19.16 Equity Bridge Loan Rider – LIHTC Projects

Use to meet the requirements of Chapter 14, Section 14.15 and Chapter 19, Section 19.4.9.6 for equity bridge loans used as a substitute for deferred tax credit equity pay-in as approved by HUD in the Firm Commitment.

This Rider (“Rider”) is attached to and made part of [insert name of equity bridge loan note] (“EBL Note”), made as of _______, 20 by [insert name of equity bridge loan Borrower] (“EBL Borrower”) to ____________ (“Bridge Lender”).

WHEREAS, [insert name of HUD Borrower on the HUD Loan] (“HUD Borrower”) has obtained financing from [insert name of FHA Lender] (“FHA Lender”) for the benefit of the project known as [insert project name], FHA No: [insert project number] (“Project”), which loan is secured by a [name of security instrument] (“Security Instrument”) dated as of _____________, and recorded in the [Recorder’s Office or other land records office] of ___________ County, __________ on _____________ as document number ______________, and is insured by the United States Department of Housing and Urban Development (“HUD”);

WHEREAS, EBL Borrower has obtained equity bridge loan financing from the Bridge Lender to defer HUD Borrower’s required equity pay-in for the Project;

WHEREAS, as a condition of approving the EBL Note and insuring FHA Lender’s financing for the Project, HUD requires that the terms of the EBL Note and related documents executed by the EBL Borrower (collectively, the “EBL Documents”) be made subject to HUD Requirements, as that term is further defined below.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

(a) In addition to the terms defined above, the following terms have meanings set forth below:

• i. “HUD Loan Documents” means the HUD-insured Note, Security Instrument, HUD Regulatory Agreement, and all other documents executed in connection with the HUD Loan.

• ii. "HUD Regulatory Agreement" means the Regulatory Agreement for Multifamily Projects (form HUD-92466M) entered into by and between HUD Borrower and HUD with respect to the Project, as the same may be supplemented, amended or modified from time to time.

• iii. “HUD Requirements” means, collectively, the HUD Loan Documents, this Rider, and Program Obligations.

• iv. “HUD Loan” has the same meaning as “Loan” as such term is defined in the Security Instrument.

• v. “Mortgaged Property” has the meaning specified in the Security Instrument.

• vi. “Program Obligations” means (1) all applicable statutes and any regulations issued by the Secretary pursuant thereto that apply to the Project, including all amendments to such statutes and regulations, as they become effective, except that changes subject to notice and comment rulemaking shall become effective only upon completion of the rulemaking process, and (2) all current requirements in HUD handbooks and guides, notices, and mortgagee letters that apply to the Project, and all future updates, changes and amendments thereto, as they become effective, except that changes subject to notice and comment rulemaking shall become effective only upon

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completion of the rulemaking process, and provided that such future updates, changes and amendments shall be applicable to the Project only to the extent that they interpret, clarify and implement terms in this Security Instrument rather than add or delete provisions from such document. Handbooks, guides, notices, and mortgagee letters are available on “HUDCLIPS,” at www.hud.gov.

vii. “Residual Receipts” has the meaning specified in the HUD Regulatory Agreement.

viii. “Surplus Cash” has the meaning specified in the HUD Regulatory Agreement.

• (b) In the event of any conflict between (i) the EBL Documents and (ii) the HUD Requirements, the HUD Requirements are controlling in all respects.

• (c) The EBL Documents and all amounts now or hereafter advanced thereunder or secured thereby are specifically subordinate to the HUD Loan Documents and all amounts now or hereafter advanced thereunder or secured thereby.

• (d) The loan evidenced by the EBL Note is nonrecourse to the HUD Borrower and is not secured by a lien or security interest in the Mortgaged Property.

• (e) Any payments due under the EBL Documents shall only be payable from [insert if applicable: capital contributions from [partners] [members] of the HUD Borrower, or] non-Project assets. The restriction on payment imposed by this paragraph does not excuse any default caused by failure of the EBL Borrower to pay the indebtedness evidenced by the EBL Note.

• (f) [For non-IOI: “Bridge Lender may not”] or [For IOI Bridge Lender: “Neither [Bridge Lender] nor [HUD Borrower’s] [limited partners] [members] may”] assert any claims, even in an event of default, against the following items without the prior written permission of HUD:

  • i. the Project;

  • ii. the proceeds of the HUD Loan;

  • iii. the Mortgaged Property;

  • iv. any reserve or deposit with respect to the Project required by Program Obligations; or

  • v. any Developer fee.

• (g) If HUD acquires title to the Project by foreclosure or deed in lieu of foreclosure, the Bridge Lender hereby consents to the discharge of all obligations of the HUD Borrower, if any, under the EBL Documents, and to the termination of the EBL Documents as to the HUD Borrower. The discharge of the HUD Borrower’s obligations under this paragraph neither: (1) excuses or relieves any co-signer, guarantor or any other party from the obligation to repay the indebtedness evidenced by the EBL Note; nor, (2) affects, limits, or impairs the Bridge Lender’s ability to seek a monetary judgment and pursue other remedies against any co-signer, guarantor or other party.

• (h) The loan evidenced by the EBL Note may last through the construction or rehabilitation period provided for in the HUD Loan Documents, but will be paid in full no later than: [select the appropriate option and strikethrough remaining inapplicable options]

[EBL provided by private, for-profit Lender on a 221(d)(4)/220 loan] no later than one year after HUD’s final endorsement of the HUD Loan;

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[EBL provided by private, for-profit Lender on a 223(f) loan] no later than one year after 100% completion of repairs;

[EBL provided by not-for-profit, public sector, or quasi-public sector entities on a 221(d)(4)/220 loan] no later than ten years after HUD’s final endorsement of the HUD Loan;

[EBL provided by not-for-profit, public sector, or quasi-public sector entities on a 223(f) loan] no later than ten years after HUD Borrower’s 100% completion of repairs required by the HUD Loan Documents.

• (i) The EBL Documents may not be amended, assigned, transferred, sold, or otherwise held without the prior written consent of HUD.

• (j) Neither the Bridge Lender nor any of its participants (if any) will have any lien upon or right of set-off against any assets of the HUD Borrower that serve as collateral for the HUD Loan.

The statements and representations contained in this rider and all supporting documentation thereto are true, accurate, and complete. This certification has been made, presented, and delivered for the purpose of influencing an official action of HUD in insuring a multifamily loan, and may be relied upon by HUD as a true statement of the facts contained therein.

Warning: Federal law provides that anyone who knowingly or willfully submits (or causes to submit) a document containing any false, fictitious, misleading, or fraudulent statement/certification or entry may be criminally prosecuted and may incur civil administrative liability. Penalties upon conviction can include a fine and imprisonment, as provided pursuant to applicable law, which includes, but is not limited to, 18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 3729, 3802, 24 C.F.R. Parts 25, 28 and 30, and 2 C.F.R. Parts 180 and 2424.

EBL BORROWER: BRIDGE LENDER: By: By: Name: Name: Title: Title:

[Jurats to be added]

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Chapter 19 Closing Guide 19.17 Section 213 Cooperative Program Rider to Regulatory Agreement for Multifamily Projects

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