8.7.5 Condition for Repayment of Secondary Financing

A. (Subordination Agreement – Public (form HUD-92420M) and Subordination Agreement – Private form HUD-92907M). Required repayment of this and any other secondary debt, including interest, must be made solely payable cumulatively from up to 75% of available surplus cash. Consider using form HUD92223M or including the following language in the secondary financing promissory note, or otherwise ensure the transaction provides for the following:

"So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on (insert project name and FHA Project No.) , the total payment(s) due under this Note, and all other secondary debt instruments shall be payable and shall not cumulatively exceed 75% of available surplus cash. Non-project sources that are outside the Mortgaged Property may also be used to repay subordinate financing. The term surplus cash is defined in the Regulatory Agreement dated (insert date) between HUD and (insert name of Borrower) . The restriction on payment(s) imposed by this

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Chapter 8 Mortgage Credit 8.7 Secondary Financing

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paragraph shall not excuse any default caused by the failure of the maker to pay the indebtedness evidenced by this Note."

B. This language does not need to be added to the Subordination Agreement – Public (form HUD-92420M) or the Surplus Cash Note (form HUD-92223M)