8.5.1.5 Sponsor’s Continuing Commitments

A. A written statement must be submitted from Active Principals who are Sponsors and are relied on for financial capacity; it must indicate the parameters of their financial commitment to and contractual relationship(s) with the Borrower:

1. If the relationship is not intended to continue until the project reaches sustaining occupancy, the financial requirements have not been met.

2. Any Sponsor relied on for financial support but not having an ownership interest in the Borrower must also certify in writing the amount of funds it will commit.

B. The Firm Commitment will contain special conditions to ensure the contractual association of the Sponsor to the project:

1. The condition must indicate that the withdrawal of any individual/firm relied on for financial capacity requires prior HUD approval. If there is a change in sponsorship or of the individuals/firms relied on for financial capacity and the Sponsor or the remaining Principals do not demonstrate the capacity to meet the financial requirements of the project at any processing stage of the application, this is considered a significant deviation from the original proposal and a cause for rejection of an

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Chapter 8 Mortgage Credit 8.5 Evaluating Financial Capacity

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application. Additionally, the withdrawal of any individual/firm relied on for financial capacity could result in HUD declaring the Firm Commitment, if issued, null and void.

2. Identification of the individuals/firms relied on for financial capacity. For confidentiality reasons, do not indicate their alphabetic designation or their dollar contribution as they are listed in the Remarks Section on form HUD-92264-A.

3. Require organizational documents reflecting such continuing contractual relationships, (i.e., for nonprofits).

C. Individuals are prohibited from submitting financial statements as Sponsor and then abandoning the project and the Borrower after the Firm Commitment is issued. The Lender should require a certified statement from such Sponsor stating their commitment to the project and specifying the amount of funds that will be reserved for contingent needs through Final Endorsement and sustaining occupancy.

D. The submission of a financial statement that is used to influence Federal Officials concerning a mortgage insurance risk determination when the Sponsor does not plan a continuing relationship with the Borrower could result in appropriate sanctions being taken against the Sponsor including suspension or debarment.