3.6.3 Equity Requirement and Controlling Mortgage Criteria

A. The owner is required to contribute at least 10% of the total development cost of the transaction. Existing RfR deposits in excess of the Initial Deposit requirement concluded in the CNA and underwriting may be used to meet the equity requirement. Similarly, land equity from adjacent or nearby parcels added and incorporated into the existing first mortgage security and additional cash contributions can be used to meet the 10% equity contribution requirement. Residual Receipt account funds (e.g., from surplus Section 8 funding) cannot be used to meet equity requirements. Imputed equity representing the difference between the “as is” value of the project and the existing indebtedness is not available to meet the equity requirements. HUD forms HUD-92264 and HUD-92264-A should recognize only the cost of the addition or improvements but, should include all (i.e. the existing and proposed) NOI in Criterion 5 of form HUD-92264-A. A supplemental analysis comparing the historical and proposed NOI should be included as an attachment to the form HUD-92264.