A.12.1.3 Interim Insurance of Advances

A. Approval. Interim Insurance of Advances, the Carrying Charges, Financing, Legal, and Audit Expense must not exceed their allocations in the Building Loan Agreement. Approve items due or already paid by the mortgagor that are supported by bills and/or paid invoices/receipts on the initial advance. Do not approve costs for interest, taxes, and insurance incurred during early start period. At cost certification, certify the actual cost without regard to release limitations imposed by the Building Loan Agreement during the Construction period.

B. Interest. Interest is advanced only when and as earned. The MAP Lender must specify on form HUD92403, the period(s) for which interest is requested and the amount for each period.

1. At initial closing, check each interest request for accuracy, i.e. 360 factor, and the annual interest rate approved at Initial Endorsement.

2. The MAP Lender is prohibited from drawing down interest and refunding a portion of the money to the Borrower. Such practice constitutes a kickback and is not acceptable to HUD and will be treated as a direct mortgage reduction. It is appropriate to allow amounts for fire, windstorm, extended coverage, liability, and other risk insurance customarily insured against in the community.

3. Do not allow amounts that accrued before Initial Endorsement.

4. Do not approve bills, invoices/receipts for workmen’s compensation and/or public liability insurance that are included in the cost estimate.