19.5.2 Project Completion Funds

A. Section 4(c) of the Building Loan Agreement implements the requirement of 24 CFR 200.54 concerning Project completion funding. Project Completion Funds are defined in Section 4(c) as the amount deemed by HUD to be sufficient, when added to Loan proceeds to assure completion of the Project and to pay the initial service charge, carrying charges, and legal and organizational expenses incident to the construction of the Project. The precise amount of Project Completion Funds must be shown in Section 4(c). Project Completion Funds must be escrowed with the Lender at closing and shown on the Lender’s Certificate (form HUD-92434M) with the following two exceptions:

1. Under 24 CFR 200.54(d), HUD will not require the escrow of Project Completion Funds derived from (a) LIHTC equity or (b) New Markets Tax Credits or historic rehabilitation tax credit equity.

2. Under 24 CFR 200.54(a), the RC Director may accept a lesser amount (or an alternative to a cash deposit) for Project Completion Funds supplied by grants or loans from a Federal, State, or local government agency or instrumentality. Chapter 8, Section 8.12.3 states that this alternative may take the form of an agreement entered among the governmental agency or instrumentality, the Lender, and the Borrower. This agreement must be reflected in the disbursement agreement referenced in Section 4(c) of the Building Loan Agreement (discussed in Section 19.5.3 below) and comply with Chapter 8, Section 8.12.3, including the requirement that the Lender has the following rights:

   • The right to approve construction advances after considering any reported noncompliance by the agency or instrumentality if the project is proceeding in compliance with approved plans and specifications.

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Chapter 19 Closing Guide 19.5 Additional Requirements for Insurance of Advances

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• A joint review and agreement between the Lender and the governmental agency or instrumentality on the construction progress schedules and allocation of draws.

• Sole authority to resolve differences in the inspection process and the process of disbursing grant/loan proceeds.