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Borrower’s Organizational
Document Provisions
U.S. Department of Housing
and Urban Development
Office of Housing
OMB Approval No.
(Exp. //)
Public Reporting Burden for this collection of information is estimated to average 0.5 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. Response to this request for information is required in order to receive the benefits to be derived. This
agency may not collect this information, and you are not required to complete this form unless it displays a currently valid OMB control
number. While no assurance of confidentiality is pledged to respondents, HUD generally discloses this data only in response to a
Freedom of Information Act request.
Warning: Any person who knowingly presents a false, fictitious, or fraudulent statement or claim in a matter within the jurisdiction of
the U.S. Department of Housing and Urban Development is subject to criminal penalties, civil liability, and administrative sanctions.
{Use in accordance with MAP Guide Chapter 19.}
The Borrower’s organizational governing document (partnership agreement, operating
agreement, or by-laws, as applicable) must provide that the Borrower will be in
existence at least as long as the term of the Loan and must include the following
provisions (that may automatically terminate when the Loan is no longer is insured or
held by HUD):
Notwithstanding any clause or provision in the [identify both the formation
document(s) and the governing document(s)] to the contrary, and so long as the
United States Department of Housing and Urban Development (“HUD”), or its
successors or assigns, insures or holds any loan to [Borrower] (“the HUD-insured
Loan”), including the loan secured by a [insert type of security instrument used in
Project state, e.g., mortgage] lien on [insert project’s name and FHA project number]
in [insert city, county and state] (the “Project”) the following provisions apply:
Terms. The terms listed below shall have the following definitions:
“Borrower” means [insert name of FHA Borrower].
“Lender” means the entity identified as “Lender” in the first paragraph of the
Security Instrument, or any subsequent holder of the HUD-insured Note.
"HUD Regulatory Agreement" means the Regulatory Agreement between
Borrower and HUD with respect to the Project, as the same may be amended
from time to time.
“Security Instrument” means the mortgage or deed of trust from Borrower in favor
of Lender, as the same may be amended from time to time.
“HUD-insured Note” means the Note executed by Borrower, and described in the
Security Instrument, including all schedules riders, allonges and agenda, as such
Note may be amended from time to time.
Requirements.
Borrower’s Organizational Document Provisions
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1. If any of the provisions of Borrower’s organizational documents conflict with the
terms of the HUD-insured Note, Security Instrument, or HUD Regulatory
Agreement ("HUD Loan Documents"), the provisions of the HUD Loan
Documents shall control.
2. No provision required by HUD to be inserted into the organizational documents
may be amended without HUD’s prior written approval. Additionally, if there is a
conflict between any HUD-required provisions inserted into this Agreement and
any other provision of this Agreement, the terms of the HUD-required provisions
will govern; and if there is a conflict between any of the provisions in the [insert
appropriate document, i.e., Articles of Organization] and any HUD-required
provisions of this Agreement, the HUD-required provisions will govern.
3. Unless otherwise approved in writing by HUD, Borrower’s business and purpose
shall consist solely of the acquisition, ownership, operation and maintenance of
the Project and activities incidental thereto. Borrower shall not engage in any
other business or activity. The Project shall be the sole asset of the Borrower
entity, which shall not own any other real estate other than the aforesaid Project.
4. None of the following will have any force or effect without the prior written
consent of HUD:
a. Any amendment that modifies the term of Borrower’s existence;
b. Any amendment that triggers application of the HUD previous participation
certification requirements (as set forth in Form HUD-2530, Previous
Participation Certification, or 24 CFR § 200.210, et seq.);
c. Any amendment that in any way affects the HUD Loan Documents;
d. Except as permitted under section 10 below, any amendment that would
authorize any member, manager, partner, owner, officer or director, other
than the one previously authorized by HUD, to bind the Borrower entity for
any matters concerning the Project which require HUD's consent or
approval;
e. A change that is subject to the HUD TPA requirements contained in
Chapter 13 of HUD Handbook 4350.1 REV-1;
f. Any change in a guarantor of any obligation to HUD (including those
obligations arising from violations of the HUD Regulatory Agreement); and
g. Any grant of a security interest in any of Borrower’s assets or mortgaged
property.
5. Borrower is authorized to execute a Note and Security Instrument in order to
secure a loan to be insured by HUD and to execute the HUD Regulatory
Agreement and other documents required by the Secretary in connection with the
HUD-insured loan.
6. Any incoming member/partner/owner of Borrower must, as a condition of
receiving an interest in the Borrower entity, agree in writing to be subject to the
HUD Loan Documents and all other documents required in connection with the
HUD-insured loan, to the same extent and on the same terms as the other
members/partners/owners.
Borrower’s Organizational Document Provisions
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7. Upon any dissolution, no title or right to possession and control of the Project,
and no right to collect the rents from the Project, shall pass to any person or
entity that is not bound by the HUD Regulatory Agreement in a manner
satisfactory to HUD.
8. The key principals of Borrower identified in the HUD Regulatory Agreement are
liable in their individual capacities to HUD to the extent set forth in the HUD
Regulatory Agreement.
9. Borrower shall not voluntarily be dissolved or converted to another form of entity
without the prior written approval of HUD.
10. Borrower has designated _________________________ [insert name, individual
must be 2530 Previous Participation Certified] as its official representative for all
matters concerning the Project that require HUD consent or approval. The
signature of this representative will bind Borrower entity in all such matters.
Borrower may, from time to time, appoint a new representative to perform this
function, provided that the individual so appointed is 2530 Previous Participation
Certified, and within three business days of doing so, will provide HUD with
written notification of the name, address, and telephone number of its new
representative. When a person other than the person identified above has full or
partial authority with respect to management of the Project, Borrower will
promptly provide HUD with the name of that person and the nature of that
person’s management authority.
11. Any obligation of the [Corporation / Partnership / Limited Liability Company] to
provide indemnification under this [Operating Agreement / Partnership
Agreement / Bylaws] shall be limited to (i) amounts mandated by state law, if any,
(ii) coverage afforded under any liability insurance carried by the [Company /
Partnership] and (iii) available “surplus cash” of the Borrower as defined in the
HUD Regulatory Agreement. Until funds from a permitted source for payment of
indemnification costs are available for payment, the [Corporation / Partnership /
Limited Liability Company] shall not (a) pay funds to any members, partners,
officers and directors, or (b) pay the deductible on an indemnification policy for
any members, partners, officers and directors.
12. [To be included in Projects with LIHTC financing, only] No amendment or change
to the obligations or rights of the tax credit investor(s), as approved by HUD,
[insert title of the entity or individuals, or defined term used in the governing doc.],
may be made without the prior written consent of HUD and Lender.
Borrower’s Organizational Document Provisions
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File Type | application/pdf |
File Title | https://hudgov-my.sharepoint.com/personal/wendy_n_houston_hud_gov/Documents/_4-30-24 OMB/9xxxM - Borrwer's Org Doc Provisions_mo |
Author | H10373 |
File Modified | 2024-05-02 |
File Created | 2024-05-02 |