13.15.3 Cost — HUD Multifamily Accelerated Processing (MAP)

A. Conduct a detailed cost review when the Borrower applies for a mortgage increase or the Regional Center Director orders a detailed review.

B. Review certifications where required from the contractor, or any subcontractor, equipment lessor, material supplier, or manufacturer of industrialized housing.

C. The forms necessary to make reviews include:

Form HUD-92330, Borrower’s Certificate of Actual Cost.
Form HUD-92330-A, Contractor’s Certificate of Actual Cost.
Form HUD-93305M, Agreement and Certification.
Form HUD-92437, Request for Construction Changes–Project Mortgages.
Form HUD-92326, Project Cost Estimate (HUD Estimate).
Form HUD-2328, Contractor’s and/or Borrower’s Cost Breakdown.
Form HUD-92331-B, Cost Certification Review Worksheet.
Form HUD-92331, Summary of Cost Certification Review.
Form HUD-95379, Trip Report.

D. Follow these steps to conduct the review:

50/75% rule check: Use information from the “total” and “name of subcontractor or payee” columns of the General Contractor’s cost certification. If the rule applies, disallow the General Contractor’s general overhead and profit. If the project uses BSPRA, disallow only the general overhead and inform the Mortgage Credit Examiner.
Identity of interest subcontract review (for Borrower, General Contractor, subcontractors, equipment lessor, material suppliers, and industrialized housing manufacturers):
- Examine form HUD-93305M and form HUD-92330-A to establish all declared identities of interest.

Review each identity of interest subcontractor’s cost certification.

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Chapter 13 Cost Certification 13.15 Review of Contractor’s Cost Certification

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1. If a cost certification is not received, disallow the subcontractor’s overhead, profit, and all questionable costs.
1. If there is no prior approval as an identity of interest subcontractor, disallow the subcontract overhead and profit.
1. In cases with prior approval:
- a) Allow prior-approved subcontract overhead and profit, plus or minus the effect of approved change orders. Disallow excess.

NOTE: Do not reduce the prior-approved subcontract overhead and profit in the event that the certified cost for the work is less than the prior-approved maximum subcontract price.

b) Allow up to the prior approved maximum subcontract amount for work, plus or minus the effect of approved change orders. Disallow excess.

E. Review the trade line items:

On form HUD-92331-B:
- Enter all trade line costs from HUD estimate (form HUD-92326) or Contractor’s schedule of values (form HUD-2328) after adjusting for approved change orders.

Enter all trade line costs from General Contractor’s cost certification (form HUD-92330-A). Take the Architect’s fees from the Borrower’s cost certification (form HUD-92330).
Using dollar and percentage variance columns, compare each trade’s actual cost with the estimate. Determine allowable amounts.

Allowable amounts are not limited by the estimates. Analyze differences.
- Allow actual costs paid to complete the work in accordance with the construction contract.
- Allow actual costs due to unusual circumstances, such as subcontractor bankruptcy, code changes, required replacement of completed work, replacements due to natural occurrences (storms, floods, earthquakes, etc.)
Question only amounts substantially in excess.
- Contact the General Contractor and/or Borrower requesting explanation or more documentation.

Make disallowances if explanation/documentation is not received in a reasonable amount of time. Only the accountant may make reallocation of monies from one trade item to another.
- As a result of discussion, have the accountant amend form HUD-92330-A and resubmit.

Disallow any amount not justified or supported as being part of the construction contract work.
Disallow costs for duplication of work due to contractor’s error or negligence, such as improper placement, failure to protect, noncompliance with contract, etc.

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Chapter 13 Cost Certification 13.16 Non-Profit Borrower’s Initial Equity Investment

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