The Trainer — November 2015
Requesting Withdrawals from Residual Receipts Account
In this month’s feature, we discussed how HUD requires many owners of nonprofit and limited-dividend sites with HUD-insured and HUD-held mortgages to set up residual receipts accounts. If you have such an account, there may come a time when you need to ask HUD to let you withdraw money from the residual receipts account to help you cover operating expense deficits that your rental revenue won’t cover. Your residual receipts may be a source of funds to make up for a cash shortfall.
HUD won’t approve withdrawals from the residual receipts account for making mortgage payments when a mortgage default has occurred or is about to occur. True or false?
To get HUD approval to withdraw funds from your residual receipts account, you should:
a. Send HUD your most recent financial statements.
b. Call HUD to request an audit.
c. Write HUD a letter explaining why you need the money.
d. None of the above.
ANSWERS & EXPLANATIONS
Correct answer: b
False. The Handbook lists two permissible uses for residual receipts that apply to all sites. HUD should approve withdrawals from the residual receipts account for:
- Reducing operating expense deficits when cash shortfalls occur; and
- Making mortgage payments when a mortgage default has occurred or is about to occur.
The Handbook also lists several other uses for residual receipts that apply only to sites whose contract with HUD was signed before 1979.
Correct answer: c
To get HUD’s approval, your written request should explain the purpose of the withdrawal and why your operating revenue isn’t adequate to cover the costs. Make sure HUD understands that your site will face serious consequences if it denies your request. Point out that even though you’re reluctant, you’d need to reduce management services unless funds are made available. Also, if you have a good record with HUD, be sure to emphasize it in your letter. Take credit for having generated residual receipts in the past.