19.6.5.4 — HUD Multifamily Accelerated Processing (MAP)

A. Preparation for Insurance Upon Completion Closings. HUD’s administrative requirements for IUC closings are detailed in Chapter 8, Section 8.13 and Chapter 12, Section 12.16. Final Endorsement occurs

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Chapter 19 Closing Guide 19.6 Requirements for Acquisition/Refinance and Other FHA Insurance Programs

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after completion of construction, cost certification, and issuance of Certificates of Occupancy for all units. See Chapter 13 for HUD’s Cost Certification requirements.

B. Form Document Requirements Specific to IUC Closings. This section supplements Chapter 8, Section 8.12 and Chapter 12, Section 12.16 of this MAP Guide.

Checklist. The complete list of documents required for IUC closings is provided in the Insurance Upon Completion Checklist, available on HUD’s website at:

https://www.hud.gov/OGC_Multifamily_Closing_Documents_Checklist.

Security Instrument. The term of the Security Instrument commences on the date of HUD’s endorsement. The Security Instrument is not recorded prior to completion of construction.

Note . The Note must be dated the same date as the Security Instrument. The amount of the Note cannot exceed the principal balance of the mortgage loan that would have been outstanding if all payments to principal due before the date of Final Endorsement (including required advance amortization payments, if any) had been paid.

Endorsement of Note. At the Initial/Final Endorsement of an IUC loan, FHA will endorse the Note form HUD-94001M) for the total sum of the insured Loan. HUD is not insuring advances on a construction loan, so there is no Initial Endorsement of the Note . The Note contains a separate endorsement panel for IUC closings. The RC Director will not endorse the Note until the Lender provides written evidence that all principal payments due and payable on the existing loan have actually been paid and the existing mortgage loan is otherwise current.
Title Policy. The title insurance policy must be dated the same day as the endorsement of the Note.
Regulatory Agreement. The Regulatory Agreement must be recorded immediately following recordation of the Security Instrument.
Builder’s Warranty. In addition to the Construction Contract, the General Contractor must enter into Escrow Agreement for Latent Defects (form HUD-92414M) with Lender and Borrower for the benefit of HUD and provide one of the following at endorsement to assure correction of any latent defects:
- Cash Escrow. A cash escrow deposit equal to 2.5% of the principal amount of the Security Instrument, to be retained in escrow by Lender for a period of 15 months; or

Letter of Credit. An irrevocable, unconditional letter of credit issued to Lender by a banking institution; or
Surety Bond. Surety Bond Against Defects Due to Defective Materials and/or Faulty Workmanship (form HUD-3259), by a surety on the U.S. Department of Treasury’s Listing of Approved Sureties (Department Circular 570), in the amount of 10% of the Construction Contract, and effective for two years after Project Substantial Completion.
- RC Director Discretion. In cases when the latent defect escrow amount is small because total repair cost is minimal (e.g., $200,000 or less), the RC Director has the discretion to waive the assurance for latent defects.

Request for Endorsement. Request for Endorsement of Credit Instrument, Certificate of Lender, Borrower and General Contractor (form HUD-92455M) is required. The form Certification of General Contractor must be given.

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Chapter 19 Closing Guide 19.7 HUD-Required Provisions for Borrower’s Organizational Documents

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Operating Deficit Escrow. If an operating deficit is projected on Multifamily Summary Appraisal Report (form HUD-92264), the Sponsors, at closing, must provide funds to meet the deficit in the manner set forth in Chapter 8, Section 8.14. Escrow Agreement for Operating Deficits (form HUD92476a-M) must be used and requires a specified sum to be held for a limited number of months after closing, in accordance with Program Obligations.
Contractor’s Prevailing Wage Certificate. The Contractor must submit Contractor’s Requisition Project Mortgages (form HUD-92448) to Lender, with the section entitled “Contractor’s Prevailing Wage Certificate” completed.
Cost Certification. The Borrower’s cost certification is reviewed by the RC Director, who will prepare Maximum Insurable Mortgage (form HUD-92580) to determine the final amount of the Note. See Chapter 13 for further guidance.
Ancillary Agreements. Other ancillary agreements are required as set forth in remainder of this MAP Guide and in IUC Checklist.
Excess (Unused) Mortgage Proceeds. Provisions for excess or unused proceeds are included in Agreement and Certification (form HUD-93305M).
Labor Relations. The RC Director must confer with the Office of Davis-Bacon and Labor Standards (DBLS) and provide OGC the RC Director with written confirmation of DBLS’s approval to proceed to closing. See Section 19.2.2 for further guidance.
Subordination of Restrictive Covenants. HUD has specific requirements concerning restrictive covenants resulting from bond financing and low-income housing tax credit financing (See Section 19.4.10 and Section 19.4.11, respectively). Regardless of the timing of recordation of such covenants and related documents, HUD requires that they meet FHA requirements before Final Endorsement of the Note for insurance, even if compliance requires amendment of already existing agreements. Consequently, Borrower and Lender should ensure that these documents, if applicable, meet FHA requirements before commencement of construction.