What is the audit requirement for when an entity/partnership has refinanced or paid off their HUD-Insured mortgage?
An explanation of HUD audit requirements and corresponding electronic submission requirements can be found in the document titled “Submission and Review Requirements & REMS Critical Data Fields for Annual Financial Statements”
Mortgage note prepayments / Refinancing from a HUD-insured mortgage to a conventional mortgage are discussed in section VII. D., starting on page 19.
D. Mortgage Note Prepayments: If there are no ongoing financial reporting requirements, owners who prepay their mortgage are required to submit an AFS [Annual Financial Statement] for the full fiscal year ending prior to the prepayment year. For example, if an owner prepays in March 2004, the AFS for the fiscal year ending December 31, 2003, is required. No AFS for 2004 will be required as long as the owner prepays the mortgage on or before the project’s fiscal year end date. However, if the owner has other business agreements (i.e., HAP contracts, Use Agreements, etc.) that require ongoing financial reporting, then no lapse in reporting is allowed. For example, if the owner prepays the mortgage in February 2004, but the owner has a HAP contract that requires financial reporting, then the owner must submit a full twelve-month AFS for 2004 and thereafter until the HAP is terminated. If the owner sells the project in conjunction with a prepayment, and the project has ongoing financial reporting requirements (i.e., HAP contract, Use Agreement, etc.), then the seller must submit an AFS covering the period up through the date before the HAP or Use Agreement is assigned.