Form HUD-3433 Request for Preliminary Determination of Eligibility as

Instructions
Request for Determination of
Eligibility as Nonprofit Sponsor
and/or Mortgagor

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

OMB Approval No. 2502-0057
(exp. 05/31/2012)

General.
A group with deep roots in the community or neighborhood will
probably be stronger than a national or regional organization without
established roots in the community. Moreover, such a locallyoriented sponsor is in a better position to have knowledge of the
market for the project.

Section 221(d)(3), 231, 232, and 235 of the National Housing Act, as
amended, Section 106(b) of the Housing and Urban Development
Act of 1968, provided mortgage insurance of financing for nonprofit
mortgagors. HUD regulations require that:
Nonprofit mortgagors and other nonprofit organizations participating in HUD programs shall be corporations or associations organized for purposes other than the making of a profit
or gain for themselves or persons identified therewith and
which the Commissioner finds are in no manner controlled by
nor under the direction of persons or firms seeking to derive
profit or gain therefrom.

A nonprofit sponsor must be motivated not only by a desire to
develop a good project, but also by a concern for the project's
continuing successful operation and financial viability. The entire
membership of the sponsoring organization, not just a few of its
members, must be motivated.
Establishing Eligibility

The purpose of these instructions and form is to obtain the information necessary to enable HUD to make a determination, prior to
issuance of a SAMA or Feasibility letter, that the sponsor of a
mortgagor or the mortgagor itself, if the mortgagor has been created,
is truly nonprofit in accordance with the definition above and demonstrates probable success in project development and continuing
operation. This determination will prevent, insofar as possible,
unnecessary outlay of funds for fees, plans, etc., by a sponsor or
proposed mortgagor, who may be found ineligible. If found ineligible,
the proposed sponsorship will not be eligible as a nonprofit mortgagor for project mortgage insurance. Determination of nonprofit
eligibility requires a knowledge of the financial and credit capacity
and the motivation of the sponsor and/or mortgagor, the relationship
between the sponsor and mortgagor, and the relationship between
the mortgagor or sponsor and the various parties or firms concerned
with the project and mortgage transaction. There must be a full
disclosure of all relationships and of all facts pertaining to each
relationship.

In order to establish that a nonprofit sponsor is properly qualified to
initiate, complete, and operate a housing project for elderly or low(er)
income families or individuals HUD requires that:
1. The sponsor:
a. have the financial capacity not only to develop and build the
project, but also have financial support which will remain with
the project during the term of the mortgage;
b. is prepared by written resolution of its officers, directors or
trustees to acknowledge the responsibilities and obligations of
sponsorship and continuing ownership, and this position reflects the will of its members;
c. agrees that all pledges made for the investment requirement
must be converted to cash prior to initial endorsement or initial
closing;
d. has the necessary longevity to continue on through the full term
of the mortgage.
2. The sponsor:

Qualifications for Successful Sponsorship

a. is reliable on the basis of its credit and community oriented
reputation and performance or that of its principals. To
determine reliability, consideration will be given to any previous experience the sponsor has had in providing housing or
related social or community services;

Nonprofit sponsors must have demonstrated continuity, financial
and credit capacity and a serious and long range desire to provide
housing for elderly or low(er) income families and/or individuals.
Churches, labor unions, and fraternal organizations are more likely
to have well-established community and social service activity and
experience than other types of sponsors. However, a nonprofit
group could have been recently formed with a sufficiently broad base
of community or neighborhood support so as to assure continuity and
financial stability for successful operation of the proposed project.

b. fully understands the responsibilities and obligations, including
financial, that attach to sponsorship of a project and its continuing successful operation;
c. either has within its own organization or has made arrangements to provide for the necessary management and other
professional skills essential for the successful development,
completion and long term operation of the proposed project. A
knowledge of social services resources and principles of
tenant participation is implicit in the effective management of
such projects.

Factors which suggest weakness include: (1) inadequate financial
stability and resources, (2) improper attitude toward obligations, (3)
no previous experience, (4) no established roots in the neighborhood
in which the proposed project would be located, (5) evidence that a
builder, landowner, consultant or other party expecting to directly
and/or indirectly benefit financially has initiated the project and
influences the sponsorship, (6) lack of assured continuity or support
by the nonprofit group as a whole, (7) heavy commitments in other
fields which would tax the financial capacity of the group and weaken
its support of the proposed project, and (8) lack of professional
expertise to develop, build and operate the project successfully.
Some sponsors are clearly ineligible without considering factors of
strength and weakness, such as a nonprofit foundation controlled by
the builder or the builder's family, or by any other person or persons
who would derive a profit or fee from the project.

Previous versoins of this form are obsolete
Replaces FHA-3433 which is obsolete

3. The principals and membership of the nonprofit sponsor organization must be prepared to explore in depth with the HUD Field Office
Manager or his/her designee the financial arrangements for the
project. HUD is concerned about the availability of funds to meet
financial requirements such as discounts, both interim and permanent, any required operating deficits, change orders, problems
connected with land acquisition, selection of architect and contractors, construction, rent-up and management.

i

form HUD-3433 (12/2003)
ref. Handbook 4600.1

4. The sponsor:

Responsibilities of Sponsorship

a. is acting on its own behalf and is not, either knowingly or
unwittingly, under the influence, control, or direction of any outside
party seeking to derive profit or gain from the proposed project, such
as a landowner, real estate broker, contractor, or consultant. A
nonprofit sponsor may not borrow or accept funds from such parties.

Some nonprofit sponsors may assume that the responsibility for the
project, particularly in time of stress, rests with HUD, the builder, or
someone other than themselves, and that their role as sponsor is
merely to lend their name to the project. If this attitude exists, it must
be dispelled. Sponsors must understand that it is their project, and
must evidence a serious intent to provide a continuing financial
support and effective management. Sponsors must act in prudent
business manner as would be expected of any project owner.

b. has a currently effective ruling from the Internal Revenue
Service of the United States, which established its status as a taxexempt, nonprofit organization, or is entitled to such status without
a specific ruling.

The FHA commitment and mortgage insurance are predicated upon
HUD's evaluation: (1) that there will be sufficient financial support
from the nonprofit mortgagor along with mortgage proceeds plus
required escrows to develop and build the project and to provide
funds for estimated operating deficits during the initial rent-up period,
change orders, cost overruns and other unexpected cost associated
with the development and construction, and (2) that the rental or
project income will be sufficient to meet all operating expenses and
mortgage payments during the full term. Nonprofit sponsors must
understand, however, that owning and operating a project can
involve difficult and trying problems, including the possibility that
some unforeseen circumstances could cause project funds to run
short. Nonprofit sponsors should understand that HUD would expect
them to cope with these problems at the time of need by all means
at their disposal, such as promotional help, contributive management or services, and appeals to membership or affiliated organizations.

Capacity of Sponsor
The proposed project should not be beyond the financial and
managerial capacity of the sponsor. One would not expect a small
bank to underwrite a major industrial financing venture. Similarly, it
is not reasonable to expect a small church or other group to assume
financial, managerial and ownership responsibility for a large project.
Project sponsorship and management must be in keeping with the
financial and managerial capabilities of the sponsoring organization.
If a well-motivated and reliable sponsor proposes a project beyond
its capabilities, a meeting should be scheduled with the sponsorship
to discuss the need for co-sponsors which would permit the combining of capabilities to the extent necessary to satisfy the requirements
of the proposal, or the size of the project should be reduced. Such
a meeting should include the membership and governing board of
the nonprofit sponsor as well as representatives from Mortgage
Credit, Housing Management, and the Office of the Director, Housing Development Division.

Previous versoins of this form are obsolete
Replaces FHA-3433 which is obsolete

HUD insists upon a financial as well as a moral and social commitment from nonprofit sponsors. There must be a full understanding of
responsibility on the part of the nonprofit sponsor. Sponsors must,
of course, also establish that they have the capabilities to met
expenses prior to the drawdown of mortgage funds, including expenses for architectural services, legal and other professional services, etc. Such expenses need not be covered by the sponsor's
funds alone. They may be met through assured advances from such
other parties as a bank, a Federal, State or municipal fund to
advance seed money, a foundation, a church hierarchy, or another
nonprofit organization in accordance with item number 4a, in the
section of this form entitled "establishing eligibility."

ii

form HUD-3433 (12/2003)
ref. Handbook 4600.1

Request for Determination of
Eligibility as Nonprofit Sponsor
and/or Mortgagor

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

OMB Approval No. 2502-0057
(exp. 05/31/2012)

Public reporting burden for this collection of information is estimated to average 0.75 hours per response, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This agency
may not conduct or sponsor, and a person is not required to respond to, a collection information unless that collecton displays a valid OMB control number.
Privacy Act Statement. The Department of Housing & Urban Development (HUD) is authorized to collect all the information on this form by the U.S.
Housing Act of 1937, as amended, and by the Housing & Community Development Act of 1987, 42 U.S.C 3543 which authorizes HUD to collect Social
Security Numbers (SSN). The information you provide will enable HUD to make a determination that the sponsor and/or mortgagor is truly a nonprofit and
demonstrates probable success in project development and continuing operation. HUD may disclose this information to Federal, State and local agencies
when relevant to civil, criminal, or regulatory investigations and prosecutions. It will not be otherwise disclosed or released outside of HUD, except as
required and permitted by law. You must provide all of the information requested in this application, including your SSN or EIN. Failure to provide the
information will result in disapproval of participation in this HUD program and/or delay action on the proposal.

Name of Proposed Project

Location

Program (Section of Act)

The instructions relating to this request have been read and are fully understood. A HUD determination as to the eligibility of the proposed
mortgagor as a nonprofit corporation or association is requested. To assist in the determination, the following information and that on the
attached exhibits is supplied. The information provided in this form will be evaluated in conjunction with the documents submitted in accordance
with Appendices 1, 2, and 3 of Handbook 4381.5, Management Documents, Agents and Fees, which will be submitted together with this form
(or at such time as appropriate).
The

(Name of Sponsoring Group)

_______________________________________________________________________________received its

Charter or, if unincorporated, was organized on

(Date)

_______________________ pursuant to

(Local Statute) _____________________________________________________________________________________________________________________________

laws

of the State of_________________ . The sponsoring group was formed for the following purpose (as stated in its Charter or Constitution, if unincorporated):
_______________________________________________________________________________________________________________
_______________________________________________________________________________________________________________
1. A. What is your motivation for sponsoring the project? (Please explain in detail.)

B. What evidence of support for participation has been demonstrated by your organization?

C. Has your organization, Board of Directors or Trustees taken a vote on participating in such projects, in general, or in the proposed project,
in particular? If the answer is ''yes,'' indicate the results.

D. If a national, State or regional organization is involved as a co-sponsor, what support have they agreed to provide?

E. What evidence can your organization provide which will demonstrate that it will have the necessary longevity to continue as sponsor
through the full term of the mortgage?

Previous versoins of this form are obsolete
Replaces FHA-3433 which is obsolete

Page 1 of 4

form HUD-3433 (12/2003)
ref. Handbook 4600.1

2. A. What is your understanding of the responsibilities and obligations of the sponsorship of a project?

B. What kind of activity has your organization undertaken which you feel qualifies it to carry out the development and management of your
proposed project? Provide details, including information on the organization's record of production and management of projects insured
by HUD or financed by direct Federal or conventional loans. Cite project location, type of project, number of units, periods involved, and
current status. Attach supplementary sheets, if necessary.

3. A. What financial and other resources do you have to carry out a project of the size you are proposing? Cite the source and amounts of
funds for the following expenses requiring cash outlay by the sponsor prior to receipt of loan advances (if borrowed, give terms of the loan):
(1) HUD application and commitment fees, as appropriate,

(2)

Option or downpayment on project site,

(3)

Advance legal, consultant, and architect fees.

B. What are your principal sources of income? Give details.

C. What cash or service resources are you prepared to provide if the project encounters difficulty during the construction period?

4. Furnish complete information for each of the items set forth below. Where arrangements have not been made, so state and supply
information as to what is contemplated.
A. Submit copy of charter and bylaws, or constitution, as currently amended. Unless covered by charter and bylaws, or constitution, explain
structure for normal management of organizational business.

Previous versoins of this form are obsolete
Replaces FHA-3433 which is obsolete

Page 2 of 4

form HUD-3433 (12/2003)
ref. Handbook 4600.1

B. (1) Does your organization have an effective 501(c)(3) exemption from income tax? If so, furnish copies of any ruling establishing such
exemption.

(2) If you have no such exemption, have you even been denied such an exemption? If so, furnish a copy of any ruling denying such
exemption.

(3) If application for any such exemption is pending, explain its legal and factual basis and its present status.

C. Attach a list of the officers and directors or trustees of the sponsoring group including names, Social Security Numbers or Employer
Identification Numbers, addresses, and titles of positions.
D. Attach resumes on all principals and staff who will actively participate in the development of the proposed project.
E. Explain the relationship between sponsoring group and mortgagor (existing connections or proposed, if mortgagor has not been formed).

5. A. Provide a detailed statement of the arrangements made or proposed for the following, listing the principals involved, the relationship
between such principals and the sponsor and mortgagor, giving the terms of the arrangement and describing the circumstances
surrounding each:
(1) Land upon which the project is to be built,

(2) Construction of the project, including the selection of the general contractor, subcontractors and architect,

(3) Legal and consultant services,

(4) Financing of the project including required discounts, if any,

Previous versoins of this form are obsolete
Replaces FHA-3433 which is obsolete

Page 3 of 4

form HUD-3433 (12/2003)
ref. Handbook 4600.1

(5) Furnish current financial statement as well as financial statements for the past three years (audited financial statements should be
submitted if available). If the sponsoring group has not been in existence for three years, the financial statement must be submitted
from the date of the formation of the group. If any required funds are to be provided by anyone other than the sponsoring group,
then the other contributor(s) must also submit a current financial statement as well as statements for the past two years. Each
financial statement submitted must contain the original signature of an officer of the sponsoring group. All statements must be
supported by adequate schedules. All statements not submitted on form HUD-92417 must contain the certification which appears
on the reverse side of form HUD-92417.
(6) A signed written resolution of its directors or trustees to acknowledge the responsibilities and obligations of sponsorship and
continuing ownership, and this position reflects the will of its membership.
(7) A current financial statement with adequate supporting schedules, as well as financial statements for the past three years on the
general contractor (audited financial statements should be submitted if available). If the general contractor has not been in existence
for three years, the financial statement must be submitted from the date of the formation of the firm. All statements not submitted
on form HUD-92417 must contain the certification which appears on the reverse side of form HUD-92417.
B. Current bank and trade references. (Name, address, telephone number, and bank account number)

C. A current resume of the proposed general contractor's construction experience. In evaluating the current resume of the proposed general
contractor's construction experience, particular attention will be paid to the following:
(1) Type and size of buildings the contractor has constructed;

(2) Geographic area of contractor's construction business involvement; and,

(3) Length of time the general contractor has acted in that capacity.

To the best of my knowledge and belief, the foregoing information and that contained in the attached exhibits are true and correct.
(Address)
(Signature)

(Title-Officer of Sponsoring Group)

(Date)
(Telephone Number)

(EIN)

(Witness)

Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties. (18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 3729, 3802)
Previous versoins of this form are obsolete
Replaces FHA-3433 which is obsolete

Page 4 of 4

form HUD-3433 (12/2003)
ref. Handbook 4600.1