19.4.10.12 Supremacy of HUD Requirements and Conflicts

A. HUD requires that HUD program obligations control over any conflicts in the bond financing documents. In addition to opinion 10 of the Opinion of Borrower’s Counsel, the HUD Closing Attorney will complete a limited review of the bond financing documentation to verify that there are contractual provisions providing for the supremacy of HUD’s requirements in the event of a conflict. Practically, this review may be achieved through review and confirmation of a conflicts provision in the trust indenture/funding loan agreement, alone, if all other bond financing documentation is incorporated therein (e.g., by reference). Alternatively, if some bond financing agreements stand alone, or involve different parties, the HUD Closing Attorney may require conflicts provisions in those agreements also. To assist the HUD Closing Attorney, Lender’s Counsel and bond counsel may provide the HUD Closing Attorney with a written explanation as to what contractual provisions provide for the supremacy of HUD’s Loan documents, and that the provisions in HUD’s Loan documents control in the event of a conflict with the bond financing documents.

• B. A sample Conflicts provision is provided below.

FHA Federal Laws and Requirements Control. Notwithstanding anything in this [title of agreement] to the contrary, the [Parties] to this [title of agreement] acknowledge that this [title of agreement] and any obligations of the [title of the Borrower under the bond financing documents] hereunder, are subject and subordinate to the [title used for the FHA-insured Loan documents]. In the event of a conflict between [title of agreement] and [title used for the FHA-insured Loan documents], the conflicting provisions in the [title used for the FHA-insured Loan documents] are controlling.