New York Codes, Rules and Regulations › Title 9 - EXECUTIVE DEPARTMENT › Subtitle S - Division of Housing and Community Renewal › Chapter III - Low Rent Housing › Subchapter D - Accounting Manual For Public Housing Agencies › Part 1643 - Financing › Subpart 1643-2 - Accounting Entries And Procedures › Section 1643-2.5 - Temporary financing-funds borrowed from private investors; refinancing

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Refinancing out
						of proceeds of issue of new temporary loan notes. Where authorized or directed
						by the division, temporary loan notes issued to private investors may be
						refinanced, upon maturity, by a new issue of temporary loan notes. The new
						temporary loan notes must be authorized by separate and appropriate resolutions
						of the local agency. These resolutions authorize the execution of new
						requisition agreement, the execution and deposit, in escrow, of a new advance
						loan note, the cancellation, upon payment of the maturing issue of the
						temporary loan notes out of the proceeds of the issue of the new temporary loan
						notes, of the old requisition agreement and old advance loan note, and the
						execution and issue of the new temporary loan notes. The resolutions
						authorizing the contracting of indebtedness (§
												1643-2.2, subd. [b]) and the
						execution and issue of certificate of indebtedness and of advance loan notes in
						the aggregate maximum principal amount of the loan contract cover refinancing
						as well as the initial financing and so are not required to be passed each time
						refinancing is undertaken.
(b) Flow
						of funds. Depending on the progress made and anticipated in the development of
						the project, the new temporary loan notes issued to refinance a maturing issue
						of temporary loan notes may be for a larger principal amount than the old
						notes, or for the same amount, or for a lesser amount. Generally speaking, only
						the difference, if any, between the principal amounts of the old and new
						temporary loan notes will be received or disbursed by the local agency and so
						pass through the project's development fund. The proceeds of the new issue of
						temporary loan notes will first be applied by the bank designated as paying
						agent for the old temporary loan notes directly to the payment of the principal
						of and interest on the old notes and this portion of such proceeds will not,
						ordinarily, pass through the project's development fund.
(c) New temporary loan notes issued for
						larger amount. Assume that an initial issue of $500,000 of temporary loan
						notes, secured by an advance loan note for $505,000 is to be refinanced by a
						temporary loan note issue of $600,000, secured by an advance loan note of
						$606,000 and that the aggregate maximum principal amount of the loan contract
						is $2,200,000. Before the refinancing, the general ledger balances of the
						affected accounts would be as follows:
Account 2120, Temporary Loan Notes Payable $500,000
						  Cr.
Entry (4): Through the Cash Receipts Register, upon
						  receipt of the check for the difference between the principal amounts of the
						  new and old Temporary Loan Notes:
Debit: Account 1111, Development Fund $100,000
Credit: Account 2120, Temporary Loan Notes Payable
						  $100,000
Note:No accounting entry is made to reflect passage of
						  the resolution authorizing the execution of the new requisition agreement and
						  the advance loan note in the sum of $606,000 and the cancellation of the old
						  requisition agreement and advance loan note. The new advance loan note is shown
						  as a footnote to the balance sheet as described in subdivision (b) of section
						  1643- 2.4.
(d) New
						temporary loan notes issued for same amount. Where the new temporary loan notes
						are to be issued in the same amount as the maturing notes, no funds will
						ordinarily flow through the project's development fund.
Note:No accounting entry is made to reflect the passage
						  of the resolution authorizing the execution and issue of the new temporary loan
						  notes or the execution and deposit, in escrow, of the new requisition agreement
						  and advance loan note, the latter being the subject of a balance sheet
						  footnote, as previously described.
(e) New temporary loan notes issued for
						lesser amount. Where the new temporary loan notes are to be issued in a lesser
						amount than the maturing notes, the difference between the principal amounts of
						the new and old notes will, ordinarily, be disbursed by the local agency out of
						development funds on hand. The accounting entries are as follows:
Entry (5): Through the Cash Disbursements Voucher
						  Register:
Debit: Account 2120, Temporary Loan Notes Payable
						  $100,000
Credit: Account 1111, Development Fund $100,000
(f) Payment of interest on
						maturing temporary loan notes. Interest on temporary loan notes outstanding is
						accrued quarterly as described in Part 1644, Debt Service.
(1) Where the new issue of temporary loan
						notes is for a larger amount than the maturing issue, the paying agent will,
						ordinarily, apply the proceeds of the new issue to the interest on the maturing
						notes, as well as to payment of the principal. In such event, the balance of
						the proceeds of the new issue passing through the project's development fund
						will be less (by the amount of the interest) than the difference between the
						principal amounts of the new and old notes. Entry (4) above, made through the
						cash receipts register upon receipt of the check for the proceeds, will then be
						modified to read as follows:
Entry (6):
Debit: Account 1111, Development Fund $95,000
Debit: Account 2132.2, Accrued Interest
						  Payable--Temporary
Loan Notes 5,000
Credit: Account 2120, Temporary Loan Notes Payable
						  100,000
(2) Where the new
						temporary loan note issue is for the same, or a lesser, amount than the
						maturing notes, the local agency will, ordinarily, disburse the interest
						thereon out of funds on hand. The entry will be made through the cash
						disbursements-voucher register as follows:
Entry (7):
Debit: Account 2132.2, Accrued Interest
						  Payable--Temporary
Loan Notes $5,000
Credit: Account 1111, Development Fund $5,000