2.6.4.4 Lenders with Tax Credit Equity Affiliates

A. With prior written approval from COB, certain MAP Lenders with tax credit equity syndicator or investor affiliates, which would otherwise represent a prohibited IOI relationship, may originate MAP loans. Approval of such requests shall be conditioned on:

1. The MAP Lender must be a Supervised Mortgagee, as defined in the HUD Single Family Handbook.

2. Except where HUD has agreed to a “Pre-Approval of Special Limited Partners as Interim Replacement GP/MM for LIHTC Transactions”, the equity syndicator or investor must remain in a purely passive role throughout the term of the FHA-insured loan, including after the tax credit compliance period ends.

3. The MAP loan must be processed, underwritten, and approved by the MAP Lender’s staff without involvement by the affiliated equity syndicator’s or investor's staff.

4. Effective firewalls must be maintained between the affiliated equity syndicator or investor and the MAP Lender. The affiliated equity syndicator or investor must not improperly influence the MAP division's staff in its role as MAP Lender, nor may the MAP Lender act to influence the affiliated equity syndicator or investor.

5. The MAP division and the affiliated equity syndicator or investor must each provide HUD with a project-specific certification that contains the MAP Guide's prescribed IOI certification contained in Section 2.6.4.6.A.8, below.

6. The MAP Lender and the Borrower must certify that the affiliated equity syndicator or investor did not seek, and shall not provide, any inducement to the Borrower to close the MAP loan with the MAP Lender.

B. MAP Lenders that are not Supervised Mortgagees may still invest in tax credit transactions through their equity syndicator or investor affiliates, subject to compliance with Section 2.6.4.4.A.2-6 above, and compliance and certification that, after the project’s placed-in-service date, the affiliated equity syndicator or investor will hold no more than a 25 percent ownership interest in the Borrower entity.

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

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