[Federal Register Volume 59, Number 42 (Thursday, March 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4823]


[[Page Unknown]]

[Federal Register: March 3, 1994]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the General Counsel
[Docket No. N-94-3728; FR-3670-N-01]

 

Submission of Proposed Information Collection to OMB

AGENCY: Office of the General Counsel, HUD.

ACTION: Notice.

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SUMMARY: The proposed information collection requirement described 
below has been submitted to the Office of Management and Budget (OMB) 
for review, as required by the Paperwork Reduction Act. The Department 
is soliciting public comments on the subject proposal.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposal. Comments should refer to the proposal by name and should 
be sent to:

Joseph F. Lackey, Jr., OMB Desk, Office of Management and Budget, New 
Executive Office Building, Washington, DC 20503.
Monica Hilton Sussman, Deputy General Counsel, (Finance and 
Regulations), GD, HUD Building, room 10214, 451 7th St., SW., 
Washington, DC 20410.

FOR FURTHER INFORMATION CONTACT:
Kay Weaver, Reports Management Officer, Department of Housing and Urban 
Development, 451 7th Street Southwest, Washington, DC 20410, telephone 
(202) 708-0050. This is not a toll-free number. Copies of the proposed 
forms and other available documents submitted to OMB may be obtained 
from Ms. Weaver.

SUPPLEMENTARY INFORMATION: This notice informs the public that the 
Department of Housing and Urban Development has submitted to OMB, for 
expedited processing, an information collection package with respect to 
two guide formats which specify the components of a legal opinion 
required by the Department in connection with the insurance of mortgage 
loans upon multifamily rental projects and health care facilities under 
Title II of the National Housing Act, 12 U.S.C. 1702, et seq. or in 
connection with the making of a capital advance under section 202 of 
the Housing Act of 1959, as amended, and section 811 of the Cranston-
Gonzalez National Affordable Housing Act, as amended, for supportive 
housing for the elderly and supportive housing for persons with 
disabilities.
    The guide clearly articulates those matters upon which HUD requires 
an opinion from private counsel as well as those matters upon which 
confirmations are required. The guide also contains detailed 
instructions pertaining to the form as well as a format for 
certifications by the mortgagor as to matters particularly within the 
knowledge of the mortgagor upon which its legal counsel relies in 
rendering the opinion.
    The section 202 and 811 programs currently have an OMB-approved 
Owner's Attorney's Closing Opinion, form HUD-90166-CA (2502:0470). 
However, the Department has decided that it would be beneficial to 
participants and their counsel to have similar formats for all loan and 
capital advance programs. The section 202 and 811 guide format is 
essentially the same as the insured loan format except for some 
differences in terminology and program requirements.
    To the extent that the new guides represent any ``collection of 
information,'' the process is necessary to ensure the Department that 
the attorney representing the mortgagor or owner has followed the 
otherwise specified requirements of the Department and to ensure the 
Department that the attorney has exercised an acceptable degree of due 
diligence in representing the client and in rendering the opinion to 
the mortgagee and HUD. The extent of due diligence expected to be 
performed under the guide is not substantially different from what HUD 
had anticipated under Form 1725 or Form HUD-90166-CA or from what 
qualified counsel, in fact, perform in conventional financing 
transactions.
    The Department has submitted the proposal for the collection of 
information, as described below, to OMB for review, as required by the 
Paperwork Reduction Act (44 U.S.C. chapter 35);
    (1) The title of the information collection proposal;
    (2) The office of the agency to collect the information;
    (3) The description of the need for the information and its 
proposed use;
    (4) The agency form number, if applicable;
    (5) What members of the public will be affected by the proposal;
    (6) How frequently information submission will be required;
    (7) An estimate of the total number of hours needed to prepare the 
information submission including number of respondents, frequency of 
response, and hours of response;
    (8) Whether the proposal is new or an extension, reinstatement, or 
revision of an information collection requirement; and
    (9) The names and telephone numbers of an agency official familiar 
with the proposal and of the OMB Desk Officer for the Department.

    Authority: Section 3507 of the Paperwork Reduction Act, 44 
U.S.C. 3507, section 7(d) of the Department of Housing and Urban 
Development Act, 42 U.S.C. 3535(d).

    Dated: February 22, 1994.
Monica Hilton Sussman,
Deputy General Counsel (Finance and Regulations), GD.

Submission of Proposed Information Collection to OMB

    Proposal: HUD Guide for Counsel to the Mortgagor and HUD Guide for 
Counsel to Owner.
    Office: Office of the General Counsel.
    Description of the Need for the Information and Its Proposed Use: 
The opinion is required to provide comfort to HUD and the mortgagee in 
multifamily rental and health care facility mortgage insurance 
transactions and similarly to HUD and owners in the capital advance 
transactions.
    Form Number: Guide.
    Respondents: Counsel to mortgagors of multifamily rental projects 
and health care facilities upon which the mortgage loans are insured by 
HUD and counsel to owners of section 202 or section 811 projects which 
receive capital advances from HUD.
    Frequency of Submission: As closings occur in connection with the 
aforementioned projects.
    Reporting Burden:

----------------------------------------------------------------------------------------------------------------
                                                                    Frequency        Hours per          Burden  
                    Number of respondents                      x   of response   =    response    =     hours   
----------------------------------------------------------------------------------------------------------------
700.........................................................                 1                1              700
----------------------------------------------------------------------------------------------------------------

    Total Estimated Burden Hours: 700.
    Status: New.
    Contact: Joseph F. Lackey, Jr. OMB (202) 395-6880, Monica Hilton 
Sussman, HUD (202) 708-0636.

    Dated: February 22, 1994.

Supporting Statement for Guide for Opinion of Mortgagor's Counsel and 
Guide for Opinion of Owner's Counsel

Justification

    1. Under the various sections of Title II of the National Housing 
Act, the Secretary of the Department of Housing and Urban Development 
(HUD) is authorizing to insure mortgage loans upon certain multifamily 
rental housing projects and health care facilities (nursing homes, 
extended care facilities, board and care homes and hospitals). Under 
section 202 of the Housing Act of 1959, as amended, and section 811 of 
the Cranston-Gonzalez National Affordable Housing Act, as amended, the 
Secretary of HUD is authorized to make capital advance for supportive 
housing for the elderly and supportive housing for persons with 
disabilities. Generally, the mortgages are defined as those ``commonly 
given'' in the various States; therefore, State and local law govern 
virtually the entire mortgage insurance transaction from the formation 
of the mortgagor entity to the making and securitization of the loan to 
the construction of the project is accord with local law. Consequently, 
prior to the making of a capital advance or endorsement of a mortgage 
note for insurance in connection with a multifamily rental project or a 
health care facility, it is imperative that HUD know the precise legal 
status of the mortgagor entity and of the realty and personalty which 
will comprise the security property. Inasmuch as the transaction is 
largely coordinated by the counsel to the mortgagor or owner (in the 
case of the section 202 and 811 programs), HUD has looked to such 
counsel for an opinion which provides comfort to the insured mortgagee 
and HUD regarding virtually all legal aspects of the transaction.
    24 CFR 200.150 provides the regulatory authority for the collection 
of ``all supporting documents'' and ``other exhibits as required by the 
terms of the commitment'' once the conditions of the commitment for 
mortgage insurance have been met and the mortgage note is presented for 
endorsement by HUD. Similarly, 24 CFR 889.415 and 890.415 provide the 
regulatory authority for the requirements prior to initial closing and 
the preparation of the necessary documents including the attorney's 
opinion.
    Although it is unclear that the rendering of a legal opinion is 
within the ambit of ``the collection of information,'' HUD has 
determined that the more conservative approach is to treat the opinion 
as such and let OMB make a definitive determination.
    2. The opinion is designed to provide HUD and the mortgagee with 
assurance that the mortgagor or owner entity has been validly formed, 
lawfully exists and that the security property and the construction 
thereupon comply with appropriate local laws such as building codes, 
zoning, etc. Further, the loan documents must comport with local law 
and practice and only an attorney licensed in the jurisdiction can 
complete such documents and provide HUD with the requisite assurance. 
It would be an enormous burden for HUD and the mortgagee, which often 
is a national entity, to perform such a legal analysis of the mortgagor 
or owner entity, the documents and the transaction. It is clear that 
without the assurance provide by the opinion, HUD and the mortgagee 
would be performing duplicative legal work and would extend 
considerably greater time and resources than the mortgagor's or owner's 
counsel, who would be conducting the analysis as a matter of course in 
representing the client/mortgagor.
    3. None--The form passes from counsel to the mortgagor or owner to 
HUD and the mortgagee. We are not aware of any new technology which 
could be employed.
    4. Since this is the only legal opinion required by HUD in 
connection with the transaction, we can find no evidence of 
duplication.
    5. Only counsel for the mortgagor or owner is in a position to 
render the necessary opinion. HUD counsel do not have access to the 
mortgagor or owner entity in a fashion that would provide HUD counsel 
with all of the data and knowledge available to the mortgagor's or 
owner's counsel. Further, HUD counsel are not in a time management or 
bar membership position to legally opine as to organizations, real and 
personal property, local law, etc. which comprise a mortgage loan 
transaction.
    6. HUD generally requires that the mortgagor or owner entity be a 
sole asset entity and sometimes the HUD-approved mortgagee might also 
be a small business; however, no burden falls upon these entities. The 
entire burden is upon the counsel to the mortgagor or owner to 
represent its client in the mortgage loan transaction. A small portion 
of such representation involves rendering a legal opinion which can be 
relied upon by HUD and the mortgagee.
    7. Not applicable--The legal opinion, if collected at all, has to 
be collected prior to endorsement of the mortgage note by HUD. In the 
case of capital advances, the legal opinion has to be collected prior 
to initial closing.
    8. Not applicable--It is questionable whether obtaining a legal 
opinion is really a collection of information.
    9. An effort was made to consult with other federal governmental 
agencies involved in mortgage loans, state and local entities involved 
in HUD's mortgage insurance programs, trade organizations, attorneys in 
the private sector representing mortgagees and mortgagors and HUD field 
counsel. Numerous changes have been made to reflect input by all the 
aforementioned parties.
    The guide format was probably developed shortly after enactment of 
the first multifamily provisions of the National Housing Act no later 
than the 1940s. The format had not been amended since 1966. Numerous 
disputes were arising in connection with the guide format (then 
designated FHA Form No. 1725) because private counsel were 
uncomfortable with what they regarded as an antiquated format which did 
not comport with modern opinions practice. Closings were delayed at 
great cost to HUD and the private sector. Efforts to revise the format 
were begun in the mid-1970s however no consensus was reached after two 
efforts to solicit comments from HUD field counsel.
    The attached Guide represents the HUD central office decisions made 
after the input described above. Names and telephone numbers of those 
consulted can be provided. All consultation took place from December 
1993 to date.
    There were no major problems which could not be resolved by central 
office decision-makers.
    Public and governmental comments received by HUD can be provided.
    The section 202 and 811 programs currently have an OMB-approved 
Owner's Attorney's Closing Opinion, form HUD-90166-CA. However, the 
Department has decided that it would be beneficial to participants and 
their counsel to have similar formats for all loan and capital advance 
programs. The section 202 and 811 guide format is essentially the same 
as the insured loan format except for some differences in terminology 
and program requirements.
    10. No assurance of confidentiality was given.
    11. No sensitive questions are addressed in the Guide.
    12. The estimated annualized cost to the federal government of 
collecting and storing the opinion based upon an hourly rate of $20.00 
per hour and a total of seven hours is $240.00. The opinion is one of 
many documents which is collected at each loan closing and is stored in 
the docket file which is maintained for the life of the project loan in 
the federal records center. For capital advances, the closing opinion 
would be kept in Field Office Docket. There is also the cost of review 
of the document by HUD field counsel. We estimate that this review 
should take approximately one-half hour and based upon an hourly rate 
of $24.00, the total cost would be $8400.00. Neither of these figures 
should change substantially from the previous total cost to the federal 
government under FHA Form No. 1725.
    The total annualized cost to mortgagors or owners of retaining 
private counsel to prepare the opinion is estimated to be $122,500.00, 
which is based upon a total of 700 hours at an average cost per hour of 
$175.00. (Although one hour is expended completing the form, 100 to 150 
hours are expended by mortgagor's or owner's counsel in representing 
the mortgagor or owner and a mortgage line item covers such typical 
total cost of approximately $20,000.00.)
    13. The above estimates are based upon an estimated total of 700 
multifamily rental project and health care facility loan closings per 
year, which is based upon last year's totals of approximately 500 FHA 
insured mortgage loan closings and 200 section 202 elderly closings. It 
is anticipated that the section 202 elderly closings will decrease and 
the FHA insured loan closings will increase by an off-setting amount. 
One legal opinion is required per closing. These estimates are based 
upon HUD's program staff experience in dealing with the aforementioned 
mortgage line item, the referenced loan closings and the experience of 
HUD personnel who have recently acted as counsel to mortgagors in the 
private sector.
    14. Although the guide is longer than the form it replaces, there 
is no substantial difference in the amount of time which will be 
expended by the parties involved in the preparation, review and 
collection of the opinion. The use of word processing technology and 
its redlining capability will make it possible to handle the increased 
length without any significant increase in time expended. Further, the 
new guide, by providing more specific instructions, should resolve many 
conflicts which had created intolerable delays in many closings. Such 
delays often resulted in the involvement of central office legal staff 
thereby further increasing the workload upon all the involved parties 
to the mortgage loan or capital advance transaction.
    15. Not applicable.

BILLING CODE 4210-01-M

TN03MR94.000


TN03MR94.001


BILLING CODE 4210-01-C
For use in FHA Insured Transactions
February 18, 1994.

Exhibit A To Opinion of Mortgagor's Counsel

Certification of Mortgagor

    This Certification of Mortgagor is made the ________ day of 
____________, 19______, by ________________, (the ``Mortgagor'') for 
reliance upon by ________________ (the ``Mortgagor's Counsel'') in 
connection with the issuance of an opinion letter dated of even date 
herewith (the ``Opinion Letter'') by ``Mortgagor's Counsel'') as a 
condition for the provision of mortgage insurance by the Department of 
Housing and Urban Development (``HUD'') of the $________ loan (the 
``Loan'') from ____________ (the ``Mortgagee'') to Mortgagor. In 
connection with the Opinion Letter, the Mortgagor hereby certifies to 
Mortgagor's Counsel for its reliance, the truth, accuracy and 
completeness of the following matters:

    1. The Organizational Documents are the only documents creating 
the Mortgagor or authorizing the Loan, and the Organizational 
Documents have not been amended or modified except as stated in the 
Opinion Letter.
    2. The terms and conditions of the Loan as reflected in the Loan 
Documents have not been amended, modified or supplemented, directly 
or indirectly, by any other agreement or understanding of the 
parties or waiver of any of the material provisions of the Loan 
Documents.
    3. All tangible personal property of the Mortgagor in which a 
security interest in granted under the Loan Documents [other than 
off-site construction materials and/or accounts or goods of a type 
normally used in more than one jurisdiction and/or additional 
collateral personalty] is located at the Property (as defined in the 
Opinion Letter) and the Mortgagor's [Chief Executive Office] [only 
place of business] [residence] is located in

----------------------------------------------------------------------

    4. The execution and delivery of the Loan Documents will not (i) 
cause the Mortgagor to be in violation of, or constitute a material 
default under the provisions of any agreement to which the Mortgagor 
is a party or by which the Mortgagor is bound, (ii) conflict with, 
or result in the breach of, any court judgment, decree or order of 
any governmental body to which the Mortgagor is subject, and (iii) 
result in the creation or imposition of any lien, charge, or 
encumbrance of any nature whatsoever upon any of the property or 
assets of the Mortgagor, except as specifically contemplated by the 
Loan Documents.
    5. There is no litigation or other claim pending before any 
court or administrative or other governmental body or threatened 
against the Mortgagor, the Property, or any other properties of the 
Mortgagor [,except as identified on Exhibit [    ], List of 
Litigation, in the Opinion Letter.]
    6. There is no default under the Public Entity Agreement (as 
defined in the Opinion Letter) nor have events occurred which with 
the passage of time will result in a default under the Regulatory 
Agreement.

    Note: All capitalized terms not defined herein shall have the 
meanings set forth in the Opinion Letter.

    In witness whereof, the Mortgagor has executed this Certification 
of Mortgagor effective as of the date set forth above.

Mortgagor:

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----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

    For use in the Section 202, Supportive Housing for the Elderly 
Program and Section 811, Supportive Housing for Persons with 
Disabilities Program

February 18, 1994.

Department of Housing and Urban Development, Federal Housing 
Administration

Guide for Opinion of Owner's Counsel

[To Be Typed on Firm Letterhead]

[Insert Capital Advance Initial Closing Date]

Re: Project Name-------------------------------------------------------

202 or 811 Project No.-------------------------------------------------

Location---------------------------------------------------------------

[Owner]
[Address]

Federal Housing Commissioner
[Insert Appropriate Field Office Address]

Ladies and Gentlemen:
    We are [I am] [general/special] counsel to ________________ [Insert 
Name of Owner] (the ``Owner''), a ____________, [Insert Type of Entity] 
organized under the laws of the State of ____________ [Insert State, 
Includes the District of Columbia and Puerto Rico] (the 
``Organizational Jurisdiction''), in connection with a first Mortgage 
(Deed of Trust) and Mortgage Note (``Capital Advance'') in the amount 
of ____________ Dollars ($____________) from HUD to the Owner. Such 
Capital Advance is being made pursuant to a Capital Advance Agreement 
dated as of the date hereof, by and between HUD and the Owner and will 
be used to construct, rehabilitate or acquire and maintain the 
captioned 202 or 811 project (``Project''), commonly known as 
________________ and located in ____________ [Insert County and State] 
(said State to be referred to hereinafter as the ``Property 
Jurisdiction'') on the property described on Exhibit ______ [Attach 
Legal Description] (together with all improvements and fixtures 
thereon) (the ``Property''). The Capital Advance is being issued, 
pursuant to [Section 202 of the Housing Act of 1959, as amended, or 
Section 811 of the Cranston Gonzalez National Affordable Housing Act], 
a firm commitment dated ____________ and which expires on ____________ 
(``Commitment''). The Owner has requested that we [I] deliver this 
opinion and has consented to reliance by HUD in making the Capital 
Advance and has waived any privity between Owner and us [me] in order 
to permit such reliance by HUD. We [I] consent to reliance on this 
opinion by HUD.
    In our [my] capacity as [general/special] counsel to the Owner, we 
[I] have prepared and or reviewed the following Capital Advance 
Documents, Organizational Documents and Collateral Documents (will be 
collectively referred to as ``the Documents'' unless expressly limited 
to a group of the above referenced documents) (numerical references in 
parenthesis following the Documents listed below are to HUD form 
numbers):

Capital Advance Documents

A. Before Initial Closing

    1. Capital Advance Agreement (HUD 90167-CA).
    2. Requisition for Disbursement of Capital Advance Funds (HUD-
92403-CA).
    3. Direct Deposit Sign-up Form (SF 1199A).
    4. Project Rental Assistance Contracts (PRAC) documents:
    a. Part I of Agreement to Enter into PRAC (HUD 90172A-CA);
    b. Part II of Agreement to Enter into PRAC (HUD 90172B-CA);
    c. Part I of the PRAC (HUD 90173A-CA); and
    d. Part II of the PRAC (HUD 90173B-CA).

B. Initial Closing

    1. Firm Commitment for Capital Advance Financing (HUD-92432-CA) 
including reissued, revised or amended commitment.
    2. Owner's Certificate (HUD 92433-CA).
    3. Evidence of Owner's Deposit (minimum capital investment) (escrow 
agreement, see 6(q)(1) of commitment) and ability to provide moveable 
furnishings and equipment not covered by capital advance, if necessary.
    4. Agreement and Certification (HUD 93566-CA).
    5. Mortgage Note (HUD-93432-CA).
    6. Mortgage (Deed of Trust) (HUD-90165-CA).
    7. Regulatory Agreement (HUD-92466-CA).
    8. Use Agreement (HUD 90163-CA).
    9. Owner's assurance of funds to cover costs over and above capital 
advance (if applicable).

Organizational Documents

(Documents regarding Organization of Non-Profit Owner)
    1. Approved and certified articles of organization (Certificate of 
Incorporation (HUD-91732A-CA)).
    2. Certificate of Good Standing.
    3. By-laws.
    4. Incumbency Certificate.
    5. Owner's I.R.S. Tax-Exemption Ruling.
    6. Corporate Resolution.

Collateral and other Documents (``Collateral Documents'')

    1. Collateral Agreements, if any.
    2. Security Agreement and UCC Financing Statement.
    3. Title Policy.
    4. Survey.
    5. Surveyor's Report (HUD-92457).
    6. Evidence of Zoning Compliance.
    7. Building Permits.
    8. Construction Contract:
    a. Lump Sum (HUD 92442-CA) OR Cost Plus (HUD 92442A-CA), as 
appropriate;
    b. Contractor's Requisition (HUD 92448); and
    c. Construction Contract, Incentive Payment (HUD 92443-CA), if 
applicable.
    9. Contractor's and/or Mortgagor's Cost Breakdown (HUD 92328).
    10. Assurance of Completion:
    a. Performance/Payment Bond 100% Dual-Obligee (92452-CA; OR
    b. Performance Bond (FHA 2452) and Payment Bond (FHA 2452A) and 
Surety Company's Telegram or Facsimile; OR
    c. Completion Assurance Agreement (HUD 92450-CA).
    11. Owner-Architect Agreement (AIA Document B181) (see attached to 
Capital Advance Agreement; HUD 90167-CA) and HUD Amendment (HUD 90169-
CA).
    12. Real Estate Tax Exemption (if applicable).
    13. Lease (if mortgage is on leasehold) (Lease Addendum at Appendix 
14 of HUD Handbook 4571.5).
    14. Land-Disposition Contract and Deed (required only for projects 
in urban renewal areas).
    15. Insurance and fidelity bonds:
    a. All applicable insurance policies per Property Insurance 
Requirements (HUD-90164-CA), including Property Insurance Schedule 
(HUD-92329); and
    b. Blanket Fidelity Bond.
    16. Assurance of Completion of Off-site Facilities, if applicable:
    a. Off-site Bond (HUD 90177-CA); OR
    b. Escrow Agreement for Off-site Facilities (HUD) 90170-CA).
    17. Fair Housing
    a. FHEO Certification in Connection with the development and 
operation of the project (assurance of compliance with HUD regulations 
(HUD Form 915); and
    b. Affirmative Fair Housing Marketing Plan (HUD will determine if 
administratively satisfied; Exhibit 3 to PRAC).
    18. Assurance of Utility services (water, electricity, sewer, gas, 
heat etc.).
    19. Additional Closing Requirements (State or local requirements).
    In basing the opinions set forth in this opinion on ``our [my] 
knowledge,'' the words ``our [my] knowledge'' signify that, in the 
course of our [my] representation of the Owner, no facts have come to 
our [my] attention that would give us [me] actual knowledge or actual 
notice that any such opinions or other matters are not accurate. Except 
as otherwise stated in this opinion, we [I] have undertaken no 
investigation or verification of such matters. Further, the words ``our 
[my] knowledge'' as used in this opinion are intended to be limited to 
the actual knowledge of the attorneys within our [my] firm who have 
been involved in representing the Owner in any capacity including, but 
not limited to, in connection with the Capital Advance. We [I] have no 
reason to believe that any of the documents on which we [I] have relied 
contain matters which, or the assumptions contained herein, are untrue, 
contrary to known facts, or unreasonable.
    In reaching the opinions set forth below, we [I] have assumed, and 
to our [my] knowledge there are no facts inconsistent with, the 
following:
    (a) Each of the parties to the Documents, other than the Owner (and 
any person executing any of the Documents on behalf of the Owner), has 
duly and validly executed and delivered each such instrument, document, 
and agreement to be executed in connection with the Capital Advance to 
which such party is a signatory, and such party's obligations set forth 
in the Documents are its legal, valid, and binding obligations, 
enforceable in accordance with this respective terms.
    (b) Each person executing any of the Documents, other than the 
Owner (and any person executing any of the Documents on behalf of the 
Owner), whether individually or on behalf of an entity, is duly 
authorized to do so.
    (c) Each natural person executing any of the Documents is legally 
competent to do so.
    (d) All signatures of parties other than the Owner (and any person 
executing any of the Documents on behalf of Owner) are genuine.
    (e) All Documents which were submitted to us [me] as originals are 
authentic; all Documents which were submitted to us [me] as certified 
or photostatic copies conform to the original document, and all public 
records reviewed are accurate and complete.
    (f) All applicable Documents have been duly filed, indexed, and 
recorded among the appropriate official records, and all fees, charges, 
and taxes due and owing as of this date have been paid.
    (g) The parties to the Documents and their successors and assigns 
will: (i) Act in good faith and in a commercially reasonable manner in 
the exercise of any rights or enforcement of any remedies under the 
Documents; (ii) not engage in any conduct in the exercise of such 
rights or enforcement of such remedies that would constitute other than 
fair and impartial dealing; and (iii) comply with all requirements of 
applicable procedural and substantive law in exercising any rights or 
enforcing any remedies under the Documents.
    (h) The exercise of any rights or enforcement of any remedies under 
the Documents would not be unconscionable, result in a breach of the 
peace, or otherwise be contrary to public policy.
    (i) The Owner has title or other interest in each item of (i) real 
and (ii) tangible personal property (``Personalty'') comprising the 
Property in which a security interest is purported to be granted under 
the Documents [and, where Personalty is to be acquired after the date 
hereof, a security interest is created under the after-acquired 
property clause of the Security Agreement].
    In rendering this opinion we [I] also have assumed that the 
Documents accurately reflect the complete understanding of the parties 
with respect to the transactions contemplated thereby and the rights 
and the obligations of the parties thereunder. We [I] also have assumed 
that the terms and the conditions of the Capital Advance as stated in 
the Documents have not been amended, modified or supplemented, directly 
or indirectly, by any other agreement or understanding of the parties 
or waiver of any of the material provisions of the Documents. After 
reasonable inquiry of the Owner, we [I] have no knowledge of any facts 
or information that would lead us [me] to believe that the assumptions 
in this paragraph not justified.
    In rendering this, we [I] also have assumed that: (i) all 
Personalty in which a security interest is created under the Documents 
(other than accounts or goods of a type normally used in more than one 
jurisdiction) is located at the Property and (ii) Owner's [Chief 
Executive Office] [only place of business] [residence] is located in 
____________. After reasonable inquiry of the Owner, we [I] have no 
knowledge of any facts or information that would lead us [me] to 
believe that the assumptions in this paragraph are not justified.
    In rendering this opinion we [I] have, with your approval, relied 
as to certain matters of fact set forth in the Owner's Opinion 
Certificate, the Certificate of Good Standing [and certain other 
specified Documents,] as set forth herein. After reasonable inquiry of 
the Owner as to the accuracy and completeness of the Owner's Opinion 
Certificate, the Certificate of Good Standing, [and such other 
Documents], and we [I] have no knowledge of any facts or information 
that would lead us [me] to believe that such reliance is not justified.
    Based on the foregoing and subject to the assumptions and 
qualifications set forth in this letter, it is our [my] opinion that:

[To be used in cases where organizational documents were prepared by 
owner's attorney]
    1. The Owner is a ____________ [Insert Type of Entity] [for 202, 
Private Non-Profit Corporation and For 811, Institution or Foundation], 
duly organized and validly existing under the laws of the 
Organizational Jurisdiction. The Owner is duly qualified to do business 
and, based solely on the Certificate(s) of Good Standing, copy attached 
hereto as Exhibit ______, is in good standing under the laws of the 
Organizational Jurisdiction and is qualified to do business as a 
foreign entity in the Property Jurisdiction.
    2. The Owner has the power and authority and possesses all 
necessary governmental certificates, permits, licenses, qualifications, 
tax exempt status and approvals to own (including the authority to 
borrow the proceeds of the Capital Advance, to encumber the Property 
with the Security Instrument, to execute the Capital Advance Documents) 
and operate the Property and such other assets as is necessary to carry 
on its business and to carry out all of the transactions contemplated 
by the Capital Advance Documents and Collateral Documents as of the 
date of this opinion and to comply with all applicable statutes and 
regulations of the Federal Housing Commissioner in effect on the date 
of the Firm Commitment.
    3. The execution and delivery of the Capital Advance Documents and 
Collateral Documents (where applicable) by or on behalf of the Owner, 
and the consummation by the Owner of the transactions contemplated 
thereby, and the performance by the Owner of its obligations 
thereunder, have been duly and validly authorized by all necessary 
action by, or on behalf of, the Owner.
    4. No authorization, consent, approval, or other action by, or 
filing with, any Organizational and Property Jurisdictions or federal 
court or governmental authority other than those that have been 
obtained, as disclosed on Exhibit ________, attached hereto, and those 
listed at Paragraphs ________ of this opinion [i.e., good standing 
certificate] are required in connection with the execution and delivery 
by the Owner of the Capital Advance Documents or Collateral Documents 
(where applicable) or the ownership [and operation] of the Property.
    5. Each of the Capital Advance Documents and Collateral Documents 
(where applicable) has been duly executed and delivered by the Owner 
and constitutes the valid and legally binding promises or obligations 
of the Owner, enforceable against the Owner in accordance with its 
terms, subject to the following qualifications:
    (i) the effect of applicable bankruptcy, insolvency, 
reorganization, moratorium and other similar laws affecting the rights 
of creditors generally; and
    (ii) the effect of the exercise of judicial discretion in 
accordance with general principles of equity (whether applied by a 
court of law or of equity).
    6. The execution and delivery of, and the performance of the 
obligations under, the Capital Advance Documents and Collateral 
Documents (where applicable), will not violate the Organizational 
Documents of the Owner or the applicable statutes and regulations of 
HUD in effect on the date of the Firm Commitment.
    [7. [Insert for Loans Involving Construction or Rehabilitation] To 
our [my] knowledge there are no proposed change(s) of law, ordinance, 
or governmental regulation (proposed in a formal manner by elected or 
appointed officials) which, if enacted or promulgated after the 
commencement of construction/rehabilitation, would require a 
modification to the Project, and/or prevent the Project from being 
completed in accordance with the plans and specifications, dated 
________, and executed by, and referred to in the Construction Contract 
(the ``Plans and Specifications'').]
    [8. [Insert if There is no Zoning Endorsement Incorporated into the 
Title Policy] The attached Zoning Certificate states that the Property 
appears on the zoning maps of [Property Jurisdiction] as being located 
in a ________ zone. According to the zoning ordinance of the Property 
Jurisdiction, the use of the Property as a ________ is a permitted use 
in such zone.
      or
    Based solely on the zoning Certificate, the Property may be used 
for ________ as a permitted use.]
    [9. [Use for New Construction or Substantial Rehabilitation in 
Cases Where HUD Does Not Receive a Certificate Directly from the 
Professional] Based solely on the Certificate, construction/
rehabilitation of the Project in accordance with the Plans and 
Specifications will comply with all applicable land use and zoning 
requirements.]
    10. Based solely upon (a) our [my] knowledge and (b) the Owner's 
Opinion Certification, the execution and delivery of the Capital 
Advance Documents and Collateral Documents (where applicable) will not: 
(i) cause the Owner to be in violation of, or constitute a default 
under the provisions of, any agreement to which the Owner is a party or 
by which the Owner is bound, (ii) conflict with, or result in the 
breach of, any court judgment, decree or order of any governmental body 
to which the Owner is subject, and (iii) result in the creation or 
imposition of any lien, charge, or encumbrance of any nature whatsoever 
upon any of the property or assets of the Owner, except as specifically 
contemplated by the Capital Advance Documents or Collateral Documents.
    11. Based solely upon (a) our [my] knowledge, (b) the Owner's 
Opinion Certification and (c) the Docket Search; there is no litigation 
or other claim pending before any court or administrative or other 
governmental body or threatened in writing against the Owner, or the 
Property, [except as identified on Exhibit ________].
    12. The Mortgage is in appropriate form for recordation in ________ 
[Insert Proper Name of Local Land Records Office] of ________ [Insert 
County or City] of the Property Jurisdiction, and is sufficient, as to 
form, to create the encumbrance and security interest it purports to 
create in the Property.
    13. Filing of the Financing Statements in the Filing Offices will 
perfect the security interest in the Personalty of the Owner located in 
the Project Jurisdiction, but only to the extent that, under the 
Uniform Commercial Code as in effect in the Project Jurisdiction, a 
security interest in each described item of Personalty can be perfected 
by filing. The Filing Offices are the only offices in which the 
Financing Statements are required to be filed in order to perfect the 
security interest in the Personalty.
    14. The Capital Advance does not violate the usury laws or laws 
regulating the use or forbearance of money of the Property 
Jurisdiction.
    15. The laws of Property Jurisdiction govern the interpretation and 
the enforcement of the Capital Advance Documents and Collateral 
Documents (where applicable) notwithstanding that the Owner may be 
formed in a jurisdiction other than Property Jurisdiction. The Owner 
can sue and be sued in Property Jurisdiction, including without 
limitation, a suit on the Note or a foreclosure proceeding arising 
under the Security Instrument. Venue for any foreclosure proceeding 
under the Security Instrument may be had in Property Jurisdiction.
    [16. [Applies to Cases Where the Land is Being Purchased From a 
Public Body] There is no default under the Public Entity Purchase 
Agreement, and construction in accordance with the Plans and 
Specifications and within the time frame specified in the Construction 
Contract will not lead to a default under the Public Entity Purchase 
Agreement. [Reliance is Permitted on the Basis of Knowledge and Owner's 
Certificate]
    [17. [Applies to Cases Where the Project is in an Urban Renewal 
Area] There is no default under the Land Disposition Contract between 
________ and ________, dated ________ and the time within which 
construction must be completed under the Capital Advance Agreement is 
within the time specified for completion in said Land Disposition 
Contract.]
    In addition to the assumptions set forth above, the opinions set 
forth above are also subject to the following qualifications:
    (i) The Uniform Commercial Code of the Property Jurisdiction 
requires the periodic filing of continuation statements with ________ 
[and ________] not more than ________ prior to and not later than the 
expiration of the ________ year period from the date of filing of the 
Financing Statements and the expiration of each subsequent ________ 
year period after the original filing, in order to maintain the 
perfection and priority of security interests and to keep the Financing 
Statements in effect.
    (ii) We express no opinion as to the laws of any jurisdiction other 
than the laws of the Property Jurisdiction and [and the Organizational 
Jurisdiction, if it is different,] and the laws of the United States of 
America. The opinions expressed above concern only the effect of the 
laws (excluding the principles of conflict of laws) of the Property 
Jurisdiction [and the Organizational Jurisdiction, if it is different] 
and the United States of America as currently in effect. We assume no 
obligation to supplement this opinion if any applicable laws change 
after the date of this opinion, or if we become aware of any facts that 
might change the opinions expressed above after the date of this 
opinion.
    We [I] confirm that:

    (a) based on the Organizational Documents, the name of the Owner 
in each of the Capital Advance Documents and Collateral Documents 
(where applicable) and the Title Policy and Firm Commitment is the 
correct legal name of the Owner;
    (b) the legal description of the Property is consistent in the 
Documents wherein it appears and in Exhibit ____________ hereto;
    (c) we [I] do not have any financial interest in the Project, 
the Property, or the Capital Advance, other than fees for legal 
services performed by us, payment for which has been provided; and 
we [I] agree not to assert a claim or lien against the Project, the 
Owner, the Capital Advance proceeds or income of the Project;
    (d) other than as counsel for the Owner, we have no interest in 
the Owner or any other party involved in the Capital Advance 
transaction and do not serve as [a director, officer or] [an] 
employee of the Owner. We have no undisclosed interest in the 
subject matters of this opinion;
    (e) based solely upon the Surveyor's Certificate and the 
Surveyor's Plat, flood insurance [is OR is not] required pursuant to 
12 U.S.C. 4012a(a). [Insert if flood insurance is required: based 
solely on the Flood Insurance Receipt, flood insurance is in effect 
which satisfies the requirements of 12 U.S.C. 4012a(a).]
    (f) we [I]] do not represent any development team member (as 
defined in 24 CFR part 889 (section 202) or 24 CFR part 890 (811 
program) or any other party or interest in connection with the above 
referenced housing project other than the Owner except for 
representation as the personal attorney for an individual associated 
with a development team member in matters not involving the housing 
project. If a dispute arises between the Owner and a development 
team member, my efforts will be directed exclusively towards serving 
the Owner. We [I] have submitted to HUD an Identity of Interest and 
Disclosure Certification;
    (g) to our knowledge, there are no liens or encumbrances against 
the Property which are not reflected as exceptions to coverage in 
the Title Policy;
    (h) we [I] hereby agree that we [I] will represent the Owner, if 
it so desires, in connection with the final capital advance 
disbursement by HUD, in which event I will be entitled to the 25% 
payment now being withheld; and
    (i) Except for the 25% being withheld (amounting to 
$____________) we [I] have been paid in full for my services and to 
the best of my knowledge, information and belief the Owner is 
obligated to no other party on account of legal services, except 
that $____________ is payable upon disbursement of the capital 
advance.

    The foregoing opinions are for the exclusive reliance of HUD; 
however, they may be made available for informational purposes to, but 
not for the reliance of, the assigns or transferees of the Owner, or 
prospective purchasers of the Project. We [I] acknowledge that the 
making, or causing to be made, of a false statement of fact in this 
opinion letter and accompanying materials may lead to criminal 
prosecution or civil liability as provided pursuant to applicable law, 
which may include 18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 3729, 3802.
      Sincerely,

----------------------------------------------------------------------
[Authorized Signature]

    For use in the Section 202, Supportive Housing for the Elderly 
Program and Section 811, Supportive Housing for Persons with 
Disabilities Program

February 18, 1994.

Department of Housing and Urban Development, Federal Housing 
Administration

Instructions to Guide for Opinion of Owner's Counsel

Explanatory Comments

    The guide for this opinion has been prepared in view of the ABA 
Accord and various state law bar reports on opinion letters.
    The Department regards the counsel to the Owner as the crucial, 
central figure in the process of preparing and executing the legal and 
administrative documents necessary to achieve a closing in connection 
with a first Mortgage (Deed of Trust) and Mortgage Note (``Capital 
Advance'') from HUD to the Owner. Pursuant to 24 CFR part 24, 
24.105(p), attorneys or others in a business relationship with the 
Owner are defined as ``principals.'' Even though the Guide is quite 
different than its predecessor (HUD 90166-CA), such revision does not 
in any fashion relieve the counsel to the Owner of its obligations to 
its client and the Department. In part, these responsibilities entail 
the exercise of due diligence to assure the accurate and timely 
preparation, completion and submission of the forms required by the 
Department in connection with the transaction. Further, the counsel to 
the Owner and any other attorneys involved in the transaction, should 
be thoroughly familiar with the regulations, procedures and directives 
of the Department pertaining to each transaction in which counsel 
participates. The Department takes seriously the preparation and 
completion of the various documents involved in the Capital Advance 
Program (most of which are HUD Form documents) and cannot overemphasize 
the importance of the following:
    ``Warning: HUD will prosecute false claims and statements. 
Conviction may result in criminal and/or civil penalties. (18 U.S.C. 
1001, 1010, 1012; 31 U.S.C. 3729, 3802)''
    With limited state law related exceptions, we expect that Owner's 
counsel will be able to follow the guide opinion and HUD field counsel 
should not accept opinions that otherwise substantially or materially 
deviate from the guide. Although we understand that attorneys and law 
firms may have evolved particular styles and forms of opinion, HUD 
field counsel do not have time to negotiate each and every opinion and 
it is essential that the guide be followed in both style and substance 
in order to ensure a timely closing.
    The counsel to the Owner is expected to complete a draft opinion 
for submission to HUD field counsel ten days prior to the closing along 
with the other closing documents. Any deviations should be specifically 
identified (blacklined or highlighted) and discussed with field counsel 
at that time. Any material deviation not required by State or local law 
must be brought to the attention of HUD's Office of General Counsel by 
field counsel along with an explanation as to the necessity for the 
deviation.
    Brackets are used in the opinion letter to indicate alternate 
language, insertions, documents, or instructions depending on the 
applicable facts and underlining is used to indicate blanks that must 
be completed.
    The guide opinion contains some instructions and definitions and is 
largely self-explanatory; however, the following instructions and 
clarifications may be helpful. The numbers and letters used below 
relate to the paragraph numbers and letters in the guide opinion unless 
page numbers are specifically designated.

Page 1 and Introductory Paragraph

     Letterhead and date: The opinion must be typed on the firm 
or single practitioner's letterhead and dated the date of the Capital 
Advance by HUD.
     Reference: Data regarding the project (name, HUD project 
number, and location must be accurate and inserted in the appropriate 
blanks.
     Addressees: The opinion must be delivered to HUD to 
establish the explicit right to rely on the opinion.
     Description of the Capital Advance: The Capital Advance 
amounts is the original principal amount of the Capital Advance unless 
a modification is necessitated in connection with the closing.

List of Documents

     In General: Each document executed in connection with the 
Capital Advance must be listed by its correct title. It is imperative 
that care must be taken to compile a list that accurately and 
completely reflects the transaction prior to submission to HUD of the 
initial draft. After HUD review of the initial draft, the opinion may 
have to be modified, as necessary, to satisfy HUD.
    All documents executed in connection with the Capital Advance must 
be listed regardless of whether the document is required by HUD. The 
appropriate HUD or FHA form number, if applicable, must be indicated in 
parens after each document.
    All of the Documents must be reviewed. The following HUD guidelines 
should be followed in preparing or reviewing the Documents.
    1. HUD Handbook 4571.5, Supportive Housing for the Elderly--
Conditional Commitment--Final Closing, dated July 1992, should be 
followed. This Handbook provides copies of most of the Documents 
required by HUD to be used in the 202 Program Closings. Until HUD 
publishes a similar Handbook for the Supportive Housing for Persons 
with Disabilities Program, section 811 Capital Advance closings shall 
follow the 4571.5 Handbook.
    2. All 202 and 811 Owners must adopt the model Certificate of 
Incorporation (HUD-91732-A-CA) except for Field Counsel modifications 
related to State law or modifications required by the Internal Revenue 
Service. All other modifications must be approved by HUD.
    3. The HUD field counsel have not been consistent in requiring HUD 
to be named in the Financing Statements as a secured party or as its 
interests may appear; consequently, the requirement that HUD be so 
named is now being standardized. This should be clarified through 
appropriate language in the Security Agreement. The purpose is to 
clarify that, under certain circumstances, HUD may assert some rights 
in the personalty arising under the Regulatory Agreement which would 
precede an assignment of the mortgage. This is desirable in the event 
HUD exercises some of its remedies under the Regulatory Agreement in 
cases where the mortgage has not been assigned to HUD. It will not be 
necessary for HUD to consent to every UCC termination, renewal, 
assignment, etc. until HUD's rights as a secured party are established. 
HUD is being named ``as its interests appear'' so that, for example, 
where HUD obtains a court order, HUD will be able to establish a 
paramount interest in the Project income stream, and other personality 
pursuant to the Regulatory Agreement.
    4. UCC searches: The UCC Search can be conducted by either the 
title insurance company, a reputable document search firm, the counsel 
to the Owner or any other attorney licensed in the jurisdiction. One or 
more UCC searches performed not more than 30 days prior to the date of 
the opinion of Owner's counsel must be made and retained by the field 
counsel in the Capital Advance file.
    5. Evidence of zoning compliance: The evidence of zoning compliance 
will vary depending on the circumstances. The evidence should establish 
that the building, if constructed according to plans and circumstances, 
will comply with all zoning requirements. The evidence may be in the 
form of a letter or certificate from the appropriate local official 
stating that, if the building is constructed according to the plans and 
specifications submitted for review, the building will comply with all 
zoning requirements. If the locality has no zoning ordinance, a letter 
should be submitted from the chief executive stating such. In those 
circumstances, it may be necessary to obtain a letter from the local 
planning body of the county in which the project is located, that the 
proposed development is compatible with the county's comprehensive 
plan. If the zoning approval is based upon a variance or other special 
action, the closing may have to be delayed until the time for appeals 
has run. In extremely complex cases, an opinion may need to be obtained 
from legal counsel specializing in local zoning matters. Such letter 
must be attached as an exhibit and referenced in the appropriate 
paragraphs of the Opinion.
    6. Survey: the survey must be signed, sealed and dated within 90 
days of the closing.
    7. Docket search: The Docket Search can be conducted by either the 
title insurance company, a reputable document search firm, the counsel 
to the Owner or any other attorney licensed in the jurisdiction.
    8. If any UCC Financing Statements have been filed on the 
Personalty in conjunction with any transaction other than the Capital 
Advance, they must be identified to the HUD field counsel as well as 
details with respect to how such Financing Statements will be 
terminated at the time of closings.
    9. If the Owner or any principal of the Owner is involved in any 
litigation, all such litigation matter(s) must be disclosed in writing 
to HUD field counsel. If the litigation involves HUD's compliance with 
civil rights requirements, it must immediately be brought to the 
attention of appropriate Fair Housing and Equal Opportunity personnel. 
As an example, it is not uncommon for neighbors of a proposed site for 
a group home for persons with disabilities to harbor discriminatory 
attitudes toward persons with disabilities and to sue to attempt to 
block the establishment or operation of a group home.

Acceptability of Counsel

     Owner's counsel must opine as to the law of the Property 
jurisdiction and the state of Owner's organization, if different from 
the Property jurisdiction. HUD requires that Owner's counsel be 
admitted to practice law in each jurisdiction in which such admission 
is required by the laws or ethical considerations of the bar to be able 
to give the opinion. If multiple jurisdictions are involved, two 
opinions may be required: one with respect to the organization of the 
Owner and another with respect to the real property and Capital Advance 
issues. A combination of the Owner's regular counsel and special local 
counsel may be required to satisfy this requirement. If counsel's 
satisfaction of these requirements is not evident from the letterhead 
of the firm, the field counsel should include a written explanation in 
the Capital Advance Closing File. In all events, each provision in the 
Guide must be addressed whether one or more opinions is required to do 
so.

Signatures

     The opinion may be signed by an authorized person of the 
law firm, in that person's name.

Owner's Certification

     A form of Owner's Certification is attached. The form 
represents the minimum amount of information that should be obtained 
from the Owner (but additions, revisions and rephrasing are acceptable 
so long as the Owner is certifying as to factual matters and not legal 
conclusions). The Owner's Certification must be dated the same date as 
the Capital Advance Documents.
    For use in the Section 202, Supportive Housing for the Elderly 
Program and Section 811, Supportive Housing for Persons with 
Disabilities Program

February 18, 1994.

Exhibit A To Opinion of Owner's Counsel

Certification of Owner

    This Certification of Owner is made the ________ day of ________, 
19______, by ________________, (the ``Owner'') for reliance upon by 
________________ (the ``Owner's Counsel'') in connection with the 
issuance of an opinion letter dated of even date herewith (the 
``Opinion Letter'') by (``Owner's Counsel'') as a condition for the 
making of a capital advance by the Department of Housing and Urban 
Development (``HUD'') in the amount of $____________ (the ``Capital 
Advance'') to the Owner. In connection with the Opinion Letter, the 
Owner hereby certifies to Owner's Counsel for its reliance, the truth, 
accuracy and completeness of the following matters:

    1. The Organizational Documents are the only documents creating 
the Owner or authorizing the Capital Advance, and the Organizational 
Documents have not been amended or modified except as stated in the 
Opinion Letter.
    2. The terms and conditions of the Capital Advance as reflected 
in the Capital Advance Documents have not been amended, modified or 
supplemented, directly or indirectly, by any other agreement or 
understanding of the parties or waiver of any of the material 
provisions of the Capital Advance Documents.
    3. All tangible personal property of the Owner in which a 
security interest is granted under the Capital Advance Documents 
[other than off-site construction materials and/or accounts or goods 
of a type normally used in more than one jurisdiction and/or 
additional collateral personalty] is located at the Property (as 
defined in the Opinion Letter) and the Owner's [Chief Executive 
Office] [only place of business] [residence] is located in

----------------------------------------------------------------------

    4. The execution and delivery of the Capital Advance Documents 
will not (i) cause the Owner to be in violation of, or constitute a 
default under the provisions of any agreement to which the Owner is 
a party or by which the Owner is bound, (ii) conflict with, or 
result in the breach of, any court judgment, decree or order of any 
governmental body to which the Owner is subject, and (iii) result in 
the creation or imposition of any lien, charge, or encumbrance of 
any nature whatsoever upon any of the property or assets of the 
Owner, except as specifically contemplated by the Capital Advance 
Documents.
    5. There is no litigation or other claim pending before any 
court or administrative or other governmental body or threatened 
against the Owner, the Property, or any other properties of the 
Owner [except as identified on Exhibit ____, List of Litigation, in 
the Opinion Letter.]
    6. There is no default under the Public Entity Agreement (as 
defined in the Opinion Letter) nor have events occurred which with 
the passage of time will result in a default under the Regulatory 
Agreement.

    Note: All capitalized terms not defined herein shall have the 
meanings set forth in the Opinion Letter.

    In witness whereof, the Owner has executed this Certification of 
Owner effective as of the date set forth above.

Owner:

----------------------------------------------------------------------

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    For use in FHA Insured Transactions

February 18, 1994.

Department of Housing and Urban Development, Federal Housing 
Administration

Instructions to Guide for Opinion of Mortgagor's Counsel

Explanatory Comments

    The guide for this opinion has been prepared in view of changes in 
opinion practice as reflected by the ABA Accord and various state law 
bar reports on opinion letters.
    The Department regards the counsel to the Mortgagor as the crucial, 
central figure in the process of preparing and executing the legal and 
administrative documents necessary to achieve a closing where the 
mortgage note is endorsed for mortgage insurance by the Department. 
Pursuant to 24 CFR part 24, 24.105(p), attorneys or others in a 
business relationship with the Mortgagor are defined as ``principals.'' 
Even though the Guide is quite different in form from its predecessor 
(FHA Form No. 1725), the substance is not intended to be substantially 
different and the revision does not in any fashion relieve the counsel 
to the Mortgagor of its obligations to its client, the Mortgagee and 
the Department. In part, these responsibilities entail the exercise of 
due diligence to assure the accurate and timely preparation, completion 
and submission of the forms required by the Department in connection 
with the transaction. Further, the counsel to the Mortgagor and any 
other attorneys involved in the transaction, should be thoroughly 
familiar with the regulations, procedures and directives of the 
Department pertaining to each mortgage insurance transaction in which 
counsel participates. The Department takes seriously the preparation 
and completion of the various documents involved in the mortgage 
insurance process (most of which are HUD form documents) and cannot 
overemphasize the importance of the following:

    Warning: HUD will prosecute false claims and statements. 
Conviction may result in criminal and/or civil penalties. (18 U.S.C. 
1001, 1010, 1012; 31 U.S.C. 3729, 3802)

    With limited state law related exceptions, we expect that 
Mortgagor's counsel will be able to follow the guide in rendering an 
opinion and HUD field counsel should not accept opinions that otherwise 
substantially or materially deviate from the guide. Although we 
understand that attorneys and law firms may have evolved particular 
styles and forms of opinion, HUD field counsel do not have time to 
negotiate each and every opinion for stylistic changes and it is 
essential that the guide be followed in both style and substance in 
order to ensure a timely closing.
    The counsel to the Mortgagor is expected to complete a draft 
opinion for submission to HUD field counsel at least ten days prior to 
the closing along with the other closing documents. Any deviations 
should be specifically identified (blacklined or highlighted) and 
discussed with field counsel at that time. Any material deviation not 
required by State or local law must be brought to the attention of the 
Assistant General Counsel, Multifamily Mortgage Division, by field 
counsel along with an explanation as to the necessity for the 
deviation.
    It is anticipated that the guide can be utilized in connection with 
all types of closings: Insured advances or insurance upon completion 
(for new construction or substantial rehabilitation); final closings 
(for refinancings, etc.). Therefore, it is crucial that the correct 
options be selected in instances where choices are provided.
    Brackets are used in the opinion letter to indicate alternate 
language, insertions, documents, or instructions depending on the 
applicable facts and underlining is used to indicate blanks that must 
be completed.
    The guide opinion contains some instructions and definitions and is 
largely self-explanatory; however, the following instructions and 
clarifications may be helpful. The numbers and letters used below 
relate to the paragraph numbers and letters in the guide opinion unless 
page numbers are specifically designated.

Page 1 and Introductory Paragraph

     Letterhead and date: The opinion must be typed on the firm 
letterhead and dated the date of endorsement of the mortgage note by 
HUD.
     Reference: Data regarding the project (name, HUD project 
number, and location and the name or title of the Mortgagor must be 
accurate and inserted in the appropriate blanks.
     Addressees: The opinion must be delivered to HUD as well 
as the Mortgagee making the loan to establish the explicit right of 
each to rely on the opinion. The Mortgagee's counsel may be relying on 
the opinion for certain aspects of its opinion. If so, the opinion must 
also be addressed to counsel to the Mortgagee.
     Description of the Loan: The loan amount is the original 
principal amount of the loan being insured unless a modification is 
necessitated in connection with the closing.
     Source of funds for the Loan: In the second full sentence 
on page 2 the source of funds must be accurately identified.

List of Documents

     In General: If there are no brackets around a particular 
document, the document is one which is commonly used for initial 
endorsements for insured advances completion cases; however, it should 
be emphasized that it is impossible to list every document for every 
insured loan. Further, no attempt has been made to list all documents 
utilized in all types of refinancings and certain specialized programs, 
e.g. certificates of need and licenses for health care programs. 
Conversely, some documents may not be utilized in a particular 
transaction and should be deleted from the list in the actual opinion. 
Brackets around the name of the document indicate that the document may 
or may not be used for every loan. If bracketed documents are not used 
in a particular loan transaction, then delete such documents from the 
list in the actual opinion. Each document executed in connection with 
the loan must be listed by its correct title, showing each party 
executing it and its date. If documents are dated ``as of'' a 
particular date, then such phrase should be included in the description 
in the text. It is imperative that care must be taken to compile a list 
that accurately and completely reflects the transaction in the 
submission to HUD of the initial draft. After HUD review of the initial 
draft, the opinion may have to be modified, as necessary, to satisfy 
HUD.
    All documents executed in connection with the loan transaction must 
be listed regardless of whether the document is required by HUD. The 
appropriate HUD or FHA form number, if applicable, must be indicated in 
parenthesis after each document. Please note that the Guide lists a 
four digit number after virtually all of the standard HUD documents. In 
many instances as these forms have been updated, the four digit number 
has been changed so that they are now preceded by a ``9.'' However, HUD 
is in the process of changing to a standardized four digit number which 
should become effective in 1994.
    A. Organizational Documents: All of the Organizational Documents 
must be reviewed.
    1. In addition to reviewing the Organizational Documents listed in 
the opinion, the following HUD guidelines should be followed in 
preparing or reviewing the following organizational documents.
    a. Corporate mortgagor--any form of corporate charter or articles 
of incorporation may be used which:
    (1) Contains nothing inconsistent with the Regulatory Agreement,
    (2) Gives the Mortgagor the powers necessary to operate the project 
and execute the note and mortgage, and
    (3) Specifically authorizes the execution of the Regulatory 
Agreement.
    Suggested charter provisions to accomplish the above are:

Purposes

    (a) To create a private corporation to construct or to acquire a 
[rental housing project or health care facility] and to operate the 
same; (b) to enable the financing of the construction of such 
[rental housing project or health care facility] with the assistance 
of mortgage insurance under the National Housing Act; (c) to enter 
into, perform, and carry out contracts of any kind necessary to, or 
in connection with, or incidental to, the accomplishment of the 
purposes of the corporation, including, expressly, any contract or 
contracts with the Secretary of Housing and Urban Development which 
may be desirable or necessary to comply with the requirements of the 
National Housing Act, as amended, and the Regulations of the 
Secretary thereunder, relating to the regulation or restriction of 
mortgagors as to rents, sales, charges, capital structure, rate of 
return and methods of operation; (d) to acquire any property, real 
or personal, in fee or under lease, or any rights therein or 
appurtenant thereto, necessary for the construction and operation of 
[the rental housing project or health care facility]; and (e) to 
borrow money, and issue evidence of indebtedness, and to secure the 
same by mortgage, deed of trust, pledge, or other lien in 
furtherance of any or all of the objects of its business in 
connection with the [rental housing project or health care 
facility].

Powers

    The corporation shall have the power to do and perform all 
things whatsoever set out in the PURPOSES section, and necessary or 
incidental to the accomplishment of said purposes.
    The corporation, specifically and particularly, shall have the 
power and authority to enter into a Regulatory Agreement with the 
Secretary of Housing and Urban Development setting out the 
requirements of the Department.

    b. Partnership Mortgagor--A copy of the partnership agreement 
should be furnished and should be examined to determine that it 
contains nothing inconsistent with the Regulatory Agreement and that 
the term of the partnership equals or exceeds the term of the Mortgage 
Loan. It should further contain a provision substantially as follows:

    The partnership is authorized to execute a note and mortgage in 
order to secure a loan to be insured by the Secretary of Housing and 
Urban Development and to execute a Regulatory Agreement and other 
documents required by the Secretary in connection with such loan. 
Any incoming general partner shall as a condition of receiving an 
interest in the partnership agree to be bound by the note, mortgage, 
and Regulatory Agreement and other documents required in connection 
with the FHA insured loan to the same extent and on the same terms 
as the other general partners. Upon any dissolution, no title or 
right to possession and control of the project, and no right to 
collect the rents therefrom shall pass to any person who is not 
bound by the Regulatory Agreement in a manner satisfactory to the 
Secretary.

    c. Trust--any Trust Agreement before it is finally accepted 
generally should:
    (1) Give the trustee the powers necessary to execute the note and 
mortgage;
    (2) Specifically authorize the execution of the Regulatory 
Agreement;
    (3) Contain nothing inconsistent with the Regulatory Agreement;
    (4) Prohibit the transfer of beneficial interest prior to 
completion of the project without the prior written consent of the 
Secretary and prohibit the transfer of such interest subsequent to 
completion of the project unless the new beneficiary assumes and agrees 
to be bound by the Regulatory Agreement; and
    (5) Require that the Secretary be advised ten (10) days prior to 
any proposed transfers of beneficial interests.
    G. The HUD field counsel have not been consistent in requiring HUD 
to be named in the Financing Statements as a secured party or as its 
interests may appear; consequently, the requirement that HUD be so 
named is now being standardized. This should be clarified through 
appropriate language in the Security Agreement. The purpose is to 
clarify that, under certain circumstances, HUD may assert some rights 
in the personalty arising under the Regulatory Agreement which would 
precede an assignment of the mortgage. This is desirable in the event 
HUD exercises some of its remedies under the Regulatory Agreement in 
cases where the mortgage has not been assigned to HUD. It will not be 
necessary for HUD to consent to every UCC termination, renewal, 
assignment, etc. until HUD's rights as a secured party are established. 
HUD is being named ``as its interests appear'' so that, for example, 
where HUD obtains a court order, HUD will be able to establish a 
paramount interest in the Project income stream, and other personalty 
pursuant to the Regulatory Agreement.
    Q. UCC searches: The UCC search can be conducted by either the 
title insurance company, a reputable document search firm, the counsel 
to the Mortgagor or any other attorney licensed in the jurisdiction.
    T. Evidence of zoning compliance: The evidence of zoning compliance 
will vary depending on the circumstances. The evidence should establish 
that the building, if constructed according to plans and circumstances, 
will comply with all zoning requirements. The evidence may be in the 
form of a letter or certificate from the appropriate local official 
stating that, if the building is constructed according to the plans and 
specifications submitted for review, the building will comply with all 
zoning requirements. In refinancing cases where no construction is 
involved, the evidence may be in the form of a letter certifying that 
the existing building(s) is (are) in compliance with outstanding zoning 
requirements or, if not, the nonconforming variance, etc., is 
acceptable. If the locality has no zoning ordinance, a letter should be 
submitted from the chief executive stating such. In those 
circumstances, it may be necessary to obtain a letter from the local 
planning body of the county in which the project is located, that the 
proposed development is compatible with the county's comprehensive 
plan. If the zoning approval is based upon a variance or other special 
action, the closing may have to be delayed until the time for appeals 
has run. In extremely complex cases, an opinion may need to be obtained 
from legal counsel specializing in local zoning matters. Such letter 
must be attached as an exhibit and referenced in the appropriate 
paragraphs of the Opinion.
    W. Survey: The survey must be signed, sealed and dated within 90 
days of the closing.
    LL. Bond documents: This does not include all documents involved in 
the typical bond financing. It does include those principal documents 
such as the Prospectus, the Indenture, a sample Bond, etc. Moreover, 
all documents executed by the Mortgagor or which establish or describe 
any obligations of the Mortgagor must be included.
    OO. Docket search: The Docket search can be conducted by either the 
title insurance company, a reputable document search firm, the counsel 
to the Mortgagor or any other attorney licensed in the jurisdiction.

Opinions

    1. This paragraph contains several options depending upon whether 
the Mortgagor's organizational documents were prepared by counsel 
rendering the opinion and the type of mortgagor entity. Care should be 
taken to ensure that the correct option is selected and that the 
requisite information is inserted correctly. It is intended that, where 
the mortgagor entity or general partner of the mortgagor entity is 
established by counsel to the Mortgagor, no reliance on other sources 
is permitted and counsel must opine as to the due organization of the 
Mortgagor. If a Certificate of Good Standing is not available in the 
State, but an equivalent document is (i.e., Certificate of Existence), 
then the bracketed language must be revised to reflect the name/title 
of the equivalent document so obtained. Any Certificate of Good 
Standing or equivalent document issued by the applicable governmental 
authority must be dated no more than 30 days prior to the date of the 
opinion of Mortgagor's counsel. If a Certificate of Good Standing or 
equivalent document cannot be obtained from the applicable governmental 
authority (e.g., for general partnerships, then the Mortgagor's 
attorney will be required to do the due diligence necessary to give the 
opinion or may engage other counsel to render such opinion). If the 
Property jurisdiction is not the State of formation for the mortgagor 
entity, counsel must also opine that the Mortgagor is qualified to 
transact business in the Property jurisdiction. Such opinion may be 
made solely on the basis of a certificate from the applicable 
governmental authorities of the Property jurisdiction, and if counsel 
is relying on such certificate(s), then the opinion must expressly 
identify those certificate(s) and they must be attached to the opinion 
as an exhibit. If the Mortgagor is an individual, paragraph one should 
be deleted from the opinion.
    7. If any UCC Financing Statements have been filed on the 
Personalty in conjunction with any transaction other than the Loan, 
they must be identified to the HUD field counsel as well as details 
with respect to how such Financing Statements will be terminated at the 
time of closings.
    11. If the Mortgagor or any principal of the Mortgagor is involved 
in any litigation, all such litigation matter(s) must be disclosed in 
writing to HUD field counsel in order that the Department can determine 
whether the endorsement of the loan is possible. If the litigation 
involves HUD's compliance with civil rights requirements, it must 
immediately be brought to the attention of appropriate Fair Housing and 
Equal Opportunity personnel. As an example, it is not uncommon for 
neighbors of a proposed site for a group home for persons with 
disabilities to harbor discriminatory attitudes toward persons with 
disabilities and to sue to attempt to block the establishment or 
operation of a group home.
    13. If the property is an elderly housing project or a health care 
facility or if the loan otherwise is to be secured by significant 
amounts of personal property, the matter should be discussed with field 
counsel. In the event further discussion is necessary, field counsel 
should contact the Assistant General Counsel, Multifamily Mortgage 
Division. For projects in which the personalty is mostly household 
appliances (e.g., refrigerators) or a limited quantity of smaller 
equipment, the opinion will be limited as shown.
    One or more UCC searches performed not more than 30 days prior to 
the date of the opinion of Mortgagor's counsel must be made and 
retained by the field counsel in the loan file.
    15. If the Mortgagor is a trust (other than a land trust), then 
Paragraph 15 must be included in the opinion letter. The second 
sentence need only be included if the trust was formed in a 
jurisdiction other than the Property jurisdiction.

Acceptability of Counsel

     Mortgagor's counsel must opine as to the law of the 
Property jurisdiction and the state of Mortgagor's organization, if 
different from the Property jurisdiction. HUD requires that Mortgagor's 
counsel be admitted to practice law in each jurisdiction in which such 
admission is required by the laws or ethical considerations of the bar 
to be able to give the opinion. If multiple jurisdictions are involved, 
two opinions may be required: one with respect to the organization of 
the Mortgagor and another with respect to the real property and loan 
issues. A combination of the Mortgagor's regular counsel and special 
local counsel may be required to satisfy this requirement. If counsel's 
satisfaction of these requirements is not evident from the letterhead 
of the firm, the field counsel should include a written explanation in 
the Washington docket. In all events, each provision in the Guide must 
be addressed whether one or more opinions is required to do so.

Signatures

     The opinion may be signed by an authorized person of the 
law firm, in that person's name.

Mortgagor's Certification

     A form of Mortgagor's Certification is attached. The form 
represents the minimum amount of information that should be obtained 
from the Mortgagor (but additions, revisions and rephrasings are 
acceptable so long as the Mortgagor is certifying as to factual matters 
and not legal conclusions). The Mortgagor's Certification must be dated 
the same date as the Loan Documents.
    For use in FHA Insured Transactions

February 18, 1994.

Department of Housing and Urban Development, Federal Housing 
Administration

Guide for Opinion of Mortgagor's Counsel

[To be typed on firm letterhead]

[Insert date of endorsement]

Re: Project Name-------------------------------------------------------

FHA Project No.--------------------------------------------------------

Location---------------------------------------------------------------

Mortgagor--------------------------------------------------------------

[Mortgagee]
[Address]

[Mortgagee's Attorney]
[Address]

Federal Housing Commissioner
[Insert Appropriate Field Office Address]

Ladies and Gentlemen:
    We are [I am] [general/special] counsel to ________________
    [Insert Name of Mortgagor] (the ``Mortgagor''), a ________________,
    [Insert Type of Entity] organized under the laws of the State of 
________________ [Insert State] (the ``Organizational Jurisdiction''), 
in connection with a mortgage loan (the ``Loan'') in the [original/
increased] principal amount of ________________ Dollars 
($________________) from ________________ [Insert Name and Type of 
Mortgagee] (the ``Mortgagee'') to the Mortgagor. The proceeds of the 
Loan will be used to [construct/rehabilitate/purchase/refinance] a loan 
secured by that certain [multifamily housing/hospital/extended care 
facility/nursing home/board and care] ____________ located in 
________________ [Insert County and State] (said State to be referred 
to hereinafter as the ``Property Jurisdiction'') on the property 
described on Exhibit ________________ [Attach Legal Description] 
(together with all improvements and fixtures thereon) (the 
``Property''). The Loan is being insured by the Federal Housing 
Administration (FHA), an organizational unit of the United States 
Department of Housing and Urban Development (``HUD''), pursuant to a 
commitment for insurance [of advances or upon completion or for 
refinancing] issued to Mortgagee by ________________, Agent of the 
Federal Housing Commissioner, dated ________________ [as amended by 
that certain letter from ________________ to ________________, dated 
________________] (``FHA Commitment''). The Loan is being funded from 
________________ [Describe Financing Source, e.g., tax-exempt bonds/
mortgage backed securities guaranteed by GNMA/participation 
certificates, etc.] The Mortgagor has requested that we [I] deliver 
this opinion and has consented to reliance by Mortgagee's counsel in 
rendering its opinion to Mortgagee and to reliance by Mortgagee and HUD 
in making and insuring, respectively, the Loan and has waived any 
privity between Mortgagor and us [me] in order to permit said reliance 
by Mortgagee, counsel to Mortgagee and HUD. We [I] consent to reliance 
on this opinion by Mortgagee, counsel to Mortgagee, and HUD.
    In our [my] capacity as [general/special] counsel to the Mortgagor, 
we [I] have prepared or reviewed the following:
    A. The [Describe Organizational Documents, e.g. for corporations: 
certified copies of the articles of incorporation, the by-laws, the 
borrowing resolution, the incumbency certificate and the good standing 
certificate(s); for partnerships: certified copies of the partnership 
agreement and any amendments thereto, the certificate of limited 
partnership, and any amendments thereto, the good standing certificate 
(or its equivalent) if provided in the Organizational Jurisdiction, 
etc.] of the Mortgagor (collectively, the ``Organizational 
Documents'');
    B. The FHA Commitment [and assignment(s) thereof, if any];
    C. The Commitment executed by the Mortgagee and accepted by the 
Mortgagor, dated ________________, (the ``Loan Commitment'');
    D. The Regulatory Agreement (________________) [Insert Appropriate 
Form No.] by and between HUD and the Mortgagor, dated ________________, 
(the ``Regulatory Agreement'');
    E. The Note (________________) [Insert Appropriate Form No.] in the 
original principal amount of ________________ Dollars 
($________________) or in the increased principal amount of 
________________ Dollars ($________________) by Mortgagor in favor of 
Mortgagee, dated ________________, (the ``Note'');
    F. [The Mortgage or Deed of Trust]
(________ [Insert Appropriate Form No.]), executed by Mortgagor for the 
benefit of Mortgagee, granting a security interest in the Property, 
dated ____________, (the ``Mortgage'');
    G. [Insert the Number of UCC's to be Filed] Uniform Commercial Code 
Financing Statements executed by the Mortgagor as debtor and naming the 
Mortgagee and HUD as secured parties or as their interests may appear, 
to be filed in ____________, [Insert Location(s)] (the Filing Offices), 
upon the [Describe Events] (the ``Financing Statements'');
    H. The Security Agreement by and between Mortgagor and the 
Mortgagee, granting a security interest under the Uniform Commercial 
Code, in those items of personality described therein, dated 
____________, (the ``Security Agreement'');
    [I. [To be Inserted If the Mortgage is on a Leasehold Estate] The 
Ground Lease executed by ____________, [Insert Lessor] as lessor and 
Mortgagor as lessee recorded in the land records of ____________, dated 
____________, (the ``Ground Lease'').]
    [J. [To be Inserted for Construction/Rehabilitation Loans] The 
Building Loan Agreement (2441) executed by Mortgagee and Mortgagor, 
dated ____________, (the ``Building Loan Agreement'').]
    [K. [To be Inserted for Construction/Rehabilitation Loans] The 
Construction Contract [Lump Sum (2442) or Cost Plus (2442-A)] executed 
by ____________ (the ``General Contractor'') and Mortgagor, dated 
____________ (the ``Construction Contract'').]
    L. The Mortgagee's Certificate (2434), executed by the Mortgagee, 
dated ____________.
    M. The Mortgagor's Certificate (2433), executed by the Mortgagor, 
dated ____________.
    N. The Agreement and Certification (3305 or 3305A or 3306 or 
3306A), executed by the Mortgagor, dated ____________.
    O. The Mortgagor's Oath (2478), executed by the Mortgagor, dated 
____________.
    P. The Mortgagor's Opinion Certification, pertaining to factual 
matters relied on by us [me] in rendering this opinion, executed by the 
Mortgagor, dated ____________, a copy of which is attached hereto as 
Exhibit ________ (the ``Mortgagor's Opinion Certification'').
    Q. A search conducted by ____________ dated ____________ [no 
earlier than 30 days before this opinion] of the financing records of 
the county and Property Jurisdiction [and Organizational Jurisdiction] 
(the ``UCC Search'').
    [R. A receipt from the insurance company providing flood insurance 
evidencing payment for the premium, dated ____________, (the ``Flood 
Insurance Receipt'').]
    S. The Title Insurance Policy issued by ____________ [acceptable 
company under HUD's regulations], together with all endorsements, and 
naming HUD and the Mortgagee as insureds as their interests may appear, 
dated ____________, (the ``Title Policy'').
    T. The following documents evidencing zoning compliance, 
____________, [Describe all Documents Fully] (the ``Zoning 
Certificate'').
    U. The building permit(s) issued on ____________ by ____________ 
(the ``Building Permit'').
    V. The following permits, ____________, [Describe Permits] which 
are required for the operation of the project, issued by ____________ 
on ____________ (``Other Permits'').
    W. [The Surveyor's Plat or Survey showing completed project], 
prepared by ____________, dated ____________, (the ``Survey'').
    X. The Surveyor's Certificate (2457), executed by ____________, 
dated ____________, (the ``Surveyor's Certificate'').
    [Y. The deferred note (1710, 1712 or 2223) executed by Mortgagor in 
favor of ____________, dated ____________, (the ``Deferred Note'').]
    Z. [The Performance Bond (2452) and/or the Payment Bond (2452-A)] 
issued by the General Contractor to secure the payment by/performance 
of ____________ and running to ____________ or the Completion Assurance 
Agreement (2450) executed by the General Contractor, dated 
____________, (the ``Assurance of Completion'').
    AA. The Owner-Architect Agreement (AIA B181 with HUD Supplement) 
executed by ____________ [Insert Design and/or Construction Architect] 
and Mortgagor, dated ____________, (the ``Owner-Architect Agreement'').
    [BB. The Off-Site Bond (2479) issued by ____________ to secure the 
completion of off-site work by ____________ and running to the 
Mortgagee and HUD or Escrow Agreement for Off-Site Facilities (2446) 
with Schedule ``A'' executed by ____________ dated ____________ (the 
``Assurance of Completion of Off-Site Facilities'').]
    CC. The documents ____________ [Describe Fully] assuring water, 
electricity, sewer, gas, heat or other utility services (the 
``Assurance of Utility Services'').
    DD. The Contractor's and/or Mortgagor's Cost Breakdown (2328) 
executed by the General Contractor, dated ____________, (the ``Cost 
Breakdown'').
    [EE. The Latent Defects Bond (3259) issued by ____________ and 
securing the performance of the General Contractor and running to the 
Mortgagee and HUD or Escrow executed by ____________, dated 
____________ (the ``Guarantee against Latent Defects'').]
    [FF. The Escrow Deposit Agreement for Incomplete On-Site 
Improvements (2456) with Schedule A executed by the General Contractor, 
dated ____________, (the ``On-Site Deposit Escrow'').]
    GG. The Contractor's Prevailing Wage Certificate (2403-A) executed 
by ____________, dated ____________, (the ``Contractor's Prevailing 
Wage Certificate'').
    HH. The Request for Endorsement of Credit Instrument (2023) and/or 
Certificate of Mortgagor and Mortgagee (2455) executed by the Mortgagor 
and the Mortgagee, dated ____________, (the ``Request for 
Endorsement''). [Modify as Appropriate for Insurance Upon Completion, 
Refinancings, Etc.]
    [II. The Operating Deficit Escrow executed by ____________, dated 
____________, (the ``Operating Deposit Escrow'').]
    [JJ. The Repair Escrow executed by ____________, dated 
____________, (the ``Repair Escrow'').]
    [KK. All documents executed by Mortgagor and any State or local 
government entity pertaining to development of the Property (the 
``Public Entity Agreement'').]
    [LL. The following documents executed or delivered in connection 
with the financing of the loan with the proceeds of bonds exempt from 
federal taxation: ________ [List Documents in Accordance With 
Instructions] (the ``Bond Documents'').]
    MM. The Good Standing Certificate(s) issued by [Organizational 
Jurisdiction OR Property Jurisdiction, if different], dated ________ 
[Date Inserted Must be Within 30 Days of the Date of Endorsement], (the 
``Good Standing Certificate'').
    NN. The certificate executed by ________ [Insert Architect or Other 
Professional], dated ________, (the ``Certificate'').
    OO. A search conducted by ________ dated [no earlier than 30 days 
before this opinion] of the public records of the federal District 
Court and State and local courts in: (i) the jurisdiction where the 
Property is located; (ii) the jurisdiction(s) where the Mortgagor is 
located and does business; and (iii) the jurisdiction where the general 
partner of the Mortgagor is organized (the ``Docket Search'').

    Note: Numerical references in parentheses above are to FHA and 
HUD form numbers.

    The documents listed in B through I above are referred to 
collectively as the ``Loan Documents.'' The documents listed in J 
through OO are referred to collectively as the ``Supporting 
Documents.'' The documents listed in A through OO are referred to 
collectively as the ``Documents.''
    In basing the opinions set forth in this opinion on ``our [my] 
knowledge,'' the words ``our [my] knowledge'' signify that, in the 
course of our [my] representation of the Mortgagor, no facts have come 
to our [my] attention that would give us [me] actual knowledge or 
actual notice that any such opinions or other matters are not accurate. 
Except as otherwise stated in this opinion, we [I] have undertaken no 
investigation or verification of such matters. Further, the words ``our 
[my] knowledge'' as used in this opinion are intended to be limited to 
the actual knowledge of the attorneys within our [my] firm who have 
been involved in representing the Mortgagor in any capacity including, 
but not limited to, in connection with this Loan. We [I] have no reason 
to believe that any of the documents on which we [I] have relied 
contain matters which, or the assumptions contained herein, are untrue, 
contrary to known facts, or unreasonable.
    In reaching the opinions set forth below, we [I] have assumed, and 
to our [my] knowledge there are no facts inconsistent with, the 
following:
    (a) Each of the parties to the Documents, other than the Mortgagor 
(and any person executing any of the Documents on behalf of the 
Mortgagor), has duly and validly executed and delivered each such 
instrument, document, and agreement to be executed in connection with 
the Loan to which such party is a signatory, and such party's 
obligations set forth in the Documents are its legal, valid, and 
binding obligations, enforceable in accordance with their respective 
terms.
    (b) Each person executing any of the Document, other than the 
Mortgagor (and any person executing any of the Documents on behalf of 
the mortgagor), whether individually or on behalf of an entity, is duly 
authorized to do so.
    (c) Each natural person executing any of the Documents is legally 
competent to do so.
    (d) All signatures of parties other than the Mortgagor (and any 
person executing any of the Documents on behalf of Mortgagor) are 
genuine.
    (e) All Documents, which were submitted to us [me] as originals are 
authentic; all Documents which were submitted to us [me] as certified 
or photostatic copies conform to the original document, and all public 
records reviewed are accurate and complete.
    (f) All applicable Documents have been duly filed, indexed, and 
recorded among the appropriate official records and all fees, charges, 
and taxes due and owing as of this date have been paid.
    (g) The parties to the Documents and their successors and/or 
assigns will: (i) act in good faith and in a commercially reasonable 
manner in the exercise of any rights or enforcement of any remedies 
under the Documents; (ii) not engage in any conduct in the exercise of 
such rights or enforcement of such remedies that would constitute other 
than fair and impartial dealing; and (iii) comply with all requirements 
of applicable procedural and substantive law in exercising any rights 
or enforcing any remedies under the Documents.
    (h) The exercise of any rights or enforcement of any remedies under 
the Documents would not be unconscionable, result in a breach of the 
peace, or otherwise be contrary to public policy.
    (i) The Mortgagor has title or other interest in each item of (i) 
real and (ii) tangible personal property (``Personalty'') comprising 
the Property in which a security interest is purported to be granted 
under the Loan Documents [and, where Personalty is to be acquired after 
the date hereof, a security interest is created under the after-
acquired property clause of the Security Agreement].
    In rendering this opinion we [I] also have assumed that the 
Documents accurately reflect the complete understanding of the parties 
with respect to the transactions contemplated thereby and the rights 
and the obligations of the parties thereunder. We [I] also have assumed 
that the terms and the conditions of the Loan as stated in the 
Documents have not been amended, modified or supplemented, directly or 
indirectly, by any other agreement or understanding of the parties or 
waiver of any of the material provisions of the Documents. After 
reasonable inquiry of the Mortgagor, we [I] have no knowledge of any 
facts or information that would lead us [me] to believe that the 
assumptions in this paragraph are not justified.
    In rendering our [my] opinion in paragraph 13, we [I] also have 
assumed that: (i) all Personalty in which a security interest is 
created under the Documents (other than accounts or goods of a type 
normally used in more than one jurisdiction) is located at the Property 
and (ii) Mortgagor's [Chief Executive Office] [only place of business] 
[residence] is located in ________________. After reasonable inquiry of 
the Mortgagor, we [I] have no knowledge of any facts or information 
that would lead us [me] to believe that the assumptions in this 
paragraph are not justified.
    In rendering this opinion, we [I] have, with your approval, relied 
as to certain matters of fact set forth in the Mortgagor's Opinion 
Certification, the Good Standing Certificate(s) [and certain other 
specified Documents,] as set forth herein. After reasonable inquiry of 
the Mortgagor as to the accuracy and completeness of the Mortgagor's 
Opinion Certification, the Good Standing Certificate(s), [and such 
other Documents], we [I] have no knowledge of any facts or information 
that would lead us [me] to believe that such reliance is not justified.
    Based on the foregoing and subject to the assumptions and 
qualifications set forth in this letter, it is our [my] opinion that:

[To be used in cases where organizational documents were prepared by 
mortgagor's attorney]
    1. The Mortgagor is a ____________ [Insert Type of Entity] duly 
organized and validly existing under the laws of the Organizational 
Jurisdiction. The Mortgagor is duly qualified to do business and, based 
solely on the Certificate(s) of Good Standing, copy attached hereto as 
Exhibit [    ], is in good standing under the laws of the 
Organizational Jurisdiction, [and is qualified to do business as a 
foreign ____________ entity in the Property Jurisdiction.]

[Or, if the mortgagor is a trust]
    The Mortgagor is ____________ [Insert Name of the Type of Trust] 
duly formed and validly existing under the laws of the Organizational 
Jurisdiction [, and is qualified to do business as a foreign 
____________ entity in the Property Jurisdiction].

[And, if the general partner of a partnership mortgagor is an entity]
     The general partner of the Mortgagor is a ____________ [Insert 
Type of Entity], duly organized, validly existing and, based solely on 
the Certificate(s) of Good Standing, copy attached hereto as Exhibit [  
  ], in good standing under the laws of the Organizational Jurisdiction 
[and is qualified to do business as a foreign ____________ [Insert Type 
of Entity] in the Property Jurisdiction].

[To be used in cases, principally refinancing, where organizational 
documents were not prepared by mortgagor's attorney]
    1. Based solely on the Certificate(s) of Good Standing, copy 
attached hereto as Exhibit [    ], the Mortgagor is a ____________ 
[Insert Type of Entity] validly existing under the laws of the 
Organizational Jurisdiction and in good standing under the laws of the 
Organizational Jurisdiction [and is qualified to do business as a 
foreign ____________ entity in the Property Jurisdiction.

[Or, if the mortgagor is a trust]
    The Mortgagor is ____________ [Insert Name of the Type of Trust] 
validly existing under the laws of the Organizational Jurisdiction [and 
is duly qualified to do business as a foreign ____________ entity in 
the Property Jurisdiction].

[And, if the general partner of a partnership mortgagor is an entity]
    Based solely on the Good Standing Certificate(s), copy attached 
hereto as Exhibit [    ], the general partner of the Mortgagor is a 
____________ [Insert Type of Entity], validly existing and in good 
standing under the laws of ____________ [Insert State] [and is 
qualified to do business as a foreign ____________ [Insert Type of 
Entity] in the Property Jurisdiction].
    2. The Mortgagor has the [corporate/partnership/trust] power and 
authority and possesses all necessary governmental certificates, 
permits, licenses, qualifications and approvals to own and operate the 
Property and to carry out all of the transactions required by the Loan 
Documents and to comply with applicable federal statutes and 
regulations of HUD in effect on the date of the FHA Commitment.
    3. The execution and delivery of the Loan Documents by or on behalf 
of the Mortgagor, and the consummation by the Mortgagor of the 
transactions contemplated thereby, and the performance by the Mortgagor 
of its obligations thereunder, have been duly and validly authorized by 
all necessary [corporate/partnership/trust] action by, or on behalf of, 
the Mortgagor.
    4. No authorization, consent, approval, permit, or other action by, 
or filing with, any Organizational and Property Jurisdictions or 
federal court or governmental authority, other than those that have 
been obtained, as disclosed on Exhibit ______, attached hereto, and 
those listed at Paragraphs ________ of this opinion [i.e. good standing 
certificate] are required in connection with the execution and delivery 
by the Mortgagor of the Loan Documents or the ownership [and operation] 
of the Property.
    5. Each of the Loan Documents has been duly executed and delivered 
by the Mortgagor and constitutes the valid and legally binding promises 
or obligations of the Mortgagor, enforceable against the Mortgagor in 
accordance with its terms, subject to the following qualifications:
    (i) the effect of applicable bankruptcy, insolvency, 
reorganization, moratorium and other similar laws affecting the rights 
of creditors generally; and
    (ii) the effect of the exercise of judicial discretion in 
accordance with general principles of equity (whether applied by a 
court of law or of equity); and
    (iii) certain remedies, waivers, and other provisions of the Loan 
Documents may not be enforceable, but, subject to the qualifications 
set forth in this paragraph at (i) and (ii) above, such 
unenforceability will not preclude (a) the enforcement of the 
obligation of the Mortgagor to make the payments as provided in the 
Mortgage and Note (and HUD's regulations), and (b) the foreclosure of 
the Mortgage upon the event of a breach thereunder.
    [6. To be inserted when any or all of the loan documents are not 
HUD approved forms or when HUD approved forms have been revised or 
modified in connection with the loan] The execution and delivery and 
receipt of, and the performance of the obligations under, the Loan 
Documents will not violate the Organizational Documents of the 
Mortgagor or the applicable statutes and regulations of HUD in effect 
on the date of the FHA Commitment.
    [7. Insert for loans involving construction or rehabilitation] To 
our [my] knowledge there are no proposed change(s) of law, ordinance, 
or governmental regulation (proposed in a formal manner by elected or 
appointed officials) which, if enacted or promulgated after the 
commencement of construction/rehabilitation, would require a 
modification to the Project, and/or prevent the Project from being 
completed in accordance with the plans and specifications, dated 
____________, executed by, and referred to in the Construction Contract 
(the ``Plans and Specifications'').]
    8. [Insert if there is no zoning endorsement incorporated into the 
title policy] The attached Zoning Certificate states that the Property 
appears on the zoning maps of [Property Jurisdiction] as being located 
in a ____________ zone. According to the zoning ordinance of the 
Property Jurisdiction, the use of the Property as a ____________ is a 
permitted use in such zone.
      or
    Based solely on the Zoning Certificate, the Property may be used 
for ____________ as a permitted use.]
    [9. Use for new construction or substantial rehabilitation in cases 
where the department does not receive a certificate directly from the 
professional] Based solely on the Certificate, construction/
rehabilitation of the Project in accordance with the Plans and 
Specifications will comply with all applicable land use and zoning 
requirements.
    [Use for refinancings] Based solely on the Certificate, the Project 
complies with all applicable land use and zoning requirements.]
    10. Based solely on (a) our [my] knowledge and (b) the Mortgagor's 
Opinion Certification, the execution and delivery of the Loan Documents 
will not: (i) Cause the Mortgagor to be in violation of, or constitute 
a default under the provisions of, any agreement to which the Mortgagor 
is a party or by which the Mortgagor is bound, (ii) conflict with, or 
result in the breach of, any court judgment, decree or order of any 
governmental body to which the Mortgagor is subject, or (iii) result in 
the creation or imposition of any lien, charge, or encumbrance of any 
nature whatsoever on any of the property or assets of the Mortgagor, 
except as specifically contemplated by the Loan Documents.
    11. Based solely on (a) our [my] knowledge, (b) the Mortgagor's 
Opinion Certification and (c) the Docket Search; there is no litigation 
or other claim pending before any court or administrative or other 
governmental body or threatened in writing against the Mortgagor, or 
the Property, [to be inserted when mortgagor is not a sole-asset 
mortgagor] or any other properties of the Mortgagor] [, except as 
identified on Exhibit ______].
    12. The Mortgage is in appropriate form for recordation in 
____________ [insert proper name of local land records office] of 
____________ [Insert County or City] of the Property Jurisdiction, and 
is sufficient, as to form, to create the encumbrance and security 
interest it purports to create in the Property.
    13. Filing of the Financing Statements in the Filing Offices will 
perfect the security interest in the Personalty of the Mortgagor 
located in the Project Jurisdiction, but only to the extent that, under 
the Uniform Commercial Code in effect in the Project Jurisdiction, a 
security interest in each described item of Personalty can be perfected 
by filing. The Filing Offices are the only offices in which the 
Financing Statements are required to be filed in order to perfect the 
Mortgagee's security interest in the Personalty.
    14. The Loan does not violate the usury laws or laws regulating the 
use or forbearance of money of the Property Jurisdiction.
    [15. [[For use only if mortgagor is a trust] The Mortgagor is an 
irrevocable trust that has a term consistent with HUD's requirements 
and the term of the irrevocable trust is not affected by the terms of 
any of the beneficiaries' interests.] [The laws of the Property 
Jurisdiction govern the interpretation and the enforcement of the Loan 
Documents notwithstanding that the Mortgagor may be formed in a 
jurisdiction other than the Property Jurisdiction. The Mortgagor can 
sue and be sued in the Property Jurisdiction without the necessity of 
joining any of the beneficiaries of the Mortgagor, including without 
limitation, a suit on the Note or a foreclosure proceeding arising 
under the Mortgage. Venue for any foreclosure proceeding under the 
Mortgage may be had in [Property Jurisdiction].
    [16. [Use in Cases Involving Bond Financing] Based solely on the 
opinion of ____________ [Insert Bond Counsel], dated as of the date 
hereof and attached hereto as Exhibit ______, to the extent that any of 
the provisions of the Bond Documents are inconsistent with any of the 
provisions of the Loan Documents or Supporting Documents, the 
provisions of the Loan Documents or Supporting Documents shall govern.]
    [17. [Use in cases where the development of the property is 
governed by an agreement with a public entity] Based upon our knowledge 
and the Mortgagor's Opinion Certification, there is no default under 
the Public Entity Agreement, and construction in accordance with the 
Plans and Specifications and within the time frame specified in the 
Construction Contract will not lead to a default under the Public 
Entity Agreement.]
    In addition to the assumptions set forth above, the opinions set 
forth above are also subject to the following qualifications:
    (i) The Uniform Commercial Code of the Property Jurisdiction 
requires the periodic filing of continuation statements with 
____________ [and ____________] not more than ____________ prior to and 
not later than the expiration of the ________ year period from the date 
of filing of the Financing Statements and the expiration of each 
subsequent ______ year period after the original filing, in order to 
maintain the perfection and priority of security interests and to keep 
the Financing Statements in effect.
    (ii) We express no opinion as to the laws of any jurisdiction other 
than the laws of the Property Jurisdiction [and the Organizational 
Jurisdiction, if it is different,] and the laws of the United States of 
America. The opinions expressed above concern only the effect of the 
laws (excluding the principles of conflict of laws) of the Property 
Jurisdiction [and the Organizational Jurisdiction, if it is different] 
and the United States of America as currently in effect. We assume no 
obligation to supplement this opinion if any applicable laws change 
after the date of this opinion, or if we become aware of any facts that 
might change the opinions expressed above after the date of this 
opinion.
    We [I] confirm that:
    (a) based on the Organizational Documents, the name of the 
Mortgagor in each of the Documents and the Title Policy and FHA 
Commitment is the correct legal name of the Mortgagor;
    (b) the legal description of the Property is consistent in the 
Documents wherein it appears and in Appendix ______ hereto;
    (c) we [I] do not have any financial interest in the Project, the 
Property, or the Loan, other than fees for legal services performed by 
us, arrangements for the payment of which has been made; and we [I] 
agree not to assert a claim or lien against the Project, the Property, 
the Mortgagor, the Loan proceeds or income of the Project;
    (d) other than as counsel for the Mortgagor, we have no interest in 
the Mortgagor (or any principal thereof) or the Mortgagee or any other 
party involved in the Loan transaction and do not serve as [a director, 
officer or] [an] employee of the Mortgagor or the Mortgagee. We have no 
undisclosed interest in the subject matters of this opinion;
    (e) based solely on the Surveyor's Certificate and the Surveyor's 
Plat, flood insurance [is or is not] required pursuant to 12 U.S.C. 
4012a(a); [insert if flood insurance is required. Based solely on the 
Flood Insurance Receipt, flood insurance is in effect which satisfies 
the requirements of 12 U.S.C. 4012a(a);] and
    (f) to our knowledge, there are no liens or encumbrances against 
the Property which are not reflected as exceptions to coverage in the 
Title Policy.
    The foregoing opinions are for the exclusive reliance of Mortgagee, 
its counsel and HUD; however, they may be made available for 
informational purposes to, but not for the reliance of, the assigns or 
transferees of Mortgagee, or prospective purchasers of the Loan. We [I] 
acknowledge that the making, or causing to be made, of a false 
statement of fact in this opinion letter and accompanying materials may 
lead to criminal prosecution or civil liability as provided pursuant to 
applicable law, which may include 18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 
3729, 3802.

      Sincerely,

----------------------------------------------------------------------
[Authorized Signature]

[FR Doc. 94-4823 Filed 3-2-94; 8:45 am]
BILLING CODE 4210-01-M