4065.1 REV-1

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CHAPTER 1. GENERAL

1-1 Introduction

The Previous Participation Review and Clearance Procedures

for principal participants in HUD\'s Multifamily Housing

Programs began in 1966. The procedure is governed by

published regulations which establish standards and provide

for due process for those who disagree with administrative

decisions. (See Appendix 1).

This procedure, which is automated, is the Department\'s

centralized review of the past/present performance of those

principals applying for participation in the Department\'s

multifamily housing programs. Principals are reviewed to

see if they have carried out their past financial, legal,

and administrative obligations in a satisfactory and timely

manner. The majority of the review concerns itself with

the applicant\'s past performance in all HUD programs, but

it also considers performance in programs of other

agencies, including those of the Farmers Home Administration

(FmHA) and of State and local housing finance

agencies. Form
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
Previous Participation Certificate

([HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm))
approval is granted when the review establishes

that the applicant is a satisfactory risk to the mortgage

insurance fund if the applicant is applying for participation

in a HUD-insured project, such as Section 221(d)(3)

or (d)(4) Multifamily Rental Housing. In the case of HUD

non-insured housing programs such as Section 202 and

Section 811,
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
approval is granted when the review

shows that the applicant is responsible.

The [HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
procedure concerns the past, present, and

prospective performance and business practices of those

applicants undergoing administrative and underwriting

reviews by the local field office in whose jurisdiction the

project is located.
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) is
not a substitute for field

office processing as to project acceptability, credit

capacity, or competency and the fact that
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
approval

is granted is not assurance that the Department will grant

final approval of the proposal or application.
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)

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1-1 9/94

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4065.1 REV-1

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procedures are also not a substitute for administrative

sanctions. (See Chapter 5 for further discussion on

administrative sanctions Debarment, Suspension and other

compliance actions ).

This Handbook is designed as a guide for a better

understanding of the regulations and as instructions for

efficient processing of
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) by
field offices.

Note: The form
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) has
been revised: to clarify

regulations and instructions; to meet the requirements of

the Paperwork Reduction Act; and to bring it into

conformity with Departmental form design standards.

(Computer generated versions of this form are acceptable

provided they are identical in all respects to the

[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)).

1-2 Policy

It is HUD\'s policy that participants in its housing

programs be responsible individuals and organizations who

will honor their legal, financial, fair housing and

contractual obligations. (\"Responsibility\" is a term used

by HUD to mean business integrity, honesty and capacity to

perform). Accordingly, uniform standards are established

in HUD regulations for approval, disapproval or withholding

of action on principals for projects in which they apply to

participate.

In this procedure the principals are required to disclose

all of their prior projects and certify as to their

previous record. HUD analyzes that record to evaluate

past, present, and future responsibility, performance,

participation, and business practices.

An unfavorable record reflects an unacceptable risk to the

public interest. Applicants who seek to participate must

certify on their
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) that
they do not fall under any

standards for disapproval. (See 24 C.F.R. Section 200.230

and the certifications on the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)).
Approval for new

or further participation is a privilege earned with a good

record and a history of responsible performance that

reflects good prospects for success in the future.

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9/94 1-2

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4065.1 REV-1

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To understand thoroughly the Previous Participation Review

and Clearance procedure, first read the regulations

(Appendix 1) and then the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
instruction sheet

(Appendix 2). This Handbook follows these items only as an

explanation, summary, and processing guide.

1-3 Key Points for Processing
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) Under
the Automated

Procedure

A. A fully completed
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) is
required as part of the

application package for most HUD multifamily housing

programs. 24 C.F.R. Section 200.217 . Any portions of

the certification that are deleted must be accompanied

by a thorough explanation from the applicant.

B. It must be signed and dated by the principals who

propose to participate. Do not process
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)\'s
that

are not signed and dated. Do not process
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)\'s

where there is a clear indication that all principals

have not been listed 24 C.F.R. Sections 200.215(e) and

200.218 . Return them to the sender. An example of an

indicator would be where only one participant\'s name is

listed with a role/title of Vice President. The role of

Vice President is indicative that there are other

officers who should have been listed.

C. All signatures of the principals are not needed if the

person who signs is authorized to bind the entity.

Evidence of that authority should be obtained and kept

in the file. A copy of that authority must also

accompany the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) when
it is sent to Headquarters

for further processing. This process assumes that all

principals have the same prior record of participation.

A separate form must be filed for each principal having

a different record of participation.

NOTE: In situations where complex ownership (multiple

tiered) structures exist, a description of the ownership

structure should be submitted along with the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm).

This description should preferably be provided by an

attorney representing the principal. The attorney

should supply this information on his or her stationery

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1-3 9/94

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4065.1 REV-1

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and be signed by the attorney. For example, the

ownership entity is a Partnership. All principals in

this Partnership must be listed on the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) \--
this

is tier one. If any of these principals are

Corporations or Partnerships, the principals in these

entities must also be listed on the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) \--
this is

tier two. If any of the principals listed in tier two

are Corporations or Partnerships, the principals in

these entities must be listed on the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) \--
this is

tier three. Principals in a Partnership are all its

General Partners, and its Limited Partners with a 25

percent or greater interest.

Principals in a Corporation are all of its officers and

directors, and its owners who have a 10 percent or

greater ownership interest. It is only necessary to

disclose the principals in these various entities

through the third tier. In those rare instances where a

public corporation is involved as a principal, such

corporation\'s Annual Report must be obtained and the

names of all principals (i.e., corporate officers, board

members, etc.) of the corporation must be entered into

the PPRS for a name match.

D. [HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
approval is required for the following

transactions at the times indicated:

1\. Projects to be financed with mortgages insured under

the National Housing Act or the U.S. Housing Act of

1937 (see Appendix 3) \-- With an Application for a

Site Appraisal and Market Analysis Letter,

Feasibility Letter, Conditional Commitment for

Mortgage Insurance, or Firm Commitment for Mortgage

Insurance, whichever application is first filed;

2\. Officers and directors of both sponsor and owner for

projects to be financed pursuant to Section 202 of

the Housing Act of 1959, and Section 811 of the

National Affordable Housing Act \-- With the

Application for Conditional Commitment; and

3\. Projects in which 20 percent or more of the units are

to receive a subsidy as described under 24 C.F.R.

Section 200.213(c) \-- With the first request for a

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9/94 1-4

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4065.1 REV-1

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reservation of funds for assistance payments (unless

the principals have already been granted
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)

approval to own the particular project receiving new

subsidy);

4\. Purchase of a project subject to a mortgage insured

or held by the Secretary \-- With the Application for

Transfer of Physical Assets;

5\. Purchase of a Secretary-owned project \-- With the bid

to Purchase;

6\. Proposed substitution or addition of a principal,

such as management agents or partners \-- Prior to the

date that the proposed action or transfer is to

become final; and

7\. Changes of roles or proposed participation in a

different capacity from that previously approved for

the same project such as a limited partner becomes a

general partner or a management agent becomes a

general partner or vice versa \-- Prior to the date

that the proposed action or transfer is to become

final.

Note: These timeframes should be judiciously adhered to

and [HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
processing should commence as early in the

process as possible to avoid crisis situations. Failure

to do so could delay a closing.

E. The
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
should not be processed until the field

office Housing Director or Multifamily Division Director

(as the case may be) staff level designee has decided

that the proposed application and the principals

involved meet processing requirements.

Note: Under the revised form
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) the
office

manager (or successor position) is no longer required to

approve the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) prior
to the commencement of

processing. Final approval by management is only

required after the form has been processed by staff and

reviewed by a supervisor.

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1-5 9/94

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4065.1 REV-1

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F. The field office Housing Director or Multifamily

Division Director (Housing/Multifamily Director) or

his/her designee reviews the form to determine whether

all principals have been listed on the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) (see

1-3(B)) and that all such names have been entered into the

PPRS for a possible name match. The form is further

reviewed to see if the principals disclosed any adverse

information which falls under the Certifications Section

of the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm).
Schedule A of the form is also

reviewed to determine if any prior projects listed show

defaults, unsatisfactory management reviews,

assignments, foreclosures, administrative sanctions, or

any other problems with respect to their projects. If

so, the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
should be forwarded to Headquarters

with a report stating the reason for the submission (see

2-4 (D)), along with a copy of the Previous

Participation Review System (PPRS) printout.

G. The
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) also
must be reviewed to see if the

principal has participated within programs administered

by either the Farmers Home Administration (FmHA) or the

States\' housing finance agencies. If the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) shows

that the principal has participated with these agencies,

the Housing/Multifamily Director or his/her designee

must then telephone such agencies to determine whether

or not their performance has been satisfactory. If

there are any problems, the Agency should be requested

to provide a written report and the principals\' names

should be entered (flagged) into the updated portion of

the PPRS right away. (See Chapters 3, 4, and 5 of the

Terminal Operations Guide for System F19, dated July

1992).

Whether or not adverse information is disclosed on the

[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) or by
contacting FmHA and State agencies, the

form should be given to the PPRS operator who must input

the full names of all principals and companies/entities,

as well as their social security number or tax identification

number, listed on the form for a possible name

match. (See Chapter 8, Pages 8-1 through 8-4 of the

Terminal Operations Guide).

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9/94 1-6

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4065.1 REV-1

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NOTE: It is of the utmost importance that all of the

names on the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) be
keyed into the automated system

accurately. A check must be made of all names on the

hard copy printout against those on the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) to be

sure all firms and individuals have been entered and

that the names of the individuals and firms are spelled

correctly. Omitting or misspelling one name or entity

could result in approval of someone who has not acted

responsibly in prior HUD or FmHA projects.

H. Once the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) has
been processed, a Supervisor must

check the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) for
completeness and accuracy and so

certify by signing Part II of the form. The
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) is

then forwarded to the Housing/Multifamily Division

Director for final approval action.

I. Never condition a commitment on
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
approval.

[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
approval should be obtained prior to the issuance

of any commitment.

J. Once
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
approval is obtained, it remains valid for

the life of the project unless the principals are

subsequently suspended or debarred, or data initially

submitted is discovered to be erroneous, fraudulent or a

principal has assumed a participation role not

originally proposed and disclosed on page 1 of the

[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm). In
these cases, the Multifamily Participation

Review Committee (MPRC) may elect to withdraw or modify

its approval.

K. Data disclosed by principals who are individuals on the

[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm) is
covered by the Privacy Act. All outside

inquiries are referred to the Chief Counsel or other

designated Field Office Privacy Act Officers for

processing in accordance with requirements of the

Privacy Act. (See Chapter 5).

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1-7 9/94

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4065.1 REV-1

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1-4 Who Files and Who Does Not File

For specific details on which program participants must

file the
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm), you
must review the instruction page

attached to it and 24 C.F.R. Sections 200.215, 200.217 and

200.218. However, the following are examples of who must

and who need not execute a
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm):

A. Who does not file:

1\. Those entities and principals who have already

received participation clearance for their specific,

respective roles in the following circumstances:

a\. When an existing project (mortgagor) is being

awarded Flexible Subsidy \-- Operating Assistance

or Capital Improvement Loans.

b\. When an existing project (mortgagor) is being

awarded Loan Management Set Aside Section 8

Assistance.

c\. When an existing Loan Management Set Aside

Section 8 Contract commitment is being increased

(number of units or dollar amounts), extended, or

renewed.

d\. When an existing project (mortgagor) is being

awarded Drug Elimination Grants.

2\. Attorneys and architects who will not have an

ownership or management role in the project or in

other ways participate as a principal and who are

retained for a cash fee solely to render usual

services of their profession. 24 C.F.R. Section

200.215(e)(1) .

3\. Those who have an interest acquired by inheritance or

by Court Degree. 24 C.F.R. Section 200.217(b) .

4\. Limited partners with less than 25 percent interest

or stockholders who own less than a 10 percent

interest. 24 C.F.R. Section 200.215(e)(2) .

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9/94 1-8

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4065.1 REV-1

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5\. Cooperative and condominium home purchasers or owners

(of less than 5 units in the same development) and

all tenants. 24 C.F.R. Sections 200.215(e)(3) i and

ii .

6\. Existing owners and/or principals of insured projects

who previously obtained
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
approval and are

only applying for refinancing of the project pursuant

to Section 223(a)(7) of the National Housing Act.

7\. Management agents renewing or amending an ongoing

management contract.

8\. Principals in projects not insured or financed by HUD

where less than 20 percent of units receive HUD

assistance such as Section 8 or Rent Supplement

Assistance.

9\. Subcontractors.

10\. Nursing home administrators renewing or amending

ongoing contracts and nursing home operators renewing

or amending ongoing leases or contracts.

B. The Following Must File
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)

1\. New management agents for proposed and existing

projects.

2\. Where an approved principal alters his/her interest

in a project or in another approved principal entity

or seeks to assume a new role. Examples: A partner

in the mortgagor entity seeks approval to become

general contractor or a general partner seeks to

become the management agent; or when seeking approval

for a new Board member in a corporate entity.

Note: When such cases are sent to Headquarters the

field office must advise that the change in the role

is the reason for the submission.

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1-9 9/94

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4065.1 REV-1

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3\. The successful bidder at sales of Secretary-held

projects including \"all cash\" sales.

4\. Those who seek approval to acquire an interest in an

existing project, with a mortgage insured or held by

HUD, whether or not there is a transfer of physical

assets, unless those persons would be limited

partners with less than 25 percent interest or

stockholders who own less than 10 percent of the

common stock.

5\. Consultants and packagers for profit motivated

projects as well as for nonprofit sponsored projects.

6\. New nursing home administrators entering into

contract for an existing or proposed nursing home and

new nursing home operators entering into lease or

contract for an existing or proposed nursing home.

C. Programs Requiring
[HUD-2530](http://www.hud.gov/offices/adm/hudclips/forms/hud2.cfm)
Approval

See listing in Appendix 3.

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9/94 1-10