Form HUD 2434 HUD 2434 Mortgagee's Certificate

Mortgagee's Certificate
(Execute original plus two copies)

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

OMB Approval No. 2502-0468 (Exp. 12/31/2015)

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. HUD collects this information as a part
of an Multifamily Housing loan application and uses it to determine the insurability of the loan. This information is required to obtain benefits. HUD may not
collect this information, and you are not required to provide it, if this form does not display a currently valid OMB control number.
Project Name

Project Number

To the Federal Housing Commissioner
We hand you herewith a check for $ _____________________ covering the first mortgage insurance premium, together with the other items
called for in your Commitment dated ___________________, 20 ___,
and in any extensions or amendments thereof, and we certify that all
conditions thereof have been fulfilled to date.
1. We are the Mortgagee under ____________________________
(hereinafter referred to as the Mortgage) dated ________________,
20___, executed by ____________________________________
(hereinafter referred to as the Mortgagor), securing a credit instrument
evidencing a loan by us as Mortgagee to the Mortgagor in the principal
sum of $ ____________________ which we have agreed to make on
condition that it be insured by you pursuant to your Regulations for
Section _______________ of the National Housing Act, effective as of
the date of your Commitment.
2. The agreement providing for the advancement of said loan is
embodied in a Building Loan Agreement dated _________________,
20 ___ , three copies of which are submitted herewith.
3. There is submitted herewith a certified Survey of the property and
title evidence in form specified in the Regulations together with evidence
that the mortgaged premises are not zoned or restricted so as to
prevent the construction of the improvements.
4. All applications for insurance of an advance of mortgage proceeds
will be submitted to you at least five days prior to the date we wish to
disburse such advance. Such application will be accompanied by forms
as required by you. We agree that the amount approved for disbursement by HUD will not be released unless the current extension of the
title policy evidences clear title.
5. The charges enumerated below have been collected in cash or will be
so collected not later than the date of initial endorsement:
(a) FHA application and commitment fee $ ______________
(b) Initial service charge, if any
(not exceeding 2%)

$ ______________

(c) Title and recording expense
$ ______________
(including cost of surveys, recording
fees, mortgage and stamp taxes, etc.
associated with initial endorsement)
(d) FHA Inspection Fee

$ ______________

(e) Ground rent during construction
(may collect only one year's rent
at initial endorsements)

$ ______________

6. (a) The undersigned has received from the Mortgagor a working
capital deposit in the form of (Cash) – (Letter of Credit)
____________________ in the sum of $ ______________________.
While under our control, it is understood that funds in this deposit may
be released or allocated for the purposes indicated below and for no
other purpose unless approved by you:
(1) The cost of equipping and renting the project after final
completion of construction of the project (Note: Not applicable to
Section 232 profit-motivated nursing home projects);
(2) For accruals during the course of construction, for interest,
mortgage insurance premiums, taxes, ground rents, property insurance premiums and assessments, when funds available for these
purposes under the Building Loan Agreement have been exhausted;
and also for allocation to such accruals after completion of construction if
the income from the project, at that time, is insufficient to meet such
accruals.
Any balance of said funds remaining in our hands one year after the
construction completion date will be returned to the Mortgagor, provided the mortgage is not then in default, unless you have directed other
disposition. (Note: Paragraph (6)(a) is not applicable to nonprofit
mortgagor projects under Sections 221, 231, 232, or 242).
We agree that no disbursements will be made from the deposit without
your prior written approval, for projects involving Low-Income Housing
Tax Credits, if the mortgagor agrees for any balance of said funds to be
transferred to the reserve for replacement or any other restricted
account specified by you.
6. (b) We certify that the allowance to make the project operational
included in the HUD estimate of replacement cost shall be disbursed
under the Building Loan Agreement for the same purposes as set forth
in paragraph (6)(a). We agree that no disbursement up to and including
final endorsement will be made from such allowance without your prior
written approval. At final endorsement, any undrawn funds shall be
transferred to the Reserve Fund for Replacements. Any remaining
undrawn funds shall be applied to the reduction of the insured mortgage
at your direction. (Note: Paragraph (6)(b) is applicable only to nonprofit
mortgagors under Sections 221, 231, 232 or 242.)
7. The Mortgagor has deposited with us or subject to our order in a
depository satisfactory to us, the following sums required by your
Commitment: (Check applicable paragraphs.)
Cash required, if any, over the proceeds of the Mortgage, to
complete the project in the amount of $________________________.
Of this amount, $____________________ will be represented by a
grant/loan from a nongovernment source; and $_______________ will
be represented from a grant/loan from a government source. We

Page 1 of 4

form HUD-2434 (10/92)
ref Handbook 4470.1

understand that these funds must be used before any mortgage
proceeds are advanced, except for the grant/loan funds from a
government source, which, with your prior written approval, will be
disbursed on the following prorata basis _____________________.
Since the grant/loan proceeds from a government source will not be
funded upfront at the time of initial closing, and escrow in the amount of
$____________________, which represents 10 percent of the grant/ loan
proceeds being provided from this source, this escrow is in the form of
. The agreement providing for the
advancement of grant/loan proceeds executed / to be executed
between us, HUD, and the government agency or instrumentality is
submitted herewith.
Cash required, if any, over the proceeds of the Mortgage, to
complete the project, which will be used before any mortgage proceeds
are advanced, in the amount of $ _____________________.
Escrow deposit guaranteeing payment foroff site utilities and
streets in the amount of $ ___________________. This deposit is in the
form of (Cash)–(Letter of Credit) -(U.S) bearer bonds with a market
value of 15 percent of the required escrow. ___________________.
Interest rate differential escrow in the amount of $ ____________
which represents the dollar difference between the interest rate in effect
after cut-off for cost certification and the permanent interest rate upon
which the mortgage debt service is calculated. The escrow is in the form of
(Cash) - (Letter of Credit) _____________________.
We shall require that the Mortgagor establish and maintain with us, or
in a depository satisfactory to us, a sinking fund in accordance with the
Regulatory Agreement executed by the Mortgagor and Commissioner for those Section 232 cases where Medicaid reimbursement is
on a depreciation plus interest basis rather than a pass through of
principal and interest on the mortgage. We agree:
(a) To require the mortgagor to direct and empower the payor of
the capital reimbursement funds into a trust account designated by us.
Also, the trust instrument shall be irrevocable unless approved by us
and shall provide that the trustee shall immediately segregate from
each provider payment an amount representing the excess depreciation component of the capital reimbursement per a schedule prepared
by us and pay it into the sinking fund held by us.
(b) To establish and maintain the sinking fund in an interest bearing
bank whose capital and surplus are at least $50,000,000 and which is
federally insured.
(c) To furnish HUD quarterly financial reports on the investments,
accounting on balances, deposits and withdrawals.
(d) To monitor the sinking fund and examine the external auditor’s
fund balance report and notify HUD whether it complies with the
contractual agreement between the mortgagor and us.
(e) To promptly notify HUD in the event of any breach of the
regulatory agreement executed between us and the mortgagor, and
further agree to seek specific performance or other injunctive relief a
appropriate, promptly upon learning of any violation under this regulatory agreement.
(f) The sinking fund constitutes “funds held by us on behalf of the
mortgagor” is held under the contractor of mortgage insurance “for and
on behalf of the mortgagor,” and as such, is unrelated to the bond
transaction.

(g) In the event of a claim for insurance benefits, the amount of
benefits is subject to surcharge if funds have been disbursed from the
sinking fund in a manner or for purposes not in compliance with the
regulatory agreement between us and the mortgagor. No such
surcharge shall be made on the basis of the mortgagor’s failure to make
required deposits into the sinking fund.
8.

We hand you herewith: (Check applicable paragraphs.)
Off site bond in the amount of $ _______________________ .

Evidence to the effect that required off site utilities and streets will
be provided by the public authorities having jurisdiction or by public utility
companies serving the project.
9. We hand you herewith a duplicate copy of the following assurance
for the completion of the project: (Check applicable paragraph.)
Performance bond and payment bond of an approved Surety in the
penal sum of $ ______________________ for each bond.
Assurance of Completion Agreement reflecting the deposit with
__________________________________ of a fund in the amount of
$ ____________________ in the form of (Cash)–(Letter of Credit)
___________________________________ which fund has been deposited and is subject to our order and will be disbursed with your written
approval in the manner and for the purposes provided for in said
agreement.
Personal undertaking in the amount of $ __________________. It
is understood that HUD reserves the right to decide the acceptability of
the principals in the personal undertaking.
10. We hand you herewith the Sponsor's guarantee to meet an initial
operating deficit as required by your Commitment: (If required, check
and complete the applicable paragraph.)
Agreement of Sponsors to Furnish Additional Funds in the amount
of $ __________________ , and Bond Guaranteeing Sponsor's Performance.
Escrow Agreement evidencing a deposit of $______________
U. S. bearer bonds, with a market value of at least 115 percent of
required escrow amount, cash, or a Letter of Credit in the amount of
$_______________________.
11. We hand you herewith the Sponsor’s guarantee to meet the 12month debt services reserve escrow required by your Commitment:
(Applicable only to Section 232 projects involving independent living
units. If required, check and complete the applicable paragraph.)
We have accepted a personal note from the mortgagor for
$____________________ which we will hold until final completion and
Bond Guaranteeing Sponsor’s Performance. The note will then be
converted to cash or a letter of credit. We agree that HUD will treat the
note as a cash item and reduce the insurance benefits by the amount
of the note if there is a mortgage default and we make a claim for
insurance benefits before the note is converted.
A escrow deposit in the amount of $____________________.
This deposit is in the form of (Cash) - (Letter of Credit)_____________.
12. If, upon completion of construction, there is any property on the
premises which is not, under the laws of the jurisdiction, clearly subject
to the lien of the real estate mortgage, we will require from the mortgagor
a financial statement and security agreement per UCC or a chattel

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form HUD-2434 (10/92)
ref Handbook 4470.1

mortgage or other appropriate security instrument covering such
property. If the law of the jurisdiction is such that no additional security
instrument is necessary to cover such property, we will submit our
attorney's opinion to that effect.
13. Beginning with the date on which the first payment toward amortization is required to be made by the terms of the insured Mortgage or at
such later date as may be agreed to by you in writing, we shall require a
monthly deposit with us or in a depository satisfactory to us of onetwelfth (1/12) of the sum set forth in your Commitment for Insurance
constituting a “Reserve Fund for Replacements” which fund will be
subject to our order and from which fund withdrawals may be made only
upon the receipt of your written permission. These funds will be
deposited with us by the Mortgagor in cash or in the form of obligations of
or guaranteed as to principal by the United States of America. We will,
upon appropriate request by the Mortgagor, permit the conversion of
the whole or a substantial part of such cash deposits into the form of
obligations of, or fully guaranteed as to principal by, the United States of
America. Notice of any failure to receive the required deposits will be
forwarded to the Commissioner within 60 days.
14. We understand that nothing herein contained or contained in the
said credit instrument or Mortgage securing the same, or in the other
contract documents, is to be deemed a waiver of any of the provisions of
the aforesaid HUD Regulations, but all of said instruments are
intended to be subject thereto. We hereby agree to conform with and
abide by such HUD Regulations in all matters with respect to the
aforesaid loan and the project in so far as they are applicable to us. We
agree to furnish you with a complete report of the results of our annual
inspection of the mortgaged premises required by the said Regulations.
15. We certify that, if the Mortgagor defaults in its obligation to
complete the construction of the improvements on the mortgaged
premises, we have the right to complete the project, which right is
transferable to the Commissioner, and for that purpose the undisbursed
balance of the Mortgage will be available in the event the completion of
the project is undertaken by either of us. Such undisbursed balance may be
used to discharge any and all valid liens or claims against the project and
all such advances will be considered as made for the account of the
Mortgagor and will be covered by the terms of the Mortgage. It is
understood that all mortgage proceeds funds so advanced for the
completion and preservation of the property will be covered by the
Contract of Mortgage Insurance.
16. So long as the Contractor, and/or Mortgagor, or upon default, the
Surety or any other person acting on behalf of, or in substitution for
them, shall be ready, able and willing to complete the Contract for the
construction of the project, we will, upon notice from you, advance the
undisbursed balance of the Mortgage and authorizing the release of
grant loan proceeds, if any, for that purpose. The term “Contractor” shall
mean all persons, firms or corporations contracting directly with the
Mortgagor for the construction of all or any portion of the project.
17. We certify that all insurance policies on the project required by the
terms of the insured Mortgage will have attached thereto a standard
Mortgagee clause making the loss payable to the Mortgagee and the
Secretary, Department of Housing and Urban Development, as their
interests may appear.
18. We certify and agree that: (Check and complete the following

applicable subparagraphs (a), (b), (c), (d), (e) or (f)).
(a) We have not imposed and will not impose a financing charge
of any kind directly or indirectly, other than the initial service charge in
the amount of $ ________________ which is included in the mortgage
proceeds.
(b) In addition to the initial service charge, we have collected in the
form of (Cash)–(Letter of Credit) ________________________ the
amount of $ ___________________ as a discount or financing charge
for the construction loan. Also, an amount of $ _____________ has
been collected in the form of (Cash) - (Letter of Credit)
_____________________ to cover construction loan extension fees.
In an addendum, we have identified the time frames in which the
extension fees must be paid.
(c) We intend to retain the permanent loan and have collected a
permanent placement fee of $___________________. In addition to
the initial service charge and permanent placement fee, we have
collected in the form of (Cash)–(Letter of Credit) _________________
the amount of $ ___________________ as a discount or financing
charge for the permanent loan. We also intend to collect in the form of
(Cash) - (Letter of Credit) _____________________ an amount of $
____________________ to cover permanent loan extension fees. In
an addendum, we have identified the time frames in which the extension
fees must be paid.
(d) We have a firm commitment from _____________________
_____________________________to purchase the loan when fully
disbursed and fully insured at a financing charge or discount of
____________________________ and we have collected in the form
of (Cash)–(Letter of Credit) ________________________ the sum of
$ _________________________ to cover said charge or discount.
The commitment also requires the collection of permanent loan extension fees in the amount of $ _____________________ , which will be
collected in the form of (Cash) - (Letter of Credit)
____________________. In an addendum, we have identified the time
frames in which the extension fees must be paid.
(e)(1) This project will be financed with (tax-exempt) - (taxable)
_________________ bonds. Therefore, we have collected in the form
of (Cash) - (Letter of Credit)_______________________________ the
amount of $_______________________ to cover costs if issued. A
statement is attached itemizing these costs with an explanation of the
necessity of each cost. We also intend to collect in the form of (Cash)
- (Letter of Credit) ___________________ the amount of
$_____________________ to cover permanent loan extension fees.
In an addendum, we have identified the time frames in which the
extension fees must be paid.
(e)(2) GNMA Mortgage Backed Securities will be issued for the
construction and/or permanent loan(s). We have collected a GNMA
Indemnification Escrow in the form of (Cash)-(Letter of Credit)
_________________ in the amount of $_____________________.
This escrow will be maintained for 36 months after the issuance of the
GNMA security to cover certain losses and expenses which would result
from a mortgage default. We understand that this fee is not cost
certifiable by the mortgagor inasmuch as it will potentially be returned
to the mortgagor at the end of the escrow period iif the project is not in
default be paid.
(f) Additional financing charges or discount of $____________

Page 3 of 4

form HUD-2434 (10/92)
ref Handbook 4470.1

a penalty of one percent or less), to:

are to be collected under the attachment hereto for the purpose shown in
(b), (c), (d), (e). (Strike inapplicable letters). The arrangement for the
collection of additional financing charges or discount must follow forms
and procedures prescribed by Commissioner.

(a) request a three-month extension of the deadline prescribed by
24 CFR Section 207.258 for filing a notice of our intention to file an
insurance claim and our election to assign the mortgage;

No financing charges other than charges disclosed herein have been or
will be made. Until final endorsement for insurance by the Commissioner, all funds collected pursuant to items (c), (d), or (e) above and
not paid over to the permanent lender, plus any funds returned by the
permanent lender, shall be held for the account of the mortgagor and
shall be subject to your control and direction in the event of claim under
the contract of insurance.

(b) assist the mortgagor in arranging a refinancing to cure the
default and avert an insurance claim, if HUD grants the requested (or
a shorter) extension of notice filing deadline;
(c) report to HUD at least monthly on any progress in arranging a
refinancing;
(d) otherwise cooperate with HUD in taking reasonable steps in
accordance with prudent business practices to avoid an insurance
claim;

19. Except for mortgage advances approved by the Commissioner or
notes executed pursuant to (18) (f), we do not have outstanding and
will not make loans or advances to the mortgagor, any of the sponsors,
the general contractor, or the architect for any purpose connected
directly or indirectly with this project without prior written approval of the
Commissioner. We have not made or offered, and will not make or
offer, any guarantees, pledges, reservations of sums to become due or
other inducements to any entity or person to make loans or
advances which we would be prohibited from making under the terms of
this paragraph.

(e) require any successors or assignes to certify in writing that they
agree to be bound by thee conditions for the remainder of the term of
the prepayment lock-out and/or penalty.
23. For any case involving components stored offsite, we agree to:
(a) File UCC-1, financing statements, in the proper jurisdiction with
the proper office;
(b) Make whatever additional filings are necessary to maintain a
first lien on the components until they are incorporated into the building
(s);

20. We certify that we have not made and will not make payment of
any kickback or fee or other consideration, directly or indirectly, to any
person who has received payment or other consideration from any
other person in connection with this mortgage transaction, including
the purchase or sale of the mortgaged property, except for compensation paid or to be paid, if any, for the actual performance of services
and approved by you.

(c) Release the financing statement filings as appropriate;
(d) Unconditional certify by letter to HUD with each disbursement
request that the security instrument(s) is (are) a “first lien” on the building
components covered by the instrument(s). This certification will be
supported by an opinion from our legal counsel;

21. We certify that in any case where a letter of credit has been
accepted instead of cash, (a) such, unconditional and irrevocable
letter of credit has been issued by (1) another banking institution; (2)
ourselves, subject to receiving your written permission prior to initial
endorsement; (b)if demand under the letter of credit is not immediately
met, we will forthwith provide cash equivalent to the undrawn balance
thereunder without recourse to the mortgagor, any sponsor, the
general contractor or the architect; (c) we have not made and will not
make any inducements as described in Paragraph 19 above to procure
issuance of letters of credit; and (d) we have made every reasonable
effort to satisfy ourselves that both the mortgagor and the institution
which issued the letter of credit are aware that it is entirely possible that
demands will be made for cash under the terms of the letter and that
no possibility exists that mortgage proceeds will be available to
reimburse the issuing bank for such cash payouts.

(e) In the event of default under the mortgage, either assign our
security interest to HUD or acquire title through foreclosure to the
components intended for use or incorporation into the building(s) and
convey title to HUD.
(f) Require a performance bond and payment bond equal to 100
percent of the construction contract be used to satisfy the assurance of
completion requirements.
24. Whenever the terms “Mortgage,” “Mortgagor,” or “Mortgagee” are
used herein, the same shall be deemed to include respectively: the
security instrument whether the same be a Mortgage or a Deed of Trust;
the Obligor of the debt secured thereby; the Obligee, or the Trustee(s)
and the Beneficiary of said credit instrument. The term “financing
charge(s)”, as used herein shall mean any charge, direct or indirect, for
supplying the loan to or servicing the loan for the mortgagor. Whenever
used, the singular number shall include the plural, the plural the singular
and the use of any gender shall be applicable to all genders.

22. For mortgages funded with the proceeds of State or local bonds
which contain a lock-out and/or penalty provision, we agree, in the
event of a default during the term of the prepayment lock-out and/or
penalty (i.e., prior to the date on which prepayments may be made with

Date

Mortgagee

Attest:

By

Clear All

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form HUD-2434 (10/92)
ref Handbook 4470.1