1. Transferring Budget Authority under Section 8(bb)(1)
Presented by:
Cindy Ross
Screensaver while class is filling.
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Who is CMS?
Located in Bremerton, WA ,Contract Management Services (CMS) is a division of the Bremerton Housing Authority since 2000, CMS serves as the Performance Based Contract Administrator (PBCA) for the Department of Housing and Urban Development (HUD) for Project Based Section 8 properties in Washington, Utah, Nebraska and sub-contractor for Hawaii.
CMS currently has oversight responsibility for over 700 contracts, representing approximately 30,000 project-based Section 8 units throughout the states of Washington, Utah, Nebraska and Hawaii.
CMS's philosophy in fulfilling its duties as HUD's PBCA is to maintain a service-oriented approach designed to assist property owners and agents in understanding and complying with the many complex federal housing regulations pertaining to their properties.
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Contact Information
Contract Management Services th Street, Suite 200 Bremerton, WA 98337
Telephone: Toll-Free: Website:
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What is Section 8(bb)(1)?
Section 8(bb) provides HUD a tool to preserve Section 8 Budget Authority
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5. Budget authority is a commitment by HUD to fund subsidy
What is Section 8(bb)(1)?
Budget authority is a commitment by HUD to fund subsidy
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6. When does the transfer of Budget Authority occur?
Budget Authority is transferred at:
Opt-out
Termination or
When Subdividing a HAP Contract
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Housing Notice H
When a Project-Based Section 8 (PBS8) HAP Contract is not renewed due to opt-out, termination, obsolete units, natural disaster,
or refinance, HUD is required to transfer any remaining budget authority to another HAP Contract.
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Budget authority may be transferred to one or more properties…
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Applicability
The Contract Administrator and Owner of an existing PBS8 HAP Contract must mutually agree to:
Terminate the HAP Contract or
Subdivide the HAP Contract
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Applicability
Recipients of the budget authority must:
Agree to accept budget authority to be added to an existing HAP Contract; or
Agree to execute a new, New Construction PBS8 HAP Contract when the property does not already have an existing PBS8 HAP Contract.
Note: Units at Property B must be ready for occupancy
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11. The Owner of Property A must select Property B
HUD or the Contract Administrator will likely have a list of owners who have expressed interest in being the recipient of the transfer of budget authority.
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Property A
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Property A
Budget Authority is transferred from Project A at opt-out, termination, or when subdividing the HAP Contract
Owner submits a request to transfer budget authority to Property B.
Include all applicable documentation and certify all requirements are met:
Annual financial statements have been submitted for the prior three year period (or time new ownership has been in place);
If the property is subject to 236 requirements, Excess Income Reports must have been submitted for the prior seven year period and monies owed, must be paid; and
Compliance flags must be resolved.
When property will continue in the PBS8 program:
REAC deficiencies must be cured or HUD must approve an acceptable plan to cure.
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Proposal - Property A
Request to terminate the PBS8 HAP Contract.
Agree to transfer all or a portion of budget authority.
If known, provide the name of the property that will be receiving the budget authority.
Narrative:
State whether the receiving property is currently in the PBS8 program or will be new to the program;
Include a description of proposed transaction and why the owner is proposing to transfer budget authority.
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Proposal - Property A
Propose a plan for the future use of the property.
Explain why there is no longer a need for PBS8 affordable rental housing at the property.
Explain how the transfer of budget authority will not have an adverse impact on tenants who:
Currently receive assistance;
Accept vouchers;
Remain at the property; and
Relocate to Property B.
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Proposal - Property A
When property will continue in the PBS8 program:
If property received less than a satisfactory rating during the last 3 MORs, a corrective action plan must be submitted to HUD.
The transfer cannot adversely impact the financial and physical feasibility of the property.
Owner must certify that all mortgage payments will be made.
Owner must certify that they will meet all physical condition standards and management requirements.
Owner must certify that they will be compliant with all business agreements imposed by HUD or the lender.
If an insured mortgage, the FHA lender will submit a letter stating that it consents to the proposed transfer of budget authority.
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17. Tenant Notification – Property A
Owner must give tenants and legitimate tenant organizations written notification of the proposed transfer in the format needed to meet the needs of all tenants.
Provide a 30 day comment period
Include the address and phone # of the HUD office, for properties located in Washington, the HUD contact is:
Mary Ellen McFarlane, HUD Senior Account Executive
Multifamily West Region/Denver Satellite Office
1670 Broadway, 24th Floor
Denver, CO
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18. Tenant Notification – Property A
Notification will include:
A description of the impact on the tenants’ rental assistance and tenant contributions.
Relocation rights and responsibilities (Uniform Relocation Act).
When the PBS8 budget authority will be transferred, the tenants may relocate to Property B or Tenant Protection Vouchers will be offered to those who qualify.
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19. Tenant Notification – Property A
Must be delivered directly to each unit or mailed.
Must be posted in 3 common areas, including the property’s office.
When the property is greater than 4 stories, the notice may be served by delivery to each unit or posting. When posted, the posting must be in each building where impacted units are located.
Tenants (including any legal or other representatives of tenants) have the right to view and copy materials submitted to HUD by the owner for 30 days.
Tenants may submit written comments to the HUD office during the 30 day posting period.
Owner A must hold a meeting with tenants and legitimate tenant organizations to discuss details of the transfer and answer questions.
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20. Tenant Notification – Property A
After the 30 day posting period has been completed:
The owner must review comments received and prepare a written evaluation of the comments.
All negative comments must be addressed.
Owner A submits to HUD
Copy of tenant notification;
Sign-in sheet from the meeting with tenants;
Copies of all written comments;
Owner A’s written evaluation of comments; and
Owner signed certification of compliance regarding tenant notification requirements.
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Relocation of Tenants
Owner A and B are jointly responsible for tenants for determining which entities will pay for relocation expenses
Tenants cannot pay any costs for relocating due to the transaction.
Questions regarding relocating should be addressed to Mary Ellen McFarlane, HUD’s Relocation Specialist.
Tenants who move from Property A to Property B remain subject to their existing lease requirements.
Any eviction procedures currently underway at Property A will not be affected by the transfer of budget authority.
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Property B
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Property B
Budget Authority is transferred to Property B at opt-out, termination, or when subdividing Property A’s HAP Contract.
Transfers must be budget neutral. Annual gross rent potential (GRP) may not exceed the annual GRP of units being terminated at Property A.
The number of transferred units to Property B should be substantially the same (lesser of 5% or 5 units) as the number of units at Property A.
Property should be located in a Small Area Fair Market Rent (SAFMR) area with a poverty rate of less than 30 percent.
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Rents - Property B
Rents will be established under the applicable Renewal Option limited to an RCS.
When the property already has a PBS8 HAP Contract, if an RCS was conducted within the last 12 months, a new RCS is not needed.
Properties with existing Option 4 HAP Contracts which are adding S8 units due to the budget authority transfer, must obtain an RCS.
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25. Request to accept Transfer - Property B
Provide documentation to assist HUD in an environmental review of the property.
May need to conduct an Environmental Study;
When a Phase I ESA is required, a prior ESA may be used as long as the ESA was completed within the last year and updated within 180 days from the date submitted to HUD.
Must be compliant with the Fair Housing Act and local Fair Housing Law.
Should not be in an area of minority concentration (see pages 14 & 15 of notice).
Must meet all applicable accessibility requirements.
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26. REAC Inspection - Property B
The previous REAC score of the property must be 60 or above.
When the property has not had a REAC inspection prior, one will be ordered by HUD.
If the ordered REAC inspection score is below 60, the deficiencies must be cured, or a plan must be approved by HUD that will result in cure of those deficiencies in a timeframe acceptable to HUD.
A physical inspection by another agency will be recognized as the REAC inspection only if the person conducting the inspection has appropriate certification and is able to upload results directly into the REAC system.
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Property B
When property has a current PBS8 HAP Contract, the most recent MOR score must be satisfactory or above, and financials must be completed.
If not, an acceptable correction plan must be submitted to HUD.
Must agree to a 20 year HAP Contract, plus Preservation Exhibit, as applicable.
Must receive Previous Participation approval via the HUD-2530.
Must provide a compliant PBS8 Tenant Selection Plan for the property.
There may no liens on the property other than the first mortgage;
Exceptions are found on page 16 of the notice.
Must resolve all non-compliance flags.
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Property B
When Property B is not currently in the PBS8 program, for the purpose of calculating distributions, initial equity will be the initial equity used at Project A, unless the owner of Project B contributes additional equity in conjunction with the transfer.
If the property is not already in the PBS8 program, a new HAP Contract will be issued and the property will enter the PBS8 inventory.
Tenants can be over-housed at Property B to accommodate all tenants who decide to move from Property A (until an appropriate unit type becomes available).
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KNOWLEDGE REVIEW
Question 1
Is there a cost associated with becoming Property B?
Answer
Yes.
Property A’s owner may request a fee to select your property as Property B. If this is the case, you may want to secure legal counsel to prepare a contract, etc.
The environmental review data could cost several thousand dollars.
And, consider the time it takes to prepare the proposal and required documents (Tenant Selection Plan, House Rules, possible Amendment of a current Use Agreement, etc.)
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KNOWLEDGE REVIEW
Question 2
How do I find out about potential Property As?
Answer
Let Mary Ellen McFarlane with the HUD-Denver office and Cindy Ross with CMS know that you are interested in becoming Property B.
Mary Ellen McFarlane
Cindy Ross
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Other Questions?
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More Information
Visit the CMS Website
At our website, you can find checklists, worksheets, helpful website, HUD forms/documents, and industry news
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