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Due Diligence Matters

By Tari Bradley, Trainer

As we begin the new-year, it is common to create new resolutions and goals. To create a new checklist of items needing addressed and a plan of action to get them all done: both personally and for work. An important item to include is to be more diligent. As a professional in the affordable housing industry, we are charged with the process of gathering or disclosing relevant and reliable information, and the degree of care that is to be reasonably expected or that is legally required.[i] This fundamental commitment to an obvious, but overlooked and important practice referred to as “due diligence”, is a key component in continued compliance, and can set the tone and success of a property.

Let us take a moment and review two recent and important events that need to be addressed and implemented. When determining how or when to apply these changes, one needs to be familiar with the company’s written policy, the qualifying criteria of the property and the state where the property is located.

Social Security and Supplemental Security Income (COLA)

In October, the Social Security Administration published an announcement that in January 2018, monthly Social Security and Supplemental Security Income (SSI) benefits will experience an increase with a 2.0 percent cost-of-living adjustment; referred to as COLA. For additional details on this, please refer to the link provided.

https://www.ssa.gov/news/cola/

Minimum Wage Increases

With the New Year comes pay raises in certain states. It is important to know if your state is one of 18 states where the minimum wage experienced an increase on January 1, 2018. Certain states, like Oregon, have an alternative date where the minimum wage may be increased. For example, Oregon’s minimum wage will increase on July 1, 2018. Understanding when to apply a known rate change that will affect the annual income of a household is a key component of due diligence and compliance.

Fixing America’s Surface Transportation (FAST) Act

Looking ahead, HUD’s Interim Final Rule on Streamlining Administrative Regulations for Multifamily Housing Programs and Implementing Family Income Reviews under the Fixing America's Surface Transportation (FAST) Act is effective on March 12, 2018.

Some of the key components that may be of importance and should be further analyzed, and if appropriate followed up with a clear and written policy, are noted below.

Streamlined Certification of Fixed Income 

Under this interim final rule, during years two and three after a full income review, PHAs and owners in the HCV, PH, and PBRA programs may determine a family’s fixed income by using a verified COLA or rate of interest on the individual sources of fixed income. In the case of a family with at least 90 percent of the family’s unadjusted income from fixed income, a PHA or owner using streamlined income verification may, but is not required to, adjust the non-fixed income. A full recertification will be required every three years, and families will need to certify that all the information they submit for income verification, including the sources of income, is accurate. For families with at least one source of fixed income, but for which less than 90 percent of the family’s income is from fixed sources, PHAs and owners must verify and adjust non-fixed sources annually.

Utility Reimbursements 

This interim final rule explicitly allows owners to make reimbursements of $45 or less (per quarter) on a quarterly basis. Owners exercising this option will be required to have a policy in place to assist tenants for whom the quarterly reimbursements will pose a financial hardship.

Family Declaration of Assets Under $5,000 

This rule amends the regulations so that, for a family that has net assets equal to or less than $5,000, an owner, at recertification, may accept a family’s declaration that it has net assets equal to or less than $5,000, without annually taking additional steps to verify the accuracy of the declaration. Third-party verification of all family assets will be required every 3 years.

In Summary

Take a moment to note your company policy and the program regulation for your property. Do you have a calendar or system providing important dates or deadlines? These are just a few important changes that will need to be reviewed and analyzed to determine if applicable to your property or program. Applying procedures and policies that demonstrate due diligence work best when consistent and in line with program regulations, landlord-tenant laws and fair housing.

[i] (Webster’s New World College Dictionary, 4th Edition. Copyright © 2010 by Houghton Mifflin Harcourt. All rights reserved.)

 

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