Contract Renewal Options

General Eligibility Criteria for Options 1A & 1B:

1. Aggregate current rent levels under the expiring or terminating contract must be less than comparable market rents.
2. Management’s most recent Management and Occupancy Review (MOR) rating is “Satisfactory” or above
3. A physical inspection score, from the Real Estate Assessment Center (REAC), of 60 or above with no uncorrected Exigent Health and Safety (EH&S) violations.
4. All Financial Assistance Subsystem (FASS) findings need to be closed or under HUD-approved corrective action plan.
5. The project owner must be:
   • A profit-motivated entity (including a limited distribution entity)
   • A housing authority occupying the status of a “public body corporate and politic” under the state legislation under which it was created
   • A limited partnership with one or more nonprofit general partners or a sole general partner that is wholly owned and controlled by one of more nonprofit entities
   • A limited liability company with one or more nonprofit managers or nonprofit managing members or a sole manager or managing member that is wholly owned or controlled by one or more nonprofit entities where the managing general partner is wholly owned and controlled by a nonprofit entity

Eligibility

Option Two is for Owners who request a renewal of their Section 8 contract where the RCS indicates that the contract’s aggregate current rents are at or below comparable market rents, or the contract’s aggregate current rents exceed comparable market rents, but the project is exempt from MTM restructuring and the owner is willing to cut the rents to comparable market rents prior to renewal of the contract.

Renewal Submission Requirements

• Contract Renewal Request Form (HUD Form 9624)
• Rent Comparability Study (RCS)
• OCAF Worksheet or Budget Based Rent Adjustment Request (See Rent Adjustment Section)
• Verification of Annual Project Debt Service (ex. monthly mortgage statement, Promissory note) Debt Service = Principal + Interest + MIP – IRP Subsidy (if applicable)
• If the project has a utility allowance: Utility analysis must be submitted based on Notice 2015-04

Rent Adjustments for Multi-year Contracts Submission Requirements

*For contracts over 5 years, a new RCS should be submitted every 5th year from the contract effective date for the 6^th, 11^th, and 16^th year adjustments. The rents will be adjusted up or down, based on the RCS rents.*

An OCAF rent increase request:

• Signed Auto OCAF letter
• Verification of Annual Project Debt Service (ex. monthly mortgage statement, Promissory note) Debt Service = Principal + Interest + MIP – IRP Subsidy (if applicable)
• If the project has a utility allowance: Utility analysis must be submitted based on Notice 2015-04

OR

A budget-based rent increase request (in accordance with the requirement of HUD Handbook 4350.1, Chapter 7)

• A cover letter that:
  1. summarizes the reasons why a rent increase is needed
  2. gives the date the increase will be effective
  3. describes the project’s physical condition and any improvements that have been budgeted

• Budget Worksheet – HUD-92547-A – Schedule of Charges and Project Information (must be signed)
• Statement & documentation explaining basis for any increases in expense line items if increase 5% or more and $500 or greater (comparing proposed budget to current year actuals and the previous years audited figures)
• Executed copy of Owner’s Certification Regarding Purchase Practices and Reasonableness of Expenses (Appendix 3)
• A signed request for increase in Replacement for Reserve Deposit (if requested)
• If the project has a utility allowance: Utility analysis must be submitted based on Notice 2015-04
• Notice to Tenants (if applicable) in accordance with 24 CFR 245.310 & Owner’s Certification As to Compliance with Tenant Comment Procedures

• Option 3A (Lite: Renewal without restructuring, with rents marked down to comparable)
• Option 3b (Full: Renewal with mortgage restructuring, with rents marked down to comparable)

Eligibility

FHA insured projects with above market rents that are not identified as an “exception project” in Chapter Six, must be referred to Recap.

• “Exception Projects” are projects that are not an “eligible multifamily housing project” under Section 512(2) of MAHRA, or are exempt from debt-restructuring under Section 514(h) of MAHRA and, therefore, should NOT be sent to Recap for renewal.
• A project owner who is suspended or debarred is ineligible for a full debt restructuring (“Full”). However, even if the project is ineligible for a Full, the project may remain eligible as a project that is financially viable without a debt restructuring after the rents are reduced to comparable market rents (“Lite”). This kind of project should be referred to Recap for a rent determination. Eligibility for a Lite will be determined on a case by case basis by Recap after a review of the project’s underwriting, which will include the results of the RCS and an analysis of the project’s expenses. If the project is determined to be ineligible for a Lite and the owner or project has been rejected, Recap will return the HAP Contract to the AE. If the HAP Contract is renewed even though the project is ineligible for a Lite, the AE must renew the HAP Contract using a Watch List Contract at Recap-determined comparable Market Rents. The project should be designated, monitored and entered into the Integrated Real Estate Management System (IREMS) as a project subject to a Watch List Contract, and defined in IREMS as a project with a loan that failed M2M restructuring and is therefore operating under a Watch List Contract.
• Section 202 Projects Refinanced for a Second time: Projects financed under Section 202 Elderly and Disabled Housing Direct Loan Program (Section 202) are eligible for restructuring if the project has been refinanced at least two times if the second refinance using a loan insured under the National Housing Act. All other projects refinanced under Section 202 are ineligible for restructuring under Mark-to-Market.

Submission Requirements

• Contract Renewal Request Form (HUD Form 9624)
• If the project has a utility allowance: Utility analysis must be submitted based on Notice 2015-04

Rent Adjustments for Full M2M Multi-year Contracts Submission Requirements

• Signed Auto OCAF letter
• Verification of Annual Project Debt Service (ex. monthly mortgage statement, Promissory note) Debt Service = Principal + Interest + MIP – IRP Subsidy (if applicable)
• If the project has a utility allowance: Utility analysis must be submitted based on Notice 2015-04

Eligibility

1. State or Local Government Financing. Projects for which the primary financing or mortgage insurance was provided by a unit of State government or a unit of general local government (or an agency or instrumentality of either) and is insured under the National Housing Act and the implementation of a Mark-to-Market Restructuring Plan would conflict with applicable law or agreements governing such financing. Note: State and local government financed projects that are not insured under the National Housing Act are not subject to Recap review. (To confirm the exemption, a determination must be made by Recap as to whether or not implementation of a Mark-to-Market Restructuring Plan is in conflict with applicable law, or agreements governing such financing. In these cases, the contract and supporting documentation of the potential conflict must be referred to Recap for review. The owner (or lender) must submit an opinion of counsel in a form acceptable to HUD, along with copies of the relevant financing documents or applicable local or State legal authority. Section 202/8 and 515/8 Projects.)
2. Section 202/8 and Section 515/8 Projects. Projects currently financed under Section 202 of the Housing Act of 1959 or Section 515 of the Housing Act of 1949. However, these projects can be eligible for restructuring if refinanced with FHA mortgage insurance. Section 202 and 811 Capital Advance projects are not eligible because they do not have Section 8 contracts.
3. Refinanced Section 202 project. The project was refinanced pursuant to Section 811 of the American Home Ownership and Economic Opportunity Act of 2000.
4. SRO Mod Rehab. Projects that have an expiring contract under Section 8 of the United States Housing Act of 1937 pursuant to Section 441 of the Stewart B. McKinney Homeless Assistance Act.
5. Section 512 of MAHRA. Projects that do not qualify as eligible multifamily housing projects pursuant to Section 512(2) of MAHRA include:
   1. A project that is not subject to a HUD-held or insured mortgage; or,
   2. A project that has FHA mortgage insurance or is HUD-held with rents at or below comparable market rents.

Renewal Submission Requirements

*The Lesser of Test is required for all Option 4 Renewals. For the lesser of test, we calculate the OCAF adjusted rents and the budget adjusted rents, and renew the contract rents at the lesser of the two. Note: Project rents may be reduced.*

• Contract Renewal Request Form (HUD Form 9624)
• OCAF Worksheet (HUD Form 9624)
• Budget Worksheet (HUD Form 92547-A)
• If the project has a utility allowance: Utility analysis must be submitted based on Notice 2015-04.

Rent Adjustments for Multi-year Contracts Submission Requirements

An OCAF rent increase request:

• Signed Auto OCAF letter
• Verification of Annual Project Debt Service (ex. monthly mortgage statement, Promissory note) Debt Service = Principal + Interest + MIP – IRP Subsidy (if applicable)
• If the project has a utility allowance: Utility analysis must be submitted based on Notice 2015-04

OR

A budget-based rent increase request: (in accordance with the requirement of HUD Handbook 4350.1, Chapter 7)

• A cover letter that:
  1. summarizes the reasons why a rent increase is needed
  2. gives the date the increase will be effective
  3. describes the project’s physical condition and any improvements that have been budgeted

• Budget Worksheet – HUD-92547-A – Schedule of Charges and Project Information (must be signed)
• Statement & documentation explaining basis for any increases in expense line items if increase 5% or more and $500 or greater (comparing proposed budget to Current year actuals and the previous years Audited figures)
• Executed copy of Owner’s Certification Regarding Purchase Practices and Reasonableness of Expenses (Appendix 3)
• A signed request for increase in Replacement for Reserve Deposit (if requested)
• Rent Comparability Study – The owner must submit or have submitted within the preceding 5 years a RCS prepared following the instructions found in Chapter Nine of the Section 8 Renewal Guide.
• If the project has a utility allowance: Utility analysis must be submitted based on Notice 2015-04
• Notice to Tenants (if applicable) in accordance with 24 CFR 245.310 & Owner’s Certification As to Compliance with Tenant Comment Procedures

Eligibility

Preservation Projects – Primarily consist of Section 236 and 221d3 BMIR projects whose Owners entered into long-term use agreements with HUD under the Preservation Program. Rent adjustment methods are determined by the approved Plan of Action (POA).

Portfolio Reengineering Demonstration Project – HUD is no longer doing initial renewals under the Portfolio Reengineering Demonstration Program.

Submission Requirements

• Contract Renewal Request Form (HUD Form 9624)
• Rent adjustment request package per POA or Use Agreement (See Rent Adjustments)
• If the project has a utility allowance: Utility analysis must be submitted based on Notice 2015-04

In order to be eligible to opt out of the Section 8 HAP Contract:

1. The owner must provide a one-year notification to the tenants and the AE/CA of the intent to opt-out of the Section 8 project-based contract (See Appendix 11-1 of the Renewal Guide.)
2. The property must not have any restrictions stated in the Section 8 HAP contract or Use Agreement that prohibit the owner from opting-out. For example, Portfolio Reengineering Demonstration projects are required to accept Section 8 contracts offered by the Department, and as such, they may not opt-out if HUD offers to renew.
3. A copy of the One Year Tenant Notice must be issued to the residents and Navigate one year prior to the contract expiration date.
4. Contract Renewal Request Form (HUD From 9624) must be submitted by 150 days prior to the expiration date of the contract.