Multi-Family Housing ProgramsUnauthorized Assistance

July 2018

• New guidance was effective 7/29/2011.

• Owner/agent works with tenant to set up repayment.

• Agency is responsible for collection.

• Owner/agent no longer collects amount due.

• Reference Handbook 3, Chapter 9 (3560 Instruction).

Summary

• Management discovers (typically while processing tenant recertification):

• Unreported income,

• Failure to report change in income in timely manner, or

• Changes to household status.

• Rural Development may discover during supervisory review.

Identifying Unauthorized Assistance

• Any situation that results in the tenant receiving more assistance then they would have if the

correct circumstances had been known or were correctly considered.

• Intentionally or unintentionally misreporting income, assets, or household status.

• Failure to report a change in a timely manner.

• Incorrectly calculating income and tenant’s net contribution to rent.

• Rural Development has not set a minimum amount of UA requiring collection.

Unauthorized Rental Assistance

When the agent is at fault, the agency will pursue collection

and will send the agent the appropriate notices.

• When the agent/owner discovers or is made aware of unauthorized assistance, they will:

• Thoroughly investigate the issue to determine the amount of unauthorized assistance.

• Retain copies of all correspondence and phone calls, including signed tenant certification, and documentation of how UA was discovered and calculated.

• Initiate recertification as appropriate.

Repayment of Unauthorized Rental Assistance

• Send preliminary determination notice to tenant using HB letter 304 as a guide.

• Rural Development has issued a “clean” copy of the 304 guide letter.

• Issue a notice of lease violation (30/14).

• Send Rural Development a copy of 304, 30/14, and supporting documentation for the claim.

• Request agency guidance on term of repayment.

Repayment Process

• The preliminary determination notice will:

• Include specific reasons why the assistance was determined to be unauthorized.

• List the amount to be repaid and the parties responsible for repayment.

• Establish a place and time to meet to discuss issues related to the notice.

• Advise tenants they may present facts, figures, written records, or other information (within a specific timeframe) that might alter the determination.

• Copy of Form 3560-65.

Repayment Process

Not Great:

“It has been discovered that your household has unreported income beginning 10/1/17. This change was not reported immediately, resulting in a violation in your lease agreement, as well as unauthorized rentalassistance.

Jane Doe was determined to have unreported income that resulted in $828.00 in unauthorized assistance that must be repaid in its entirety.”

Repayment Process

Better:

“During the annual recertification process, we became aware that you had a change in income that was not reported to us in a timely manner. The Verification of Employment from Ms. Doe’s job indicates she started her new job on 8/10/2017. Had you reported this change in a timely manner, your net tenant contribution would have increased from $179 per month to $317 per month, effective with your rent payment due on 10/1/2017.

You are now responsible for repaying the difference, $138 per month, for the months of October 2017 through March 2018. The total amount of unauthorized assistance you received is $828, which must berepaid.”

Repayment Process

• If the tenant responds within 15 days and agrees to repay the debt:

• Get a repayment agreement signed and

• Provide Rural Development with a written explanation as to your findings within 10 days of the date of the meeting.

• If the tenant does not respond within 15 days and/or refuses to sign the 3560-65, send the Final Determination Notice (Letter 305).

• Send the servicing office a copy of the demand letter.

Repayment Process

• The demand letter will:

• Include specific reasons why the assistance was determined to be unauthorized.

• List the amount to be repaid and specify the parties responsible for repayment.

• Describe actions management will take if repayment is not made by a specified date, including termination of tenancy and referral to the U.S. Treasury for collection (7 CFR 3560.709).

• Include a copy of 3560-65.

• Include grievance rights as specified in 3560.160.

Repayment Process

• If no response is received from the tenant within 30 days of the Final Demand Letter;

• Complete 3560-65,

• Check the box indicating the tenant refused to sign, and

• Provide the form to theservicing office.

• Update the servicing office on the status of lease termination actions.

Repayment Process

• If the tenant vacates the unit prior to signing the 3560-65, the borrower/agent is no longer responsible for recapturing the UA.

• The borrower/agent MUST notify Rural Development immediately when a tenant moves out.

• The Borrower/agent MUST provide copies of all records to Rural Development to assist in establishing and collecting the UA, including:

• Signed tenant certification and lease,

• Documentation of how the UA discovered,

• Calculations of UA,

• The eviction notice related to the UA, and

• Any other pertinent information.

Repayment Process

• If the tenant agrees to repay, the borrower/agent will establish a repayment agreement with the tenant.

• Contact the servicing office if requested term of repayment is outside of prior agency guidance.

• Complete Form RD 3560-65 and “Level Debt Installment Worksheet” (when applicable) with tenant signature and submit to the servicing office for signature.

• The servicing office will approve repayment and return a signed copy to the borrower/agent.

• The Borrower/agent will provide the tenant with a copy of the approved form.

Repayment Agreement

• If the term of repayment is 90 days or less, no interest will be charged and the tenant will not receive billing statements.

• As a courtesy, the agent may collect payments and forward to Rural Development for processing.

• If paid in lump sum, deliver the tenant’s check for repayment to the servicing office with a copy of3560-65.

• The maximum term of repayment is 24 months without Rural Development national officeapproval.

Repayment Agreement

• The installment calculation worksheet (available from the servicing office) is required when the term is longer than 90 days.

• The interest rate is based on the 3-month rate for “Treasury Constant Maturities.”

• http://www.federalreserve.gov/releases/H15/current/default.htm

• Convert the rate to the decimal equivalent: 1.75% = 0.0175.

• Use the rate in effect on the day the tenant signs the form.

Repayment Agreement

http://www.federalreserve.gov/releases/H15/current/default.htm

• For the date of the debt, use the date the tenant signs the form.

• The 1st payment will always be on the 15th of the month and no sooner than 3 weeks past the date you will submit the form to the servicing office for approval.

• Use the worksheet to determine the amount of the payments (all payments will be the sameamount).

Repayment Agreement

• For payment agreements in excess of 90 days, the tenant will receive a monthly billing notice directly from Rural Development.

• The tenant is responsible for submitting payment to Rural Development as directed on the billing notice.

• Borrowers will have no further collection responsibility once the Form 3560-65 is completed andsubmitted.

• Uncollectable and unpaid agreements will be submitted to the U.S. Treasury for collection action, including potential offset of any federal funds that may be due to the tenant.

Follow Up

• The amount due needs to be well documented (including on the signed tenant certification and lease, in documentation of how the UA was discovered, in calculations of the UA, and in the eviction notice) and justified.

• The amount should equal the amount stated in the notice letter.

• Rural Developments needs to be involved.

• Actions need to be timely.

• Ensure you provide the tenant’s complete mailing address.

Important Points

QUESTIONS?

Contact Us:

Jay DeLapp, Multi-Family Housing Program Specialist(541) 801-2676jay.delapp@usda.gov

www.rd.usda.gov/or

mailto:jay.delapp@usda.gov

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http://www.ascr.usda.gov/complaint_filing_cust.htmlmailto:program.intake@usda.gov

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