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Section 236 Excess Income Reporting Will Be Aggressively Pursued

Published On: Feb 17, 2012

In February 2012 HUD announced that it would “aggressively pursue” all confirmed delinquent excess income receivables and missing reports related to Section 236 excess income filings. LeadingAge sent out an immediate housing-management listserv announcement warning Section 236 providers to “take notice.”

Notice H 2012-2: “Collection Procedures for Excess Income Receivables and Form HUD-93104, Monthly Report of Excess Income”  was issued February 10, 2012 to the attention of Multifamily HUB Directors, Contract Administrators, Multifamily Directors of Project Management, and HUD Field Council with the following introduction:

It is the Department’s policy that all confirmed delinquent Excess Income Receivables (EIR) and missing reports will be aggressively pursued, and all available enforcement remedies will be taken against those owners/management agents who fail to comply with the Department’s requirements. This Notice describes the processes that must be followed to collect these receivables and ensure that all required monthly reports are filed and any required payment is made. Except where specifically referenced, this Notice supplements guidelines in HUD Handbook 4350.1, Multifamily Asset Management and Project Servicing, Section 7-28.

Excess Income is the rent collected in excess of the Basic Rents for Section 236 projects. Owners/management agents of Section 236 projects are required to prepare and submit form HUD- 93104, Monthly Report of Excess Income, to HUD on a monthly basis, whether or not there is any Excess Income. Unless prior written authorization is given to retain the documented excess rental income, these funds must be remitted to HUD.

Though we assume our members are generally in compliance, the tone and timing of this notice is consistent with the new environment articulated in the FY13 budget proposal and earlier “head’s up” on efforts to constrain budget increases in properties, offsetting growth through use of residuals, etc.

Read the notice in its entirety for full details.   However, we have also create a fact sheet on the subject to summarize the key issues.   They are also included below.

Updated Requirements on Excess Income Reporting for 236 Projects
For those who are familiar with the process, Owners/Management Agents are required to prepare and submit form HUD-93104, Monthly Report of Excess Income to HUD monthly, regardless of whether or not excess income was collected. Excess income is the rent collected in excess of the Basic rent for Section 236 projects. Some properties have obtained written authorization to retain these funds and unless your property has done so, the required payments need to be submitted.
Per the notice: On September 1, 2008, it became mandatory for Owners/Management Agents to use the system, through which remittance of the required payment must be made. If your property had receivables that were converted to a HUD-approved Repayment Agreement and they are current, you are exempt from this notice.
Keep in mind that any transfer of ownership of these properties has no effect on the responsibility of the project to pay the amounts due.

For those unfamiliar with Section 236 requirements, HUD’s policy is that owners/management agents are only allowed to keep the HUD-approved Basic Rent. 

Any amounts over Basic collected from tenants (i.e. those who pay between Basic and Market Rent) must be remitted to HUD, unless sites have gotten HUD approval to keep the funds (usually for items like building repairs and upgrades).  This approval must be renewed each year.

EIR Reports (along with appropriate payment, if any) must be submitted, electronically, every month, whether money is due to HUD or not.  EIR Reports list the actual amounts collected from tenants for the month.  Since properties deposit tenant payments into their Operating Accounts, a change in ownership has no effect on the amounts due.

According to the notice, each HUD MF Hub Director is being asked to appoint a Collection Coordinator and an alternate.  By March 10, 2012, any Section 236 site with overdue funds should expect a Demand Letter requiring that the funds be paid within 30 days, or that the Owner/Agent contact the Coordinator to work out a payment plan.

If that’s not done within 90 days, the site may be referred to the DEC (Departmental Enforcement Center) for further action, which may include stiff financial penalties and/or suspension from all federal programs.


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