12.16 — HUD Multifamily Accelerated Processing (MAP)

A. Basic requirements during construction stage are generally the same as for projects with FHA insured advances. However, IUC advances are not FHA insured. Therefore, HUD does not monitor the Lender’s disbursements. Also, because HUD has no risk exposure until final endorsement, HUD does not become involved in the resolution of construction problems, even if those problems prevent or may prevent the

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Chapter 12 Construction Period 12.16 Insurance Upon Completion (IUC)

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Borrower from meeting program obligations. The following are major variations from standard program requirements for insurance upon completion projects.

B. Firm Commitment to Insure Upon Completion, completed on the HUD Commitment template by HUD staff, must contain special conditions defining requirements necessary to maintain the commitment until Final Endorsement of the permanent mortgage.

While there is no initial closing there should be a preconstruction meeting to advise the Lender, Borrower and contractors of requirements that must be met and the construction monitoring methods that will be followed from the date of the Firm Commitment through Final Endorsement. The construction stage starts after the issuance of the Firm Commitment.
The Firm Commitment must specify the expected date of construction start and the expected date of construction completion, followed by a date for Final Endorsement. Construction/rehabilitation must start and be completed within the period provided by the Firm Commitment, subject to HUD’s decision to amend the Firm Commitment pursuant to a request by the Lender. Unless terminated, the Firm Commitment will endure until consummated at Final Endorsement. The Lender may request or advise HUD of its termination of the Firm Commitment for the convenience of the Borrower. HUD may terminate the Firm Commitment upon Lender or Borrower’s failure to cure material nonperformance of program requirements and/or requirements of the Firm Commitment after notice and opportunity to cure consistent with existing construction administration procedures defined in this Chapter 12. In the event of termination, the Lender will not be entitled to any refund of application or inspection fees paid.

C. Required documents include the following:

Construction contract, form HUD-92442M. The following must be made a part of the contract:
- a. General Conditions, AIA Document A201;
- b. Supplementary General Conditions, form HUD-92554M;
- c. Davis-Bacon Wage Rates (supplied by HUD Labor Standards and Enforcement);
- d. AIA Document B108 with HUD 92408-M, HUD Amendment to AIA Document B108 attached identifying identities of interest between Owner, Contractor, Subcontractor and Architect; and

e. Cost certification criteria from form HUD-92442M, Article 13, where an identity of interest exists or a “cost plus” form of contract is used.

A complete master set of drawings and specifications and two duplicate sets.
The Agreement and Certification, form HUD-93305M, executed by the Borrower, Lender, and the General Contractor.
A title policy or title evidence showing:
- Insured property free of all encumbrances other than the mortgage and acceptable reservations of title;

Proof that no unpaid obligations exist except as previously approved by HUD; and
Title policy continued to date of credit instrument endorsement.

Survey and Surveyor’s Certificate, form HUD-91073-M.

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Contractor’s Requisition Project Mortgages, form HUD-92448. The Contractor’s Prevailing Wage Certificate must be submitted at the time the mortgage is presented to HUD for insurance
Assurance of funds to meet operating deficit. Completed forms to assure funds are available to carry the project to a sustaining occupancy after final closing:
- a. Form HUD-92476M, Agreement of Sponsor to Furnish Additional Funds;

Form HUD-92476a-M, Escrow Agreement for Operating Deficit; and
Form HUD-92477M, Bond Guaranteeing Sponsor’s Performance.

Warranty against latent defects is required in accordance with Section 12.16.S.

D. The pre-construction conference must precede the initial start of construction, see Section 12.2. However, matters concerning insured advances of funds, and deposits to or disbursements from escrows for additive change orders are not relevant to insurance upon completion transactions.

E. Construction monitoring and reporting must be done in accordance with Section 12.3 but only for the purpose of Labor and FHEO compliance and adherence to the approved plans and specifications subject to approved change orders.

F. For Labor and FHEO liaison, see Section 12.12.

G. Contractor’s monthly requisitions are not applicable to projects insured upon completion.
H. Off-site construction:

Monitoring is recorded by the HUD inspector on form HUD-95379.
Advance of funds monitoring is not applicable to projects insured upon completion.

I. Construction contract changes and Architect’s supplemental instructions (see Sections 12.8 to 12.11 and 12.4.D). Construction changes are processed in the same manner as insurance of advances, except as modified below:

An escrow is not required for additive change orders, because HUD has no risk exposure until final closing. The mortgagor must be able to provide the additional funds required and must not have any outstanding obligation in connection with construction other than the insured mortgage at the time the mortgage is presented for insurance.
Surety approval is not required for the approval of additive change orders regardless of the percentage of contract increase.

J. Permission to Occupy applies as in Section 12.14.

K. Final HUD CA or Inspector’s Trip Report falls under HUD procedures above at Section 12.3.4.

L. Warranty period falls under HUD procedures above at Section 12.6.3.

M. Working capital deposit and operating deficit escrows are usually required for Insurance upon Completion projects. Therefore, to mitigate any risk, projects that apply for Insurance upon Completion must fully meet the operating deficit escrow and the working capital requirements contained in Chapter 8, Section 8.13, except for the extra 2% new construction contingency portion of the working capital escrow which is not required. See Section 12.15.3 and Section 12.15.5 for releasing escrowed funds.

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Chapter 12 Construction Period 12.17 Completion of Repairs and Alterations Pursuant to Section 223(a)(7) and 223(f)

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N. Property insurance schedule and requirements. When onsite construction is 80% complete (before Final Endorsement of the mortgage), the Lender must prepare the following:

Property Insurance Schedule, form HUD-92329, that:

Correctly shows the insurable value of the completed structures; and

Reflects any changes in cost occurring after issuance of Firm Commitment.

Property Insurance Requirements, form HUD-92447.

O. MIP is not charged until final endorsement.
P. For information about cost certification, see Chapter 13.
Q. Closing must occur within the period provided in the commitment.
R. Extension of Firm Commitment instructions are discussed in Chapter 11.

S. The General Contractor must provide a builder’s warranty and enter into a latent defect agreement with the Owner and Lender for the benefit of HUD and provide one of the following at Final Endorsement to assure correction of any latent defects:

Cash escrow deposit of 2.5% of the total cost of construction, to be retained in an escrow held by the Lender for a period of 15 months, or
An irrevocable, unconditional letter of credit for 2.5% of the cost of construction issued to the Lender by a banking institution.