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Prepayment
and the
USDA Voucher Program
USDA Rural Development
Multifamily Housing Programs AHMA and ARHC Conference
April 2015
What Happens When An Owner
Prepays?
• ‘Prepayment’ means that the USDA Rural Development
loan (mortgage) is being paid off early.
• Owners of USDA Rural Development financed projects
receive a subsidy on the interest on their USDA loan
which allows them to set rents lower than if they had a
bank loan. When an Owner pays off their USDA loan, the
subsidy on interest goes away.
• Some units in a USDA Rural Development financed
projects also receive Rental Assistance (RA) subsidy for
the tenants. Rental Assistance pays all or part of the
rent for tenants who live in these units. When an Owner
pays off their loan, Rental Assistance is no longer
available to tenants.
What Happens When An Owner
Prepays?
• A tenant’s lease states the amount of rent due each month.
• The amount stated on the lease usually does not take into
consideration the amount of Rental Assistance (RA) received
by the tenant.
• RA is paid directly to the landlord by Rural Development,
and tenant pays the difference. For example:
– Rent shown on lease
– Rental Assistance paid by RD
– Amount paid by tenant
$600
-$300
$300
• When the loan is paid off, Rental Assistance goes away.
What are a Tenant’s Options When An
Owner Prepays?
• Letter of Priority Entitlement (LOPE Letter)
• Transfer Rental Assistance to another Rural Development
Project
• Use RD Voucher and stay in current apartment
• Use RD Voucher and go to different rental
• Stay in current rental and pay rent without benefit of Rental
Assistance or Voucher (rent will likely increase)
• Look for other subsidized or unsubsidized housing options
Letter of Priority Entitlement (LOPE)
Letter of Priority Entitlement (LOPE Letter)
•A LOPE letter moves you to the top of the waiting list at another Rural Development
financed project.
•You have one year from the date of Prepayment to apply for a LOPE letter. Contact the
local USDA office for a LOPE letter.
•To obtain a list of Rural Development financed properties where the LOPE letter can
be used, go to the USDA Rural Development website:
http://www.rd.usda.gov/
Select ‘Multi-Family Housing Rentals.’ A map of the Unites States appears.
Select the State and then the County where you want to live
A list of RD financed projects in that County will come up
Select a project for more information about that project
Contact information for the project is listed – call for information on
vacancies, etc. Let them know you have a LOPE letter.
Transfer Rental Assistance to Another USDA Rural Development Project
• Tenants receiving USDA Rental Assistance (RA) on date of
prepayment may transfer their RA to another USDA property.
• This must be done within 4 months of the date of prepayment!
• You can use your LOPE letter to go to the top of the waiting
list at another Rural Development financed project, and then
transfer the RA to an unsubsidized unit. Follow instructions in
previous slides for finding an RD financed project.
• After finding a unit, contact the USDA Rural Development
Washington State Office or the Local Office to transfer Rental
Assistance.
• If you move again, the Rental Assistance will not move with
you – it stays with first project you moved to.
Stay in Current Apartment
Stay in current apartment with Voucher
•With owner’s concurrence, terminate the existing lease and
sign a new lease that includes provision for the RD Voucher
Program (RDVP).
•Remain at current residence under terms of existing lease and
upon expiration of lease, sign a new lease that includes
provision for payment of the RD Voucher.
•The Voucher cannot begin until a new lease is signed.
•If you use RD Voucher to stay in current apartment, and you
decide to move later, you can take the voucher with you.
Stay in current apartment without Voucher
•Landlords are not required to accept RD Vouchers.
Move to a Different Rental
Use RD Voucher and look for another rental.
•New Landlord needs to be willing to accept the RD Voucher
•Find new rental within 60 days of receipt of Voucher. Can request
a 60 day extension.
•Use anywhere in the United State and its territories
•The Voucher will move with you anywhere you go as long as you
remain eligible for the RD Voucher.
Find Another Rental without using the RD Voucher
•Look for another subsidized rental (such as Section 8, Low Income
Tax Credit, etc.) or move to a non-subsidized rental.
•If you decline the RD Voucher, you will never have the
opportunity again.
RD Projects that have ProjectBased Section 8
Some RD Projects have ‘Project-based’ Section 8
Assistance
•Tenants receive Section 8 assistance instead of
Rural Development Rental Assistance
•Tenants receiving ‘Project-based’ Section 8
assistance at the time of Prepayment may,
– elect to remain in that property and continue
to receive Section 8 rental assistance, or
– they may apply for a USDA voucher.
Purpose of the RD Voucher Program
• The USDA Rural Development Voucher Program (RDVP)
was authorized by Congress to provide some protection
against expected rent increases for tenants who live in
USDA Rural Development financed properties that pay
off their USDA loans early.
• RD Vouchers are available to all eligible tenants living in
the USDA financed property at the time of prepayment
for as long as there are funds available.
• The RD Voucher helps tenants by providing a subsidy to
help with rent payments.
Who is Eligible for an RD Voucher?
Three basic qualifications for the RD Voucher:
1. Low-income household (income below 80% of area
median income)
2. Tenant of property on the date of prepayment
3.
US Citizens, US non-citizen national, or qualified
alien.
•Tenants who were not previously receiving RD Rental
Assistance are also eligible to receive a RD Voucher if they
meet the above three basic qualifications.
What is the Amount of the RD Voucher?
• The voucher is based on comparable market rents for
similar unsubsidized apartments.
• The RD Voucher amount is the difference between the
comparable market rent for similar apartments and the
tenant’s portion of the rent on the date of prepayment.
• For example:
Comparable Market Rent
Minus Tenant Portion of Rent
Amount of the Voucher
$800
$300
$500
• If utilities are charged to the tenant separately, the RD
Voucher will not cover the payment of utilities even if the
tenant previously received a utility allowance from USDA.
How do I get an RD Voucher?
• Tenants will receive a Voucher Determination Letter with an
RD Voucher obligation form after prepayment. This letter will
advise tenants of the amount of their voucher and next steps.
• Return the RD Voucher obligation form, proof of citizenship
and verification of income within 10 months of prepayment.
• If eligible, tenant will receive an RD Voucher and will need to
locate a rental unit within 60 days of receipt of voucher (or
stay at current rental if owner will accept a Voucher). Upon
request, an additional 60 days may be granted.
• If staying in current rental, tenant and landlord may agree to
terminate existing lease and sign new lease, OR, they may
sign a new lease upon expiration of existing lease. RD
Voucher payments can begin only when the new lease begins.
• Landlord must agree to use Voucher Program lease provisions
and the proposed rental unit must pass Rural Development
inspection.
More about RD Vouchers
• The Voucher obligation form along with citizenship and
income information must be returned within 10 months of
Prepayment!
• Household size and/or income are not factors in
determining the amount of the voucher.
• Vouchers may be used at the tenants current apartment
(if Owner will accept the Voucher) or may be used at any
other rental anywhere in the Unites States and its
territories that tenant choses to move to - if the new
Landlord will accept the Voucher and unit passes
inspection. This includes manufactured housing.
• If not sure if you want to stay or go, you can use voucher
at current apartment now, and then if you decide you
want to move at a later date, you can take the voucher
with you when you move.
More about RD Vouchers
• Vouchers cannot be used for rental units that already receive
subsidy, such as RD Rental Assistance, Section 8, or other
public subsidy.
• Vouchers are renewed annually based upon availability of
funds. Tenants must return requested info on time to
continue Voucher.
• Participation in the RD Voucher Program is voluntary – no
tenant is required to accept a Voucher.
• Tenants need to comply with ‘Obligations of the Family’
section of the Voucher in order to retain the Voucher subsidy.
• If a tenant chooses to stop using the Voucher, moves to a
property where the Voucher is not accepted, or becomes
ineligible for the Voucher program, the Voucher will be
terminated.
• Once terminated, the Voucher will never be available again.
More about RD Vouchers
• The amount of the RD Voucher will not increase,
regardless of increases in rent.
• The amount of the RD Voucher will decrease if tenant
moves to a property where rent is less than the voucher.
– For example, Voucher is for $500 and tenant moves to
a property where rent is $400. Voucher would
decrease to $400.
– Once Voucher decreases, it will never increase.
• An increase in household income above 80% of median
household income for the area will disqualify a tenant
household from continued use of Voucher Program.
• Only one voucher can be used per rental.
More about RD Vouchers
• Voucher is issued to the primary tenant only.
• In the event of death of primary tenant, the Voucher would
pass to the co-tenant.
• If Voucher holder leaves the household, the voucher will
not be transferred to remaining household members.
• If Voucher holder is incarcerated for less than 3 months,
Voucher payments will continue for the household. If
incarceration lasts more than 3 months, the Voucher will be
terminated.
• Voucher may be terminated for certain criminal activities
and alcohol abuse.
More about RD Vouchers
• RD Vouchers are handled by Quadel Consulting
Corporation.
• Contact Quadel with questions about specific rental
situations at: 866-258-1167
• Tenants may appeal the income-eligibility determination or
the voucher amount determination.
• Median household income is calculated for every county in
the country, and may be different from the county where
you currently live. Before moving to a new area, check
the median household income for that area - if you are
over the income limits for the area, you will not be
eligible for the voucher program.
Tenant Responsibilities - Vouchers
•
Return required forms & provide true/complete documentation on time.
•
Use the apt for tenant/family and as tenant’s only residence. Tenant
may not have an ownership interest in the property they are renting.
•
Pay tenant’s portion of rent on time & don’t damage property.
•
Comply with the lease including provisions of the Voucher Program.
•
Allow RD to inspect at reasonable times and after reasonable notice.
•
No subletting or assigning the lease.
•
No criminal activity. No alcohol abuse that causes a disturbance or is
harmful to other residents.
•
Notify Quadel and owner before moving or terminating the lease.
Contact Quadel at [email protected] or call 1-866-258-1167.
•
Promptly give Quadel a copy of any eviction notice.
Commonly Asked Questions
Q: What does the RD voucher do?
A: The voucher is a subsidy to help pay the rent for
eligible
tenants after the RD loan is paid off.
Q: How much is the voucher worth?
A: The amount of the voucher is the difference between
the
net tenant contribution for rent and the Comparable
Market
Rent for a unit. EXAMPLE: If an eligible tenant
pays $300 a month, and the Comparable Market rent is $800,
the
voucher amount for that tenant will be set at $500.
Q: Can I take the voucher amount and spend it any way I
want?
A: No. The voucher is good only for rent; it is paid
directly to the landlord.
Commonly Asked Questions
Q: If I move, and if the rent is higher than my current rent,
will the voucher amount be increased?
If
any
may
be
A: No. The amount of the voucher will never increase.
you move to a higher rent unit, you will have to pay
increase in rent. If you move to a lower rent unit, the
voucher amount is not changed, but your contribution
be lower. However, the amount of the voucher cannot
more than the rent.
Q: Can two or more of us pool our vouchers and rent a really
nice place?
A: No. Only one voucher can be used per lease.
Commonly Asked Questions
Q: Can I take the voucher with me if I move to another rental?
A: Most likely. The Voucher can be used in any rental
situation anywhere in the United States if the owner
will accept the Voucher, the unit passes RD inspection, and
you are under the low income limit for that area. The only
exception is Section 8 housing, RD Rental Assistance
units and other publicly subsidized units. This is because
these units are already subsidized.
Q: Is the RD Voucher only for tenants who receive Rental
Assistance from the USDA?
A: No. All tenants with incomes less than 80% of area
median income are potentially eligible to receive a voucher,
regardless of whether or not they are currently receiving
Rental Assistance.
Commonly Asked Questions
Q: How long will voucher payments be made?
A: The Voucher is worth 12 monthly payments. RD will
continue to renew the voucher for an additional 12 months
so long as funding is available and the tenant remains
below 80% of area median household income (low income).
Q: If there is a change in household income, will it affect the
voucher amount?
A: It depends. Initial eligibility for the voucher is based
on
household income being at or below 80% of the area
median
household income (low income). The amount of the
voucher
will not change if income goes down or up.
However, if at the time of
renewal, household income is
more than 80% of area
median household income,
tenant will be ineligible to
receive further assistance.
Commonly Asked Questions
Q: If I move to a new area, can I loose my voucher if I am
over the low income limit for that area?
A: Yes. Look before you leap! There are two ways to
find
the low income limit for an area where you are
considering
moving.
Go to the Rural Development website:
http://www.rd.usda.gov/
Select ‘Multi-Family Housing Rentals.’ A map of the US appears.
Select the State and then the County where you want to live
A list of RD financed projects in that County will come up
Select the project you are interested in
Select ‘Contact Servicing Office.’ Call or email the office and ask
them
for the LOW INCOME LIMIT for the County where you want to
live.
NOTE: If you select ‘View Income Limit’, it will show you the
‘MODERATE’ income limit. What you need is the LOW
INCOME
LIMIT.
Find Low Income Limit On-line
The second way to find the low income limits for an area is to look them up
on-line.
Go to the Rural Development website:
http://www.rd.usda.gov/
Select ‘Housing Assistance’
Select ‘Income & Housing Eligibility’
Under ‘Income Eligibility’
Select ‘Single Family Housing’
Select the State from drop down list
Select County from drop down list
Enter Household Member Information
Select ‘Next’
Enter Monthly Gross Income
Select ‘Finish’
If it says you are ELIGIBLE for the Section 502 Direct
Housing Loan Program, then you are under the low
income limit for that county & eligible for the Voucher
If it says you are INELIGIBLE for the Section 502 Direct
Housing Loan program, then you are over the low income
limit for that County and are NOT eligible for the Voucher.
The maximum income for the County is also given