Chapter 8 of the U.S. Department of Housing and Urban Development (HUD) Handbook 4350.3 REV-1 outlines the tenant's obligation to repay once it is determined by the owner that an overpayment of housing assistance payments has been made. If it is determined that the tenant should enter into a repayment agreement to collect funds and reimburse HUD the owner should keep in mind the following HUD guidelines:
The tenant is not required to reimburse the owner for undercharges caused solely by the owner's failure to follow HUD's procedures for computing rent or assistance payments.
A tenant must reimburse the owner for the total overpayment back to the time overpayment of assistance started, not to exceed the 5-year limitation that the tenant was receiving assistance discussed in forms HUD-9887 and HUD-9887A. This 5- year limitation applies for all overpayments of assistance and is not limited to errors found using the EIV system.
The owner must have the form HUD-50059(s) on file that was in effect during the period(s) that the overpayment of assistance occurred, along with any supporting documentation, in order to calculate the amount the tenant must reimburse the owner.
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 payments 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 Owner/Agent (O/A); or
- A combination of 1 and 2, listed above.
- The repayment agreement must include the total retroactive rent amount owed, the amount of lump sum paid at time of execution of the agreement, if applicable, and the monthly payment amount.
- 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 Web site for a listing of agencies for each state.
- Tenants who do not agree to repay amounts due will be in noncompliance with their lease agreement and may be subject to termination of tenancy.
- The repayment agreement must reference the paragraphs in the lease whereby the tenant is in non-compliance and may be subject to termination of their lease.
- The repayment agreement must contain a clause whereby the terms of the agreement can be renegotiated if there is a decrease or increase in the family's income of $200 or more per month.
- The repayment agreement must include a statement that the monthly retroactive rent repayment amount is in addition to the family's monthly rent payment, and is payable to the owner.
- The repayment agreement must be signed and dated by the tenant and the O/A.
- The tenant's monthly payment must be what the tenant can afford to pay based on the family's income.
- The monthly payment plus the tenant's total tenant payment (TTP) at the time the repayment agreement is executed should not exceed 40 percent of the family's monthly adjusted income.
- No specific payment time period maximum is indicated by HUD.
- 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 Repayment Agreements and all information into the MAT30, Section 7. Under TRACS update 2.0.3.A the Section 7 Record is being renamed to reflect Repayments and Escrows. O/A's should consult their software documentation or software provider if assistance is required.
O/A's should also consult the TRACS Monthly Activity Transmission (MAT) User's Guide to obtain updated instructions on how to record these payments. See the MAT Guide Chapter 6, Section 7 Record for guidance on how the various fields are to be filled for Repayment Agreements.
NOTE: The Office of the Inspector General has ruled that there is no minimum amount for a repayment agreement.