CHAPTER 1 

INTRODUCTION 

1.1 PROGRAM BACKGROUND 

The Financial Institutions Reform, Recovery and 

Enforcement Act of 1989 (FIRREA) required that the 

Resolution Trust Corporation (FDIC) develop a program 

for selling residential properties to provide affordable 

housing opportunities. In response to this provision, 

FDIC established the Affordable Housing Disposition 

Program (AHP), 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 FDIC terminated on December 31, 1995, and all 

of FDIC’s rights and obligations were transferred to the 

FSLIC Resolution Fund, the successor in interest to the 

FDIC, which is managed by the Federal Deposit 

Insurance Corporation (FDIC). This transfer 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 FDIC’s obligations. 

AHP encourages qualified for-profit and nonprofit housing 

developers, as well as public agencies, to purchase FDICheld multifamily properties. Under the program, FDIC 

sells properties to eligible purchasers who make an 

acceptable offer at or above the property's net realizable 

market value established by FDIC. In return for 

purchasing a property at a price below the fair market 

value, purchasers agree to make units available to Low 

and Very Low Income households at affordable rents. 

The rent and income restrictions are designed to assure 

that, for the next 40 to 50 years, the property serves 

families in need of affordable housing. 

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This manual is designed to help owners who have 

purchased AHP properties meet their obligations. This 

guide will help owners and their managers to: 

0	 meet occupancy requirements; 

0	 appropriately evaluate tenant income and
 

eligibility;
 

0	 determine maximum allowable rent for units; 

0	 lease vacant units; and 

0	 re-certify tenant income eligibility. 

The appendices to the manual provide sample forms and 

documents that may assist owners in meeting their 

obligations. The manual also contains suggested 

practices and management tips gleaned from experienced 

owners and managers of affordable housing. 

1.2 BASIC PROGRAM REQUIREMENTS 

The program has four basic requirements to assure that 

AHP multifamily rental properties provide affordable 

housing to Low and Very Low Income tenants. They are: 

¤	 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 AHP statute establishes that at least 35 percent 

of the total units must be available to these 

households. The proportion of Low and Very Low 

income units is specified in the Land Use Restriction 

for each property. 

¤	 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 over the 

life of the agreement signed at the time the property 

was purchased through the program. If the original 

AHP purchaser or subsequent owners sell the 

property, the new purchaser must be informed of the 

ongoing affordability requirements. 

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¤ Compliance Period. Under the Program, AHP 

property 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 through three documents: a 

Land Use Restriction Agreement for each property, the 

AHP Owner's Compliance Manual and a Memorandum of 

Understanding between the FDIC and the State 

Monitoring Agency. 

A. Land Use Restriction Agreement (LURA) 

The LURA is a deed restriction which buyers sign and is 

recorded at the time they purchase a property through the 

Program. The LURA establishes the affordability 

requirements for the property and the owner's obligations 

to the FDIC and the State Monitoring Agency. In signing 

the LURA, the owner agrees to abide by the restrictions 

regarding the use of the property as 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. 

B. AHP Owner's Compliance Manual 

This manual describes the procedures AHP property 

owners must follow to comply with the provisions of their 

LURA and enable the designated monitoring agency (see 

Memorandum of Understanding below) to monitor their 

compliance with these procedures. Owners should 

receive copies of this Manual at the time of initial 

purchase. Additional or replacement copies can be 

obtained from the monitoring agencies. 

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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1
C. Memorandum of Understanding (MOU) 

The Memorandum of Understanding (MOU) is the 

Agreement between the FDIC and its designated 

monitoring agency (most commonly a State Housing 

Finance Agency). The monitoring agency agrees to 

monitor specified AHP properties on behalf of the FDIC in 

order to insure that the properties comply with all 

occupancy, eligibility, reporting and recordkeeping 

requirements. The monitoring agency is compensated for 

its service through an annual fee paid by each property in 

the program. 

To aid state monitoring agencies and owners in reporting 

on their compliance with AHP program requirements, the 

FDIC provides an automated system known as the AHP 

Compliance Monitoring System (CMS). The component 

of CMS that helps owners to report information and 

monitor their compliance is known as the Owner Data 

Entry Program (ODEP). The system is more fully 

described in Chapter 6 (Reporting) and Appendix J. The 

software is available to owners at no charge from their 

state monitoring agency. 

1.4 TYPES OF PURCHASES 

Multifamily properties can be purchased either individually 

or in bulk. Owners who buy properties in bulk have 

flexibility in how the 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, some of these two types of 

properties have been sold in bulk to qualified investors, 

public agencies and non-profit organizations for rental 

and/or sale. When renting these units, purchasers agree 

to follow the same basic occupancy requirements that 

apply to AHP multifamily property owners. However, if 

units are converted to owner-occupied units, a specified 

portion of the units must be sold to Low Income families. 

This manual includes guidance on the sale of these 

properties in Chapters 8 and 9. 

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1.5 PRINCIPAL PLAYERS AND RESPONSIBILITIES 

There are three major players with responsibilities for 

assuring that AHP properties comply with the programs' 

affordability requirements. They are: 

KEY AHP PLAYERS
 

Owners/Property Managers
 

Monitoring Agencies
 

FDIC
 

A. Owners/Property Managers 

After purchasing a property through AHP, owners and 

their managers must fulfill the following responsibilities: 

0 Comply with occupancy and rent requirements 

specified in the property's LURA; 

0 Inform on-site management personnel of program 

requirements; 

0 Maintain appropriate records, certifications, and 

documentation; 

0 Report to the monitoring agency as required 

(monthly or annually); 

0 Certify property compliance annually or as 

required by monitoring agency; 

0 Pay monitoring fees to the monitoring agency as 

required; 

0 Cooperate with the monitoring agency during 

compliance reviews; 

0 Take required corrective actions if property is out 

of compliance; and 

0 Inform potential buyers of LURA restrictions. 

B. Monitoring Agency 

Once an owner has purchased a property through AHP, 

the monitoring agency with jurisdiction will: 

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0 Provide guidance to owner/managers on program 

requirements; 

0 Monitor properties for compliance with program 

requirements; 

0 Collect monitoring fees from owners; 

0 Monitor and enforce corrective action in cases of 

non-compliance; 

0 Evaluate financial infeasibility exemption requests; 

0 Monitor bulk purchases of condominiums and 

single family properties, and sales of those
 

properties to individual buyers; and
 

0 Report to FDIC.
 

C. Federal Deposit Insurance Corporation 

In addition to program oversight, FDIC has the following 

responsibilities: 

0 Provide monitoring agencies with guidance on 

program procedures; 

0 Provide monitoring agencies with data on new 

properties for sale; 

0 Notify monitoring agencies of new sales upon final 

closing; 

0 Provide monitoring agencies with LURAs and 

other necessary materials; 

0	 Provide enforcement support to restore owner 

compliance upon request from a monitoring 

agency; and 

0	 Review state monitoring agency performance. 

1.6 GLOSSARY OF PROGRAM TERMS 

In this Manual, the following Program terms and 

acronyms will be used and have meaning as described 

herein: 

AHP or AHP -- The Affordable Housing Disposition 

Program (AHP) , 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. 

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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 Congress. 

Compliance Period -- The longer of forty (40) years 

from the date of the Land Use Restriction Agreement or 

fifty (50) years from the date the property was initially 

occupied as multifamily housing, during which the 

property owner or successors must comply with the 

Occupancy Requirements of the applicable LURA. 

Condominium Owners -- Nonprofit organizations, 

public agencies and for-profit entities that purchased 

Condominium Properties from the FDIC 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. 

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. 

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 

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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, through its monitoring 

agencies, to owners/managers of AHP housing to assist 

them with determining tenant eligibility, monitoring for 

property compliance with set-asides, 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 

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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. 

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 Set-Aside 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 (i) which 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) which 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. 

FDIC -- 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 9. 

State Monitoring Agency -- The State Housing Finance 

Agency or other agency under a Memorandum of 

Understanding with the FDIC to monitor AHP properties 

and enforce compliance with AHP rules. 

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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. 

1.7 ORGANIZATION OF THIS MANUAL 

This manual contains nine chapters, plus appendices. 

Each chapter is divided into several sections, using its 

chapter number as a prefix (e.g., this is Section 1.7). The 

Appendices follow the chapters, and contain many useful 

forms and other details of the Program. 

Chapter 2 ("AHP Multifamily Property Requirements") 

defines important program terms and spells out the basic 

program requirements pertaining to restricted units, tenant 

eligibility, maximum rents, and annual tenant reexaminations. Several exercises involving sample AHP 

properties have been included at the end of this chapter 

to enable owners and their staff to practice the application 

of key program requirements. 

Chapter 3 ("Achieving Compliance") describes what 

owners need to do in order to reach and maintain full 

compliance with AHP program requirements. Guidance 

also is provided regarding properties that fall out of 

compliance. 

Chapter 4 ("Determining Income Eligibility") discusses 

the process of determining the eligibility of Low and Very 

Low Income households, including the determination of 

household size, the computation and verification of annual 

income, and the requirements for annual re-examination 

of income eligibility. 

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Chapter 5 ("Meeting Rent and Lease Requirements") 

describes AHP maximum rent provisions, and contains 

the provisions owners must include in dwelling leases as 

well as clauses that may not be included in the lease. 

Chapter 6 ("Owner Record-Keeping, Reporting, and 

Administrative Requirements") provides procedures for 

keeping records, filing reports, and complying with any 

other requirements monitoring agencies may institute to 

assure compliance with the LURA. 

Chapter 7 ("Financial Infeasibility Waivers") describes 

the provisions for temporary waiver of the occupancy 

requirements in cases where factors beyond the control of 

management are threatening the solvency of the property, 

and where a temporary reduction of set-asides would 

prevent foreclosure. 

Chapter 8 (“Compliance Procedures for 

Condominium Bulk Purchases”) provides guidance to 

owners who make bulk purchases of condominium units, 

and contains provisions governing the rental of such units 

as well as sales to individual low income homebuyers. 

Chapter 9 ("Compliance Procedures for One-to-Four 

Unit Property Bulk Sales to Public Agencies and 

Nonprofits") outlines the compliance procedures for oneto-four-unit properties and describes the procedures for 

reselling them to individual homebuyers. 

This manual also includes a set of appendices with 

program documents, sample forms and reports, and other 

information that may be helpful to owners and managers. 

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