Request for Endorsement

The "Certificate of General Contractor" was included in previous versions of the Request for Endorsement and remains materially unchanged from the earlier version except for the addition of an affirmation from the contractor that all statements are correct. Because this document is submitted for refinance transactions, the contractor should disclose payment due for work that has been performed, as of the date of closing, in connection with repairs. The lender will submit a Lender's Certificate for new construction projects.

2. The new Closing Guide checklists for a7 and 223 closing require both a Lender's Certificate and a Request for Endorsement. Is this correct?

The Lender's Certificate should only be used for new construction and substantial rehabilitation closings and the Request for Endorsement should be used for refinancings. For your closings, the checklist for the a7s and 223fs should be amended to remove the Lender's Certificate from the checklist.

3. It appears that D.10 (the section that imposes obligations on the lender with respect to permits and licenses) of the Request for Endorsement of Credit Instrument & Certificate of Lender, Borrower & General Contractor, while it doesn't explicitly say so, is designed to apply to 221(d)(4)'s, not 223(f)'s or 223(a)(7)'s. The section requires the lender to acknowledge as of the date hereof that the licenses and permits are sufficient to allow the construction of the project and that the lender will confirm before final endorsement that the borrower has obtained the necessary permits, licenses, etc. to own and operate the project. It appears that, if this section was meant to apply to 223(f)'s or 223(a)(7)'s, it would require the lender to acknowledge that the borrower has obtained the necessary permits, licenses, etc. to own and operate the project "as of the date hereof" and not as of a date in the future, since final endorsement on 223(f)'s and 223(a)(7)'s occurs the date the Request forEndorsement is executed. Please let me know whether this interpretation of the section is correct.

Thanks for pointing out this scrivener's error in the document. The Request for Endorsement has been revised and the corrected version is in the process of being posted onto HUD Clips.

4. (3/1/2012)

In the Lender's Certificate, at Paragraph 29, and in the Request for Endorsement of Credit Instrument, at Paragraph I.D.9, Lender must certify that "all HUD form closing documents submitted to HUD in connection with this transaction (with the exception of the Opinion by Counsel to Borrower and the companying Certification by Borrower) conform to those documents Lender obtained from HUD and such documents have not been changed or modified in any manner except as suitably identified and approved by HUD as evidenced by the attached memorandum." Some lenders and their counsel have submitted a document that seeks HUD's signature, in order to evidence HUD's approval of the closing documents, but HUD field counsel has rejected any requirement that HUD sign such a document. How is HUD's approval to be evidenced?

If the Lender or its counsel has submitted the requisite memorandum identifying any changes made to the HUD forms (as further specified in the Request for Endorsement or in the Lender's Certificate) and HUD has reviewed the closing documents and accepted them at the closing, and the authorized HUD official has endorsed the Note for insurance, then such review, acceptance and endorsement shall evidence HUD's approval. It is unnecessary for HUD to sign any document simply to evidence its approval of the closing documents, other than HUD's endorsement of the Note.

5. In the Request for Endorsement of Credit Instrument, at Paragraph I.A.7, Lender must certify that, "[t]o the best of our knowledge and information, any required repairs have been completed in accordance with Program Obligations, except for such items approved by HUD for delayed completion or non-critical deferred repairs as indicated on a separate schedule attached hereto as Exhibit ___." Some lenders and their counsel have submitted a document that seeks HUD's signature, in order to evidence either (a) HUD's approval of the critical repairs or (b) HUD's approval to defer completion of non-critical repairs until after closing, or both (a) and (b), but HUD field counsel has rejected any requirement that HUD sign such a document. How is HUD's approval to be evidenced?

HUD's Firm Commitment explains what is required regarding critical and non-critical project repairs. With respect to critical repairs, if the Firm Commitment indicates that specified critical repairs must be completed prior to endorsement of the Note, and Lender has provided HUD with the requisite evidence of completion of such repairs, then HUD's endorsement of the Note evidences its approval. With respect to deferral of non-critical repairs, if the Firm Commitment indicates that funds are to be placed in escrow until the repairs are completed, then issuance of the Firm Commitment, accompanied by execution and funding of an appropriate escrow agreement at closing, will be evidence of HUD's approval to defer the repairs, and nothing further is required.

6. How does Lender certify to document changes, modifications or deletions pursuant to paragraph I D 9?

Please see the answer in the General Questions Category dated 12/5/12 and titled "How must changes to loan documents be shown?," which answers this question.

7. The FHA 2455 Request for Endorsement provides a place in Section 10(b) of the Mortgagee's Certificate to show the initial service charge (financing fee) for the loan but I do not see a place for this in Section D Paragraph 1 of the HUD-92455M. Should the initial service charge be shown in an Exhibit pursuant to (g)? The escrow agreements listed in Exhibit C do not include an Escrow Agreement for Non-Critical Deferred Repairs, form HUD-92476.1M; if this escrow is required should it be shown as an exhibit?

It appears that a blank space to record the initial service charge amount was left off the form. The amount should be written in Section D – 1.a. at the end of the sentence. The following language should be added to the end of the sentence in Section D-1.a.: "Lender has collected in the form of (cash or letter of credit) ______________ for the amount of $____________."

8. The checklist calls for a PCNA Lender's Certification. Is there a particular form that the lender should be using, or, in the alternative, is there a source for the language that should be included in this certification? In my current closing, the parties have submitted the attached rider entitled Certification with Respect to MAP Guide with the following language from the MAP Guide (p 490): "HUD will reevaluate the Project's Replacement Reserve needs and, if appropriate, adjust the Borrower's deposits to the Replacement Reserve every 10 years. To assist in completing this evaluation, the Lender must obtain a new Project Capital Needs Assessment (PCNA) every 10 years which covers the next ten years [or the remaining term of the Mortgage] plus two years. Replacement Reserve funds may be used to pay for the additional PCNAs." The MAP Guide states that the Hub may at initial/final endorsement have a rider signed by the Lender and HUD and attached to the Lender's Certificate that requires the lender to comply with those requirements. Is the rider provided sufficient for what HUD is contemplating?

The PCNA is collected as part of the Application for Firm Commitment, and required by MAP Guide Section 3.2(S) every 10 years. No additional certification is required by the Request for Endorsement. The Request for Endorsement, at Section C.5, indicates that HUD may increase or decrease the Reserve Fund for Replacements pursuant to Program Obligations. HUD will make this assessment based on the PNCA reports.

9. Regarding the change to 1.D.10, did I understand someone to say that "certifies" should be changed to "acknowledges"? Section 1.D.10 should read: "Lender 'certifies' that Borrower possesses all necessary certificates. . . ." The Lender's Certificate uses the work "acknowledges" in the corresponding paragraph.

FYI--SEE POSTING OF 11/17 ENTITLED "IS LENDER OBLIGED TO CONFIRM THAT BORROWER HAS OBTAINED THE REQUIRED PERMITS AND LICENSES?" PART OF THE QUESTION STATES THAT "THE SECTION REQUIRES THE LENDER TO ACKNOWLEDGE AS OF THE DATE HEREOF..." . THE ANSWER PUBLISHED NOTES CHANGES TO THE DOCUMENT WILL BE PUBLISHED IN HUDCLIPS. THE CURRENT DOC ON HUDCLIPS DOES CONTAIN THE WORD "ACKNOWLEDGES" NOT CERTIFIES.

10. In Section C, involving escrows and deposits held by the Lender, Counsel seeks to modify provision I.C.4 in the Lender's Certificate by adding the exact amount of the Reserve for Replacement deposit that was submitted as well as real estate tax escrow and hazard insurance escrow. Two asterisks were added at the end of I.C.4 and the following language was inserted: "The establishment of a Reserve Fund for Replacement to be funded by an initial deposit in the amount of $3,340,000.00, and by making payments of $262,400.00 per annum to be accumulated monthly ($21,866.67 per month) throughout the duration of the mortgage. Real Estate Tax escrow in the amount of $_ and hazard insurance escrow in the amount of $__." Is this change permitted? If not, where should I advise them to include this information? Should it not be included at all?

No, this change should not be made. The language of Section I.4.C of the Lender's Certificate to the Request for Endorsement states that "...Lender shall require a monthly deposit with Lender or in a depository satisfactory to Lender in accordance with Program Obligations of the sum required by the HUD Regulatory Agreement constituting a Reserve for Replacement...Lender acknowledges that the amount of the monthly deposit may be increased or decreased from time to time at the direction of HUD in accordance with Program Obligations." Therefore, the amount is already specified in the Regulatory Agreement in Paragraph 10.

Additionally, with respect to the real estate tax escrow and the hazard insurance escrow, per 12.15.C of the MAP Guide, the working capital deposit encompasses "project expenses during the first operating year that project income is not expected to cover, including: real estate taxes, permanent property insurance premiums..." The working capital deposit is referenced in I.C(b) of the Lender's Certificate in the Request for Endorsement.

11. Counsel submitted the following change to the Certificate of Borrower for a 223(f) transaction: "4. Borrower represents and warrants that no UCC filings have been made against Borrower . . . except such UCC-1s in connection with the previous financing which have been released or will be released with the financing of the HUD insured loan . . . . " This change makes sense because the Borrower can't warrant that there are no UCC filings in a refinance transaction. Is this change permitted?

No. There should be no problem with the Borrower delivering its certificate to HUD, for HUD to hold in trust or escrow pending the closing of the transaction to be released when HUD releases the endorsed Note. In instances where documents must be filed by the title company prior to recording the Security Instrument, the title company must provide gap title coverage insuring that the Security Instrument and lien position from the date of closing, not recordation.

12. Please see paragraph 10 on page 8 of the Request for Endorsement. Lender's counsel has submitted additional language to this document which reads, "[l]ender also acknowledges that appropriate actions have been taken by and necessary filings have been made with those Governmental Authorities all as disclosed by Borrower in Exhibit X, attached hereto." Lender is saying that it has no way of knowing the filings in all jurisdictions and it is up to the Borrower to provide this information. Although I agree with the lender's position, is this permitted?

The language "Lender also acknowledges that appropriate actions have been taken by and necessary filings have been made with those Governmental Authorities all as disclosed by Borrower in Exhibit ___, attached hereto." is already located in Section D(10) on page 8 of the Request for Endorsement form 92455M. Latest forms of the multifamily documents can be found on HUDCLIPS.

13. What is acceptable as Exhibit D to the Request for Endorsement (see I.D.10, proper licenses, etc.)? In a closing I'm reviewing now, the lender attached a generic certification from the borrower that borrower has everything it is supposed to have.

The lender is responsible for performing the necessary due diligence in order to make the certification in Section I.D.10 of the Request for Endorsement. HUD review of the document does not include judgment on the sufficiency of that due diligence. If questions arise regarding the borrower's possession of the required governmental certificates, permits, licenses, qualifications and approvals, the lender will be required to demonstrate the adequacy of its review.

14. 3/1/2012
In Section D(2) of the Request for Endorsement and Section 21 of the Lenders Certificate the lender certifies in part that it "does not have outstanding and shall not make loans or advances to Borrower, any of the sponsors, the general contractor, or the architect for any purpose connected directly or indirectly with this Project without prior written approval of HUD." In some (a)7 refinance transactions the lender is making a loan to the borrower's principals which loan is secured by their interests in the borrower entity. Does this provision apply to (a)7 transactions and if so does the commitment evidence HUD's written approval of the loan to the sponsor?

Please note that this question and answer pertain only to the limited circumstances described in the question, namely a second loan by the FHA lender in a refinance transaction, secured by an interest in the Borrower. This answer does not necessarily apply in other circumstances, such loans by tax credit investors or in new construction transactions. The Request for Endorsement (HUD-92455M), including section D.2. and the language in question, is applicable to section 223(a)(7) refinancings. Section 8.9.B.1.b. of the Map Guide states "[s]econdary financing from private sources are not permitted under [Sections of the Act other than section 223(f)]." Pursuant to this guidance, the type of financing described in the question, a hybrid between secondary financing and equity ("mezzanine") where the loan is secured by an ownership entity interest and not the real property, is generally not permitted in connection with 223(a)(7) transactions. However, in the event the Office of Housing were to approve mezzanine financing due to the unique circumstances of a given 223(a)(7) refinancing, the resulting identity of interest would make the project ineligible for MAP processing, and would require particular underwriting scrutiny by the HUD Field Office doing traditional processing. The mezzanine financing would have to be disclosed and approved in writing by HUD during the application process and prior to issuance of the Firm Commitment and should be addressed in a special condition to the Firm Commitment. Please note that section 21 of the Lender's Certificate contains a provision similar to D.2. of the Request for Endorsement. This provision, however, is not applicable to 223(a)(7) because the Lender's Certificate is not used in refinancings.

15. 3/7/2012
Can we omit the separate certification of retyped forms?
It looks like the question of retyped forms is addressed in the Request for Endorsement. Can we omit the separate certification?

Because an itemized list of changes to loan documents is required by both the Request for Endorsement and the Lender's Certificate, the Certificate of Retyped Forms is no longer required. Please also see posting of 12/5/12 "How must changes to loan documents be shown?" in the General Questions Category for additional guidance.

16. 3/19/2012
In the Request for Endorsement, as an attachment to the Exhibit that is incorporated by Paragraph I.D.10, I have a number of deals where language similar to the following has been added: "The undersigned individuals/entities, being the same parties who are identified in Section 50 of the Regulatory Agreement and who have executed and delivered such Section 50 of the Regulatory Agreement, hereby confirm the foregoing representations, warranties and certifications of Borrower and further agree to indemnify and hold Lender harmless from and against any loss, damage or claim arising or resulting from the foregoing representations, warranties or certifications being false or misleading, including without limitation, any deductions from or surcharges assessed by HUD in connection with the assignment of the Loan for a mortgage insurance claim following a default by the Borrower." Thus, the Borrower is effectively indemnifying the lender for any false statements that may be made in the Exhibit associated with Paragraph I.D.10 of the Request for Endorsement. That exhibit is intended to be a disclosure of such things as local government permits, certificates, licenses, approvals, etc., that may be required in association with the closing. Is such indemnification acceptable?

The additional language is not acceptable. The exhibit incorporated through Paragraph I.D.10 of the Request for Endorsement should be limited to permits, licenses, etc. Inclusion of an indemnification provision creates the misperception that the indemnification is (1) required by HUD , and (2) an acceptable alternative to lender liability. While a lender may seek indemnification from another party through a side agreement, the indemnification should not be included in the closing documents and will not be recognized by HUD as shifting lender liability. In addition, in no event should the borrower entity be the party providing an indemnification to the lender. The borrower is a single asset entity and any indemnification would perforce execute against the mortgage property, which is contrary to the limitations on encumbrance, pledging, etc in the Regulatory Agreement.

17. 351/2012
Editorial correction to paragraph 1(D)(10) of Request for Endorsement to delete certain language.

Paragraph 1(D)(10) of Request for Endorsement should read: "Lender acknowledges, based on its reasonable due diligence, that Borrower has obtained the necessary governmental certificates, permits, licenses, qualifications and approvals of Governmental Authorities to own and operate the Mortgaged Property and to carry out all of the transactions required by the Loan Documents . . . . "

18. 5/1/2012
A new paragraph 1(C)(4) Request for Endorsement was added and the initially published 1(C)(4) was renumbered 1(C)(5) and 1(C)(5) was renumbered to 1(C)(6).

The new inserted paragraph 1(C)(4) of the Request for Endorsement should read: "List any other escrows: . . ." and the initially published 1(C)(4) is renumbered 1(C)(5) and 1(C)(5) is renumbered to 1(C)(6).

19. 5/1/2012
Editorial correction to paragraph 1(C)(3) of Request for Endorsement to correct language.

Paragraph 1(C)(3) of the Request for Endorsement should read: "As required by the Firm Commitment (if required, check and complete the applicable paragraph).

Submitted separately is the sponsor's guarantee to meet an initial operating deficit (dated , 20__, and executed by )."

20. 5/1/2012
Editorial correction to paragraph 1(C)(1)(c) of Request for Endorsement to correct language.

Paragraph 1(C)(1)(c) of the Request for Endorsement should read: "Lender has [collected from Borrower in cash] OR [set aside from the final disbursement of Loan proceeds] funds totaling [150% of the amount necessary to complete the items of delayed completion] OR [120% of the amount necessary to complete non-critical deferred repairs] described in Paragraph 1 A 7, above. The [Escrow Agreement for incomplete Construction] OR [Escrow Agreement of Non-critical Deferred Repairs] is attached hereto.

21. 5/1/2012
Editorial correction to paragraph 1(A)(10) of Request for Endorsement to correct language "Mortgaged Property is" to "Improvements are".

Paragraph 1(A)(10) of the Request for Endorsement should read: "If Lender determined that any of the Improvements are located in an area identified by the Federal Emergency Management Agency . . . ."

22. 5/1/2012
Editorial correction to paragraph 1(A)(7) of Request for Endorsement to add language "or non-critical deferred repairs".

Paragraph 1(A)(7) of the Request for Endorsement should read: "To the best of our knowledge and information, any required repairs have been completed in accordance with Program Obligations, except for such items approved by HUD for delayed completion or non-critical deferred repairs as indicated on a separate schedule . . . . "

23. 5/16/2012
My copy of the Request for Endorsement, 92455M, shows a Rev. 05/11 date, and that "Previous editions are obsolete." When I told a lender's counsel that the Rev 04/11 version was out-of-date, they said they couldn't find a more recent version. In looking on Sharepoint and HUDclips, all I find is the 04/11 version. I thought I got the 05/11 version from Sharepoint, but I noted that I produced the copy on 3/13/12. Can you shed any light on this? Is the 04/11 the current version of this form?

The official versions of all the revised documents that are posted on HUDCLIPS are all marked (REV. 04/2011) since that was the official OMB date for the revised documents. There has been some confusion about whether the documents were dated 04/2011 or 05/2011 since the documents collected in the bound volume for the HUD 2011 Closing School have a 05/2011 date. The official date, however, is 04/2011. Documents that have been modified to reflect scriveners' edits are still marked (REV. 4/2011) and are not re-dated whenever a scrivener's edit is made.

24. 6/12/2012
Lender's counsel has added the following language shown in caps to I.D.12 of the Request for Endorsement. Is this permitted? "Lender certifies that it has made reasonable inquiry and has discovered no liens or encumbrances against the Mortgaged Property that are not reflected as exceptions to coverage OR AS SUBORDINATE LIENS OR ENCUMBRANCES in the title policy."

No. The insertion of the line "EXCEPTIONS FROM COVERAGE" above "PART I" in Schedule B of the 2006 ALTA Form Lender's Policy evidences that both Parts I and II of Schedule B contain exceptions from coverage. Therefore, the Lender's requested modification is unnecessary. However, the title company is insuring against loss or damage in the event that the items shown in Schedule B, Part II are not subordinate to the lien of the insured mortgage.

25. 6/21/2012
In a 207/223(f), sometimes HUD requires that the lender hold 50% of the cash out proceeds. This is indicated on the Non-Critical Repair Escrow. Can we get something added to the Request for Endorsement to show that the lender is holding these funds, so we have a more complete list of the funds held by the lender?

Section I.C.1.(c) of the Request for Endorsement was revised to require the lender to attach the Non-Critical Repair Escrow Agreement to the Request for Endorsement. The most recent version of the document is available on HUDClips.

26. 6/21/2012
With regard to what is acceptable as Exhibit D to the Request for Endorsement, can the lender attach a copy of a borrower's certification indicating all permits have been obtained?

Section D.10 of the Request for Endorsement requires the lender to acknowledge, based on reasonable due diligence, that the Borrower has obtained "necessary governmental certificates, permits, licenses, qualifications, and approvals of Governmental Authorities . . . to own and operate the Mortgaged Property." The section requires the lender to attach a list of those actions and filings, disclosed by the borrower, as an exhibit. The exhibit may only include the referenced list. HUD expects the lender to collect additional materials and certifications while conducting its due diligence; however, those additional materials may not be added as part of this exhibit. Please note that the borrower indicates that the Certifications of Lender are correct in Section A.1 of the Certificate of Borrower.

27. 1/17/2013
How do you reconcile the following FAQ with Section 5.G VII.C.2 [Editorial Comment: this should read 5.G VI.C.of the MAP Guide? Is someone going to modify the MAP Guide in order to ensure the guidance is consistent. FAQ: "The checklist calls for a PCNA Lender's Certification. Is there a particular form that the lender should be using, or, in the alternative, is there a source for the language that should be included in this certification? In my current closing, the parties have submitted the attached rider entitled Certification with Respect to MAP Guide with the following language from the MAP Guide (p 490): 'HUD will reevaluate the Project's Replacement Reserve needs and, if appropriate, adjust the Borrower's deposits to the Replacement Reserve every 10 years. To assist in completing this evaluation, the Lender must obtain a new Project Capital Needs Assessment (PCNA) every 10 years which covers the next ten years [or the remaining term of the Mortgage] plus two years. Replacement Reserve funds may be used to pay for the additional PCNAs.' The MAP Guide states that the Hub may at initial/final endorsement have a rider signed by the Lender and HUD and attached to the Lender's Certificate that requires the lender to comply with those requirements. Is the rider provided sufficient for what HUD is contemplating? A: The PCNA is collected as part of the Application for Firm Commitment, and required by MAP Guide Section 3.2(S) every 10 years. No additional certification is required by the Request for Endorsement. The Request for Endorsement, at Section C.5, indicates that HUD may increase or decrease the Reserve Fund for Replacements pursuant to Program Obligations. HUD will make this assessment based on the PNCA reports."Section 5.G VII.C of the MAP Guide reads as follows:
C. The Lender will recommend and HUD may set up the Total Near Term Replacement Reserve Account.
1. HUD will reevaluate the Project's Replacement Reserve needs and, if appropriate, adjust the Mortgagor's required deposits to the Replacement Reserve every ten years. a. To assist in completing this evaluation, the Lender must obtain a new PCNA every 10 years which covers the next ten years [or the remaining term of the Mortgage] plus two years. b. Replacement Reserve funds may be used to pay for the additional PCNAs.
2. The Hub or Program Center at the time of initial/final endorsement will have a rider signed by the Lender and HUD and attached to the Lender's Certificate which will require the Lender to comply with the requirements of C.1 above.

Housing intends to remove the PCNA rider requirement in the next revision of the MAP guide. Until that revision is published, please refer to the FAQ referenced in this question.

28. 3/08/2013
Section 11.7.C.4 of the MAP Guide provides the following: Rider to the Request for Endorsement. The new Request for Endorsement, Form HUD092455M (at Section D.5(A)), requires the Lender to certify that in the event of a default during the term of the prepayment lockout and/or penalty (i.e., prior to the date on which prepayment may be made with a penalty of one percent or less), it will: a. Request a 3-month extension of the deadline prescribed by 24 C.F.R. Section 207.258 for filing a notice of its intention to file an insurance claim and its election to assign the mortgage; b. Assist the Borrower to arrange refinancing to cure the default and avert an insurance claim if HUD grants the requested (or shorter) extension of the notice filing deadline; c. Report to HUD at least monthly on any progress in arranging a refinancing; d. Otherwise cooperate with HUD in taking reasonable steps to avoid an insurance claim; e. Require any successors or assigns to certify in writing that they agree to be bound by these conditions for the remainder of the term of the prepayment lockout and/or penalty period; and f. Notify HUD of the delinquency where a payment is not received by the 16th day of the month in which it is due.

This excerpt seems to indicate one of two things: the latest version of the Request for Endorsement contains the quoted language; or the Request for Endorsement must include a Rider with the quoted language. Section D.5(A) of form HUD-92455M does not contain all of the above-referenced language, but instead states that the lender must "follow those procedures set forth in Program Obligations." Do we need to add a Rider to the form to include the MAP Guide language? If no Rider is required, and HUD is expecting lenders to comply with (a)-(f) above (or successor requirements) simply by referencing "Program Obligations", I would recommend changing the title of Section 11.7.C.4 of the MAP Guide ("Rider to the Request for Endorsement").

No Rider to the Request for Endorsement is required and revisions are forthcoming to the applicable section of the MAP Guide..

29. 1/16/2014
Lender's attorney proactively created an addendum for Section I(D)(1)(h) of the Request for Endorsement. The addendum goes into detail about the different types of fees a Lender will charge to a Borrower over the life of the HUD insured loan. For example: (1) a fee for processing a TPA; (2) a fee for Lender assistance with processing other HUD approvals required under the Regulatory Agreement; (3) fees in connection with: UCC Financing statement filings, forced-placed insurance costs, insurance loss draft inspections, repair escrow inspections, NFS fees, void and re-issue check fees, wire transfer fees, prepayment calculation fees, tax certification fees, mortgage prepayments by assignments, and mortgage discharge fees; (4) fees in connection with Investment of Restricted Escrows; and (5) fees for Lender performance of any duties delegated to the Lender by HUD. Is this type of Addendum contemplated and or permitted to be attached to the Request for Endorsement?

No. Section I(D)(1)(h) of the form does not require the addition of an addendum. The addendum in question, which lists categories of fees that the lender may charge over the life of the loan, should not be permitted.

30. 2/06/2014
Please explain what should be inserted in B.2(c) of the Certificate of Borrower in the case of a 223f loan. Do the "unpaid obligations" include all costs involved with the transaction, such as any existing indebtedness and other fees, even if they are paid at closing or should this section only include unpaid costs that survive after the closing?

The "unpaid obligations" to be listed in B.2 of the Request for Endorsement (within the Certificate of Borrower) should only be those that will remain after endorsement of the Note by HUD in connection with the 223(f) closing, such as unpaid costs associated with critical repairs that are approved by HUD. The term "unpaid obligations" for the purposes of this listing does not apply to the existing indebtedness and other fees paid at closing.

31. 1/09/2015
Paragraph 15 of the request for endorsement provides: "(d) Lender has collected the sum of $____ for deposit into the Project's Reserve for Replacement account [(which includes the transfer of the balance in the Reserve for Replacement account from FHA Project No. )]. [In addition, the balance in the Reserve for Replacement account from FHA Project No. _ in the estimated amount of $__ is to be transferred to the Lender for deposit into the Reserve for Replacement account post-closing.]" The language, "which includes the transfer of the balance in the Reserve for Replacement Account from FHA Project No. _," suggests that this first dollar number is intended to include any deposit into reserves and the transfer from existing reserves for 223(a)(7) refinance transactions. However, the second sentence in brackets includes, "In addition, the balance in the Reserve for Replacement account from FHA Project No. _ in the estimated amount of $ is to be transferred to the Lender for deposit into the Reserve for Replacement account post-closing." Is the intent to identify the transfer balance separately from the cumulative deposit? If so, shouldn't this second read, "[The balance in the Reserve for Replacement account from FHA Project No. in the estimated amount of $ ______ is to be transferred to the Lender for deposit into the Reserve for Replacement account post-closing]?" Or is HUD trying to make a distinction to reserves collected "post-closing?" If so, there appears to be some confusion concerning closing logistics. All funds required to close, including any deposit to the Reserve for Replacement Account and any transfer balance from existing reserves, are wired into the escrow agent's account as part of the closing. Once the note is endorsed, the escrow agent disburses per the closing statement. Often "transferring" of reserve funds is akin to a legal fiction -- the reserves from an existing loan may be used to reduce the payoff or are returned to the borrower post closing, but all reserves are fully funded from the escrow which is disbursed post closing.

The bracketed sentence beginning "[i]n addition," is not intended to identify the cumulative amount in the Reserve for Replacement Account collected by the Lender. Rather, it recognizes that in certain instances there is a need to make post-closing transfers and thus identifies those amounts in the Reserve for Replacement Account, if any, that are transferred after a 223(a)(7) closing. We understand different Lenders and escrows agents may have varying approaches to the transfer of existing Reserves in connection with section 223(a)(7) closings. The bracketed sentence in question is optional and may be stricken through as not applicable if it does not apply to a particular transaction.

32. 8/12/2015
I am currently working on a 223(f) closing. Paragraph I D(29( of the Request for Endorsement of Credit Instrument & Certificate of Lender, Borrower & General Contractor (HUD-92455M (06/14) requires the Lender to certify that "[a]ll HUD form closing documents submitted to HUD in connection with this transaction (with the exception of the Opinion by Counsel to Borrower and the accompanying Certification by Borrower) conform to those documents Lender obtained from HUD and such documents have not been changed or modified in any manner except as specifically identified and approved by HUD." In my closing, the Lender did not include the Survey Instructions and Surveyor's Report, HUD 91073M. When I asked Lender to include it, Lender stated that "[o]ur practice is to not include the Surveyor's Report in this list of documents because it was not prepared by nor executed by the Lender." However, I note that the Lender did include in its list the form "Consolidated Certifications-Borrower" (HUD-091070M) which is also not prepared nor executed by Lender. I don't read paragraph I D(29) as limiting the list of HUD forms to those actually prepared or executed by Lender, but instead that all HUD forms used in the transaction should be listed in the exhibit that corresponds to this paragraph. Is this correct, or should the Lender be allowed to limit the list to those HUD forms prepared or executed by it?

Paragraph I(D(29)) states that "All HUD form closing documents submitted to HUD in connection with this transaction (with the exception of the Opinion by Counsel to Borrower and the accompanying Certification by Borrower) conform to those documents Lender obtained from HUD…" No exception has been made in the text of the certification except for the Opinion. Thus, pursuant to the text of the HUD-92455M, all HUD form closing documents submitted to HUD, including those prepared or executed by parties other than the Lender, should be included in the certification.

33. 9/18/2015
I am wondering what is supposed to be contained in the Exhibit referenced in Part B of this form. Part B states that "Additional fees and/or charges of Lender are enumerated on a separate schedule prepared by Lender, attached hereto as Exhibit __. The charges have been (I) collected in cash or will be so collected not later than the date of initial endorsement; (ii) will be disbursed from Loan proceeds; or (iii) will be collected or disbursed as otherwise set forth in Program Obligations." The remainder of the form seems to cover pretty much all lender fees or charges, plus most many or most other fees or charge associated with closing FHA-insured loand. I close many loans using this form and the only uniformity that I receive concerning the Part B exhibit is that everyone seems to feel obligated to list something on it, although not necessarily the same items. Some lenders are attaching the settlement statement showing the collection and distribution of all monies associated with the closing; others are just repeating the figures already listed. A settlement statement shows many items that are not "additional fees and/or charges of Lender," including, for example, such items as Borrower's attorney fees or title agency fees or survey company fees. Similarly, the HUD inspection fee or an additional exam would not fall into the category of "additional fees and/or charges of Lender." Can I advise Lender's counsel that this exhibit is not applicable if there are no "additional fees and/or charges of Lender?" Can the exhibits required by Part B and subparagraph 21(f) (and possibly even subparagraph 21(e)) be combined into one exhibit? Specific examples of what lender fees would be expected to be listed on the Part B exhibit would be appreciated.

The closing guide states in Section 2.11(F) that the Request for Endorsement "shall be completed so as to account for all of the funds required by the Firm Commitment…" Thus, the exhibit in question could encompass any fees/charges of Lenders as dictated in the firm commitment. As these would be underwriting decisions as to what fees/charges should be reflected on the Request for Endorsement, please confirm with the applicable program office as to the accuracy of the fees/charges for your particular transaction.

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