13.16 Non-Profit Borrower’s Initial Equity Investment

A. A non-profit Borrower will be permitted a 6% return on its initial equity as computed on form HUD92580, Maximum Insurable Mortgage.

1. The base equity is determined as follows:

   • For New Construction : Line 6 on form HUD-92580, minus finally-endorsed mortgage determined in line 10 of the form.

• For Rehabilitation – Property Owned : Reduce the sum of line 4 on form HUD-92580, plus HUD’s estimate of the “as is value” of the existing land and improvements before rehabilitation, by the finally-endorsed mortgage determined in line 10 of the form.

• For Rehabilitation – Property Acquired : Reduce the sum of line 4 on form HUD-92580, plus the lesser of HUD’s estimate of the “as-is value” of the existing land and improvements before rehabilitation or the acquisition cost of the property, by the finally-endorsed mortgage determined in line 10 of the form.

  • For Rehabilitation under Section 220 and 221(d)(4) : Use the New Construction formula in Section 13.16.A.1.a above.

2. The base equity computed in Section 13.16.A.1 above may be increased by:

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Chapter 13 Cost Certification 13.17 Determine the Borrower’s Initial Investment

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• The cost of furnishing, fixtures, equipment, or other necessary items and betterments essential to the operation of the project.

• The non-profit Developer’s fee used to reduce the estimate closing costs of the project.

• Grants from national, regional, and local community service organizations (non-government source).

Sponsor’s cash contribution for the cost of land over and above what HUD has allowed.

3. Modify the Regulatory Agreement to require the return on equity be:

   • Used for continued affordable housing initiatives; or

   • Pledged to the repayment of surplus cash or residual receipts notes held as secondary financing.

4. Asset Management will monitor the non-profit Borrower to be certain that the return on equity is used only for permissible purposes.

5. The return on equity is paid from surplus cash/residual receipts. Any shortfall in the permitted return in one year may be made up from surplus project funds in a future year.