[Code of Federal Regulations]
[Title 24, Volume 4]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 24CFR880.602]

[Page 56-57]
 
                 TITLE 24--HOUSING AND URBAN DEVELOPMENT
 
  CHAPTER VIII--OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL
 
PART 880_SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR NEW 
CONSTRUCTION--Table of Contents
 
                          Subpart F_Management
 
Sec. 880.602  Replacement reserve.

    (a) A replacement reserve must be established and maintained in an 
interest-bearing account to aid in funding extraordinary maintenance and 
repair and replacement of capital items.

[[Page 57]]

    (1) Part 880 and 24 CFR part 881 projects. (i) For this part 880 and 
24 CFR part 811 projects, an amount equivalent to .006 of the cost of 
total structures, including main buildings, accessory buildings, garages 
and other buildings, or any higher rate as required by HUD from time to 
time, will be deposited in the replacement reserve annually. This amount 
will be adjusted each year by the amount of the automatic annual 
adjustment factor.
    (ii) The reserve must be built up to and maintained at a level 
determined by HUD to be sufficient to meet projected requirements. 
Should the reserve achieve that level, the rate of deposit to the 
reserve may be reduced with the approval of HUD.
    (iii) All earnings including interest on the reserve must be added 
to the reserve.
    (iv) Funds will be held by the mortgagee or trustee for bondholders, 
and may be drawn from the reserve and used only in accordance with HUD 
guidelines and with the approval of, or as directed by, HUD.
    (v) Partially-assisted part 880 and 24 CFR part 881 projects are 
exempt from the provisions of this section.
    (2) Part 883 of this chapter projects. (i) For 24 CFR part 883 
projects, an amount equivalent to at least .006 of the cost of total 
structures, including main buildings, accessory buildings, garages and 
other buildings, or any higher rate as required from time to time by:
    (A) The Agency, in the case of projects approved under 24 CFR part 
883, subpart D; or
    (B) HUD, in the case of all other projects, will be deposited in the 
replacement reserve annually. For projects approved under 24 CFR part 
883, subpart D, this amount may be adjusted each year by up to the 
amount of the automatic annual adjustment factor. For all projects not 
approved under 24 CFR part 883, subpart D, this amount must be adjusted 
each year by the amount of the automatic annual adjustment factor.
    (ii) The reserve must be built up to and maintained at a level 
determined to be sufficient by the Agency to meet projected 
requirements. Should the reserve achieve that level, the rate of deposit 
to the reserve may be reduced with the approval of the Agency.
    (iii) All earnings, including interest on the reserve, must be added 
to the reserve.
    (iv) Funds will be held by the Agency, other mortgagee or trustee 
for bondholders, as determined by the Agency, and may be drawn from the 
reserve and used only in accordance with Agency guidelines and with the 
approval of, or as directed by, the Agency.
    (v) The Agency may exempt partially-assisted projects approved under 
24 CFR part 883, subpart D, from the provisions of this section. All 
partially-assisted projects not approved under the Fast Track Procedures 
formerly in 24 CFR part 883, subpart D, are exempt from the provisions 
of this section.
    (b) In the case of HUD-insured projects, the provisions of this 
section will apply instead of the otherwise applicable mortgage 
insurance provisions, except in the case of partially-assisted insured 
projects which are subject to the applicable mortgage insurance 
provisions.

[61 FR 13588, Mar. 27, 1996]