(a) Violations of laws and agreements. A PHA may be declared in substantial default when the PHA:

1. (1) Violates a federal statute;
2. (2) Violates a federal regulation; or
3. (3) Violates one or more terms of an ACC, or other covenants or conditions to which the PHA is subject.

(b) Failure to act. In addition to the violations listed in paragraph (a) of this section, in the case where a PHA is designated as a troubled performer under PHAS, the PHA shall be in substantial default if the PHA:

1. (1) Fails to execute an MOA;
2. (2) Fails to comply with the terms of an MOA; or
3. (3) Fails to show substantial improvement, as provided in § 902.75(d) of this chapter.