Establishing Eligibility Training for Property Owners/Contract Administrators Presented by:

Establishing Eligibility Training for Property Owners/Contract Administrators Presented by:

Establishing Household Eligibility Key Discussion Items • Completing applications • Evaluating eligibility of a household • Documenting household income • Annualizing household income • Completing a Dept approved Income Certification • Determining adjustments to income (HOME Program) • Calculating rents (HOME Program)

Establishing Household Eligibility Applications • Gathering Income Information • No required form • Conventional rental applications WILL NOT gather sufficient information • If your property/program uses a conventional application, must use a supplement to gather more accurate information about income and assets Reminder Gather income information during recertifications, as well as initial certification

Establishing Household Eligibility Applications Application Tips: • Must be completed by household • Completed in entirety • NO white-out • All household members must be listed

Establishing Household Eligibility Application Who Counts as a household member? (income limit purposes) • Year-round occupants • Members temporarily away • Children temporarily absent due to placement in a foster home • Children away at school but live with the family during school recesses • Family members in the hospital or a rehabilitation facility for period of limited or fixed duration

Establishing Household Eligibility Application Who Counts as a household member? (continued) • Unborn children • Children under joint custody living in the unit more than 1/2 the year • Children who are in the process of being adopted Note: For persons permanently confined to a hospital or nursing home the family decides if such person is to be included as a household member. If the family decides to include the confined household member, they cannot be the head, co-head or spouse. Include the income of the person only if included as a household member.

Establishing Household EligibilityApplication Who Counts as a household member • Temporarily absent Persons in the military Do Count as a household member if they arethe head, co-head or spouse (or) if they have a spouse or a dependent residing in the unit Do not count if they are not the head, co-head or spouse and do not have a spouse or dependent in the unit i.e. Phil and Pam Cooper are applying for residency with Justin their 19 year old son. Justin is temporarily away on active military duty. Should the 2 person or 3 person limit be used?

Establishing Household Eligibility Application Who Does Not count as a household member? (income limit purposes) • Live-in aides • Absent Children • Foster children or foster adults • Children under joint custody living in the unit less than 1/2 the year

Establishing Household Eligibility Evaluate Eligibility TBRA • Is the household’s disclosed income less than the current maximum limit required to meet the set aside? If no: Household DOES NOT qualify for assistance!! Note: When determining the eligibility of potential households a review of the assistance to date must be conducted. A contract requiring assistance to 5 households at 30 of area median income (ami) and 8 households at 80% of ami must be adhered to. If 8 households at 80% ami have already been assisted, then only 30% households would qualify.

Establishing Household Eligibility Evaluate Eligibility • Does the Household Look Eligible? • If YES: • Obtain tenant authorization for release of information (required for ALL HOME ) • Owners/managers/contract administrators will need written authorization to verify a household’s income and assets • Keep copies in applicant/household file

Establishing Household Eligibility Evaluate Eligibility – Income Inclusions • What counts as Income? • Keep in mind: • Gross Income does not equal Taxable Income • Annual income includes all amounts not specifically excluded • Include the GROSS amount of income • Must include income from all household members

Establishing Household Eligibility Evaluate Eligibility – Income Inclusions • What counts as Income? • Employment Income • Gross Income from earnings, including shift differentials, tips, bonuses, commissions, and overtime pay. • The employment income of all adults, including those under the age of 18 who are considered emancipated

Establishing Household Eligibility Evaluate Eligibility – Income Inclusions • What counts as income (continued)? • Lump Sum Payments Counted as Income • Lump sum payment caused by delays in processing periodic payments for unemployment or welfare assistance. • Generally, all other types of lump sum payments are considered assets.

Establishing Household Eligibility Evaluate Eligibility – Income Inclusions • What counts as income (continued)? • Payments in Lieu of Earnings • Includes unemployment, worker’s compensation, disability, compensation and severance pay • Income that may not last for a full 12 months should be calculated assuming current circumstances will last a full 12 months. • Military Pay • Include all regular and special pay and allowance for a member of the Military (Hostile fire is the only exclusion) • Leave and Earnings Statement

Establishing Household Eligibility Evaluate Eligibility – Income Inclusions • What counts as income (continued)? • Regular Cash Contributions and Gifts • Benefits or other unearned income of minors • Alimony or Child Support • Court ordered alimony or child support is counted unless: • The applicant can certify the payments are not being received AND that he or she has taken all reasonable legal actions to collect the amount due, including filing with appropriate courts or agencies responsible for enforcing payments

Establishing Household Eligibility Evaluate Eligibility – Income Inclusions • What counts as income (continued)? • Income from a Business (including self-employment) • Include Net Income • Net income is gross income less business expenses, interest on loans, and depreciation computed on a straight-line basis. • Count any salaries or any other amounts distributed to any of the household members from the business • Resident Service Stipends • In excess of $200 per month count FULL amount

Establishing Household Eligibility Evaluate Eligibility – Income Inclusions • What counts as income (continued)? • The Full Amount of Periodic Payments • Such as those received from social security, annuities, pensions and disability or death benefits (entire amount included for all HH members, regardless of age) • For HH members receiving long-term care insurance payments, count only the amount received in excess of $180 per day. • NOTE: If an Agency is reducing the family’s benefit to adjust for a prior overpayment count only the amount that is distributed after the adjustment.

Establishing Household Eligibility Evaluate Eligibility – Income Inclusions • What counts as income (continued)? • Withdrawal of Cash or Assets from an Investment • Handle withdrawals from annuities, IRAs, 401(k) plans and other investment accounts as income in the following manner: • Count it as income if it meets these conditions • It is a period payment received on a regular basis and • The total amount withdrawn to date exceeds the amount invested • Welfare Assistance • Temporary Assistance for Needy Families (TANF)

Establishing Household Eligibility Evaluate Eligibility – Income Exclusions • What is Excluded from income? • Earned income of minors, including foster children (family members under 18 and not the head, co-head or spouse) • Payments received for the care of foster children/adults • Lump sum payments received from inheritances, insurance payments (including health and accident insurance and worker’s compensation), capital gains & settlement for personal or property losses • Amounts that are specifically for, or in reimbursement of, the cost of medical expenses for any family member

Establishing Household Eligibility Evaluate Eligibility – Income Exclusions • What is excluded from income (continued)? • Income of a live-in aide • Educational Scholarships or Grants • All forms of student financial assistance are excluded whether the assistance is paid directly to the student or educational institution • Includes amounts received under the work-study program • A resident service stipend (not to exceed $200 a month) • Temporary, nonrecurring, or sporadic income • Special pay to a family member serving in the Armed Forces who is exposed to hostile fire

Establishing Household Eligibility Evaluate Eligibility – Income Exclusions • What is excluded from income (continued)? • Amounts received from HUD-funded training programs • Includes: • Earnings and benefits for participation in a qualifying state or local employment training programs (including programs not affiliated with a local government) • The employment training program must have clearly defined goals and objectives and run for a specific, limited time period • Are excluded only for the period of the training program • Adoption assistance payments in excess of $480 per adopted child

Establishing Household Eligibility Evaluate Eligibility – Income Exclusions • What is excluded from income (continued)? • Earnings in excess of $480 for each full-time student 18 years or older (excluding the head, co-head and spouse) • Deferred periodic amounts from supplemental security income and social security benefits (regardless of how disbursed) • Value of food • Food Stamps • Groceries and/or contributions paid directly to the child care provider by persons not living in the unit

Establishing Household Eligibility Evaluate Eligibility – Income Exclusions • What is excluded from income (continued)? • Earned income tax credit (EITC) refund payments • Including advanced earned income credit payments • Payments under Section 8 of the United States Housing Act of 1937 or any comparable rental assistance program

Establishing Household Eligibility Evaluate Eligibility - Income REFER TO HUD 4350.5 and HOME Income Guide FOR A COMPLETE LIST OF INCOME INCLUSIONS AND EXCLUSIONS

Establishing Household Eligibility Evaluate Eligibility – Income Exercises • It’s exercise time EXERCISE #1 Income Inclusions & Exclusions

Establishing Household Eligibility Evaluate Eligibility – Income Exercises 1.Alimony or Child Support • Heather indicates on her application that she has court ordered child support in the amount of $375 a month. However, after making reasonable attempts to collect she actually gets $100 a month. What amount of child support should be counted, if any? • Answer:

Establishing Household Eligibility Evaluate Eligibility – Income Exercises 1. Answer: $1,200 (100x12). Since Heather has made reasonable efforts to collect the unpaid child support include only the amount actually received.

Establishing Household Eligibility Evaluate Eligibility – Income Exercises 2. Regular Cash Contributions and Gifts/ Scholarships & Grants • William Smith and Buddy Light apply for a unit. William reports that his parents give him $350 a month to help pay for bills and that he works part-time at Star Coffee making $7,600 a year. Bud reports that he is an unemployed full time student and receives a $12,400 scholarship a year. What is the household's annual income. • Answer:

Establishing Household Eligibility Evaluate Eligibility – Income Exercises 2. Answer: $11,800 ((350 x 12) + 7,600). Include the assistance from William’s parents and his employment earnings. Scholarships and grants are excluded from income so Buddy has no income.

Establishing Household Eligibility Evaluate Eligibility – Income Exercises 3. Withdrawal of Cash or Assets from an Investment • Maria and Juan Gomez have received $275 a month from an annuity for 97 months. The Gomez’s paid $29,500 for the annuity when they initially purchased it. Is the $275 considered Income? If so, what amount, if any, would you include? • Answer:

Establishing Household Eligibility Evaluate Eligibility – Income Exercises 3. Answer: YES. $475 is included as income. The Gomez’s have been receiving payments for 97 months for a total of $26,675 (275 x 97). The amount that they will receive during the certification period will be $3,300 (275 x 12). When added together the total is $29,975 (26,675 + 3,300). Since the amount received during this certification period will exceed their initial investment only the amount in excess should be counted as income (29,975 – 29,500). Keep in mind, if it was not possible to document that the amounts withdrawn are reimbursements of amounts invested, then the full $3,300 would be included as income. Note: Generally, when the holder of an annuity has begun receiving payments, the asset can no longer be converted to cash. Therefore, no calculation of income from assets will be made.

Establishing Household Eligibility Evaluate Eligibility • Special Considerations: • If only including $480 of employment income because of special student rule; full time student status must be verified • If employment status changes between application and move in: Require the household to complete a new application and do not throw away old application. Verify the employment status change by gathering third party or first hand documentation. Example: Mary and John Smith apply on 3/1/04. Mary lists a job at the bookstore, John lists a job at the grocery store. On 3/15/04 Mary returns with John’s check stubs and verbally informs you that she no longer works at the bookstore. A new application must be completed and gather third party verification of the date employment ended. If she is now receiving other income (unemployment?) first hand or third party verify the new income.

Establishing Household Eligibility Evaluate Eligibility • Special Consideration: • The revised HUD 4350.5 states “Owner may not verify further than self certification”, in regard to unborn children. TDHCA Policy: If the eligibility of the household depends upon the existence of an unborn child documentation must be gathered. A self certification is acceptable, but third party or first hand documentation is preferred. Example: Mark and Jane Doe apply for assistance or residency. On their application the indicate that they are expecting a child in 5 months. The income limit for two people is $22,000; the income limit for 3 people is $24,000. Their total income is $22,500. Explain to the household that your property/program can only process applications if the household is income eligible and that they appear eligible, based on a 3 person household. Your job is to clearly document their eligibility. Inquire if they can provide a note from their health care provider indicating the expected due date. If so, get a copy. If not, require a self certification.

Establishing Household Eligibility Evaluate Eligibility – Income Review • True or False • Barbara Hugh has applied for residency/assistance with her adult daughter, Lisa and Lisa’s 6 year old daughter Sara. Lisa is overseas in the military. The Hugh household has the option of including Lisa as a household member and including her income. TRUE or FALSE • Ryan Lee receives social security payments in the amount of $525 a month. The payment is being reduced by $25 to make up for a prior overpayment. The gross amount of $525 must be used to determine eligibility. TRUE or FALSE • Sally Pry applies for residency/assistance with her 3 children. Sally indicates that she receives AFDC assistance in the amount of $75 a month and $125 in food stamps. The household’s total annual income is $900. TRUE or FALSE • Albert Culver has an IRA account but is not receiving periodic payments from it at this time. However, he has withdrawn $2,500 for a Disneyworld trip with his children. The withdrawal is counted as income. TRUE or FALSE

Establishing Household Eligibility Evaluate Eligibility - Assets • Keep in mind • Assets are items of value that may be turned into cash. Households are not required to convert the assets into cash. • Not all items of value are considered an asset. • For assets owned jointly, prorate according to the percentage of ownership, if no percentage prorate the asset evenly. • Asset income must be determined when looking at assets. • Keep in mind, that not all assets earn interest.

Establishing Household Eligibility Evaluate Eligibility – Assets Inclusions • What is considered an asset? • Cash held in savings and checking accounts, safe deposit boxes, homes, etc. • Revocable Trusts • Any member of the household has the right to withdraw the funds in the account

Establishing Household Eligibility Evaluate Eligibility – Assets Inclusions • What is considered an asset? (continued) • Stocks, bonds, Treasury bills, CD’s, mutual funds, money market accounts and other investment accounts • Interest or dividends earned are counted as income from assets even if the earnings are reinvested • Individual retirement, 401K, Keogh accounts and other similar retirement savings accounts • Included when holder has access to the funds, even though withdrawal could result in penalty • If the holder is making occasional withdrawals, determine value by using previous 6 month average

Establishing Household Eligibility Evaluate Eligibility – Assets Inclusions • What is considered an asset? (continued) • Cash value of life insurance policies available to the holder before death • Personal Property held as an investment • i.e. Sports cards, movie posters, comic books • Equity in real property and other capital investments • Equity is current market value less the unpaid balance on all loans secured by the asset and reasonable costs that would be incurred in selling the asset

Establishing Household Eligibility Evaluate Eligibility – Assets Inclusions • What is considered an asset? (continued) • Retirement and pension funds • While employed, include only amounts the holder can withdraw without retiring or terminating employment • At retirement, termination of employment, or withdrawal, periodic receipts are counted as income and lump-sum receipts are counted as assets • Note: If the holder receives a lump-sum payment followed by period receipts, count the lump-sum as an asset and periodic payments as income. At recertification the owner/contract administrator would only include the periodic payments as income.

Establishing Household Eligibility Evaluate Eligibility – Assets Inclusions • What is considered an asset? (continued) • Lump-sum receipts or one-time receipts • Can include inheritances, one-time lottery winnings, victim’s restitution, settlements on insurance claims (i.e. worker’s compensation, personal or property losses) • Mortgage or deed of trust held by an applicant • Also referred to as a “contract sale” • Value is determined by calculating the principal amount; interest is considered actual income

Establishing Household Eligibility Evaluate Eligibility – Assets Inclusions • What is considered an asset? (continued) • Assets disposed of for less than fair market value • An owner/contract administrator must include for two years from the date the asset was disposed of • Count the difference between the cash value and the amount actually received • Rule applies when the “disposed amount” exceeds $1,000 • Do not count assets disposed of as a result of foreclosure, bankruptcy, divorce/separation

Establishing Household Eligibility Evaluate Eligibility – Assets Exclusions • What is NOT considered an asset? • Personal property • Items NOT held as an investment, regardless of monetary value • Interests in Indian Land • Term life insurance policies • Equity in a cooperative unit in which the family lives • Assets that are not accessible to the applicant and provide no income to the applicant

Establishing Household Eligibility Evaluate Eligibility – Assets Exclusions • What is NOT considered an asset? (continued) • Assets that are part of an active business • “Business” does NOT include rental properties that are held as an investment unless the applicant is holding such properties as their main occupation • Assets that are NOT effectively owned by the applicant • The assets are held in the individuals name but benefit someone outside of the HH who is responsible for the income taxes on the asset • A non-revocable trust (only the income and none of the principal is available to the household) is not considered an asset; however, income is counted in annual income

Establishing Household Eligibility Evaluate Eligibility – Asset Review • True or False • Max Yoshino purchased a term life insurance policy and named his dependent as the beneficiary. The life insurance policy was for $250,000. The life insurance policy is an asset. TRUE or FALSE • John Grissom is 32 years old and has a retirement savings account with a balance of $35,600. John only has access to the account at retirement or termination of employment. The full amount of the retirement savings account is considered an asset. TRUE or FALSE • Peter Piper indicates on his application that he owned a home. He reports that his home was worth $137,000 and was sold at foreclosure 2 month ago for only $97,000. $40,000 should be included in assets for the next 22 months. TRUE or FALSE

Establishing Household Eligibility Evaluate Eligibility - Assets • Income from assets is always counted • Calculation depends on amount of assets 0 - $5,000 $5,000 & Use actual income (e.g. interest dividends) Use actual income or imputed income (whichever is greater)

Establishing Household Eligibility Evaluate Eligibility – Assets • Determining ACTUAL Income from Assets • Actual income from assets is calculated based on the market value of the asset. • Example: • -$500 in checking acct at 2% interest $10.00 • $3000 in a CD at 3% interest $90.00 • Coin collection worth $500 $ 0 Total Assets $4,000 Total Actual Income $100 Add $100 to other sources of household income when determining income eligibility

Establishing Household Eligibility Evaluate Eligibility – Assets Determining Imputed Income from Assets • Imputed means “attributed” or “assigned”. Imputing income from assets is “assigning” an amount of income solely for the sake of the annual income calculation. It is NOT real income. • To calculate imputed income, multiply the cash value of the asset by 2% (the passbook savings rate) • Cash Value is how much the family would receive if the asset was converted to cash. • Cash Value= Market Value less reasonable expenses to convert the asset to cash.

Establishing Household Eligibility Evaluate Eligibility – Assets • Determining Imputed Income from Assets • Example: • $4,000 in Savings Acct • $1,960 in Checking Acct • Comic Book collection valued at $272 Total cash value = $6,232 Imputed Income = ($6,232 x 2%) $124.64 $124.64 is the imputed income from the cash value of the assets.

Establishing Household Eligibility Evaluate Eligibility – Assets • Review Determining Income from Assets • If the total cash value of all household assets is more than $5,000, include in annual income, the greater of Imputed income or actual income • If the total cash value of all household assets is less than $5,000, include in annual income the actual income generated by assets.

Establishing Household Eligibility Evaluate Eligibility – Assets • Determining Income from Assets • Determine what income from the asset to include • Jan has $2,000 in a savings account earning 3% interest. Greg’s six month average in his checking account is $3,000 and earns 1.2% interest. Greg also has a stamp collection valued at $500. • $2000 in Svgs Acct (3% interest) $60 • $3000 in Checking Acct (1.2% interest) $36 • Stamp collection valued at $500 earns no income $0 Actual income from assets $96.00 Imputed income from assets ($5,500 x 2%) $110 Add $110 to other sources of household income when determining eligibility.

Establishing Eligibility Training for Property Owners/Contract Administrators Presented by: