The Trainer — June 2017
Handling Security Deposits Properly
In this month’s feature, we gave you eight rules to follow to avoid making common mistakes when handling security deposits. HUD imposes strict requirements on how you collect and maintain security deposits. When HUD auditors visit your site, they will check that you have followed various rules. And if auditors find that you have not followed the rules, you could be charged with serious offenses, such as “equity skimming” and “misappropriation of funds.”
If you own or manage several assisted sites, you can keep security deposits from residents at all the sites in one bank account. True or false?
You may not open multiple security deposit accounts at different banks for one site. True or false?
ANSWERS & EXPLANATIONS
Correct answer: b
False. If you own or manage more than one site, you must open a separate bank account for each site’s security deposits. The account must be opened in the site’s name—for instance, “ABC Apartments Security Deposit Account.” Furthermore, the account can hold only security deposit funds; you can’t mix the security deposit funds with funds from any other source. For example, you must not put deposit funds that belong in the site’s reserve for replacements account into the security deposit account [Handbook 4370.2, par. 2-9 (A)].
Correct answer: b
False. The balance in a security deposit account may not exceed the FDIC insurance limit, so if you collect more than the FDIC limit in security deposit funds at a particular site, you’ll have to open security deposit accounts at more than one bank to ensure that the account balances remain below the FDIC limits. Also, because the security deposit account balance is constantly changing as residents move in and out throughout the year, you must remain watchful and make sure that the balance doesn’t go over the FDIC limit at any time [Handbook 4381.5, par. 6.47(b); Handbook 4370.2, par. 2-9(A)].