92432 Commitment of Insurance Advances

Commitment
for Insurance of Advances
Sections 207, 220, 221, 231, 232, 242 and 810; and Title XI

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

Project Number

Name of sponsor

To (Borrower)

Street address

Street Address

City & State

City & State

Name of proposed Lender

OMB No. 2502-xxxx (Exp. xx/xx/xxxx)

The Federal Housing Commissioner, acting herein on behalf of the Secretary of Housing and Urban Development, will endorse for insurance under
the provisions of Section ________ of the National Housing Act, and the Regulations thereunder now in effect, a mortgage note in the amount of
$_______________________, to be secured by a mortgage, on the property locate at ________________________________________________
and consisting of approximately _______ square feet. The insurance endorsement will be subject to compliance with the requirements of the
Regulations, and the terms and conditions set forth below. The mortgage amount, however, is subject to reduction prior to final insurance
endorsement of the mortgage note as provided in the Regulations.
1. The mortgage note shall be payable in monthly installments in
accordance with the payment provision checked and completed below:
(a)

Combination Declining Annuity Plan

The loan shall bear interest at the rate of _______ percent per annum
payable on the first day of each month on the outstanding balance of
principal. The first payment to principal (commencement of amortization) shall be due on the first day of the ___________ month
following the month in which the mortgage is dated. The mortgage
shall provide that the first payment to principal shall be in the amount
of $____________________. Thereafter, on the first day of each
succeeding month until the ________ installment has been paid, an
installment of principal shall be paid in an amount equal to ________
percent of the principal payment which became due on the first day of
the next preceding month. The ___________ payment and, until the
mortgage is paid in full, each succeeding payment shall be in an
amount equal to _________ percent of the last preceding payment. The
maturity and final payment date shall be ___________ years and
____________ months following the due date of the first payment to
principal (commencement of amortization).
(b)

Accelerating Curtail Declining Annuity Plan

The loan shall bear interest at the rate of ______ percent per annum
payable on the first day of each month on the outstanding balance of
principal. The first payment to principal (commencement of amortization) shall be due on the first day of the _________ month following
the month in which the mortgage is dated. The mortgage shall provide
that the first payment to principal shall be in the amount of
$______________. Thereafter, on the first day of each succeeding
month until the entire indebtedness has been paid, an installment of
principal shall be paid in an amount equal to _________ percent of the
principal payment which became due on the first day of the preceding
month. The maturity and final payment date shall be _______ years
and ________ months following the due date of the first payment to
principal (commencement of amortization).
(c)

Level Annuity Monthly Payment Plan

The loan shall bear interest at the rate of _______ percent per annum
payable on the first day of each month on the outstanding balance of
principal. The first payment to principal (commencement of amortization) shall be due on the first day of the ____________ month

Replaces FHA-2432, which may be used

following the month in which the mortgage is dated. The loan shall be
payable on a level annuity basis by _____________ monthly payments
of principal and interest in the amount of $ ___________________.
The maturity and final payment date shall be _________ years and
_________ months following the due date of the first payment to
principal (commencement of amortization).
(d)

Level Annuity Monthly Payment Plan
(Sec. 221(d)(3) Below Market Interest Rate Mortgage)

The loan shall bear interest at the rate of _____ percent per annum
payable on the first day of each month on the outstanding balance of
principal up to and including the date of final endorsement of the
secured note. Thereafter, the loan shall bear interest at the rate of
__________ percent per annum payable on the first day of each month
on the outstanding balance of principal. The first payment to principal
(commencement of amortization) shall be due on the first day of the
_________ month following the month in which the mortgage is dated.
The loan shall be payable on a level annuity basis by monthly payments
of principal and interest in the amount of $___________________.
The maturity and final payment date shall be _______ years and
_________ months following the due date of the first payment to
principal (commencement of amortization).
2. A project shall be constructed on the mortgaged property in accordance with Drawings and Specifications filed with the Commissioner
and designated as ________________________________________
FHA Project No. _______________ dated ___________________.
The Drawings and Specifications, which include "General Conditions
of the Contract for Construction" (AIA Document A 201) and "Supplementary Conditions of the Contract for Construction (form HUD2554), shall be identified in a manner acceptable to the Commissioner
by the following parties or their authorized agents: Mortgagor, Design
Architect, Architect administering the Construction Contract, Contractor and the Contractor’s Surety.
3. At least 15 days prior to the anticipated date for initial insurance
endorsement of the mortgage note, two draft copies of each of the
following documents and exhibits shall be submitted to the Commissioner. After review, the place and date of the initial closing will be
designated, at which time the following documents and exhibits in
final form shall be delivered to the Commissioner for approval:
(a) The mortgage and the note evidencing the debt secured.

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HUD-92432­OHF (5/79)
ref. Handbooks 4571.4 & 4571.5

(b) The Building Loan Agreement (form HUD-92441) between the
Mortgagee and the Mortgagor governing advances of the mortgage
proceeds.
(c) The Construction Contract (form HUD-92442 or 92442A)
between the Mortgagor and the General Contractor whereby the
project is to be built.
(d) Contractor’s Certification of Labor Standards and Prevailing
Wage Requirements.
(e) Agreement and Certification executed by the Mortgagee and
Mortgagor.
(f) Owner-Architect Agreement (appropriate HUD form).
(g) Title evidence in conformity with the Regulations which shall
show that title to the property on the date of initial endorsement of the
mortgage for insurance is vested in the Mortgagor free of all encumbrances other than the mortgage, and free of all reservations of title
(either junior or prior to said mortgage), except such as are specifically
determined to be acceptable by the Commissioner. If such title
evidence is in the form of a title insurance policy, it shall by its terms
inure to the benefit of the Mortgagee and the Secretary of Housing and
Urban Development, as interest may appear. Such title evidence must
be accompanied by a survey of the property, together with the Surveyor’s
Certificate showing that there are no easements or encroachments
upon the subject property except those acceptable to the Commissioner, which survey will be extended from time to time during
construction to show that the improvements on the site have been
erected solely upon the land covered by the mortgage and within the
building restriction lines, if any, on said land and do not encroach upon
or overhang any land not covered by the mortgage nor upon any
easement or right-of-way. Evidence will be required to show that the
premises are not zoned or restricted so as to prevent the construction
of the improvements, and that building and other permits have been
issued by legally constituted authorities having jurisdiction.
(h) Assurance of the completion of the project.
(i) Assurance that adequate sewer, water, gas, and electric facilities will be fully installed prior to completion of the project and that
necessary public streets, sidewalks, and curbing outside the project
site, if not yet constructed, will be fully completed within a reasonable
time after completion of the project.
(j) The Mortgagee’s Certificate itemizing the charges made by
you in connection with the mortgage transaction and evidencing the
collection by you or your nominee from the Mortgagor of the following
sums to be applied to the following items:
(1) Deposit to meet cost of equipping and renting the project
subsequent to completion of the entire project or units thereof, and to
be applied to taxes, mortgage insurance premiums, property insurance
premiums and assessments required by the terms of the mortgage
accruing subsequent to initial endorsement of the mortgage for insurance, and not included in the proceeds of the mortgage ......
$____________________. (Note: For Section 232 Nursing Home
Projects this deposit is required only for accruals of taxes, mortgage
insurance premiums, property insurance premiums and assessments.)
(2) Funds, if any, required over and above mortgage proceeds
for completion of the project $_________________________. This
sum represents the difference between the Commissioner’s estimate of
the total cash required for carrying charges, financing, and for construction of the project, including builder’s fees (or builder’s and
sponsor’s profit and risk allowance, if any), architect’s fees, and the
maximum amount of the mortgage to be insured. These funds may be

Replaces FHA-2432, which may be used

reduced by so much of the profit and risk allowance and fees, up to a
maximum of $_____________________, as the closing documents
show are not to be paid in cash.
(3) Escrow deposit, if any, to cover off-site utilities and
streets... $ ____________________________ .
(4) The Mortgagor shall establish to the Commissioner’s
satisfaction that, in addition to the proceeds of the insured mortgage,
the Mortgagor has funds in the amount of $_____________________,
or has made financial arrangements acceptable to the Commissioner in
order to meet the expenses of the project from the date of initial
occupancy until_______ months after the date of final endorsement as
the Commissioner estimates is necessary to establish a profitable
operation. The funds shall be deposited with the Mortgagee or other
depository acceptable to the Commissioner on or before the date of
initial endorsement, and such funds shall be held in a special account
under an agreement approved by the Commissioner.
(k) The Escrow Agreement providing for the deposit, if any,
required by Item (i)(3) of this paragraph and covering off-site utilities
and streets.
(1) The Mortgagor’s Certificate certifying to the priority of the
mortgage and to other matters set forth therein.
(m) The instrument under which the Mortgagor entity is created,
unless the Mortgagor is an individual.
4. The Mortgagor must possess the powers necessary for operating the
project and meeting all the requirements of the Secretary of Housing
and Urban Development for insurance of the mortgage. At the initial
insurance endorsement of the mortgage note, there shall be filed with
the Commissioner copies of all instruments or agreements necessary
under the laws of the applicable jurisdiction to authorize the execution
of the mortgage and the other closing documents, and a Regulatory
Agreement or other instrument to permit the Commissioner’s regulation of the Mortgagor as to rents, charges, and methods of operation.
Such instrument shall provide, among other things, for the establishment of a Reserve Fund for Replacements under control of the Mortgagee by payment of $_______________________ per annum, to be
accumulated monthly commencing on the date of the first payment to
principal as established in the insured mortgage, unless a later date is
agreed to by the Commissioner.
5. (a) Approval of advances in accordance with the Building Loan
Agreement must be obtained on a form prescribed by the Commissioner prior to the date of each advance to be insured. A Contractor’s
Prevailing Wage Certificate will be filed with the request for approval
of each advance which includes a payment for construction costs.
(b) During the course of construction, the Commissioner and his
representatives shall at all times have access to the property and the
right to inspect the progress of construction, and an inspection fee in
the amount of $______________________ shall be paid upon the
initial insurance endorsement of the mortgage note. The inspection of
construction by a representative of the Commissioner shall be only for
the benefit and protection of the Secretary of Housing and Urban
Development.
(c) Upon completion of the project in accordance with the Drawings and Specifications the mortgage note will be finally endorsed for
insurance to the extent of the advances of mortgage proceeds approved
by the Commissioner, subject to reduction as provided in the Regulations.

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HUD-92432­OHF (5/79)
ref. Handbooks 4571.4 & 4571.5

6. Any change in the Drawings and Specifications or in the conditions
upon which this commitment is based, which may occur after the date
hereof, shall be explained in writing, or in a supplementary application
if required by the Commissioner, and must be approved by the
Commissioner prior to initial endorsement. Any such change occurring subsequent to initial endorsement must be brought to the attention
of the Commissioner immediately upon occurrence, and, except for
such changes in the Drawings and Specifications which may be
authorized by the Architect, must be approved by the Commissioner
prior to the date on which the Commissioner is requested to approve
any further advance for insurance. Changes in the Drawings and
Specifications which result in any net construction cost increase, or
will, change the design concept, or will result in a net cumulative
construction cost decrease of more then 2% of the contract amount may
be effected only with the prior written approval of the Lender and the
Commissioner. The Commissioner’s approval of any change described above may be subject to such conditions and qualifications as
the Commissioner in his discretion may prescribe.
7. If under the laws of the jurisdiction in which the project is located,
the personal property of the Mortgagor, which is used in the operation
of the project, is not covered by and subject to the real estate mortgage,
the Mortgagee shall require and receive from the Mortgagor, prior to
the final insurance endorsement of the mortgage note, a Security
Agreement and a Financing Statement or such other security instrument as may be necessary to effect a first lien on such personal property
in favor of the Mortgagee.
8. Any change in the sponsorship upon which this commitment is
predicated must be requested in writing by the Mortgagee on behalf of
any proposed substitute sponsor, and such request must be approved in
writing by the Commissioner. Any sponsor or principal (including the
principals of any parent entity of such sponsor or principal), who is
now or who may later become involved in this project by way of
financial interest, employment or otherwise, and who has not filed a
certificate with the Commissioner fully disclosing his previous participation in FHA mortgage insurance programs, shall file such certificate on the form prescribed by the Commissioner and must be approved
by the Commissioner.

10. This commitment shall terminate __________________ days from
the date hereof unless renewed or extended by the Commissioner.
Prior to any renewal or extension of this commitment, the Commissioner may, at his option, reexamine the commitment to determine
whether it shall be extended in the same amount, or shall be amended
to include a lesser amount.
11. A request for the reopening of this commitment within 90 days of
its termination must be accompanied by the reopening fee prescribed
by the Regulations.
12. The Design Architect and the Architect administering the construction contract shall each be covered by a policy of professional liability
insurance in an amount consistent with insurance industry practice. At
initial closing, there shall be provided for each Architect the writing
agent’s certificate in substantially the following form:

To:

Mortgagee and Secretary of Housing and Urban Development

I certify that _____________________________(Name of Architect)
is insured in the amount of $______________________________
under _____________________________________ (Name of Insurer)
Policy No. ____________________ of Architect and/or Engineers
Professional Liability Insurance.

Your attention is directed to the Regulations covering the assignment
or the transfer of the insured mortgage, in whole or in part, and the
transfer of your rights, privileges, and obligations under the contract
of mortgage insurance.
Special conditions set forth below or attached hereto and identified as
additional numbered paragraphs are made a part hereof.

9. All certificates, documents and agreements called for by this
commitment shall be on forms approved or prescribed by the Commissioner and shall be completed, executed and filed in the number of
copies and in such manner as he shall prescribe.

Dated _________________________

Secretary of Housing and Urban Development
By: Federal Housing Commissioner
By: _________________________________________________
Authorized Agent

Replaces FHA-2432, which may be used

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HUD-92432­OHF (5/79)
ref. Handbooks 4571.4 & 4571.5