AHMA-NCN Touchstone / Newsletter November 2002

Novemerber, 2002 Newsletters

IG Tackles Overpayments
In an effort to reduce the estimated $1.7 billion in rental assistance overpayments, HUD's Inspector General is requesting more on-site monitoring in affordable housing properties. Closer monitoring of approximately 4 million households nationwide should also unearth $600 million in underpayments to deserving families, according to a report from the IG's office to Congress. The report speculated that it would take another two years of departmental efforts to implement monitoring and several more years after that to determine the effects on residents and HUD. The report requests onsite reviews of rental assistance on Section 8 properties, information to housing authorities on determining assistance and guidance on Section vouchers. HUD's success in financial management is weakened by a lack of integration between financial systems, including a database between the HUD general ledger and the FHA, according to the report. HUD initiatives to improve financial management have been hampered by budget problems, goal changes and delays in scheduling.

House Bill Will Undercut Vouchers
Affordable housing groups are quickly lobbying Congress on the dangers of changing the way renewal vouchers are calculated since the HUD appropriations bill passed out of a House committee. The House 2003 appropriations bill will adversely change the way renewal vouchers are calculated and cause funding problem for public housing agencies, according to statements from members of several affordable housing groups. After the bill passed the House committee, several housing groups including the Council of Large Public Housing Agencies, the National Leased Housing Association, and the Public Housing Authorities Directors Association began to survey their members for information to determine if the bill will cause inadequate funding situations for PHAs. At a time when operating costs are increasing, the House bill calls for the use of older renewal figures to determine the number of units leased, usually based on numbers that are at least two years old and not accounting for inflation. These older figures will cause problems with PHAs if operating costs increase. Although the bill creates a central reserve fund, affordable housing officials claim the fund will not cover increased expenses. Housing officials are speculating that the House bill, if passed as is and is incorporated into the final bill, will cause PHAs with funding problems to decide whether to increase rents or recall vouchers.

Commission On Elderly Issues Disagrees On Needs
A bipartisan commission on elderly issues has been unable to agree on the proposed needs of senior citizens in the 21st century in a report released last summer. The Commission on Affordable Housing and Health Facility Needs for Seniors in the 21st Century issued majority and minority reports in "A Quiet Crisis in America." Congress originally appointed the commission to study the needs for elderly housing and health facilities and to make policy recommendations that would improve housing and supportive services available to seniors. The first difference is that the majority report does not include suggestions for program funding while the minority report lists programs which should be more fully funded and emphasized programs for low-income elderly with the greatest need, such as $200 million for preservation of existing assisted housing and the replacement of a new unit for every assisted unit lost. The majority report mentioned concerns about available data and it's reliability, but went on to provide five basic recommendations: existing housing stock, rental and single ownership, should be preserved for aging in place; shelter and supportive services should be linked to promote aging in place; expansion of successful housing production, rental assistance; supportive housing programs, and home-and community-based services; reformation of existing federal financing programs through the Government Sponsored Enterprises and FHA to provide flexibility, increased production and coverage of health care and services in housing; research into new housing and service programs, models and demonstrations. Aging in place for homeowners was a concern in the majority report, while the minority emphasized government-assisted rental housing and cited the disparity of government support for homeownership compared to housing assistance for the poorest seniors. The minority report also recommended that Congress provide for housing production, preservation and increasing assisted and supportive housing for seniors by 60,000 units per year through HUD and Department of Health and Human Services programs. Aging in place support systems such as expanding Medicare to include long-term care and prescription drugs and Medicaid eligibility based on area median income were also minority suggestions. Information on the commission's finding is available online at www.seniorscommission.gov

Watch List Properties Financially Unstable
A study of 211 mark-to-market properties on HUD's "watch list" has found that 62 percent have a potential for financial risk and almost half do not have the funds to cover mortgage payments. Senators Paul Sarbanes (D-MD), Jack Reed (D-RI) and Wayne Allard (R-CO) requested the study from the General Accounting Office to evaluate oversight of watch list properties by HUD's Office of Multifamily Housing Assistance Restructuring. The GAO study assessed 211 properties placed on the watch-list by OMHAR because the properties had rents reduced under the mark-to-market program but did not have their mortgages restructured to avoid a situation where the property did not have sufficient cash flow to cover debt service and operating costs. Owners of 177 properties on the list had not gone through mortgage restructuring despite recommendations from OMHAR, according to the report. Three properties were ineligible for restructuring because of owner disqualification, and 31 were not financially viable for restructuring. Physical inspections of the properties found that 87 percent garnered satisfactory marks, although 41 percent had not been re-inspected after being placed on the list, mainly because HUD guidelines do not require another inspection for three years if the property is rated satisfactory. Case studies of six watch-list properties and the GAO report are available at www.gao.gov/new.items/d02953.pdf

HUD Notice 02-17 (August 2, 2002)
Renewal of Expiring PRACS Contracts
This notice announces the one-year renewal of expiring Project Rental Assistance Contracts for properties Under the Section 202 program, supportive housing for the elderly, and Section 811, supporting housing for persons with disabilities.

HUD Notice 02-20 (August 15, 2002)
Area Payment Standard Instructions for Vouchers
This notice announces how area exception payment standard amounts are determined and reviewed, reporting instructions for approved area exceptions, and provides an overview of changes specified in the housing choice voucher program.

HUD Notice 02-16 (Aug. 23, 2002)
Prepayment of 202/8 Direct Loans
This notice announces revisions for the prepayment of direct loans on Section 202 and 202/8 properties with inclusion of FHA mortgage insurance guidelines.

Federal Register FR-4679-N-04 (August 30, 2002)
Reduction in MF Mortgage Insurance Premiums
This notice announces the lowering of mortgage insurance premiums for certain FHA multifamily mortgage insurance programs whose commitments will be issued in fiscal year 2003, and republished others at the rate that was in effect in FY2002.

Directive Number 98-05 (September 3, 2002)
ADA Guidelines for Buildings and Facilities
This notice announces final accessibility guidelines issued by the Architectural and Transportation Barriers Compliance Board to be used as a basis for standards of new construction and alterations of recreational facilities under the Americans with Disabilities Act.

Federal Register FR-4672-F-02 (September 4, 2002)
Exception Payments to Offset Utilities
This notice announces the withdrawal of the rule that temporarily increased FMRs in areas affected by increased utility process and restores the regulatory language back to its original form.

PIH Notice 02-19 (September 30, 2002)
Extension of 99-7, Subordinate Financing
This notice announces the reinstatement of HUD Notice 99-07, which was previously extended in HUD Notice 01-9, and extends it until September 30, 2003.

PIH Notice 02-21 (October 2, 2002)
Processing of Vouchers for Relocation
This notice announces the submission and processing of public housing agency applications for housing choice vouchers for relocation or replacement housing related to demolition or disposition and plans for removal of public housing units, and supersedes PIH Notice 2001-20.

Federal Register FR-4679-N-05 (October 15, 2002)
Reduction of FHA Multifamily Insurance Premiums
This notice re-issues a notice published August 30, 2002, lowering the mortgage insurance premiums for certain FHA multifamily mortgage insurance programs.

IRS Revenue Ruling 2002-65 (October 28, 2002)
Section 236 RAP
This notice announces that Section 236 rental assistance and rent supplement payments are not considered grants under the low-income housing tax credit program and will not be subtracted from eligible basis. The ruling does not apply to Section 236 interest reduction payments.

PIH Notice 02-22 (October 29, 2002)
Screening & Eviction for Drug Abuse
This notice announces the final rule for screening and eviction for drug abuse and other criminal activity.

Appropriations Still Not Settled
Congress has had to pass three continuing resolutions to keep the government running since the end of the fiscal year and a lame duck session after the November 5 elections will be required. None of the thirteen appropriations bills had been passed as of September 30, and an extension for block grants funds to provide additional monies for Temporary Assistance to Need Families was incorporated into the continuing resolutions. Mid-term elections, homeland security, and a proposed war in Iraq have been blamed for the delay. A budget ceiling requested by the president has also made it difficult to finalize numbers for domestic spending bills and the HUD budget has historically not been as much of a priority as the Veteran's Administration or other agencies covered by the subcommittee's jurisdiction.

Although the Senate passed the HUD bill in July, the House appropriations subcommittee did not get a look at the bill October. Housing officials have pinned their hopes on the Senate version with more adequate funding for affordable housing issues and are lobbying for rescission of a provision in the House version that will change the way renewal vouchers are calculated. Funding in the House version did not change between the subcommittee and full appropriations committee with $16.6 billion provided for the Section 8 certificate fund; $841 million for Section 202 elderly housing; $259 million for Section 811 disabled housing; $4.58 billion for the CDBG program; and $5 billion for community development.

While the House bill closely follows the administration's budget blueprint, the Senate is more fully funding housing programs with lead paint hazards taking the fore. The Senate budgeted $201 million in 2003 for hazard reduction and $75 million for a new lead paint hazard reduction demonstration program that focus on the disproportionate risk of lead poisoning in urban areas with children under six years of age.

Stall on H.R. 3995 Prompts Democratic Letter
A handful of Democrats have asked the Speaker of the House to bring the omnibus housing bill to the floor before some provisions are lost to the untimely delay. Speaker Dennis Hastert (R-IL) received the letter from 24 Democratic members of the House Financial Services Committee with the request to begin floor debate on H.R. 3995, which passed the committee in early July with bipartisan support. The National Housing Trust Fund and the re-introduction of the Public Housing Drug Elimination Program are two of the main issues in the bill, along with other issues that confront the affordable housing crisis. Speculation about the delay in bringing the bill to the floor maintains that Republicans are trying to garner support for the bill's original version before amendment in committee. The original, as backed by Republicans, contained the re-authorization of HOPE VI, the Native American Housing and Self Determination Act of 1996, and Housing for People with AIDS, homeownership provisions and a housing impact analysis requirement. Although the letter states that the Democratic signees prefer a national housing trust fund over the bill's current program of matching grants to state and local trust funds, the importance of an affordable housing production program and the bill's timely passage is critical and should be up for debate.

Housing Production Act Not Expected This Session
Because of the delay in appropriations bills, Senator "Kit" Bond (R-MO) is not expecting his new housing legislation to make it through this year, but hopes to bring housing issues more to the forefront with his "Affordable Housing Production Expansion Act of 2002." Bond's bill is expected to "expand the production of affordable low income housing for extremely low, very low, and low-income families," with provisions that would allow for "thrifty production" vouchers, institute a housing production block grant administered by state housing finance agencies and provide new loan guarantee authority for public housing agencies. Production, rehabilitation rehab of private and federally assisted rental housing, moderate and substantial, would be allowed, along with preservation of at-risk government-assisted housing. Other provisions include land trusts and the conversion of public and Section 202 elderly housing into assisted living facilities for the elderly. All new production and rehab projects would be required to be mixed income rental housing. Funding for these programs would be $1 billion for 2003 and no funds would be appropriated from existing programs, especially any unused Section 8 budget, Bond has said. A least thirty percent must be used for extremely low income households and seventy percent could be used for residents up to eighty percent of area median income.

Fatal Errors System Incurs Changes, Postponement
TRACS officials have announced changes, postponements and corrections of errors in the Fatal Edits portion of the TRACS system. Officials recently removed two fatal error messages from the Security Deposit logic and replaced them with discrepancies. Since both changes are discrepancies and not fatal errors, they will not reject mat transactions. Fatal error F0221 has been replaced with the CE252 discrepancy and F0222 was replaced with the discrepancy CE253. The changes were made in October 8 and officials have since applied the CE253 discrepancy edit to the Rent Supplement Units and RAP Units. As a result, a security deposit may not be less than $50 for rent supplements or RAPs. Since the $50 requirement was already in place for 202 PRACs, 811 PRACs, and 202 PACs, these requirements will not change. The change is in response to revised 4350 handbook requirements on security deposits and should be in place in November. Details about security deposits are available on the "TRACS Documents" web page under "Security Deposit Logic". In other news, a set of fatal edits for the TRACS system scheduled for release in December has been postponed indefinitely. TRACS officials also recently discovered that users were not receiving TRACS fatal error messages. The error was corrected and as of October 1, users should again be receiving fatal errors from the TRACS batch process.

Keep Private Information Off Discussion Forum
Officials are currently reviewing the TRACS discussion forum on the web site for security issues. The forum is available for TRACS users to discuss problems and questions about the TRACS system. TRACS officials warn users to remember that sensitive and private information, including tenant's social security numbers should not be mentioned during use of forum. The forum is available www.hud.gov/office/hsg/mfh/trx/trxsum.cfm.