A. Secondary Financing from Federal, State or Local Government Agencies. If grant or loan funds from government sources are being contributed as Project Completion Funds (as defined in Section 4(c) of the Building Loan Agreement) and are unavailable at Initial Endorsement, the FHA-insured mortgage proceeds must be disbursed in accordance with procedures set forth in Section 8.12 and memorialized in the disbursement agreement attached to the Building Loan Agreement (see 24 CFR 200.54).
B. Grants or Loans from Private (Non-governmental) Sources. If grant or loan funds from private, non-government sources are being contributed as Project Completion Funds but are not available at initial endorsement, HUD will require Borrower to escrow an equivalent amount with Lender before or at initial endorsement, and will require that such escrowed funds be disbursed in full prior to disbursement of any insured Loan proceeds. Unless approved in advance by the RC Director and FHA Lender, a mortgage or deed of trust for a private loan that is approved to be secured with a lien against the Project may not be recorded until the loan is disbursed.
MAP Guide, March 2021 Go to beginning of Chapter 19
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Chapter 19 Closing Guide 19.4 Document and Diligence Requirements
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C. Tax Credit Exception. Notwithstanding the foregoing subsections 1 and 2, HUD will not require an escrow of tax credit equity (e.g., proceeds from LIHTC, New Market Tax Credit Program, or historic rehabilitation tax credits), as dictated by the Housing and Economic Recovery Act of 2008 (HERA) and 24 CFR 200.54. See also Section 19.4.9.6 and Chapter 14, Section 14.15 for guidance regarding Equity Bridge Loans in tax credit projects.
