§ 1944.232 - Rental Assistance (RA) from sources other than FmHA or its successor agency under Public Law 103-354.

RA from sources other than FmHA or its successor agency under Public Law 103-354 may be used in new or existing RRH projects upon National Office authorization. FmHA or its successor agency under Public Law 103-354 will consider authorizing such private RA (PRA) proposals which offer RA in the same general dollar amount and terms in which FmHA or its successor agency under Public Law 103-354 RA is calculated and granted. PRA proposals will be in the form of a memorandum of understanding (MOU) between the provider and FmHA or its successor agency under Public Law 103-354.

(a) Provisions of MOU. FmHA or its successor agency under Public Law 103-354 may consider entering into an MOU with other providers of RA such as State or local public entities, profit or nonprofit organizations, individuals, or other providers acceptable to FmHA or its successor agency under Public Law 103-354. The MOU will be executed between FmHA or its successor agency under Public Law 103-354 and the provider prior to the appropriate official issuing an AD-622 for new projects. At a minimum, the MOU must contain the following provisions:

(1) Reason for providing PRA and its intended purpose.

(2) The length of time PRA will be provided.

(3) Actions to be taken at the end of the PRA proposal to minimize impact on tenants losing PRA and avoid displacement.

(4) A copy of the proposed PRA agreement, which is the instrument of agreement involving the tenant, owner, and provider of assistance. FmHA or its successor agency under Public Law 103-354 will not be a party to the PRA agreement nor have any responsibilities under the agreement. The PRA agreement must state that:

(i) The payments should be paid directly to the tenants or a separate project operating account for this purpose. The tenants must be advised of the amount and source of the assistance through the lease or a supplement to the lease.

(ii) Sufficient funds will be set aside in a way that assures availability of PRA for the life of the PRA agreement, which must be for a minimum of 5 years. The method of supplying the funds must be clearly set forth and acceptable to FmHA or its successor agency under Public Law 103-354.

(b) Documentation. (1) Documentation must be provided that the PRA is needed in the market area.

(2) The provider must provide FmHA or its successor agency under Public Law 103-354 with reasonable assurances that tenants receiving the PRA will not be displaced when the PRA expires.

(3) In accordance with § 1944.215(w)(2)(ii) of this subpart, it must be demonstrated that for the term of the loan remaining after PRA is no longer available, an adequate rental market exists for the project without the assistance.

(4) For complexes with LIHTC, if the PRA term is less than the LIHTC compliance periods, the marketability of the PRA units must be further demonstrated by either:

(i) Demonstrating that there are sufficient households within the LIHTC income limits to support the units without rent overburden; or

(ii) The applicant's certification that the targeted percentage of LIHTC units (not the minimum set-aside option) does not include the PRA units, so that the units will be marketable to households in all FmHA or its successor agency under Public Law 103-354 income ranges.

(c) Review and recommendations. The documentation, the MOU, and the PRA agreement will be submitted to the servicing official for review. If acceptable, the servicing official will submit the proposal for similar review to the State Office and submission to the National Office. Proposals forwarded to the National Office will contain the recommendations of the District and State Director.