HUD Amends Verification Requirements

On December 10, 2013, HUD put online a revised transmittal for Handbook 4350.3, Chg. 4. It provided clarification for verification techniques - primarily those relating to EIV disputes and discrepancies. There is also an important change to Appendix 3, Acceptable Forms of Verification. A new column to the Appendix has been added under "Third Party Verification." This new column is titled " Provided by Applicant," and permits some applicant provided documents to serve as third party verification.   Following are applicant provided documents that now are acceptable as third party verification. All these changes impact the HUD assisted properties that are governed by 4350.3, and those relating to income impact LIHTC properties also.  

• Alimony or Child Support: Recent original letters from the Court may be provided by applicants;
• Auxiliary apparatus for households with disabled residents claiming disability related expenses that permit a household member to work: Copies of receipts may be provided by applicants;
• The cost of a care attendant for disabled family members: Copies of receipts may be provided by applicants;
• Child care expenses that enable a family member to work or go to school: Copies of receipts may be provided by the Applicant;
• Current net family assets: Applicants may provide passbooks, checking, or savings account statements; certificates of deposit; property appraisals; stock or bond documents; financial statements completed by financial institutions; copies of real estate tax statements (if tax authority uses approximate market value); copies of real estate closing documents that indicate distribution of sales proceeds and settlement costs;
• Dividend and Savings Account Income: Applicants may provide current statements, bank passbooks, certificates of deposit (all must show the current rate of interest); copies of Form 1099 from the financial institution may be provided by the applicant as long as there is a verification of projected income for the next 12 months; and applicants may provide broker’s quarterly statements showing value of stocks/bonds and earnings credited to the applicant;
• Employment income including tips, gratuities and overtime: Applicants may provide W-2 forms, if the applicant has had the same employer for at least two years and increases can be accurately projected. Paycheck stubs or earning statements may also be provided by the applicant and are now considered third party verification (HUD requires that the most recent four to six consecutive stubs be used);
• Income maintenance payments, benefits, income other than wages (i.e., welfare, Social Security, SSI, disability income, pensions: Applicants may provide current or recent check stubs with date, amount and check number recorded by the owner; award or benefit letters or computer printout from court or public agency; and most recent quarterly pension account statement (phone verification is recommended if the printout or award letter is out of date);
• Interest from the sale of real property (e.g., contract for deed, installment sales contract, etc.): Applicant may provide a copy of the contract (enough information must be provided to compute actual interest income for the next 12 months);

 

• Medical Expenses:
  • Copies of income tax forms (schedule A, IRS Form 1040) that itemize medical expenses, when the expenses are not expected to change over the next 12 months;
  • Receipts, or pay stubs, which indicate health insurance premium costs, or payments to a resident attendant; or
  • Receipts or ticket stubs that verify transportation expenses directly related to medical expenses.
• Net Income for a Business:
  • Form 1040 with Schedule C, E, or F;
  • Financial statements of the business (audited or unaudited) including an accountant’s calculation of straight-line depreciation expense if accelerated depreciation was used on the tax return or financial statement; or
  • For rental property, copies of recent rent checks, lease and receipts for expenses, or IRS Schedule E.
• Self-employment, tips, gratuities, etc.: applicants may provide Form 1040 or 1040A showing amount earned and employment period;
• Unemployment Compensation:
  • Copies of checks or records from agency provided by applicant stating payment amounts and dates; or
  • Benefit notification letter signed by authorizing agency

  Obviously, these changes will impact the way files are documented for all types of projects. Before making any change in the way verifications have been done, owners of LIHTC properties should ensure that the State Agency administering the LIHTC program will permit the change.