A. Firm Commitment Special Conditions:

1. The policies and procedures involving master lease structuring to facilitate the use of tax credits are incorporated herein and made a part of this Commitment for insurance of advances, specifically including, without limitation, the terms and conditions contained in Chapter 16 of the MAP Guide. All information submitted to HUD with the Application for Multifamily Housing Project, form HUD92013, to evidence the satisfaction of such terms and conditions shall be true and correct as of the date submitted and must continue to be true and correct at the time of Initial Endorsement.

2. This commitment is subject to, and has been issued upon the reliance of, the successful (a) allocation to the project of LIHTC, Historic Tax Credits or New Markets Tax Credits and (b) syndication of such credits, with an appropriate agreement for the timely investment of equity, as shown on forms HUD2880 and HUD-92013, to assure completion of the project and pay other associated and incidental costs. In addition to the standard provisions that must be included in the organizational documents for the Borrower entity, a provision must be added that prohibits any changes to the organizational documents that affect the obligations of the tax credit investor without the written consent of the Lender and HUD.

3. Notwithstanding the issuance of this commitment, this commitment remains subject to, and HUD’s obligations hereunder are conditioned upon the satisfactory resolution, as determined by HUD, of the adverse items determined by HUD during the Previous Participation Review process.

4. As an accommodation, this commitment has been issued and based upon schematic drawings, instead of the final Drawings and Specifications, if allowed by the State Historic Preservation Office (SHPO) and/or Memorandum of Understanding (MOU) for historic tax credits. At least 30 days prior to the scheduled date for initial endorsement, HUD must receive the final Drawings and Specifications for review and approval to ensure consistency of design and cost. In the event that there is a net

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Chapter 16 Master Leases with Market Tax Credits 16.5 Cost Certification and Final Endorsement

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cumulative construction cost increase or change in the design concept, if allowed by the State Historic Preservation Office (SHPO) and/or MOU for historic tax credits, or a net cumulative construction cost decrease in the amount of more than 5%, this commitment shall be subject to and conditioned upon the further approval of HUD, to be evidenced in writing, and may be terminated and voided by HUD, or additional conditions may be imposed, at HUD’s option.

5. (See Chapter 5, Section 5.6, Streamlined Processing, for further policy guidance on the deferral of final plans and specifications at Firm Commitment when tax credits are involved.)

• B. The following forms should be revised to reflect the lease structure and HUD requirements:

1. Form HUD-92434M, Lender’s Certificate - To include language that clearly states that the Master Tenant and Sub-lessees must report lease payments during the construction period as rental income.

2. Form HUD-93305M, Agreement and Certification - To include language that clarifies that the Borrower must report all receipts and disbursements from the date of first occupancy and during the rehabilitation period for substantial rehabilitation cases.

C. Each Master Lease or Master Sub-Lease must be recorded in the appropriate real estate records, along with the Regulatory Agreement executed by each Master Tenant or Master Sub-Lessee. These documents must also be included in Schedule B, Part II of the title insurance policy. In jurisdictions where recording these leases would result in a substantial tax, a Memorandum of Lease may be used. In lieu of recording the lease(s), a lease memorandum approved by the HUD Multifamily Regional Center Director, after consultation with field counsel, may be filed.