5.7.3 Firm Commitment Application

A. The Lender’s Construction Analyst must have visited and inspected the site and its environs, investing time and attention to detail sufficient to allow the analyst to appreciate due diligence needs and to knowledgeably evaluate prepared due diligence and all design and construction documents. The Lender must submit the following exhibits for review, provided that, if the application is approved for streamlined processing, the following exhibits may be submitted as substantially completed drafts and resubmitted as proposed final drafts at least 30 days prior to an initial endorsement (See Section 5.6 above):

1. Form HUD-92013, Application for Project Mortgage Insurance.

2. Owner-Architect Agreement, AIA Document B108 (and HUD Amendment to the B108), fully defining the services and fees for each prime design professional with which the Borrower/owner contracts directly. The Project Architect shall have the authority and duty to coordinate all the consultants and their work involved in the basic design services of the Architect.

3. Completed Surveyor’s Report, form HUD-1073M, with responses to all questions and the completed HUD certification. See Appendix 5, Section A.5.1.

4. Engineering and specialty reports (e.g., geotechnical, structural).

5. Municipal and utility company letters of confirmation for the provision of services and/or offsite improvements.

6. Any documents necessary to establish:

   • Site ingress and egress, utility services and other general acceptability criteria in MPS 4910.1, Chapter 2; and

   • Binding or signature-ready drafts of proposed joint use, access and maintenance agreements where common use easements (e.g., common driveways) exist or are proposed. When proposed, easements should be platted, and agreements drafted for review in preparation for recording.

7. Certification from Project Architect substantially in the form of Appendix 5, Section A.5.8.1.

8. Drawings and Specifications. One legible full-sized printed set (hard copy) of drawings and one set of specifications for review that conform to the specific format and requirements described in Appendix 5, Section A.5.5.

9. Description of all work essential to the project but outside the boundaries of the property (see Appendix 5, Section A.5.5).

10. The General Contractor’s Cost Breakdown, form HUD-2328.

11. The Lender’s CNA based on construction plans and specifications of the improvements to be built. A qualified energy professional must be engaged to complete section “a” below, as required for green MIP applications (See Chapter 6. The Lender’s Construction Analyst or the Project Architect may complete the remaining three sections “b,” “c,” and “d.” The Project Architect should verify the accuracy of the information reflected in these sections according to the latest plans and specifications developed by the Project Architect. The CNA must be completed and submitted using the CNA e-Tool in accordance with Appendix 5, Section A.5.7 and includes:

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• For green MIP applications, a HUD Custom Statement of Energy Design Intent (SEDI) from EPA’s Portfolio Manager based on projected utility consumption for the entire property to be built, including the entire site and all the buildings. The projected utility consumption data resulting from the Energy Modeling should be reported to Portfolio Manager and the HUD Custom SEDI obtained. The resulting HUD Custom SEDI must show an energy score not less than the prescribed minimum per applicable program requirements. (See Chapter 6.) Note that the HUD Custom SEDI minimum score is a requirement in addition to, and not in lieu of, the obligation to prepare plans and specifications meeting the requirements of the applicable version of the International Energy Conservation Code or the ASHRAE standard 90.1. See Chapter 6 for more details.

• A completed physical inventory of the property to be built, (that is, description of the site, buildings, units, utility types and rates, components and alternatives in the CNA e-Tool).

• An estimate of replacement cost, as new, for each structure (form HUD-92329, Schedule of Insurable Values, automated in the CNA e-Tool). The Aggregate Costs should be consistent with the Lender’s Construction Analyst’s estimate of costs for structures including general requirements, contractor’s overhead and profit, and bonding.

  • The Lender’s financial plan for funding future capital replacement needs based on actual expected replacements with appropriate adjustments for inflation and other variables as described in Appendix 5, Section A.5.7. The financial plan will define the schedule of annual deposits to the RfR escrow.

12. The Lender’s Construction Analyst’s detailed cost estimate package (Cost Report) composed of the following:

Detailed cost estimate to be reported on form HUD-92326.

• A comparison of the General Contractor’s trade line item cost estimate (form HUD-2328) with the Lender’s Construction Analyst’s estimate (form HUD-92326) with comments and explanations described on form HUD-92331-B).

• Form HUD-2328, signed and dated by the Lender’s Construction Analyst in-the FHA: Processing Analyst’s box. The Lender’s Underwriter must sign and date form HUD-2328 in the FHA: Chief Underwriter box. After review, HUD approves this document by the Technical Branch Chief signing in the FHA Chief Cost Branch or Cost Analyst’s box.

13. Form HUD-92264, signed and dated by the Lender’s Construction Analyst submitted by the Lender as both “Cost Processor” and “Architectural Processor.” If different analysts execute the architectural and the cost reviews, then each must sign as appropriate.

14. The Lender’s Construction Analyst’s review and disclosure of identities of interest and application of the 50%-75% Rule (See Chapter 13, Section 13.14.13 and Section 13.15 for instructions on this Rule.), which should

• Identify and describe any identity of interest relationships between or among the Borrower, any of the Borrower’s design professionals, the General Contractor, any subcontractors, material suppliers, equipment lessors, or manufacturers of industrialized housing.

• Identify by analysis of form HUD-2328 any single subcontractor that executes 50% or more of the total construction or any three subcontractors who in the aggregate execute 75% or more of the total construction measured by dollar value.

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15. The proposed but unsigned owner-contractor agreement for construction (form HUD-92442M) indicating any selected options (e.g., incentive payments) or special conditions and the Supplementary Conditions (form HUD-92554M) reviewed and included in the Lender’s Construction Analyst’s report.

16. Review report prepared by Lender’s Construction Analyst who must state that all exhibits are acceptable without conditions, and that all deficiencies have been acceptably corrected, except that in the case of an application approved for streamlined processing, this statement may allow for the contingency that final plans and specifications have not been completed and that final cost estimates may vary by up to 5% from the costs estimated in the Firm Commitment application. The report should address the following:

• Completeness of construction documents;

• Conformance to local building codes and HUD standards, including the HUD minimum energy codes when these exceed local code requirements;

• Accessibility for persons with disabilities. Refer to the Fair Housing Act design and construction requirements for accessibility found at 24 CFR 100.205. If the property is federally assisted, refer also to the Uniform Federal Accessibility Standard (UFAS). For any public space at the property (e.g., leasing office, commercial space), refer to Title III of the Americans with Disabilities Act (See Appendix 5, Section A.5.2);

• Site design:

  • 1. Placement of buildings, roads, walks and parking on the site;
  • 2. Identification and review of offsite construction;
  • 3. Site erosion and storm drainage; and
  • 4. Soil borings report;

• Building design and building circulation:

• 1. Adequacy of elevators;
• 2. Number and placement of stairs;
• 3. Adequacy of lobbies and corridors;
• 4. Adequacy of fire egress;
• 5. Typical dwelling units: Adequacy of room sizes and circulation within units;
• 6. Fire safety: Provision of adequate fire safety measures, e.g., fire sprinklers, firewalls, fire doors (if required);
• 7. Structural adequacy: Review of building structure and structural details including measures implemented to address identified hazards such as seismic risk, coastal high wind and/or flood zones;
• 8. Mechanical, electrical and plumbing adequacy: Review of mechanical and electrical and plumbing plans; and

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• 9. Energy efficiency. Review utility combination for energy efficiency and determine acceptability of utility combination.

• Submit copies of the Lender’s Construction Analyst’s project files and logs only if requested by the HUD Office.

Standard certification by Lender’s Construction Analyst(s) (see Chapter 11, Section 11.2).

17. See Chapter 9 for environmental review requirements.