HUD-3306 Agreement and Certification (Insurance Upon Completion)

U.S. Department of Housing
and Urban Development
Office of Housing
Federal Housing Commissioner

Agreement and
Certification
For use in Insurance Upon Completion Cases
Must be executed before executing the construction contract

This Agreement made this _______________ day of _________, 19 ________ by and between the _____________________________________
_______________________________________________, a _____________________________ *(hereinafter called Mortgagor), and
__________________________________________________________________________________________________________________, a
_________________________________________________________________ corporation (hereinafter called Mortgagee), and the Secretary of
Housing and Urban Development, acting by and through the Federal Housing Commissioner (hereinafter called Commissioner);
Whereas, Mortgagor has applied to Mortgagee for a mortgage loan in the amount of $ ______________ for the purpose of erecting a housing
project to be located at __________________________________________________________________________ and identified as HUD Project
No.___________________; and
Whereas, Mortgagee has applied to the Commissioner for mortgage insurance under Section _______, of the National Housing Act covering said
mortgage loan and Commissioner has issued a commitment to insure said mortgage loan upon completion of the project in an amount not to
exceed $________________________, which amount, however, is subject to reduction as provided in the National Housing Act and Regulations
promulgated pursuant thereto; and
Whereas, under the provisions of the National Housing Act and the Regulations promulgated pursuant thereto, this agreement is required;
Now therefore this agreement witnesseth:

1. That in consideration of the agreement by the Mortgagee to make
said mortgage loan and as an inducement to the Commissioner to insure
said loan, the Mortgagor agrees to submit to the Commissioner prior to
endorsement of the loan for insurance its Certificate of Actual Cost, and,
if required, the Contractor’s Certificate of Actual Cost, on forms
prescribed by the Commissioner, and/or the HUD form for Contractor’s,
Subcontractor’s and Mortgagor’s Certifications. Mortgagor and General
Contractor agree that all Certificates of Actual Cost shall be certified to
by an independent Certified Public Accountant or an independent Public
Accountant in form acceptable to the Commissioner. The Mortgagor
further agrees that if the Commissioner, for cost certification purposes,
accepts estimates for any items, the Mortgagor will, at final
endorsement, establish a cash escrow to pay all the “to be paid in cash
items” identified in its Certification of Actual Cost and debts to third
parties who made the original disbursement for an item listed as paid on
the Mortgagor’s Certification of Actual Cost unless documentation,
satisfactory to the Commissioner, is submitted evidencing that these
amounts were paid by the Mortgagor after the submission of its
Certification of Actual Cost. The Mortgagor understands that the items
covered by this cash escrow must be paid within 45 days of the date of
final endorsement, except for those items involved in dispute or
involved in litigation. If the Mortgagor’s actual cost was less than the
estimates accepted for cost certification purposes and the Commissioner
determines that this difference plus the net amount (total receipts less
expenses of perfecting claims) of settlement of claims against bonding
companies would have required a reduction of the insured mortgage, the
Mortgagor understands that prepayment of the mortgage in an amount
equal to the scheduled monthly principal payments, to the extent
possible, is required and any remaining balance shall be deposited to the
Reserve Fund for Replacements.
2. Mortgagee and the Mortgagor agree that, prior to endorsement of
the loans for insurance, the mortgage loan and the commitment will be
adjusted to comply with the provision of Section 227 of the National
Housing Act, as amended, and HUD Regulations issued pursuant
thereto.

3. Mortgagor by its execution of this Agreement agrees to the
acceptance of the mortgage loan reduced by the amount, if any,
required by Section 227 of the National Housing Act, as amended, and
the applicable HUD Regulations, and the Mortgagor and Mortgagee
further agree to execute such instruments as may be required to legally
accomplish such reduction, and Mortgagee agrees that the contract of
insurance will likewise be reduced by the amount the mortgage and
commitment are so reduced.
4. Mortgagor certifies that the financial interests or family
relationships which exist between Mortgagor or any of its officers,
directors, or stockholders with the Architect and with the General
Contractor, subcontractors, suppliers, or equipment lessors are: (if
none, so state.)

5. Mortgagor agrees to notify the Commissioner, in writing, of any
changes in relationship subsequent to the execution of this agreement
which results in an identity of interest of the Mortgagor with the
General Contractor or any subcontractor, supplier, or equipment lessor
within 10 working days from the date the change occurred, in which
case the Mortgagor’s certification of actual cost will be accompanied
by the Contractor’s certification of actual cost in form prescribed by
the Commissioner and, if required by the Commissioner, certification
of actual cost by such subcontractor, supplier, or equipment lessor. It
is agreed that the absence of such notice may be treated by the
Commissioner as a representation that no change in relationship has
occurred which creates any such identity of interest.

*Enter amounts from appropriate items on HUD-92264.
Previous editions are obsolete
Page 1 of 3

Form HUD-3306 (6/09)
ref Handbook 4470.1

6. Mortgagor agress to maintain and keep adequate records of all costs
referred to in (1) above, and to make such records available for
examination by the Commissioner upon request.

Mortgagor further agress that for purposes of determining actual cost,
no general overhead expense in excess of $___________ will be
allowed by the Commissioner as actual cost.

7. Mortgagor agrees that, where this agreement and certification
reveals any identity of interest between the Mortgagor and the General
Contractor, the Mortgagor will include in the contract for the
performance of the construction of the project a provision requiring the
General Contractor, upon completion of the project, to submit to
Mortgagor for delivery to the Commissioner its certificate of all actual
costs of labor and materials and necessary services as required by
paragraph (1) hereof. Mortgagor further agress to include in the
construction contract a requirement that the Contractor shall maintain
adequate records of all such costs and make such records, documents,
contracts and accounts available for review upon request by the Federal
Housing Commissioner.

(b) In the event there is no identity of interest between the Mortgagor
and the General Contractor, the Builder’s and Sponsor’s profit and risk
allowance provided for in paragraph 10. (a) herein shall not be
applicable, but the Mortgagor shall be entitled to include in its
certificate of actual cost a Sponsor’s profit and risk allowance which
shall be Section 227 of the National Housing Act and the Regulations
adopted pursuant thereto and which was in effect on the date the
Commitment was issued, to the actual cost, as accepted by the
Commissioner, of those items which, under the provisions of the
National Housing Act, shall be include in computing the allowance.
(The National Housing Act specifically excludes, among other items,
the amount of the construction in computing the allowance.)

8. Mortgagor agrees that it will require in the general contract and in
all agreements with subcontractors (which term for the purposes of this
paragraph shall also include material suppliers and equipment lessors) a
provision that if there is, or comes into being, any identity of interest
between the Mortgagor and any Subcontractor, or ( in those cases where
the General Contractor is required to certify his actual costs) between
the General Contractor and any Subcontractor, then (a) such
Subcontractor will agree to submit to the Commissioner (unless
specifically waived in writing by the Commissioner) a certificate of the
actual cost of providing the material and/or services after deduction of
all kickbacks, rebates, adjustments, discounts, or any other arrangements
in the nature thereof, and (b)such Subcontractor will join in the
execution and submission of the HUD form for Contractor’s,
Subcontractor’s and Mortgagor’s Certifications. The Subcontractor’s
certificates of actual cost will be supported by the certification of an
independent Certified Public Accountant or an Independent Public
Accountant in form acceptable to the Commissioner has in advance
granted approval in writing of the subcontract and has approved a
specific dollar amount or a specific percentage for profit and/or general
overhead.

(c) If there is any identity of interest between the Mortgagor and the
General Contractor and more than 50 percent of the actual cost of
construction is subcontracted with any one contractor, or
subcontractor, or more than 75 percent with three or less contractors
or subcontractors, the Builder’s and Sponsor’s profit and risk
allowance provided for in paragraph 10.(a) herein shall not be
permitted as an actual cost and the Mortgagor shall be limited to the
inclusion of the Sponsor’s profit and risk allowance, provided for in
paragraph 10.(b) herein, on its certificate of actual cost.

9. Mortgagor agrees that if there comes into being any identity of
interest between the Mortgagor and the Architect or between the
General Contractor and the Architect, the Architect will immediately be
relieved of Inspection duties and the maximum Architect’s fees
allowable for cost certification purposes will be $____________ for
design services only. No fee will be allowed to the identity of interest
Architect for supervision.
10. For those cases which include a Builder’s and Sponsor’s Profit and
Risk Allowance (Sections 220, 221 (d) (3) and (4), 231, and 236), the
Mortgagor and General Contractor agree that:
(a) If there is any identity of interest between the Mortgagor and the
General Contractor, the construction contract will be on a cost plus fee
basis with a maximum upset price, provided, however that in lieu of the
contractor’s fee, the Mortgagor shall be entitled to include in its
certificate of actual cost an allowance for Builder’s and Sponsor’s profit
and risk. The allowance for Builder’s and Sponsor’s profit and risk shall
be determined by applying the profit and risk percentage, provided for
in Section 227 of the National Housing Act and the Regulations adopted
pursuant thereto and which was in effect on the date the Commitment
was issued, to the actual cost, as accepted by the Commissioner, of those
items which, under the provisions of the National Housing Act, shall be
included in computing the allowance.

11. For those cases which do not incluse a Builder’s and Sponsor’s
Profit and Risk Allowance, the Mortgagor and General Contractor
agree that the construction contract will be on a cost plus fee basis
with a maximum upset price if there is any identity of interest between
the General Contractor, or under any other circumstances where the
Commissioner requires the use of such a contract, and that for the
purpose of determining the actual cost of physical improvements on
the mortgaged property, the allowance for the Contractor’s fee shall
not exceed $___________ and the general overhead expense shall not
exceed $__________________; provided, however, that in the event
more than 50 percent of the actual cost of construction is
subcontracted with any one contractor, or more than 75 percent with
three or less contractors or subcontractors, the Contractor’s fee
provided for herein shall not be allowed as an actual cost.
12. The Mortgagor and General Contractor agree that for the purpose
of paragraphs 10.(c) and (11): (i) the terms contractor and
subcontractor include material suppliers and equipment lessors, and
(ii) any two or more contractors or subcontractors having an identity of
interest or common ownership shall be considered as one contractor or
subcontractor. It is understood that the 50-70 percent rule is not
applicable to manufacturers of industrialized housing, trade items
performed by persons on the general contractor’s payroll, mobile home
park program, supplemental loan program, or rehabilitation programs
other than gut rehabilitation.
13. Mortgagor and General Contractor further agree that if there comes
into being an identity of interest between the Mortgagor and the
General Contractor following the execution by the parties of a lump
sum contract, the allowable costs to the Mortgagor of the construction
contract and profit and risk allowance shall be determined in
accordance with the applicable provisions of paragraphs 10.(a) through
10.(c) or 11 or 12 herein.

Previous editions are obsolete
Page 2 of 3

Form HUD-3306 (6/09)
ref Handbook 4470.1

14. The Mortgagor agrees to submit with this form signed duplicate
copies of any collateral agreements(s) and/or side deal agreement(s)
executed by the Mortgagor or any principals of the Mortgagor
evidencing any secured or unsecured borrowing made in association
with the construction of the project. The Mortgagor further agrees to
obtain the approval of the Commissioner before entering into any such
agreement after executing this form.

15. Mortgagor, Mortgagee, and General Contractor understand and
agree that the foregoing agreements and certifications were made by
them for the purpose of influencing an official action of the Federal
Housing Commissioner, and may be relied upon by the Commissioner
as true.

In Witness Whereof the parties hereto have duly executed this agreement the day and year first above written.

Attest

(Mortgagor)
By
(General Contractor)
By
(Mortgagee)
By

Secretary of Housing and Urban Development
Acting by and Through the
Federal Housing Commissioner

By (Authorized Agent)

Previous editions are obsolete
Page 3 of 3

Form HUD-3306 (6/09)
ref Handbook 4470.1