19.6.3.4 HUD Form Documents for 241(a) Supplemental Loans

A. Lender’s Counsel is responsible for preparing the Section 241(a) closing documents to address the supplemental nature of the 241(a) Loan, including that the 241(a) Security Instrument will be subordinate to the lien of the existing FHA-insured loan. Modifications are necessary to remove certain references (i.e., the absence of other liens) to clarify that the supplemental loan does not violate the terms of HUD’s form documents and to highlight that various rights of a subordinate Lender may be subject to the prior rights of a senior Lender (even when the two Lenders are the same), etc.

Note: The OGC Multifamily Mortgage Division will maintain a set of template documents for use in 241(a) transactions while HUD prepares the documents for OMB approval through the PRA process. Lender’s Counsel may contact the MMD to obtain the current templates. Templates include the supplemental security instrument, Lender’s certificate, note, building loan agreement, agreement and certification, and regulatory agreement. Once published with an OMB approval number, preparers should use the OMB-approved forms.