U.S. Department of Housing and Urban Development

Public and Indian Housing

Special Attention of:

Notice: PIH 97-18 (IHA)

ONAP Administrators; Facilities Planning Issued: April 21, 1997

& Development Directors; Finance & Expires: April 30, 1998

Budget Directors; and

Indian Housing Authorities (IHAs) Cross Reference: 24 CFR Part 950

Subject: Modification of Mutual Help Contribution Drawdown

Procedures in LOCCS

1\. Purpose: This Notice modifies the policies and procedures for

the drawdown of Mutual Help Contribution funds from the Line

of Credit Control System - Voice Response System (LOCCS-VRS)

for Indian Housing projects.

2\. Background: As a condition of occupancy, a Mutual Help

homebuyer is required to provide a Mutual Help Contribution.

When an Indian housing authority\'s development project reaches

the Date of Full Availability (DOFA), the Mutual Help

Contribution is credited to the homebuyer\'s account and

retained by HUD. After DOFA, the Mutual Help Contribution may

only be drawn down from LOCCS-VRS to cover a debit balance in

the Monthly Equity Payment Account (MEPA) for a vacated unit,

to the extent of the credit balance in this account, or upon

the homebuyer\'s purchase of the home. In order to simplify

the administration of the Mutual Help Contribution and in

anticipation of the programmatic changes which will occur with

the implementation of the Native American Housing Assistance

and Self-Determination Act of 1996, this Notice modifies the

above policies and procedures to provide for the drawdown of

the Mutual Help Contribution at the time of DOFA. The Mutual

Help Contribution will then be held by the housing authority

rather then by HUD.

3\. Applicability: All Mutual Help projects shall be covered by

the provisions of this Notice.

4\. Policy:

a\. Mutual Help Contributions of cash are not included in this

procedure. Cash contributions are retained and held by

the housing authority at the time of payment by the

homebuyer.

b\. Upon entry of the DOFA date, LOCCS-VRS will disburse all

Mutual Help Contribution funds as approved on the current

Development Cost Budget, form HUD-52484 or HUD-53045A.

c\. Upon receipt by the housing authority, the funds may be

invested in securities selected by the housing authority

and approved by HUD (see Notice PIH 96-33 , Required HA

Cash Management and Investment Policies and Procedures).

d\. Interest accrued on Mutual Help Contribution investments

are considered \"Other Income\" for the Mutual Help program

and become part of the operating reserve.

e\. The instructions in this Notice in no way affect the

purposes for which Mutual Help Contributions can be used

by the housing authority or homebuyer. Mutual Help

Contributions can only be used to reimburse the housing

authority to cover a debit balance in MEPA for a vacated

unit, to the extent of the credit balance in this account

(24 CFR 950.446(d)), or at homebuyer purchase of the home

(24 CFR 950.440(e)(4)).

f\. After conveyance of the home, the Mutual Help Contribution

becomes part of the \"proceeds of sale\" and is eligible for

loan forgiveness. The housing authority must continue to

follow the procedures outlined in Notice 96-25 , Indian

Housing Homeownership Programs - Loan Forgiveness

Procedures. This includes the execution of the

Consolidated Annual Contributions Contract (ACC) or a Loan

Forgiveness ACC Amendment in order to authorize the

housing authority to retain \"proceeds from sale\". Also,

the use of \"proceeds\" will be governed by the procedures

in Notice 96-25.

5\. Procedure:

a\. Housing Authority Responsibilities

1\) Prior to DOFA, verify that the funds budgeted for Mutual

Help Contributions on the latest approved development

budget equals the correct number of units built times

\$1,500. If corrections are necessary, submit a revised

Development Cost Budget, form HUD-52484 or HUD-53045A.

2\) Upon notification by HUD of the disbursement of Mutual

Help Contributions funds to the housing authority bank

account, record the accounting transactions as usual.

Only the timing of the drawdowns are affected by this

Notice.

b\. Area Offices of Native American Program (ONAP)

1\) For all Mutual Help projects with a DOFA date entered

into LOCCS, verify and make necessary corrections to

budget line item (BLI) 1503, Mutual Help Contributions,

in LOCCS. All corrections must be complete 30 days from

the date of this Notice.

2\) On June 5, 1997, LOCCS will automatically disburse the

balance of funds in BLI 1503 for all Mutual Help

projects with a DOFA date in LOCCS. The area ONAP will

receive a report listing the disbursement of Mutual Help

Contribution funds. Within 5 workdays

of receipt of the report, the Area ONAP must notify each

affected housing authority of the amount of Mutual Help

Contributions funds disbursed from each project. The

Area ONAP may accomplish this task by providing a cover

letter and a copy of the applicable section of the

report to each housing authority.

3\) Upon notification of DOFA from an IHA, the date should

be promptly entered into LOCCS. Entry of the DOFA will

automatically create a voucher in LOCCS which will

disburse the funds in BLI 1503. The Area ONAP must

verify the amount of funds on the voucher and notify the

housing authority of the scheduled date of disbursement

and the amount of funds to be disbursed.

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Kevin Emanuel Marchman, Acting Assistant Secretary