What Does Transfer Of Physical Assets Mean?

A transfer of physical assets (TPA) is a type of property sale that requires the assumption of a HUD-sponsored loan. HUD is the common abbreviation for the United States Department of Housing and Urban Development. A HUD-sponsored loan is insured by the Federal Housing Administration, or FHA.

TPAs must be applied for through a process dictated by HUD. The process involves a number of forms, including the Assumption of Housing Assistance Payments (HAP) contract. TPAs pertain only to HUD loans and are not applicable to commercial loans. HUD oversees subsidized and public housing in the U.S. Many properties financed through HUD-sponsored loans are multi-unit properties, rented at a low cost under government regulations.

Understanding Transfer Of Physical Assets (TPA)

A transfer of physical assets may take one of two forms. It may be full or modified. A full TPA describes a transaction in which the property completely changes hands. One owner sells the home to another. With a full TPA, the purchaser assumes the note and mortgage associated with the property. They then may either assume the existing regulatory agreement, the central contract with HUD, or they can enter into a new regulatory agreement with HUD.

In a modified TPA, the structure of ownership changes, but ownership does not completely change hands.

Some properties eligible for a TPA are also subject to an Assignment or Assumption of Housing Assistance Payments (HAP) Contract. These contracts relate to properties which may be rented through Section 8.

Some HUD properties come with use agreements that the purchaser must still abide by. These agreements can limit the rent that the owner may charge on the property’s units. For this reason, HUD encourages all potential buyers to read any preexisting use agreements carefully. Each one is unique and will likely affect whether the purchaser believes the purchase price to be appropriate.

The TPA Review Process

A TPA review involves two phases. The first phase is the application phase. The second phase is the preliminary approval phase. In this second phase, HUD reviews the application as well as 22 separate documents, which are outlined in the application. Once the process enters the second phase, the two parties are legally bound to undertake the necessary steps to reconvey the property to the seller if the terms of preliminary approval are not met within 45 days. 

These documents include the purchaser’s credit report and financial statements, a purchaser’s letter that describes the transaction, the borrower’s proposed organizational documents, and any previous participation certificates.