A.12.1.1 Approving Advances

A. Before any FHA-insured mortgage proceeds are advanced, funds provided by the Borrower must be disbursed in full for project work, material, and incidental charges, and expenses from other available funding sources in the following order:

1. All funds from the cash escrow established by the Borrower for: onsite construction, fees, carrying charges (e.g. taxes, insurance MIP, exam fee, inspection fee, Government National Mortgage Association (GNMA) fee, title and recording), and financing (front money escrow).

2. Grant/loan proceeds furnished by a national, regional, or local community service organization or a private source.

3. Grant/loan proceeds furnished by a government agency or instrumentality, low-income housing tax credit syndication proceeds, historic tax credits syndication proceeds, or new market tax credit proceeds, need not be fully disbursed before the disbursement of mortgage proceeds as long as the Regional or Satellite Office Director has previously approved a pro-rata agreement for governmental source funds and tax credits per 24 CFR 200.54. In the case of mortgage insurance for construction or rehabilitation, and the purchasing or refinancing of a multifamily tax credit project, HUD may not require the escrowing of tax credit equity or any other form of security, such as a letter of credit.

B. The amount approved for a requested item cannot exceed the amount claimed by the Borrower. Release of the front money cash escrow may not be targeted to the completion of specific on-site improvements.

C. The MAP Lender will state on form HUD-92403 the cumulative total of all advances made to the Borrower, including the advance under consideration. Reconcile any discrepancies before recommending approval of the advance.

D. MAP Lender-approved disbursement amounts shall not exceed the sum of the amounts approved:

1. For mortgage insurance;

2. For funding from the Borrower’s cash escrow; and

3. For funding from available grant/loan proceeds.

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Appendix 12 Construction Period A.12.1 Approval of Advances

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E. The Housing and Economic Development Recovery Act of 2008 (HERA) provides that if the project will receive the benefit of equity from the sale of low-income housing tax credits (LIHTC) syndication proceeds, historic tax credits syndication proceeds, or new markets tax credit proceeds, HUD may not require the escrowing of the equity, or accept any form of security in place thereof, such as a letter of credit. Therefore, the Borrower will deposit cash with the MAP Lender that is sufficient, when added to the proceeds of the insured mortgage, to assure completion of the project and to pay the initial service charge, carrying charges, and legal and organizational expenses pertaining to the construction of the project. The Lender may accept a lesser cash deposit or an alternative to a cash deposit, where the required funding is to be provided by a grant or loan from a Federal, State, or local government agency or instrumentality.

1. As a special condition to the firm commitment, the Lender is required to provide HUD with the most recently updated Equity Contribution Schedule. The Equity Contribution Schedule is a part of the LIHTC Summary Report which is located at:

   • https://www.hud.gov/sites/dfiles/Housing/documents/LIHTCSummaryReport20AllDealTypes092 0.xlsx

2. A Disbursement Agreement that reflects the terms of the Limited Partnership Agreement or Operating Agreement for the remaining outlay of tax credit equity contributions must also be provided prior to Initial Closing.

3. The Borrower’s minimum initial equity installment is twenty percent (20%) of the total tax credit equity allocated for mortgageable and nonmortgageable costs (10% may be funded with an equity bridge loan). The initial installment shall be disbursed in accordance with the amounts approved by the Regional or Satellite Office Director per the pro-rata agreement for governmental sources funds and tax credits per 24 CFR 200.54.

4. Subsequent contributions should be made at a time and in a manner during construction to ensure that the statutory limitations based on actual costs for the applicable FHA mortgage program are maintained during construction.

5. Tax credit equity pay-ins related to Investor/Syndicator required reserves and/or escrows may be made after construction completion pursuant to benchmarks established in the partnership or operating agreement.