Financial Reporting and Compliance Requirements for Approved Mortgagors

PURPOSE: This rule provides regulatory control by the Missouri Housing Development Commission (commission) over approved mortgagors. It requires approved mortgagors to furnish reports and financial information, allows the commission to perform on-site inspections of developments, and restricts the ability of approved mortgagors to change rents or ownership without the consent of the commission. (1) All developments financed in whole or in part by the Missouri Housing Development Commission (commission) must remain available to low- and moderate-income persons at the lowest possible costs throughout the life of the loan, or until such later time as the commission may require. To help insure the achievement of these goals, for all developments financed by the commission, the following procedures shall be established to monitor compliance with the requirements of the state housing act, these regulations, and the requirements of any regulatory agreement or land use restriction agreement governing the use of the development: (A) Within ninety (90) days following the end of each fiscal year, all approved mortgagors operating developments consisting of twenty-four (24) or more units shall furnish the commission with a complete annual financial report based upon an examination of the books and records of the development prepared in accordance with the requirements of the commission by a certified public accountant or other person acceptable to the commission and certified by an authorized agent of the mortgagor. For any development containing less than twenty-four (24) units, the commission may, where deemed appropriate to protect the interests of the state of Missouri, require approved mortgagors of such developments to provide the commission with similar annual financial reports; (B) The staff of the commission shall perform an annual performance audit of each development unless other applicable federal or state laws or regulations require more restrictive audit rules, in which case the more restrictive rules shall dictate the frequency with which audits are performed. Notwithstanding the previous sentence, the commission staff may, in the absence of more restrictive federal or state laws or regulations, perform such audits less frequently than once per year for developments meeting such criteria as the commission staff may establish from time-to-time; (C) The staff of the commission shall perform an annual on-site inspection of each development unless other applicable federal or state laws or regulations require more restrictive inspection rules, in which case the more restrictive rules shall dictate the frequency with which inspections are performed. Notwithstanding the previous sentence, the commission staff may, in the absence of more restrictive federal or state laws or regulations, perform such on-site inspections less frequently than once per year for developments meeting such criteria as the commission staff may establish from time-totime; (D) The approved mortgagor for each development shall, on an annual basis, provide the commission staff with a verification of income of each of the tenants in its development. This requirement shall apply to all tenants, regardless of whether they occupy a market rate unit or a unit for which reduced affordable housing rents are being charged. For developments not receiving financing from the commission, the only initial verification of income for each tenant will be required unless any other federal or state laws applicable to the development shall require more frequent income verification of tenants, in which case the more restrictive requirements shall prevail; and (E) Upon the request of the commission, its agents, employees, or attorneys, approved mortgagors shall submit monthly occupancy reports to the commission staff, as well as give specific answers to questions upon which information is desired from time-totime relative to the operation and condition of any development. (2) No rents or charges to tenants in any development financed by the commission shall be increased without the prior written approval of the commission staff. (3) Transfer of Ownership. The basic documents of the commission severely restrict the transfer of legal or beneficial interest in any development, and no such transfer may occur without the prior written consent of the commission. No monies paid for either the legal or beneficial interest of a development financed by the commission shall be deemed to increase the equity for the purposes of determining allowable distribution of dividends, except for those funds approved as development costs. (A) Any intent to utilize secondary financing secured by the development shall be specifically identified. (B) The consent of the U.S. Department of Housing and Urban Development (HUD) shall not be deemed adequate for commission approval of transfer of ownership. (4) The approved mortgagor shall provide the commission with the following information: (A) In the case of an individual approved mortgagor, the name and address of the mortgagor; (B) In the case of an approved mortgagor that is a partnership, the names and addresses of all persons or entities having an ownership interest in the partnership; and (C) In the case of an approved mortgagor that is a corporation, the names and addresses of the officers, directors, and shareholders and any amendments or substitutions which may occur from time-to-time in the organization of the approved mortgagor. (5) Until the later of i) the repayment of the commission’s loan on the development, ii) the expiration of any applicable compliance period set forth in the commission’s loan documents, or iii) any longer period otherwise prescribed by the commission, an approved mortgagor shall notify the commission regarding any of the following changes: (A) Any change in the approved mortgagor’s address; (B) Any change in the management agent managing the development; (C) Any amendments or substitutions in the organization of the approved mortgagor (which notice shall also be provided to the management agent of the development); and (D) Any other events for which notice may be required under the commission’s loan documents. AUTHORITY: section 215.030(5), (12), and (19), RSMo 2000.* Original rule filed May 24, 2010, effective Jan. 30, 2011. *Original authority: 215.030, RSMo 1969, amended 1974, 1982, 1985, 1989, 1993, 1995, 1998. Development Commission