_____________________________________________________________________________ PREPAYMENTS 2014 ARHC-AHMA Convention Yakima, WA
_____________________________________________________________________________ PREPAYMENT – What is it? What is prepayment? – When a borrower (owner) pays off their USDA Rural Development loan early To protect the supply of affordable housing and ensure that tenants do not suffer from rent overburden or the loss of their unit, borrowers (owners) need USDA approval before prepaying USDA may offer incentives to the borrower to encourage them not to pay off early
_____________________________________________________________________________ PREPAYMENT – Who can Prepay? Borrowers with loans approved prior to December 15, 1989 may be eligible to prepay Loans approved on/after December 15, 1989 are not eligible to prepay. Incentives to avert prepayment have been on hold since August 2012 pending re-write of the prepayment procedure – EXCEPTION: Borrowers who provide a written statement that they wish to prepay without any incentives
_____________________________________________________________________________ PREPAYMENT - Application Application to prepay – Description of loan and statement of compliance with federal, State and local laws related to prepayment – Documentation that requirements of RCW 59.28 have been met – more on this later – Lease language to be used during prepayment to notify tenants certified by attorney–HB 3, Ch. 15 Attachment 15-G – Authorization to release information signed by Borrower – Certifications related to notification of other government entities, continuation of other government subsidies, and that project will continue to be available to eligible tenants during prepayment process – Proposed use of property after prepayment and proposed rents – Copy of project waiting list – Documentation of ability to prepay - cash, loan, or sale
_____________________________________________________________________________ PREPAYMENT – RCW 59.28 Send a notice by certified & regular mail at least 12 months before prepayment to: – Each tenant – City Clerk (or County Clerk if unincorporated area) – Local Housing Authority – WA State Dept. of Commerce (the successor agency to the Dept. of Community Trade and Economic Development) Give a copy of the notice to new tenants who move in after original notice was given Post notice in a conspicuous place on site
_____________________________________________________________________________ PREPAYMENTS – Lease Addendum Sample Lease Addendum language can be found in HB 3, Ch. 15, Attachment 15-G Because the lease addendum modifies the lease, it must be certified by Borrower’s attorney [3560.156(a) ] Existing Tenants sign the addendum New tenants sign when they move in Keep a copy in tenant file
_____________________________________________________________________________ PREPAYMENTS – USDA Tenant Notice Within 30 days of receipt of application, USDA sends a notice to each tenant with copy to borrower/management – Notice is also sent to other interested parties such as non-profits, public bodies and congressional representatives Borrower/Management must post copy of USDA letter in public area of project until the next prepayment notice letter is sent Borrower/Management must provide copy of USDA letter to new tenants who move in after initial letter was sent Additional USDA notices are sent to keep tenants informed of progress. Borrower/management must post subsequent USDA notices in public area of project & provide copy to new tenants
_____________________________________________________________________________ PREPAYMENTS – Tenant Meeting 60 Days before prepayment, USDA sends a notice to tenants A tenant meeting is held to explain tenant options A unit by unit inspection is performed (required for vouchers)
_____________________________________________________________________________ PREPAYMENTS – Tenant Options Letter of Priority Entitlement (LOPE) Letter – Will move tenant to top of waiting list at another Rural Development financed property. – Tenants have up to one year from the date of prepayment to request a LOPE letter. USDA Rural Development Vouchers – Everyone living in the property on day of prepayment is eligible for a voucher if 1) income is at or below 80% of median household income and 2) tenant is a US citizen or legally admitted alien – Tenants have up to 10 months from the date of prepayment to request an RD Voucher
_____________________________________________________________________________ PREPAYMENTS - Vouchers A bit about Vouchers – Issued to tenants (not the project) – Portable – tenant can move & take voucher with them – Can be used anywhere as long as the owner is willing to accept the Voucher except at HUD Section 8 and RD rental assistance units (because these units already have subsidy) – The amount of the RD Voucher is calculated as: Market Rate Rent at Prepayment Less Tenant’s Rent at Prepayment Equals Voucher Amount – There is no 30% of income requirement – The amount of Voucher cannot exceed Rent at approved apt..
Your consent to our cookies if you continue to use this website.