Compliance Requirements for HUD 223(f) Loans

HUD provides a list of suggested Compliance Requirements and Audit Areas for HUD’s FHA multifamily housing programs. A few of these requirements are listed below:

• Mortgage Status: All payments must be made promptly according to the terms of the the note and mortgage.

• Federal Financial Reports: Projects must ensure that all financial reports contain reliable data. These reports must be presented according to terms of agreements between HUD and the project owners and managers. If a project experiences management or financial difficulties or is suspected of noncompliance, HUD may require monthly reports.

• Fair Housing and Nondiscrimination: In accordance with the Fair Housing Act, owners and management cannot engage in discriminatory practices regarding the acceptance of applications, renting units, and designating units for renting.

• Replacement Reserves: If necessary, owners must set up a replacement reserve account and make deposits according to HUD requirements. The account must be placed under the lender’s control. Disbursements may be made only after HUD’s consent.

• Cash Disbursements: Disbursements from a project’s regular operating account must only be used to pay reasonable expenses and must be backed up by bills, invoices, or other approved documentation.

Further Reading:

For a more extensive discussion of compliance requirements, read Chapter 3 HUD Multifamily Housing Programs.