8.7.7 Unsecured Private Secondary Financing Conditions

A. Terms of unsecured private Promissory Notes must reflect those provisions found in: form HUD91710M, Residual Receipts Note [Non-profit Borrower], or form HUD-91712, Residual Receipts Note [Limited Dividend Borrower], or form HUD-92223M, Surplus Cash Note [Profit Motivated Mortgagors] based upon the type of Borrower; or Form Residual Receipts Note (form HUD-92908M), when Borrower’s distributions are restricted through a Residual Receipts Rider to the Regulatory Agreement . See the Closing Chapter 19, Section 19.4.8.2 for further details.

1. Form HUD-91710M, Residual Receipts Note (for Non-profit Mortgagors) and form HUD-91712M, Residual Receipts Note (for Limited Dividend Mortgagors).

• Principal and interest shall be due and payable on or after the maturity date of the HUD-insured mortgage.

• If the HUD-insured mortgage is prepaid in full, the holder of the residual receipts note has the right to declare the entire principal sum or any remaining balance including any accrued interest immediately due and payable.

MAP Guide, March 2021 Go to beginning of Chapter 8

Bookmarked Version Go to Acronym and Abbreviation List, Glossary, Index

Chapter 8 Page 8-27

To return to this page after clicking a link, press ALT + Back Arrow

Chapter 8 Mortgage Credit 8.7 Secondary Financing

Go to Table of Contents

• Prepayments to principal and interest:

• 1. may be made (a) from the residual receipts as defined in the Regulatory Agreement only after obtaining written approval from HUD or (b) from sources other than Project Income or Project Assets, e.g., syndication proceeds.
• 2. may be made only after final endorsement of the insured mortgage and after the end of a semiannual or annual fiscal period.

• if unauthorized prepayment is accepted, the funds shall be returned to the project immediately upon discovery.

• The residual receipts note is nonnegotiable and may not be sold, transferred, assigned, or pledged by the payee.

  • Presentation, demand and notice of demand, nonpayment and protest of the residual receipts note are waived.

• Interest on the note must not compound; however, for LIHTC projects, HUD will consider compounding of interest pursuant to the instructions in Chapter 14, Section 14.11.B.5 of the MAP Guide.

2. Form HUD-92223M, Surplus Cash Note (for all other mortgagor entities). The conditions and limitations are the same as form HUD-91710M, except that:

   • Provisions may be made for interest payments annually or semiannually or at the end of a fiscal period. However, the Note should provide for interest to accrue and be payable in full at maturity.

• Prepayment of principal or any payment of interest must be limited to sources other than Project Income or Project Assets, e.g., syndication proceeds or surplus cash as defined in the Regulatory Agreement.

• Payments on promissory notes will be made only as permitted by the applicable Regulatory Agreement, but prepayment of the promissory notes from sources other than the project is permitted without HUD approval.

• Should any unauthorized prepayments be made, as determined by HUD, it shall be the responsibility of the Borrower to return them to the project.

• Interest on the Note must not be compounded, however for LIHTC and otherwise affordable projects, HUD will consider compounding of interest pursuant to the instructions in Chapter 14, Section 14.11.B.5 of the MAP Guide.