13.20 — HUD Multifamily Accelerated Processing (MAP)

A. The National Housing Act requires that the mortgage will not exceed the applicable percentage of actual costs. If certified actual costs are lower than original projected cost as reflected in form HUD-92264, a reduction in mortgage may be applicable. Form HUD-93305M, Agreement and Certification, also addresses this issue and provides that where HUD accepts, for cost certification, estimates of cost for any item, the later substitution of certified actual costs may require a reduction of the mortgage. For affordable projects that are exempt from providing a Cost Certification but are determined to be oversourced based on a CPA-prepared cost certification (for LIHTC purposes), a mortgage reduction is allowed. As evidence of the mortgage reduction, HUD will accept the Lender-prepared form HUD-92580, Maximum Insured Mortgage, along with the final sources and uses, as well as form HUD-92264 and form HUD-92264-A that were modified showing the reduction. The mortgage reduction must be evaluated and requested by the MAP Lender, Borrower, Borrower’s CPA, and tax credit investor.

B. Reductions of cost may arise from scrutinized, checked, evaluated, and/or examined:

Refunds, rebates, or discounts.
Excess of escrows over the actual costs of incomplete construction items.
Refunds of deposits made by the Borrower to prevent losses to the Lender in connection with sale of the mortgage.
Settlement of claims against bonding companies or others after project completion.

C. At final endorsement, the Borrower must set up a cash escrow to pay all "to be paid in cash items" identified on form HUD-92330, Borrower's Certificate of Actual Cost, and debts to third parties who made the original disbursement for an item listed as paid on form HUD-92330.

Reconcile the difference between:
- Obligations listed on form HUD-92023M, Request for Final Endorsement of Credit Instrument or form HUD-92455M (for Insurance Upon Completion Projects only), and
- The "to be paid" column on form HUD-92330, plus debts to third parties.
Paid receipts to third parties must support differences and a statement from the Borrower identifying, by name and cost, those items paid in cash. The receipts and statement are affixed to forms HUD92023M or HUD-92455M.
Do not accept personal or business checks issued by the Borrower at final endorsement as evidence of payment. Payments to third parties must be in the form of a certified or cashier check.
Prepare a new form HUD-92331A to disallow obligations listed as "paid" or "to be paid" on form HUD92330, which are represented at final endorsement as paid by HUD-approved notes. Prepare a new form HUD-92580 from the total of HUD-approved cost of revised form HUD-92331A.
Undisbursed mortgage proceeds may supplement or satisfy the cash escrow for all "to be paid in cash items".
Use form HUD-92476.1M, Escrow Agreement for Non-Critical, Deferred Repairs, to:

Set up the cash escrow for all "to be paid in cash items".

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Attach a detailed listing of the unpaid costs.

Use form HUD-92464M, Request for Approval of Advances of Escrow Funds to disburse escrow.
Escrow should be disbursed within 45 days after final endorsement. If all the funds are not disbursed, follow the procedures for sixty days after final endorsement in Section 13.20.D below.
At final endorsement, if all obligations have been paid in cash, this completes the process.

D. At sixty days after final endorsement:

Prepare a new form HUD-92331A. Enter under the column headings:
- "92264" - the amount of each item of cost recognized from the earlier form HUD-92331A "Allowed" column.

"92330/92330A" - the amount listed in Column C of the form HUD-92330, Borrower's Certificate of Actual Cost, for each item of cost.
"Allowed" - the amounts paid in cash based on the reconciliation performed in Section 13.20.B above and disbursements from the cash escrow account.
- "Disallowed" - the lower of the amounts previously allowed or paid in cash.

Compute a new Maximum Insurable Mortgage, form HUD-92580, based on the total of the "Disallowed Column" (form HUD-92331-A). If this computation produces an amount less than the mortgage finally endorsed:
- Notify the Directors of Housing Production and Asset Management (OAMPO) by memorandum that prepayment to the mortgage is required.

Prepayment is mandatory, and:
- 1. Is applied in amounts equal to the scheduled monthly principal payments, to the extent possible.
- 1. Any remainder goes to the Reserve for Replacements Account.
If HUD is notified that payment has been delayed because of a dispute or litigation, retain funds to pay the amount, pending resolution of the dispute.
Notify the Lender or escrow agent by letter (from the Director of Housing Production) of the required prepayment.
Control the remaining balance in a special account, as a reserve for unpaid construction costs from which disbursements may be made only after written consent of the Regional Center or Satellite Office.

The Lender will continue to use the existing amortization schedule for servicing the mortgage.

The prepayment is in addition to the regular monthly payments to principal.
- There is no adjustment in the amount of the annual MIP due because of these mandatory prepayments.

The escrow requirement does not apply to funds the General Contractor owes. However, the General Contractor must submit a reconciliation of its "to be paid" items, such as form HUD-92330A.

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Chapter 13 Cost Certification 13.21 Increase in Mortgage Amount

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