Option 3a or 3b – Initial Referrals

Initial Referral to RECAP

You may remember when this option was known as OAHP. OAHP expired in 2017 and is now known as the Office of Recapitalization, or RECAP.

Option 3 is split into two different options, Option 3a RECAP Lite, or Option 3b RECAP Full.

Typically, we see a Referral to RECAP when a property comes in to renew under Option 2, has an Active FHA loan with HUD, and the property’s current rents are above the Rent Comparability Study the property has procured.

RECAP will make the determination whether the property must have their rents reduced to market, or can still make debt payments on their FHA loan?

Option 3a RECAP Lite

RECAP Lite is used when there is no debt restructuring and the property rents get reduced to the Rent Comparability Study rents. During renewal years, an Option 3a can adjust their rents by the OCAF or with a budget, pending HUD approval.

Option 3b RECAP Full

Full RECAP is used when debt re-structuring is required. Upon closing of full debt restructuring, a Housing Assistance Payment (HAP) Contract is typically issued for 20 years and must be continually renewed under Option 3b until the property’s Use Agreement expires. Budget-based rent adjustments under this option are not allowed. Rents are adjusted by the OCAF only. Properties are not allowed to terminate a Option 3b contract early to reissue under a different option.

Utility Allowance Analysis

A Full Baseline Utility Allowance with all supporting data collected from utility companies or tenants is required at minimum every 3 years but can be prepared and submitted annually.
Download the Baseline Utility Allowance Worksheet

For the two years following the most recent Baseline Utility Allowance, owners and agents have the option to again obtain data from utilities or tenants to determine utility allowances, or to perform a Factor-Based Utility Analysis, adjusting the allowance using a state-specific increase factor called the Utility Allowance Factor (UAF) provided by HUD.
Download the UAF Calculation Worksheet

What is required for your submission?

Access our Option 3a or 3b Initial Renewals Checklist here for a detailed list of submission requirements, or download it along with our Option 3 Initial Resource Bundle below.

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