Date Published: October 2012
NSP funds can be used for operating reserves in certain circumstances if the NSP grantee can demonstrate that such a requirement is consistent with industry practices and the dollar amount of the required reserves is consistent with local industry standards. It is allowed when a third party mortgage lender requires that funds be allocated for operating reserves as a condition of the lender approving a mortgage. NSP funds can be used for up-front deposits to operating reserves at the time of acquisition. Replacement reserves may be capitalized from cash flow during operations. The grantee may not use NSP funds to pay for an on-going operating subsidy (or any other on-going project based rental assistance) for the project.