| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
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| #15897 | Closed | public | Multifamily | Les Sparks |
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We have a client that paid off a HUD insured 221 (d)4 mortgage (no section 8 or any other HUD program applies to this project) early as part of the sale of the project in Jan 2020 (buyer secured conventional mortgage) The AFS for 12/31/2019 was filed with REAC……Based on our readings (including to a previous Q&A on this site pasted below) think our client (seller) has fulfilled all REAC filing requirements with the 2019 statement filings. 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.
However, purchaser thinks that might not be right based on the Q&A below from HUD webpage: A: The seller must file an AFS covering the period from the beginning of the seller’s fiscal year through the day before the deed was signed. The date the deed was signed marked the beginning of the purchaser’s (new owner’s) financial reporting responsibilities. The purchaser must file an AFS from the date the deed was signed until the end of the purchaser’s selected fiscal year. And just FYI if it matters, our client (seller) has NOT received any correspondence from HUD about a delinquent REAC filing from them for that one month of 2020. |
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I am out of the office and will return August 27th. I will check my email periodically. * If your email is concerning a multifamily submission please contact submit@ahacpa.org If you have other questions call our office at 801-547-0809. Thanks, Kathy Christensen |