HUD Updates
March 13, 2012

HUD Update
March 13, 2012

HUD Funding:
The Congressional “Super Committee” was tasked with coming up with $1.5 trillion in debt savings over a ten year period. Their failure to do so, has forced agencies, such as the Department of Housing and Urban Development (HUD) to implement mandatory budget cuts to its fiscal year (FY) 2012 budget. Overall funding for the department will be down $1.1 billion from the net levels in FY 2011. Expect to see additional across the board cuts of 7% in 2013 and 8% in 2014.

Performance Based Contract Administration (PBCA):
On Friday, March 1, HUD issued a Notification of Funding Availability (NOFA) for the PBCA Program for the administration of Project-Based Section 8 Housing Assistance Payment Contracts. The closing date for applications is April 10, 2012. HUD anticipates that Annual Contributions Contracts (ACCs) awarded under this NOFA will become effective on October 1, 2012. This contract will be a two year term. See link for more information:

Real Estate Assessment Center (REAC)
The REAC will be issuing trends found during previous REAC inspections. New and clearer definitions will be issued and new software (4.0 vs. the current 2.3) will be implemented by the summer of 2012. There will be a point cap for deficiencies (e.g., a 7.5 cap on site deficiencies, a 10 point cap on project wide deficiencies, a 0 point cap on common areas and a 5 point cap on unit deficiencies). A REAC pilot program on reducing the number of multiple inspections will be conducted in six states.
On the REAC Financial side, all audits are to be reviewed for project financial health. If the project does not pass the REAC benchmarks, the project must submit a financial plan. HUD is discussing issuance of internal financial benchmarks.

Surplus Cash:
REAC Financial audits are up to date. New guidance will be issued on the old and new programs. If you receive a finding indicating that you spent money from surplus cash when it should have been from the replacement reserve account, you may appeal for a waiver at the local HUD hub.

Section 8 Renewal:
New Section 8 Renewal Guidance will be issued soon. Highlights include:
• No more extension of Section 8 contracts (only Termination and Renewals);
• New rent Comps for Tax Credit deals;
• Option 4 (Exception Project Renewals) will use current debt service and not original debt service and they must use Rent Comparability Studies (RCS);
• Appraisers may need to produce more justifications for higher rents.
Expect HUD to issue additional updates on an ongoing basis.

Operating Cost Adjustment Factor (OCAF)
The automatic OCAF was released nationwide on March 1, 2012.

Rent Comparability Study (RCS)
The appraiser must submit further documentation to justify any proposed rents over 110% of Fair Market Rent (FMR) in your area. The appraiser must justify the higher rent.

HUD Other:
HUD’s Green initiatives can result in a 27% reduction of energy costs.
New guidance on Replacement and Reserve will be issued soon.
New Guidance on 2530 will be issued soon.
A pilot for the 223(f) loan program to reduce processing time and protocol is expected to be released in May of 2012. The rehab limits will be increased to $40,000.00 per unit.
HUD will be conducting training sessions on preservation programs in some cities and by satellite. Go to for training material and information.
The update to the 4350.3 Handbook is expected to be issued soon…

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