B. Tenant Repayment of Unreported or Underreported Income
Tenant’s Obligation to Reimburse
Tenants are obligated to reimburse the O/A if they are charged less rent than required by HUD’s rent formula due to underreporting or failure to report income. The tenant is required to reimburse the O/A for the difference between the rent that should have been paid and the rent that was charged. (See Paragraph 18 of the HUD Model Lease for Subsidized Programs, Paragraph 14 of the Section 202/8 and 202/162 PAC lease and Paragraph 12 of the Section 202 and Section 811 PRAC leases found in Appendix 4 and Paragraph 8-13.A.5 of Handbook 4350.3 REV-1.).
Repayment Options
Tenants can repay amounts due:
In a lump sum payment; or
By entering into a repayment agreement with the O/A; or
A combination of (2) options above.
For example, a tenant may owe $1,000, make a lump sum payment of $300 and enter into a repayment agreement for the remaining $700.
Tenants who do not agree to repay amounts due will be in non-compliance with their lease agreement and may be subject to termination of tenancy. (See Paragraph 8-13.A.5 of Handbook 4350.3 REV-1.)
Tenants may also be required to repay funds to the O/A due to a:
Civil action taken by the O/A, or
Court action as a result of an IG investigation.
Repayment Agreements
The tenant and O/A must both agree on the terms of the repayment agreement. HUD also recommends that the O/A of Company Name has the Head of Household and if applicable the family member who had the un-reported income sign the repayment agreement.
The tenant may wish to consult with HUD’s Housing Counseling Agency in their area to assist them in working with the O/A to reach agreeable terms for the repayment agreement. See the Housing Counseling Agency website for a listing of agencies for each state at http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
(1) Monthly Payment.
The tenant’s monthly payment must be what the tenant can afford to pay based on the family’s income. The monthly payment may exceed 40% of the family’s monthly adjusted income only if the family agrees to the amount stated in the repayment agreement.
The monthly payment plus the amount of rent the tenant/family pays at the time the repayment agreement is executed should not exceed 40 percent of the family’s monthly adjusted income.
Example:
Family’s monthly adjusted income is $1,230.
Family’s monthly rent payment is $369 (30% of the family’s monthly adjusted income).
40% of the family’s monthly adjusted income is $492.
The monthly payment for the repayment agreement should not exceed $123 per month ($492 - $369 = $123)
($369 monthly rent + $123 repayment = $492, 40% of the family’s monthly adjusted income.)
(2) Repayment Time Period.
The time period for repayment by the tenant of the amount owed.
Example : The tenant agrees to repay $1,000, and agrees to monthly payments of $25. $1,000/$25 = 40 months (time period).
The repayment agreement must reference the paragraphs in the lease whereby the tenant is in non-compliance and may be subject to termination of their lease.
The repayment agreement should contain a clause whereby the terms of the agreement can be renegotiated if there is a decrease or increase in the family’s income.
The repayment agreement must be signed and dated by the tenant and the O/A.
O/As must not apply a tenant’s monthly rent payment towards the repayment amount owed that would result in an accumulation of late rent payments. The monthly payment due on the repayment agreement is in addition to the tenant’s monthly rent payment.
Tenants are not required to reimburse the O/A for undercharges caused solely by the O/A’s failure to follow HUD’s procedures for computing rent or assistance payments. (See Chapter 8, Paragraph 8-20.B.2, of Handbook 4350.3 REV-1 addressing the O/A’s obligation to reimburse HUD for overpayments of assistance due to the owner’s failure to follow HUD’s procedures.)
Disposition of Funds Received by O/A
O/As are required to reimburse funds collected from the tenant to HUD in accordance with the requirements in Chapter 8, Paragraph 20 of Handbook 4350.3 REV-1.
O/As should be familiar with their software’s capability that allows for adding Miscellaneous Accounting Requests to the housing assistance payments (HAP) voucher (form HUD-52670) as the procedures vary from software to software. O/As should consult their software documentation or software provider if assistance is required.
After verifying the tenant’s income, the O/A must complete corrections to a prior certification(s) affected by the income change. O/As must not fail to correct the prior certification(s) in an attempt to avoid having large negative adjustments appear on the HAP voucher.
Voucher adjustments:
If the tenant is able to pay the entire amount due in one lump sum payment, no Miscellaneous Accounting Request is needed.
If the tenant pays a lump sum payment and enters into a repayment agreement for the remaining amount due, the O/A must first reverse the adjustment created by correcting the prior certification(s) less the lump sum payment by adding an O/A initiated accounting adjustment (OARQ) Miscellaneous Accounting Request to the voucher.
Example: If the total adjustment is -$1,240 (indicating that $1,240 in subsidy is being returned to HUD) and the tenant pays $480 in a lump sum, the OARQ request is for $760 ($1,240 - $480). The comment field must be completed describing the transaction, e.g. “Reversal of adjustments subject to repayment – Unit 1023, John Smith.”
Adjustments for payments received from the tenant per the repayment agreement are made as addressed in (e), below.
NOTE: The comment field allows for 78 characters to describe the transaction. The comment field must also be completed when explaining payment and cost retained even if no costs were retained.
If the tenant is subject to a repayment agreement, the O/A must first reverse the full amount of the voucher adjustment created by correcting the prior certification(s). Example: If the total of the adjustments is -$1,240 (indicating that $1,240 in subsidy is being returned to HUD), the OARQ request will be for $1,240. This leaves the voucher unaffected by the retroactive corrections to a recertification(s). The comment field must be completed describing the transaction, e.g., “Reversal of adjustments subject to repayment – Unit 1023, John Smith.”
As the tenant makes payments per the repayment agreement, the O/A must enter them as negative amounts on the voucher as OARQ Miscellaneous Accounting Requests.
Example: The tenant pays $50, the OARQ will be for -$50. The comment field must be completed describing the transaction, e.g., “Repayment – Unit 1023- John Smith.”
If the O/A is deducting his/her costs from the payment received from the tenant, the OARQ Miscellaneous Account Request will be for the amount collected from the tenant less the O/A’s costs.
Example: The tenant pays $50 and the O/A’s costs are $8, the OARQ would be for -$42. The comment field must be completed describing the transaction, e.g., “Repayment – Unit 1023 – John Smith - $50 collected less costs of $8.”
O/As should consult the TRACS Monthly Activity Transmission (MAT) User’s Guide to obtain updated instructions on Miscellaneous Account Requests.
O/As may retain a portion of the repayments they actually collect from the tenants who have improperly reported their income at the time of certification or recertification to help defray the cost of pursuing these cases (this is not limited to cases where the O/A has determined fraud). O/As may only retain an amount to cover their actual costs, which is the lesser of:
(1) their actual costs, or
(2) 20 percent of the amount received from the tenant.
Amounts retained by O/As must be deposited into the project’s operating account to offset the expenses incurred for these cases.
As with all income and expenses of the project, O/As must keep records of the receipt and disbursement of all amounts collected from the tenant for audit purposes. At a minimum, the owner must record:
(1) Date and amount(s) received from the tenant;
(2) Expenses incurred;
Examples of types of expenses incurred include staff time for verifying the unreported income; meeting with tenant; drafting repayment agreements; generating and sending monthly invoices to tenant; generating manual voucher adjustments; collection agency fees, if applicable; and, meeting state requirements.
(3) Amount(s) retained; and
(4) Voucher date(s) and amount(s) of reimbursement made to HUD.
Attachments;
History______________________________________________________________
Gabrielle Harris composed this Policy/Procedure on 02/09/2011 03:31:08 PM.
Gabrielle Harris edited this Policy/Procedure on 09/19/2011 09:04:08 AM.