Exhibit I to Subpart C of Part 1930 - Rural Rental Housing Loans and the Housing and Urban Development Section 8 Rental Certificate and Rental Voucher Programs (Existing Units)

IGeneral. This exhibit contains the policies and procedures that will be followed by the Farmers Home Administration (FmHA) or its successor agency under Public Law 103-354 to permit the utilization of existing Section 515 Rural Rental Housing (RRH) units and the Department of Housing and Urban Development (HUD) tenant-based Section 8 Rental Certificate and Rental Voucher Programs.

IIApplicability. This exhibit is not applicable to units in Section 515/8 projects which use the project-based Section 8 new construction and substantial rehabilitation programs. Otherwise, FmHA or its successor agency under Public Law 103-354 RRH borrowers are authorized to utilize the procedure outlined in this exhibit and the HUD Section 8 Rental Certificate Program or the Rental Voucher Program for existing housing as outlined in HUD's regulations 24 CFR part 882 and 24 CFR part 887 (as amended) respectively. To promote the use of these programs with existing projects, the following action should be taken:

AServicing Officials should inform RRH borrowers operating in the area of their jurisdiction of the contents of this exhibit.

BThe HUD Section 8 program could benefit any eligible tenant in an RRH project who is paying more than 30 percent of its income for rent and utilities. Therefore, RRH borrowers should advise tenants who are paying more than 30 percent of their adjusted income for housing of the possibility of obtaining Section 8 housing assistance payments. Those tenants paying 50 percent or more of their adjusted income for housing have preference over those paying less. In the Rental Certificate Program, families generally pay 30 percent of their monthly adjusted income toward the rent and the total rent to the owner must be below a maximum amount. Section 8 Rental Certificate and Rental Voucher assistance is administered by local Public Housing Agencies (PHA) authorized by HUD to administer the program in the area. This Section 8 assistance can be used in the unit of the family's choice anywhere in the State where the issuing PHA is located, and in certain areas in adjacent States. Families must apply to the PHA and come to the top of its waiting list through normal PHA selection preferences.

CThe HUD Rental Voucher Program uses a “shopper's incentive.” If a unit rents for less than the payment standard established by the local PHA, the eligible family benefits by paying less than 30 percent of its monthly adjusted income toward rent and utilities, subject to a minimum rent calculation by the PHA. If a unit rents for more than the payment standard for the area (not the actual rent), the housing assistance payment is not increased, nor is the family told it must find another unit, as in the Rental Certificate Program. Instead, the family pays the entire difference between the rent and the rental voucher payment standard. The family may rent the unit if it is willing to pay more than 30 percent of its income toward rent. There is no maximum rent as in the Rental Certificate Program.

DIn Rural Cooperative Housing (RCH), cooperatives are considered rental housing in the Section 8 Rental Certificate and Rental Voucher programs. Wherever the word tenant appears in this exhibit, it shall also mean member; rent shall also mean occupancy charge; and lease shall also mean occupancy agreement.

IIIFmHA or its successor agency under Public Law 103-354 Policies Concerning Rental Rates and Payments.

AUnder the Section 8 Rental Certificate and Rental Voucher Programs, the PHA will pay a portion of the tenant's rent including utility allowance as described in paragraphs II B or C of this exhibit, whichever is appropriate. The contract rent to be established under either HUD program will be as follows:

1For borrowers with a 3 percent direct RRH loan and borrowers operating in accordance with interest credit Plan I, the contract rent will be the note rate rental rate for the units as determined by the current approved annual budget using a 3 percent amortization factor for principal and interest payments;

2For borrowers operating without interest credit, the contract rent will be the note rate rental rate for the unit as determined by the current approved annual budget using the amortization factor for the note rate of interest for principal and interest payments;

3For borrowers operating in accordance with interest credit Plan II, the contract rent:

aFor Rental Certificate participants will be the basic rental rate as determined by the current approved annual budget using a 1 percent interest amortization factor for principal and interest payments;

bFor Rental Voucher participants, the rent to owner must be the lesser of the note rate rent for the unit as approved by FmHA or its successor agency under Public Law 103-354 OR the payment standard approved by the PHA (but not less than basic rent approved by FmHA or its successor agency under Public Law 103-354).

(1) When basic rent is less than the PHA approved payment standard, the borrower will collect and remit the difference between the basic rent and payment standard to FmHA or its successor agency under Public Law 103-354 as overage to avoid double subsidy on behalf of the tenant.

(2) Should the PHA inadvertently pay the owner (borrower) more than the amount specified in the housing assistance contract between the PHA and the owner, the owner shall return the overpayment to the PHA as an excess payment

BThe method of calculation and transmittal of the scheduled payment to the Finance Office will be in accordance with paragraph IX of exhibit H of this subpart.

IVResponsibilities.

AFamily. A household family must apply to the PHA and be issued a Certificate of Family Participation or a Rental Voucher to obtain the appropriate housing assistance. Households receiving housing assistance under either program will be responsible for fulfilling all of their obligations under the Certificate of Family Participation or Rental Voucher issued to them by the PHA and under the lease with the owner. However, a lease violation is not necessarily a reason for terminating Section 8 assistance.

BOwner (FmHA or its successor agency under Public Law 103-354 borrower). Upon being presented a Certificate of Family Participation or a Rental Voucher by a family, an owner wishing to participate in the program shall sign a Request for Lease Approval (Form HUD 52517-A) which is then submitted to the PHA. After PHA approval the owner will execute a Housing Assistance Contract (Form HUD 52535-A) with the PHA and a lease with the tenant. Owners shall be responsible (and subject to review or audit by the PHA or HUD) for performing all of their obligations under the contract and lease.

CFmHA or its successor agency under Public Law 103-354.

1FmHA or its successor agency under Public Law 103-354, in accordance with existing regulations, will be responsible for normal loan servicing and supervision, including but not limited to:

aObtaining and reviewing all reports from the borrower in accordance with paragraph XIII C of exhibit B of this subpart.

bReview and approval of budgets and rental rates.

cCollection of required payments and review of the borrower's establishment and maintenance of required accounts.

2FmHA or its successor agency under Public Law 103-354 will not be responsible for the requirements and conditions of the contract entered into between the PHA and owner but will cooperate with HUD and the PHA to the extent possible to assure that the borrower carries out all obligations under the contract.

VSpecial Conditions.

AEligibility of family.

1The PHA will determine a household's eligibility before the Certificate of Family Participation or Rental Voucher is issued. To be eligible for either form of housing assistance, the household's income as determined by HUD generally may not exceed the very low-income limit, based on 50 percent of the median income for the area. The household's eligibility for housing assistance payments under the Rental Voucher program continues until the amount payable by the family equals or exceeds the payment standard or when the amount payable by the family equals or exceeds the rent to owner plus any applicable utility allowances. However, when these conditions are exceeded, the family may still be able to occupy a rental unit under the FmHA or its successor agency under Public Law 103-354 interest credit program if 30 percent of the family's adjusted gross income is greater than the lowest established rental rate for the unit. In both the Rental Certificate and Rental Voucher Programs, the housing assistance contract terminates when 1 year has elapsed since the last Housing Assistance Payment (HAP) to the owner.

2Form FmHA or its successor agency under Public Law 103-354 1944-8, “Tenant Certification,” will not be required for tenants who have obtained a Certificate of Family Participation or a Rental Voucher from the PHA. A copy of the Certificate of Family Participation or the Rental Voucher, however, needs to be provided to the FmHA or its successor agency under Public Law 103-354 Servicing Official.

3At admission, the tenant's adjusted household income must not exceed the maximum income limitations (initially in the case of RCH) as authorized by FmHA or its successor agency under Public Law 103-354 for the project.

BSecurity deposits. According to HUD regulations, the owner may require a household to pay a security deposit. For certificate participants the maximum amount will be the greater of the amount of one month's total tenant payment or $50. For voucher participants, the security deposit may not exceed the lesser of the limit established by the PHA or one month's rent to the owner. Under HUD regulations, if a certificate household vacates a unit and the security deposit is insufficient, the owner may claim reimbursement from the PHA in an amount not to exceed two month's contract rent. For voucher participants, the owner may claim up to one month's rent to owner for amounts owed under the lease. Neither program allows claims for reimbursement of unpaid rent for the period after the family moves from the unit.

CPayment for vacated units.

1 Rental Certificate Program. If a certificate family vacates the unit in violation of the provisions of the lease, the owner may receive the full housing assistance payment for the month in which the family vacates and then in the amount of 80 percent of the contract rent for a vacancy period not exceeding an additional month or the expiration or other termination of the lease, whichever comes first.

2Rental Voucher Program. If the voucher family moves from the unit, the owner shall promptly notify the PHA. The PHA shall make no additional housing assistance payment to the owner for any month after the month in which the family moves out. However, the owner may retain the housing assistance payment for the month in which the family moves.

DRecertification for families with either a Section 8 Rental Certificate or Rental Voucher.

1The PHA, not the FmHA or its successor agency under Public Law 103-354 borrower, must reexamine the income and family composition of all Rental Certificate and Rental Voucher families at least annually, and adjust the housing assistance payment made on behalf of the family to reflect any changes in the family's monthly adjusted income, size, or composition. Once a HAP contract expires, recertification responsibility reverts to the borrower and FmHA or its successor agency under Public Law 103-354 forms and income verification and certification requirements apply.

2All changes in family composition must be reported to the PHA.

3A family may request a redetermination of the housing assistance payment at any time, based on a change in the family's income, adjusted income, size, or composition.

4Whether reporting of increases of family income between annual recertifications is required is determined by the PHA. The PHA policy must be stated in its administrative plan.

ERent changes.

1When project rents in all units change.

aRental Certificate Program. Rents for tenants receiving rental certificate assistance under HUD Form 52535-A (Section 8 Existing Housing Assistance Payments Contract for Subsidized Units) may change after the beginning (day 1) of the HAP contract term for the initial leasing of the unit with Section 8 assistance. The amount of the contract rent adjusts automatically when the subsidized rent is changed. However, the adjustments are subject to rent reasonableness limitations which are determined by the PHA. Adjustments may not result in material differences between the rents charged for assisted and comparable unassisted units as determined by the PHA.

bRental Voucher Program. Rents for tenants receiving rental voucher assistance may not change until the end of the initial 12 months of the individual lease, even though all unit rents may have been changed in the meantime. The lease may provide that the owner may increase the tenant's rent any time AFTER the first anniversary of the lease, but the Owner must give the tenant and the PHA 60 days prior written notice of any increase before it takes place.

2When tenant household income, size, and composition change. The following items apply to both the Section 8 Rental Certificate and Rental Voucher Program.

aThe PHA must examine the income and family composition of all rental certificate and rental voucher families at least annually and adjust the housing assistance payment made on behalf of the family to reflect any changes in the family's income, size, or composition.

bAll changes in family composition must be reported to the PHA.

cA family may request a redetermination of the housing assistance payment at any time, based on a change in the family's income, size, or composition.

dWhether reporting of increases of family income between annual recertifications is required is determined by the PHA. The PHA policy must be stated in its administrative plan.

(1) Should household income INCREASE to where HUD assistance becomes zero, the HAP contract between borrower/owner and the PHA remains in effect for 12 more months. When 12 months of “zero” assistance occurs, the HAP contract automatically terminates. However, if during that year the family's income decreases to the level where subsidy is needed again, the PHA will resume subsidy payments under the HAP contract after notification by the family of the change.

(2) In both the Rental Certificate and Rental Voucher programs, the tenant's lease term runs concurrently with the Housing Assistance Contract until the tenant or owner terminates the lease or the PHA terminates the contract. In a situation where a tenant's income increases to where the tenant does not receive a subsidy for 12 months, the owner can offer the tenant a new lease for execution. If the tenant fails to execute the new lease after a reasonable time, the owner may terminate the tenant's occupancy.

FChanges in household size and composition.

1.An increase in household size that results in the occupied unit not meeting the PHA occupancy standards or housing quality standards (namely, overcrowding) requires the PHA to issue the household a new rental certificate or rental voucher for a larger unit. The PHA must provide assistance to the family in locating another unit. The PHA may not terminate the current contract unless the family has rejected with good cause the offer of a new unit.

2.If the OWNER fails to maintain the dwelling unit at acceptable housing quality standards, the PHA may, after unsuccessful efforts to correct the problem, terminate or abate the housing assistance payments, even though the household continues to occupy the unit.

3.A decrease in household size will not necessarily require the household to move. In the Rental Voucher Program, the household may rent a unit with greater number of bedrooms than indicated on the housing voucher and still receive housing assistance. In the Rental Certificate Program, the family may continue to receive assistance in the unit if the gross rent (contract rent plus utility allowance) is within the fair market rent for the smaller size unit appropriate for the size and composition of the family.

GLimitation of owner's participation in the two programs. HUD's regulations provide that assistance under Section 8 Certificates will not exceed 40 percent of the total number of units in the project; however, this limitation may be exceeded on a case-by-case basis for the purpose of relieving hardship of a particular household or households with the approval of the HUD field office. There is no corresponding limit under the HUD Rental Voucher program. The HUD limits shall not affect the number of rental assistance units the project receives through FmHA or its successor agency under Public Law 103-354.

HSpecial problems. Any problems on utilizing either the HUD Section 8 Certificate or the Rental Voucher program for existing RRH projects not covered by this exhibit should be referred to the National Office by the State Director.