CHAPTER 1 

INTRODUCTION 

1.1 PROGRAM BACKGROUND 

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 

(FIRREA) required that the Resolution Trust Corporation (RTC) develop a 

program for selling residential properties to provide affordable housing 

opportunities. In response to this provision, RTC established the Affordable 

Housing Disposition Program (AHDP), or herein referred to as the Affordable 

Housing Program (AHP), to enhance its ability to sell single family and 

multifamily properties that will benefit Low Income families. 

Pursuant to the Resolution Trust Corporation Completion Act, the RTC 

terminated on December 31, 1995, and all of RTC’s rights and obligations were 

transferred to the FSLIC Resolution Fund, the successor in interest to the RTC, 

which is managed by the Federal Deposit Insurance Corporation (FDIC). This 

does not affect the terms and conditions of the Land Use Restriction Agreements 

(LURAs), as owners’ responsibilities continue, and the FDIC, as manager of the 

FSLIC Resolution Fund, assumes the RTC’s obligations. 

AHP gives income eligible families and qualified housing developers first 

opportunity to purchase FDIC-held properties suitable for affordable housing. 

Under the Disposition program, FDIC will sell these properties to the first eligible 

purchaser who makes an acceptable offer at or above the property's net 

realizable market value established by FDIC. In purchasing a property through 

AHP, the buyer agrees to meet the affordability guidelines established by the 

program. These requirements are designed to assure the property serves 

families in need of affordable housing. 

Under the program, FDIC enters into an agreement with state agencies to 

monitor multifamily properties for compliance with these affordability 

requirements. 

This handbook is designed to serve as a guide for state monitoring agencies in 

carrying out their monitoring responsibilities. It describes the program 

requirements for multifamily rental properties and the procedures agencies 

should follow in monitoring compliance. It also outlines how agencies can 

assure that owners who make bulk purchases of condominium units and single 

family properties through the program meet their commitment to make units 

available to Low Income families. 

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1.2 BASIC PROGRAM REQUIREMENTS 

The program incorporates four basic requirements to assure that AHP 

multifamily properties provide affordable housing to Low and Very Low Income 

tenants: 

¤	 Occupancy Requirements. The owner agrees to set aside a specified 

number of units in the property for occupancy by Low and Very Low Income 

tenants. The program's statute establishes that at least 35 percent of the 

total units must be made available to these households, however the actual 

percent may vary for an individual property. The number and proportion of 

Very Low Income and Low Income units is specified in the property’s Land 

Use Restriction Agreement (LURA). 

¤	 Rent Limits. AHP owners also agree to keep the rents for these units 

affordable to Low and Very Low Income tenants. The program establishes 

maximum rent levels for localities based on area median income. 

¤	 Resale Requirements. The occupancy requirements and rent limits remain 

in effect for the applicable compliance period. If the original AHP purchaser 

or subsequent owners sell the property during the compliance period, the 

new purchaser must be informed of the ongoing affordability requirements. 

Even if the new owner has not been properly informed, s/he is still obligated 

to meet affordability requirements as outlined in the LURA. 

¤	 Compliance Period. Under the program, AHP purchasers agree to comply 

with the affordability requirements for the useful life of the property.1 

1.3 KEY PROGRAM DOCUMENTS 

Program compliance and monitoring responsibilities for AHP properties are set 

forth in four documents: 

¤	 Memorandum of Understanding (MOU) -- The Compliance Monitoring 

MOU is the agreement between FDIC and a state agency that sets forth the 

terms under which the state agency will monitor AHP properties. The MOU 

establishes the agency's responsibility to monitor and enforce owner 

compliance with the occupancy requirements, rent limits, and resale 

restrictions placed on these properties. The MOU also describes the 

enforcement responsibilities of the state agency and FDIC, and the 

compensation an agency may collect for its services. 

1 The useful life of the property is defined as 40 years from the date of the Land Use Restriction Agreement 

(LURA) or 50 years from the date the property was first occupied, whichever is longer. 

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¤	 Land Use Restriction Agreement (LURA) -- The LURA is a deed 

restriction which purchasers sign at the time they acquire a property through 

the program. The LURA establishes the affordability requirements for the 

property and the owner's obligations to FDIC and the monitoring agency. In 

signing the LURA, the owner agrees to the restrictions on the use of the 

property set forth in the document. The LURA binds the purchaser and all 

succeeding owners for the full term of the agreement. Its conditions remain 

in effect regardless of whether the document is formally re-executed at the 

time of resale. 

¤	 AHP Owner's Compliance Manual -- The manual describes the 

procedures AHP property owners must follow to comply with the provisions of 

their LURA and program requirements. Agencies can obtain this manual 

from FDIC and should make copies available to owners upon request. 

¤	 AHP Compliance Monitoring Manual For State Agencies -- This manual 

presents the procedures state agencies should follow in monitoring and 

enforcing owner compliance with the provisions of the LURA. Copies of this 

manual are available from FDIC. 

1.4 TYPES OF PURCHASES 

Multifamily properties can be purchased either individually or in bulk. Most have 

been purchased individually. Owners who buy properties in bulk have flexibility 

in how Low and Very Low Income units are allocated among the properties in the 

purchase. While some properties in a bulk purchase may have a larger share of 

Low Income units than others, the basic program requirements and monitoring 

procedures for the two types of purchases are essentially the same. 

Most condominium units and one-to-four unit properties sold through AHP are 

purchased individually by income eligible buyers. However, in several areas, 

FDIC has packaged and sold these two types of properties in bulk to qualified 

purchasers, including public agencies and nonprofits. When leasing these units, 

the purchasers agree to follow the same basic occupancy requirements that 

apply to AHP multifamily property owners. If the units are converted to owneroccupied units, a specified portion of the units must be sold to Low Income 

families. This manual includes guidance to agencies that will monitor these 

properties. 

1.5 PRINCIPAL PLAYERS AND RESPONSIBILITIES 

There are three major players with responsibilities for assuring that AHP 

properties comply with the programs' affordability requirements: 

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Key Players 

¤ FDIC 

¤ Monitoring Agencies 

¤ Owners/Property Managers 

A. Federal Deposit Insurance Corporation 

In addition to program oversight, FDIC has the following responsibilities: 

�	 Provide monitoring agencies with guidance on program procedures; 

�	 Provide monitoring agencies with basic data on new properties at the 

time they are offered for sale; 

�	 Notify monitoring agencies of new sales upon final closing; 

�	 Provide monitoring agencies with LURA and other necessary 

materials; 

�	 Provide enforcement support to restore owner compliance upon 

request from a monitoring agency; and 

�	 Review monitoring agency performance. 

B. Monitoring Agency 

Once an owner has purchased a property through AHP, the monitoring agency 

with jurisdiction over that location will: 

�	 Provide guidance to owner/managers on program procedures and 

requirements; 

�	 Provide current rent and income and income limits to
 

owner/managers;
 

�	 Provide information regarding program changes to owner/managers; 

�	 Monitor properties for compliance with program requirements; 

�	 Monitor and enforce corrective actions in cases of non-compliance; 

�	 Evaluate financial infeasibility exemption requests; 

�	 Monitor bulk purchases of condominiums and single family properties; 

�	 Collect administrative fees from owners; and 

�	 Report to FDIC. 

C. Property Owners/Managers 

After purchasing a property through AHP, owners and their managers must fulfill 

the following responsibilities: 

�	 Comply with occupancy and rent requirements specified in the 

property's LURA; 

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�	 Inform on-site management personnel of program requirements; 

�	 Pay monitoring fees to the monitoring agency as required; 

�	 Maintain appropriate records, certifications, and documentation; 

�	 Report to the monitoring agency as required (monthly or annually); 

�	 Certify property compliance annually or as required by monitoring 

agency; 

�	 Pay administrative fees to the monitoring agency as required; 

�	 Cooperate with the monitoring agency during compliance reviews; 

�	 Take required corrective actions if property is out of compliance; and 

�	 Inform potential buyers of LURA restrictions. 

To assist state agencies in coordinating AHP monitoring responsibilities with their 

monitoring activities for other key affordable housing programs, Exhibit 1.1 

highlights important similarities and differences between AHP, Tax Credits, 

Section 8 New Construction/Substantial Rehabilitation, and Tax Exempt Bond 

programs. 

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EXHIBIT 1-1 

COMPARISON OF AFFORDABLE HOUSING PROGRAMS 

ITEM AHP 

SECTION 8 NEW 

CONST. & SUB. 

REHABILITATION 

LOW INCOME 

HOUSING 

TAX CREDITS 

TAX EXEMPT 

BOND 

(POST 1986) 

Targeting Income Depending on No. 

of Set-Aside units, 

usually 35% Low 

Income (<80% of 

median) and Very 

Low Income (< 50% 

of median) 

Pre-1981 contracts, 

program served both 

tenants @ 80% and 

50% of median income; 

Post-81, served tenants 

with < 50% of median 

income only 

20% of tenants must have 

income < 50% of median 

or 40% of tenants must 

have income < 60% of 

median income 

20% of tenants must 

have income < 50% of 

median or 40% of 

tenants must have 

income < 60% of 

median income 

Definitions of

 Income 

Housing Act of 

1937, as amended 

Housing Act of 1937, as 

amended 

Housing Act of 1937, as 

amended 

Housing Act of 1937 

(most states) 

Income Verification 

Method 

Based on HUD 

Handbook 4350.3 

Based on HUD 

Handbook 4350.3 

Based on HUD Handbook 

4350.3 

Left to States; most 

use Handbook 4350.3 

Tenant Income 

Recertification 

Annually Annually and

 Interim 

Annually Annually 

Use of Lease Required, no model 

lease * Required, must use 

model lease 

Required, no model lease * Required, no model 

lease * 

Maximum Rents � High rent: 30% of 

adjusted income 

at 65% of median; 

� Low rents: 30% 

of adjusted inc. at 

50% of median 

Initial rents based on 

Fair Market Rents; 

annual adjustment 

actors from HUD, 

special adjustments 

permitted 

� 30% of LIHTC income 

limits for household at 

50% of median; or 

� 30% of LIHTC income 

limits for households at 

60% of median; 

Rents restricted for 

qualified units 

Number of Qualified 

Units 

Varies based on 

terms of LURA; 

generally 20% of 

units set-aside for 

very low income; 

total set-aside is 

35% 

Varies by project; some 

projects are 100% low 

income and others are 

mixed 

At a minimum, 20% of 

units must be occupied by 

tenants at 50% of median 

or 40% of units must be 

occupied by tenants at 

60% of median 

Minimum 20% of units 

must be occupied by 

tenants at 50% of 

median or 40% of units 

must occupied by 

tenants at 60% of 

median 

Owner Reporting � Monthly reports � Monthly vouchers to Varies by State: Varies by State 

Requirements until compliance 

is achieved 

� Annual reports 

after compliance 

� Must report 

income and rents 

for qualifying 

units 

obtain subsidy 

� Submit tenant data 

upon move-in & 

recertification 

� Annual audited 

financial statements 

� Report monthly until 

95% utilized 

� 50% of projects report 

& 20% of units 

reviewed; 

� 20% of projects 

inspected; 20% of 

those units reviewed 

� All units in all projects 

report; 20% send 20% 

of units for review 

Agency 

* Program specific lease provisions must be included; certain provisions prohibited. 

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1.6 GLOSSARY OF PROGRAM TERMS 

In this Manual, the following Program terms and acronyms will be used and have 

the following meanings: 

AHDP or AHP -- The Affordable Housing Disposition Program, referred to in 

this manual as the Affordable Housing Program (AHP). 

AHP regulations -- The final rule for the Affordable Housing Disposition 

Program, codified at 12 C.F.R. S1609, as such rule may be modified or amended 

from time to time. 

Annual Income -- Household income is defined by the Section 8 program 

administered by HUD, except as modified by this Manual in the definition of 

student household income. 

Compliance Monitoring System (CMS) -- The computer software made 

available to State Monitoring Agencies to assist them in the monitoring of 

compliance by property owners and in compiling the semi-annual reports 

required by FDIC and the Congress. 

Compliance Period -- The longer of forty (40) years from the date of execution 

of the LURA or fifty (50) years from the date the Property was initially occupied 

as multifamily housing, during which the property must comply with the 

Occupancy Requirements of the applicable LURA. 

Condominium Owners -- Nonprofit organizations, public agencies and forprofit entities that purchased Condominium Properties from the RTC pursuant to 

Section 21A(c) of the FHLBA (12 U.S.C. S144la(c)). 

Condominium Property -- An eligible condominium property that is sold to a 

Condominium Owner subject to the Occupancy Requirements, the Rent 

Restrictions and the Condominium Resale Restrictions, under the terms of the 

applicable LURA. See Chapter 7. 

FDIC -- The Federal Deposit Insurance Corporation, which, in acting in its 

capacity as manager of the FSLIC Resolution Fund, is successor in interest to 

the Resolution Trust Corporation in implementing the Affordable Housing 

Disposition Program. 

Homebuyer Income Certification (HIC) -- The Certification Form (contained in 

Appendix I) executed by the selling owner and a low income homebuyer 

certifying total income and eligibility to purchase a specific Qualified Unit. 

HUD -- The U.S. Department of Housing and Urban Development, which issues 

annual income eligibility limits and income qualification guidelines adopted for 

AHP. 

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Low Income Household -- Households and individuals whose Annual Incomes 

do not exceed 80 percent of area median income in the area in which the 

particular Property is located, as determined by the Secretary of HUD under the 

Section 8 Program, with adjustment for family size. Also referred to as “ Low 

Income” . 

Low Income Restrictions -- The occupancy, rent, income and resale 

restriction set out in Section 21A(c) of the FHLBA (12 U.S.C. S144la(c)), the 

Final Rule, and the applicable LURA. 

LURA -- The Land Use Restriction Agreement entered into by the Owner at 

time of purchase, setting forth the Owner's obligation to comply with the 

applicable occupancy, rent and resale restrictions with respect to the Owner's 

Property. 

MOU -- The Memorandum of Understanding for Monitoring and Enforcement 

between the FDIC, acting in its capacity as Manager of the FSLIC Resolution 

Fund, successor in interest to the Resolution Trust Corporation, and a State 

Monitoring Agency. 

Occupancy Requirement -- The requirement to set aside a minimum number 

of units in a Property for occupancy by Low Income and Very Low Income 

Households, as specified in the applicable LURA. 

Owner(s) -- The purchaser of a AHP Property, and any successors in title to 

such owners. 

Owner Data Entry Program (ODEP) -- Computer software provided by FDIC 

via its monitoring agencies to owners/managers of AHP housing to assist them 

with determining tenant eligibility, monitoring for property compliance with setasides, and making monthly and annual reports to the State Monitoring Agency. 

Qualified Tenant (QT) -- A household or individual who has been certified as 

meeting the applicable income limits, has executed a Tenant Income 

Certification, and is occupying a Qualifying Unit. 

Qualifying Unit (QU) -- The total units in a Property or Properties required to be 

set aside to meet the applicable Occupancy Requirement. A Qualifying Unit is a 

Unit that (i) is rented to either a Low Income Family or Very Low Income Family, 

(ii) has a rent that is at or below the applicable rent limit for the Program, and (iii) 

is used in complying with the Low Income occupancy requirements of the 

Program. Any Unit rented to a Low Income Family or Very Low Income Family 

that is not needed to meet the Low Income occupancy requirements of Section 

2.2(a) will not be deemed a Qualifying Unit and will not be subject to rent 

restrictions. 

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Rent Restrictions -- The applicable rent limits for Qualifying Units in a 

Property, as provided in the applicable LURA. The Program has two rent limits: 

one applicable to Very Low Income households that occupy units meeting the 

Very Low Income Set-Aside, and a Low Income limit applying to all other SetAside units. Rent limits are published annually by the FDIC based upon median 

income calculations by HUD. 

Resale Restrictions -- The requirement that a Single Family or Condominium 

may be sold by an owner only to a purchaser that is a Low Income Family which: 

(i) agrees to occupy, and certifies in writing that it intends to occupy, such 

property as a principal residence for at least 12 months; and (ii) enters into an 

agreement providing for the recapture of seventy-five percent (75%) of the profits 

from the resale of such property, if such resale takes place within 12 months after 

such purchase, all as more fully provided in the applicable LURA. 

RTC -- The former Resolution Trust Corporation, as established pursuant to 

Section 501(a) of the Financial Institutions Reform, Recovery, and Enforcement 

Act of 1989, which administered AHP through 1995. 

Section 8 Program -- The Section 8 Program is the principal Federal rental 

assistance program administered by HUD, and is the source for the income 

qualification standards and procedures for AHP. 

Single Family Property -- A one-to-four unit property purchased by a Single 

Family Owner, and subject to the Single Family Occupancy Requirement, the 

Rent Restrictions and the Single Family Resale Restrictions. See Chapter 8. 

State Monitoring Agency -- The State Housing Finance Agency or other 

agency under a Memorandum of Understanding (MOU) with the FDIC to monitor 

AHP properties and enforce compliance with AHP rules. 

Tenant Income Certification (TIC) -- The Certification Form (contained in 

Appendix E) executed by the owner/manager and the tenant certifying total 

income and eligibility to occupy a specific Qualified Unit. 

Unit -- A residential accommodation constituting a part of the Property and 

containing separate and complete living facilities, including Single Room 

Occupancy (SRO) units. 

Very Low Income Household -- A household, family, or individual whose 

Annual Income(s) do not exceed 50 percent of area median income in the area in 

which the Property is located, as determined by the Secretary under Section 

3(b)(2) of the United States Housing Act of 1937 (42 U.S.C. S1437&(b)(2)), with 

adjustment for family size. 

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1.7 ORGANIZATION OF THE HANDBOOK 

To guide state agencies in monitoring owner compliance with AHP 

requirements, this manual describes the procedures an agency should 

follow in performing its monitoring activities. 

¤	 Chapter 2 describes the specific requirements for AHP multifamily 

properties. 

¤	 Chapter 3 outlines the basic procedures agencies should follow in 

monitoring owner compliance. 

¤	 Chapter 4 provides instructions on the actions monitoring agencies 

should take when they determine an owner is out of compliance. 

¤	 Chapter 5 discusses financial infeasibility exemptions from program 

requirements and the guidelines agencies should use in assessing 

owner requests for an exemption. 

¤	 Chapter 6 reviews a monitoring agency's administrative 

responsibilities and provides guidance on contracting for monitoring 

services. 

¤	 Chapter 7 provides guidance for agencies that need to monitor bulk 

condominium purchases. 

¤	 Chapter 8 describes the monitoring procedures for one-to-four unit 

properties purchased in bulk by public agencies and nonprofit 

organizations. 

These chapters are followed by a set of appendices containing program 

documents, sample forms and reports. 

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