Federal Register, Volume 59 Issue 42 (Thursday, March 3, 1994)

[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
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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:

----------------------------------------------------------------------

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,

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[Authorized Signature]

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