2.6.4.2 Secondary Financing Relationships

A. Secondary financing includes, but is not limited to:

1. Loans secured by the project or made to the Borrower entity in addition to a first mortgage;

2. Loans made to and/or secured by upper tier ownership interests in the Borrower entity (i.e., persons or entities with any ownership interest in the property’s Single Asset Mortgagor Entity); and

3. Other forms of mezzanine financing associated with the project proposed for the MAP loan transaction.

B. Any proposed secondary financing relationship between the Borrower and the MAP Lender on a MAP financed project constitutes an IOI and, unless explicitly allowed in published program guidance, must be disclosed in writing to HUD and the MAP Lender must receive written approval of the IOI from COB before submitting an application. Such approval will not be unreasonably withheld provided the relationship is fully disclosed and the parties demonstrate to HUD’s satisfaction that the relationship will not undermine the integrity and independence of the MAP Lender’s underwriting, credit review and loan closing process. These situations will require additional scrutiny by HUD and by the MAP Lender to ensure an appropriate property valuation and compliance with MAP program requirements. In cases where a secondary financing IOI occurs during or after processing, it must be disclosed in the manner provided in this section as soon as it is anticipated.

MAP Guide, March 2021 Go to beginning of Chapter 2

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Chapter 2 Lender Qualifications and Practices 2.6 Identity of Interest, Conflicts of Interest

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