December 17, 2017

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HUD Reminds RAD Participants of HAP Effective Date Flexibility

As we head into the fourth quarter, HUD sent out an e-mail reminder Friday afternoon about flexibility when establishing Housing Assistance Payments (HAP) contract effective dates in Rental Assistance Demonstration (RAD) transactions. The January 2017 revision to the RAD Notice at Section 1.13(B)(5) gives Project Owners the ability to establish a HAP contract effective date of either 1) the first day of the month after closing, or 2) the first day of the second month following closing.  For example, this flexibility allows RAD transactions that close in October to have a HAP effective date of either November 1 or December 1.

The fourth quarter has historically been the busiest time for closing RAD transactions, and HUD made this policy change to try to relive some pressure from the November closing schedule. In the reminder, HUD suggested that those with hard November closing deadlines should consider closing in October but maintaining a December HAP effective date. HUD strongly encouraged working toward an October closing if a December 1 HAP effective date is critical to the transaction.

The HUD reminder also reiterated the milestones established by HUD in March for yearend closings:

Step

Deadline to close by Nov. 30, 2017

Deadline to close by Dec. 31, 2017

Receive a RAD Conversion Commitment (RCC)

August 16

September 15

Submit complete closing package

September 1

October 1

All RAD documents approved and ready for HUD signatures

November 16

December 14

HUD’s methodology for prioritizing yearend closings are based on several factors, including:

  • Adherence to the deadlines set forth in the table above.

  • Prioritization categories for CHAP processing listed in Section 1.11 of the RAD Notice.

  • Critical deadlines beyond the control of the PHA and its development team (note that HUD will require documentation of these deadlines when considering this factor).

  • Lower priority will be given to transactions when the original RCC expiration date has been extended past 90 days from issuance.

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About this Author

Amber Mohr, Baltimore, real estate attorney, ballard spahr law firm
Associate

Amber Mohr is an associate whose practice focuses on representing developers and public housing authorities in complex multifamily affordable housing developments using mixed-finance sources such as low income housing tax credit (LIHTC) equity, private debt, bond financing, and project-based rental assistance in addition to other financing sources and initiatives for acquisition and development. She frequently represents developers, public housing authorities, and LIHTC investors in public housing conversions under the Rental Assistance Demonstration (RAD) program,...

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