92466M Regulatory Agreement_final 6-9-21

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OMB Approval No. 2502-0598
(Exp. //)

Public Reporting Burden for this collection of information is estimated to average .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. 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.

Recording Requested by:
_____________________
_____________________
_____________________
_____________________
After Recording return to:
_____________________
_____________________
_____________________
_____________________

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
REGULATORY AGREEMENT FOR MULTIFAMILY PROJECTS
UNDER SECTIONS 207, 220, 221(d)(4), 223(a)(7), 223(f) and 231 OF THE
NATIONAL HOUSING ACT, AS AMENDED
Project Name:
HUD Project No.:
HAP Contract No.:
Project Location:
Lender:

Processed under:

[ ]MAP

[ ]TAP

Original Principal Amount of Multifamily Note:

Originally endorsed for insurance under Section ______________. Date of Note:

Residual Receipts Rider: ______Yes _____No
*If “yes” is checked, the Surplus Cash and Distribution provisions of this Agreement are modified by an
attached Rider relating to residual receipts account requirements.

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This Regulatory Agreement for Multifamily Projects (“Agreement”) is entered into
this
day of
, 20 , between ________________________________,
a
organized and existing under the laws of
, whose address is
, its successors, heirs, and assigns (jointly and
severally) (Borrower) and the United States Department of Housing and Urban
Development, acting by and through the Secretary, his or her successors, assigns or
designates (HUD).
In consideration of, and in exchange for an action by HUD, HUD and Borrower agree
to the terms of this Agreement. The HUD action may be one of the following: HUD’s
endorsement for insurance of the Note, HUD’s consent to the transfer of the Mortgaged
Property, HUD’s sale and conveyance of the Mortgaged Property, or HUD’s consent to
other actions related to Borrower or to the Mortgaged Property.
Further, Borrower and HUD execute this Agreement in order to comply with the
requirements of the National Housing Act, as amended, and the regulations adopted by
HUD pursuant thereto. This Agreement shall continue during such period of time as
HUD shall be the owner, holder, or insurer of the Note. Upon satisfaction of such Note,
this Agreement shall automatically terminate. However, Borrower shall be responsible
for any Violations of this Agreement which occurred prior to termination.
Violation of this Agreement may subject Borrower and other signatories hereto to
adverse actions. Refer to Article VII below.
AGREEMENTS: Borrower and HUD covenant and agree as follows:
I. DEFINITIONS
1. DEFINITIONS. Any capitalized term or word used herein but not defined shall have
the meaning given to such term in the Security Instrument between Borrower and
Lender or the Note. The following terms, when used in this Agreement (including when
used in the above recitals), shall have the following meanings, whether capitalized or
not and whether singular or plural, unless, in the context, an incongruity results:
a. “Affiliate” means any person or business concern that directly or indirectly
controls policy of a Principal or has the power to do so. Persons and business
concerns controlled by the same third party are also Affiliates.
b. “Borrower” means all entities identified as “Borrower” in the first paragraph of
the Security Instrument, together with any successors, heirs, and assigns (jointly
and severally). “Borrower” shall include any entity taking title to the Mortgaged
Property whether or not such entity assumes the Note. Whenever the term
“Borrower” is used herein, the same shall be deemed to include the obligor of the
debt secured by the Security Instrument and shall also be deemed to be the
mortgagor as defined by Program Obligations.
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c. “Business Day” is defined in Section 46.
d. “Construction Contract” means the construction contract, approved by HUD,
between Borrower and the contractor contracting to perform construction or
substantial rehabilitation on the Project.
e. “Declaration of Default” is defined in Section 37.
f. “Displaced Persons or Families” means a person, family or families, displaced
from (i) an urban renewal area, (ii) as a result of government action, or (iii) as a
result of a major disaster determined by the President pursuant to the Robert T.
Stafford Disaster Relief and Emergency Assistance Act.
g. “Distribution” means any disbursal, conveyance or transfer of any portion of the
Mortgaged Property, including the segregation of cash or assets for subsequent
withdrawal as Surplus Cash, other than in payment of Reasonable Operating
Expenses, or any other disbursement, conveyance, or transfer provided for in
this Agreement.
h. “Elderly Person” means any person, married or single, who is 62 years of age
or older.
i.

“Fixtures” means all property or goods that become so related or attached to
the Land or the Improvements that an interest arises in them under real property
law, whether acquired now or in the future, excluding all tenant owned goods and
property, and including but not limited to: machinery, equipment, engines,
boilers, incinerators, installed building materials; systems and equipment for the
purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or
light; antennas, cable, wiring and conduits used in connection with radio,
television, computers, security, fire prevention, or fire detection or otherwise used
to carry electronic signals; telephone systems and equipment; elevators and
related machinery and equipment; fire detection, prevention and extinguishing
systems and apparatus; security and access control systems and apparatus;
plumbing systems; water heaters, ranges, stoves, microwave ovens,
refrigerators, dishwashers, garbage disposals, washers, dryers and other
appliances; light fixtures, awnings, storm windows and storm doors; pictures,
screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling,
rugs and floor and wall coverings; fences, trees and plants; swimming pools;
playground and exercise equipment and classroom furnishings and equipment.

j.

“Goods and Services” is defined in Section 22.

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k. “HUD” means the United States Department of Housing and Urban
Development acting by and through the Secretary in his or her capacity as
insurer or holder of the Loan under the authority of the National Housing Act, as
amended, the Department of Housing and Urban Development Act, as amended,
or any other federal law or regulation pertaining to the Loan or the Mortgaged
Property.
l.

“Impositions” and “Imposition Deposits” are defined in the Security
Instrument.

m. “Improvements” means the buildings, structures, and alterations now
constructed or at any time in the future constructed or placed upon the Land,
including any future replacements and additions.
n. “Indebtedness” means the principal of, interest on, and all other amounts due at
any time under the Note, the Security Instrument, and any other Loan Document,
including prepayment premiums, late charges, default interest, and advances to
protect the security as provided in the Security Instrument.
o. “Land” means the estate in realty described in Exhibit A.
p. “Leases” means all present and future leases, subleases, licenses, concessions
or grants or other possessory interests now or hereafter in force, whether oral or
written, covering or affecting the Mortgaged Property, or any portion of the
Mortgaged Property (including but not limited to proprietary leases, nonresidential leases or occupancy agreements if Borrower is a cooperative housing
corporation), and all modifications, extensions or renewals. (Ground leases that
create a leasehold interest in the Land and where the Borrower’s leasehold is
security for the Loan are not included in this definition.)
q. “Lender” means the entity identified as "Lender" in the first paragraph of the
Security Instrument, or any subsequent holder of the Note, and whenever the
term “Lender” is used herein, the same shall be deemed to include the Obligee,
or the Trustee(s) and the Beneficiary of the Security Instrument and shall also be
deemed to be the mortgagee as defined by Program Obligations.
r. “Loan” means the loan initially made by Lender to Borrower, as defined in the
Security Instrument.
s. “Mortgaged Property” means all of Borrower's present and future right, title and
interest in and to all of the following whether now held or later acquired:
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(1)

the Land;

(2)

the Improvements;

(3)

the Fixtures;

(4)

the Personalty;

(5)

all current and future rights, including air rights, development rights,
zoning rights and other similar rights or interests, easements, tenements,
rights-of way-, strips and gores of land, streets, alleys, roads, sewer rights,
waters, watercourses, and appurtenances related to or benefiting the Land
or the Improvements, or both, and all rights-of-way, streets, alleys and
roads that may have been or may in the future be vacated;

(6)

all insurance policies covering the Mortgaged Property, and all proceeds
paid or to be paid by any insurer of the Land, the Improvements, the
Fixtures, the Personalty or any other part of the Mortgaged Property,
whether or not Borrower obtained such insurance policies pursuant to
Lender’s requirement;

(7)

all awards, payments and other compensation made or to be made by any
Governmental Authority with respect to the Land, the Improvements, the
Fixtures, the Personalty or any other part of the Mortgaged Property,
including any awards or settlements resulting from condemnation
proceedings or the total or partial taking of the Land, the Improvements,
the Fixtures, the Personalty or any other part of the Mortgaged Property
under the power of eminent domain or otherwise and including any
conveyance in lieu thereof;

(8)

all contracts, options and other agreements for the sale of the Land, the
Improvements, the Fixtures, the Personalty or any other part of the
Mortgaged Property entered into by Borrower now or in the future,
including cash or securities deposited to secure performance by parties of
their obligations;

(9)

all proceeds (cash or non-cash), liquidated claims or other consideration
from the conversion, voluntary or involuntary, of any of the Mortgaged
Property and the right to collect such proceeds, liquidated claims or other
consideration;

(10)

all Rents and Leases;

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(11)

all earnings, royalties, instruments, accounts, accounts receivable,
supporting obligations, issues and profits from the Land, the
Improvements or any other part of the Mortgaged Property, and all
undisbursed proceeds of the Loan and, if Borrower is a cooperative
housing corporation, maintenance charges or assessments payable by
shareholders or residents;

(12)

all Imposition Deposits;

(13)

all refunds or rebates of Impositions by any Governmental Authority or
insurance company (other than refunds applicable to periods before the
real property tax year in which the Security Instrument is dated);

(14)

all forfeited tenant security deposits under any Lease;

(15)

all names under or by which any of the above Mortgaged Property may be
operated or known, and all trademarks, trade names, and goodwill relating
to any of the Mortgaged Property;

(16)

all deposits and/or escrows held by or on behalf of Lender under Collateral
Agreements; and

(17)

all awards, payments, settlements or other compensation resulting from
litigation involving the Project.

Notwithstanding items numbered (1) through (17) above, Borrower may hold nonproject funds in separate, segregated accounts, specifically labeled as non-project
funds, which are not part of the Mortgaged Property. These accounts may hold those
assets owned or received by Borrower, through equity contributions, gifts, or loan
proceeds that were not required by HUD to become part of the Mortgaged Property and
were not made a part of the Mortgaged Property by Borrower and funds released from
the Mortgaged Property in compliance with Program Obligations (such as Distributions
of Surplus Cash and loan repayments, if allowed). [If such accounts already exist, it is
acceptable to identify them here, for example: The [name of accounts/reserves] are
designated non-project fund accounts.]
t. “Note” means the Note executed by Borrower described in the Security
Instrument, including all schedules, riders, allonges and addenda, as such Note
may be amended from time to time.
u. “Notice” is defined in Section 46.
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v. “Personalty” means all equipment, inventory, and general intangibles. The
definition of “Personalty” includes furniture, furnishings, machinery, building
materials, appliances, goods, supplies, tools, books, records (whether in written
or electronic form), computer equipment (hardware and software) and other
tangible or electronically stored personal property (other than Fixtures) that are
owned, leased or used by Borrower now or in the future in connection with the
ownership, management or operation of the Land or the Improvements or are
located on the Land or in the Improvements, and any operating agreements
relating to the Land or the Improvements, and any surveys, plans and
specifications and contracts for architectural, engineering and construction
services relating to the Land or the Improvements, choses in action and all other
intangible property and rights relating to the operation of, or used in connection
with, the Land or the Improvements, including all certifications, approvals and
governmental permits relating to any activities on the Land. Intangibles shall also
include all cash and cash escrow funds related to the Project, such as but not
limited to: Reserve for Replacement accounts, bank accounts, Residual Receipt
accounts, and investments.
w. “Principal” means:
(1)

an individual, joint venture, partnership, corporation, trust, nonprofit
association, or any other public or private entity proposing to participate,
or participating, in a project as sponsor, owner, prime contractor, turnkey
developer, management agent, packager, or consultant; and architects
and attorneys who have any interest in the project other than an armslength fee arrangement for professional services;

(2)

the term principal also includes: (i) any Affiliates of a principal; (ii) if the
principal is a partnership, all general partners, and each limited partner
having a 25 percent or more interest in the partnership; (iii) if the principal
is a public or private corporation or governmental entity; the president,
vice-president, secretary and treasurer and any other executive officers
who are directly responsible to the board of directors, or the equivalent
thereof; all the directors; and each stockholder having a 10 percent or
more interest; and

(3)

specifically excepted from this definition of a principal are: (i) parties
whose sole interest is that of purchaser or owner of less than five
individual unit(s) in the same condominium or cooperative development;
(ii) parties whose sole interest is that of a tenant; and (iii) public housing
agencies.

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x. “Project” and “Project Assets” mean the Mortgaged Property.
y. “Program Obligations” means (1) all applicable statutes and any regulations
issued by the Secretary pursuant thereto that apply to the Project, including all
amendments to such statutes and regulations, as they become effective, except that
changes subject to notice and comment rulemaking shall become effective only
upon completion of the rulemaking process, and (2) all current requirements in HUD
handbooks and guides, notices, and mortgagee letters that apply to the Project, and
all future updates, changes and amendments thereto, as they become effective,
except that changes subject to notice and comment rulemaking shall become
effective only upon completion of the rulemaking process, and provided that such
future updates, changes and amendments shall be applicable to the Project only to
the extent that they interpret, clarify and implement terms in this Agreement rather
than add or delete provisions from such document. Handbooks, guides, notices,
and mortgagee letters are available on “HUDCLIPS,” at www.hud.gov.
z. “Property Jurisdiction” is (are) the jurisdiction(s) in which the Land is located.
aa. “Reasonable Operating Expenses” means the reasonable expenses and
payments that arise from the purchase of goods or services which are exclusively
used for the operation, maintenance, and routine repair of the Project (including all
payments and deposits required under this Agreement, the Note, or the Security
Instrument), or as otherwise permitted by Program Obligations.
bb. “Rents” means all rents (whether from residential or non-residential space),
revenues, issues, profits (including carrying charges, maintenance fees, and other
cooperative revenues, and fees received from leasing space on the Mortgaged
Property), other income of the Land or the Improvements, gross receipts,
receivables, parking fees, laundry and vending machine income and fees and
charges for food and other services provided at the Mortgaged Property, whether
now due, past due, or to become due, Residual Receipts, and escrow accounts,
however and whenever funded and wherever held.
cc. “Reserve for Replacement” is defined in Section 10.
dd. “Residual Receipts” means certain funds which are restricted in their use by
Program Obligations and applicable business documents (e.g., HAP Contract, Use
Agreement) as may be more specifically described in a Residual Receipts Rider
attached hereto.
ee. “Security Instrument” means the Multifamily (Mortgage, Deed of Trust, Deed
to Secure Debt, or other designation as appropriate in Property Jurisdiction),
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Assignment of Leases and Rents and Security Agreement (HUD-94000M), and any
other security for the Indebtedness between Borrower and Lender and shall be
deemed to be the “mortgage” as defined by Program Obligations.
ff. “Surplus Cash” means certain Project cash pursuant to the calculation set forth
in Section 13.
gg. “State” includes the several states comprising the United States of America,
and Puerto Rico, the District of Columbia, Guam, the Commonwealth of the Northern
Marianas, American Samoa, and the U.S. Virgin Islands.
hh. “Taxes” means all taxes, assessments, vault rentals and other charges, if any,
general, special or otherwise, including all assessments for schools, public
betterments and general or local improvements, that are levied, assessed or
imposed by any public authority or quasi-public authority, and that, if not paid, could
become a lien on the Land or the Improvements.
ii. “Undocumented Expense” is defined in Section 16.
jj. “Violation” is defined in Section 36.
kk. “Waste” means a failure to keep the Mortgaged Property in decent, safe and
sanitary condition and in good repair. During any period in which HUD insures the
Loan or holds a security interest on the Mortgaged Property, Waste is committed
when, without Lender’s and HUD’s express written consent, Borrower:
(1)

physically changes the Mortgaged Property, whether negligently or
intentionally, in a manner that reduces its value;

(2)

fails to maintain and repair the Mortgaged Property in accordance with
Program Obligations;

(3)

fails to pay before delinquency any Taxes secured by a lien having priority
over the Security Instrument;

(4)

materially fails to comply with covenants in the Note, the Security
Instrument or this Regulatory Agreement respecting physical care,
maintenance, construction, abandonment, demolition, or insurance
against casualty of the Mortgaged Property; or

(5)

retains possession of Rents to which Lender or its assigns have the right
of possession under the terms of the Loan Documents.

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II. CONSTRUCTION; REFINANCING
2. [Check the applicable box(es):]
a. CONSTRUCTION FUNDS. Borrower shall keep funds of the Mortgaged Property
to be used for construction or substantial rehabilitation separate and apart from
operating funds of the Mortgaged Property. Funds for construction or substantial
rehabilitation are identified in the Building Loan Agreement and/or Construction
Contract.
b. DEFERRED REPAIR FUNDS. Borrower shall keep funds of the Mortgaged
Property to be used for deferred repairs separate and apart from operating funds of the
Mortgaged Property. Funds for deferred repairs are identified in the Escrow Agreement
for Deferred Repairs, if applicable.
3. UNPAID OR OUTSTANDING OBLIGATIONS. Borrower certifies, upon final or
initial/final endorsement of the Note by HUD, Borrower shall have no unpaid obligations
in connection with the purchase of the Mortgaged Property, the construction or repair of
the Mortgaged Property, or with respect to the Security Instrument, except such unpaid
obligations as have the written approval of HUD as to terms, form and amount; and,
except for those obligations approved by HUD in writing, the Land shall be paid for in
full and is free from any liens or purchase money obligations, or if the Land is subject to
a leasehold interest, it shall be subject to a HUD approved lease, and it shall be free
from any lien. As of the date hereof, Borrower has no knowledge of any liens or
encumbrances against the Mortgaged Property that are not reflected as exceptions to
coverage in the lender’s title policy insuring the Security Instrument accepted by HUD or
that are not shown on the UCC search. All contractual obligations of Borrower or on
behalf of Borrower with any party shall be fully disclosed to HUD.
4. LENDER’S CERTIFICATE. Borrower acknowledges receipt of the Lender’s
Certificate or the Request for Endorsement of Credit Instrument & Certificate of Lender,
Borrower & General Contractor, as applicable. To the extent such document
establishes or reflects obligations of Borrower, such provisions are incorporated herein
by this reference. Borrower agrees that the fees and expenses enumerated in the
applicable document have been fully paid or payment has been provided for as set forth
in such document and that all funds deposited with Lender shall be used for the
purposes set forth in such document insofar as Borrower has rights and obligations in
respect thereto.
5. CONSTRUCTION COMMENCEMENT/REPAIRS.
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a. [Check the box to the left for Construction/Substantial Rehabilitation
transactions.] Borrower certifies that it has not commenced construction or substantial
rehabilitation of the Mortgaged Property prior to HUD’s initial endorsement of the Note,
except that this Section 5a is not applicable if HUD has given prior written approval to
an early start of construction, or if this Project is an Insurance Upon Completion or if
such work has been disclosed to and approved in writing by HUD. If Borrower has
received prior written approval for early start, Borrower shall perform, observe and
comply with all Program Obligations for early start prior to initial endorsement, which
includes but is not limited to the release of liens in association with the Project, the
funding of escrows for change orders, and the payment of an inspection fee.
b. [Check the box to the left for Refinance/Purchase transactions.] Borrower shall
complete all required repairs in accordance with the terms of the Firm Commitment.
Borrower is in receipt of HUD’s written acknowledgment of the satisfactory completion
of certain repairs to the Mortgaged Property to the extent such repairs have been
completed. Borrower has provided funds to complete any remaining deferred repairs,
as evidenced by the Escrow Agreement for Deferred Repairs, in accordance with
Program Obligations, if applicable.
6. DRAWINGS AND SPECIFICATIONS. The Mortgaged Property shall be
constructed in accordance with the terms of the Construction Contract as approved by
HUD, if any, and with the Drawings and Specifications, if any, that have been approved
by HUD and deemed attached to the Construction Contract.
7. REQUIRED PERMITS
a. [Check the box to the left for Construction/Substantial Rehabilitation
transactions.] The Borrower has obtained, or caused to be obtained, all necessary
certificates, permits, licenses, qualifications, authorizations, consents and approvals
from all necessary Governmental Authorities to own and operate the Project and to
carry out all of the transactions required by the Loan Documents and to comply with all
applicable federal statutes and regulations of HUD in effect on the date of the Firm
Commitment, except for those, if any, which customarily would be obtained at a later
date, at an appropriate stage of construction or completion thereof, and which the
Borrower shall obtain, or cause to be obtained, in the future. As the construction of the
Project progresses, the Borrower will obtain or cause to be obtained, and submit to
HUD and Lender all necessary building and other permits required by Governmental
Authorities. The Mortgaged Property shall not be available for occupancy by any tenant
without the prior written approval of HUD and of all other legal authorities having
jurisdiction of the Mortgaged Property.

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b. [Check the box to the left for Refinancing/Acquisition transactions.] Borrower
has obtained, or cause to be obtained, all necessary certificates, permits, licenses,
qualifications, authorizations, consents and approvals from all necessary Governmental
Authorities to own and operate the Project, to carry out all of the transactions required
by the Loan Documents and to comply with all applicable federal statutes and
regulations of HUD in effect on the date of the Firm Commitment. If HUD requires that
Borrower execute an Escrow Agreement for Deferred Repairs in connection with HUD’s
endorsement for insurance of the Note, the licenses and permits that are in effect as of
the date hereof are sufficient to allow any repair of the improvements required pursuant
to the terms of the Escrow Agreement for Deferred Repairs to proceed to completion in
the ordinary course.
8. ACCOUNTING REQUIREMENTS.
a. [Check the box to the left for Construction/Substantial Rehabilitation
transactions.] Borrower shall submit a cost certification to HUD, if and as required by
Program Obligations, for all receipts and disbursements during the period set forth
therein. The excess of project income over property disbursements, as determined by
HUD, shall be treated as a recovery of construction cost, except as otherwise allowed in
Program Obligations.
b. [Check the box to the left for Refinancing/Acquisition transactions.] Borrower
shall submit a cost certification to HUD, if and as required by Program Obligations,
including all receipts and disbursements relating to repairs required pursuant to the
Building Loan Agreement and/or the Escrow Agreement for Deferred Repairs. Any
funds remaining after completion of the repairs shall be treated in accordance with
Program Obligations, and pursuant to the Escrow Agreement for Deferred Repairs, if
applicable.

III. FINANCIAL MANAGEMENT
9. PAYMENTS. Borrower shall make promptly all payments due under the Note,
Security Instrument, and this Agreement.
10. RESERVE FOR REPLACEMENT. Borrower shall establish and maintain a
Reserve for Replacement account for defraying certain costs of replacing major
structural elements and mechanical equipment of the Project or for any other purpose.
a. The Reserve for Replacement shall be deposited with Lender or in a safe and
responsible depository designated by Lender in accordance with Program Obligations.
Such funds shall at all times remain under the control of Lender or Lender’s designee
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and shall be held in accounts insured or guaranteed by a federal agency and in
accordance with Program Obligations.
b. Borrower shall deposit a monthly amount of $______ concurrently with the
Amortization Commencement Date unless a different date or amount is established by
HUD. The amount of the monthly deposit may be increased or decreased from time to
time at the written direction of HUD without a recorded amendment to this Agreement.
At least every ten years, starting from the date of initial or initial/final endorsement of the
Note, and more frequently at HUD’s sole discretion, Borrower shall submit to HUD a
written analysis of its use of the Reserve for Replacement during the prior ten years and
the projected use of the Reserve for Replacement in accordance with Program
Obligations.
c. Borrower shall carry the balance in this account on the financial records as a
restricted asset. The Reserve for Replacement shall be invested in accordance with
Program Obligations, and any interest earned on the investment shall be deposited in
the Reserve for Replacement for use by the Project in accordance with this Section 10.
d. Disbursements from the Reserve for Replacement shall only be made after consent,
in writing, of HUD, in its sole discretion, or as otherwise approved by HUD pursuant to
Program Obligations. In the event of an actual or imminent Declaration of Default under
the terms of the Security Instrument, a written notification by HUD to Borrower of a
violation of this Agreement, or at such other times as determined solely by HUD, HUD
may direct the application of the balance in such account to the amount due on the
Indebtedness or for such Project-related purposes as may be determined solely by
HUD.
e. In the case of a transfer of the Mortgaged Property where the Project is already
subject to a Security Instrument insured or held by HUD as of the date hereof, and this
Agreement is now being executed by Borrower as of the date hereof, the Reserve for
Replacement now to be established shall be equal to the amount due to be in such
account under this Agreement, and payments hereunder shall begin with the first
payment due on the Security Instrument after acquisition, unless some other method of
establishing and maintaining the account is approved in writing by HUD.
f. Upon Borrower’s full satisfaction of all HUD obligations, including but not limited to
those imposed under this Agreement, Borrower shall receive any monies remaining in
the Reserve for Replacement.
11. PROPERTY AND OPERATION; ENCUMBRANCES.
a. Borrower shall deposit all Rents and other receipts of the Project in connection with
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the financing of the Project, including equity or capital contributions required under
the Firm Commitment or otherwise advanced for the purpose and as part of the
Mortgaged Property, in the name of the Project in a federally insured depository or
depositories and in accordance with Program Obligations. (Such required equity or
capital contributions shall not include certain syndication proceeds, such as proceeds
from Low Income Housing Tax Credit transactions used to repay bridge loans, all as
more fully set forth in Program Obligations.) Such funds shall be withdrawn only in
accordance with the provisions of this Agreement for Reasonable Operating Expenses
of the Project or for Distribution of Surplus Cash or as reimbursement of advances as
permitted by Sections 14 and 15 below; or for permitted deposits authorized by this
Agreement or for any other reason authorized under this Agreement. Any person or
entity receiving Mortgaged Property other than for payment of Reasonable Operating
Expenses, authorized Distributions of Surplus Cash, or for any reason authorized under
Section 34 of this Agreement, shall immediately deliver such Mortgaged Property to the
Project and failing so to do shall hold such Mortgaged Property in trust.
b. Borrower shall not engage in any business or activity, including the operation of any
other project, or incur any liability or obligation not in connection with the Project, nor
acquire an Affiliate or contract to enter into any affiliation with any party except as
otherwise approved by HUD.
c. Borrower shall satisfy or obtain a release of any mechanic’s lien, attachment,
judgment lien, or any other lien that attaches to the Mortgaged Property or any part
thereof.
d. Penalties, including but not limited to delinquent tax penalties and civil money
penalties, shall not be paid from the Project.
e. Borrower shall promptly notify HUD of the appointment of any receiver for the
Project, the filing of a petition in bankruptcy or insolvency or for reorganization.
f. Borrower shall keep the Mortgaged Property insured at all times in accordance with
the Security Instrument and Program Obligations, and Borrower shall notify HUD of all
payments received from an insurer.
g. Borrower shall notify HUD of any action or proceeding relating to any condemnation
or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged
Property, whether direct or indirect condemnation.
h. Borrower shall notify HUD of any litigation proceeding filed against Borrower or the
Project, or any litigation proceeding filed by Borrower.
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12. SECURITY DEPOSITS. Any funds collected as security deposits shall be kept
(a) separate and apart from all other funds of the Project; (b) in interest bearing trust
accounts, to the extent required by State or local law; and (c) in an amount which shall
at all times equal or exceed the aggregate of all outstanding obligations under said
account. Security deposit account interest shall be paid on a pro rata basis to tenants
or applied to sums due under their leases upon the termination of their tenancy in the
Project. The use of tenant security deposits for Project operations is prohibited unless
the tenant has forfeited the deposit.
13. SURPLUS CASH.
a. Borrower must calculate Surplus Cash as of the last day of its fiscal year. Borrower
may also, at its election, and if permitted pursuant to Program Obligations, calculate
Surplus Cash as of the last day of the sixth month of its fiscal year. Borrower shall
submit a report of its Surplus Cash calculation(s) to HUD with its required annual
financial reports, pursuant to Program Obligations.
b. Surplus Cash shall equal the sum of:
(1)

Project cash and cash equivalents (excluding the Reserve for
Replacement account and other HUD-required reserves);

(2)

short-term investments;

(3)

project-based Section 8 Housing Assistance Payments earned but not yet
received by Borrower; and

(4)

any amounts approved for withdrawal but not yet withdrawn from the
Reserve for Replacements or any other reserves or escrow accounts;
after deducting:

(5)

all sums due or required to be paid within the calendar month following the
date as of which Surplus Cash is calculated under the terms of the Note
and Security Instrument (including without limitation principal, interest,
mortgage insurance premium deposits, deposits to the Reserve for
Replacements and other reserves as may be required by HUD, and tax
and insurance escrow deposits);

(6)

all special funds required to be segregated by this Agreement, the Note,
the Security Instrument, or Program Obligations, including tenant security
deposits and any other amounts held in trust for tenants; and

(7)

all other obligations of the Project payable within the next thirty days,
unless the obligation is paid subject to available Surplus Cash or subject

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funds for payment of the obligation are set aside or HUD has approved
deferment of payment.
14.
DISTRIBUTIONS. Borrower shall not make or take, or receive and retain, nor
allow any Affiliate or Principal to receive or retain any Distribution of assets or any
income of any kind of the Project, except from Surplus Cash or in accordance with
Program Obligations. Distributions are governed by the following conditions:
a. No Distribution shall be made or taken from borrowed funds. Distributions shall
not be taken prior to the completion of the Project. Distributions shall not be
taken after HUD has given Notice to Borrower of a Violation under this
Agreement or an Event of Default occurs under the Note or Security Instrument.
Distributions shall not be taken when a Project is under a forbearance
agreement.
b. No Distribution shall be made or taken when either (i) necessary services
(utilities, trash removal, security, lawn service or any other services that Borrower
is required to provide) are not being provided on a regular basis, which failure
Borrower should have known about in the exercise of due care; (ii) notices of
physical repairs or deficiencies (including, but not limited to, building code
violations) by Governmental Authorities and/or by HUD have been issued and
remain unresolved to the satisfaction of the issuing public body; or (iii) Borrower
has been notified by HUD, Lender or a Governmental Authority that physical
repairs and/or deficiencies exist and Borrower has not corrected or cured the
identified items to HUD’s satisfaction. Upon completion of the repairs, HUD may
permit a Distribution to be placed in an escrow account until a subsequent
inspection has been completed by HUD. If the Project passes a subsequent
inspection, HUD may then authorize release of the funds in the escrow account
to Borrower. HUD may also permit Distributions when there are minor or
contested local code violations on a case-by-case basis.
c. Any Distribution of any funds of the Project not permitted by this Agreement or
Program Obligations shall be returned to the appropriate Project account as
specified by HUD immediately.
d. Any Distributions shall be made or taken only as permitted by the law of the
applicable jurisdiction. Distributions, if taken, must be taken out of the
appropriate Project account as specified by HUD within the accounting period
immediately following the computation of Surplus Cash, and prior to the
Borrower’s next calculation of Surplus Cash, pursuant to Section 13 above, and if
not taken within the identified period, these funds remain as Mortgaged Property
and may only be used as permitted by this Agreement.
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e. Equity or capital contributions shall not be reimbursed from Project accounts
without the prior written approval of HUD. Borrower advances for Reasonable
Operating Expenses shall not be deemed to fall under this subsection but rather
shall be treated under Section 15 below.
15. BORROWER ADVANCES.
a. “Borrower Advances” means any advance of funds or loan to the Project made
by Borrower or any Affiliate for whatever reason. Borrower Advances do not
include equity or capital contributions whether required in conjunction with the
financing of the Project or otherwise. Borrower Advances may only be repaid
from Project funds pursuant to this Section 15.
b. Any Borrower Advances must be deposited into the Project’s operating account
as required by Program Obligations. Interest may accrue on Borrower Advances
pursuant to Program Obligations and may only be paid in accordance with this
Section 15.
c. Borrower Advances may only be repaid, and interest on Borrower Advances may
only be paid:
(1)

with prior written approval from HUD, or

(2)

if and to the extent that Borrower is permitted to take Distributions, from
funds allowable for Distributions, and only at times when Distributions are
permitted pursuant to Sections 13 and 14 of this Agreement.

d. Repayments of Borrower Advances, and payments of interest on Borrower
Advances, approved by HUD and made pursuant to Section 15(c)(i) shall be
considered Reasonable Operating Expenses.
e. Borrower shall require, as a condition of any agreement to repay Borrower
Advances, or to pay interest thereon, with any party making such Borrower
Advances, that such agreement shall recognize the limitations of this Section 15
and, if all of the conditions of this Section 15 are not met, shall hold the Borrower
and the Mortgaged Property harmless for failure to pay.
16. FINANCIAL ACCOUNTING. Borrower shall keep the books and accounts of the
operation of the Mortgaged Property in accordance with Program Obligations. The
books and accounts must be complete, accurate and current at all times. Posting
must be made at least monthly to the ledger accounts, and year-end adjusting
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entries must be posted promptly in accordance with sound accounting principles.
Any Undocumented Expense or Distribution shall be an ineligible Project expense,
unless otherwise determined in writing by HUD. An “Undocumented Expense” is
an expense without sufficient documentation that provides reasonable identification
of the basis of the expense. Books, accounts and records shall be open and
available for inspection by HUD, after reasonable prior notice, during normal office
hours, at the Project or another mutually agreeable location.
17. BOOKS MAINTAINED BY MANAGEMENT AGENTS. The books and records of the
Project maintained by management agents and Affiliates shall be maintained in
accordance with Program Obligations and shall be open and available to inspection
by HUD, after reasonable prior notice, during normal office hours, at the Project or
another mutually agreeable location. Every agreement executed on behalf of the
Project with any management agent or Affiliate shall include the provision that the
books and records of the Project shall be properly maintained and open to
inspection during normal business hours by HUD at the Project or another mutually
agreeable location and that upon the termination of an agreement with management
agent and/or Affiliates, the books and records of the Project maintained by the
management agent and/or Affiliates shall remain with Borrower.
18. ANNUAL FINANCIAL REPORTS.
a. Within ninety (90) days, or such period established in writing by HUD, following
the end of each fiscal year, Borrower shall prepare a financial report for the
Borrower’s fiscal year, or the portion thereof that started with the Borrower’s
assumption of financial responsibility (or the portion thereof that ended with
Borrower’s permitted transfer pursuant to a HUD-approved transfer of the
Project), based on an examination of the books and records of the Borrower in
accordance with generally accepted accounting principles (GAAP) and in such
other form and substance as specified by HUD in supplemental guidance, and
provide such report to HUD in such form, substance, and manner as specified by
HUD under the Uniform Financial Reporting Standards at 24 C.F.R. Section
5.801 (UFRS), or any successor regulations, and Program Obligations.
b. Unless specifically waived or modified by HUD or to the extent otherwise exempt,
Borrower shall: (i) engage an independent, licensed Certified Public Accountant
(CPA) to audit the Borrower’s annual financial report and to produce an audit
report in accordance with both Generally Accepted Government Auditing
Standards (GAGAS) and Generally Accepted Auditing Standards (GAAS); (ii)
engage an independent, licensed CPA to perform an agreed-upon procedure, in
accordance with the American Institute of Certified Public Accountants (AICPA)
Statement on Standards for Attestation Engagements (SSAE) Number 4, to
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compare the financial data template information submitted electronically by the
Borrower to HUD against the annual financial report examined by, and the audit
report prepared by, the independent, licensed CPA; and (iii) furnish to HUD the
audit report, and any other reports relating to the annual financial report or the
audit report as required by Program Obligations, by such means and in such
form, substance, and manner as specified by HUD under UFRS, or any
successor regulations, and Program Obligations.
c. To the extent certain non-profit Borrowers’ requirement to submit annual financial
reports may be waived or modified by HUD, or such Borrowers may otherwise be
exempt from compliance, such waiver, modification or exemption shall not be
construed to relieve Borrower of any requirements of this Section 18, except for
those requirements specifically waived, modified or exempt.
d. If Borrower fails to perform as required pursuant to this Section 18, HUD may, at
its sole election, and in a manner determined by HUD, and without affecting any
other provisions of this Agreement, and without first providing notice of violation
of this Agreement pursuant to Section 36 of this Agreement, initiate a forensic
audit of the Borrower’s books, records, and accounts in such a manner as to
provide to HUD with as much of the same information that would have been
provided had the Borrower not failed to perform as required. Any such audit
initiated by HUD does not relieve Borrower of the requirement to submit to HUD
an annual audited financial report as required pursuant to this Agreement.

IV. PROJECT MANAGEMENT
19. PRESERVATION, MANAGEMENT AND MAINTENANCE OF THE MORTGAGED
PROPERTY. Borrower (a) shall not commit Waste, (b) shall not abandon the
Mortgaged Property, (c) shall restore or repair promptly, in a good and workmanlike
manner, any damaged part of the Mortgaged Property to the equivalent of its original
condition, or such other condition as HUD may approve in writing, whether or not
litigation or insurance proceeds or condemnation awards are available to cover any
costs of such restoration or repair, and (d) shall keep the Mortgaged Property in decent,
safe, sanitary condition and good repair, including the replacement of Personalty and
Fixtures with items of equal or better function and quality, all in accordance with
Program Obligations. By executing this Agreement, Borrower agrees and understands
that obligations (a) through (d) of this Section 19 are absolute and unconditional and are
not limited by any conditions precedent and are not contingent on HUD’s performance of
any administrative or contractual obligations. Furthermore, HUD is in no way obligated to
provide funding or any financial assistance of any kind to Borrower to repair, rehabilitate,
maintain, or make improvements to the Mortgaged Property. The Mortgaged Property
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must also be maintained in reasonable condition for proper audit and subject to
examination by HUD at the Project or another mutually agreeable location. In the event all
or any of the Improvements shall be destroyed or damaged by fire, by failure of warranty,
or other casualty, the money derived from any settlement, judgment, or insurance on the
Mortgaged Property shall be applied in accordance with the terms of the Security
Instrument. In the event all or any of the Improvements shall be taken by an exercise of
the power of eminent domain, all awards of compensation in connection with
condemnation for public use of or a taking of any of the Improvements shall be paid in
accordance with the Security Instrument.
20. FLOOD HAZARDS. Borrower shall maintain flood insurance if required by the
Security Instrument.
21. MANAGEMENT. Borrower shall provide management of the Mortgaged Property in
a manner deemed to be acceptable to HUD. At HUD’s sole discretion, HUD may
require replacement of the management under any circumstances set forth in
subsection (d) of this Section 21 pursuant to Program Obligations, in which case
Borrower shall immediately make arrangements for providing management satisfactory
to HUD. Borrower shall execute a management agreement or other document outlining
procedures for managing or operating the Mortgaged Property. Such agreement or
document must comply with Program Obligations. Borrower and management agent (if
applicable) shall submit and maintain a current management certification in accordance
with Program Obligations. In addition to the requirements of Section 17 above, all
management agreements must contain the following provisions:
a. HUD’s rights and requirements prevail in the event of any conflict with the terms
of the management agreement.
b. The management agreement shall not be assigned without the prior written
approval of HUD.
c. Management fees will be computed and paid in accordance with HUD
requirements.
d. HUD may require Borrower to terminate the management agreement:
(1)

immediately without penalty if an Event of Default occurs under the
Security Instrument, Note, or Regulatory Agreement ;

(2)

upon thirty (30) days written notice to Borrower and management agent,
for failure to comply with the provisions of the Management Certification,
or for other good cause; or

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(3)

immediately without penalty when HUD takes control of the Mortgaged
Property pursuant to its rights under the Loan Documents as mortgagee in
possession.

e. If Borrower terminates the management agreement pursuant to a request from
HUD, the management agent must immediately turn over to Borrower all of the
cash, accounts, deposits, investments, and records pertaining to the Mortgaged
Property.
f. Borrower may terminate the management agreement for cause with no more
than a thirty (30) day notice period.
g. The management agreement shall not exempt the management agent from
liability for damages, injuries or losses, resulting from the management agent’s
gross negligence or willful misconduct.
22. CONTRACTS FOR GOODS AND SERVICES. Consistent with Program
Obligations, Borrower shall obtain contracts for goods, materials, supplies, and services
(Goods and Services) at costs, amounts, and terms that do not exceed reasonable
and necessary levels and those customarily paid in the vicinity of the Land for Goods
and Services received. The purchase price of Goods and Services shall be based on
quality, durability and scope of work and shall be made upon the most advantageous
terms for the Project operation. Reasonable Operating Expenses do not include
amounts paid for Improvements and/or betterments, unless approved in writing by HUD.
Borrower shall keep copies of all written contracts or other instruments that affect the
Mortgaged Property, all or any of which may be subject to inspection and examination
by HUD at the Project or another mutually agreeable location.
23. RESPONSIVENESS TO INQUIRIES. At the request of HUD, Borrower shall
promptly furnish operating budgets and occupancy, accounting and other reports
(including credit reports) and give specific answers to questions relative to income,
assets, liabilities, contracts, operation, and conditions of the Mortgaged Property and
the status of the Security Instrument.
24. TENANT ORGANIZATIONS. If the Project is subject to 24 C.F.R. Part 245, Subpart
B or any successor regulation covering the rights of tenants to organize, Borrower shall
comply with this Section 24. Borrower shall not (a) impede the reasonable efforts of
resident tenant organizations to represent their members or the reasonable efforts of
tenants to organize, or (b) unreasonably withhold the use of any community room or
other available space appropriate for meetings that is part of the Mortgaged Property
when requested by: (i) a resident tenant organization in connection with the
representational purposes of the organization; or (ii) tenants seeking to organize or to
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consider collectively any matter pertaining to their living environment, which includes
the terms and conditions of their tenancy as well as activities related to housing and
community development. Borrower may charge for the use of the Mortgaged Property
any fees or costs approved by HUD as may normally be imposed for the use of such
facilities or may waive any such fees or costs.

V. ADMISSIONS AND OCCUPANCY
25. RESIDENTIAL UNITS AND SERVICES. If the Project is subject to regulation of rent
by HUD, Borrower shall make residential units and services of the Project available to
eligible tenants at charges not exceeding those established in accordance with a rental
schedule approved in writing by HUD.
26. LEASE TERMS FOR RESIDENTIAL UNITS. No part of the Mortgaged Property
shall be used as a Rental for Transient or Hotel Purposes. “Rental for Transient or
Hotel Purposes” shall mean: (a) rental for any period less than thirty (30) days or (b)
any rental if the occupants of the housing accommodations are provided customary
hotel services such as room service for food and beverages, maid service, furnishing
and laundering of linen, and bellboy service. Residential units shall not be rented for
more than three (3) years, except for residential units in projects with Security
Instruments initially endorsed for insurance pursuant to Section 231 of the National
Housing Act, as amended.
27. COMMERCIAL (NON-RESIDENTIAL) LEASES. No portion of the Mortgaged
Property shall be leased for any commercial purpose or use without receiving HUD’s
prior written approval as to terms, form and amount, except that for lease renewals or
extensions or amendments involving no change in terms or use, rent increases are
permitted without HUD approval. Borrower must deliver an executed copy of the
commercial Lease to HUD.
28. SUBLEASES. All Leases of residential units by Borrower to tenants must also
prohibit assignment of the leasehold interest by the tenant without the prior written
approval of Borrower. All Leases of residential units by Borrower to tenants must
prohibit tenants from entering into any subleases that do not run for at least thirty (30)
days and must require that all subleases be approved in advance in writing by
Borrower. Leases of residential units must prohibit the tenant from granting the right to
occupy the premises as a Rental for Transient or Hotel Purposes, as defined in Section
26. Assignment and subleasing of units by other than the tenant thereof without the
prior written approval of Borrower shall be prohibited in the Lease. Upon discovery of
any unapproved assignment, sublease or occupancy, Borrower shall, to the extent
permitted by law, immediately demand cancellation and/or vacation of the premises, as
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appropriate, and notify HUD thereof.
29. TENANT SELECTION/OCCUPANCY.
a. If the Security Instrument is originally a HUD-held purchase money mortgage, or
is originally endorsed for FHA multifamily insurance under any Section of the
National Housing Act, as amended, other than Section 231 units specially
designed for use and occupancy of Elderly Persons exclusively, Borrower shall
not, in selecting tenants, discriminate against any person or persons by reason of
the fact that there are children in the family, unless in accordance with the Fair
Housing Act and otherwise approved in writing by HUD in accordance with the
Program Obligations.
b. If the Security Instrument is originally endorsed for insurance under Section 221,
Borrower shall, in selecting tenants, give to Displaced Persons or Families an
absolute preference or priority of occupancy that shall be accomplished as
follows: (1) For a period of sixty (60) days from the date of original offering,
unless a shorter period of time is approved in writing by HUD, all units shall be
held for such preferred applicants, after which time any remaining unrented units
may be rented to non-preferred applicants; (2) thereafter, and on a continuing
basis, such preferred applicants shall be given preference over non-preferred
applicants in their placement on a waiting list to be maintained by Borrower; and
(3) through such further provisions agreed to in writing by the parties to this
Agreement.
c. At least 75% of the units in a Project insured under Section 231 shall be
designed for the use and occupancy of Elderly Persons unless prior written
approval is given by HUD for a lesser number of units.
d. All advertising or efforts to rent a project insured under Section 231 shall reflect a
bona fide effort of Borrower to obtain occupancy by Elderly Persons.

30. ADDITIONAL OCCUPANCY RESTRICTIONS AND POLICIES:
[a. List any additional occupancy restrictions and policies imposed in connection
with the Loan (e.g., [[reduced mortgage insurance premiums for Affordable
Housing] [reduced mortgage insurance premiums for Broadly Affordable Housing],
which affordability restrictions are more particularly described in the Rider for
Section 30 attached to this Regulatory Agreement and incorporated by this
reference.] For Affordable Housing, also include with the Rider the required
Borrower’s agreement to accept Section 8 voucher holders) or insert “none”.
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b. Additional occupancy restrictions and policies imposed by other programs may
be listed here as well, but, if so, also insert a caveat to such restrictions stating:
“these provisions are for informational purposes only and are not required under
the Loan.”]
31. RENTS. If the Project is subject to regulation of rent by HUD, HUD will at any time
entertain a written request for a rent increase that is properly supported by
substantiating evidence and HUD will, within a reasonable time: (a) approve a rental
schedule that is necessary to compensate for any net increase, occurring since the last
approved rental schedule, in taxes (other than income taxes) and operating and
maintenance costs over which Borrower has no effective control; or (b) deny the
increase and state the reasons for its decision.
32. CHARGES FOR SERVICES AND FACILITIES. If the Project is subject to
regulation of rent by HUD, Borrower shall only charge tenants such amounts as have
the prior written approval of HUD and are mutually agreed upon between Borrower and
the tenant for any facilities and/or services not included in the HUD approved rent
schedule.
33. [RESERVED]
34. [RESERVED]

VI. ACTIONS REQUIRING THE PRIOR WRITTEN APPROVAL OF HUD
35. ACTIONS REQUIRING THE PRIOR WRITTEN APPROVAL OF HUD. Borrower
shall not without the prior written approval of HUD:
a. Convey, assign, transfer, pledge, hypothecate, encumber, or otherwise dispose of
the Mortgaged Property or any interest therein, or permit the conveyance,
assignment, or transfer of any interest in Borrower (if the effect of such conveyance,
assignment or transfer is the creation or elimination of a Principal) unless permitted
by Program Obligations. Borrower need not obtain the prior written approval of
HUD: (i) for a conveyance of the Mortgaged Property at a judicial or non-judicial
foreclosure sale under the Security Instrument; (ii) for inclusion of the Mortgaged
Property in a bankruptcy estate by operation of law under the United States
Bankruptcy Code; (iii) for acquisition of an interest by inheritance or by Court decree;
or (iv) for actions permitted under subsection (g) below.
b. Enter into any contract, agreement or arrangement to borrow funds or finance any
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purchase or incur any liability, direct or contingent, other than for Reasonable
Operating Expenses.
c. Pay out any funds of the Mortgaged Property except as provided in this Agreement
and Program Obligations.
d. Except from permissible withdrawals of Surplus Cash, pay any compensation,
including wages or salaries, or incur any obligation to do so, to any officer, director,
stockholder, trustee, beneficiary, partner, member, manager (in the case of a
Borrower formed as a Limited Liability Company or Limited Liability Corporation), or
Principal of Borrower, or to any nominee thereof.
e. Enter into or change any contract, agreement or arrangement for supervisory or
managerial services or Leases for operation of the Project in whole or in part except
as permitted under Program Obligations.
f. Convey, assign or transfer any right to receive the Rents of the Mortgaged Property,
except as provided in the Security Instrument.
g. Remodel, add to, subtract from, construct, reconstruct or demolish any part of the
Mortgaged Property, except as required by HUD under Section 19(c) and except
that Borrower may, without the prior written approval of HUD, dispose of obsolete or
deteriorated Fixtures or Personalty if the same are replaced with like items of the
same or greater quality or value and make minor alterations that do not impair the
security.
h. Permit the use of the Mortgaged Property for any other purpose except the use for
which it was originally intended, or permit commercial use greater than that originally
approved by HUD.
i.

Amend the organizational documents of Borrower in a way that materially modifies
the terms of the organization, including, but not limited to: any amendment that
activates the requirement that a HUD previous participation certification be obtained
from any additional partner or member; any amendment that would authorize any
officer, partner or member other than the officer(s), general partner(s) or the
managing member(s) of the corporation, partnership or company or pre-approved
successor officer(s), general partner(s) or managing member(s) to bind the
corporation, partnership or company for any matters concerning the Project which
requires HUD’s consent or approval; a change in the officer(s), general partner(s) or
managing member(s) or pre-approved successor officer(s), general partner(s) or
managing member(s) of the corporation, partnership or company and any proposed
changes to the HUD-required provisions included in the organizational documents.
Copies of all fully executed amendments to the organizational documents must be

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provided to HUD within ten (10) days of the effective date of the amendment. If
the amendments to the organizational documents are recorded or filed, copies of the
recorded or filed documents must be provided to HUD within ten (10) days of receipt
by Borrower.
j.

Reimburse any party from Mortgaged Property for payment of expenses or costs of the
Project or for any purpose except for Reasonable Operating Expenses and in a
manner consistent with Section 15.

k. Receive any fee or payment of any kind from any managing agent, employee of the
Project or of the managing agent, or other provider of Goods or Services of the Project,
except for warranty claims from providers of Goods and Services.
l.

Initiate or acquiesce in a change in the zoning classification of the Mortgaged Property
that results in any change in permitted use that was in effect at the time of initial/final
endorsement.

m. Establish any condominium or cooperative regime with respect to the Mortgaged
Property.
n. Materially change any unit configurations or change the number of units in the
Mortgaged Property.

VII. ENFORCEMENT
36. VIOLATION OF AGREEMENT. The occurrence of any one or more of the following
shall constitute a “Violation” under this Agreement:
a. Any failure by Borrower to comply with any of the provisions of this Agreement;
b. Any fraud or material misrepresentation or material omission by Borrower, any of its
officers, directors, trustees, general partners, members, managers or managing agent in
connection with (1) any financial statement, rent roll or other report or information
provided to HUD or (2) any request for HUD’s consent to any proposed action, including
a request for disbursement of funds from any restricted account for which HUD’s prior
written approval is required; and/or
c. The commencement of a forfeiture action or proceeding, whether civil or criminal,
which, in HUD’s reasonable judgment, could result in a forfeiture of the Mortgaged
Property or otherwise materially impair the value of the Mortgaged Property.
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37. DECLARATION OF DEFAULT.
a. Upon a Violation, HUD may give written Notice, pursuant to Section 46, of the
Violation to Borrower, addressed to the addresses stated in this Agreement, or such
other addresses as may subsequently, upon appropriate written Notice to HUD, be
designated by Borrower as its legal business address. If, after receiving written Notice
of a Violation, that Violation is not corrected to the satisfaction of HUD either within thirty
(30) days after the date Notice is mailed, or within such shorter or longer time set forth
in said Notice, HUD may declare a default (Declaration of Default) under this
Agreement without further Notice. Alternatively, in order to protect the health and safety
of the tenants, HUD may declare a default at any time during the existence of a
Violation without providing prior written Notice of the Violation.
b. Upon any Declaration of Default HUD may:
(1)

If HUD holds the Note, declare the whole of said Indebtedness
immediately due and payable and then proceed with the foreclosure of the
Security Instrument;

(2)

If said Note is not held by HUD, notify the Lender of such default and
require the Lender to declare a default under the Note and Security
Instrument, and the Lender, after receiving such Notice and demand, may
declare the whole Indebtedness due and payable and thereupon proceed
with foreclosure of the Security Instrument or assignment of the Note and
Security Instrument to HUD as provided in Program Obligations. Upon
assignment of the Note and Security Instrument to HUD, HUD may then
proceed with the foreclosure of the Security Instrument;

(3)

Collect all Rents and charges in connection with the operation of the
Project and use such collections to pay Borrower’s obligations under this
Agreement and under the Note and Security Instrument and the
necessary expenses of preserving and operating the Mortgaged Property;

(4)

Take possession of the Mortgaged Property, bring any action necessary to
enforce any rights of Borrower growing out of the Mortgaged Property’s
operation, and maintain the Mortgaged Property in decent, safe, and
sanitary condition and good repair;

(5)

Apply to any court, state or federal, for specific performance of this
Agreement, for an injunction against any Violations of this Agreement, for
the appointment of a receiver to take over and operate the Project in
accordance with this terms of the Agreement, or for such other relief as

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may be appropriate, as the injury to HUD arising from a default under
any of the terms of this Agreement would be irreparable and the amount of
damage would be difficult to ascertain; and,
(6)

Collect reasonable attorney fees related to enforcing Borrower’s
compliance with this Agreement.

38. FORBEARANCE NO WAIVER. Any forbearance by HUD in exercising any right or
remedy under this Agreement or otherwise afforded by applicable law shall not be a
waiver of or preclude the exercise of any right or remedy.
39. MEASURE OF DAMAGES. The damage to HUD as a result of Borrower’s breach
of duties and obligations under this Agreement shall be, in the case of failure to
maintain the Mortgaged Property as required by this Agreement, the cost of the repairs
required to return the Project to decent, safe and sanitary condition and good repair.
This contractual provision shall not abrogate or limit any other remedy or measure of
damages available to HUD under any civil, criminal or common law.

VIII. MISCELLANEOUS
40. COMPLIANCE WITH LAWS; POST-CLOSING DELIVERABLES.
a. Borrower shall comply with all applicable: laws; ordinances; regulations;
requirements of any Governmental Authority; lawful covenants and agreements
(including the Security Instrument) recorded against the Mortgaged Property; and
Program Obligations including lead-based paint maintenance requirements of 24 C.F.R.
Part 35, Subpart G, and any successor regulations; including but not limited to those of
the foregoing pertaining to: health and safety; construction of improvements on the
Mortgaged Property; fair housing; civil rights; zoning and land use; Leases; and
maintenance and disposition of tenant security deposits; and, with respect to all of the
foregoing, all subsequent amendments, revisions, promulgations or enactments.
Borrower shall at all times maintain records sufficient to demonstrate compliance with
the provisions of this Section 40. Borrower shall take appropriate measures to prevent,
and shall not engage in or knowingly permit, any illegal activities at the Mortgaged
Property, including those that could endanger tenants or visitors, result in damage to the
Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise impair
the lien created by the Security Instrument or Lender's interest in the Mortgaged
Property. Borrower represents and warrants to HUD that no portion of the Mortgaged
Property has been or shall be purchased with the proceeds of any illegal activity.

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b. HUD shall be entitled to invoke any remedies available by law to redress any
breach or to compel compliance by Borrower with these requirements, including any
remedies available hereunder.
c. Borrower shall deliver or cause to be delivered to HUD any document required by the
Firm Commitment that HUD agrees in writing may be delivered after HUD’s
endorsement of the Note for insurance, or is otherwise required by Program
Obligations, within such time as specified in writing by HUD or established by Program
Obligations.
41. BINDING EFFECT. This Agreement shall bind, and the benefits shall inure to,
Borrower, its heirs, legal representative, executors, administrators, successors in office
or interest, and assigns, and to HUD and HUD’s successors, so long as the Contract of
Insurance continues in effect, and during such further time as HUD shall be the Lender,
holder, coinsurer, or reinsurer of the Security Instrument, or obligated to reinsure the
Security Instrument.
42. PARAMOUNT RIGHTS AND OBLIGATIONS. Borrower warrants that it has not,
and shall not, execute any other agreement with provisions contradictory of, or in
opposition to, the provisions hereof, and that, in any event, the requirements of this
Agreement are paramount and controlling as to the rights and obligations set forth and
supersede any other requirements in conflict therewith.
43. SEVERABILITY. The invalidity of any clause, part, or provision of this Agreement
shall not affect the validity of the remaining portions hereof.
44. RULES OF CONSTRUCTION. The captions and headings of the Sections of this
Regulatory Agreement are for convenience only and shall be disregarded in construing
this Regulatory Agreement. Any reference in this Regulatory Agreement to an
“Exhibit” or a “Section” shall, unless otherwise explicitly provided, be construed as
referring, respectively, to an Exhibit attached to this Regulatory Agreement or to a
Section of this Regulatory Agreement. All Exhibits attached to or referred to in this
Regulatory Agreement are incorporated by reference into this Regulatory Agreement.
Use of the singular in this Regulatory Agreement includes the plural and use of the
plural includes the singular. As used in this Regulatory Agreement, the term, “including”
means “including, but not limited to.” In this Regulatory Agreement, where the context
may so require, feminine or masculine pronouns or adjectives shall be substituted for
those of the neutral gender, and vice versa.
45. PRESENT ASSIGNMENT. Borrower irrevocably and unconditionally assigns,
pledges, mortgages and transfers to HUD its rights to the Rents, charges, fees, carrying
charges, Project accounts, security deposits, and other revenues and receipts of
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whatsoever sort that it may receive or be entitled to receive from the operation of the
Mortgaged Property, subject to the assignment of Rents in the Security Instrument.
Until a default is declared under this Agreement, a revocable license is granted to
Borrower to collect and retain such Rents, charges, fees, carrying charges, Project
accounts, security deposits, and other revenues and receipts, but upon a Declaration of
Default under this Agreement or under the Security Instrument, this revocable license is
automatically terminated.
46. NOTICE.
a. All notices, demands and other communications (“Notice”) under or concerning this
Agreement shall be in writing. A courtesy copy of any Notice given by Borrower or
HUD shall be sent simultaneously to Lender. Each Notice shall be addressed to the
intended recipients at their respective addresses set forth below, and shall be
deemed given on the earliest to occur of (i) the date when the Notice is received by
the addressee; (ii) the first or second Business Day after the Notice is delivered to a
recognized overnight courier service, with arrangements made for payment of
charges for next or second Business Day delivery, respectively; or (iii) the third
Business Day after the Notice is deposited in the United States mail with postage
prepaid, certified mail, return receipt requested. As used in this Section 46, the term
“Business Day” means any day other than a Saturday or a Sunday, a federal
holiday or holiday in the state where the Project is located or other day on which the
federal government or the government of the state where the Project is located is not
open for business. When not specifically designated as a Business Day, the term
“day” shall refer to a calendar day.
b. Any party to this Agreement and Lender may change the address to which Notices
intended for it are to be directed by means of Notice given to the other party in
accordance with this Section 46. Each party agrees that it shall not refuse or reject
delivery of any Notice given in accordance with this Section 46, that it shall
acknowledge, in writing, the receipt of any Notice upon request by the other party
and that any Notice rejected or refused by it shall be deemed for purposes of this
Section 46 to have been received by the rejecting party on the date so refused or
rejected, as conclusively established by the records of the U.S. Postal Service or the
courier service.

BORROWER:
HUD:
LENDER:
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47. CONFLICTS PROVISION. Borrower shall comply with the requirements set forth in
this Agreement as well as any other agreement Borrower enters into with
HUD. However, if a conflict exists between this Agreement and any other HUD
agreement executed by Borrower, the agreement which imposes the more restrictive
requirements on Borrower shall control.
48. THIRD PARTY BENEFICIARY. Borrower agrees that it is not a third-party
beneficiary to the Contract of Insurance between HUD and Lender, as more fully set
forth in 24 C.F.R. Part 207, Subpart B.
49. EXPLANATION OF ROLES. HUD is not providing a loan to the Borrower. HUD
operates insurance programs under the provisions of the National Housing Act. HUD,
through the Federal Housing Administration (FHA) provides insurance to private and
public lenders, which it has approved as financially responsible, against loss on
mortgages financing multifamily projects. The mortgage insurance is a contract
between the approved lender and HUD. These are the only two parties to the FHA
insurance contract, the approved mortgage lender and HUD. The approved lender is
the only party that is intended to benefit from the contract of mortgage insurance. While
borrowers and other program participants may incidentally benefit in some manner from
the insured mortgage financing that the approved lender provides, all other program
participants are deemed not to be third party beneficiaries of the insurance contract.
Thus, program participants have no rights and should not have any expectations in
regard to decisions made or actions taken by HUD under the mortgage lender’s contract
of mortgage insurance, including but not limited to accepting a loan as eligible for
insurance or paying a claim.

SECTION IX. NON-RECOURSE
50. NON-RECOURSE DEBT. The addendum (“Section 50 Addendum”) attached
hereto is incorporated herein by this reference.

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{The following statement must appear on the same page as the executed signature
for the Borrower.}
The signatory below certifies that all of the information provided in this Agreement and
in any accompanying documentation is true, accurate, and complete, has been made,
presented, and delivered for the purpose of influencing an official action of HUD, and
may be relied upon by the HUD as a true statement of the facts contained therein. The
signatory below acknowledges that the submission of any false, fictitious, or fraudulent
statement, representation, or certification in this Agreement or on any accompanying
documents may result in criminal, civil, and/or administrative sanctions, including fines,
penalties, and/or imprisonment under applicable federal law.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals on the date
first herein above written.

BORROWER

THE UNITED STATES DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT,
ACTING BY AND THROUGH THE
SECRETARY

(insert name)

BY:_________________
Authorized Agent
Title

BY:______________________________
Authorized Agent

[ADD ADDITIONAL LINES IF MORE THAN TWO SIGNATORIES]
[HUD’s SIGNATURE PAGE MUST INCLUDE PROJECT NAME, FHA PROJECT
NUMBER ALONG WITH TITLE OF FORM]
NOTICE: THIS DOCUMENT MUST HAVE A LEGAL DESCRIPTION ATTACHED
AND BOTH THIS DOCUMENT AND THE SECTION 50 ADDENDUM MUST BE
EXECUTED WITH ALL FORMALITIES REQUIRED FOR RECORDING A DEED TO
REAL ESTATE (e.g., NOTARY/ACKNOWLEDGEMENT, SEAL, WITNESS OR
OTHER APPROPRIATE FORMALITIES).

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EXHIBIT A
[DESCRIPTION OF THE LAND]

A-1
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SECTION 50 ADDENDUM
The Loan is non-recourse. Each individual/entity (each, a “Section 50 party”) as
identified below and in the “Firm Commitment” (which means the commitment for
insurance of advances or commitment for insurance upon completion issued to Lender
by HUD under which the debt evidenced by the Note is to be insured pursuant to a
Section of the Act, dated ___________ [month, date, year], and any amendments
thereto):
1._______________________
(Individual/Entity Name)

2._______________________
(Individual/Entity Name)
does not assume personal liability for payments due under the Note and Security
Instrument, or for the payments to the Reserve for Replacements, or for matters not
under its control, provided that each Section 50 Party shall be personally liable under
this Agreement only with respect to the matters hereinafter stated; namely: (a) for funds
or property of the Project coming into its hands which, by the provisions hereof, it is not
entitled to retain; (b) for authorizing the conveyance, assignment, transfer, pledge,
encumbrance, or other disposition of the Mortgaged Property or any interest therein in
violation of Section 35(a) of the Regulatory Agreement to which this addendum is
attached (“Regulatory Agreement”) without the prior written approval of HUD; and (c)
for its own acts and deeds, or acts and deeds of others, which it has authorized in
violation of the provisions of this Section 50 Addendum. The obligations of each
Section 50 Party shall survive any foreclosure proceeding, any foreclosure sale, any
delivery of any deed in lieu of foreclosure, any termination of the Regulatory Agreement,
or any release of record of the Security Instrument.
______________________________________
Name
_______________________________________
Title

_______________________________
Date
[ADD ADDITIONAL LINES FOR MULTIPLE SIGNATORIES]
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