19.6.3.2 Effect on Existing Financing

A. First Lender’s Consent to Secondary Encumbrance. The lender in any existing FHA-insured loan (First Lender) must provide written consent for the Borrower to obtain the supplemental loan, even when the First Lender is also the Lender of the supplemental loan. The consent must grant Borrower permission to further encumber the First Lender’s security with the subordinate loan (including the supplemental loan Security Instrument, UCC-1 Financing Statements, and HUD Regulatory Agreement) and any other new secondary financing (i.e., HOME funds, etc.).

B. Consent of Existing Subordinate Lenders. If any existing subordinate financing on the Project requires written consent from the subordinate Lender before Borrower may further encumber the Project, Lender’s Counsel must submit copies of such written consent evidencing the subordinate Lender’s authorization for the Borrower to obtain the 241(a) supplemental loan..

C. Modification of Legal Description in Underlying First Loan Documents. If the supplemental loan will finance construction on or acquisition of a separate parcel of land, the additional parcel(s) must be made part of the legal description for the land on the first loan. This addition of land requires modification of the first loan documents to expand the legal description wherever it appears, i.e., in the Security Instrument, Regulatory Agreement, UCC-1 Financing Statements (both county-recorded and state-filed), and Lender’s title policy (which itself must be modified both to reflect the modification of the existing loan and to revise the legal description). The same expanded legal description will be used for the supplemental loan.

Note: No change in the legal description is necessary if no new land is being added, e.g., adding floors to an existing building, expanding the existing building into an area already included under the first mortgage, or rehabilitation of existing units