Dollars and Cents Keeping Up With Program Income Presented by: Jim Wallace August 29, 2013

Dollars and CentsKeeping Up With Program Income

Presented by: Jim WallaceAugust 29, 2013

New HUD Program Income Regulations For CDBG Funded Projects

• Effective May 23, 2012.

• What they mean for you.

What You Need To Know – HUD CDBG Regs

• New Program Income Definition– gross proceeds received in a 12-month period from a

project funded with CDBG monies of $35,000 or more.

• Miscellaneous Revenue– gross proceeds received in a 12-month period from a

project funded with CDBG monies less than $35,000.

PI - What You Need To Know - DHCD Policy

• CDBG Funded Housing Rehab Projects

1. Grantees may retain 100% of Miscellaneous Revenue and/or Program Income if have DHCD approved PI Plan (one exception).

2. Exception – Lump Sum receipts of $35,000 or more must be reported immediately to DHCD and returned to DHCD.

3. Gross Proceeds will be monitored at compliance.• No more Active and Inactive PI.

PI - What You Need To Know - DHCD Policy

• CDBG GP Reporting and Tracking

1. 12-month period = July 1 – June 30.2. Reports will be required for every year for 5 years from

date of Administrative Closeout. Example – December 1, 2013 date of Administrative Closeout Report 1 = December 1, 2013 – June 30, 2014 (7 months) Report 2 = July 1, 2014 – June 30, 2015 (19 months) Report 3 = July 1, 2015 – June 30, 2016 (31 months) Report 4 = July 1, 2016 – June 30, 2017 (43 months) Report 5 = July 1, 2017 – June 30, 2018 (55 months) Report 6 = July 1, 2018 – November 30, 2018 (60 months)

What You Need To Know - DHCD Policy

• CDBG GP Reporting and Tracking 3. DHCD will issue report forms in July of each year.4. Forms due to DHCD in mid-August.5. Report Gross Proceeds for that reporting period.6. CDBG Gross Proceeds from Grantees receiving more

than one CDBG contract during that 5 year window must report the aggregate of Gross Proceeds received in any given year.

7. Effective date of new policies - July 1, 2013. 8. Applies to all open contracts.

Dollars and CentsLoan Processing

Presented by: Jim WallaceAugust 29, 2013

Loan Processing

• DHCD housing rehab assistance is a loan program.

• Beneficiaries are to repay the DHCD funds that were expended on their houses to bring them up to HQS standards.

• The way beneficiaries are to repay their loans is based on ________________.

Loan Processing

• DHCD housing rehab assistance is a loan program.

• Beneficiaries are to repay the DHCD funds that were expended on their houses to bring them up to HQS standards.

• The way beneficiaries are to repay their loans is based on their ability-to-pay.

Determining Ability-To-PayThe Beginning

Scenario- Bill and Evelyn Johnson are in their 40’s and have 3 children

ages, 14, 11, and 7.- Their gross income is $2,620 per month.- Their out-of-pocket medical expenses are $843*.- They have an existing monthly mortgage payment of $250.- Their annual home insurance premium is $504.- Their house and lot are appraised at $40,800.- The county tax rate is $0.50/$100 of appraised value.- Their monthly utility allowance is $199.- Total costs to rehab their house is $55,000.

Determining Ability-To-PayABILITY-TO-PAY WORKSHEET

Homeowners and Renters

Step A: Gross Household Income: $2,620 x 12 $___31,440.00____(A)

Step B: (-) Dependents 3 x $480 $___ (1,440.00)___ (B) $480 for each dependent under the age of 18 years old.

Do not include head of household or spouse.

Step C: (-) Elderly 0 $________0______ (C) $400 per elderly Household (age 62 years and older).

Step D: (-) Other Deductibles 0 $________0______ (D) Include documented, out-of pocket medical expenses in excess of three (3%) of annual income.Out-of-pocket medical expenses = $843.00 (NA) . 3% of GHI = $931.20

Step E: A- (B+C+D) =Adjusted Gross Income (AGI) $____30,000.00___ (E)

Step F: Monthly Income (AGI/12) $_____2,500.00___ (F)

Step G: Income Available for Housing $______ 625.00___ (G)(Monthly Income of Homeowners x .25) (Monthly Income of Renters x not to exceed .35)

Step H: Monthly Housing Costs

Mortgage Payment $ __250.00_ Home Insurance $ __ 42.00_ $504 AP ÷ 12 mo.Real Estate Taxes $ ___17.00_ $0.50. per $100 AV = $40,800 AV ÷ $100 = $408 X $0.50 = $204 ÷ 12 = $17.00Utility Allowance $ 199.00_ (gas, electricity, heat, water, public sewer & garbage only)

Total Monthly Housing Costs $______508.00___ (H)

Step I: G- H = Amount Available for Loan Repayment $______117.00___ (I)

Determining Monthly Loan Payment

LOAN REPAYMENT WORKSHEET

Step A: Loan Amount (base, exceptions and demolition costs) (A) $ 55,000.00

Step B: Monthly Amount to Fully Amortize Loan (B) $ 458.33 (For 0%, 10 years - divide loan amount by 120) $55,000.00 ÷ 120 = $458.33

Step C: Client Payment Amount (C) $ 117.00(From Ability to Pay Calculations—line I)

Step D: Monthly Amount Forgiven Subtract (C) from (B) = (D) (D) $ 341.33

Step E: If (B) is greater than (C): (C) is the monthly payment from client; (D) is the monthly loan amount forgiven;

BUT

If (C) is greater than (B): nothing is forgiven and (B) is the monthly payment from client.

Loan Servicing

• The responsibility of entities servicing loans is to collect, forgive and otherwise manage payments monthly. (page 16, Appendix 17)

• The servicing agents are to maintain records of loan balances, final payment due dates, and to make good a faith effort to collect delinquent loans. (page 16, Appendix 17)

• DHCD prefers that any missed payments (ATP and forgiven amounts) be added to the lien period. (page 16, Appendix 17)

• ATP may be reviewed on an annual basis. It must be recalculated if the compensation of the household changes or if requested by the beneficiary, and the monthly loan payment be adjusted accordingly. (page 14, Appendix 17)

Loan Servicing

Example – Year 1Bill & Evelyn Johnson

Month 1 Month 2 Month 3 Month 4 Month 5 Month 12

Month Beginning Loan Obligation 55,00000 54,541.67 54,083.34 54,083.34 53,625.01 55,416.70

Total Loan Payment Amount 458.33 458.33 458.33 458.33 458.33 458.33

Amount Due Based on Ability-To-Pay 117.00 117.00 117.00 117.00 117.00 117.00

Amount Paid 117.00 117.00 0 117.00 117.00 117.00

Amount Forgiven 341.00 341.00 0 341.00 341.00 341.00

Amount Credited 458.33

Deferred/Account Payable 0 0 458.33 458.33 458.33 458.33

Cumulative Amount Paid 117.00

Cumulative Amount Credited 458.33 916.66 916.66 1,374.99 1,833.32 5,041.63

Month Ending Loan Obligation 54,541.67 54,083.34 54,083.34 53,625.01 53,166.68 49,958.37

Loan Servicing






Amount Paid 117.00 117.00 0 117.00 117.00 117.00

Amount Forgiven 341.00 341.00 0 341.00 341.00 341.00

Amount Credited 458.33 458.33 0 458.33 458.33 458.33


Cumulative Amount Paid 117.00 234.00



Loan Servicing






Amount Paid 117.00 117.00 0 117.00 117.00 117.00

Amount Forgiven 341.00 341.00 0 341.00 341.00 341.00

Amount Credited 458.33 458.33 0 458.33 458.33 458.33

Deferred/Account Payable 0 0 458.33

Cumulative Amount Paid 117.00 234.00 234.00



Loan Servicing



Month Beginning Loan Obligation 55,000.00 54,541.67 54,083.34 54,083.34 53,625.01 55,416.70



Amount Paid 117.00 117.00 0 117.00 117.00 117.00

Amount Forgiven 341.00 341.00 0 341.00 341.00 341.00

Amount Credited 458.33 458.33 0 458.33 458.33 458.33


Cumulative Amount Paid 117.00 234.00 234.00 351.00



Loan Servicing






Amount Paid 117.00 117.00 0 117.00 117.00 117.00

Amount Forgiven 341.00 341.00 0 341.00 341.00 341.00

Amount Credited 458.33 458.33 0 458.33 458.33 458.33


Cumulative Amount Paid 117.00 234.00 234.00 351.00 468.00



Loan Servicing






Amount Paid 117.00 117.00 0 117.00 117.00 117.00

Amount Forgiven 341.00 341.00 0 341.00 341.00 341.00

Amount Credited 458.33 458.33 0 458.33 458.33 458.33


Cumulative Amount Paid 117.00 234.00 234.00 351.00 468.00 1,287.00



Loan ServicingExample – Year 2

Bill & Evelyn JohnsonATP Increased by $100.00 per Month

Month 12 Month 13 Month 14 Month 15 Month 12

Month Beginning Loan Obligation 50,416.70 49,500.04 54,083.34

53,625.01

55,416.70

Total Loan Payment Amount 458.33 458.33 458.33 458.33 458.33

Amount Due Based on Ability-To-Pay 117.00 217.00 117.00 117.00 117.00

Amount Paid 117.00 217.00 117.00 117.00 117.00

Amount Forgiven 341.00 241.33 341.00 341.00 341.00

Amount Credited 458.33 458.33 458.33 458.33 458.33

Deferred/Account Payable 458.33 0 458.33 458.33 458.33

Cumulative Amount Paid 1,287.00 1,504.00

Cumulative Amount Credited 5,041.63 5,958.29 1,374.99 1,833.32 5,041.63

Month Ending Loan Obligation 49,958.37 49,041.71 53,625.01

53,166.68

49,958.37




Month Beginning Loan Obligation 55,416.70 49,500.04 49,041.71 53,625.01 55,416.70



Amount Paid 117.00 217.00 217.00 117.00 117.00

Amount Forgiven 341.00 241.33 241.33 341.00 341.00

Amount Credited 458.33 458.33 458.33 458.33 458.33

Deferred/Account Payable 458.33 0 0 458.33 458.33

Cumulative Amount Paid 1,287.00 1,504.00 1,721.00


Month Ending Loan Obligation 49,958.37 49,041.71 48,583.38 53,166.68 49,958.37







Amount Paid 117.00 217.00 217.00 0 117.00

Amount Forgiven 341.00 241.33 241.33 0 341.00

Amount Credited 458.33 458.33 458.33 458.33 458.33


Cumulative Amount Paid 1,287.00 1,504.00 1,721.00 1,721.00









Amount Paid 117.00 217.00 217.00 0 217.00

Amount Forgiven 341.00 241.33 241.33 0 241.33

Amount Credited 458.33 458.33 458.33 458.33 458.33


Cumulative Amount Paid 1,287.00 1,504.00 1,721.00 1,721.00 1,938.00



Loan Servicing

• Key Points

1. Keep track of loan obligations and loan payments.

2. Grantee/subrecipient has discretion in how it deals with missed payments.a) Can forgive based on extenuating circumstances.b) Can defer until paid, i.e., extend the term.c) Can work out payment plan.d) Can foreclose on property.e) Expected to use sound judgment.

Loan Servicing

• Key Points

3. Expected to review ATP annually.

4. Can assess a loan processing fee of up to $5 per loan per month to offset loan servicing costs. (30 x $5 = $150 per month or $1,800.00 annually)

5. May utilize 10% of program income expended annually for admin.

6. DHCD policy is that no more than 10% of miscellaneous income expended is to utilized for admin.

Questions

Documents

Dollars and Cents Keeping Up With Program Income Presented by: Jim Wallace August 29, 2013