When calculating annual income for a family that is receiving subsidy through one of HUD’s multifamily subsidy programs, HUD regulations require that we include income from the family’s assets. If the family’s assets exceed $5000, we are required to include the greater of the actual income from assets or the imputed income from assets based on the “current passbook savings rate as established by HUD.” (4350.3 Par. 5-7F)
Each time I teach COS, we talk about how the “current passbook savings rate” is not actually very current. In fact, HUD has maintained the passbook rate at 2% for more than two decades despite declining interest rates! An article in the Baltimore Sun from September 10, 1991 states that the average savings passbook rate at that time was 5.01%. The next paragraph speculates as to the reasons for these “lean times.” If only the author knew what the next 20 years would bring for the banking industry. These days I am happy to get .05% on my savings account!
For decades, industry professionals have awaited a change. And I am happy to announce that the long awaited change has arrived! Last month, HUD released Notice H2014-15 that announced that the new passbook savings rate would be .06%. This new rate is effective with all certifications effective on or after February 1, 2015. In addition, the notice announces a plan to update the current passbook rate on an annual basis through the publication of a Housing Notice. It will be based on the national average provided by the Federal Deposit Insurance Corporation. HUD also reserved the right to adjust the rate more frequently than annually if the national average differs by at least 2% from the published rate.
This is good news for residents who have more than $5000 in assets! Under the current passbook rate, a resident with $20,000 in assets had a minimum of $400 in asset income included in their annual income figure. That will now drop to $12 under the .06% rate. That could result in a difference of $10 in rent each month depending on the actual income received from the assets.
If you are currently working on February 1, 2015 recertifications, you need to ensure that the new passbook rate (.06%) is used. If you are not sure how to change the rate in your software, please contract your software provider. Any certifications effective prior to February 1, 2015 MUST continue to use the current passbook rate of 2%. If your software does not allow you to enter this new rate with an effective date of February 1, 2015, you will need to discuss with your software vendor and management company how to ensure any pre-February 1, 2015 certifications use the proper 2% passbook rate and any February 1, 2015 or later certifications use the new rate.
In addition, please keep in mind that this change could result in a decrease in rent for tenants. According to Paragraph 7-10, tenants have the right to request an Interim Recertification if the change in income will result in a decrease in rent.
We are in the process of updating COS to include this change. If you need further guidance, please contact us through the NCHM eHotline.