On June 19, 2015, the U.S. Department of Housing and Urban Development (“HUD”) issued a memorandum to incorporate language from the Consolidated and Further Continuing Appropriations Act, 2015. The language in the Act directs HUD to utilize balances greater than $250 per unit in Residual Receipts accounts to support current program purposes. The guidance applies to all HUD projects subject to Section 202 or Section 811 PRACs (Project Rental Assistance Contracts) with Residual Receipts accounts. This makes it apparent that residual receipts account balances in excess of $250 per unit are no longer considered assets of the Project.
HUD defines “Residual Receipts” as Multifamily Housing Project funds in excess of amounts needed for project operations, required reserves, and permitted distributions. Residual Receipts are required by regulation or an applicable PRAC to be deposited by project owners into an interest-bearing account known as a Residual Receipts account.
The June 19th memorandum requires Section 202/811 Projects to remit amounts in excess of $250 per unit in their residual receipts accounts to HUD upon termination of the PRAC. This is effective for all Section 202/811 Projects with PRACs that have an annual or multi-year term renewal dates or expiration dates no less than 30 days after issuance of the June 19th memorandum. PRAC termination is defined as expiration of the contract term, which for most PRACs is the annual contract anniversary date. Project owners will continue to make the required deposits to residual receipts 90 days after year end. At contract termination/renewal, Project owners will need to prepare and submit Form HUD-9250, “Funds Authorization” for the release of residual receipts exceeding $250 per unit.
Excess residual receipts amounts should be remitted to HUD’s Accounting Center either by wiring the funds directly to HUD or mailing a check, payable to HUD, to the following:
Bank of America
PO Box 277303
Atlanta, GA 30384-7303.
HUD may grant exceptions to the aforementioned for the following:
- The residual receipts account is necessary to assure continued successful operation of the project
- Repair plans or other approved uses were initiated prior to publication of the June 19th memorandum
- Repair Exigent Health and Safety (EHS) deficiencies required to meet HUD Physical Condition Standards
- To pay accounts payable that may exist within the first 120 days of the June 19th memorandum
Owners of Section 202/811 Projects with Residual Receipts account balances at or below $250 per unit shall retain the existing Residual Receipts balance until the next expiration/renewal date of the PRAC in accordance with existing procedures. HUD will also continue to consider approving requests for releases from the Residual Receipts account in accordance with HUD Handbook 4350.1, Chapter 25, “Residual Receipts”.
If you have any questions, concerns, or would like additional information on the aforementioned, please contact your HW&Co. Principal.