HUD Passbook Rate Change-follow up

Hopefully everyone is aware of the HUD passbook rate change. Effective February 1, 2015, the passbook savings rate to be used for all move-in, initial, annual, and interim recertifications when a family has net assets over $5,000 is .06% (that’s .0006 and no rounding).

This new rate will affect the following subsidy types:

• Project-based Section 8 New Construction
• Project-based Section 8 State Agency Financed
• Project-based Section 8 Substantial Rehabilitation
• Section 202/8
• Rural Housing Services (RHS) Section 515/8
• Project-based Section 8 Loan Management Set-Aside (LMSA)
• Project-based Section 8 Property Disposition Set-Aside (PDSA)
• Section 101 Rent Supplement
• Section 202/162 Project Assistance Contract (PAC)
• Section 202 Project Rental Assistance Contract (PRAC)
• Section 202 Senior Preservation Rental Assistance Contracts (SPRAC)
• Section 811 PRAC
• Section 811 Project Rental Assistance Demonstration units under a Rental Assistance Contract (PRA)
• Section 236
• Section 236 Rental Assistance Payments (RAP)
• Section 221(d)(3) Below Market Interest Rate (BMIR)

The most popular question right now is what do I do about the certifications I have previously processed which were effective for 2/1/2015? What about the implementation for annual’s, initial’s and interim’s effective 2/1/15. Does this mean as long as they are signed before 2/1/15 we can use the 2% no matter the effective date? And what if I have to do a retroactive certification or correction, will it now be based on the .06% retroactively or does it need to be broken out to certifications before 2/1/15?

I would say, based on the HUD Notice H2014-15, that any HUD 50059 processed prior to 02/01/15 would use the 2% passbook rate. The Notice states that the new passbook rate will be “announced” 02/01/15.

What we know for sure is that any cert effective prior to 2/1 will use the 2% rate. That includes retroactive certs done after 2/1 but effective prior to 2/1.
In addition any cert done on or after 2/1 and effective on or after 2/1 will of course use the new rate of .06%.

The question is certs effective on or after 2/1 but executed prior to 2/1. There are two possibilities:
1. The new rate must be used and any certs done earlier need to be corrected.
2. The old rate is used.

One final question: If the change in passbook rate doesn’t affect the rent calculation because assets are less than $5,000, do you think a correction would still be necessary?

The answer is that if the cash value of assets is less than $5000.00 then there is no comparison to the imputed income. In that case, there should be no need to create a correction as long as the certification is sent before 2/1/2015.

A word of caution for the future. HUD would like to give at least 90 days -notice of these changes. If the rate were going up, site software would need to be able to use the new rate on a cert done in advance. Waiting for the calendar date to come around could leave you out of compliance on an IC or MI cert.

The benefit for your tenants who have more than $5000 in assets (and for the sake of argument the Interest income was less than the amount of the imputed rate), under the current passbook rate, a resident with $30,000 in assets had a minimum of $600 in asset income included in their annual income figure. That will now drop to $18.00 under the .06% rate. That will result in a difference in rent each month depending on the actual income received from the assets.

According to Paragraph 7-10 in the HUD Handbook, tenants have the right to request an Interim Recertification if the change in income will result in a decrease in rent.