Section 202: HUD Issues FAQs on Refinancing Guidance

Members | May 10, 2012

Early in September, the U.S. Department of Housing and Urban Development (HUD) issued , which is intended to clarify  (HUD Notice 2012-8).  

Early in September, the U.S. Department of Housing and Urban Development (HUD) issued Frequently Asked Questions: Housing Notice 2012-08, which is intended to clarify Updated Requirements for Prepayment and Refinance of Section 202 Direct Loans (HUD Notice 2012-8). 

The FAQs provide clarifications to the policies and procedures established in the notice, including:

  • Use of funds for acquisition of other property or for supportive services.
  • Section 8 renewal contracts
  • Debt service savings and specific line items in future budgets.
  • Use of residual receipts going forward.
  • Use of current debt service rather than prior debt service.
  • Refinancing of already refinanced 202s. 

What is missing is any guidance about how residual receipts accounts that had been designated for use as part of a refinancing should be treated in the new guidance for residual receipts sweeps and we are still waiting for FAQs for the recent residual receipts notice.

HUD Notice 2012-8 was issued in May to implement the provisions of the Section 202 Reform Act signed into law in January of 2011. That notice covers all of the Section 202 refinancing reforms included in the bill except for the provisions related to the new Senior Preservation Rental Assistance Contracts, and provides updated guidance for the prepayment and refinancing of Section 202 Direct Loan properties financed between 1959 and 1990.