U.S. Department of Housing and Urban Development

Community Planning and Development

Special Attention of: **Notice:** CPD 00-06

All Secretary\'s Representatives

All State Coordinators Issued: April 26, 2000

All CPD Division Directors Expires: April 26, 2001

All HOPE 3 Program Grantees

Cross Reference: 24 CFR Part 572

SUBJECT: HOPE 3 Program - Procedures for Closing Out HOPE 3 Program
Implementation Grants and for Returning funds to HUD

**I.** **Introduction**

The purpose of this notice is to provide instructions for closing out
Homeownership for People

Everywhere (HOPE 3) Program Implementation Grants authorized by the
National Affordable

Housing Act of 1990, as amended by the Housing and Community Development
Act of 1992.

This notice supersedes prior closeout instructions contained in CPD
Notice 99-02, issued March 23, 1999.

The HOPE 3 Program regulations provide, at 24 CFR 572.210(g), that
recipients will comply with closeout procedures as issued by HUD.
Closeout of HOPE 3 Implementation Grants will provide a systematic
process of assuring that major program requirements have been met as
specified in the program regulations at 24 CFR Part 572. These
procedures apply to grants where the grantee has provided at least 70
percent of the homeownership opportunities in the HUD-approved
application for the HOPE 3 Implementation Grant or the number of
homeownership opportunities subsequently approved in an amendment to the
application. Grants not meeting this criterion will be closed on a
case-by-case basis with the assistance of Headquarters, Office of
Affordable Housing staff.

**II.** **Grant Closeout Procedures**

A. Criteria for Closeout. A HOPE 3 Implementation Grant will be closed
out when HUD determines, in conjunction with the grantee, that the
following criteria have been met:

(1) Property Transfer and Project Completion Reports for all properties
    utilizing grant or match funds from the grant to be closed out have
    been submitted and entered in the HOPE 3 Program\'s Cash and
    Management Information (C/MI) System, and discrepancies in C/MI
    System data, if any, have been resolved.

CGHP: Distribution: W-3-1, W-2

\(2\) With respect to rehabilitation activities, the work to be assisted
with HOPE 3 grant or match funds, or contributed as match, has actually
been accomplished and the properties have been transferred to
homebuyers. (NOTE: Where the homebuyer or another party remains
responsible to complete some required rehabilitation with non-HOPE 3
funds, the grant may be closed out, although the grantee must monitor
completion of such work.)

\(3\) Other activities of the grantee under the grant agreement and
applicable laws and regulations have been carried out satisfactorily,
or, the grantee is in compliance with any corrective and remedial
actions imposed by the Field Office as specified in 24 CFR 572.225.

\(4\) All costs, except those related to closeout costs, contingent
liabilities or replacement reserves as specified in the closeout letter,
to be paid with HOPE 3 grant and match funds have been paid.

\(5\) All required matching cash and other match contributions have been
made.

\(6\) A final grant amount has been determined by HUD after any
adjustment for unallowable costs, and any amount of previously disbursed
HOPE 3 funds found not allowable has been returned to HUD by the
grantee.

B. Closeout Action.

\(1\) When it is determined that the criteria for closeout have been
met, the Field Office shall request a final Annual Performance Report
from the grantee. The final APR shall include an accounting of all
proceeds of initial sale, initial resale proceeds, and program income
earned and expended during the grant period. The accounting of resale
proceeds shall include proceeds returned to HUD as well as proceeds
retained by the grantee. Grantees must submit the final APR within 90
days of the Field Office request.

\(2\) Based on the information provided in the performance report and
other relevant information (such as information contained in the
Program\'s Cash and Management Information System), the Field Office, in
consultation with the grantee, will prepare a letter agreement for
closeout in accordance with paragraph (C) of this section. See
Attachment A for a Model Letter Agreement for Closeout.

\(3\) After receipt of the letter agreement, executed by the grantee,
HUD will cancel any unallowable portion of the awarded grant, determined
under Paragraph II.A. Any unexpended or unallowable grant funds
disbursed from the U.S. Treasury which are in the possession of the
grantee, except for costs identified in Paragraph C.1. below, shall be
refunded to HUD. (See Section V. of this Notice.)

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\(4\) Any funds paid with HOPE 3 Implementation Grant funds which have
not been audited shall be subject to coverage in the grantee\'s next
single audit performed in accordance with 24 CFR Part 44. The grantee
may be required to repay HUD any disallowed costs based on the results
of the audit.

C. Letter Agreement for Closeout.

> Any grantee obligations remaining as of the date of closeout shall be
> covered by the terms of the closeout agreement. See Attachment A for a
> model closeout letter agreement. A HOPE 3 grant shall not be closed
> out subject to conditions other than those provided for in the
> attached model letter agreement. The letter agreement shall be
> prepared by the HUD Field Office in consultation with the grantee. The
> Field Office shall prepare an original and three copies of the letter
> agreement. Upon execution of the letter agreement by the CPD Field
> Office Director, the agreement shall be forwarded to the grantee. When
> the terms of the agreement are accepted by the grantee, the original
> and two copies of the agreement executed by the grantee must be
> submitted to the Field Office within 30 days of the date of execution
> by the CPD Field Office Director. If the agreement is not executed and
> returned to the Field Office within 30 days, the Field Office and
> grantee may need to renegotiate the terms of the agreement, since the
> program income, proceeds of initial sale and initial resale proceeds
> figures may be out of date. See Paragraph III below for instructions
> on distribution of the executed closeout letter. As shown in the
> attached model, the closeout letter agreement shall identify the grant
> being closed out, and shall include provisions with respect to the
> following:

\(1\) Identification of any closeout costs, contingent liabilities or
replacement reserves, subject to payment with HOPE 3 grant funds after
the closeout agreement is signed;

\(2\) Identification of any grant funds to be canceled by HUD.

\(3\) Identification of any proceeds of initial sale or initial resale,
and, where applicable, program income in the possession of the grantee
at the time the closeout agreement is signed;

\(4\) Description of the grantee\'s responsibility after closeout for
compliance with all program requirements, certifications and assurances
in using proceeds of initial sale, initial resale proceeds or program
income on deposit at the time the closeout agreement is signed and in
using any other remaining HOPE 3 funds available for closeout costs and
contingent liabilities. HOPE 3 proceeds of initial sale and program
income on hand at time of closeout must be used for costs eligible under
24 CFR 572.135(a) and (c) (proceeds of initial sale) and (d) (program
income), respectively. Fifty percent of the proceeds of the initial
resale of a HOPE 3 property (i.e., the amount that may not be retained
by the homebuyer under 24 CFR 570.130) must be used by the grantee in
compliance with

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24 CFR 572.135(b) and (c ). HOPE 3 proceeds of initial sale, initial
resale proceeds and program income received after closeout may be used
for the activities described in 24 CFR 572.135, may be contributed to
the HOME Investment Partnerships Program (HOME) as a cash matching
contribution in accordance with the applicable HOME program rules, or
may be used for other affordable housing activities as determined by the
grantee. Grantees are not required to return to HUD any portion of
proceeds generated from the use of resale proceeds. Proceeds generated
from the use of the proceeds of the initial sale of HOPE 3-assisted
property or from the use of the grantee\'s share of the proceeds of the
initial resale of such a property are not subject to HOPE 3 program
requirements. **NOTE, *however, 50 percent of*** ***net proceeds from
the initial resale of the property must continue to be returned to HUD,
whether received before or after closeout.***

\(5\) The agreement shall authorize monitoring by HUD, and shall provide
that findings of noncompliance may be taken into account by HUD, as
unsatisfactory performance of the grantee, in the consideration of any
future grant awards.

D. Termination of Grant

Grant assistance provided under 24 CFR 572 may be terminated in whole or
in part before the completion of the assisted activities, in accordance
with the provisions of 24 CFR Part 84 or Part 85, as applicable. The
grantee shall not incur new obligations for the terminated portions
after the effective date, and shall cancel as many outstanding
obligations as possible. HUD may allow full credit to the grantee for
those portions of the obligations which could not be canceled and which
had been properly incurred by the grantee in carrying out the activities
before the termination. Proposals to terminate grants must be reviewed
and approved by the Office of Affordable Housing Programs. At a minimum,
grant termination proposals forwarded to Headquarters for review should
include a summary of the activities approved in the application, the
status of the grant, including units acquired and transferred, match
contributed, the reason(s) for the termination, etc., and the Field
Office\'s recommendation for actions to be undertaken by the grantee to
terminate the grant.

**III.** **Distribution of Grant Closeout Documents**

Upon receipt of the original and two copies of the executed agreement
from the grantee, the Field Office shall retain the original copy as the
Field Office official file copy, forward one copy of the closeout
agreement to the CFO Accounting Center, Department of Housing and Urban
Development, P.O. Box 901013, Fort Worth Texas, 76101-2013 and a copy
(along with a copy of the grantee\'s final APR) to the Office of
Affordable Housing Programs, CPD, 451 7th Street, S.W., Room 7158,
Washington, DC 20410, Attention: HOPE 3 Program. In instances where HUD
must cancel any undisbursed portion of the awarded grant (see paragraph
II.B.(3) above), Field Offices must include a request to recapture the
undisbursed funds with the CFO Accounting Center\'s copy of the Closeout
Agreement.

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**IV.** **Recordkeeping Responsibilities**

The Field Office will keep all records concerning HOPE 3 Program grants
for three years from the date of closeout. Each grantee shall retain
records that clearly document its performance for a period of three
years from the date of closeout of the HOPE 3 Implementation Program
Grant. Records with respect to proceeds of initial sale and resale
proceeds shall be maintained for as long as such proceeds are received
and shall be retained for 3 years after the final proceeds have been
received. The date of closeout is the date the closeout agreement is
executed by the Field Office CPD Director.

**V.** **Procedures for Returning Resale Proceeds and Other Funds to HUD
for Remittance to the U.S. Treasury**

A. [Remitting Funds in Amounts Less Than \$2,000]{.underline}. Funds
being remitted that are in amounts less than \$2,000 may be returned
using the Department of Treasury Financial Communications System (TFCS)
described in this section or by sending a check payable to the
Department of Housing and Urban Development. If funds are being remitted
by check, recipients should send the check to:

DHUD

Bank of America

P.O. Box 277303

Atlanta, Georgia 30384-7303

The recipient should indicate the grant number, tax identification
number, and property number, if applicable, on the check and include the
following information in a cover letter accompanying the check:

\(1\) Grantee Name

\(2\) A statement that the funds are being remitted for the HOPE 3
Program

\(3\) HOPE 3 grant number Tax Identification Number (TIN)

\(4\) Explanation of remittance, e.g., net resale proceeds, disallowed
costs, etc.

A copy of the letter should be sent to: HOPE 3 Program, P.O. Box 23997,
L\'Enfant Plaza Station, Washington, DC 20026.

B. [Remitting funds in amounts greater than \$2,000]{.underline}. Funds
being remitted in the amount of \$2,000 or greater should be wired to
the U.S. Department of Treasury Financial Communications System (TFCS).
In order for funds and deposit messages to be routed efficiently, all
wire transfer messages must conform to the structured format described
below:

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\(1\) ABA Number 021030004

\(2\) Receiver Information: TREAS NYC/CTR/BNF=/AC-86-01-1101

\(3\) Third Party Information: **HOPE 3 PROGRAM** (Name of Recipient,

Recipient Grant Number, Recipient Tax Identification Number)

\(4\) Explanation, e.g., net resale proceeds, disallowed costs, etc.

\(5\) ATTN: HOPE 3-CPD

> All wire transfers must be remitted through the HOPE 3 recipient\'s
> local financial institution. If the local financial institution is not
> a member of the TFCS, it must have a correspondent bank relationship
> with a member bank that will actually make the wire transfer to
> Treasury.

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**ATTACHMENT A**

**HOPE FOR HOMEOWNERSHIP OF SINGLE FAMILY HOMES PROGRAM**

**(HOPE 3)**

**IMPLEMENTATION GRANT**

**MODEL LETTER AGREEMENT FOR CLOSEOUT**

\[Date of Letter - date signed by HUD\]

\[Authorized Official of Grantee

Name of Grantee

Address of Grantee\]

RE: Letter Agreement for Closeout of HOPE 3 Implementation Grant No.
\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Dear [\[Name of Authorized Official of Grantee\]]{.underline}:

The purpose of this letter is to set forth the terms and conditions
under which HUD will close out the above referenced grant. This letter
is prepared pursuant to HUD Notice \_\_\_\_\_\_\_, HOPE 3 Program -
Procedures for Closing Out HOPE 3 Program Implementation Grants, which
is referred to in this letter as the \"Closeout Notice.\"

**A.** The originally approved HOPE 3 grant amount for this grant was
\_\_\_\_\_\_\_\_\_\_. Of that

amount, HUD has determined pursuant to 24 CFR Part 572 and Paragraph
II.A. of the Closeout Notice that the final allowable grant amount is
\_\_\_\_\_\_\_\_\_. Therefore, grant funds in the amount of
\$\_\_\_\_\_\_\_\_

shall be canceled by HUD. The canceled amount represents unexpended
grant funds in the amount of \_\_\_\_\_\_\_, and/or unallowable costs in
the amount of \_\_\_\_\_\_\_\_, which have been returned or repaid to
HUD in accordance with Paragraph V. of the Closeout Notice.

**B.** Only the following unexpended but allowable HOPE 3 grant funds
may be drawn down from the Grantee\'s HOPE 3 Treasury Account and
deposited in the Grantee\'s local account after the date of this letter:
HOPE 3 grant funds drawn down for unpaid closeout costs and contingent
liabilities shall be disbursed within 90 days of the date of the
Grantee\'s execution of this letter. HOPE 3 grant funds drawn down to
fund a replacement reserve account shall be administered consistent with
the requirements of 24 CFR 572.125 (c).

Amount

Unpaid Closeout Costs \$

Contingent Liabilities \$

Replacement Reserve Account \$

Total \$7

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**C.** HOPE 3 Program proceeds of initial sale in the amount of
\$\_\_\_\_\_\_\_, and program income in the amount of \$\_\_\_\_\_\_\_,
which were in the Grantee\'s possession on or before the date of this
letter shall be used for eligible uses under 24 CFR 572.135(a) and (c)
(proceeds of initial sale ) and (d) (program income), respectively.
These eligible uses include (to the extent provided for in the
Grantee\'s HUD-approved HOPE 3 application, including any amendments
thereto (the \"Approved Application\") additional homeownership
opportunities eligible under the HOPE 3 Program, improvements to
properties under the HOPE 3 Program, business opportunities for
low-income families participating in the HOPE 3 Program, supportive
services related to the HOPE 3 program, any other activity specifically
provided for in the Approved Application, and the following additional
activities eligible under the HOPE 3 Program and hereby approved, as
follows:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**D.** HOPE 3 Program initial resale proceeds in the amount of
\$\_\_\_\_\_\_ in the possession of the Grantee on or before the date of
this letter, and HOPE 3 Program sale and/or resale proceeds and program
income received by the Grantee thereafter may be used for any HOPE 3
eligible activity, any activity described in 24 CFR 572.135, may be
contributed to the HOME Investment Partnerships Program (HOME) as a cash
matching contribution in accordance with the applicable HOME program
rules, or may be used for other affordable housing activities as
determined by the grantee.

**E.** Fifty (50) percent of net resale proceeds received after the date
of this letter shall be returned to HUD, in the manner described in
Paragraph V of the Closeout Notice.

**F.** To the extent that any funds paid with the HOPE 3 Implementation
Grant have not been audited, such funds are subject to coverage in the
next single audit performed in accordance with 24 CFR Part 44. The
grantee may be required to repay HUD any disallowed costs based on the
results of the audit.

**G.** The grantee shall retain records that clearly document its
performance under the grant for a period of three years from the date of
this Agreement. Records with respect to resale proceeds shall be
maintained for as long as such proceeds are received and for three years
thereafter.

**H.** If any provision of this Agreement is held invalid, such holding
shall not affect the validity of the remainder of the Agreement.

**I.** This letter agreement may be enforced by HUD by any means
available by law or under 24 CFR Part 572.

**J.** This letter agreement shall be executed in four counterparts,
each of which shall be deemed to be an original, and such counterparts
shall constitute one and the same instrument.

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K.  **AUTHORIZED OFFICIAL\'S CERTIFICATION:** It is hereby certified on
    behalf of the Grantee that, to the best of my knowledge, all
    approved HOPE 3 Program activities undertaken with HOPE 3
    Implementation Program grant and match funds

L.  provided under the Grant Agreement have been carried out in
    accordance with the grant agreement and with all applicable laws,
    regulations, and requirements that govern the HOPE 3 Program; that
    proper provision has been made by the recipient for the payment of
    all unpaid costs and unsettled third-party claims; and that every
    statement and amount is true and correct as of this date.

WARNING: HUD will prosecute false claims and statements. Conviction may
result in criminal and/or civil penalties (18 U.S.C. 1001, 1010, 1012;
31 U.S.C. 329, 3802).

If you have any questions about this letter, please contact
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

of this office as soon as possible. Otherwise, please sign this letter
in the space provided below, indicating the Grantee\'s acceptance of the
terms and conditions hereof, within thirty days of the date hereof. If
this letter is not returned within thirty days, you will need to provide
revised information on sales proceeds, program income and resale
proceeds earned before closeout for paragraphs **C.** and **D.** of this
letter.

Sincerely yours,

CPD Field Office Director

ACCEPTED AND AGREED:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Legal Name of Recipient Entity)

**BY:**

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Signature of Authorized Official)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Date)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Title)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\[Employer Identification Number (EIN)

of Recipient Entity\]

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