Frequency of Surplus Cash Distributions Increased

Dear Multifamily Stakeholders and Owners,  

HUD is modifying the Regulatory Agreement for new loans to allow more frequent distributions of surplus cash for properties without rental assistance and change other distribution policies. The Mortgagee Letter has details including the required criteria to be eligible.

The change to Section 13 of the Regulatory Agreement (Form HUD 92466M) will increase the frequency of distributions from surplus cash for eligible borrowers from the current maximum of twice in any accounting year to as many as once per month and is limited only to FHA Multifamily insured properties not subject to a Section 8 rental assistance payment contract or a HUD-held mortgage note. The guidance will only affect applications endorsed after the effective date of 9/7/2022.

The guidance reduces unnecessary regulatory constraints that may discourage Multifamily investment in FHA insured debt and harmonizes FHA Multifamily income distribution rules with private industry and GSE policies. As noted in the Mortgagee Letter, the new policy issued today retains and expands existing risk-management requirements. See the press release here.