8.5.1 Financial Statement Analysis

A. MAP Lenders have the responsibility to review financial statements of the Borrower and its Principals to determine that the Borrower, and/or the Principals have the financial capacity to own and operate the property. For construction proposals, an analysis of financial statements is used to determine whether the owner and the General Contractor have the singular ability to deliver the project. Financial analysis is performed on Active Principals as identified in the Borrower entity’s organizational structure. The Lender’s Underwriter must determine which Principals have control of the single asset entity and the property; and review their financial statements along with any financial schedules to assess the Principal’s financial stability and assess any potential risk to FHA. Also, the Underwriter must analyze and disclose to HUD as part of their recommendation any financial interests that do not rise to the level of Principal, but nevertheless have a material impact on the creditworthiness of the proposed Borrower or its Principals.

• B. These determinations are based on:

1. Past financial condition;

2. Present liquidity; and

3. Projected future financial capacity.