Refinance and ownership of the Reserve for Repalcement and Residual Accounts

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ID Status Date Public/Private Industry AHACPA Contact
#7401 Closed public Multifamily Les Sparks
Customer Reply

This is a first for me. I have a client who is refinancing their 202 direct loan with a local bank which will drop their interest rate from 9% to 4.5%. They want to know if the reserve accounts belong to them or if HUD will take them back. The outstanding loan is approximately 350K and the reserve account are approximately $300K. Please advise me, if you can. Also, will the rent subsidy be paid from a different account also. Haven’t been to your classes lately because I am doing reviews for my HUD clients because HUD funding is under $750K. Thank you for your assistance.
Kathy Christensen

From Les Sparks:
Reserve for replacement always belongs to the project and can be used for the repayment of the loan. Residual receipts, if any, may be a different story. Rental subsidy should not be effected as long as HUD knows where to send the voucher payment.

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