B. New Construction .

1. Land value equity can be applied to fund operating deficit or working capital escrows, or other cash requirements at Initial Endorsement. After Initial Endorsement, additional draws from mortgage proceeds associated with the excess land value will be considered only after the designated escrow accounts have been fully exhausted. Advances from land equity may include the following costs incurred in connection with the site purchase:

   • Legal fees associated with negotiations for acquisition of land, zoning, and examination of title on the purchase or defense of title after purchase;

• Prepaid special assessments;

• Interest on bridge loans to purchase property after the date of submission of the initial application for mortgage insurance;

• Taxes; and

Cost of improvements made to the project site by the Sponsor/Borrower.

2. Cash escrow to cover offsite construction cost.

3. Cost of any demolition reflected in the Fair Market Value of Land. Payment is approved as demolition progresses.

4. Construction and/or permanent loan discounts required to be paid at initial closing.

5. Cash to cover interest shortfall escrow, working capital deposit(s) (i.e. 2% escrow and 2% construction contingency), initial operating deficit, non-realty items, and any permanent loan discounts not required to be paid at initial closing.

6. Remaining balance may be used to fund any approved change orders or held until final endorsement.

MAP Guide, March 2021 Go to beginning of Appendix 12

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Appendix 12 Page A12-6

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Appendix 12 Construction Period A.12.1 Approval of Advances

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• C. Rehabilitation of Existing Construction.

1. HUD’s estimate of the “as-is” value by market comparison or the Borrower’s acquisition cost/existing indebtedness, whichever is less.

2. Items in Appendix 12, Section A.12.1.4.B.1 through Section A.12.1.4.B.6 above.