A.8.1 Required Loan Application Documents

A. The guidance provides instructions on the type of required financial documents the Underwriter must prepare for the loan application. The collection of the applicable documents should meet the requirements on the Underwriter checklist. A Borrower (if fully capitalized), principal(s), and a General Contractor must furnish current financial statements. This includes: a balance sheet, income and expense statement, supporting schedules, a Real Estate Owned (REO) schedule and a schedule of mortgage debt. The most recent three years of federal tax returns may be required, if submitted financial statements are determined to be underdeveloped or not acceptable.

1. Individuals must submit either:

   • Personal Financial and Credit Statement, form HUD-92417 shall cover a period of no less than the most current 12-month period:

• 1. The spouse of married Sponsors or principals must also sign the form;
• 2. If a spouse’s signature cannot be obtained, the principal must prepare the form reflecting only those assets that are solely in their name and any liability, including those joint liabilities, for which they have any responsibility, or

  • A substitute statement, which contains at a minimum the information contained on form HUD92417. This form must contain the following certification and criminal warning:

    • 1. I HEREBY CERTIFY that the foregoing figures and statements contained herein submitted by me as agent of the Borrower [owner] for the purpose of obtaining mortgage insurance under the National Housing Act are true and give a correct showing of _________________________’s (Name of Borrower or owner) financial position as of _____________________________ (the financial statement must include the most recent twelve month period).
    • 2. Signed this ____ day of ____, 20. Signature of authorized agent with name printed or typed under signature ___________________________.
    • 3. Warning – HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties. (18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 3729, 3802)
    • 4. For married individuals, the spouse also must sign certification.

2. Business entities must submit the following separate statements and supporting documents for the last 3-years or the length of their existence. If less than 3 years, an authorized officer of the organization must provide the statements and supporting documents with a signed statement that there has been no material adverse change since the date of the statements.

Balance Sheet which:

• 1. Provides a breakdown of current and non-current assets; a list of all other assets including the market value of each asset, the basis for calculating value (for real estate owned assets

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this will be shown on the schedule of real estate), and any notes receivable from related entities;

• 2. Identifies restricted and non-restricted funds;
• 3. Provides a breakdown of current and non-current liabilities; identifies the current portion of long-term debt; contingent liabilities, including debts under secured or unsecured lines of credit or letters of credit, personal guaranties, obligations to limited partnerships and other obligations payable in the future, including the amount and duration of the obligation; and
• 4. Lists details of any factors that may materially affect the Borrower’s or Sponsors financial position now or during the term of the mortgage.

Income and Expense Statement that reflects:

• 1. Income from normal operations;
• 2. Investment income;
• 3. Other income; and
• 4. Total expenses.

• For audited statements, a Statement of Changes in Financial Position (or if a fund accounting system is used, a Statement of Changes in Fund Balance), and all notes.

• Supporting Schedules:

  • 1. An Aging Schedule of Accounts Receivable that provides the name, type of account (trade, affiliate, employee, relative or other), payment terms, amount and aging information;
  • 2. An Aging Schedule of Notes Receivable that provides the name, type of account, payment terms, maturity date, current portion (due within 1 year or one operating cycle of the business, whichever is less), past due amounts and non-current amounts;
  • 3. Schedule of Pledged Assets, if applicable. Identify the pledged asset, the amount pledged and the offsetting liability;
  • 4. Schedule of Marketable Securities that provides name, number of shares, current market values as of the date of the statement, and the exchange where the shares are listed;
  • 5. Schedule of Accounts Payable that provides name, type of account (trade, affiliate, employee, relative or other), payment terms, amount and aging information;
  • 6. Schedule of Notes and Mortgages Payable that provides name, type of account, payment terms, maturity date, current portion (due within 1 year or one operating cycle of the business, whichever is less), past due amounts and non-current amount;
  • 7. Schedule of Legal Proceedings, if applicable;
  • 8. In addition to the applicable schedules in the above paragraphs, general contracting firms must submit a schedule of jobs (work) in progress that identifies the:

    • a) Original contract price;

    • b) Construction start date;

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• c) Construction completion date; and

• d) Percentage of completion.

The REO schedule must contain the following information for each physical property listed:

• 1. Borrower/ principal’s name;
• 2. Property name and address;
• 3. Type of property and number of units;
• 4. Property acquisition date;
• 5. Ownership role and interest;
• 6. Percent of current occupancy;
• 7. Annual net operating income;
• 8. Present market value;
• 9. Existing mortgage lien holder (FHA or Conventional) and maturity dates;
• 10. If FHA insured, project number;
• 11. Interest rate and dates;
• 12. Sum of existing loan balances of mortgages and liens;
• 13. Current property equity;
• 14. Annual effective gross rental and commercial income (after deducting concessions and vacancy loss);
• 15. Annual operating expenses;
• 16. Annual debt service;
• 17. Debt service coverage ratio; and
• 18. Pending judgments, legal suits/actions or bankruptcy against the property.

• A Schedule of Mortgage Debt is applicable only when the event of mortgage maturity is in the next five (5) years or the property is a troubled asset. Provide the following for each property listed:

• 1. Name of creditor/ lien holder;
• 2. Type of debt (e.g. FHA mortgage (project number), conventional mortgage, bridge loan, balloon);
• 3. Original mortgage amount or debt amount and origination date;
• 4. Interest rate and origination date (i.e. fixed, fixed bonds, variable, etc.);
• 5. Unpaid principal balance or current debt amount and origination date;
• 6. Maturity dates for all debt;
• 7. Monthly payment;
• 8. Balloon payment;

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• 9. Collateral (describe the security type for repayment of the mortgage or debt); and

10. Status of debt as current or delinquent.

• Combined or consolidated financial statement(s), if applicable:

• Other financial data necessary to determine the financial responsibility and capacity of the sponsorship or General Contractor:

  • An authorized official of the company must sign and date the certification. The certification must reference the name of the business and the date of the financial statement(s).