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About the Mark-to-Market Process

Most of the following information has been abridged from the "Mark-to-Market Pocket Guide" published by OMHAR and is available in more detailed form at

Owners of properties with expiring Section 8 contracts have 3 options:

  • Renew Section 8 with mortgage debt restructuring
  • Renew Section 8 without mortgage debt restructuring
  • Opt out of the Section 8 program

The Mark-to-Market program is for those who choose the first option.  Properties with expiring subsidy contracts are eligible for the Mark-to-Market program if they meet all of the following requirements:

  • Multifamily housing (4 or more units)
  • One or more FHA-insured or HUD-held mortgages (except Section 202 or if financed by state/local government)
  • Receives project-based assistance (Section 8 contract)
  • Project-based rents exceed comparable market rents
  • Owner is in good standing

Once the property owner has decided to renew with mortgage debt restructuring, the property is assigned  to a Participating Administrative Entity (PAE), which will oversee the process.  The PAE is the primary agency that will review the owner eligibility and property performance data, determine the appropriate type of renewal,   negotiate restructuring terms, and work with the owner on closing.  The PAE also works with tenants and other interested groups to make sure that all affected parties have a say in the process.

The PAEs are often state or local housing finance agencies, but some other groups/corporations have received approval.  So far, several state housing finance agencies, including Texas, Delaware, Pennsylvania, and Virginia, have opted not to participate in the program.

One of the key processes used by the PAE is the Rental Assistance Assessment Plan (RAAP).  This plan determines whether the project, on renewal, will receive project-based assistance or will be converted to tenant-based assistance.  A property receives mandatory project-based assistance if it is:

  • in a tight rental market (vacancy rates of 6 percent or lower
  • predominantly occupied by elderly or disabled families (at least 50 percent)
  • held by a nonprofit cooperative ownership housing corporation or a nonprofit cooperative housing trust

After the project is assigned to a PAE and the owner meets with the PAE to establish contact and reporting procedures, the owner is responsible for gathering the following information for the PAE:

  • Documentation, including ownership documents, title information, insurance policies, easements, and current rent rolls
  • Financial analysis and projections, including
    • A one year project rent and expense analysis to size first mortgage
    • Optional 20-year pro formas (one with Section 8 assistance and one without). Revenue estimates should use comparable market rents based on unsubsidized properties in the market area.  Pro formas should also include operating expense estimates and Net Operating Income (NOI) projections.
  • A Physical Condition Assessment (PCA) which evaluates critical repair items, 12-month physical needs, long-term physical needs and an analysis of the Reserves for Replacement.   The PAE will also engage a qualified inspector to develop an independent PCA.
  • Financing plan--owner may propose a plan for restructuring property's debt and for refinancing and rehabilitation costs
  • Appraisal--if the owner plans to apply for FHA mortgage insurance under Section 223(f), an appraisal from an approved appraiser should be submitted.

The PAE will then review and verify this information, confirming it through independent sources if necessary.  Once the information is verified and input is received from all necessary parties, an underwriter is brought in to help evaluate the information.   A determination is made of NOI, and whether the project is eligible for exception rents.  Rehabilitation needs are confirmed and management is evaluated based on feedback from tenants and the financial and physical condition of the property.   Mortgage alternatives are identified. The underwriter then produces a draft restructuring plan, called a Case Memorandum, which is submitted for inspection by interested parties at least 20 days prior to submission for approval. 

This Restructuring Plan is then reviewed by the PAE to ensure that it meets all necessary standards.  The PAE then drafts a Restructuring Commitment, which includes information from the draft plan as well as the findings from the RAAP (how much and what type of rental assistance the project should receive), findings from the PCA.  The PAE certifies completion of the Restructuring Plan and submits it to OMHAR for approval.   If approved, the owner has 30 days to accept or reject.  If rejected, the owner has 10 days to appeal to the PAE for a hearing.


Properties whose rents are currently above market and whose owners request to renew their Section 8 contracts at market rents without debt restructuring will undergo an abbreviated review and approval process.  These owners are not required to execute Use Agreements and are not subject to LIHTC affordable rent limitations.  The standard timetable for these reviews will be 60 to 90 days from the date assigned to the PAE.  These properties must meet the following requirements:

  • Adequate Debt Service Coverage after rents adjusted to market rents
  • In good physical condition with sufficient Reserves for Replacement to maintain the property for the long term as well as make minimum short-term improvements.
  • Evidence of competent management

For this process, owners are required to submit

  • A comparable market rent analysis
  • The most recent fiscal year audited financial statements for the property
  • Evaluation of physical condition of the property
  • Other documents that may be required by the PAE or HUD

Danter and Associates Services for Mark-to-Market Candidates
        How the Danter Company can help you identify the most accurate comparable market rent for your property and other services we can provide to enhance the process
List of Participating Administrative Entities (PAEs)
        As updated weekly by HUD in PDF format
Mark-to-Market Links
        Sites for additional information on the Mark-to-Market program

Back to Danter Mark-to-Market Overview page  



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