Note: Risk Sharing — HUD Section 8 Renewal Policy Guidebook

Chapter Five – Published March 2023

F. Ineligible Project Determinations: A project owner who is suspended or debarred is ineligible for a full debt restructuring (“Full”). However, even if the project is ineligible for a Full, the project may remain eligible as a project that is financially viable without a debt restructuring after the rents are reduced to comparable market rents (“Lite”). This kind of project should be referred to Recap for a rent determination. Eligibility for a Lite will be determined on a case by case basis by Recap after a review of the project’s underwriting, which will include the results of the RCS and an analysis of the project’s expenses. If the project is determined to be ineligible for a Lite and the owner or project has been rejected, Recap will return the HAP Contract to the AE. If the HAP Contract is renewed even though the project is ineligible for a Lite, the AE /CA must renew the HAP Contract using a Watch List Contract (HUD-9643) at Recap-determined comparable Market Rents. The project should be designated, monitored and entered into the Integrated Real Estate Management System (IREMS) as a project subject to a Watch List Contract, and defined in IREMS as a project with a loan that failed M2M restructuring and is therefore operating under a Watch List Contract. Follow OAMPO guidance on monitoring of projects subject to a Watch List Contract.
G. Mod Rehab Projects: Projects with Mod Rehab HAP contracts are eligible for Recap restructuring before Sunset if the projects meet the requirements in Section B, above. The Interim (Full) Mark-to-Market Renewal Contract (HUD-9640) is used for entry into Recap for a Mark-to-Market restructuring.
H. Section 202 Projects Refinanced for a Second time: Projects financed under Section 202 Elderly and Disabled Housing Direct Loan Program (Section 202) are eligible for restructuring if; 1) the project has been refinanced at least two times if the second refinance using a loan insured under the National Housing Act, 2) the project refinanced with a FHA insured loan at the time of the 202 refinancing but did not refinance under the terms in Notice 13-17.All other projects refinanced under Section 202 are ineligible for restructuring under Mark-to-Market.