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TRACS 202D and Repayment Agreements

Although I have previously written an article on this subject before it wasn’t until now that there was some more clarity from TRACS 202D and the impending TRACS release in September. Through this release we now have a recovery system in place through a new Section 7 of the MAT 30 record.  However the question for most property managers is how do you keep a tenant who owes a debt to HUD from receiving federal housing subsidy?  In the affordable housing industry we have a system in place called the Active Previous Participation System (APPS).  The APPS system is how HUD keeps tabs on who has and is doing business with them.  A red flag is used to alert HUD that there is an issue with the entity, property owner and or principles of a company doing business with HUD.   I still feel strongly that we need a similar system (let’s call it the “Voucher Recovery System”) to keep track of tenants who owe money back to HUD.  Enterprise Income Verification (EIV) is a big step in the right direction.  But to adequately complete the process there has to be an in place process to identify, recover, track and eventually penalize.  HUD, through TRACS 202d implementation, now has a great system in place to track improper subsidy payments and the repayment of payments made in error.  This Voucher Recovery System should be used to prevent those from obtaining housing until the debt is paid as they are tracked through the Voucher /MAT30 record.   So let’s talk about the new Section 7 of the MAT 30 record which will be used perhaps in the future as a vehicle to successfully track tenants who leave owing a debt.  According to the TRACS 202d Specification:

Repayment Agreements: Repayment agreements come in two types: money being paid back by a tenant as a result of misreporting and money being paid back by an owner/agent as a result of an O/A error (See 4350.3, 8-20). Tenant and Owner repayment agreements used to be accounted for on the HAP voucher through OARQ miscellaneous accounting request records. Starting with TRACS 202D, these transactions will be reported on a new 52670-A, part 6 voucher form and sent to TRACS in a new MAT30, Section 7 record.

MAT30-section7

 

The proper way to address retroactive adjustments that result in repayment agreements is as follows: Allow the full amount of the adjustment(s) due to the retroactive action(s) to appear on the voucher.  Do not prevent the adjustments from appearing on the voucher. Reverse the amount of the adjustment subject to the repayment agreement by submitting a repayment agreement record of type Tenant or Owner (T or O).

As the tenant makes payments, enter them on the voucher as repayment agreement records.  Enter one request for each tenant making a payment in the voucher month.  If the tenant is making payments for multiple agreements, submit multiple repayment agreement records. The amount paid to HUD in a given month may be the amount collected less allowed collection expenses per handbook guidance.

Owner payments are handled in a similar way but there is never any reduction in the payment for expenses incurred.

If the tenant or O/A is repaying all of the money due in the same voucher month as when the retroactive adjustments appear, there is no reversing entry and no payment entries. There is no repayment agreement. However, the EIV flag would be set on any certifications being added or corrected as a result of the use of EIV. In this case (full repayment and no reversal) no Section 7 record is sent.

Improper payment tracking in the absence of a repayment agreement: If the tenant has signed retroactive certifications but does not sign a repayment agreement (Case 3 below) and does not immediately pay the amount owed, the certifications are transmitted and the reversing entry is also done with a Repayment Agreement record using an Agreement Type of None (N).

Notes: While not required, it is best not to process a gross rent change in the same voucher month as transactions that will be reversed subject to a repayment agreement. If it is possible, execute the GR in one month and bill for it and then execute the retroactive tenant transactions in another voucher month and bill for them. CA’s may not insist that a GR be implemented for a particular voucher.  However O/A’s need to keep in mind handbook rules for timing of GR submissions.

The unit number reported in the repayment record should always be the unit in which the household is living on the first of the month the current voucher is created or the unit they were last in if the payment is received after move-out.

Scenarios: Questions have come up on the mechanics of when corrected certifications are submitted and whether or not adjustments related to transmitted certifications may be reversed if there is no repayment agreement and the household has not paid the amount owed.  There are several scenarios after EIV or other methods disclose potential reporting problems:

1. Tenant refuses to cooperate in the investigation and moves out without signing any certifications. There is no repayment agreement.

  • No retroactive certifications are created or transmitted.

2. Tenant remains in unit; verifications are completed; tenant does not sign certifications. There is no repayment agreement.

  • No retroactive certifications are created or transmitted.

3. Tenant signs certifications but does not sign a repayment agreement

  • Certifications are transmitted and the total adjustments caused by the certifications are reversed with a Section 7 record of type N (None). Additional information can be found in HUD Handbook 4350.3 Revision 1, Paragraph 8-20

4. Tenant signs certifications and repayment agreement.

  • Certifications are transmitted and the total adjustments caused by the certifications are reversed. The owner/agent uses the Repayment Agreement record to record the reversal. The Agreement Type is T (Tenant).  Additional information can be found in HUD Handbook 4350.3 Revision 1, Paragraph 8-20

Rules: If an investigation results in corrected/new certifications that decrease the rent for the tenant, see HUD Handbook 4350.3 Revision 1, Paragraph 8-21 for instructions on how to handle the refund.

If investigation determines that a household was over income at MI, the household is allowed to remain in the unit and subsidy is recalculated.  If recalculation of the MI certification in light of newer income determinations results in the household being at $0 subsidy, the household should be terminated effective on the MI date and using the NS termination code so that subsidy is automatically returned for the MI date.  Should the household’s income subsequently drop such that they are eligible for subsidy, an IC should be performed.

If the tenant or O/A has multiple repayment agreements running simultaneously (one agreement for one situation and another one for a later one), payments should be reported separately for each agreement so that the person auditing the transactions can see what is happening. However, if there is more than one payment in a month for the same agreement, the payments may be combined and reported as one transaction.

If a repayment agreement is renegotiated as a result of changed tenant financial circumstances or for any other reason, reporting for the revised agreement must be under the same Agreement Id as used in the original Section 7 record.  Doing this permits HUD and CA’s to track all payments related to the original misreporting.

If there is a repayment agreement in effect and a tenant is involved in a new instance of misreporting, a new agreement must be created.  Do not add the amount of the new misreporting to an existing agreement. Having a new agreement allows HUD and CA’s to properly audit payments related to specific instances of misreporting.

Site software needs to allow for the MAT30, Section 7 Record, Field 7 (Agreement Date) to accept past dates for current active repayment agreements.  This situation arises the first time a payment for an existing agreement is submitted in TRACS 202D and also when an O/A changes software and needs to capture original agreement dates.

Transitioning from TRACS 202C to 202D: In TRACS 202C, repayment agreement transactions are transmitted as Miscellaneous Accounting Requests of type OARQ with specific requirements for the formatting of the comment field. Under 202D, repayment agreement transactions are no longer to be transmitted as Miscellaneous Requests, even for agreements that have been in process for some time.  Instead ALL such transactions are to be transmitted as MAT30, Section 7 Repayment Agreement records. In practice, this means that the first 202D transaction for a particular agreement must include information that may or may not have been stored previously in site software. Specifically, an Agreement ID that is unique within the project must be assigned and transmitted unchanged for all subsequent transactions for that agreement. The original Agreement Date is required along with the original Agreement Amount. The former date will always be retroactive for an existing agreement. The latter amount is that of the original agreement.  Both the Agreement Date and Agreement Amounts are from the original agreement even if the agreement has subsequently been renegotiated to change the payment terms. Finally, the Ending Balance on the agreement as a result of the current transaction must be filled.