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REAC Declares Inspection Holidays; Revises "Flag" Policies

by Published On: Oct 07, 2011

The U.S. Department of Housing and Urban Development (HUD) Real Estate Assessment Center (REAC) has proclaimed that no physical inspections be conducted during: 

  • Thanksgiving week.
  • The week before Christmas.
  • The week after Christmas.

The agency said it made the move to avoid the historic difficulties experienced in completing inspections or dealing with last-minute cancellations and postponements. Owner/agents can direct inspectors to this request if necessary, but should be accommodated in deferring any request to schedule an inspection during that time.     

Office of Multifamily Housing has revised its policies about flagging properties

On Sept. 13, HUD released Notice H 2011-24 "Reissuance of Revised Protocol for Placing a Flag in the Active Partners Performance System (APPS) When a Property Receives a Physical Inspection Score Below 60 but Above 30," which revises the existing Office of Multifamily Housing asset management policies about flagging properties that get below 60 but above 30 on a REAC inspection.
According to the notice, no longer will a flag automatically be placed on the record of a property as soon as a score in this range is received on the first inspection. However, a flag will be placed should the owner/agent fail to respond and/or correct the problem in a timely manner, or the property receives a second inspection below 60. 

The following is the new protocol for physical inspection report scores from 31 – 59:

  • The Hub/Program Center will not place a flag in APPS but the Hub Director or his or her designee will meet with the Owner in person or by telephone. As a result of the discussions, the Hub Director or his/her designee will issue a Notice of Violation (NOV) and/or Notice of Default (NOD) of a business agreement(s) for substandard physical condition within 10 days of the release of a physical inspection report with a score below 60 but above 30. 
  • The NOD and/or NOV will inform the Owner that he or she:

    1. Must conduct a survey of the entire project and identify all physical deficiencies. 
    2. Must correct all of the physical deficiencies at the project, including but not limited to, those deficiencies identified in the REAC inspection. 
    3. Must execute and deliver the “Project Owner’s Certification that the Physical Condition of the Project is in Compliance with HUD Contracts and the Physical Condition Standards of 24 CFR. Part 5.703” and the comprehensive survey to the HUD Office cited in the Notice. The NOD and/or NOV must also inform the Owner that HUD’s Office of Multifamily Housing will flag the Owner and other parties responsible for the subject of the Notice in APPS if the Owner does not submit the “Project Owner’s Certification” within the 60-day timeframe specified in the Notice.
  • If the Owner submits the “Project Owner’s Certification” within the designated timeframe, the Hub Director or his or her designee(s) will not place a flag in APPS and will inform the Office of Asset Management, Business Relationships and Special Initiatives Division that the project will be subject to the annual inspection process and will be inspected by the mortgagee or bid out in a Reverse Auction on or about the new ideal date the following year. If the property receives another score below 60 the following year, the Hub Director or his or her designee must place a flag in the APPS system, issue a new NOD and/or NOV.
  • If upon re-inspection the property once again receives a score that is below 60, the Hub/Program Center must once again flag the Owner in APPS and submit a CDE plan which recommends what actions should be taken to obtain Owner compliance with the terms of all business agreements to the Office of Asset Management, Business Relationships and Special Initiatives Division, for approval within 30 days of the release on the last inspection report. The Department will strive to review and approve all CDE plans within 30 days of receipt.  


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