| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
|---|---|---|---|---|---|
| #7114 | Closed | public | Multifamily | Les Sparks |
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I have what I think is a quick and hopefully easy question. It is as follows: I have a HUD 202 project that, while making all of their R4R deposits, they do not do so timely. In the past they have made all the years requirement in December. I have made this a compliance finding in those years. For the current year they again made all the required payments, plus around $12 extra due to rounding. The deposits were made in July and November. Would you continue to make this a compliance finding because they are not making the deposits timely per the regulatory agreement? |
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From Les Sparks: Uugghh! This is really an interesting dilemma, isn’t it? I am sure they will never get to the point of making monthly payments. In the end the agreement indicates the following: 5. (a) Mortgagor will establish and maintain a reserve fund for replacements in a separate account in a bank which is insured by the Federal Deposit Insurance Corporation, Savings Association Insurance Fund, or the National Credit Union Share Insurance Fund. Concurrently with the effective date of the Assistance Contract, the Mortgagor will deposit an amount equal to $ _____________________ per month unless a different date or amount is approved in writing by HUD. Such fund, whether in the form of a cash deposit or invested in obligations of, or fully guaranteed as to principal by, the United States of America shall at all times be subject to the control of HUD. Disbursements from such fund, whether for the purpose of effecting replacement of structural elements and mechanical equipment of the project or for any other purpose, may be made only after the consent in writing of HUD. In the event of a default in the terms of the mortgage, HUD may demand the full or partial application of the balance in such fund to the amount due on the mortgage debt. If I really wanted to go to the letter of the law, the agreement does not really say that they have to deposit monthly. At least I could argue it. They “are required to deposit the “an amount equal to$…. per month.” If it appears they have tried to do that, then I probably get tired of trying to get them to deposit monthly. You can keep the finding, if you want, but to what end? It would be better if they went to quarterly. Maybe there is a negotiation to drop the finding if they go quarterly. Look, this is a huge judgment call, so I hate to suggest too much. DO as you think best, however, I think you have some leeway. Les |