures on owner-adopted verification forms in order to perform both owner-adopted and HUD-required screening criteria as long as they obtain original, “wet” signatures on the verification forms at a later date.

Vacancy claims

If an owner/agent is not able to interview and fill vacancies as a result of the national emergency, then they may be able to request vacancy claims to keep the property solvent. HUD has advised that the owner should submit information to their contract administrator or HUD office, as appropriate, documenting why the filling of any vacancies was considered infeasible. The HUD office will review this information on a case-by-case basis and process requests for vacancy claims accordingly.  The standard limitation of 60 days’ payment for a vacancy claim appears to still be operative, HUD has not stated an intention to extend that benefit for a longer time as of yet.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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