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Penalties for Non-Filing

Last Updated: Oct 22, 2015 03:08PM MDT
If you know ahead of time that your submission is going to be late you can submit an extension request. Bear in mind that HUD rarely grants extensions.

If you do not get your electronic submission completed by the end of the "Grace Period" you may be referred to the Departmental Enforcement Center (DEC).

The DEC's primary goal has been to obtain owner compliance in filing the required statements. However, the DEC has authority to impose civil money penalties (CMPs) against owners of HUD-insured and assisted multifamily properties who do not comply.

The following Q & A is taken from the DEC page on HUD's website.

Q: Who is subject to the civil money penalties?

A: Recent rules have expanded the parties against whom HUD may seek a civil money penalty. In most cases, for AFS due after January 7, 2002, HUD may seek a civil money penalty against mortgagors, general partners of mortgagors, officers or directors of corporate mortgagors, identity of interest agents, and members of limited liability companies that are mortgagors or partners of partnership mortgagors. The rules also expanded liability for penalties against Section 8 owners, their general partners, and identity of interest agents.

Q: What is the maximum civil money penalty that can be imposed?

A: Effective for violations occurring after February 19, 2013, the maximum penalty that may be imposed upon an FHA mortgagor of a multifamily property (or on any person in a relationship with the mortgagor) has increased from $37,500 to $42,500 per violation. In cases where there is only a HAP contract, the maximum penalty amount has also increased from $25,000 to $27,500 for each violation that occurred after February 19, 2013. Project funds cannot be used for payment of the penalty. See 24 CFR 30.45 (g) and 24 CFR 30.68 (c) as amended in the Federal Register at 78 FR 4057 (January 18, 2013).

Q: I received an email letter from REAC indicating that REAC/FASS has not received the annual financial statement (AFS). Can I get an extension of time to file the AFS?

A: Requests for extensions must be filed electronically through the REAC website at http://www.hud.gov/reac through the "online systems" selection. Please refer to Chapter 2 of the online REAC User Guide for Financial Assessment Subsystems - Multifamily Housing (FASS). The DEC is not authorized to grant extensions for filing.

Q: I need to talk to someone for technical assistance in understanding the electronic filing requirements. Is there a telephone number I can call to speak to someone?

A: Yes. To discuss a FASS technical problem or get assistance, contact the REAC Technical Assistance Center at 1-888-245-4860.

Q: If a property changed owners, what are the obligations of the seller and purchaser for filing an AFS?

A: The seller must file an AFS covering the period from the beginning of the seller's fiscal year through the day before the deed was signed. The date the deed was signed marked the beginning of the purchaser's (new owner's) financial reporting responsibilities. The purchaser must file an AFS from the date the deed was signed until the end of the purchaser's selected fiscal year.

Q: If my mortgage is paid off, does HUD require an AFS for the property?

A: Owners are required to submit an AFS for the full fiscal year ending before the year the owner paid off the mortgage. Owners must continue to file the AFS after prepayment if any other contract and/or agreement with HUD requires an AFS (i.e., a Section 8 Housing Assistance Payments Contract or Use Agreement). Please contact the local HUD multifamily program center if there is any question concerning the AFS filing requirements.

Q: If HUD sold my mortgage in a Multifamily Note Sale, why am I being contacted to file an AFS?

A: Owners of mortgages sold under the Multifamily Notes Sale Program are required to submit the annual financial statements covering the fiscal year ending before the year in which the note sale closing occurs.

Q: If my property is in foreclosure what AFS filing rules apply to me?

A: Owners of HUD-held properties included in a foreclosure sale, that have a business requirement to submit an AFS, are required to submit financial statements covering the full fiscal year before the year in which the foreclosure sale occurs.

Q: I received a Prepenalty Notice; can I pay a civil money penalty and not be required to file the AFS?

A: No. All owners who have a regulatory or contractual agreement to file AFS must do so.
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