19.5.3 Disbursement Agreement

A. The Exhibit C disbursement agreement is generally required under 24 CFR 200.54(b), and must provide that Project Completion Funds are disbursed before Loan proceeds, except for funds from a grant or loan from a Federal, State or local government agency or instrumentality, or certain tax credit proceeds, including tax-credit related Equity Bridge Loans. See 24 CFR 200.54(b) and (c). These exceptions must be approved by the RC Director (consistent with the Firm Commitment) and must be reflected in the disbursement agreement.

B. The disbursement agreement is required in all new construction and substantial rehabilitation closings, except in certain limited situations, e.g., when all Project Completion Funds are already disbursed prior to Loan proceeds, as part of the initial draw. The disbursement agreement must list all charges referenced in Section 5 of the Building Loan Agreement.

C. If the RC Director determines that a disbursement agreement is not required, Building Loan Agreement Sections 4(c) and 5 still require an Exhibit C listing charges and items funded through Project Completion Funds and Loan proceeds. In those limited circumstances, Lender’s Counsel is authorized to revise the Building Loan Agreement reference to Exhibit C to accurately describe the contents (such as disbursement charges rider or list of mortgageable costs).

D. All parties directly providing construction financing for the Project must be parties to the disbursement agreement. HUD, as an insurer, is not a party to the disbursement agreement.

E. The disbursement agreement must include a provision stating that in the event of a conflict between the disbursement agreement and Program Obligations, as defined in the Building Loan Agreement, HUD’s Program Obligations are controlling in all respects.