National Housing Trust Fund. Ongoing Compliance Monitoring Manual

Transcription

1 Natinal Husing Trust Fund Onging Cmpliance Mnitring Manual Planning and Husing Develpment Divisin 2624 Vermnt Avenue PO Bx 1535 Bismarck, ND / r 701/ / (TTY) hfainf@nd.gv Revised 12/2016

2 TABLE OF CONTENTS SECTION 1 - HTF PROGRAM INFORMATION AND REGULATIONS Intrductin... 1 Definitins Respnsibilities. 2 Prgram Requirements.. 3 SECTION 2 - INCOME ELIGIBILITY COMPLIANCE PROCEDURES Overview 5 General Requirements fr Determining Incme Eligibility Calculating Annual Incme...10 Treatment f Assets Differences Between Incme Certificatin at Annual Recertificatin & Initial Occupancy. 18 Determining Maximum Rents...19 SECTION 3 - MONITORING REVIEW PROCESS Recrdkeeping 20 Receipt and Review f Prject Infrmatin by NDHFA 21 Quarterly Reprting 22 Operating Cst Assistance...22 Recrd Retentin 23 Scheduling the Site Visit 23 Entrance Cnference. 23 Mnitring Review Dcumentatin.. 23 Exit Cnference.. 23 Mnitring Letter. 24 Mnitring Fllw-up Mnitring Fees SECTION 4 TENANT PROTECTIONS AND FEDERAL CROSSCUTTING REQUIREMENTS Tenant Fees 24 Leases Tenant Selectin. 25 Affirmative Marketing VAWA SECTION 5 PROPERTY STANDARDS...26 SECTION 6 REMEDIAL ACTION..31 APPENDIX - INCOME CALCULATION EXAMPLES Sample Frmat fr Cmputing Part 5 Annual Incme... i Examples f Annual Incme Calculatin.. ii Examples f Part 5 Asset Incme Calculatin... vi Part 5 Incme Calculatin Exercise... ix Rev. 12/16

3 SECTION 1 - HTF PROGRAM INFORMATION AND REGULATIONS INTRODUCTION The Natinal Husing Trust Fund (HTF) is a permanent federal prgram, established as part f the Husing and Ecnmic Recvery Act f The primary purpse f the HTF is t prvide grants t state gvernments t increase and preserve the supply f affrdable rental husing fr extremely lw incme (ELI) husehlds, defined as thse earning less than 30 percent (30%) f the area median incme (AMI), including hmeless families. The HTF is funded by an assessment n all business bked by Fannie Mae and Freddie Mac. This manual is a training and reference guide fr the administratin f the HTF prgram. It is intended t answer questins regarding the prcedures, rules, and regulatins that gvern develpments assisted by the HTF. The manual shuld be used in cnjunctin with and as a supplement t Part 93 f Title 24 f the Cde f Federal Regulatins ( 24 CFR Part 93 r the Cde ). If a determinatin is made that any prvisin f this manual is in cnflict with 24 CFR Part 93, the Cde will gvern. This manual has nt been reviewed r apprved by the United States Department f Husing and Urban Develpment (HUD) and shuld nt be relied upn fr interpretatin f federal legislatin r regulatins. Referenced in the manual are a number f frms fr yur use. The use f sme f the frms is mandatry while the use f ther frms is ptinal. Please pay particular attentin t language within the manual that states which are required frms. If n-site management uses frms ther than thse prvided, care shuld be taken t assure that the frms use sufficient infrmatin t meet HUD incme determinatin guidelines. The Nrth Dakta Husing Finance Agency (NDHFA) Planning and Husing Develpment Divisin is respnsible fr the perfrmance f cmpliance mnitring which culd include, but nt be limited t: annual desk reviews; n-site reviews; tenant file reviews; health/safety/building cde inspectins; sending cmpliance ntificatins t wners/managers; mnitring fllw up cmpliance; and updating this Cmpliance Manual and cmpliance frms. Questins regarding cmpliance mnitring shuld be directed t the Planning and Husing Develpment Divisin s cmpliance staff at hfaplan@nd.gv r by calling (701) / (800) / (800) (TTY). DEFINITIONS Cde: The authrity fr the Natinal Husing Trust Fund fund in the Cde f Federal Regulatin (CFR) at Title 24 CFR Part 93. HTF-assisted prject: Any multifamily rental develpment which has received a funding award frm the Natinal Husing Trust Fund. HTF-assisted unit: Thse units within an HTF-assisted prject which benefitted frm HTF assistance and are subject t incme and rent restrictins as published by HUD, generally, at 30% f area median incme. HTF lan dcuments: Thse executed dcuments which detail the agreement between NDHFA and the recipient f HTF funds. HTF lan dcuments may include, but may nt be limited t, the Applicatin, Financial Award, Lan Agreement, Prmissry Nte, Mrtgage, Land Use Restrictive Agreement, Operating Cst Assistance Reserve Agreement, and Pst-Clsing Requirements. Owner: The wner f an HTF-assisted develpment, r the wner s designated agent r prperty manager. Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 1 f 41

4 Perid f affrdability: Als, affrdability perid r cmpliance perid. Units in prjects receiving HTF assistance will be required t maintain affrdability t husehlds at r belw 30 percent (30%) AMI fr a perid f at least 30 years. Recipient: The entity, r its successr(s), which applied fr and was awarded assistance frm the HTF prgram. UPCS: The Unifrm Prperty Cnditin Standards is a standardized inspectin cde created by HUD in rder t ensure subsidized husing is maintained in a cnditin which is decent, safe, sanitary and in gd repair. RESPONSIBILITIES Prject Owner The prject Owner is respnsible fr cmpliance. Each Owner has chsen t utilize the HTF prgram t take advantage f its develpment and perating assistance benefits. In exchange fr the benefit f HTF assistance, the Owner has made, during the applicatin and clsing prcess, acceptable assurances t NDHFA that it will cmply with the requirements f the HTF prgram during the entire perid which begins upn selectin f the Owner s prject by NDHFA, and ends upn the cnclusin f the affrdability perid. Any vilatin f the HTF requirements culd result in crrective actin, including the repayment f funds t NDHFA. Any and all financial cnsequences t the Owner, as a result f nncmpliance, will be the respnsibility f the Owner. The Owner is respnsible fr ensuring that the develpment is prperly administered. The Owner must make certain that the n-site management team is familiar with, and cmplies with all apprpriate HTF rules, regulatins and plicies that gvern the develpment. The prject Owner agrees t maintain sufficient recrds in supprt f their nging cmpliance with HTF regulatins. The prject Owner will make such recrds available fr review by NDHFA upn request. The prject Owner must allw full access f all files t NDHFA and must retain all dcuments and recrds fr a perid f five (5) years r until any related review findings have been reslved, whichever is later. Nrth Dakta Husing Finance Agency NDHFA is respnsible fr mnitring cmpliance. Nrth Dakta Husing Finance Agency awards HTF assistance within the State f Nrth Dakta. Once HTF funds are awarded t a develpment, the Cde requires NDHFA t mnitr cmpliance by reviewing certain recrds kept by the Owners f the HTFassisted develpment. NDHFA will accmplish this mnitring requirement by cnducting desk and/r n-site reviews f the develpment. NDHFA will cnduct desk reviews annually. NDHFA will cnduct an nsite inspectin at prject cmpletin in rder t cnfirm that the prject meets the prperty standards listed in the HTF Allcatin Plan and Minimum Rehabilitatin and Prperty Standards dcuments. NDHFA will cnduct nsite prperty inspectins during the perid f affrdability in rder t determine cmpliance with the nging prperty standards and t verify any infrmatin submitted by the Owner. Onsite inspectins must ccur at least nce every three (3) years during the perid f affrdability. The n-site inspectin may include a review f recrds fr all r a sample f the incme and rent restricted units including, but nt limited t, tenant files, rent rlls, apprved and declined tenant applicatins, dcumentatin supprting tenant incme and emplyment verificatin, marketing materials and advertisements, and dcumentatin f requests fr reasnable accmmdatins. It may als include a review f any lcal health, safety, r building cde vilatin reprts r ntices and an inspectin f the prperty t determine if the buildings are suitable fr ccupancy, taking int accunt lcal health, safety, and building cdes, and UPCS inspectin Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 2 f 41

5 standards as prescribed by HUD. In additin, any reprts made by state r lcal gvernment units f vilatins, with dcumentatin f crrectin, will be reviewed. PROGRAM REQUIREMENTS Cmpliance Perid NDHFA will ensure lng term affrdability fr HTF-restricted husing units by requiring that a land use restrictin agreement r deed restrictin be placed n HTF-assisted prperties dictating affrdability terms as agreed t by the prject Owner in the HTF lan dcuments. Develpments assisted with HTF funds must make a cmmitment t cmply with eligibility requirements fr a perid f at least 30 years (the affrdability perid) beginning at the issuance f the Certificate f Occupancy. The develpment Owner and NDHFA must enter int an agreement pursuant t which the Owner and any successrs agree t meet the tenant incme requirements fr the applicable affrdability perid. Maximum Tenant Incme All HTF-assisted rental prjects must meet the bjective f prviding husing t husehlds with extremely lw incme (ELI), defined generally as 30% r less f Area Median Incme (AMI), at initial ccupancy and subsequent annual recertificatin. NDHFA will cnduct annual mnitring t ensure nging cmpliance with all restricted units husehld incme restrictins. The LURA, recrded against the real estate encmpassing the prject, will specify the number f units required t be set aside fr ELI husehlds. The methd recgnized by NDHFA fr calculating eligible incme under the HTF prgram is knwn as the Part 5 annual incme methd, which is als used by NDHFA in the Lw Incme Husing Tax Credit prgram, Husing Incentive Fund, and Neighbrhd Stabilizatin Prgram, as well as in HUD s Sectin 8 and HOME prgrams. HTF incme limits, calculated at the greater f 30 percent area median incme r the federal pverty line, are published by NDHFA annually, immediately fllwing their release by HUD. Maximum Rent All HTF-restricted units are subject t maximum allwable tenant-paid rent limits. A unit s specific maximum rent amunt is determined based n the cunty in which the prject is physically lcated and the bedrm cunt f the unit. HTF rent limits are published annually by NDHFA, immediately fllwing their release by HUD, and are calculated t be 30 percent f 30 percent f area median incme r 30 percent f pverty level, whichever is greater. The rent limits reflect the maximum tenant-paid prtin f rent plus the applicable allwance fr any tenant-paid utilities plus any tenant-based rental assistance received fr the unit. Utility Allwances & Maximum Rent An allwance fr the cst f any utility and/r utility service which the tenant is respnsible fr paying must be deducted frm the maximum allwable rent currently in effect fr that unit when determining the maximum tenant-paid rent. The sum f a unit s tenant-paid rent and all applicable utility allwance(s) must nt exceed NDHFA s currently published maximum HTF rent limit. The specific amunt f any utility allwance shall be btained frm the currently-in-effect utility allwance schedule f the Prject s lcal public husing authrity r thrugh an energy study prvided t & apprved by NDHFA. Current maximum rent determinatins shuld include, and have dcumented, a unit s current utility allwance schedule. Sectin 8 Prject Based Vuchers & Maximum Rent If the HTF-assisted unit receives prject-based rental subsidy, and the tenant pays a cntributin tward rent f nt mre than 30 percent f the tenant s adjusted incme, the maximum rent fr the HTF-assisted Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 3 f 41

6 unit (nly and specifically fr the unit in which the PBV is designated) is the rent allwable under the prject-based rental subsidy prgram, als knwn as the payment standard. Full-Time Student Eligibility The HTF prgram may nt be used t develp student husing. Husehlds cmprised entirely f fulltime students are nt eligible fr ccupancy in a HTF-restricted unit unless ne r mre f the fllwing six exemptins is met. 1) A student has been previusly under the custdy f a fster care system. 2) A student is a single parent when neither the parent-student nr their children can be claimed as a dependent n the tax return f smene else. (Hwever, this exemptin can still be met if the children can be claimed n the tax return f their ther parent nt residing in the unit.) Owners r managers shuld btain a cpy f any divrce decree shwing custdy and dependent status and a signed cpy f the current tax return verifying the dependent status. 3) All adults in the husehld are married and filing a jint tax return. 4) A student is a veteran, hnrably discharged. 5) A student is receiving welfare benefits (TANF r AFDC). 6) A student is enrlled in a jb training prgram which receives assistance under the Wrkfrce Investment Act (WIA), the Jb Training Partnership Act (JTPA), r a similar federal, state, r lcal prgram. A full-time student is defined as any individual wh has been r will be a full-time student (as determined by the educatin institutin) at an educatinal institutin with regular facilities at least five mnths f the calendar year. First Grade thrugh twelfth grade students are cnsidered full-time students. The student status f all husehlds must be annually verified. If the applicant indicates that he r she is a student, have the applicant sign the Student Certificatin Frm. If the applicant is a student and receiving Sectin 8 Assistance als have the applicant sign the Student Status and Financial Aid Verificatin Frm and send it t the educatinal institutin t verify full- r parttime student status and financial aid fr incme purpses. Reserve Accunts All prperties will be required t maintain a replacement reserve accunt fr the term f the HTF lan. The replacement reserve requirement fr new cnstructin prperties and substantial rehabilitatin prperties (rehab exceeding $30,000 per unit) designed fr senirs will be n less than $300 per unit per year, inflated at three percent (3%) annually. The requirement fr all prperties designed fr families as well as rehabilitatin develpments with rehabilitatin csts f $30,000 per unit r less will be n less than $350 per unit per year, inflated at three percent (3%) annually. This accunt shall be used nly fr capital imprvements and the replacement f lng-lived capital assets, and nt fr rutine maintenance and upkeep expenses. The replacement reserve shall be, and shall remain, an asset f the Prject, and shall nt be distributed t the Owner r any partner f the Owner at any time during r after the cmpliance perid. Prject wners shall be required t prvide NDHFA with a recrd f all activity in the replacement reserve accunt during the prir fiscal year in cnjunctin with submissin f the prject s annual cmpliance mnitring materials. All prperties will als be required t establish and maintain, until the prperty has achieved a minimum f five years f stabilized peratins, an perating reserve equal t a minimum f six (6) mnths f prjected perating expenses plus must-pay debt service payments and annual replacement reserve payments. This requirement can be met with an up-frnt cash reserve; a persnal guarantee frm the develper/general partner with a surety bnd t stand behind the persnal guarantee; r partnership dcuments specifying satisfactry establishment f an perating reserve. Fr purpses f the HTF prgram, stabilized Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 4 f 41

7 peratins is defined as ccupancy f at least 90 percent (90%) f the units in the prperty fr a perid f at least 90 days. Each reserve accunt identified in this sectin must be maintained in separate accunts maintained in a federally insured financial institutin r the Bank f Nrth Dakta. Reserve accunts must als be separate frm the prject s rdinary perating accunt. SECTION 2 - INCOME ELIGIBILITY COMPLIANCE PROCEDURES OVERVIEW HTF establishes annual incme limits fr husehlds ccupying affrdability-targeted rental units in HTF prjects (HTF-restricted units). Each year, HUD determines the annual median incmes fr all states, cunties, and metrplitan statistical areas. Thse incme determinatins are used by NDHFA t assess a husehld s eligibility t rent an HTF-restricted unit. In rder t determine whether a husehld is eligible, the Prject Owner needs t cmpare the verified anticipated annual husehld incme against the published limit. Current Incme Limits fr HTF are psted n the NDHFA website at HTF incme limits, calculated at the greater f 30 percent area median incme r the federal pverty line, are published by NDHFA annually, immediately fllwing their release by HUD. The methd recgnized by NDHFA fr calculating eligible incme under the HTF prgram is knwn as the Part 5 annual incme methd, which is als used by NDHFA in the Lw Incme Husing Tax Credit prgram, Husing Incentive Fund, and Neighbrhd Stabilizatin Prgram, as well as in HUD s Sectin 8 and HOME prgrams. The term Part 5 refers t annual incme as defined in Federal Regulatins at 24 CFR Incme is calculated fr all adult husehld members and is prjected fr the upcming 12-mnth perid, factring in histrical data and any ther infrmatin btained in the incme review prcess. GENERAL REQUIREMENTS FOR DETERMINING INCOME ELIGIBILITY Qualificatin f Applicants Applicants fr HTF-assisted units shuld be advised early in their initial visit t the develpment that there are maximum incme limits that apply t these units. The Owner shuld explain t the prspective tenants that the anticipated incme f all persns expecting t ccupy the unit must be verified and included n an Applicatin and Incme Certificatin frm prir t ccupancy. The Applicatin A fully cmpleted rental applicatin is critical t an accurate determinatin f eligibility. The infrmatin furnished n the applicatin shuld be used as a tl t determine all surces f incme and assets. The Agency encurages the use f the Applicatin fr Husing and Tenant Incme Certificatin. If management chses t use their wn applicatin, it must slicit sufficient infrmatin t make an accurate determinatin f the husehld s ttal incme and assets using HUD standards. It is recmmended that unrelated persns cmplete separate applicatins. After the husehld cmpletes the applicatin, the Owner must verify all incme and assets. After all incme and assets have been verified, the Owner must then cmplete the Tenant Incme Certificatin (TIC). The TIC must be signed and dated by bth the tenant(s) and Owner and a cpy retained in the Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 5 f 41

8 tenant file. The TIC must be used fr all mve-ins. The TIC, alng with the lease, is t be executed prir t mve-in. All ccupants in an HTF-assisted unit must be certified and under lease. General Incme Verificatin Requirements Applicants shuld be asked t sign tw cpies f each verificatin frm. The secnd cpy may be used if the first request has nt been returned in a timely manner. Incme verificatin requests must be sent directly t and frm the surce, nt thrugh the tenant. It is suggested that a self-addressed, stamped envelpe be included with the request fr verificatin. When written verificatin is nt pssible prir t mve-in, direct cntact with the surce will be acceptable t the NDHFA but must be fllwed up by written verificatin. The cnversatin shuld be dcumented in the applicant's file t include all the infrmatin that wuld be included in a written verificatin. The name and title f the cntact, the name f the management representative accepting the infrmatin and the date must be included. The frm, Dcument Viewed r Telephne Infrmatin Received may be used fr dcumentatin f a direct cntact. By using this apprach, the ultimate risk f admitting an ineligible tenant is brne slely by the Owner. The Owner shuld give the applicant the pprtunity t explain any significant differences between the amunts reprted n the applicatin and amunts reprted n third-party verificatin in rder t determine actual incme. The explanatin shuld be dcumented in the tenant file. Certain requirement areas apply t the Part 5 methd, including hw t determine whse incme t cunt, anticipating and verifying incme, and cmparing calculated annual incme t HUD incme limits. Once annual incme is calculated and verified by the prperty manager, the tenant husehld must sign a tenant incme certificatin attesting t the truth and accuracy f the incme infrmatin and calculatins. Determining Husehld Size The incme limits are adjusted by husehld size. Therefre, ne f the first steps in determining eligibility is t determine the size f the applicant husehld. Sme husehlds may include persns wh are nt cnsidered as family members fr the purpses f determining husehld size and incme eligibility, including: Fster children Fster adults Live-in aides Children f live-in aides These persns shuld nt be cunted as husehld members when determining husehld size, and their incme, if any, is nt included when calculating annual incme. A child wh is subject t a shared-custdy agreement in which the child resides with the husehld at least 50 percent f the time can be cunted in the husehld. Anticipating Incme HTF regulatins require that, fr purpses f determining eligibility fr an HTF-restricted unit, the Owner must prject a husehld s incme in the future. T d s, a snapsht f the husehld s current circumstances is used t prject future incme. In general, it shuld be assumed that tday s circumstances will cntinue fr the next 12 mnths, unless there is verifiable evidence t the cntrary. Fr example, if a head f husehld is currently wrking fr $10.00 per hur, 40 hurs per week, the prperty Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 6 f 41

9 manager shuld assume that the family member will cntinue t d s fr the next year. Thus, estimated earnings will be $10.00 per hur multiplied by 2,080 hurs, r $20,800 per year. This methd shuld be used even when it is nt clear that the type f incme received currently will cntinue in the cming year. Fr example, assume a family member has been receiving unemplyment benefits f $100 per mnth fr 16 weeks at the time f incme certificatin. It is unlikely that the family member will cntinue n unemplyment fr anther 52 weeks. Hwever, because it is nt knwn whether r when the family member will find emplyment, the Owner shuld use the current circumstances t anticipate annual incme. Incme wuld therefre be calculated as fllws: $100 per week x 52 weeks, r $5,200. The exceptin t this rule is when dcumentatin is prvided which indicates that current circumstances are abut t change. Fr example, an emplyer might reprt that an emplyee currently makes $10.00 an hur, but a negtiated unin cntract will increase this amunt t $12.00 an hur eight weeks frm the date f initial ccupancy. In such cases, incme can be calculated based n the infrmatin prvided. In this example, the calculatin wuld be as fllws: $10.00/hur x 40 hurs/week x 8 weeks = $3.200 $12.00/hur x 40 hurs/week x 44 weeks = $21,120 $3,200 + $21,120 = $24,320 prjected annual incme Verifying Incme At initial ccupancy, annual incme must initially be determined by examining at least 2 mnths f surce dcuments evidencing annual incme (e.g., wage statements, interest statements, unemplyment cmpensatin r gvernment benefits statements) fr the husehld. Annual recertificatin f tenant incme during the affrdability perid is required. Fr subsequent incme determinatins during the affrdability perid, incme may be verified thrugh review f surce dcuments (as during initial ccupancy) r thrugh tenant self-certificatin r thrugh certificatin by ther gvernment prgrams. Prject-Based Rental Assistance recertificatin rules prevail and will als be emplyed fr all HTF-assisted units when applicable. 1) Review f Surce Dcuments (Initial Occupancy r Annual Recertificatin) HTF regulatins require that Owners determine incme eligibility fr applicants f HTF-restricted units by examining surce dcuments (such as wage statements r interest statements) as evidence f annual incme. Owners may develp their wn verificatin prcedures prvided that they cllect surce dcumentatin and that this dcumentatin is sufficient fr NDHFA t mnitr prgram cmpliance. Dcuments prvided by the applicant (e.g., pay stubs, tax returns, etc.) may be mst apprpriate fr certain types f incme and can be used as an alternative t third party verificatins. (Nte, hwever, that if a cpy f a tax return is needed, IRS Frm 4506 Request fr Cpy f Tax Frm must be cmpleted and signed.) Cpies f dcuments shuld be retained in tenant files. Althugh easy t btain, a review f dcuments prvided by the applicant may nt prvide all necessary infrmatin. Fr instance, an emplyed applicant s pay stubs may nt prvide sufficient infrmatin abut the average number f hurs wrked, vertime, tips, and bnuses. Therefre, the Owner may als need t cntact the emplyer t accurately prject annual incme. Third-Party Verificatin Under this frm f verificatin, a third party (e.g., emplyer, Scial Security Administratin, r public assistance agency) is cntacted t prvide infrmatin t verify incme. Althugh written requests Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 7 f 41

10 and respnses are generally preferred, cnversatins with a third party are acceptable if dcumented thrugh a memrandum t the file that ntes the cntact persn, infrmatin cnveyed, and date f call. In additin, an Owner may btain third party written verificatin by fax, , r Internet. The Owner must make adequate effrt t ensure the sender is a valid third-party surce. T allw Owners t cnduct third-party verificatins, mst recmmended frms include a written release frm the husehld that authrizes the third party t release required infrmatin. Third-party verificatins are helpful because they prvide independent verificatin f infrmatin and permit the Owner t determine if any changes t current circumstances are anticipated. Sme third-party prviders may, hwever, be unwilling r unable t prvide the needed infrmatin in a timely manner. Sme third-party prviders (such as banks) may charge a fee t prvide the infrmatin. In such cases, the Owner shuld attempt t find suitable dcumentatin withut the third-party verificatin fr example, bank statements. 2) Self-Certificatin (Annual Recertificatin Only) Thrugh the self-certificatin methd, the husehld prvides a written statement f the amunt f the husehld s annual incme and size, alng with a certificatin that the infrmatin is cmplete and accurate. The certificatin must state that surce dcuments will be prvided upn request. Incme surce dcuments must be verified at least nce every six (6) years. 3) Certificatin by Other Prgrams (Annual Recertificatin Only) By btaining a written statement frm the administratr f a gvernment prgram under which the husehld receives benefits and which examines each year the annual incme f the husehld. The statement must indicate the tenant s husehld size and state the amunt f the annual husehld incme; r alternatively, the statement must indicate the current dllar limit fr ELI husehlds fr tenant s husehld size and state that the husehld s annual incme des nt exceed this limit. Unemplyed Zer Incme Applicants If a husehld member is currently unemplyed and claims n incme frm such surces as Scial Security, pensins, incme frm assets, etc., the tenant must cmplete the Certificatin f Zer Incme and the Nnemplyed Affidavit. The incme f unemplyed husehld members, with regular incme frm any surce such as Scial Security, pensin, recurring gifts, incme frm assets, etc., must be verified. Assessing Infrmatin Owners must assess all the facts underlying the incme infrmatin cllected. Belw are sme f the cnsideratins Owners must take int accunt. 1) Pay Perid The Owner shuld determine the basis n which emplyees are paid (hurly, weekly r mnthly, and with r withut vertime). An emplyee wh gets paid twice a mnth may actually be paid either twice a mnth (24 times a year) r every tw weeks (26 times a year). Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 8 f 41

11 An annual salary is cunted as annual incme regardless f the payment schedule. Fr example, if a teacher s annual salary is $30,000, this is the annual incme regardless f whether the teacher is paid ver a nine- r 12-mnth perid. 2) Variatins in Pay Fr applicants whse jbs prvide steady emplyment (e.g., 40 hurs a week, 52 weeks a year), it can be assumed that there will nly be slight variatins in the amunt f earnings reflected in mnthly r bi-weekly pay stubs. In such cases, three cnsecutive mnths wrth f incme dcumentatin is an apprpriate amunt upn which t base a prjectin f incme ver the fllwing 12-mnth perid. Fr thse whse annual emplyment is less stable r des nt cnfrm t a twelve-mnth schedule (e.g., seasnal labrers, cnstructin wrkers, teachers), Owners shuld examine incme dcumentatin that cvers the entire previus twelve-mnth perid. Such wrkers can experience substantial variatins in earned incme ver the curse f a year. As such, an examinatin f three mnths wrth f incme dcumentatin may nt prvide an accurate basis upn which t prject the applicant s incme ver the fllwing 12 mnths. 3) Surces f Earned Incme In additin t hurly earnings, Owners must accunt fr all earned incme. In additin t the base salary, this will include annual cst f living adjustments (COLAs), bnuses, raises, and vertime pay. In the case f vertime, it is imprtant t clarify whether vertime is spradic r a predictable cmpnent f an emplyee s incme. If it is determined that an applicant has earned and will cntinue t earn vertime pay n a regular basis, Owners shuld calculate the average amunt f vertime pay earned by the applicant ver the pay perid the Owner is using t calculate incme eligibility. This average amunt is then t be added t the ttal amunt f prjected earned incme ver the fllwing 12-mnth perid. Exhibit 2.1 prvides a step-by-step explanatin f the standard methdlgy fr prjecting annual incme. Exhibit 2.1 Step-by-Step Methdlgy fr Prjecting Annual Incme Steps Instructins Step 1: Cllect apprpriate incme dcumentatin. Step 2: Calculate the applicant husehld s prjected incme based upn dcumentatin. Step 3: Cmpare the amunt f prjected incme against current HUD-published incme limts. Apprpriate dcumentatin includes pay stubs, third-party verificatin, bank statements (checking and/r savings), r certified cpies f tax returns. (These can be acquired by submitting an IRS Frm 4506, Request fr Cpy f Tax Frm. ) This calculatin must include hurly wage figures, vertime figures, bnuses, anticipated raises, COLAs, r ther anticipated changes in incme. Other specific inclusins must als be reflected in the calculatins, such as ther eligible surces f nnwage incme. Once the Owner has calculated the husehld s incme, it must cmpare the husehld s final prjected figure t HUD-published incme limits. Husehlds whse prjected annual incme is less than the current HTF incme limit are eligible fr an HTFrestricted unit. Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 9 f 41

12 Cmparing Annual Husehld Incme t Published Incme Limits Once husehld and incme infrmatin has been established and verified, an Owner must cmpare the infrmatin t the apprpriate HUD incme limits t determine if the husehld is eligible fr a HTFrestricted unit. T determine eligibility, Owners must use a cpy f the mst recent HTF incme limits, adjusted fr family size and cunty. Current annual incme limits fr the HTF prgram are updated annually and psted n NDHFA s website at Exhibit 2.2 prvides a sample HTF incme limits table. T cmpare a husehld s verified annual incme t the HTF incme limits, fllw these steps: 1) Find the gegraphic area in which the prject is lcated n the HTF Incme Limits chart. 2) Find the clumn that crrespnds t the actual number f persns in the husehld. 3) Cmpare the verified incme f the husehld with the incme limit fr the applicable husehld size. Using the sample incme limits chart in Exhibit 2.2, cnsider the fllwing example: Mr. and Mrs. Larsn f Adams Cunty have three children that permanently reside with them. It has been determined by the prperty manager that the Larsns have an annual husehld incme f $27,500. Based n the incme limits, the Larsn family must have an incme f less than $28,440 in rder t be eligible fr an HTF-assisted unit. Since the Larsn s incme f $27,500 is less than the HTF limit f $28,440, they are eligible fr the HTF-assisted unit. Exhibit 2.2 Sample HTF Incme Limit Schedule Natinal Husing Trust Fund Maximum Incme and Rents Extremely Lw Incme (30% AMI) Limits as f: 05/30/2016 Effective: 05/30/2016 Maximum Incme Limits Persn Persn Persn Persn Persn Persn Persn Persn Adams 15,450 17,650 20,160 24,300 28,440 32,580 36,730 40,890 Barnes 16,100 18,300 20,450 24,300 28,440 32,580 36,730 40,890 Bensn 15,800 18,050 20,300 24,300 28,440 32,580 36,730 40,890 CALCULATING ANNUAL INCOME The Part 5 definitin f annual incme is the grss amunt f incme f all adult husehld members that is anticipated t be received during the cming 12-mnth perid. Each f the italicized wrds r phrases in this definitin is key t understanding the requirements fr calculating annual incme: Grss amunt. Fr thse types f incme cunted, grss amunts (befre any deductins have been taken) are used. Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 10 f 41

13 Incme f all adult husehld members. The Part 5 definitin f annual incme cntains incme inclusins types f incme t be cnsidered and exclusins types f incme that are nt cnsidered (fr example, incme f minrs). Anticipated t be received. A prperty manager must use a husehld s expected ability t pay, rather than past earnings, when estimating husing assistance needs in this case, an HTFassisted rental unit. Whse Incme t Cunt Knwing whse incme t cunt is as imprtant as knwing which incme t cunt. Under the Part 5 definitin f annual incme, special cnsideratin is given t incme earned by the fllwing grups f peple. 1) Minrs - Earned incme f minrs, including fster children (age 18 and under) is nt cunted. Hwever, unearned incme attributable t a minr (e.g., child supprt, TANF payments and ther benefits paid n behalf f a minr) is included. 2) Live-in Aides - If a husehld includes a paid live-in aide (whether paid by the family r a scial service prgram), the incme f the live-in aide, regardless f the surce, is nt cunted. Except under unusual circumstances, a related persn des nt qualify as a live-in aide. 3) Temprarily Absent Family Members - The incme f temprarily absent family members is cunted in the Part 5 definitin f annual incme regardless f the amunt the absent member cntributes t the husehld. Fr example, a cnstructin wrker emplyed at a temprary jb n the ther side f the state earns $600 per week. He keeps $200 per week fr expenses and sends $400 per week hme t his family. The entire amunt ($600 per week) is cunted in the family s incme. 4) Adult Students Living Away frm Hme - If the adult student is cunted as a member f the husehld in determining the husehld size (t cmpare against the HUD incme limits), the first $480 f the student s incme must be cunted in the family s incme. Nte, hwever, that the $480 limit des nt apply t a student wh is the head f husehld r spuse (their full incme must be cunted). 5) Permanently Absent Family Members - If a family member is permanently absent frm the husehld (e.g., a spuse wh is in a nursing hme), the head f husehld has the chice f either cunting that persn as a member f the husehld, and including incme attributable t that persn as husehld incme, r specifying that the persn is n lnger a member f the husehld. Types f Incme t Cunt Exhibits 2.3 and 2.4 prvide a cmprehensive list f incme that is included and excluded frm calculatins f annual incme under Part 5. This list cmes directly frm the Federal regulatins at 24 CFR HUD updates this list when changes are made by Cngress. In general, incme exclusins fall int the fllwing categries: Benefits that shuld nt be cunted as incme. Incme f certain husehld members that shuld nt be cunted, including earned incme f minrs and incme attributable t fster children and live-in aides. Amunts that are cunted as assets rather than incme, such as lump-sum lttery winnings. Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 11 f 41

14 Exhibit 2.3 Annual Incme Inclusins Per 24 CFR Part 5 1. The full amunt, befre any payrll deductins, f wages and salaries, vertime pay, cmmissin, fees, tips and bnuses, and ther cmpensatin fr persnal services. 2. The net incme frm the peratin f a business r prfessin. Expenditures fr business expansin r amrtizatin f capital indebtedness shall nt be used as deductins in determining net incme. An allwance fr depreciatin f assets used in a business r prfessin may be deducted, based n straight-line depreciatin, as prvided in Internal Revenue Service regulatins. Any withdrawal f cash r assets frm the peratin f a business r prfessin will be included in incme, except t the extent the withdrawal is reimbursement f cash r assets invested in the peratin by the family. 3. Interest, dividends, and ther net incme f any kind frm real r persnal prperty. Expenditures fr amrtizatin f capital indebtedness shall nt be used as deductins in determining net incme. An allwance fr depreciatin is permitted nly as authrized in number 2 (abve). Any withdrawal f cash r assets frm an investment will be included in incme, except t the extent the withdrawal is reimbursement f cash r assets invested by the family. Where the family has net family assets in excess f $5,000, annual incme shall include the greater f the actual incme derived frm all net family assets r a percentage f the value f such assets based n the current passbk savings rate, as prvided by NDHFA. 4. The full amunt (befre deductins fr Medicare, etc.) f peridic amunts received frm Scial Security, annuities, insurance plicies, retirement funds, pensins, disability r death benefits, and ther similar types f peridic receipts, including a lump-sum amunt r prspective mnthly amunts fr the delayed start f a peridic amunt (except fr certain exclusins, listed in Exhibit 2.4, number 13). 5. Payments in lieu f earnings, such as unemplyment and disability cmpensatin, wrker s cmpensatin, and severance pay (except fr certain exclusins, as listed in Exhibit 2.4, number 3). 6. Welfare assistance payments made under the Temprary Assistance fr Needy Families (TANF) prgram are included in annual incme. 7. Peridic and determinable allwances, such as alimny and child supprt payments, and regular cntributins r gifts received frm rganizatins r frm persns nt residing in the dwelling. 8. All regular pay, special pay, and allwances (ther than husing allwance) f a member f the Armed Frces (Except as prvided in number 7 f Exhibit 2.4 Incme Exclusins.) Exhibit 2.4 Annual Incme Exclusins Per 24 CFR Part 5 1. Incme frm emplyment f children (including fster children) under the age f 18 years. 2. Payments received fr the care f fster children r fster adults (usually persns with disabilities, unrelated t the tenant family, wh are unable t live alne). 3. Lump-sum additins t family assets, such as inheritances, insurance payments (including payments under health and accident insurance and wrker s cmpensatin), capital gains, and settlement fr persnal r prperty lsses (except as prvided in Exhibit 2.3, number 5 f Incme Inclusins). 4. Amunts received by the family that are specifically fr, r in reimbursement f, the cst f medical expenses fr any family member. Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 12 f 41

15 5. Incme f a live-in aide. Per 24 CFR 5.403, a live-in aide is defined as a persn wh resides with ne r mre elderly persns, r near elderly persns, r persns with disabilities, and wh (a) is determined t be essential t the care and well-being f the persns; (b) is nt bligated fr the supprt f the persns; and (c) wuld nt be living in the unit except t prvide the necessary supprting services. 6. The full amunt f student financial assistance paid directly t the student r t the educatinal institutin. 7. The principal prtin f payments received n mrtgages r deeds f trust. 8. (a) Allwance fr husing t a member f the Armed Frces; (b) The special pay t a family member serving in the Armed Frces wh is expsed t hstile fire. 9. (a) Amunts received under training prgrams funded by HUD; (b) Amunts received by a persn with a disability that are disregarded fr a limited time fr purpses f Supplemental Security Incme eligibility and benefits because they are set aside fr use under a Plan t Attain Self- Sufficiency (PASS); (c) Amunts received by a participant in ther publicly assisted prgrams that are specifically fr, r in reimbursement f, ut-f-pcket expenses incurred (special equipment, clthing, transprtatin, childcare, etc.) and which are made slely t allw participatin in a specific prgram; (d) Amunts received under a resident service stipend. A resident service stipend is a mdest amunt (nt t exceed $200 per mnth) received by a resident fr perfrming a service fr the PHA r wner, n a part-time basis, that enhances the quality f life in the develpment. Such services may include, but are nt limited t, fire patrl, hall mnitring, lawn care, and serving as a member f the PHA s gverning bard. N resident may receive mre than ne such stipend during the same perid f time; (e) Incremental earnings and benefits resulting t any family member frm participatin in qualifying state r lcal emplyment training prgrams (including training nt affiliated with a lcal gvernment) and training f a family member as resident management staff. Amunts excluded by this prvisin must be received under emplyment training prgrams with clearly defined gals and bjectives, and are excluded nly fr the perid during which the family member participates in the emplyment training prgram. 10. Temprary, nnrecurring, r spradic incme (including gifts). 11. Reparatin payments paid by a freign gvernment pursuant t claims filed under the laws f that gvernment by persns wh were persecuted during the Nazi era. 12. Earnings in excess f $480 fr each full-time student 18 years ld r lder (excluding the head f husehld r spuse). 13. Adptin assistance payments in excess f $480 per adpted child. 14. Deferred peridic amunts frm supplemental security incme and scial security benefits that are received in a lump-sum amunt r in prspective mnthly amunts. 15. Amunts received by the family in the frm f refunds r rebates under state r lcal law fr prperty taxes paid n the dwelling unit. 16. Amunts paid by a state agency t a family with a member wh has a develpmental disability and is living at hme t ffset the cst f services and equipment needed t keep the develpmentally disabled family member at hme. 17. Amunts specifically excluded by ther Federal statute frm cnsideratin as incme fr purpses f determining eligibility fr benefits under a categry f assistance prgrams that includes assistance under any prgram t which the exclusins set frth in 24 CFR 5.609(c) apply. A ntice will be published in the Federal Register and distributed t husing wners identifying the benefits that qualify fr this exclusin. Updates will be published and distributed when necessary. The fllwing is a list f incme surces that qualify fr that exclusin: Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 13 f 41

16 The value f the alltment prvided t an eligible husehld under the Fd Stamp Act f 1977; Payments t vlunteers under the Dmestic Vlunteer Service Act f 1973 (emplyment thrugh AmeriCrps, VISTA, Retired Senir Vlunteer Prgram, Fster Grandparents Prgram, yuthful ffender incarceratin alternatives, senir cmpanins); Payments received under the Alaskan Native Claims Settlement Act; Incme derived frm the dispsitin f funds t the Grand River Band f Ottawa Indians; Incme derived frm certain sub-marginal land f the United States that is held in trust fr certain Indian tribes; Payments made under the Department f Health and Human Services Lw-Incme Hme Energy Assistance Prgram; Payments received under the Maine Indian Claims Settlement Act f 1980 (25 U.S.C. 1721); The first $2,000 f per capita shares received frm judgment funds awarded by the Indian Claims Cmmissin r the U.S. Claims Curt and the interests f individual Indians in trust r restricted lands, including the first $2,000 per year f incme received by individual Indians frm funds derived frm interests held in such trust r restricted lands; Amunts f schlarships funded under Title IV f the Higher Educatin Act f 1965, including awards under the Federal wrk-study prgram r under the Bureau f Indian Affairs student assistance prgrams; Payments received frm prgrams funded under Title V f the Older Americans Act f 1985 (Green Thumb, Senir Aid4es, Older American Cmmunity Service Emplyment Prgram); Payments received n r after January 1, 1989, frm the Agent Orange Settlement Fund r any ther fund established pursuant t the settlement in the In Re Agent Orange prduct liability litigatin, M.D.L. N. 381 (E.D.N.Y.); Earned incme tax credit refund payments, including advanced earned incme credit payments; The value f any child care prvided r arranged (r any amunt received as payment fr such care r reimbursement fr csts incurred fr such care) under the Child Care and Develpment Blck Grant Act f 1990; Payments received frm prgrams funded in whle r in part under the Jb Training Partnership Act (emplyment and training prgrams fr Native Americans and migrant and seasnal farm wrkers, Jb Crps, veterans emplyment prgrams, state jb training prgrams and career intern prgrams, AmeriCrps); Payments by the Indian Claims Cmmissin t the Cnfederated Tribes and Bands f Yakima Indian Natin r the Apache Tribe f Mescaler Reservatin; Allwances, earnings, and payments t AmeriCrps participants under the Natinal and Cmmunity Service Act f 1990; Any allwance paid under the prvisins f 38 U.S.C t a child suffering frm spina bifida wh is the child f a Vietnam veteran; Any amunt f crime victim cmpensatin (under the Victims f Crime Act) received thrugh crime victim assistance (r payment r reimbursement f the cst f such assistance) as determined under the Victims f Crime Act because f the cmmissin f a crime against the applicant under the Victims f Crime Act; and Allwances, earnings, and payments t individuals participating in prgrams under the Wrkfrce Investment Act f TREATMENT OF ASSETS Sme assistance prgrams require that families spend dwn assets befre they can participate. There is n asset limitatin fr participatin in the HTF prgram. Incme frm assets is, hwever, recgnized as Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 14 f 41

17 part f annual incme under the Part 5 definitin. T cmply with the Part 5 rules regarding assets, Owners must knw: (1) what t include as assets, (2) hw t cmpute the market and cash value f thse assets, and (3) hw t determine the incme frm the asset t be included in annual incme. Checking accunts, savings accunts, certificates f depsit and mney market accunts must be verified by a third party using the Asset Verificatin Frm. Other assets such as bnds, stcks, IRA's and retirement funds may be verified by dcumentatin prvided by the tenant, such as cpies f statements. What t Include as an Asset In general terms, an asset is a cash r nn-cash item that can be cnverted t cash. Exhibit 2.5 summarizes items that are and are nt t be cnsidered assets. (Nte: it is the incme earned e.g., interest n a savings accunt nt the value f the asset that is cunted in annual incme.) Examples and exercises are included in Appendix A which demnstrates hw incme frm assets is calculated. Exhibit 2.5 Part 5 Annual Incme Net Family Asset Inclusins and Exclusins Inclusins 1. Cash held in savings accunts, checking accunts, safe depsit bxes, hmes, etc. Fr savings accunts, use the current balance. Fr checking accunts, use the average 6-mnth balance. Assets held in freign cuntries are cnsidered assets. 2. Cash value f revcable trusts available t the applicant. 3. Equity in rental prperty r ther capital investments. Equity is the estimated current market value f the asset less the unpaid balance n all lans secured by the asset and all reasnable csts (e.g. brker fees) that wuld be incurred in selling the asset. 4. Cash value f stcks, bnds, Treasury bills, certificates f depsit, mutual funds, and mney market accunts. 5. Individual retirement, 401(k), and Kegh accunts (even thugh withdrawal wuld result in a penalty). 6. Retirement and pensin funds. 7. Cash value f life insurance plicies available t the individual befre death (e.g., surrender value f a whle life r universal life plicy). 8. Persnal prperty held as an investment such as gems, jewelry, cin cllectins, antique cars, etc. 9. Lump sum r ne-time receipts, such as inheritances, capital gains, lttery winnings, victim s restitutin, insurance settlements and ther amunts nt intended as peridic payments. 10. Mrtgages r deeds f trust held by an applicant. Exclusins 1. Necessary persnal prperty, except as nted in number 8 f Inclusins, such as clthing, furniture, cars, and vehicles specially equipped fr persns with disabilities. 2. Interest in Indian trust lands. 3. Assets nt effectively wned by the applicant. That is, when assets are held in an individual s name, but the assets and any incme they earn accrue t the benefit f smene else wh is nt a member f the husehld and that ther persn is respnsible fr incme taxes incurred n incme generated by the asset. 4. Assets nt accessible t and that prvide n incme fr the applicant (fr example, retirement accunts while the persn is still wrking and nt yet retired). 5. Term life insurance plicies. 6. Assets that are part f an active business. Business des nt include rental f prperties that are held as an investment and nt a main ccupatin. Ph: 701/ Fax: 701/ Tll Free 800/ / (TTY) Page 15 f 41