8.13 Insurance Upon Completion

A. Insurance Upon Completion (IUC) is an option for new construction and substantial rehabilitation projects financed under Sections 220, 221(d)(4), and 231. Mortgage insurance is provided after project completion and issuance of Certificates of Occupancy for all units. The following instructions apply to IUC projects:

1. A financial and credit investigation is required on the Borrower, its Principals and any identity of interest General Contractor.

2. MIP is not included in form HUD-92264 nor is it charged until the project reaches endorsement.

3. Working Capital and Operating Deficit Escrows. Projects that apply under IUC must meet the operating deficit escrow and working capital requirements as outlined in Section 8.14 below, except for the extra 2% construction contingency portion of the working capital, which is not required.

4. Assurance of Completion is not applicable to IUC projects. However, at endorsement, the General Contractor must address latent defects by completing the Latent Defects Escrow, form HUD-92414M. An escrow of 2½% of the total amount of the construction contract in the form of a surety bond, cash escrow, or an irrevocable letter of credit issued by a banking institution is required at endorsement. (See Chapter 12, Section 12.16.S Builder’s Warranty)

5. Breakdown of Financing Charges: In IUC projects before issuance of the Firm Commitment.

   • The mortgagee must provide:

• 1. A breakdown of financing charges and discounts by submitting form HUD-92455M Request for Endorsement of Credit Instrument, Certificate of Mortgagee, Borrower and General Contractor, with the Certificate of Mortgagee portion completed. The balance of the Form is to be completed before Final Endorsement in lieu of form HUD-92023M.
• 2. Information relative to the construction and permanent interest rates and mortgage term.

• Each item is reviewed to ensure its reasonableness in relation to comparable projects and market conditions.

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Chapter 8 Mortgage Credit 8.14 Determining Cash Requirements for Completion

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HUD will inform the Borrower of the fees that are recognizable for cost certification.

6. Building Loan Agreement, form HUD-92441M, is not applicable to IUC projects.