x Pop Quiz Answers - Spectrum Enterprises


Pop Quiz Answers

Here are the questions and answers to our Pop Quiz we posted last week. How did you do? Any questions post in the comments section below.

1. An unmarried couple applies for an apartment and they tell you during the application process that they are expecting a baby in 5 months. How many people are in this household?

  1. 1
  2. 2
  3. 3

ANSWER 3: Unborn children of pregnant women are household members. Use the 3 person income limit for this household.

2. An applicant has a checking account with a current balance of $4,000 and an average 6 month balance of $4,275.00. The interest rate is 0.0%. Please select the correct math to use:

  1. $4,275 x 2%
  2. $4,000 x 2%
  3. $4,275 x 0%
  4. $4,000 x 0%
  5. None of the above

ANSWER 3: Always use the average 6 month checking account balance for checking accounts. Do not impute interest unless combined value of all assets is $5,000 or more.

3. You property has only tax credit (no other programs) and you have an LIHTC-eligible single adult applicant who can afford it and would like to rent a 3 bedroom apartment. Can he have it?

  1. Yes
  2. No

ANSWER 1: There are no LIHTC restrictions on how many people can occupy a unit. You can place 3 people in a 1 bedroom unit, or 1 person in a 3 bedroom unit.

4. A single parent with one child applies to live at your property. The household income is $26,000. The 1 person income limit is $25,000, the 2 person limit is $30,000. How do you document custody and that the child will live in the unit at least 50% of the time:

  1. You don’t need to
  2. School registration or court documents
  3. A self affidavit from the applicant

ANSWER 2: Spectrum strongly advises that if a household needs the children included as members in order to qualify, you should always document that they will reside in the unit at least 50% of the time.

5. A divorced woman applies for a 2 BR apartment. She explains to you that her 15 year old daughter stays with her every other weekend so she needs the extra bedroom. She is willing to pay the higher rent amount. Her only source of income is a job which pays her $25,000 per year. The 1 person income limit is $22,250 and the 2 person income limit is $27,750. Is this a qualified household?

  1. Yes
  2. No

ANSWER 2: A child may only count as a household member for income limit testing if they reside in the unit at least 50% of the time.

6. An applicant receives gift income from her father monthly. The notarized Certification of Contribution is completed by the applicant and signed by her father. Is this acceptable?

  1. Yes
  2. No

ANSWER 2: All 3rd party verification forms must be completed by the person providing the income. Applicants may not fill out income verification data.

7. Patty Patterson is a teacher. Her employer confirms she has summers off, but is paid year round. Patty is considered a seasonal worker and should complete a Seasonal Worker Affidavit.

  1. True
  2. False

ANSWER 1: Remember, just because she is paid year round does not mean she does not seek additional employment during the summer months. Teachers and other school employees can work for summer camps, as restaurant or resort workers, for catering companies, etc. Tenant files must document anticipated annual income for the 12 months following move in.

8. Mrs. Garcia owns a home that is for sale. The taxable value of the property is $100,000. She has listed it with a realtor for $95,000. After completing her application, but prior to moving into your property, the home sells for $85,000. Because the home sold for less than the taxable value, the $15,000 difference is considered a disposed asset.

  1. True
  2. False

ANSWER 2: Mrs. Garcia sold her home for the best price she could get on the open market. She did not give it away or reduce the price as a favor to a friend or family member. Therefore the asset was sold for Fair Market Value.

9. You fax an EV to Harry’s Hot Dog Hut. When it is sent back, the only questions answered are the hourly wage and number of hours per week. When you call to follow up with Harry regarding the fields left blank you should:

  1. Fill in the blanks on the EV with the info he provides
  2. Say, “I assume the types of compensation you left blank do not apply to this employee, correct?”
  3. Record Harry’s answers on a separate page and attach it to the EV
  4. You don’t need to call Harry

ANSWER 3: Never write on a verification form after it was signed by the 3rd party. Always re-ask the questions when following up with a source via telephone. Be sure to keep the documented answers filed with the original (incomplete/unclear) verification so an auditor can easily review the file. Use a form specifically designed to document phone calls (record the date & time of call, who was contacted, etc).

10. A household applying to live at your property consists of 2 unrelated adults. One of the applicants is a full time college student and the other person is a half time college student. Is this household eligible?

  1. Yes as long as income is under the limit
  2. No due to a student status violation

ANSWER 1: Once student status has been third party verified, student status is only an issue when all members of the household meet the IRS definition of a full time student.

11. Caroline Clark applies for an apartment. The only other household member listed is her 3-year old son, Fred Foster. You notice on the application that her current landlord is also named Fred Foster and that she pays no rent. You should:

  1. Ask more questions about her current living situation
  2. Ignore it; rental history has nothing to do with income or assets

ANSWER 1: Similarities like this could be the result of countless situations, but you should ask when you see that the current landlord appears to be related to a household member or that no rent is currently paid. The answer you get could indicate more assets or other household members or other income. Besides, chances are you are going to contact Fred Foster for a landlord reference anyway, so don’t hesitate to get as much info as possible up front.

12. When an adult reports being a student, how do you determine full vs. part time student?

  1. Allow self certification
  2. Use info on tax return
  3. Verify with the school

ANSWER 3: Full time student status is defined by the school being attended. Always get third party verification of student status for adults – especially when all members of the household are students.

13. Ken Carpenter is a retired widower whose only income is Social Security. When you get his award letter, you see that it lists three different monthly amounts. It shows his gross award is $1,230.70 and he should receive $1,230 per month. However, then goes on to explain that due to an overpayment, he will only receive $900 for the next 12 months. Which is the correct calculation:

  1. 1,230 x 12
  2. 900 x 12
  3. 1,230.70 x 12
  4. None of the above

ANSWER 2: When the Social Security Administration is recovering for an overpayment, you should use the reduced amount. Other deductions (i.e. child support) cannot be subtracted and the gross benefit amount must be used.

14. A household applying to live at your property consists of 3 adults (a husband/wife and an unrelated friend). The completed tenant file should include how many Asset Addendum Forms?

  1. 1
  2. 2
  3. 3
  4. 0

ANSWER 1: In most states, the Asset Addendum or Under $5,000 Asset form is a household form; all adults in the household complete just one (a small number of states have a different policy – be sure to check).

15. You go on a lunch break. When you come back to the office you see that someone has dropped off an application form. Some of the questions were not answered. So, you write NONE next to all the stuff they left blank. This is the correct thing to do.

  1. True
  2. False

ANSWER 2: Never write on an application. You should call the applicant and clarify the missing information by documenting answers separately or have him come back in to finish the application.

16. An applicant tells you not to bother sending an EV to his employer because the company he works for has a policy that they will not complete such verifications. He does give you his last 8 consecutive pay stubs. Do you need to attempt to get an EV as well?

  1. Yes
  2. No

ANSWER 1: You are required to attempt to obtain third party verification of employment. You must document your efforts to verify before you resort to other forms of verification. Spectrum recommends obtaining complete tax returns in addition to pay stubs for applicants who have had the same employer for multiple years.

17. A divorced man applies to live at your property. He has a job which pays him $25,000 per year. The one person income limit is $22,250. According to his divorce arrangement, he must pay his ex-wife $1,000 per month for child support. Is this a qualified household?

  1. Yes
  2. No

ANSWER 2: You cannot deduct child support payments from an individual’s income.

18. Jose Rivera is employed at Home Improvement Warehouse. The EV for this job lists his wages as $8.00 per hour, 40 hours per week, with no additional pay from overtime, bonus, raise, etc. He gets paid biweekly. How would you calculate income from this job?

  1. $8 x 40 x 52
  2. $8 x 20 x 26
  3. $8 x 40 x 26
  4. $8 x 80 x 24

ANSWER 1: Income should always be calculated according to the information on the verification form. Tenant files should clearly show all math and a 2nd set of eyes should double check that no errors were made.

19. You get an EV for a job which lists $10 per hour, 25 hours per week, and no additional pay from overtime, commissions, bonus, etc. A $1.00 per hour raise is scheduled for six months after move-in. The individual is paid weekly. Please select the correct math to use:

  1. $10 x 25 x 52
  2. $10 x 25 x 52 and $11 x 25 x 26
  3. $10 x 25 x 26 and $11 x 25 x 26
  4. $11 x 25 x 52
  5. None of the above

ANSWER 3: Don’t forget to include raises that are verified.

20. Brad and his girlfriend, Janet, are applying to live at your property. Janet has a job and her income brings the household to $800 below the income limit. The applications show that Bob was working less than a month before they filled out the applications but now claims to have no anticipated income. You should ask:

  1. Nothing.
  2. Why doesn’t he anticipate any income in the next 12 months?

ANSWER 2: Follow up is needed where an adult has recent employment history but now claims zero income status. Remember, the LIHTC program is looking at all anticipated income for the next 12 months (not just the current status). In this case we would ask if unemployment benefits are received; have Brad complete an Unemployed Affidavit; and ask if he is looking for work. He should also document why his status has recently changed. He could have reasonable explanation for his zero income status (such as health issues, becoming a student, etc.). If you don’t ask and the household is over income at first annual certification (due to Brad becoming employed shortly after move in), you won’t be able to show you’ve met the due diligence requirement and the unit could be at risk for losing credits.

21. The Jackson household fills out an application and Asset Addendum saying they have no assets. Because Mr. Jackson’s employer refused to complete an EV, you collect his pay stubs. The pay stubs show direct deposit into a checking account. You should not rent to this household.

  1. True
  2. False

ANSWER 1: When an applicant intentionally fails to disclose an asset or income source during the application process it is up to you to decide whether this was an honest mistake or intentional fraud. However, if they have signed 2 forms not only stating “no assets” bust specifically answered “no” regarding a checking account, you have to wonder what else might not have been disclosed. This type of situation calls into question the integrity of all other information included in the file; Spectrum would not approve the file for move-in.

22. A married couple from New York wants to retire, sell their home, and move to Florida and live in one of your apartments. After getting the application and verifying all of their income and assets, you inform them that they are over the income limit by $200. They decide to sign the deed on their home over to a relative and ask you to remove the home as it is no longer an asset they own. Since they are doing this before the move in date, there is no effect.

  1. True
  2. False

ANSWER 2: This is an asset disposed of for less than Fair Market Value and must be counted as an asset for 2 years. The imputed income from this could keep them over the income limit.

23. In August, you get an application for Mary, a 23 year old with no rental history who just started her first job in June. She is income eligible, can afford the rent, and says she is not currently and will not be a student. You should ask Mary:

  1. Do you like your new job?
  2. How will you be paying rent?
  3. When were you last a full time student?
  4. None of the above.

ANSWER 3: The IRS definition of student status includes a ‘lookback.’ In this scenario it is possible (given her age and lack of rental and work history) that Mary graduated from college in May. If she was a full time student for January, February, March, April, and even 1 day in May, she will have to meet one of the student status exceptions in order to be LIHTC eligible.

24. An applicant has a new part time job, 18 hours per week, at Don’s Donuts. His application shows he was previously working part time, 25 hours per week, at Cindy’s Coffee Shop. You should:

  1. Verify employment with Don’s
  2. Verify termination of employment with Cindy’s
  3. Both of the above
  4. None of the above

ANSWER 3: It is not uncommon for people to work 2 part time jobs in order to make ends meet. Spectrum recommends that you verify termination of employment when an individual’s current employment is new. We can’t count the times the clarification comes back that the “previous” job is actually a current “second” job.

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