12.7.3 Stages of Advances

A. In cases involving insurance of advances, HUD and the Lender’s processing of advances is divided into the following stages:

1. Initial advance. Initial advance refers to the first application and coincides with the initial endorsement of the HUD-insured Note. The initial advance will be reviewed and executed by the HUD mortgage credit analyst. The Lender should submit form HUD-92403, Application for Insurance of Advance of Mortgage Proceeds, with supporting documentation for HUD approval.

2. Interim advances . Interim advances are subsequent applications up to completion of the project and will be processed and approved by the Lender.

3. Next to Final Advance.

   • When HUD is in receipt of the contractor’s certification and the consent from both the mortgagor and surety, if any, the final 2.5% of the construction holdback is released.

   • This procedure applies only to non-identity of interest contractors or where the contractor's identity of interest in the project ownership is not greater than 5%.

4. Final Advance. Final advance refers to any remaining balance of mortgage proceeds at final endorsement and takes into consideration funds necessary to set up the escrows for “Items of Delayed Completion” and “To Be Paid in Cash Items” and will be processed by HUD. In addition to the form HUD-92403, the Lender must submit a copy of form HUD-92451 Financial Record of Mortgage Loan Transaction (or similar format in an Excel worksheet), which reflects payments to the various participants during the construction period.