Criteria: The regulatory agreement specifies that the mortgagor shall establish and maintain a reserve for replacements with the mortgage, funded by monthly deposits. Condition: During the year ended March 31, 2026, Ascension Housing, Inc. failed to fund the reserve for replacements account in accordance with the regulatory agreement. The required monthly deposits of $6,500 were not made for four out of twelve months. Effect: The project failed to maintain the required capital reserve balances in accordance with the Regulatory Agreement. Although the delayed funding represented less than 7% of the total required reserve balance and no major replacement or repair activities were pending during the period, the project was not in compliance with FHA-insured mortgage reserve funding requirements. Cause: The delay in funding the reserve for replacements account was attributable to temporary turnover in the accounting position responsible for processing and monitoring the required monthly reserve deposits. As a result, four required monthly deposits were not made in a timely manner.