13.30.1.4 Excess (Unused) Mortgage Loan Proceeds

A. In circumstances where the cash paid out for completion of the project is less than the mortgage loan proceeds, the Regional Center Director shall require that any part of the mortgage loan proceeds that have not been expended to pay necessary costs of completing the project shall be deposited in the reserve for replacement account of the Borrower, from which disbursements may be made only with the prior written consent of the Regional Center Director. This requirement is stated in form HUD-93305M, Agreement and Certification, at paragraph 3. Where the Commissioner requires the Borrower to make a deposit of cash, such deposit shall be with Lender or a repository acceptable to the Lender. The deposit shall be held by the Lender in a special account, or by the depository under an appropriate agreement approved by the Commissioner.

1. The establishment of the fund can be avoided by an immediate reduction of the mortgage loan at closing, before establishment of the amortization schedule.

2. The Regional Center Director will approve or disapprove the use of the funds for purposes other than reduction of the mortgage loan.

3. If the mortgage loan proceeds exceed the cash paid out for completion solely because there is a difference between the purchase price of land for a period of years and its “fair market value” in fee simple and “as is”, as determined by HUD, the Regional Center Director may waive this requirement. The request for waiver shall be accompanied by full information as to the date of purchase and the purchase price of the land.

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Chapter 13 Cost Certification 13.30 Final Closing – Insurance of Advances

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