8.12.3.2 Initial Endorsement

A. Before scheduling the closing, Field Counsel must review the grant/loan documents to assure their legal sufficiency.

B. The MAP Lender must consent in writing to the placing of the subordinate mortgage and agree that its existence could not create a basis for default on the first mortgage.

C. The governmental secondary financing Lender must enter into the HUD prescribed form of Subordination Agreement.

D. The Borrower, instead of that portion of the front money escrow provided by the grant/loan, may use either:

1. An unconditional irrevocable letter of credit issued by a banking institution with a rating and term acceptable to HUD; or

2. An agreement between the governmental agency or instrumentality, the MAP Lender and the Borrower, which provides the following:

MAP Lender has:

• 1. The right to approve construction advances after considering any reported noncompliance by the agency or instrumentality if the project is proceeding in compliance with approved plans and specifications.
• 2. A joint review and agreement between the MAP Lender, and the governmental agency or instrumentality on the construction progress schedules and allocation of draws.
• 3. Sole authority to resolve differences in the inspection process and the process of disbursing grant/loan proceeds.

MAP Guide, March 2021 Go to beginning of Chapter 8

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Chapter 8 Mortgage Credit 8.12 Firm Commitment Processing with Grants and Loans

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• The MAP Lender will furnish both HUD and the governmental agency with copies of the approved interim advances form HUD-92448, Contractor’s Requisition, form HUD-92403, Application for Insurance of Advances of Mortgage Proceeds, and supporting documentation. HUD approves the initial and final advances.

• The governmental agency or instrumentality must process the advance from its grant or loan funding promptly and without adjustment. HUD or the MAP Lender will:

• 1. Send the governmental agency a copy of the approved requisition for its records.
• 2. The governmental agency must notify HUD and the Lender of a need to make an adjustment the following month.

• The governmental agency assumes the risk for any grant/loan funds disbursed in excess of the amount approved by HUD or the Lender and agrees to replenish the excess funds within 10 working days of notification by HUD or the Lender.

• If a default occurs before completion of construction, the governmental agency must disburse the remaining grant/loan funds so long as the request for funds remains in the same ratio as previously authorized.

• The governmental agency’s attorney must render an opinion that the agreement and grant/loan commitment is legally binding on present and all future administrations.