Repayment Agreement

PBCA Repayment Agreements

Learn the U.S. Department of Housing and Urban Development (HUD) guidelines for handling overpayments of housing assistance, creating repayment agreements with tenants, and remitting funds back to Kentucky Housing Corporation (KHC).

Tenant's Obligation to Repay

Chapter 8 of the HUD Handbook 4350.3 REV-1 outlines the tenant's obligation to repay once an owner determines that an overpayment of housing assistance has been made. If it is determined that the tenant should enter into a repayment agreement, the owner must follow specific HUD guidelines. 

HUD Handbook 4350.3, Chapter 8 (Repayment)
Form HUD-9887 / 9887A (5-Year Limitation)
Form HUD-50059 (Owner's Certification)

Repayment Guidelines

Select a topic below for detailed rules on tenant errors, owner errors, and agreement terms.

Tenant Repayment Rules

  • A tenant must reimburse the owner for the total overpayment back to when the overpayment started. This is not to exceed the five-year limitation discussed in forms HUD-9887 and HUD-9887A. 
  • This five-year limitation applies to all overpayments, not just errors found using the EIV system. 
  • The owner must have the Form HUD-50059(s) and all supporting documentation on file for the period(s) in question to calculate the amount owed. 

A tenant is not required to reimburse for undercharges caused solely by the owner's failure to follow HUD's procedures. 

Owner's Obligation to Repay HUD

  • If the overpayment was caused by the tenant's incorrect information, the owner is not required to reimburse HUD immediately. Repayments are required when and as tenants repay the owner. 
  • The owner must reimburse HUD for all other overpayments caused by the owner's error or failure to follow procedures. 
  • If immediate repayment would jeopardize the property's financial condition, HUD or the Contract Administrator (CA) may permit repayment over time through a reduction of normal housing assistance payments. 

Repayment Options for Tenants

Tenants can repay amounts due in one of the following ways: 

  1. In a lump sum payment.
  2. By entering into a repayment agreement with the Owner/Agent (O/A).
  3. A combination of a lump sum and a repayment agreement. 
Find a HUD Housing Counseling Agency

Repayment Agreement Requirements

  • The tenant and O/A must both agree on the terms.  The agreement must include:
  • The total retroactive rent amount owed. 
  • The amount of any lump sum paid at the time of execution. 
  • The monthly payment amount. 
  • A statement that the monthly repayment is in addition to the family's monthly rent payment. 
  • A clause to renegotiate the terms if the family's income changes (decreases or increases) by $200 or more per month. 
  • A reference to the lease paragraphs where the tenant is in non-compliance. (Tenants who do not agree to repay may be subject to termination of tenancy). 
  • The agreement must be signed and dated by both the tenant and the O/A. 

Monthly Payment Rules

  • The tenant's monthly payment must be what the tenant can afford to pay based on their income. 
  • The monthly payment plus the tenant's Total Tenant Payment (TTP) should not exceed 40 percent of the family's monthly adjusted income.
  • HUD does not indicate a specific maximum time period for repayment. 

O/A's must not apply a tenant's regular monthly rent payment towards the repayment amount. This would result in an accumulation of late rent payments. 

Disposition of Funds (TRACS)

  • O/As must be familiar with their software's capability to add Repayment Agreements into the MAT30, Section 7 (now "Repayments and Escrows" under TRACS update 2.0.3.A). 
  • O/As should consult their software provider or the TRACS Monthly Activity Transmission (MAT) User's Guide (Chapter 6, Section 7) for updated instructions. 

The Office of the Inspector General has ruled that there is no minimum amount for a repayment agreement. 

TRACS Monthly Activity Transmission (MAT) User's Guide