Chapter 8 of the HUD Handbook 4350.3 REV-1 outlines the tenant's obligation to repay due to overpayment of housing assistance payments.(Chapter 8, Section 8-20, Page 8-28). Once determined a tenant owes, the owner is required to reimburse HUD.
Owner's Obligation to Repay
The owner is not required to reimburse HUD immediately for overpayments of assistance where the overpayment was caused by the tenant's submission of incorrect information. Repayments are required when and as tenants repay in accordance with an agreed-upon repayment plan.
The owner must reimburse HUD for all other overpayments of assistance where such overpayments were due to the owner's error or the owner's failure to follow HUD's procedures. HUD or the Contract Administrator (CA) may permit the owner to repay such overpayments in one lump sum or over a period of time through reduction of normal housing assistance requisitions if immediate repayment in full would jeopardize the financial condition of the property.
Repayment Options for Tenants:
Tenants can repay amounts due:
- In a lump sum payment; or
- By entering into a repayment agreement with the O/A; or
- A combination of 1. and 2., above
The tenant and O/A must both agree on the terms of the repayment agreement.
The tenant can consult with HUD’s Housing Counseling Agency in their area to assist them in working with the O/A to reach agreeable terms for the repayment agreement. See the Housing Counseling Agency website for a listing of agencies for each state at http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
The monthly payment plus the amount of rent the tenant/family pays at the time the repayment agreement is executed should not exceed 40 % of the family’s monthly adjusted income.
No specific payment time period maximum is indicated in the HUD Notice.
The repayment agreement must be consistent with and reference lease whereby the tenant is in non-compliance and may be subject to termination of their lease.
The repayment agreement should contain a clause whereby the terms of the agreement can be renegotiated if there is a decrease or increase in the family’s income.
The repayment agreement must be signed and dated by the tenant AND the O/A.
O/A’s must not apply a tenant’s monthly rent payment towards the repayment amount owed that would result in an accumulation of late rent payments.
Disposition of Funds Received by O/A
O/A’s should be familiar with their software’s capability that allows for adding Miscellaneous Accounting Requests (Manual Adjustments) to the HAP Voucher. O/A’s should consult their software documentation or software provider if assistance is required.
O/A’s should consult the TRACS Monthly Activity Transmission (MAT) User’s Guide to obtain updated instructions on Miscellaneous Accounting Requests.
O/A must complete corrections to a prior certification(s) affected by the income change. O/A’s must not fail to correct the prior certification(s) in an attempt to avoid having large negative adjustments appear on the HAP Voucher.
No MAR is needed if a tenant is able to pay the entire amount due in one lump sum payment.
If the tenant pays a lump sum payment and enters into a repayment agreement for the remaining amount due, the O/A must first reverse the adjustment created by correcting the prior certification(s) less the lump sum payment by adding an O/A initiated accounting adjustment (OARQ) Miscellaneous Accounting Request to the Voucher.
If the tenant is subject to a repayment agreement, the O/A must first reverse the full amount of the voucher adjustment created by correcting the prior certification(s).
Note: The Voucher Comment field allows for 78 characters to describe the transaction. The Comment field must be completed describing the transaction, e.g., “Reversal of adjustments subject to repayment – Unit 1023, John Smith.”
As the tenant makes payments per the repayment agreement, the O/A must enter them as negative amounts on the voucher as OARQ Miscellaneous Accounting Requests.
Example: The tenant pays $50, the OARQ will be for -$50. The comment field must be completed describing the transaction (as noted above).
O/A Deducting Costs From Tenant Payments
O/A’s may retain a portion of the repayments they actually collect from the tenants who have improperly reported their income to help defray the cost of pursuing these cases (this is not limited to cases where O/A has determined fraud). O/A’s may retain an amount to cover their actual costs, which is the lesser of:
- Their actual costs, or
- 20% of the amount received from the tenant.
Amounts retained by O/A’s must be deposited in the project’s operating account.
Payment Schedule Sample
Repayment Agreement Schedule
HUD Notice H 09-20, Issued December 7, 2009
HUD Notice H 10-10, Issued July 1, 2010