14.4 Subsidy Layering Review

A. Subsidy Layering Review (SLR) requirements have been eliminated for LIHTC projects using FHAinsured loans but no other sources of Federal subsidy. Thus, most of HUD’s mortgage insurance transactions are exempt from the formal SLR. The Lender and HUD Underwriter must always review the Sources and Uses Statements for both mortgageable and non-mortgageable funds, however, to ensure that costs are not being funded twice and that all costs funded from mortgage proceeds are appropriate and necessary to complete the transaction[63] . Documentation must be included in the Firm Application. To ensure accuracy, all costs must be identified and should not be categorized as “other” on the Sources and Uses statement.

B. In addition to the analysis of the Sources and Uses Statement in the FHA loan underwriting, other public funds combined with the FHA mortgage in a Tax Credit project may require a formal SLR. These public funds might include Home Investment Partnerships Program (HOME) funds and other Federal loans or grants, secondary financing provided from state or local sources, or capitalized debt supported by abovemarket, budget-based Section 8 rents. If those funds require a SLR, either a state agency, another public source, or HUD will perform the review based on the FHA MAP Lender’s analysis.

C. Criterion 11 on the Supplement to Project Analysis (form HUD-92264-A) is not required. It may be used as an optional worksheet.