Exhibit E to Subpart C of Part 1930 - Rental Assistance Program

IGeneral. The objective of the rental assistance (RA) program is to reduce rents paid by low-income households. This exhibit sets forth the policies and procedures and delegates authority under which RA will be extended to eligible tenants occupying eligible Rural Rental Housing (RRH) and eligible members occupying Rural Cooperative Housing (RCH) projects financed by the Farmers Home Administration (FmHA) or its successor agency under Public Law 103-354. For the purposes of this exhibit, the term “tenant” also means “member.” This exhibit also applies to Farm Labor Housing (LH) projects when the borrower is a broadly-based nonprofit organization, nonprofit organization of farmworkers, or a State or local public agency. RA will supplement the benefits available to tenants under the interest credit program outlined in exhibit H to this subpart.

IIDefinitions.

AEligible tenants. Any very low-income, or low-income household meeting the following requirements:

1The household adjusted annual income must not exceed the very low- or low-income limit established for the area as indicated in Appendix 9 of HB-1-3550 (available in any Rural Development office).

2The household must be unable to pay the approved rental rate plus utility allowance within a portion of their income not exceeding the highest of:

a30 percent of their adjusted monthly income;

b10 percent of gross monthly income; or

cIf the household is receiving payments for public assistance from a public agency, the portion of such payments which is specifically designated by that agency to meet the household's shelter cost.

3The household must meet the occupancy policy established for the project and approved by FmHA or its successor agency under Public Law 103-354 according to paragraph VI D 2 of exhibit B of this subpart.

4The household must have an unexpired and signed Form FmHA or its successor agency under Public Law 103-354 1944-8, “Tenant Certification,” on file with the borrower.

BEligible project.

1All projects must operate under Interest Credit Plan II RA to be eligible to receive RA, except LH loans, direct RRH, and insured RRH loans approved prior to August 1, 1968, which must operate under Plan RA. To be eligible for RA the project must have a:

aRRH insured or direct loan made to a broadly-based nonprofit organization, or State or local agency, including Senior Citizen Housing;

bRRH insured loan to an individual or organization who has or will execute a loan resolution or loan agreement agreeing to operate the housing on a limited profit basis as defined in § 1944.205 of subpart E to part 1944 of this chapter;

cRCH insured or direct loan; or

dLH loan, or an LH loan and grant combination, made to a broadly-based nonprofit organization or nonprofit organization of farmworkers or a State or local public agency.

2Borrowers may utilize the Department of Housing and Urban Development (HUD) Section 8 Housing Assistance Payments Program and FmHA or its successor agency under Public Law 103-354 RA in the same project. In such cases, Form FmHA or its successor agency under Public Law 103-354 1944-7, “Multiple Family Housing Interest Credit and Rental Assistance Agreement,” for the project will reflect coding for “Plan II RA.”

3Borrowers will provide RA to only those eligible tenants occupying LH, RCH, or RRH rental housing units financed by FmHA or its successor agency under Public Law 103-354.

COperational project. A completed RRH, RCH, or LH project financed by FmHA or its successor agency under Public Law 103-354 which has been opened for occupancy and has at least been partially occupied by tenants.

DNew projects. Newly constructed or substantially rehabilitated RRH, RCH, or LH project financed by FmHA or its successor agency under Public Law 103-354. For new construction RA purposes, if further means before any units are occupied.

ERental assistance. RA, as used in this exhibit, is the portion of the approved shelter cost paid by FmHA or its successor agency under Public Law 103-354 to compensate for the difference between the approved shelter cost and the monthly tenant contribution as calculated according to paragraph IV A 2 c of exhibit B to this subpart. When the household's monthly gross tenant contribution is less than the approved utility allowance which is billed directly to and paid by the tenant, the owner will pay the household that difference according to paragraph IX A 2 of this exhibit.

FRA agreement. The term refers to Form FmHA or its successor agency under Public Law 103-354 1944-27, or its predecessor. Form FmHA or its successor agency under Public Law 103-354 444-27 and Form FmHA or its successor agency under Public Law 103-354 444-27A.

GRA obligation. The obligation consisting of the number of RA units and associated dollar amounts of rental assistance specified in a particular RA agreement.

HRA obligation number. The identification number associated with a particular RA obligation.

IReplacement units. RA units which replace RA units in RA agreements expiring because obligated funds have been fully disbursed.

JServicing units. RA units which increase the number of RA units resulting in initial or additional RA agreements.

KShelter cost. The approved shelter cost consists of basic or note rate rent plus utility allowance when used. Basic or note rate rent must be shown on the project budget for the year and approved according to § 1930.122(b)(1). Utility allowances, when required, are determined and approved according to part 1944, subpart E, exhibit A-6, of this chapter. Any changes in rental rates or utility allowances must be processed according to exhibit C of this subpart.

LUtility allowances. The allowance approved by FmHA or its successor agency under Public Law 103-354 according to exhibit A-6 of subpart E of part 1944 of this chapter to cover the cost of utilities which are payable directly by the households.

IIIUtilization of RA. All borrowers with eligible projects as defined in paragraph II B of this exhibit are encouraged to utilize the RA program and receive RA payments on behalf of eligible tenants. Generally, the borrower, or the borrower's approved management agent, will initiate the processing of a RA application.

IVPriority of RA applications.

AState of allocations. The National Office may establish a State quota on the number of RA units that may be approved and obligated in any fiscal year. The State Director will limit the approval of RA to no more than the number of units allocated to the State. Unless otherwise stated by the National Office, the State allocation will indicate the number of RA units for operational projects and the number of RA units to be used for new construction.

BAllocation to projects within a State. The State Director will distribute any RA units allocated to the State according to any specific guidance established by the National Office. When no specific guidance is established by the National Office the State Director will approve requests for RA to projects according to the provisions of this exhibit. Priority in allocating RA units will be as follows:

1Replacement units: The State Director will distribute or reserve RA units and give priority to projects needing replacement units before any initial or additional units are allocated to other new or operational projects. The State Director should ascertain how many RA units are expected to expire in each Servicing Office during the current fiscal year and the first quarter of the following fiscal year.

2New housing: Any RA units allocated to the State for new construction will be distributed on a priority basis in the following order:

aApplications for RRH and RCH loans where the market survey information indicates that a large percentage of the prospective tenants needed RA. When the number of RA units available is inadequate to cover all such applications, the units will be distributed giving priority to those projects having highest need located in areas identified as having the greatest need for low-income housing, and selected for funding in accordance with § 1944.231 of subpart E of part 1944 of this chapter.

bFor LH projects, RA units will be allocated by the National Office from the National Office reserve on a case-by-case basis at the time the projects are considered for funding at the National Office level.

3Operational housing: When the National Office provides an allocation for servicing RA units, the State Director will distribute them to operational RRH, RCH, and LH projects based on Form FmHA or its successor agency under Public Law 103-354 1944-25, “Request for Rental Assistance,” that have been submitted by eligible borrowers. Priority will be given to projects based on this exhibit and administrative directives issued by the National Office under the annual RA allocations or other authorizations or guidelines established through the budget process. The National Office will notify the State Director each year of any specific date by which all requests for RA must be submitted to FmHA or its successor agency under Public Law 103-354 for consideration.

VProcessing of RA applications. All requests for RA will be processed according to this paragraph and may be approved by the State Director.

AOperational projects.

1A borrower with an eligible project in which there are tenants paying in excess of 30 percent of their adjusted income for rent should be encouraged to have on file a Form FmHA or its successor agency under Public Law 103-354 1944-25 with the Servicing Official to avoid delays in processing future servicing requests. Once a Form FmHA or its successor agency under Public Law 103-354 1944-25 is on file at the FmHA or its successor agency under Public Law 103-354 Servicing Office, subsequent submittals of the form will not be necessary to support subsequent approvals of RA by FmHA or its successor agency under Public Law 103-354. A separate Form FmHA or its successor agency under Public Law 103-354 1944-25 will be submitted for each project. The borrower should include the following with each request.

aForm FmHA or its successor agency under Public Law 103-354 1944-29, “Project Worksheet for Interest Credit and Rental Assistance,” with all columns completed for each tenant in the project. (All Forms FmHA or its successor agency under Public Law 103-354 1944-8 must be current.)

bApproved or proposed budget for the year on Form FmHA or its successor agency under Public Law 103-354 1930-7, “Multiple Family Housing Project Budget,” with exhibit A-6 of subpart E of part 1944 of this chapter attached, when applicable.

2Prior to the full disbursement of obligated funds on any agreement, a borrower or approved management agent may submit a request for replacement RA units. The request should contain all the material requested in paragraph V A 1 of this exhibit and should be submitted no later than 3 months prior to the expected full disbursement of obligated funds, to allow time for processing the request. The number of replacement units may not exceed the number of units that are expiring. Once replacement units have been requested, additional units may not be requested until Form FmHA or its successor agency under Public Law 103-354 1944-51, “Multiple Family Housing Obligation-Fund Analysis,” is received obligating the replacement units. Form FmHA or its successor agency under Public Law 103-354 1944-51 requesting the additional units must be coded sequentially as required in paragraph V C 5 of this exhibit.

3The Servicing Official will review the budget, exhibit A-6 of subpart E of part 1994 of this chapter, Form FmHA or its successor agency under Public Law 103-354 1944-29, and Form FmHA or its successor agency under Public Law 103-354 1944-25 submitted by the borrower to assure that the items are complete and accurate. The Servicing Official will complete Form FmHA or its successor agency under Public Law 103-354 1944-25 and submit all data provided by the borrower to the State Director with appropriate comments and recommendations.

BProjects to be funded.

1Applicants requesting funding for new projects who are planning to utilize the RA program, should submit a completed Form FmHA or its successor agency under Public Law 103-354 1944-25 to the Servicing Official when submitting a preapplication or application for funding.

2The number of units of RA requested should be based on the market data for the area, the proposed rental rates as reflected in a budget for the project, and the income levels of the prospective tenants.

CState Director action on requests for RA. Only the State Director or delegated members of the State Office staff may approve or disapprove RA requests.

1Approval actions. When the State Director determines that RA can be obligated or transferred, part III of Form FmHA or its successor agency under Public Law 103-354 1944-51 for obligation, or Form FmHA or its successor agency under Public Law 103-354 1944-55, “Multiple Family Housing Transfer of Rental Assistance,” for transfers, will be prepared and distributed according to the Forms Manual Insert (FMI). Form FmHA or its successor agency under Public Law 103-354 1944-27, “Rental Assistance Agreement,” will not be executed or amended until the obligation or transfer is verified by the Finance Office. The State Office will verify the obligation or transfer via the computer terminal on the day following the request.

2Completing RA agreements. When the State Director verifies that RA units have been obligated or transferred by the Finance Office, the State Director will forward a copy of either Form FmHA or its successor agency under Public Law 103-354 1944-51 or Form FmHA or its successor agency under Public Law 103-354 1944-55 to the Servicing Official. The Servicing Official will complete Form FmHA or its successor agency under Public Law 103-354 1944-27, and attach the appropriate copies of Form FmHA or its successor agency under Public Law 103-354 1944-51 or Form FmHA or its successor agency under Public Law 103-354 1944-55 according to the FMI.

aInitial RA agreements. The Servicing Official will prepare the original and two copies of Form FmHA or its successor agency under Public Law 103-354 1944-27. When the project does not have a Form FmHA or its successor agency under Public Law 103-354 1944-7 in effect, the Servicing Official will prepare an original and three copies. The Servicing Official and the borrower will then execute the originals and all copies of Form FmHA or its successor agency under Public Law 103-354 1944-27 and Form FmHA or its successor agency under Public Law 103-354 1944-7. The forms will be distributed according to their FMIs.

bReplacement or modified RA agreements. When a Form FmHA or its successor agency under Public Law 103-354 444-27 initiated prior to May 1, 1985, is replaced or modified, a new Form FmHA or its successor agency under Public Law 103-354 1944-27 will be prepared and distributed according to the FMI. For every replacement or modification on or after May 1, 1985, the original and all copies of the affected RA agreement will be noted, assembled and distributed by the Servicing Official according to the FMI.

3Modification of an existing RA agreement. After any request for a change in the amount of RA has been obligated, a copy of Form FmHA or its successor agency under Public Law 103-354 1944-51 or Form FmHA or its successor agency under Public Law 103-354 1944-55 will be attached to Form FmHA or its successor agency under Public Law 103-354 1944-27 and distributed according to the FMI. A new FmHA or its successor agency under Public Law 103-354 1944-7 is not required.

4Denial of RA Request.

aIf RA funds are available but cannot be provided due to a determination of ineligibility, the State Director will inform the borrower, in writing, of the reasons. The borrower will be given appeal rights in accordance with subpart B of part 1900 of this chapter in such cases. When RA funds are not available from the State's allocation or the National Office Reserve the decision will be considered nonappealable, however, the decision is still reviewable, under subpart B of part 1900 of this chapter.

bShould RA not be available for lack of appropriation to replace an expiring RA obligation, the State Director will advise the borrower to notify tenants of the increase to their contribution to rent following the notification requirements of exhibit C of this subpart. Tenants who cannot afford the increased rent shall be given the opportunity to quit the lease and vacate the project without penalty.

5RA obligation numbers.

aEach RA obligation will be assigned a six digit RA obligation number by the Approving Official as follows:

(1) First two digits—Fiscal year (FY) in which the funds were obligated (i.e., 85, 86, etc).

(2) Second two digits—Numbers in sequential order for each fiscal year starting with 01 (i.e. 93-01, 93-02, 94-01, 94-02).

(3) Third two digits—All obligations will be coded 00.

bRA obligation obligated before FY 1985 will be coded as follows:

(1) First two digits—FY initial obligation was made on the project (i.e., 78, 79, 80, etc.)

(2) Second two digits—Relate to the pre-Automated Multi-housing Accounting System conversion loan number to which the RA obligation was processed.

(3) Third two digits—Indicate the number of modifications plus 1. (Form FmHA or its successor agency under Public Law 103-354 1944-27 with two modifications on September 30, 1984, will be designated “03.”)

cThe Finance Office will track RA obligations and undisbursed balances by number.

VITerms of the RA Agreement.

AEffective date. Each Form FmHA or its successor agency under Public Law 103-354 1944-27 will be effective the first day of the month in which it is executed. If assistance is granted to a project under an appeal according to paragraph XVI of this exhibit, the effective date will be retroactive to the first day of the month in which the assistance was denied, provided the borrower agrees to make any appropriate refunds to tenants who would have been entitled to RA during the retroactive period.

BTerm.

1Twenty-year RA agreement. Twenty-year agreements were authorized during the initial years of the RA program through FY 1982. Twenty-year agreements were restricted to new projects or modifications of existing 20-year agreements. The agreement is effective for 20-years from the effective date of the agreement. This agreement may be modified or terminated in accordance with the terms of the RA agreement. The agreement will expire when the funds obligated for the RA units described in section 1 of Form FmHA or its successor agency under Public Law 103-354 1944-27 are fully disbursed. This can be any time before or after the end of the 20-year term. Upon expiration of the agreement, a replacement agreement may be executed. If a replacement agreement is considered, it will be for a 5-year period.

2Five-year RA agreement. Five-year agreements may be used for operational projects, or for new projects when 20-year units are not available. The agreement shall be effective for 5 years from the effective date of the agreement. This 5-year agreement may be modified or terminated in accordance with the terms stated on Form FmHA or its successor agency under Public Law 103-354 1944-27.

The agreement will expire when the funds obligated for the RA units described in section 1 of Form FmHA or its successor agency under Public Law 103-354 1944-27 are fully disbursed. This can be any time before or after the end of the 5-year period.

3Modification of RA agreements. Forms FmHA or its successor agency under Public Law 103-354 1944-27 may be modified:

aTo add or subtract RA units assigned to the project through obligation, through transfer from another RA obligation, or as an incentive to avert prepayment.

bTo reinstate a suspended RA obligation(s) to a new borrower in the same project after a voluntary conveyance or a foreclosure and a credit sale within the Multiple Family Housing (MFH) program; or

cTo transfer a suspended RA obligation(s) to a new borrower and a different project after liquidation of the project assets or after the loan is paid in full.

4Amendment of RA agreements.

aAny existing RA obligation executed prior to February 15, 1983, which will have a remaining obligation balance at the end of the 5-year or 20-year expiration date stated in section 9, “Term of the Agreement,” may be modified by the use of Form FmHA or its successor agency under Public Law 103-354 444-27A, “Amendment to Rental Assistance Agreement.” The amended agreement will expire when the obligated funds are fully disbursed.

bAny existing RA agreement on earlier Form FmHA or its successor agency under Public Law 103-354 444-27 or exhibit D-2 (of now obsolete FmHA or its successor agency under Public Law 103-354 Instruction 444.5) containing an occupancy standard may be amended by mutual consent of the borrower and FmHA or its successor agency under Public Law 103-354 when a new occupancy policy for the project is approved according to paragraph VI D 2 of exhibit B of this subpart. To amend the form:

(1) Delete section 5 of the original and the borrower's copy and have the deletion dated and initialed by the appropriate FmHA or its successor agency under Public Law 103-354 official and the person(s) authorized to sign for the borrower.

(2) Type the following statement on the reverse of the original agreement and the borrower's copy and have the statement dated and initialed by the appropriate FmHA or its successor agency under Public Law 103-354 official and the person(s) authorized to sign for the borrower. “Amended (date) ___ by authority of paragraphs VI B 4 of exhibit E and VI D 2 a of exhibit B of subpart C of part 1930, chapter XVIII, title 7, Code of Federal Regulations.”

5Replacement RA obligations. Replacement RA obligation(s) for either 5-year or 20-year obligations will be for a 5-year period. All requirements in paragraphs VI B 2 and 3 of this exhibit apply. Expiring RA obligations and replacement RA obligations may run concurrently for a period of 30-50 days so any undisbursed obligation balance on the expiring RA agreement can be liquidated.

VIIRecordkeeping Responsibilities.

AThe Finance Office (FO) will track the use of RA obligation and ensure that RA obligation is not disbursed or credited to a borrower's account in excess of the RA obligation. Quarterly and annually, the FO will provide the Servicing Official with an RA payment and obligation status report for each project. The annual version of this report will be filed in position 2 of the project case file and maintained indefinitely.

BThe Servicing Official will notify the borrower to apply for replacement RA obligation when the RA undisbursed balance reaches a level sufficient to cover approximately 6 months of RA requests. This figure will be based on the project's average monthly request for RA.

VIIIResponsibilities of Borrower in Administering the RA Program.

The borrower and management agent for each project receiving RA should fully understand the responsibilities and requirements of carrying out the program. The following guidelines will be followed:

ARA payments will not be made directly to eligible tenants receiving RA except as specified in paragraph IX A of this exhibit. The borrower will maintain an accurate accounting of each tenant's utility allowance and payments made to tenants. All other RA payments will be recorded as a credit to the tenant's monthly rental payment.

BThe borrower must submit Form FmHA or its successor agency under Public Law 103-354 1944-8 for each tenant as required in paragraph VII F of exhibit B of this subpart.

CThe incomes reported by the tenants must be verified by the borrower in accordance with paragraph VII of exhibit B of this subpart.

DBorrowers utilizing RA must comply with § 1930.122(b)(1) of this subpart. RA will not be approved for a project until the operating budget has been approved by the FmHA or its successor agency under Public Law 103-354 State Office or the Servicing Official. Servicing Officials, with assistance from the State Office, must closely supervise and assist borrowers in complying with all accounting and management requirements.

EA borrower participating in the RA program must have an FmHA or its successor agency under Public Law 103-354 approved lease with the assisted household. All leases must comply with the provisions of paragraph VIII of exhibit B of this subpart.

FThe borrower will be responsible to FmHA or its successor agency under Public Law 103-354 for any errors made in the administration of the RA program which are made by the borrower or the borrower's authorized management agent. Errors in computation or other unauthorized use of RA will require, at a minimum, the repayment of any incorrectly advanced RA funds. If the error or unauthorized use of RA appears to be deliberate or intentional, the State Director will refer the case to the Office of Inspector General according to FmHA or its successor agency under Public Law 103-354 Instruction 2012-B (available in any FmHA or its successor agency under Public Law 103-354 office).

IXHandling Utility Allowances.

APayment of utilities.

1When the tenant is billed directly for utilities, rent paid by the tenant receiving RA will be the difference between the established utility allowance and the portion of income cited in paragraphs II A 2 a, b, or c of this exhibit.

2When utilities are paid by the household receiving RA and the portion of income cited in paragraphs II A 2 a, b, or c of this exhibit is less than the allowance for utilities, the borrower will pay the household the difference between the utility allowance and one of those limits of the household's adjusted monthly income.

3In a project where the owner pays all utilities, the tenant rent will be the portion of income cited in paragraphs A 2 a, b, or c of this exhibit up to the approved rent for the rental unit being occupied.

BDetermining the allowance. The utility allowance will be determined and recorded by the use of exhibit A-6 of subpart E of part 1944 of this chapter.

CChanges in allowances. The utility allowance should be reviewed annually and adjusted if there are substantial changes in utility and public service rates. Allowances will be adjusted on an annual basis if necessary when the owner submits a new budget for approval. Changes in utility allowance which will result in changed rent paid by tenants will be processed according to exhibit C of this subpart.

XMethod of Payment of RA to Borrower

ARegular monthly RA payments.

1Borrower responsibilities.

aAny RA due the borrower will be deducted from the balance of scheduled loan payments, any delinquent payments, and other charges due on Form FmHA or its successor agency under Public Law 103-354 1944-29 and the remaining balance must be submitted to the Servicing Office by check. If the RA due the borrower exceeds the balance of scheduled loan payments, delinquent payments and other charges, no additional payment is due from the borrower and an RA check for the excess will be issued by the FO.

bEach month the borrower must forward to the Servicing Official a Form FmHA or its successor agency under Public Law 103-354 1944-29. Any new Forms FmHA or its successor agency under Public Law 103-354 1944-8 must be submitted to the Servicing Office as required in exhibit B of this subpart. Both forms must be prepared for each project according to the instruction attached to the respective forms.

2Servicing Official responsibilities.

aWhen new Forms FmHA or its successor agency under Public Law 103-354 1944-8 are received, the Servicing Official will immediately date stamp each form with the receival date, review each Form FmHA or its successor agency under Public Law 103-354 1944-8 and verify that the information contained on the form is complete and correctly computed based on information contained in the form.

bWhen a Form FmHA or its successor agency under Public Law 103-354 1944-29 is received, the Servicing Official will:

(1) Date stamp each form FmHA or its successor agency under Public Law 103-354 1944-29, and review the form and assure that entries are supported by the current form FmHA or its successor agency under Public Law 103-354 1944-8.

(2) Enter the payment data via field office terminals as required in exhibit A to subpart K of part 1951 of this chapter (available in any FmHA or its successor agency under Public Law 103-354 office).

cThe Servicing Official should verify the accuracy of the borrower's servicing address shown on the FO record. When the address shown is incorrect, corrections must be made on AMAS screen M5A “Record Borrower/Project Data” via a field computer terminal.

BWhen a project account is delinquent, the Servicing Official may agree to release a portion of the monthly RA for project operation according to provisions authorized in a servicing plan developed in accordance with exhibit F of subpart B of part 1965 of this chapter (available in any FmHA or its successor agency under Public Law 103-354 Office).

CAn RA payment request must be based on actual occupancy as of the first day of the month.

XIAssigning RA to tenants

ANew project. Applications for occupancy should be accepted during the construction phase of the project, after the preconstruction conference has been held, and placed on a waiting list. During initial rent-up period, the following priorities will apply:

1Until all the RA units have been assigned, a number of apartment units in the project equal to the number of RA units will be initially reserved for eligible tenants as defined in paragraph II A of this exhibit who qualify for RA, even if there are applications on other lists that applied earlier. Applications qualifying for RA will be considered according to the priority established by paragraph XI B of this exhibit, by passing those applicants on the waiting list whose income is above the low-income limits for the area. The remaining units equal to the number of units that will not be subsidized with RA can be rented simultaneously to other applicants.

2If a substantial number of apartment units reserved to be used with RA units remain vacant after initial rent-up and the borrower could rent those units to applicants not eligible for RA, the borrower may request a transfer of unused RA units in accordance with paragraph XV B 5 of this exhibit. However, applicants not eligible for RA cannot be selected to occupy units initially reserved to be used with RA until the unused RA units are transferred.

3If there are still vacant units, those applicants by-passed because they did not qualify for RA will be considered for occupancy on a first-come, first-served basis.

BOperational RRH and RCH projects. To determine priority for assigning an available RA unit in an operational project, the latest Form FmHA or its successor agency under Public Law 103-354 1944-29 for the project must be updated as of the date the unit is available, assuring that columns 3 through 9 of part II are current and accurate.

1First priority for assigning RA must always be given to eligible very low-income households in the following order:

aEligible very low-income tenants paying the highest percentage of adjusted annual income for approved shelter costs.

bEligible very low-income applicants from the project waiting list according to the order provided in paragraph VI H of exhibit B of this subpart. No eligible tenant household in the project may be required to move from the project to allow an applicant on the waiting list who is eligible for RA to move in.

2Second priority for assigning RA will be given to eligible households with low-income in the following order.

aEligible low-income tenants in the project paying the higher percentage of adjusted annual income for approved shelter cost.

bEligible low-income applicants from the project waiting list. Low-income applicants will be selected according to paragraph VI H of exhibit B of this subpart, provided the borrower has satisfied the requirements of paragraph XI C of this exhibit.

3Third priority for RA will be given to occupancy ineligible tenants as described in paragraph VI D 7 b of exhibit B of this subpart living in the project.

4Eligible tenants receiving the benefits of RA may continue receiving such benefits as long as they remain eligible for RA, as the RA calculation formula shows a moderate income tenant that was initially eligible for RA as a very low- and/or low-income tenant who still needs RA and there is an RA agreement in effect.

CLimits on low-income RRH and RCH applicants who may receive occupancy and RA:

1When no more very low-income applicants are on the waiting list and RA is available, eligible low-income applicants may obtain occupancy and receive RA provided that:

aFor projects available for initial occupancy prior to November 30, 1983, no more when 25 percent of the vacant units receiving RA may become occupied by low-income tenants other than very low-income tenants.

bFor projects available for initial occupancy on or after November 30, 1983, no more than 5 percent of the vacant units receiving RA may become occupied by low-income tenants other than very low-income tenants.

2The borrower may rent units and provide RA to other than very low-income applicants/tenants in excess of the percentage in paragraph XI C 1 a and b of this exhibit respectively, only when there are no more very low-income applicants or tenants available in the market area. The borrower must have documentation in its file and available to FmHA or its successor agency under Public Law 103-354 for its review to show the efforts made, and the facts used to determine that there are currently no more very low-income applicants in the market area.

DOperational LH projects: Tenants who meet the definitional requirements of domestic farm laborers found at § 1944.153 of subpart D of part 1944 of this chapter shall be assigned RA in the following priority order within the subcategories of priority occupancy established by that subpart:

1Very low-income.

2Low-income.

EAssigning RA other than the first of the month:

1When a tenant receiving RA vacates before the end of the month, the RA unit should be immediately reassigned to another tenant or an applicant using the priorities given in paragraph XI B of this exhibit.

2When RA is assigned to an applicant and the applicant initially enters the project on a day other than the first of the month, the applicant's tenant contribution for housing costs will be prorated for the remaining portion of the month the same as if the tenant was receiving RA. [Example: Basic rent of $200 and the tenants monthly contribution with RA would be $120, the prorate amount for 1/2 month would be $60.]

3When RA is assigned to a tenant other than the first of the month, no adjustment to their tenant contribution on Form FmHA or its successor agency under Public Law 103-354 1944-29 for that month will be made. The borrower will begin to receive reimbursement of RA for the tenant as of the first day of the next month.

4No adjustment will be made on Form FmHA or its successor agency under Public Law 103-354 1944-29 to request additional RA payment or to refund any excess RA payment or overage for the previous month when RA is reassigned other than the first of the month.

XIIRA assigned to wrong household: When the tenant has correctly reported income and household size, but RA was assigned to a household in error, that tenant's RA benefit should be canceled and reassigned. Incidents involving incorrect reporting are addressed in subpart N of part 1951 of this chapter.

ABefore the borrower notifies the tenant, the borrower or management agent shall review the case with the Servicing Official. If the Servicing Official verifies that an error has been made based on information available at the time the unit was assigned, the tenant will be given 30 days written notice that the unit was assigned in error and that the RA benefit will be canceled effective on the next monthly rental payment due date after the end of the 30-day notice period. The tenant will also be notified in writing that:

1The tenant has the right to cancel the lease based on the error made by the borrower and the loss of benefit to the tenant.

2The RA granted in error will not be recaptured from the tenant.

3The tenant may meet with management to discuss the cancellation and the facts on which the decision was based. If the facts are accurate and the tenant cannot produce further evidence proving eligibility for RA, there will be no appeal from the decision. If the tenant feels there is justification for further review, the borrower must give the tenant appeal rights under subpart L of part 1944 of this chapter.

BReassigning RA. The RA unit will be reassigned to the next eligible household, based on Form FmHA or its successor agency under Public Law 103-354 1944-29 from which the original priority was established, when the unit was erroneously assigned. The RA will not be retroactive unless the reassignment was based on an appeal by the tenant. Retroactive RA may not exceed the project's remaining RA obligation balance.

XIIIRA payment cancellation: When an RA check must be canceled, the following procedure will be followed:

AReturn of the original RA U.S. Treasury Check: The Servicing Office will prepare Form FmHA or its successor agency under Public Law 103-354 1944-53, “Multiply Family Housing Cancellation of U.S. Treasury Check and/or Obligation” as specified in the FMI and mail it to the MFH unit in the FO.

BReturn of all or a portion of the monthly RA payment or refund of RA previously advanced: A check from the borrower made payable to FmHA or its successor agency under Public Law 103-354 will be submitted to the MFH unit in the FO on Form FmHA or its successor agency under Public Law 103-354 1944-53, completed according to the FMI.

XIVTerminating existing RA agreements obligated in prior and/or current FYs.

AWhen a project's obligated funds are fully disbursed under any given RA obligation number, RA will be automatically terminated by the FO and no further RA requests will process against the RA obligation number. The Servicing Official must monitor these balances through field office terminals and AMAS Report No. 513-C. The Servicing Office will modify Form FmHA or its successor agency under Public Law 103-354 1944-27 according to the FMI to indicate that a termination has occurred. The Servicing Official will notify the borrower in writing that the obligation under the RA obligation number has expired and the RA obligation number must be stricken from the agreement.

1For all RA obligations before FY 1985. RA is considered fully disbursed by the FO when all RA funds obligated before FY 1985 are disbursed.

2For all RA obligations after FY 1984. RA is considered fully disbursed by the FO when all RA funds obligated in a particular FY are disbursed. This includes RA transferred from a different MFH project.

3When a Form FmHA or its successor agency under Public Law 103-354 1944-27 consists of several different obligations (Form FmHA or its successor agency under Public Law 103-354 1944-51, part III, or Form FmHA or its successor agency under Public Law 103-354 1944-55) identified by different RA obligation numbers, and the obligations will not be fully disbursed at the same time, only those RA obligation numbers with fully disbursed obligation will be terminated.

BPrior to full disbursement of obligated funds:

1Prior FY obligations. Prior FY obligations will not be terminated. They will be suspended by the State Director using procedures in paragraph XV of this exhibit.

2Current FY obligations. The State Director is authorized to terminate RA obligation prior to the disbursement of obligated funds if the funds were obligated during the current FY. The undisbursed funds for the RA obligation will be returned to the current FY obligation authority.

XVSuspending or transferring existing RA.

ARA may be suspended or transferred according to the requirements for each situation described in paragraph XV B of this exhibit and the following:

1Suspension.

aThe State Director may approve a suspension of a project's RA agreement and obligation as a result of the servicing actions described in paragraphs XV B 2, 3, and 4 of this exhibit. The State Director will maintain records and control of the suspended RA.

bThe State Director or Servicing Office will notify the borrower in writing, stating the reason(s) the RA is suspended.

cThe Servicing Office will put a suspend code on the account. This is done on the M5A “Record Borrower/Project Data” screen in AMAS using Suspend Code 7. After suspension, only RA payments described in paragraph XV B 4 of this exhibit will be processed by the Servicing Office.

dThe State Director may approve reinstatement of the RA to the same borrower in the same project. After approval, the Servicing Office will remove the suspend code from the project using the M5A screen.

eThe State Director may reinstate the RA to the same borrower in the same project by removing the suspend code from the M5A screen through field office terminals.

2Transfer.

aOnly the State Director may approve an RA transfer.

bRA may be transferred to any borrower with an RA eligible project according to the priorities established by this exhibit or the National Office.

cAMAS will determine the per unit value of the RA obligation being transferred by dividing the undisbursed balance of the RA obligation on the date the transfer is processed by the number of RA units in the agreement. The number of units being transferred times the per unit value equals the total amount transferred. After the transfer processes the State Director should enter the dollar amount of the transfer in the Remarks area of Form FmHA or its successor agency under Public Law 103-354 1944-55.

dRA units identified by different RA obligation numbers may be transferred. New RA obligation numbers should be assigned according to the FMI for Form FmHA or its successor agency under Public Law 103-354 1944-55.

eAll or any portion of the units in an RA Agreement with an undisbursed balance may be transferred by the State Director.

fWhen the State Director approves an RA transfer, Form FmHA or its successor agency under Public Law 103-354 1944-55 completed according to the FMI, will be used to notify the FO except as noted in paragraph XV B 1 of this exhibit.

gForm FmHA or its successor agency under Public Law 103-354 1944-27, with Form FmHA or its successor agency under Public Law 103-354 1944-55 attached, will be completed according to the FMI for each transferee. The transferee may use the transferred units effective the first day of the month in which the transfer is approved.

hThe transferor's Form FmHA or its successor agency under Public Law 103-354 1944-27 will be modified by attaching a copy of Form FmHA or its successor agency under Public Law 103-354 1944-55 according to the FMI to indicate that a portion of the agreement has been transferred. When all the RA units on a RA agreement have been transferred, the transferor's present agreement will be so documented.

BRA may be suspended and/or transferred in the following situations according to the following directions:

1RA transfer accompanying a project transfer. When a project is transferred to an eligible borrower, the transferee may assume the transferor's liquidated RA obligation(s). Form FmHA or its successor agency under Public Law 103-354 1944-55 will be forwarded to the FO attached to Form FmHA or its successor agency under Public Law 103-354 1965-10, “Information on Assumption of Multiple Family Housing Loans,” as required in § 1965.65(c)(11) of subpart B of part 1965 of this chapter.

2Suspension and transfer after a voluntary conveyance or foreclosure sale. When a project with RA is voluntarily conveyed to the Government or acquired by foreclosure sale, the RA obligation will be automatically suspended under the borrower's name when the FO processes Form FmHA or its successor agency under Public Law 103-354 1965-19, “Multiple Family Housing Advice of Mortgaged Real Estate Acquired.” These units will be held in suspense until the final disposition of the acquired property has been determined. During the inventory period tenants will pay 30 percent of their income for rent. Tenants entitled to reimbursement for utilities will be paid from project income.

3Suspension and transfer after a liquidation or prepayment.

aWhen a project with RA is liquidated through sale outside of the program or the loan is paid in full, the RA will be suspended and, subsequently, transferred to a different FmHA or its successor agency under Public Law 103-354 financed project in accordance with paragraph XV B 3 b of this exhibit, if applicable, or if not, to another project at the State Director's discretion.

bWhen a tenant receiving RA is, or will be, displaced from an FmHA or its successor agency under Public Law 103-354 project due to prepayment or liquidation, the RA the tenant was receiving will be transferred, or suspended and transferred, to any other FmHA or its successor agency under Public Law 103-354 project, regardless of location, to which the displaced tenant moves. That tenant will be given first priority for a unit of RA, regardless of other priorities for the RA, if all the following conditions are met:

(1) The borrower is eligible to receive and administer RA.

(2) The tenant is eligible to occupy the project and to receive RA.

(3) The tenant had taken all the following steps to insure eligibility to receive priority for the unit of RA:

(i) Had been placed on at least one waiting list for a FmHA or its successor agency under Public Law 103-354 project with a Letter of Priority Entitlement.

(ii) Moved to the project as soon as the name was reached on a waiting list, even if it meant temporarily occupying an ineligible unit. The ineligiible unit may not differ from the one for which the tenant is eligible by more than one bedroom.

(iii) Moved to an eligible unit as soon as one was available.

(4) The RA has not previously been transferred for the tenant's current displacement.

cProcedures for transferring RA and modifying RA agreements outlined in paragraphs V C and XV A 2 of this exhibit will be followed, but the receiving project borrower need not submit Form FmHA or its successor agency under Public Law 103-354 1944-25 if the RA was received as a result of the occupancy of a displaced tenant.

4Suspension and transfer or reinstatement due to a servicing action.

aWhen servicing a project's account according to § 1965.85 of subpart B of part 1965 of this chapter and the account has been accelerated:

(1) The RA will be suspended to the extent that no payments will be credited to the project's account. Interest credit will be credited to the project's account until the appeal period for the acceleration has expired. After the expiration of the appeal period, if it is determined that foreclosure will proceed, the interest credit will be cancelled as of the last day of the month in which the appeal period expired. RA will be automatically suspended by the interest credit cancellation.

(2) That portion of the monthly RA not needed to pay the project monthly installment and other charges as specified in paragraph VIII of exhibit A to subpart K of part 1951 of this chapter (available in any FmHA or its successor agency under Public Law 103-354 office) may be processed and returned to the project operating account to maintain project operation.

(3) RA agreements expiring during the acceleration and appeal process may be renewed in order to continue payment of RA as described in paragraph X V B 4 a (2) of this exhibit.

bAfter final disposition of the acceleration, expiration of the appeal and redemption period of the defaulting borrower the RA will be:

(1) Transferred with a credit sale. If the project is sold through a credit sale to an eligible borrower within the program, the suspended RA should be transferred from the previous borrower's case number and project number to the new case number and project number. Form FmHA or its successor agency under Public Law 103-354 1944-55 will be attached to Form FmHA or its successor agency under Public Law 103-354 1965-20 “Multiple Family Housing Advice of Mortgaged Real Estate Sold,” when it is sent to the FO, or

(2) Transferred to a different project when the defaulting project is sold outside the program. When the suspended RA is not needed for the project after the credit sale or other disposition of the acquired property, the State Director should transfer the RA to a different project or projects as provided in paragraph XV A 2 of this exhibit, or

(3) Reinstated to the same project when the defaults are corrected and the State Director reinstates the borrower's account.

cThe borrower will be apprised of the appeal rights available under subpart B of part 1900 of this chapter upon notification of the pending suspension. The suspension will not be effective until these appeal rights have been exhausted.

5Transfer of unused RA. When RA is unused after initial rent-up and not needed because of a lack of eligible potential tenants in the area, all or a portion of it may be transferred when the State Director determines that the following conditions have been met:

aThe borrower describes the efforts made to market the subsidized units and further demonstrates that:

(1) The market survey indicated there should be a significant need for rental housing by households in the market area that would have required RA for occupancy, but all or a substantial portion of the RA units available remain unused after a 2-year period since initial availability. The borrower must:

(i) Document the efforts made to market the project to RA eligible applicants;

(ii) Demonstrate that the waiting list does not contain RA eligible applicants and the project is not occupied by RA eligible tenants who do not receive RA; and

(iii) Certify that project management has not used a policy of discouraging RA eligible households from applying for or obtaining tenancy in the project.

(2) Rent increases anticipated for the following 2 years will not prompt a request for RA according to the provision of exhibit C of this subpart.

bThe Servicing Official recommends the RA transfer after reviewing documentation submitted by the borrower and finding that the applicable conditions of paragraph XV B 5 of this exhibit have been met.

cIf, after the end of the initial year of a RA agreement, the borrower has not used a portion of the RA units for any ensuing consecutive 12-month period, the State Director may transfer the number of unused units, minus at least one, to another project without the borrower's request. If the remaining unit(s) remains unused after an additional 12-month period, the State Director may authorize its transfer to another project. This would apply only if the current agreement is on form FmHA or its successor agency under Public Law 103-354 1944-27 and when:

(1) The borrower has made the efforts described in paragraphs XV B 5a (1)(i), (ii), and (iii) of this exhibit to market the project to tenants needing RA, or if the borrower's failure to use RA has resulted in an acceleration of the loan account.

(2) The Servicing Official has reviewed the project occupancy list, waiting list, past RA usage, and any other data available and verified that there is no apparent RA needs in the project.

(3) The State Director has notified the borrower at least 30 days in advance of FmHA or its successor agency under Public Law 103-354's intent to transfer the RA units and has given the borrower appropriate appeal rights in accordance with subpart B of part 1900 of this chapter.

(4) If the borrower appeals the decision, the appeal is resolved in accordance with subpart B of part 1900 of this chapter before any transfer action is taken.

(5) The transfer will be completed in accordance with paragraph XV A 2 of this exhibit.

6Transfer due to an unclosable loan. When RA will be unused because the loan to which it was obligated will not be closed, or the RA agreement is not signed, the RA obligation may not be transferred except as provided under the conditions of § 1944.235 (b) of subpart E of part 1944 of this chapter. However, if this situation occurs during the same FY of obligation, the obligation should be cancelled and reobligated immediately using current authorities. Obligations from prior FY must be canceled and will be lost unless the conditions of § 1944.235 (b) of subpart E of part 1944 of this chapter exist.

XVIRights for appeal if RA is not granted or is cancelled by FmHA or its successor agency under Public Law 103-354.

ABorrowers who have requested RA in writing and are denied such assistance due to a determination of ineligibility by FmHA or its successor agency under Public Law 103-354, or when RA is cancelled, will be notified in writing of the specific reasons why they have been denied RA and will be notified of their appeal rights in accordance with subpart B of part 1900 of this chapter.

BIf at any time a borrower or a household is granted RA under an appeal, the borrower or household will receive the next available RA unit.

CBorrower denial of RA to tenants will be handled according to subpart L of part 1944 of this chapter.

XVIIForms and exhibits. Exhibit A-6 to subpart E of part 1944 of this chapter and Form FmHA or its successor agency under Public Law 103-354 1944-7 are to be used in determining the amount of RA to be provided.