I work with  3 HUD projects that have paid off their HUD insured mortgages and their original HAP contracts are dated 1976,1977,1978.  We are trying to determine if the surplus cash computation/limit on owner distribution is still in effect now that ONLY the HAP contract remains (no more mortgage regulatory agreement). All of the HAP agreements are less than 500k annually.

I have read through the original HAP docs and unless I am missing it I do not see where owner distributions/surplus cash is addressed. I also read through some of the subsequent HAP renewals and don’t find anything either.  It seems that the surplus cash calculation/limit on owner distributions is no longer applicable…..could that be correct ? (I am relying on some of what I have researched (in bold below) in coming to that determination.
(I don’t think the renewals of the original contract make them New Regulation projects)

Pursuant to HUD regulations and applicable guidelines, certain HAP Contracts entered into by the owners of New Regulation Projects (with certain exceptions as hereinafter described) require the owners to comply with the following additional requirements: (i) to submit to the Contract Administrator within sixty (60) days after the end of each fiscal year of the project, audited financial statements for the project; (ii) to establish with the holder of the project mortgage loan an interest bearing replacement reserve to pay for extraordinary project maintenance needs and the repair and replacement of capital items which is funded with monthly deposits that are subject to adjustment by the AAF (defined below) concurrent with an adjustment in Contract Rent levels, (iii) to limit generally distributions of cash flow of the project remaining after payment of all debt service and other project payables; and (iv) to deposit with the holder of the project mortgage loan or other depository approved by HUD any revenues of the project remaining after payment of the aforesaid distributions into an interest bearing account called the residual receipts account which may be used for a variety of HUD-approved project-related purposes, including debt service.

In general, New Construction and Substantial Rehabilitation HAP Contracts, executed by an owner of an assisted mortgage property pursuant to a notice of selection issued by HUD prior to November 15, 1979 and February 20, 1980, respectively, do not contain any of the aforementioned additional requirements for New Regulation Projects.