8.5.1.1 Submission of Financial Statements–New Construction

A. The Active Principals and the General Contractor must submit with the loan application current financial statements to include a balance sheet, income and expense statement, supporting schedules a REO schedule history and the schedule of mortgage debt. Individuals will submit a Personal Financial and Credit Statement, form HUD-92417 (or an acceptable form of financial statement, e.g., balance sheet that contains a certification and criminal warning statement) and if applicable, an REO schedule and schedule of mortgage debt. The General Contractor must submit a REO schedule if it has a significant financial interest or contribution or has a role to direct project operations. A non-identity of interest General Contractor with only a nominal equity interest need not submit REO. See Appendix 8, Section A.8.1 for detailed requirements.

B. The financial analysis is used to determine the amounts available for investment in the project by performing an analysis of working capital. Working capital is the difference between current assets and

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Chapter 8 Mortgage Credit 8.5 Evaluating Financial Capacity

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current liabilities and is the cash or liquidity that exists to purchase assets, pay off debt and make up deficits from operations or fund new activities or projects. The financial analysis also determines which non-pledged assets can be readily used as collateral or pledged as security to obtain cash. See Appendix 8, Section A.8.2 for instructions on how to correctly analyze financial statements when determining the financial capability of the Active Principal, Sponsor, General Contractor and/or Manager of an LLC.