Residual Receipts Note (Nonprofit and Limited Dividend Mortgagor)
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1. 3/04/2014 0
We are processing several 202 prepayment applications for non-profit owners that will be refinancing under 223(f). Should promissory notes for these types of properties be in the form of a Residual Receipts Note or a Surplus Cash Note? Although the Regulatory Agreements indicate profit motivated, the ownership structures are non-profit entities. We processed several with Residual Receipts Notes, now the owners' attorney is requesting that they be processed with Surplus Cash Notes instead
HUD is engaged the Paperwork Reduction Act process for revision of the multifamily loan documents and has proposed adding a rider to incorporate Section 8 residual receipts requirements into the Regulatory Agreement. In the interim, Housing must consult requirements contained in the Section 8 contract to determine if a residual receipts account is required. If so, the owner would execute a Residual Receipts Note. If not, the owner would execute a Surplus Cash Note.
If the HAP contract is subject to a “new regulation” HAP contract, and the contract contains a provision requiring the project owner to maintain a residual receipts account, the residual receipts account remain with the property and would be unaffected by any prepayment of the Section 202 direct loan. (See the HAP contract provision captioned “Use of Project Funds” section 2.6(b) of HUD-52522D, which was used for projects subject to parts 880, 881, 885, and 886 subpart C).
However, some new regulation HAP contracts do not require a residual receipts account. Regarding those contracts, the project owner was relieved of the requirement to maintain a residual receipts account.
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