10.6 Bonding Requirements for Agents

A. The Lender must determine that the agent has adequate bonding to provide a basic level of protection for the multifamily project assets.

B. The Management Agent must certify in the Management Certification that it carries fidelity bond or employee dishonesty coverage for:

1. All principals of the management entity; and

2. All persons who participate directly or indirectly in the management and maintenance of the project and its assets, accounts, and records.

• C. The fidelity bond or coverage must name the mortgagee and HUD as additional loss payees.

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Chapter 10 Management Analysis 10.7 Management Agreement Requirements

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D. Coverage may be through one or more bonds, and one bond may cover more than one project, including projects whose mortgages are not insured or held by HUD. The agent’s principals and supervisory and front-line staff may be covered under the same bond.

E. Each project must be bonded for at least the value of two months’ gross potential income for the project. If a bond covers more than one project, this minimum must be computed using the project with the highest gross potential income.