| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
|---|---|---|---|---|---|
| #7759 | Closed | public | Multifamily | Les Sparks |
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I’m currently working as an auditor on an engagement for a Senior Housing Facility. The Organization is subject to HUD due to an Insured Mortgage Loan (223 F) as well as receives section 8 housing assistance payments. During the course of the year, the organization had a debt modification to lower to decrease its interest rate (5.875% to 3.75%). During this processed it paid closings costs of $5,000 for legal and $10k for an interest rate lock. The controller expressed concerns that these may not be allowable under HUD – can you provide any guidance to determine if these costs are in fact allowable or not? |
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From Les Sparks: In short, there is a lot of confusion about these costs. If they are always unallowable, how do debt issuance costs get on the balance sheet? Usually, most of these costs are absorbed by the new mortgage. If there is out-of-pocket money spent for these costs and it shows up on the cash flow, it will generally end up with a problem at REAC even though there is no real guidance on the matter. I hope this helps. If the costs was covered at closing, then there should be no problem. |