Application for HUD/FHA Insured Mortgage “Hope for Homeowners”

EXHIBIT D

SHARED EQUITY NOTE
_____________, 20____

[Property Address]
[insert identifying number for administrative tracking of note]
THIS NOTE (the “Note”) is given on ______________ ____, 20___ by and between
[Borrower’s Name] (whether one or more person, hereinafter referred to as
“Borrower”) and the United States Department of Housing and Urban Development,
which is organized and existing under the laws of the United States, having its principal
office at 451 Seventh Street, S.W., Washington, D.C., 20410 (hereinafter referred to as
the “Lender”).
RECITALS
R1.
The Borrower has chosen to participate in the Hope for Homeowners program as
established by Title IV of the Housing and Economic Recovery Act of 2008 (the “Hope
Program”).
R2.
As a participant in the Hope Program, the Borrower has a FHA-insured first
mortgage of even date herewith in the amount of ____________[Insert amount of the
Hope Mortgage] with _________________ [Insert First Lienholder Name] (the “Hope
Mortgage Lender”) secured by the Property (as defined herein). (the “Hope Mortgage”).
R3.
Pursuant to the terms and conditions of the Hope Program, the Borrower shall
grant the Lender an equity and appreciation interest in the Property by executing a Shared
Equity Note, Shared Appreciation Note, Shared Equity Mortgage (the “SEM”) and
Shared Appreciation Mortgage (the “SAM”) of even date herewith with the SEM and
SAM to be secured by a second and third priority lien against the Property.
NOW, THEREFORE, in consideration of the sum of TEN DOLLARS ($10.00)
and other good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged and the mutual covenants herein contained, the parties do hereby
agree as follows:
1.
Borrower’s Promise to Pay. Upon the refinance of the Hope Mortgage,
arms length sale or any other disposition of all or any part of the Property including the
sale or disposition of a beneficial interest in the Property (the “Maturity Event”) or an
Event of Default, the Borrower hereby promises [jointly and severally] to pay to the order
of the Lender principal based on Equity pursuant to the following schedule:

EXHIBIT D
(A)

If the Maturity Event or Event of Default occurs during
the period that begins on the date the Hope Mortgage
becomes FHA-insured (the “Date of Insurance”) and
ends one (1) year after the Date of Insurance, the
Borrower shall pay the Lender one hundred percent
(100%) of the Equity.

(B)

If the Maturity Event or Event of Default occurs during
the period that begins after one (1) year after Date of
Insurance and ends two (2) years after such Date of
Insurance, the Borrower shall pay the Lender ninety
percent (90%) of the Equity.

(C)

If the Maturity Event or Event of Default occurs during
the period that begins after two (2) year after Date of
Insurance and ends three (3) years after such Date of
Insurance, the Borrower shall pay the Lender eighty
percent (80%) of the Equity.

(D)

If the Maturity Event or Event of Default occurs during
the period that begins after three (3) year after Date of
Insurance and ends four (4) years after such Date of
Insurance, the Borrower shall pay the Lender seventy
percent (70%) of the Equity.

(E)

If the Maturity Event or Event of Default occurs during
the period that begins after four (4) year after Date of
Insurance and ends five (5) years after such Date of
Insurance, the Borrower shall pay the Lender sixty
percent (60%) of the Equity..

(F)

If the Maturity Event or Event of Default occurs during
any period that begins after five (5) year after Date of
Insurance, the Borrower shall pay the Lender fifty
percent (50%) of the Equity.

Maturity Event shall not include the following:
(a)
a transfer by devise, descent, or operation of law on the death of a
joint tenant or tenant by the entirety;
(b)
the granting of a leasehold interest of three (3) years or less not
containing an option to purchase;
(c)
a transfer to a relative resulting from the death of the Borrower;
(d)
a transfer where the spouse or children of the Borrower become an
owner of the property;

EXHIBIT D
(e)
a transfer resulting from a decree of a dissolution of marriage, legal
separation agreement, or from an incidental property settlement agreement, by which the
spouse of the Borrower becomes an owner of the property; or
(f)
a transfer into an inter vivos trust in which the borrower is and
remains a beneficiary and which does not relate to a transfer of rights of occupancy in the
property.
Borrower agrees that if the Hope Mortgage is determined to be ineligible
for insurance under the National Housing Act, the Note shall be void and the Lender shall
execute and record a release for the SEM. A written statement of any authorized agent of
the Lender dated subsequent to from the date hereof, declining to insure the Hope
Mortgage, shall be deemed conclusive proof of such ineligibility. Notwithstanding the
foregoing, this option may not be exercised by Lender when the unavailability of
insurance is solely due to the Hope Mortgage Lender's failure to remit a mortgage
insurance premium to the Secretary.
2.
Equity. In the event the Maturity Event is a refinance or any other
disposition method other than an arms length sale of the Property or an Event of Default,
the Property’s equity is in the amount of _______________________ ($_____) (the
“Equity”). [Insert amount equivalent to the difference between the appraised value
of the Property at origination of the Hope Mortgage and the amount of the Hope
Mortgage.]
In the event the Maturity Event is an arms length sale of the Property,
Equity shall be the equivalent of _______________ ($__________) [Insert equity
amount from previous paragraph (difference between the appraised value of the
Property at origination of the Hope Mortgage and the amount of the Hope
Mortgage).] less allowable settlement costs. Allowable settlement costs consist of the
following:
ƒ
ƒ
ƒ

real estate sales commission consistent with the prevailing rate but not to
exceed six percent (6%) of the contract sales price;
local/state transfer tax stamps and other closing costs customarily paid
by the seller and
other actual, customary closing costs customarily paid by
the seller not to exceed two percent (2%) of the contract sales price.

3.
Interest. This Note shall not bear interest unless the principal amount due
upon occurrence of a Maturity Event is not paid to Lender. If principal amount due is not
paid, the principal sum due pursuant Paragraph 1 of this Note shall bear interest from the
date of the Maturity Event at the rate of the current value of funds to the United States
Treasury in effect on the date of the Maturity Event. The current value of funds rate is
prescribed and published by the Secretary of the Treasury in the Federal Register and the
Treasury Fiscal Requirements Manual Bulletins.
4.
Mortgage. This Note is secured by a SEM, deed of trust, or similar
security instrument of even date herewith between Borrower and Lender (the “Security
Instrument”). The Security Instrument encumbers certain real property located at [Insert

EXHIBIT D
Property Address] (the “Property Address”) and more fully described in the Security
Instrument (the “Property”).
5.

Payment.

(a)
No regular monthly payments are due under this Note. A payment
is due upon the occurrence of a Maturity Event pursuant to the terms and schedule
provided in Paragraph 1 of this Note.
This Note is a deferred contingent liability. Principal and any interest on this Note and
all other sums which may or shall become due under this Note and the Security
Instrument, shall be due and payable upon the occurrence of the Maturity Event (Maturity
Date) if (1) not otherwise satisfied in accordance with the provisions of the Security
Instrument, or (2) there is an Event of Default (defined hereafter).
(b)
Payment shall be made at _____________________ [insert
address] or at such place as Lender may designate in writing by notice to Borrower.
6.

Full Recourse. This Note is a full recourse obligation of the Borrower.

7.

Prepayment. Borrower shall have the right to prepay this Note in whole.

8.
Default. The term “Event of Default” shall mean the violation of any
term of this Note or the Security Instrument. The terms of the Security Instrument are
incorporated herein by reference as though set forth herein.
9.
Acceleration. Upon the occurrence of any Event of Default, Lender may
declare, without notice, the principal and interest on this Note, together with all other
sums which may or shall become due under this Note and the Security Instrument,
immediately due and payable.
10.
Payment of Lender’s Costs and Expenses. If Lender has required
immediate payment in full, as describe above, Lender may require Borrower to pay costs
and expenses including reasonable and customary attorney’s fees for enforcing this Note
to the extent not prohibited by applicable law. Such fees and costs shall bear interest
from the date of disbursement at a rate of the current value of funds to the United States
Treasury in effect on the date of the date of disbursement and, at the option of Lender,
shall be immediately due and payable. The current value of funds rate is prescribed and
published by the Secretary of the Treasury in the Federal Register and the Treasury Fiscal
Requirements Manual Bulletins.
11.
Modifications. This Note shall not be modified, amended, changed,
discharged, or terminated orally. This Note may only be modified, amended, changed,
discharged, or terminated by an agreement in writing signed by the party against whom
enforcement of such modification, amendment, change, discharge, or termination is
sought.

EXHIBIT D
12.
Notices. Any notice to Borrower provided for in this Security Instrument
shall be given by delivering it or by mailing it by first class mail unless applicable law
requires use of another method. The notice shall be directed to the Property Address or
any other address Borrower designates by notice to Lender. Any notice to Lender shall be
given by first class mail to Lender's address stated herein or any address Lender
designates by notice to Borrower. Any notice provided for in this Security Instrument
shall be deemed to have been given to Borrower or Lender when given as provided in this
paragraph.
13.

Time of the Essence. Time is of the essence as to all dates set forth

herein.
14.
Waivers. Borrower and all endorsers, sureties and guarantors jointly and
severally waive presentation for payment, demand for payment, notice of nonpayment,
notice of protest, notice of dishonor, protest, notice of protest, and any and all lack of
diligence or delays in collection or enforcement of this Note.
15.
Successors and Assigns Bound. The covenants and agreements of this
Note shall bind and benefit the successors and assigns of Lender and Borrower. The
covenants and agreements of Borrower under this Note are not assignable without the
prior written consent of Lender.
16.
Governing Law; Severability. This Note shall be governed by Federal
law. In the event that any provision or clause of this Note or the Security Instrument
conflicts with applicable law, such conflict shall not affect other provisions of this Note
or the Security Instrument which can be given effect without the conflicting provision.
To this end the provisions of this Note and the Security Instrument are declared to be
severable.
17.
Authority to Execute. The representative of Borrower executing this Note
represents that he/she has full power, authority and legal right to execute and deliver this
Note and that the debt hereunder constitutes a valid and binding obligation of Borrower.
BY SIGNING BELOW, Borrower accepts and agrees under seal to the terms and
covenants contained in this Note.
BORROWER:
By:________________________________(SEAL)
Name:_____________________________

By:________________________________(SEAL)
Name:_____________________________

EXHIBIT D
[NOTE: THE FOLLOWING IS A SAMPLE MODEL MORTGAGE FORM
THAT IS NOT ADAPTED FOR STATE LAW. THE FHA-APPROVED
MORTGAGEE EXTENDING THE FIRST MORTGAGE IS RESPONSIBLE FOR
ADAPTING PROVISIONS WITHIN THIS MODEL FORM TO STATE LAW ON
BEHALF OF HUD. THE GENERAL SUBSTANCE OF EACH PROVISION
SHOULD NOT CHANGE FROM THE MODEL FORM. IF THERE IS A
CONFLICT BETWEEN SUBSTANTIVE CONTENT OF A PARTICULAR
PROVISION AND STATE LAW, THE MORTGAGEE SHALL CONTACT FHA
FOR FURTHER GUIDANCE.]

After Recording Return To:
[Insert where to return recorded document]
____________________[Space Above This Line For Recording Data]_____________
[insert identifying number for administrative tracking of mortgage]
SHARED EQUITY MORTGAGE

THIS SHARED EQUITY MORTGAGE (the “SEM”) is given on
______________
____, 20___ by and between ____________________[Insert
Borrower’s Name] (whether one or more person, hereinafter referred to as “Borrower”)
and the United States Department of Housing and Urban Development, which is
organized and existing under the laws of the United States, having its principal office at
451 Seventh Street, S.W., Washington, D.C., 20410 (hereinafter referred to as the
“Lender”) with Mortgage Electronic Registration Systems, Inc., organized and
existing under the laws of Delaware, with an address and telephone number of P.O. Box
2026, Flint, Michigan 48501-2026, tel. (888) 679-MERS (“MERS”) acting solely as a
nominee for Lender and Lender’s successors and assigns. FOR PURPOSES OF
RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD..
RECITALS
R1.
Borrower is the owner of property located in _________ County, _____________
more particularly described on Schedule A annexed hereto which has the address of
_________________________ [Street], ____________, ___________, ____________
[Zip code], (the “Property Address”).
R2.
The Borrower has chosen to participate in the Hope for Homeowners program as
established by Title IV of the Housing and Economic Recovery Act of 2008 (the “Hope
Program”).
R3.

As a participant in the Hope Program, the Borrower has a FHA-insured first

EXHIBIT D
mortgage of even date herewith in the amount of ____________[Insert amount of the
Hope Mortgage] with _________________ [Insert First Lienholder Name] (the “Hope
Mortgage Lender”) secured by the Property (as defined herein). (the “Hope Mortgage”).
R4.
Pursuant to the terms and conditions of the Hope Program, the Borrower shall
grant the Lender an equity and appreciation interest in the Property by executing a Shared
Equity Note, Shared Appreciation Note, Shared Equity Mortgage (the “SEM”) and
Shared Appreciation Mortgage (the “SAM”) of even date herewith with the SEM and
SAM to be secured by a second and third priority lien against the Property.
NOW, THEREFORE, in consideration of the sum of TEN DOLLARS ($10.00)
and other good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged and the mutual covenants herein contained, the parties do hereby
agree as follows:
1.
Borrower promises to pay the principal sum stipulated in the Note and all
other sums which may or shall become due under this SEM or the Note, upon the
occurrence of a Maturity Event (the “Maturity Date”), if (a) not otherwise satisfied in
accordance with the provisions of this SEM or (b) there is an Event of Default (defined
hereafter).
2.
This SEM secures (a) the repayment of the debt evidenced by the Note;
(b) the performance of Borrower’s promises and agreements under this SEM and the
Note. For this purpose, Borrower hereby mortgages, warrants, grants, and conveys to
Lender a security interest, with power of sale, in the Property;
TOGETHER WITH all the improvements now or hereafter erected on the
property, and all easements, appurtenances, and fixtures now or hereafter a part of the
property. All replacements and additions shall also be covered by this SEM.
BORROWER COVENANTS that Borrower is lawfully seized of the estate
hereby conveyed and has the right to mortgage, grant and convey the Property and that
the Property is unencumbered, except for encumbrances of record. Borrower warrants
and will defend generally the title to the Property against all claims and demands, subject
to any encumbrances of record.
UNIFORM COVENANTS
1.
Payment of Principal and Interest. Upon the refinance of the Hope
Mortgage, arms length sale or any other disposition of all or any part of the Property
including the sale or disposition of a beneficial interest in the Property (the “Maturity
Event”) or an Event of Default, the Borrower hereby promises [jointly and severally] to
pay to the order of the Lender principal based on Equity pursuant to the following
schedule and any interest due thereon:
(A)

If the Maturity Event or Event of Default occurs during the period
that begins on the date the Hope Mortgage becomes FHA-insured

EXHIBIT D
(the “Date of Insurance”) and ends one (1) year after the Date of
Insurance, the Borrower shall pay the Lender one hundred percent
(100%) of the Equity.
(B)

If the Maturity Event or Event of Default occurs during the period
that begins after one (1) year after Date of Insurance and ends two
(2) years after such Date of Insurance, the Borrower shall pay the
Lender ninety percent (90%) of the Equity.

(C)

If the Maturity Event or Event of Default occurs during the period
that begins after two (2) year after Date of Insurance and ends
three (3) years after such Date of Insurance, the Borrower shall pay
the Lender eighty percent (80%) of the Equity.

(D)

If the Maturity Event or Event of Default occurs during the period
that begins after three (3) year after Date of Insurance and ends
four (4) years after such Date of Insurance, the Borrower shall pay
the Lender seventy percent (70%) of the Equity.

(E)

If the Maturity Event or Event of Default occurs during the period
that begins after four (4) year after Date of Insurance and ends five
(5) years after such Date of Insurance, the Borrower shall pay the
Lender sixty percent (60%) of the Equity..

(F)

If the Maturity Event or Event of Default occurs during any period
that begins after five (5) year after Date of Insurance, the Borrower
shall pay the Lender fifty percent (50%) of the Equity.

In the event the Maturity Event is a refinance or any other disposition
method other than an arms length sale of the Property or an Event of Default, the
Property’s equity is in the amount of _______________________ ($_____) (the
“Equity”). [Insert amount equivalent to the difference between the appraised value
of the Property at origination of the Hope Mortgage and the amount of the Hope
Mortgage.]
In the event the Maturity Event is an arms length sale of the Property,
Equity shall be the equivalent of _______________ ($__________) [Insert equity
amount from previous paragraph (difference between the appraised value of the
Property at origination of the Hope Mortgage and the amount of the Hope
Mortgage).] less allowable settlement costs. Allowable settlement costs consist of the
following:
ƒ
ƒ
ƒ

real estate sales commission consistent with the prevailing rate but not to
exceed six percent (6%) of the contract sales price;
local/state transfer tax stamps and other closing costs customarily paid
by the seller and
other actual, customary closing costs customarily paid by
the seller not to exceed two percent (2%) of the contract sales price.

EXHIBIT D
Maturity Event shall not include the following:
(a)
(b)
(c)
(d)
(e)

(f)

a transfer by devise, descent, or operation of law on the death of
a joint tenant or tenant by the entirety;
the granting of a leasehold interest of three (3) years or less not
containing an option to purchase;
a transfer to a relative resulting from the death of the Borrower;
a transfer where the spouse or children of the Borrower become
an owner of the property;
a transfer resulting from a decree of a dissolution of marriage,
legal separation agreement, or from an incidental property
settlement agreement, by which the spouse of the Borrower
becomes an owner of the property; or
a transfer into an inter vivos trust in which the borrower is and
remains a beneficiary and which does not relate to a transfer of
rights of occupancy in the property.

This Note shall not bear interest unless the principal amount due upon
occurrence of a Maturity Event is not paid to Lender. If principal amount due is not paid,
the principal sum due pursuant Paragraph 1 of the Note shall bear interest from the date
of the Maturity Event at the rate of the current value of funds to the United States
Treasury in effect on the date of the Maturity Event. The current value of funds rate is
prescribed and published by the Secretary of the Treasury in the Federal Register and the
Treasury Fiscal Requirements Manual Bulletins.
Borrower agrees that if the Hope Mortgage is determined to be ineligible
for insurance under the National Housing Act, the Note shall be void and the Lender shall
execute and record a release for the SEM. A written statement of any authorized agent of
the Lender dated subsequent to from the date hereof, declining to insure the Hope
Mortgage, shall be deemed conclusive proof of such ineligibility. Notwithstanding the
foregoing, this option may not be exercised by Lender when the unavailability of
insurance is solely due to the Hope Mortgage Lender's failure to remit a mortgage
insurance premium to the Secretary.
2.
Payment of Taxes, Insurance, and Other Charges. Borrower shall pay
all (a) taxes and special assessments levied or to be levied against the Property; (b)
leasehold payments or ground rents on the Property; (c) Community Association Dues,
Fees, and Assessments, (c) governmental or municipal charges, fines, and impositions;
(d) other items which can attain priority over this Security Instrument as a or on the
Property. The phrase “Community Association Dues, Fees, and Assessments” means all
dues, fees, assessments and other charges that are imposed on Borrower or the Property
by a condominium association, homeowners association or similar organization.
Borrower shall pay these obligations on time directly to the entity owed the payment. If

EXHIBIT D

If Borrower fails to make these payments, fails to perform any other
covenants and agreements contained in this SEM, or there is a legal proceeding that may
significantly affect Lender's rights in the Property (such as a proceeding in bankruptcy,
for condemnation, or to enforce laws or regulations), then Lender may do and pay
whatever is necessary to protect the value of the Property and Lender's rights in the
Property, including payment of taxes and hazard insurance.
Any amounts disbursed by Lender under this paragraph shall become an
additional debt of Borrower and be secured by this SEM. These amounts shall bear
interest from the date of disbursement at a rate of the current value of funds to the United
States Treasury in effect on the date of the date of disbursement and, at the option of
Lender, shall be immediately due and payable. The current value of funds rate is
prescribed and published by the Secretary of the Treasury in the Federal Register and the
Treasury Fiscal Requirements Manual Bulletins.
Borrower shall promptly discharge any lien which has priority over this
SEM or is subordinate to this SEM unless the lien has priority as provided in Paragraph
7. If Lender determines that any part of the Property is subject to a lien that may either
attain priority over this SEM or be subordinate to this SEM, Lender may give Borrower a
notice identifying the lien. Borrower shall satisfy the lien or take one or more of the
actions set forth above within ten (10) days of the giving of notice. Within ten (10) days
of the date on which that notice is given, Borrower shall satisfy the lien or take one or
more of the actions set forth above.
3.
Fire Flood and Other Hazard Insurance. Borrower shall insure all
improvements on the Property, whether now in existence or subsequently erected, against
any hazards, casualties, and contingencies, including fire, for which Lender requires
insurance. This insurance shall be maintained in the amounts and for the periods that
Lender requires. Borrower shall also insure all improvements on the Property, whether
now in existence or subsequently erected, against loss by floods to the extent required by
the Secretary. All insurance shall be carried with companies approved by Lender. The
insurance policies and any renewals shall be held by Lender and shall include loss
payable clauses in favor of, and in a form acceptable to, Lender.
If any improvement is located within the special flood hazard area,
Borrower shall obtain flood insurance covering all improvements on the property,
whether now in existence or subsequently erected, in an amount equal to (a) the value of
the Property, or (b) the maximum limit of coverage made available under the National
Flood Insurance Act of 1968, whichever is less. If any improvement on the Property is
located within a special flood hazard area, Borrower shall insure all improvements on the
Property, whether now in existence or subsequently erected, against loss by floods to the
extent required by law. The insurance policies and any renewals, regardless of whether
such policies and renewals are required by Lender, shall include loss payable clauses in
favor of, and in a form acceptable to, Lender.

EXHIBIT D
In the event of loss, Borrower shall give Lender immediate notice by mail.
Lender may make proof of loss if not made promptly by Borrower. Each insurance
company concerned is hereby authorized and directed to make payment for such loss
directly to Lender, instead of to Borrower and to Lender jointly. All or any part of the
insurance proceeds may be applied by Lender, at its option, either (a) to the reduction of
the indebtedness under the Note and this SEM, or (b) to the restoration or repair of the
damaged Property. Any excess insurance proceeds over an amount required to pay all
outstanding indebtedness under the Note and this SEM shall be paid to the entity legally
entitled thereto.
In the event of foreclosure of this SEM or other transfer of title to the
Property that distinguishes the indebtedness, all right, title and interest of Borrower in
and to insurance policies in force shall pass to the purchaser.
4.
Maintenance and Protection of Property. Borrower shall not commit,
or permit, any waste on, destruction to, or damage to the Property. Borrower shall not
allow the Property to deteriorate, reasonable wear and tear excepted. Borrower shall, at
all times, maintain the Property. Borrower shall comply with all applicable Federal,
state, and local statutes, ordinances, codes, regulations, requirements, and restrictive
covenants, if any, upon the use of the Property. Borrower shall, to the satisfaction of
Lender, promptly repair or replace any of the Property damaged by fire or other casualty.
Lender and its representatives shall have the right to inspect the Property from time to
time at any reasonable hour.
5.
Occupancy, Preservation, Maintenance and Protection of the
Property; Borrower's Loan Application; Leaseholds. Borrower shall occupy,
establish, and use the Property as Borrower's principal residence within sixty (60) days
after the execution of this SEM and shall continue to occupy the Property as Borrowed
principal residence for at least one (1) year after the date of occupancy, unless Lender
determines that requirement will cause undue hardship for Borrower, or unless
extenuating circumstances exist which are beyond Borrower's control. Borrower shall
notify Lender of any extenuating circumstances. Borrower shall not commit waste or
destroy, damage or substantially change the Property or allow the Property to deteriorate,
reasonable wear and tear excepted. Lender may inspect the Property if the Property is
vacant or abandoned or the loan is in default. Lender may take reasonable action to
protect and preserve such vacant or abandoned property. Borrower shall also be in default
if borrower, during the loan application process, gave materially false or inaccurate
information or statements to Lender (or failed to provide Lender with any material
information) in connection with the loan evidenced by the Note, including, but not
limited to, representations concerning Borrower's occupancy of the Property as a
principal residence. If this Security Instrument is on a leasehold, Borrower shall comply
with the provisions of the lease. If Borrower acquires fee title to the Property, the
leasehold and fee title shall not be merged unless Lender agrees to the merger in writing.
6.
Prepayment; Release of Security Instrument. Borrower shall have the
right to prepay this Note in whole only. The Note shall be considered satisfied and this

EXHIBIT D
SEM shall be released only upon receipt of principal and interest due Lender pursuant to
Paragraph 1 and 3 of the Note.
7.
Priorities. Notwithstanding any other provision to the contrary, this SEM
is superior to all liens on the Property, other than the Hope Mortgage. Additionally,
during the first five (5) years of the Hope Mortgage, the Borrower shall not grant any
junior lien interest in the Property other than a SAM to the Lender or ,upon the Borrower
obtaining Lender’s prior written consent, a security instrument securing a loan that is
essential to preserve and protect the Property (the “P&P Loan”) and fulfills the following
criteria:

8.
Note.

(A)

the condition to be repaired represents a health or safety hazard
and/or failure to make the repair will cause the property condition
to deteriorate;

(C)

the cost of the proposed repair is reasonable for the geographic
market area;

(D)

the repairs are not primarily cosmetic or represent routine
maintenance;

(E)

the P&P Loan is closed end loan under Federal Reserve Board’s
Regulation Z;

(F)

the P&P Loan does not reduce the amount of the Lender’s equity
share in the Property (the sum of the unpaid principal balance and
accrued interest on the Hope Mortgage upon origination of the
P&P Loan and the original principal balance of the P&P Loan is
less than the sum of (i) the appraised value of the Property, as
determined by Lender, after completion of the proposed
preservation and protection repair and (ii) HUD’s share of the
Equity created upon origination of the Hope Mortgage as if a sale
of the Property occurred on date of origination of the P&P Loan.);
and the sum of the unpaid principal balance and accrued interest on
the H4H mortgage and the original principal balance of the new
mortgage debt is less than the sum of (i) the appraised value of the
property after completion of the proposed repair and (ii) HUD’s
share of the new equity created upon origination of the H4H
mortgage as if a sale of the property occurred on date of
origination of the new mortgage debt.

(G)

total cumulative debt secured by the Property does not exceed
ninety-five percent (95%) of the Property’s new appraised value.

Fees. Lender may collect fees and charges authorized by this SEM or the

EXHIBIT D
9.
Default. The term “Event of Default” shall mean the occurrence of any
one or more of the following:
(A)
Any materially false or inaccurate information on any form or
report submitted to Lender;
(B)
A failure to provide any material information on any form or report
submitted to Lender;
(C)
A default under any security instrument (other than this SEM) that
encumbers the Property;
(D)

A failure to perform any other obligations in this SEM; or

(E)

A failure to perform any obligations under the Note.

10.
Grounds for Acceleration of Debt. Upon the occurrence of any Event of
Default, Lender may declare, without notice, immediately due and payable the principal
and interest due on the Note and all other sums which may or shall become due under this
SEM or the Note.
11.
Full Recourse. The obligations arising under this SEM and the Note
represent full recourse obligations of Borrower.
12.

Time of the Essence. Time is of the essence as to all dates set forth

herein.
13.
Waivers. Borrower and all endorsers, sureties and guarantors jointly and
severally waive presentation for payment, demand for payment, notice of nonpayment,
notice of protest, notice of dishonor, protest, notice of protest, and any and all lack of
diligence or delays in collection or enforcement of this SEM.
14.
Successors and Assigns Bound. The covenants and agreements of this
SEM shall bind and benefit the successors and assigns of Lender. The covenants and
agreements of Borrower under this Note are not assignable without the prior express
written consent of Lender. Borrower covenants and agreements shall be joint and
several.
15.
Modifications. This SEM shall not be modified, amended, changed,
discharged, or terminated orally. This SEM may only be modified, amended, changed,
discharged, or terminated by an agreement in writing signed by the party against whom
enforcement of such modification, amendment, change, discharge, or termination is
sought.
16.
Notices. Any notice to Borrower provided for in this SEM shall be given
by delivering it or by mailing it by first class mail unless applicable law requires use of
another method. The notice shall be directed to the Property Address or any other address
Borrower designates by notice to Lender. Any notice to Lender shall be given by first

EXHIBIT D
class mail to Lender's address stated herein or any address Lender designates by notice to
Borrower. Any notice provided for in this SEM shall be deemed to have been given to
Borrower or Lender when given as provided in this paragraph.
17.
Governing Law; Severability. This SEM shall be governed by Federal
law. In the event that any provision or clause of this SEM or the Note conflicts with
applicable law, such conflict shall not affect other provisions of this SEM or the Note
which can be given effect without the conflicting provision. To this end the provisions of
this SEM and the Note are declared to be severable.
18.
Copy of Mortgage. Borrower acknowledges that it has received a true
copy of this SEM, read this SEM, and executed this SEM as of the date at the top of the
first page.
19.
Hazardous Substances. Borrower shall not cause or permit the presence,
use, disposal, storage, or release of any Hazardous Substances on or in the Property.
Borrower shall not do, nor allow anyone else to do, anything affecting the Property that is
in violation of any Environmental Law. The preceding two sentences shall not apply to
the presence, use, or storage on the Property of small quantities of Hazardous Substances
that are generally recognized to be appropriate to normal residential uses and to
maintenance of the Property.
Borrower shall promptly give Lender written notice of any investigation,
claim, demand, lawsuit or other action by any governmental or regulatory agency or
private party involving the Property and any Hazardous Substance or Environmental Law
of which Borrower has actual knowledge. If Borrower learns, or is notified by any
governmental or regulatory authority, that any removal or other remediation of any
Hazardous Substances affecting the Property is necessary, Borrower shall promptly take
all necessary remedial actions in accordance with Environmental Law.
As used in this paragraph, “Hazardous Substances” are those substances
defined as toxic or hazardous substances by Environmental Law and the following
substances: gasoline, kerosene, other flammable or toxic petroleum products, toxic
pesticides and herbicides, volatile solvents, materials containing asbestos or
formaldehyde, and radioactive materials. As used in this paragraph “Environmental
Law” means Federal law and laws of the jurisdiction where the Property is located that
relate to health, safety or environmental protection.
20.
Authority to Execute. The Borrower executing this SEM represents that
he/she has full power, authority and legal right to execute and deliver this SEM and that the
debt secured hereunder constitutes a valid and binding obligation of Borrower
NON-UNIFORM COVENANTS.
Borrower and Lender further covenant and agree as follows:
21.
Foreclosure Procedure. [For illustration only. Mortgagee needs to
adapt this provision to state law so as to ensure HUD full enforcement ability for a

EXHIBIT D
shared equity mortgage under state law.] If Lender requires immediate payment in full
under Paragraph10, Lender may invoke the power of sale and any other remedies
permitted by applicable law.
If Lender invokes the power of sale, Lender shall give notice of sale to
Borrower in the manner provided in Paragraph 16. Lender shall publish and post the
notice of sale, and the Property shall be sold in the manner prescribed by applicable law.
Lender or its designee may purchase the Property at any sale. The proceeds of the sale
shall be applied in the following order: (a) to all expenses of the sale, including, but not
limited to, reasonable attorney's fees; (b) to all sums secured by the Hope Mortgage; (c)
to all sums secured by this SEM; and (c) any excess to the person or persons legally
entitled to it.
[The following language is mandatory in all cases.] If the Lender’s
interest in this Security Instrument is held by the Secretary of Housing and Urban
Development (the Secretary) and the Lender requires immediate payment in full under
Paragraph 10, the Lender may invoke the nonjudicial power of sale provided in the
Single Family Mortgage Foreclosure Act of 1994 (“Act”) (12 U.S.C. 3751 et seq.) by
requesting a foreclosure commissioner designated under the Act to commence
foreclosure and to sell the Property as provided in the Act. Nothing in the preceding
sentence shall deprive the Lender of any rights otherwise available to a Lender under this
paragraph or applicable law.
22.
Riders to this Security Instrument. The following Riders are to be
executed by Borrower [check box as applicable] and the covenants of each such rider
shall be incorporated into and shall amend and supplement the covenants and agreements
of this Security Instrument:
Other [specify]:
_______________________________________________________
BY SIGNING BELOW, Borrower accepts and agrees under seal to the terms
contained in this Security Instrument and in any rider(s) executed by Borrower and
recorded with it.
Witnesses:

BORROWER:

_____________________

By:________________________________(SEAL)
Name:_____________________________

_____________________

By:________________________________(SEAL)
Name:______________________________

EXHIBIT D
______________[Space Below This Line for Acknowledgement]___________________

State of ______________________ )
) ss.:
County of ____________________ )
On the <> day of <>, in the year <>, before me, the
undersigned, a Notary Public in and for said State, personally appeared <>, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument and
acknowledged to me that s/he executed the same in her/his capacity, and that by her/his
signature on the instrument, the individual, or the person or entity on behalf of which the
individual acted, executed the instrument.

__________________________________________
Notary Public

State of ______________________ )
) ss.:
County of ____________________ )
On the <> day of <>, in the year <>, before me, the
undersigned, a Notary Public in and for said State, personally appeared <>, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within instrument and
acknowledged to me that s/he executed the same in her/his capacity, and that by her/his
signature on the instrument, the individual, or the person or entity on behalf of which the
individual acted, executed the instrument.

__________________________________________
Notary Public